# Sherayzen Law Office

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### 2026 Foreign Earned Income Exclusion | International Tax Lawyer & Attorney
The Foreign Earned Income Exclusion (“FEIE”) is a valuable tax strategy available to US tax residents who live and work abroad. It allows US citizens to exclude a certain amount of foreign earned income from their US taxable income. The IRS adjusts the precise amount every year.  In this article, I will discuss the 2026 Foreign Earned Income Exclusion.
2026 Foreign Earned Income Exclusion: Background Information
FEIE was born out of the fact that the US tax system is unique and taxes its citizens and even more broadly its residents on their worldwide income irrespective of where they reside. In many countries, such taxpayers are subject to local foreign income taxes on the same income. In order to alleviate the potential burden of double taxation, the US Congress enacted Section 911 of the Internal Revenue Code. This section codified FEIE.
Section 911 allows qualifying individuals to exclude a specified amount of foreign earned income from US taxable income. The IRS adjusts this amount every single year.  A taxpayer must use Form 2555 to claim FEIE.
2026 Foreign Earned Income Exclusion: Eligibility
In order to claim FEIE, a taxpayer must meet certain requirements set forth in IRC §911. I will provide only a brief outline of these requirements in this article. They are discussed in more detail in other articles on our website.
First of all, FEIE applies only to foreign earned income, not passive income and not US-source income.
Second, the taxpayer must maintain his tax home in a foreign country. “Tax Home” is a term of art that has its specific meaning.
Third, you must pass either the physical presence test or the bona fide residence test.
2026 Foreign Earned Income Exclusion: Additional Considerations
While FEIE brings a huge benefit of income exclusion, it often is not the best option for US taxpayers who reside overseas. Let’s focus on the four most important considerations.
First, FEIE limits and in some cases completely eliminates the ability to take Foreign Tax Credit (“FTC”). If you use FEIE, you cannot use the FTC to reduce US taxes on income already excluded under the FEIE.  The problem arises when FTC is actually higher than the US tax.  In this case, you may be losing a very important tax strategy to reduce your US taxes not only in the current year, but also in the future.
Second, FEIE may result in ineligibility to take other tax credits normally available to a taxpayer.
Third, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion).
Finally, while not a tax consideration, usage of FEIE by US permanent residents may result in the abandonment of their green card. In other words, FEIE may present a huge risk to the immigration goals of a taxpayer.
2026 Foreign Earned Income Exclusion: Adjustment for 2026
On October 9, 2025, the IRS announced that the foreign earned income exclusion amount under §911(b)(2)(D)(i) is going to be $132,900 for the tax year 2026. This is up from $130,000 in the tax year 2025.
Contact Sherayzen Law Office for Professional Help with Foreign Earned Income Exclusion
The Foreign Earned Income Exclusion is a vital tax tool for US taxpayers working abroad, but it must be used cautiously and after careful consideration of all circumstances.  Hence, if you are a US taxpayer who lives abroad or you are planning to accept a job overseas, you need to secure the help of Sherayzen Law Office, a premier firm in US international tax compliance. We can help you navigate the complexities of FEIE, determine your eligibility for it and build a tax strategy to help you maximize the advantages offered by the Internal Revenue Code. Contact Us Today to Schedule Your Confidential Consultation!

### Streamlined Domestic Offshore Procedures Eligibility | SDOP International Tax Lawyer St Paul MN
https://youtu.be/BkplNnlV_xE?si=QantQZZTmmuD_Smj
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Minnesota, more precisely, the capital of Minnesota, St. Paul.
As I have previously said, this series is devoted to offshore voluntary disclosures and today, I would like to discuss the very important subject of streamlined domestic offshore procedures or SDOP eligibility.
As I have previously mentioned, SDOP is one of the major offshore voluntary disclosures options that affect a large number of US taxpayers who wish to bring themselves into full compliance with US international tax laws. The question of eligibility is critical to them.
Let's dig into the details. First, you must be a US taxpayer which really means US tax resident, either US citizen, Us permanent resident or a person who satisfied the substantial presence test, plus a couple of smaller categories. Second, you must be in violation of US international tax compliance obligations. This is logical, if you're not in violation of any US international tax compliance obligations why would you do a streamlined domestic offshore procedures? Third, and this is an important one, because this is where a lot of people become ineligible. You must have filed all of the original tax returns included in your offshore voluntary disclosure period. Under the terms of the SDOP, you can only amend a return; you cannot file an original return and fourth, you must be non-willful with respect to all aspects of your US international tax non-compliance. When I say all, I really mean all including US information returns such as FBAR, Form 8938, Form 3520, Form 5471, etcetera and non-reporting of foreign income.
If you would to learn more about Streamlined Domestic Offshore Procedures and how it may benefit you to participate in this offshore voluntary disclosure option, you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Non-Willfulness vs. Willfulness | Streamlined Domestic Offshore Procedures Attorney Minnesota
https://youtu.be/TzElSLz37Bs?si=-AU__S7MmbjMvniq
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from St. Paul, Minnesota. This vlog is devoted to Offshore Voluntary Disclosures.
In the previous vlog, I discussed the issue of the SDOP eligibility and I mentioned that one of the main factors is non-willfulness. In fact, this is the key, the heart of the Streamlined disclosure whether it's domestic or foreign, in fact. It's the issue of non-willfulness. You can only participate in the Streamlined Domestic Offshore Procedures if you can establish non-willfulness. If you cannot, you should not be participating in this program and even less so, signing up for form 14654 under the penalty of perjury, you believe you were non-willful, if you believe you were not. That's very important.
What is non-willfulness? The short answer is that this is an opposite of willfulness - not a very instructive answer if you don't know what non-willfulness is. Let's discuss what willfulness is first. Willfulness is an intentional or a reckless disregard of a known duty.
For example, if you know that you need to file an FBAR and you intentionally choose not to file it, the IRS may have the argument for willfulness. If you close your eyes and ears and say, 'I don't want to hear anything, I don't want to see anything, that's it, I want to be in complete ignorance'. This is called willful blindness. Willful blindness is a form of recklessness and recklessness is a form of willfulness.
Outside of the voluntary disclosure, the IRS has the 'burden of proof' to establish willfulness. In the voluntary disclosure, you have the 'burden of proof' to establish non-willfulness.
What does it mean? It means potentially that say you participate in a voluntary disclosure program, in the Streamlined Domestic Offshore Procedures and this SDOP submission is later audited and the IRS disagrees that you've established the case for non-willfulness, this does not automatically mean that you were willful because once they kick you out of the program, this means that the IRS will have the 'burden of proof' to establish willfulness. This is a fine distinction. Sometimes it doesn't matter; sometimes it may make a huge difference to the entire case.
Willfulness is the opposite of non-willfulness and non-willfulness is not willfulness, seems very logical and simple but as I had just said, you have to establish non-willfulness. How do you do that? You do that based on the number of factors and arguments.
For example, you take a look at the history of your client. For example, if the client finished law school, is an international tax attorney and does not file an FBAR, while the issue of non-willfulness is going to be really difficult to establish if he did it intentionally. Similiarly, if it is a CPA, same story, it's going to be much harder for the CPA to establish non-willfulness than it would be, for say a carpenter.
This is an example of one factor; there are a lot of them. The factors include education, work history, financial means (meaning financial means to secure professional help), the time that it took you to realize that you were non-compliant, that is the length of your non-compliance and many, many other factors.
The job of establishing non-willfulness is for an international tax attorney to do. I would strongly recommend that it would be an attorney who would draft your non-willfulness statement that you will submit as part of your SDOP package to the IRS because otherwise, you may unintentionally open a can of worms that could lead to a fishing expedition by the IRS if they think you do not have a solid case for non-willfulness simply because of the way you presented the facts of your case, not necessarily because you were willful but because you created a doubt in the mind of the IRS that you were non-willful. They will start thinking that maybe they should audit your case. Even if you end up in this situation, proving that you were non-willful, you will have by your incorrect non-willfulness statement, raised the chance of a follow-up audit.
If you would like to learn more about non-willfulness and whether your international tax compliance was non-willful, you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### First Quarter 2026 IRS Interest Rates on Overpayment & Underpayment of Tax
On November 13, 2025, the IRS announced that the First Quarter 2026 IRS interest rates on overpayment and underpayment of tax will not change from the Fourth Quarter of 2025.
This means that, the First Quarter 2026 IRS interest rates will be as follows:
seven (7) percent for overpayments (seven (7) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
four and a half (4.5) percent for the portion of corporate overpayment exceeding $10,000.
How the IRS Calculated First Quarter 2026 IRS Interest Rates
The IRS calculates the IRS interest rates based on specific tax provisions. We begin with the Internal Revenue Code (“IRC”) §6621, which establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Additionally, under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Similarly to overpayments, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. Also, the readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Finally, pursuant to the IRC §6621(b)(1), the IRS computed the First Quarter 2026 IRS interest rates based on federal short-term rates in October of 2025.
Importance of the First Quarter 2026 IRS Interest Rates
The IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Firstly, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second, the IRS and the taxpayers use these rates to calculate the interest on any additional US tax liability on amended or audited tax returns. This also applies to the amended (and, in case of SFOP, original) tax returns that the taxpayers submit pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the First Quarter 2026 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates.

### Streamlined Foreign Offshore Procedures Advantages | International Tax Lawyers St Paul Minnesota
https://youtu.be/fiUzoHhLDhQ?si=TjsZj4xeLwnZrZDN
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from St. Paul, Minnesota. This series is devoted to offshore voluntary disclosures and in the last dozen or so videos, I focused on Streamlined Domestic Offshore Procedures.
Today, I would like to discuss Streamlined Foreign Offshore Procedures and I would like to begin the discussion with deliberation of the advantages, enormous advantages that Streamlined Foreign Offshore Procedures offers to its participants.
Streamlined Foreign Offshore Procedures is a true amnesty program and this is its biggest advantage. When you participate in the SFOP (Streamlined Foreign Offshore Procedures), you're not paying any penalties for your prior US noncompliance with US international tax reporting obligations. If you are in violation of the FBAR requirement, Forms 5471, 8938, 926, what have you, for reporting requirements, you are eligible for the Streamlined Foreign Offshore Procedures and you actually do it, then you will not be required to pay any penalties even if you have income tax noncompliance. This is a huge advantage of the Streamlined Foreign Offshore Procedures which is unmatched by any other offshore voluntary disclosure option.
The other advantages of SFOP include a shorter voluntary disclosure period - only three years for tax returns and six years for FBARs. This is much shorter say than the OVDP program that used to be in existence that required eight years of compliance: eight years of amended tax returns.
A lower legal standard is also part of Streamlined Foreign Offshore Procedures, so all of the US international tax reporting requirements have a reasonable cause exception that if established, you are not paying any penalties. However, reasonable cause standard is an extraordinarily difficult standard to satisfy. Non-willfulness that is required by SFOP is a difficult standard but is much easier compared with the reasonable cause exception.
Basically, Streamlined Foreign Offshore Procedures is a low-risk, high reward option and whenever you're eligible to participate in it, my general recommendation is to actually do it.
If you would like to learn more about Streamlined Foreign Offshore Procedures and how I can help you bring your US tax affairs in full compliance with US international tax laws, call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Fourth Quarter 2025 IRS Interest Rates on Overpayment & Underpayment of Tax
On August 25, 2025, the IRS announced that the Fourth Quarter 2025 IRS interest rates on overpayment and underpayment of tax will remain the same as in the Fourth Quarter of 2025.
This means that, the Fourth Quarter 2025 IRS interest rates will be as follows:
seven (7) percent for overpayments (seven (7) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
five (5) percent for the portion of corporate overpayment exceeding $10,000.
How the IRS Calculated Fourth Quarter 2025 IRS Interest Rates
The IRS calculates the IRS interest rates based on specific tax provisions. We begin with the Internal Revenue Code (“IRC”) §6621, which establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Additionally, under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Similarly to overpayments, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. Also, the readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Finally, pursuant to the IRC §6621(b)(1), the IRS computed the Fourth Quarter 2025 IRS interest rates based on federal short-term rates in July of 2025.
Importance of the Fourth Quarter 2025 IRS Interest Rates
The IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Firstly, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second, the IRS and the taxpayers use these rates to calculate the interest on any additional US tax liability on amended or audited tax returns. This also applies to the amended (and, in case of SFOP, original) tax returns that the taxpayers submit pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the Fourth Quarter 2025 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Fourth Quarter 2025 IRS interest rates.

### 2025 SDOP Audit | Streamlined Domestic Offshore Procedures Lawyer
Every submission under the Streamlined Domestic Offshore Procedures (SDOP) may be subject to an IRS audit, including the submissions made in 2025. In this article, I will explain what is the 2025 SDOP Audi and what a taxpayer should expect during the Audit.
2025 SDOP Audit: Background Information on Streamlined Domestic Offshore Procedures
Streamlined Domestic Offshore Procedures is a voluntary disclosure option offered by the IRS since June of 2014 to noncompliant US taxpayers to settle their past tax noncompliance concerning foreign assets and foreign income at a reduced penalty rate. In order to participate in SDOP, a taxpayer must meet various eligibility requirements. The most important of these eligibility requirements is non-willfulness of prior noncompliance.
SDOP is likely to be the most convenient and the least expensive voluntary disclosure option for taxpayers who is not eligible for Streamlined Foreign Offshore Procedures and whose prior tax noncompliance was non-willful. 
2025 SDOP Audit: Why SDOP Disclosures Are Subject to IRS Audits
SDOP audits originate within the very nature of SDOP. SDOP voluntary disclosures have certain eligibility requirements.  Once taxpayers submit their disclosures, the IRS does not immediately subject them to an immediate comprehensive review of whether the disclosures met all eligibility requirements.  There is a review process, but initially it focuses on whether the taxpayers met all formalities of the SDOP.
This is very different from the immediate comprehensive audit-like review of all items as part of the voluntary disclosure process that form part of some other programs, such as prior OVDPs (Offshore Voluntary Disclosure Program) or even current IRS Voluntary Disclosure Practice (VDP). These voluntary disclosure options usually also require the signing of Form 906, the Closing Agreement. SDOP does not have that final stage of signing Form 906.
This means that, if a suspicion arises concerning whether a taxpayer met the SDOP eligibility requirements, the only way for the IRS to resolve it is to audit the entire disclosure, particularly on the issue of non-willfulness. As part of the SDOP process, the IRS reserves the right to audit any SDOP submission  at any point within three years after the submission of the original SDOP voluntary disclosure package.
2025 SDOP Audit Process: Initial Contact
The exact process of a Streamlined Submission Audit varies from case to case, but all of such audits have a similar format: initial letter with request for a meeting, meeting with an interview, review of submitted documents and (very likely) additional requests for information, potentially interview of other involved individuals (such as a tax preparer) and, finally, the results of an audit are provided by the IRS to taxpayer(s) and/or the representative indicated on Form 2848.
In other words, your 2025 SDOP Audit would commence in a way very similar to a regular IRS audit: the IRS sends letter to taxpayers and (if there is a Form 2848 on file) to their representatives. The letter explains that the IRS decided to examine certain tax returns (usually all three years of amended tax returns) and asks for submission of all documentation and work papers that the taxpayer or the tax preparer used to prepare the amended returns. Additionally, the letter requests that the taxpayers’ representative (or taxpayers if not represented) contact the IRS agent in charge of the audit to schedule the initial meeting.
2025 SDOP Audit Process: Interview and Follow-up
During the initial meeting, the IRS agent will review (at least to make sure he or she has what the IRS needs) the documents that the taxpayer supplied earlier in response to the IRS requests. In larger cases, the IRS agent will need a lot more time to later examine all of the submitted documents and see if he or she needs additional documents. If a case is very small, it is possible for an agent to cover everything in the first meeting, but it is very rare.
Also, during an initial meeting, there is going to be an interview with the taxpayer(s). I will discuss the interview separately in a different article.
Once the review of the initial package of documents is concluded, it is very likely that the IRS agent will have questions and additional document requests. The questions may be answered by the taxpayers’ attorney during a separate meeting with the agent; smaller questions may be settled over the phone.
If the IRS needs additional documentation, the agent will send out an additional request to taxpayers and/or their attorney. The answer will most likely need to be provided in writing (actually, it is often better to state your position in writing for the IRS Appeals Office).
Once the IRS completes its interview of other involved parties and reviews all evidence, it will make its decision and submit the results of the audit to the taxpayers and their tax attorney in writing. The taxpayers’ attorney will need to build a strategy with respect to the taxpayers’ response to the audit results depending on whether the taxpayers agree or disagree with the results of the audit.
Differences Between Your 2025 SDOP Audit and Regular IRS Audit
At first, it may seem that there are no big differences between a regular IRS audit and an SDOP audit. While procedurally this may be correct, substantively it is not.
The greatest difference between the two types of IRS audits is the subject-matter of what the IRS subjects to its review. While a regular IRS audit will concentrate on the tax returns only, a Streamlined Submission Audit will involve everything: amended tax returns, FBARs, other information returns and, most importantly, Non-Willfulness Certification. In other words, a Streamlined Submission Audit will focus not only on whether the tax forms are correct, but also on whether the taxpayer was actually non-willful with respect to his prior tax noncompliance.
This difference in the subject-matter examination will carry over to other aspects of a Streamlined Submission Audit: the taxpayers’ interview will focus on their non-willfulness arguments, third-party interviews of original tax preparers become a regular feature (this may be different from a regular IRS audit), and the final IRS results must necessarily make a decision on whether to challenge the taxpayers’ non-willfulness arguments.
Failure by a taxpayer to sustain his non-willfulness arguments may result in a disaster for the taxpayer with a potential referral to the Tax Division of the US Department of Justice for a criminal investigation.
This is why it is so important for a taxpayer subject to an SDOP Audit to retain the services of an experienced international tax lawyer to handle the audit professionally.
Contact Sherayzen Law Office for Professional Help with Your 2025 SDOP Audit
If the IRS audited your submission under the Streamlined Domestic Offshore Procedures, contact Sherayzen Law Office as soon as possible. Our international tax law firm is highly experienced in offshore voluntary disclosures (SDOP, SFOP, “noisy disclosures”, “quiet disclosures”, et cetera) and the IRS audits of voluntary disclosures, including the audits of SDOP submissions.  We can Help You during Your IRS Audit!  Contact Us Today to Schedule Your Confidential Consultation!

### Who Benefits from IRS Offshore Voluntary Disclosure | International Tax Lawyer Minneapolis Minnesota
https://youtu.be/Bdt0Qo9axxI?si=VdwW0Z-RC2jSnrYu
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Minneapolis, Minnesota. As I had said in previous videos from this series, this series is devoted to Offshore Voluntary Disclosures.
In the previous vlog, I explained what is an offshore voluntary disclosure; today I would like to talk about who is affected or who can take advantage of an offshore voluntary disclosure program.
In order to participate in an offshore voluntary disclosure, you have to be in violation of one or more US International tax reporting requirements and that applies equally to individuals and to businesses. It's very important to understand that an offshore voluntary disclosure is not limited to individuals; a business can participate in an offshore voluntary disclosure program.
Unfortunately, it happens too often that an offshore voluntary disclosure can involve a situation where an accountant of a business, a CPA even did not realize that there were additional US international tax reporting requirements and because of that, the business became noncompliant. It is okay for the business, in this situation to participate in an offshore voluntary disclosure program, but how does one know that one needed to file something to be compliant with his/her or its (in the case of a company) international tax obligations?
In order to do that, there is no alternative but to schedule a consultation with an international tax attorney, someone like me, or me.
One of the purposes of a consultation is precisely to do that: identify your US international tax reporting requirements. Many times I found that clients do not really know what they're required to do or they may only know of one form but don't know of another form. For example: fairly recently, I did a voluntary disclosure in a case where the client discovered that she was required to file a form 3520 for the year 2023 but she didn't know that she needed to file FBAR and form 8938. This is a bit of a surprising case because usually it's the other way around; people know about FBAR but they don't know about form 3520. In this case, it was a particular case where the client was able to discover 3520 but not the FBAR. During the consultation, I was able to identify these additional reporting requirements and use them to build a voluntary disclosure strategy for her case which we have successfully completed in early 2025.
If you would like to know more about your US international tax obligations and your offshore voluntary disclosure options to fix your prior international tax noncompliance, you can call me at (952) 500-8159 or you can email me at: eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### IRS Offshore Voluntary Disclosure: New Series | International Tax Lawyer Minnesota
https://youtu.be/bw8jE5MQ7N0?si=PKo7PF2dODM2Pj-d
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm starting a new series of vlogs from my home state of Minnesota. Right now I'm standing in the sculpture garden in front of the Walker Art Center in Minneapolis. Part of this series is going to be filmed in Minneapolis and part of it is going to be filmed in St. Paul, in other words the Twin Cities and the subject of the series of vlogs is going to be: Offshore Voluntary Disclosures.
What is it? How many voluntary disclosures are there? Who is affected? What are its requirements? What are the potential IRS penalties? And other similar questions. All of these questions, I will address in this new series of vlogs.
I want to remind the viewers that offshore voluntary disclosures is the core area of practice of Sherayzen Law Office. We have done hundreds of these types of disclosures involving assets from over eighty countries. Assets that include bank accounts, life insurance policies, investment accounts, precious metal accounts, foreign trusts, foreign business ownership including corporations, partnerships and disregarded entities. We have filed thousands of FBARs, forms 8938, 8621, 8865, 5471, 8858, 926 etcetera. In other words, we have an extensive experience in this area and I would like to share some of the wisdom I have acquired throughout the years of almost being twenty years as an international tax attorney with you.
Stay tuned for future vlogs. In the next vlog, I will address the issue of 'What is an Offshore Voluntary Disclosure?'
Thank you for watching, until the next time.

### Third Quarter 2025 IRS Interest Rates on Overpayment & Underpayment of Tax
On May 12, 2025, the IRS announced that the Third Quarter 2025 IRS interest rates on overpayment and underpayment of tax will remain the same as in the Second Quarter of 2025.
This means that the Third Quarter 2025 IRS interest rates will be as follows:
seven (7) percent for overpayments (seven (7) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
four and a half (4.5) percent for the portion of corporate overpayment exceeding $10,000.
How the IRS Calculated Third Quarter 2025 IRS Interest Rates
The IRS calculates the IRS interest rates based on specific tax provisions. We begin with the Internal Revenue Code (“IRC”) §6621, which establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Additionally, under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Similarly to overpayments, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. Also, the readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Finally, pursuant to the IRC §6621(b)(1), the IRS computed the Third Quarter 2025 IRS interest rates based on federal short-term rates in April of 2025.
Importance of the Third Quarter 2025 IRS Interest Rates
The IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Firstly, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second, the IRS and the taxpayers use these rates to calculate the interest on any additional US tax liability on amended or audited tax returns. This also applies to the amended (and, in case of SFOP, original) tax returns that the taxpayers submit pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the Third Quarter 2025 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Third Quarter 2025 IRS interest rates.

### US International Tax Attorney Veracruz Mexico: New "Port" Series Begins
https://youtu.be/UG6b6jzvJEY?si=7gER1kUaQ_imNXZe
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm beginning a new series of vlogs from Veracruz, Mexico and I'm standing here in the port of Veracruz and thinking about the similarities between a port and taxation. At first you would think: 'What are the similiarities'? A port is where the ships enter and taxation is usually done at an office but if you take a closer look, you will see there are some striking similarities, especially relevant to my area of practice: US International tax law.
First of all, a port means international commerce. A port is crucial to international commerce, so is international taxation. International tax is also a very important factor in international commerce, maybe from a very different angle but still a very important factor.
Second, a port means basically an open door, an open door to anyone who wants to come in and anyone who wants to get out; similarly, a voluntary disclosure is an open door. It's an open door to anyone who has not been compliant with their US international tax obligations and wants to resolve their prior tax noncompliance.
In this series of vlogs, there will be two parts: the first part is that I will do an overview of major US international tax reporting requirements which are most common in causing noncompliance. In the second part, I will talk about the open door: the IRS voluntary disclosure programs that the IRS has put into place and which are currently still open and I'm right now filming in December of 2024.
In the next vlog, I will begin the discussion of the main US tax reporting requirements.
Thank you for watching, until the next time.

### Introduction to PFIC Compliance | Form 8621 International Tax Lawyer Veracruz Mexico
https://youtu.be/Pnynsj1E_Io?si=-XZy6fiiiYAsx0kj
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of vlogs from Veracruz, Mexico. This series of vlogs is devoted to two things: first the discussion of the most common US international tax forms which are most likely to cause non-compliance among US taxpayers and the second part is devoted to IRS Offshore Voluntary Disclosure options.
Right now we're in the first part and in this first part and in this first part, I had already discussed the issue of FBAR and Form 8938 compliance.
In this vlog, I would like to focus on PFIC compliance or Form 8621 compliance. This is a very complex issue and it is a very obscure issue. In fact, it is so obscure that in most cases accountants would not be able to identify it; they simply do not know about it or even if they heard something about it, they don't know how to comply with it.
Let's discuss what a PFIC is. First of all, a little bit of history: PFIC was part of the tax reform of the late 1980s under Ronald Reagan and it is effective all the way back to 1987, technically even further.
There are two legal tests for determination of PFICs: an asset test and an income test. First of all, it is important to state that a PFIC is a corporation; it is a foreign corporation that satisfies one of the two tests that I just mentioned. The asset test is basically whether the corporation has 50% or more of assets as passive assets. If more than 50% of the assets are passive assets then you have a PFIC. The second one is if the foreign corporation has 75% or more of it's income as passive income, it is a PFIC. Some companies satisfy both tests; some companies satisfy either test and others do the satisfy either test. Just based on this definition, you can see one of the most common categories are foreign corporations that will fall into the category of PFICs are foreign mutual funds. They are meant to hold various parts of foreign corporations and most of their income would be in the form of dividends, interest or capital gains. As such, foreign mutual funds are the most common problem for US taxpayers.
Form 8621 on which the PFICs are reported, in of itself, is a four page form but it is being expanded and undergoing revisions, so it depends in what year you are watching this video. With respect as to which year in having to comply with this form.
PFICs calculations are very complex and there's not just one PFIC regime, there are various PFIC regimes and each PFIC regime has it's own complexities; in some situations, they are simply impossible to have elected. In another situation, you just have to go with the default option and face the consequences and the consequences are heavy; you are being taxed at the highest marginal tax in existence with an interest charge on top of that.
Irrespective of your actual tax bracket, that's the problem with the default methodology. I will not discuss the PFIC regimes in detail here; I just want to mention it as one of the most common ones to produce compliance with respect to US taxpayers and I want you to know the countries where this is especially likely. They are Spain, England, Germany and France. Basically all of main Western European countries, also Australia, New Zealand and one of the biggest ones - India and you'd be surprised to learn, also Mexico. The reason for it is that often-times Mexican banks will offer investments to US taxpayers who come to Mexico to open up a bank account and they say 'why don't you open another account like this?' without realizing that they are getting them into trouble with US international tax law.
If you would like to learn more about your PFIC compliance, you can call me at (952) 500-8159 or you can email me at: eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Worldwide Income Taxation for US Persons in Mexico | US International Tax Lawyer Alvarado Veracruz
https://youtu.be/cfOUUMQhC_A?si=sAHbDh7h3p-iKHJB
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
I'm continuing a series of vlogs from Alvarado, Mexico. In the first half of the series, I have focused on debunking various myths concerning US taxation for US persons who reside outside of the United States and in particular, in line with the general theme of this series of vlogs: Mexicans who acquired US tax status and continued to reside in Mexico.
Now that we've discussed where the wrong beliefs about US tax obligations of these persons, it is time now to turn our attention toward the actual, correct reporting obligations of US persons who reside in Mexico and we will begin with the most basic of them: worldwide income tax reporting.
A US person who resides in Mexico, and when I say a US person, I include Mexicans who acquired either US permanent residency or US citizenship and continue to reside in Mexico, for most of the year, at least. These persons must disclose their worldwide income on their US tax returns. Not just US-sourced income but worldwide income on their US tax returns. This is an absolute requirement and all US persons who reside in Mexico must comply with it.
This means reporting US-sourced income, Mexican-sourced income and any other income from whatever source or whatever country, it must be disclosed on US tax returns.
In the next vlog, I will continue discussing US tax obligations of Mexicans who acquired US status and continue to reside in Mexico.
Thank you for watching, until the next time.

### Debunking the "Only US Citizens" Myth About US International Income Tax Compliance | FBAR Lawyer
https://youtu.be/J2glUHbziQo?si=3JF2AyUerR6fFvvC
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
In this vlog from Alvarado, Mexico, I would like to continue focusing on the theme of debunking various tax myths that exist concerning the tax obligations of US tax persons who reside in Mexico; myths which are absolutely false but widely believed.
One of such myths is one I call the 'US Citizens Only Myth'. Sometimes it has a variation of 'US Permanent Residents and US Citizens Only Myth'. The idea behind these myths are very simple and very believable, this is why they are so wide-spread. That even though you may have qualified for under the substantial presence test to become a US tax resident, only US citizens or sometimes only US permanent residents and US citizens have to disclose their worldwide income and foreign assets on their US tax returns. The rest do not; they're either not US citizens or they're not US permanent residents or as I said there are variations on this myth.
This is completely false. As long as you are a tax resident, whether you are a tax residency comes from the substantial presence test, the fact that you are a permanent resident or the fact that you are a US citizen; it doesn't really matter, what the precise source of this belief but as long as you are a US tax resident, you must disclose your worldwide income on your US tax returns and you must disclose your foreign assets to the IRS.
Thank you for watching, until the next time.

### Obligation to Report Foreign Account to the IRS is Universal | US International Tax Attorney Mexico
https://youtu.be/ZO4bs-54LTc?si=x4vF5NMd-zlXZ_Gj
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Alvarado, Mexico. In the first part of this series, I'm focusing on debunking various myths that exist concerning US obligations of Mexicans who reside in Mexico and one of the most popular myths is what I call 'The Big Fish Myth'.
'The Big Fish Myth' is basically a belief that only people who are multimillionaires and multibillionaires need to disclose their foreign accounts and foreign income to the IRS. This is completely wrong.
While the extent of your tax reporting obligations may be affected by the amount of assets that you have, if you have assets outside of the United States and if you have income outside of the United States, you must disclose it.
Your worldwide income obligations are not affected by the fact that you have $1,000 of foreign income or you have $1,000,000 of foreign income; you still must report it. Your obligations may change in number and intensity but the basic obligation to disclose foreign assets to the IRS and disclose foreign income on your US tax returns remains unchanged.
Thank you for watching, until the next time.

### The Big Fish Myth: Who Really Needs to Report Foreign Accounts | US International Tax Lawyer Mexico
https://youtu.be/Hwr5NYTcqbo?si=z5Zsvj38c8J0WP5M
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Alvarado, Mexico. In this vlog, I would like to continue working on the same theme of debunking popular US tax myths that prevent US taxpayers from being fully compliant on their US tax returns. In this vlog, I will discuss what I call the 'Big Fish Myth'.
The Big Fish Myth is basically a belief that only multi billionaires need to disclose their foreign accounts and foreign income to the IRS - that the rest of the people don't really need to worry about this at all. This is completely wrong. US taxpayers' obligation to disclose their foreign accounts and foreign income in the United States is not affected by how many millions, billions or how many thousands they may have as long as they meet the threshold filing requirements, they must disclose their foreign assets and foreign income on their US tax returns.
Obviously, if you only have $1,000 in US accounts and foreign accounts, then your obligations are going to be a lot smaller than if you have $1,000,000 in foreign accounts. But your obligation to disclose your foreign assets and particularly foreign financial accounts are not affected by how much money or how many millions you have. As long as you meet the thresholds, you must file the relevant tax forms with your US tax returns.
In the next vlog, I will continue discussing your US tax obligations and debunk various tax myths concerning US tax compliance.
Thank you for watching, until the next time.

### Debunking the Separation Myth | US International Tax Lawyer Alvarado Veracruz Mexico
https://youtu.be/XLgFZa784as?si=ih86JQyasmy7UwY7
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Alvarado, Mexico and in this vlog I'd like to focus on what I call the separation myth. Basically a belief that if you reside, that you only need to report income in the jurisdiction where it was earned and only in that jurisdiction; that's why it's a separation myth. Basically, you separate your income by jurisdiction where it was earned and reported only in that jurisdiction.
This is a very common myth. I receive clients every single month who believe in this myth; actually, I have already lost count of how many people have come to me and said "Oh, you know what? I thought that everything that I had in Mexico is really only relevant to Mexico and everything we have in the United States is only relevant to the United States". Or "Everything we have in Thailand is only relevant to Thailand and everything in the United States is only relevant to the United States". "Everything in France is relevant only to France and everything I earn in the United States is only relevant to the United States" and "I've always disclosed my US-sourced income on my US tax returns and my foreign income either was not disclosed at all anywhere because it was not required to be so or it was disclosed on local tax returns".
This myth is completely wrong. If you are a US person; if you are a US tax resident to be more exact, then you must disclose your worldwide income on your US tax returns. It's not a matter of choice, it's an obligation and it is absolute.
The only exceptions, and there are few, are contained in some tax treaties, most commonly in the US-France tax treaty. Otherwise, the income must be disclosed on US tax returns if you are a US tax resident.
Be careful and do not fall victim to this myth. In the next vlog, I will continue debunking common myths concerning US tax compliance.
Thank you for watching, until the next time.

### Sherayzen Law Office Successfully Completes Its 2025 Spring Tax Season
On April 15, 2025, Sherayzen Law Office, Ltd., successfully completed its 2025 Spring Tax Season. It was a challenging and interesting tax season. Let’s discuss it in more detail.
2025 Spring Tax Season: Sherayzen Law Office’s Annual Compliance Clients
Annual tax compliance is one of the major services offered by Sherayzen Law Office to its clients. The majority of our annual compliance clients are individuals and businesses who earlier retained our firm to help them with their offshore voluntary disclosures. They liked the quality of our services so much that they preferred our firm above all others to ensure that they stay in full compliance with US tax laws.
It is natural that this group of clients is the largest among all other groups, because the unique specialty of our firm is conducting offshore voluntary disclosures.
A smaller group of our annual compliance clients consists of tax planning clients who also asked Sherayzen Law Office to do their annual compliance for them. While the group is smaller, it is usually the one always has a complex set of US tax compliance requirements due to the size of each client.
Finally, the last group of our annual compliance clients consists of businesses and individuals who were referred to our firm specifically for help with their annual compliance. These are usually foreign businesses who just expanded to the United States and foreign executives and professionals who just arrived to the United States to start working here. An important part of this group also includes foreign students.
2025 Spring Tax Season: Sherayzen Law Office’s Annual Compliance Services
Virtually all of our clients have exposure to foreign assets and international transactions. Hence, in addition to their domestic US tax compliance, Sherayzen Law Office prepares the full array of US international tax compliance forms related to foreign accounts (FBAR and Form 8938), PFIC calculations (Forms 8621), foreign business ownership and Section 367 notices (Forms 926, 5471, 8858, 8865, et cetera), foreign trusts (Form 3520 and Form 3520-A), foreign gifts/foreign inheritance (Form 3520), foreign ownership of US businesses (Form 5472) and other relevant US international tax compliance issues.
2025 Spring Tax Season: Unique Challenges and Opportunities
The 2025 Spring Tax Season was especially challenging because of the record number of deadlines that Sherayzen Law Office had to complete. During the season, Sherayzen Law Office filed a large number of FBARs, US income tax returns and US international tax returns such as Forms 3520, 5471, 8865, 8621 and 926.  Despite a very large number of deadlines that we timely finished prior to April 15, due to the international nature of our cases, Sherayzen Law Office extended ever more deadlines.
This year we also implemented on a grander scale new spreadsheets for clients, including the 3.2 version of Account Summary and 3.1 version of Summary of Entities. We also replaced the older versions of the Schedule C and Schedule E spreadsheets with the new 2025 versions. We hope to complete the process of firm-wide usage of updated spreadsheets by the end of the fall tax season.
Looking Forward to Completing Offshore Voluntary Disclosures, Additional Tax Planning and 2025 Fall Tax Season
Having completed such a challenging 2025 Spring Tax Season, Sherayzen Law Office now looks forward to completing our outstanding offshore voluntary disclosures and IRS audits.  During the Spring of 2025, we also expanded our portfolio of international tax planning clients. Finally, we will be working on completing the extensions prior to the October 15th, 2025 deadline.
Contact Sherayzen Law Office for Professional Help with US International Tax Law, including Offshore Voluntary Disclosures
If you have foreign assets or foreign income, contact Sherayzen Law Office for professional help. Our firm specializes in US international tax compliance. We have helped hundreds of US taxpayers to bring themselves into full compliance with US tax laws, and We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

### Santander Bank Polish PFIC Investments | International Tax Lawyers Chicago Illinois
https://youtu.be/GfJoTW0bbCc?si=duz8-UtL8XlE2Ylm
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Chicago, Illinois. Today I would like to discuss a difficult but very interesing subject of PFIC compliance concerning Polish investments. In particular, (I mean) those very popular former WBK bank (now it's Santander Bank) investments in Polish mutual funds.
These investments are considered to be PFICs for US international tax compliance purposes. PFICs - Passive Foreign Investment Companies have very special and very unfavorable treatment in US international tax law. If you are a US Person who is doing these types of investments, you should be very careful because these investments have to be worth it. Why? PFIC tax compliance could cost you more than a potential gain that you can get from those PFIC investments, especially if we're talking about small investments. The trouble that they can bring you could be enormous.
Not only are those investments reportable on FBAR and Form 8938 but you also have to consider the fact that you could/would be paying potentially tax at the highest marginal rate in existence on income related to gains from foreign mutual funds.
If you have any of these former WBK bank investments (now Santander bank investments) in Polish mutual funds you should contact me at (952) 500-8159 or email me at: eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### 2025 FBAR Civil Penalties | FBAR International Tax Lawyer & Attorney
This article is an update of the prior articles on the FBAR Civil Penalties. Since the US Congress mandated the IRS to adjust FBAR civil penalties for inflation on an annual basis, this article discusses the year 2025 FBAR Civil Penalties.
2025 FBAR Civil Penalties: Overview of the FBAR Penalty System
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”), has always had a very complex, multi-layered system of penalties, which has grown even more complicated over the years. There are four categories of FBAR penalties: criminal, willful, non-willful and negligent.
Of course, the most dreaded penalties are FBAR criminal penalties. Not only is there a criminal fine of up to $500,000, but, in some case, a person can be sentenced to 10 years in prison for FBAR violations (and these two criminal penalties can be imposed simultaneously). Since the focus of this article is on FBAR civil penalties.
The next category of penalties are FBAR civil penalties are for a willful failure to file an FBAR. The IRS imposes these penalties in a very harsh manner per each violation – i.e. on each account per year, potentially going back six years (the FBAR statute of limitations is six years).
The third category of penalties apply to a non-willful failure to file an FBAR or a filing of an incorrect FBAR. This means that the IRS can impose these penalties on US persons who do not even know that FBAR exists.
Finally, with respect to business entities, the IRS can assess a penalty for a negligent failure to file an FBAR or a filing of an incorrect FBAR.
It is important to note that FBAR has its own reasonable cause exception. The Reasonable Cause Exception can a very important tool for fighting the assessment of any of the aforementioned civil penalties. Moreover, each of these penalty categories has numerous levels of penalty mitigation that a tax attorney may utilize to lower his client’s FBAR civil penalties.
2025 FBAR Civil Penalties: Penalties Prior to November 2 2015
Prior to November 2, 2015, the US government never adjusted FBAR penalties for inflation. Rather, the penalties stayed flat at the same levels as the Congress originally mandated them. Let’s go over each category of penalties prior to inflation adjustment.
As of November 1, 2015, Willful FBAR penalties were up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation. Again, a violation meant a failure to correctly report an account in any year. Non-willful FBAR penalties were up to $10,000 per violation per year; per US Supreme Court’s decision last year, the penalty should have been imposed on a per form (not per account) basis. Finally, FBAR penalties for negligence were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.
2025 FBAR Civil Penalties: Inflation Adjustment
The situation changed dramatically in 2015. As a result of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Inflation Adjustment Act”), Congress mandated federal agents to: (1) adjust the amounts of civil monetary penalties with an initial “catch-up” adjustment; and (2) make subsequent annual adjustments for inflation. The inflation adjustment applied only to civil penalties.
The “catch-up” adjustment meant a huge increase in penalties, because the Congress now required federal agencies to update all of these penalties from the time of their enactment (or the last year the Congress adjusted the penalties) through November of 2015. This meant that, in 2015, the penalties jumped to account for all accumulated multi-year inflation. The Congress only gave one limitation this increase: the catch-up adjustment could not exceed to two and a half times of the original penalty.
Fortunately, Congress adjusted FBAR penalties in 2004 and the “catch-up” adjustment did not have to go back to the 1970s. It still meant a very large (about 25%) increase in FBAR civil penalties, but it was not as dramatic as some other federal penalties.
2025 FBAR Civil Penalties: Bifurcation of FBAR Penalty System
The biggest problem with the inflation adjustment, however, was the fact that it further complicated the already dense multi-layered FBAR system of civil penalties – FBAR penalties became dependent on the timing of a violation and IRS penalty assessment. In essence, the 2015 Inflation Adjustment Act split the FBAR penalty into two distinct parts.
The first part applies to FBAR violations that occurred on or before November 2, 2015. The old pre-2015 FBAR penalties described above applies to these violations irrespective of when the IRS actually assesses the penalties for these violations. The last FBAR violations definitely eligible for the old statutory penalties are those that were made concerning 2014 FBAR which was due on June 30, 2015. The statute of limitations for the 2014 FBAR ran out on June 30, 2021.
The second part applies to all FBAR violations that occurred after November 2, 2015. For all of these violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred. In other words, if an FBAR violation occurred on October 15, 2017 and the IRS assessed FBAR penalties June 17, 2021, the IRS would use the inflation-adjusted FBAR penalties as of the year 2021, not October 15, 2017.
2025 FBAR Civil Penalties: Penalties Assessed On or After January 17, 2025
Now that we understand the history of FBAR penalties, we can specifically discuss the 2025 FBAR Civil penalties. The first thing to understand is that we are talking about penalties assessed by the IRS on or after January 17, 2025; prior to that date, the 2024 FBAR civil penalties were still effective.
The 2025 Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(C)(i)(I) is $165,353 per violation. Per last year’s court decisions, the term “violation” in the context of willful FBAR penalties means on a “per account for each year” basis described above.
The 2025 Non-Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(B) is $16,536 per violation. The term “violation” in the context of non-willful FBAR penalties at this point has been settled to mean “per form” (rather than per-account) basis.
The 2025 Negligence FBAR penalty imposed under 31 U.S.C. §5321(a)(6)(A) is $1,430; if there is a pattern of negligence under 31 U.S.C. §5321(a)(6)(B), then the penalty goes up to $111,308.
Contact Sherayzen Law Office for Professional Help With Your Prior FBAR Noncompliance
Sherayzen Law Office is a leader in US international tax law and FBAR compliance. We have successfully helped hundreds of clients from over eighty countries resolve their prior FBAR noncompliance, including through various voluntary disclosure programs (such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, et cetera). We can help you! Contact Us Today to Schedule Your Confidential Consultation!

### West Virginia IRS Tax Relief: November 3 2025 Deadline | Tax Lawyer News
On March 14, 2025, the Internal Revenue Service announced a tax relief for individuals and businesses in parts of West Virginia affected by severe storms, straight-line winds, flooding, landslides and mudslides that began on February 15, 2025. On March 20, 2025, the tax relief expanded to four more counties. Let’s discuss this West Virginia IRS tax relief in more detail.
West Virginia IRS Tax Relief: Who is Affected
The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, individuals and households that reside or have a business in Greenbrier, Lincoln, Logan, McDowell, Mercer, Mingo, Monroe, Summers, Wayne and Wyoming counties qualify for tax relief.
The same relief will be available to any other counties added later to the disaster area. The current list of eligible localities is always available on the Tax relief in disaster situations page on IRS.gov.
West Virginia IRS Tax Relief: New Tax Deadline for Affected Counties
All taxpayers who reside in the aforementioned countries (as updated later by the IRS) will now have until November 3, 2025, to file various federal individual and business tax returns and make tax payments.
West Virginia IRS Tax Relief: What Tax Deadlines are Postponed by the IRS
The tax relief postpones various tax filing and payment deadlines that occurred from February 15, 2025, through November 3, 2025 (“postponement period”). As a result, affected individuals and businesses will have until November 3, 2025, to file returns and pay any taxes that were originally due during this period.
Here is a non-exclusive list:
Individual income tax returns and payments normally due on April 15, 2025.
2024 contributions to IRAs and health savings accounts for eligible taxpayers.
Quarterly estimated tax payments normally due on April 15, June 16 and September 15, 2025.
Quarterly payroll and excise tax returns normally due on April 30, July 31 and October 31, 2025.
Calendar-year partnership and S corporation returns normally due on March 17, 2025.
Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2025.
Calendar-year tax-exempt organization returns normally due on May 15, 2025.
West Virginia IRS Tax Relief: Additional Penalty Abatement
In addition, penalties for failing to make payroll and excise tax deposits due on or after February 15, 2025, and before March 3, 2025, will be abated as long as the deposits were made by March 3, 2025.
The Disaster assistance and emergency relief for individuals and businesses page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.
West Virginia IRS Tax Relief: Tax Relief is Automatic
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.
It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these kinds of unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the IRS Special Services toll-free number at 866-562-5227 to update their address and request disaster tax relief.
Moreover, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. In such cases, taxpayers qualifying for relief who live outside the disaster area need to contact the IRS Special Services toll-free number at 866-562-5227. Of course, this also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization. Disaster area tax preparers with clients located outside the disaster area can choose to use the bulk requests from practitioners for disaster relief option, described on IRS.gov.
West Virginia IRS Tax Relief: Additional Tax Relief
So, when should the taxpayers claim their losses disaster? Actually, there is a choice. Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2025 return normally filed next year), or the return for the prior year (2024). Also, taxpayers have extra time – up to six months after the due date of the taxpayer’s federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election. For individual taxpayers, this means October 15, 2026. Be sure to write the FEMA declaration number – 4861-DR − on any return claiming a loss. See Publication 547, Casualties, Disasters, and Thefts, for details.
West Virginia IRS Tax Relief: Taxation of Qualified Disaster Relief Payments
The IRS generally allows to exclude qualified disaster relief payments from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.
West Virginia IRS Tax Relief: Impact on Offshore Voluntary Disclosures
Sherayzen Law Office tracks carefully the IRS announcements of tax relief because they may affect the schedule of an offshore voluntary disclosure.  There are many reasons for it. For example, some taxpayers simply may not have the ability to tackle the document collection tasks for a while, others may benefit from the tax deadline postponement which would allow the voluntary disclosure to proceed before making any current-year tax compliance filings.

### Naples FBAR Attorney | International Tax Lawyer Florida
If you reside in Naples, Florida and have unreported foreign bank and financial accounts, you may be looking for a Naples FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs. Let’s explore the main reasons for it.
Naples FBAR Attorney is an International Tax Lawyer
From the outset, it is very important to understand that, by looking for Naples FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you search for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Naples FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Naples FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Naples FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Naples, Florida. On the contrary, consider international tax attorneys who reside in other states and help Naples residents with their FBAR compliance.  The most important consideration is developing the trust in your attorney’s knowledge, professionalism and ability to resolve your FBAR compliance issues. Remember that US international tax law (including FBAR compliance) is federal law.  Hence, the resident of your international tax attorney is not important.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Naples, Florida. Thus, if you are looking for a Naples FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Miami FBAR Attorney | International Tax Lawyer Florida
If you reside in Miami, Florida and have unreported foreign bank and financial accounts, you may be looking for a Miami FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs. Let’s explore the main reasons for it.
Miami FBAR Attorney is an International Tax Lawyer
From the outset, it is very important to understand that, by looking for Miami FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you search for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Miami FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Miami FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Miami FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Miami, Florida. On the contrary, consider international tax attorneys who reside in other states and help Miami residents with their FBAR compliance.  The most important consideration is developing the trust in your attorney’s knowledge, professionalism and ability to resolve your FBAR compliance issues. Remember that US international tax law (including FBAR compliance) is federal law.  Hence, the resident of your international tax attorney is not important.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Miami, Florida. Thus, if you are looking for a Miami FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Second Quarter 2025 IRS Interest Rates on Overpayment & Underpayment of Tax
On March 6, 2025, the IRS announced that the Second Quarter 2025 IRS interest rates on overpayment and underpayment of tax will remain the same as in the First Quarter of 2025.
This means that, the Second Quarter 2025 IRS interest rates will be as follows:
seven (7) percent for overpayments (six (6) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
four and a half (4.5) percent for the portion of a corporate overpayment exceeding $10,000.
How the IRS Calculated Second Quarter 2025 IRS Interest Rates
The IRS calculates the IRS interest rates based on specific tax provisions.  We begin with the Internal Revenue Code (“IRC”) §6621, which establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Additionally, under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Similarly to overpayments, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. Also, the readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Finally, pursuant to the IRC §6621(b)(1), the IRS computed the Second Quarter 2025 IRS interest rates based on federal short-term rates in January of 2025.
Importance of the Second Quarter 2025 IRS Interest Rates
The IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Firstly, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second, the IRS and the taxpayers use these rates to calculate the interest on any additional US tax liability on amended or audited tax returns. This also applies to the amended (and, in case of SFOP, original) tax returns that the taxpayers submit pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the Second Quarter 2025 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates.

### Chicago International Tax Lawyer | Reporting of Polish Income Paid in Poland on US Tax Returns
https://youtu.be/Oy2aso1v0pY?si=b5-rVK47N-VSvtIL
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
I'm continuing my series of blogs from Chicago, Illinois, United States. Today, I'd like to talk about something that I mentioned in the very first blog from this city and this is the fact that there is a very large Polish speaking community here in Chicago. Polish is still the second most spoken language among immigrant groups here in Chicago after Spanish. But since I've started many topics concerning Latin America in my blog from Mexico City, I wanted to focus today on the discussion of Polish-related issues, particularly income tax reporting concerning Polish-source income.
The reason why I thought about this topic is because I recall I had client from Chicago whose mother runs a successful busines in Poland and in order to reduce her Polish taxes, she would pay a salary to her daugher but her daughter never reported the Polish-source income, that is never until she came to know about the worldwide income reporting requirement. This is precisely what I wanted to emphasize in this blog:
Just because an income is paid in Poland to a Polish account of a US person, this income, and if this income is never brought into the United States, this will not be enough for this income not to be taxed in the United States.
The worldwide income reporting requirement applies irrespective of whether the income (the foreign-source income) is ever brought into the United States.
Thank you for watching, until the next time.

### US Taxation: Barter Exchange of Gold & Silver | US International Tax Attorney Chicago Illinois
https://youtu.be/ri4SGZ-QgG4?si=FagTB9rb3HTXdcwf
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Chicago, Illinois, United States. In a previous blog I discussed precious metals accounts and the FBAR and FATCA compliance requirements that apply to this type of an account and I promised that I would mention another aspect concerning income tax compliance with respect to precious metals.
I always keep my promises and I want to talk to you about a very interesting question: Does the change of gold for silver trigger income tax compliance requirements? Let's say you have one bar of gold and you've exchanged it for an equivalent amount of silver bars. A barter exchange of gold to silver or gold to platinum or silver to platinum or silver to gold, it doesn't really matter, is a taxable event. You will have to recognize income on the sale in essence of your gold bar. Let's say that you bought gold and let's say it was $1200 an ounce; you were very lucky. Now you've exchanged it for silver and the price for gold today is say $1850 an ounce which is not that far from the literal price as of today. While that exchange will trigger a gain between today's price of gold and the $1200 an ounce cost-basis if you had in that gold.
Thank you for watching, until the next time.

### Foreign Inheritance Tax Attorney Fresno | International Tax Lawyers California
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in Fresno, California, you need to look for a Foreign Inheritance Tax Attorney Fresno. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney Fresno: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney Fresno: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney Fresno: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in Fresno and all over the world.  We also have highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney Fresno: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Fresno, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you!
Hence, if you are looking for a Foreign Inheritance Tax Attorney Fresno, contact us now to schedule Your Confidential Consultation!

### Tampa FBAR Attorney | International Tax Lawyer Florida
If you reside in Tampa, Florida and have unreported foreign bank and financial accounts, you may be looking for a Tampa FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Tampa FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Tampa FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Tampa FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Tampa FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Tampa FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Tampa, Florida. On the contrary, consider international tax attorneys who reside in other states and help Tampa residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Tampa, Florida. Thus, if you are looking for a Tampa FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### FBAR Gold & Precious Metal Accounts Reporting | International Tax Lawyer & Attorney Chicago Illinois
https://youtu.be/wDMs5akUXeQ?si=soMP6Akw9yNpDQiv
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Chicago, Illinois, United States. For some reason, that I still do not fully understand, there's an inordinant amount of people in Chicago who came to my office with respect to FBAR compliance concerning their precious metals accounts.
This is a good time to discuss FBAR compliance concerning precious metals. If you own a gold bar or more realistically gold coins and you place them in your safe at your house, even if this house is located in Switzerland, that is not a reportable account. However, if you place your ownership of precious metals (when I say precious metals, I mean gold, silver, platinum, valuable minerals etcetera). If you place these items, these precious metals with a bank in the bank vault and there is a number that identifies your ownership of these precious metals, then this is a reportable account for FBAR purposes. Interestingly enough, it's also a reportable account for FATCA purposes on Form 8938.
As long as there is a fiduciary relationship with respect to precious metals that you own, there will be a reportable foreign account; of course it has to be a foreign account in order to be reportable for FBAR/FATCA purposes. If you have it here somewhere in the United States, that of course would not matter and for some inexplicable reason, there has been a very large number of people from here (Chicago) who came to my office and asked me to do FBAR compliance or to do an offshore voluntary disclosure with respect to their prior FBAR noncompliance concerning their foreign precious metal accounts.
(But) I want to warn you in this video, if you have any of these accounts, you need to make sure that you are fully compliant with US international tax law with respect to FBAR compliance, with respect to FATCA compliance and with respect to foreign income reporting requirements. You have to report any income from sale of your foreign precious metal accounts or precious metals, I should say.
In the next blog, I will talk about another income tax aspect of having foreign precious metals accounts.
Thank you for watching, until the next time.

### Chicago Illinois International Tax Lawyer: Link Between FATCA and IRS Offshore Voluntary Disclosure
https://youtu.be/2rxdX5YPhi8?si=Unabz3EHpjVgwEjI
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from Chicago. I'm in Grand Park in downtown Chicago. As I mentioned in a previous blog, this park has a very special meaning for me because it was precisely here where Obama made his speech and it was precisely under the Obama administration when FATCA the Foreign Account Tax Compliance Act, the most influencial piece of legislation, in US international tax law history was passed into law.
Once of the most important things we should note about FATCA is the link between FATCA and the popularity of the various IRS voluntary disclosure programs, including OVDP, the 2009 OVDP that was put into place while FATCA was still under discussion, the 2011 OVDI, the offshore voluntary disclosure initiative - a highly successful offshore voluntary disclosure program and it was precisely highly successful because of FATCA. It was FATCA that was a major impetus for US owners of foreign accounts to bring themselves into full compliance with US international tax laws and of course the 2012 OVDP with its modification of 2014 OVDP as well as the 2014 Streamlined compliance programs: the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
All of these voluntary disclosure programs are directly linked to FATCA. Without FATCA, they would never have been as successful as they were and US international tax rules would not have had such a big impact as they do today.
In the next blog, I will talk more about US international tax issues concerning Chicago and (the) people who live here.
Thank you for watching, until the next time.

### Tulsa FBAR Attorney | International Tax Lawyer Oklahoma
If you reside in Tulsa, Oklahoma and have unreported foreign bank and financial accounts, you may be looking for a Tulsa FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Tulsa FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Tulsa FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Tulsa FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Tulsa FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Tulsa FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Tulsa, Oklahoma. On the contrary, consider international tax attorneys who reside in other states and help Tulsa residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Tulsa, Oklahoma.
Thus, if you are looking for a Tulsa FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Portland Oregon International Tax Lawyer: Streamlined Disclosure of Foreign Inheritance in Thailand
https://youtu.be/ll2uOcWGRjI?si=z64r80fT8U_7Glcb
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Portland, Oregon. As part of the series, I'm discussing the cases that I've handled in the past with respect to Asian Americans and Asians who became US tax residents and today I'd like to talk to you about a case from Thailand that I had a few years ago. The essence of this case is foreign inheritance.
A client came to me a few years actually after receiving a sizeable foreign inheritance. As it turns out to be the case, this was not only issue. It appears that before his death, her father actually gifted her a large number of accounts in Thailand, all of them in Thai Bahts. None of these accounts were ever disclosed to the IRS on FBAR or Form 8938. When my client came to me, we could immediately identify several problems: FBAR, Form 8938 and Form 3520. As we started digging deeper into her assets, it turns out that a large amount of her assets were invested in life insurance policies. Now, Thai life insurance policies come in two parts: Simple life insurance policies and Investment life insurance policies.
When we talk about investment-type life insurance policies, we're talking about PFIC compliance; these are almost always foreign mutual funds that they're invested into. In addition to all of the forms I have mentioned, we also needed to do tax compliance concerning Form 8621.
The case was not an easy one but thankfully everything went well; we've done our due diligence; we've discovered all of the accounts, identified all of the compliance issues, we've completed the Streamlined Domestic Offshore Procedures disclosure and the IRS accepted it. There was no follow-up audit with respect to this voluntary disclosure.
This is a good example of how complex foreign inheritance compliance can be. It's not only about the assets that you inherit, it's also (about) the assets you had before that. It's understanding the history of the foreign inheritance; it's understanding the relationship in the family. It's being diligent and getting through all of the facts in the case: analyzing the primary documents, bank statements etcetera.
I've handled hundreds of voluntary disclosures and I can tell you that every one of these has it's certain individual face: meaning it has its own characteristics which are unlike any other case. Now, some of the cases, of course can be very similar but there's always something in that particular case that will differ this case from another.
In the next blog, I will continue talking about my experience with respect to doing voluntary disclosures for Asian Americans and Asians who became US tax residents.
Thank you for watching, until the next time.

### St Louis FBAR Attorney | International Tax Lawyer Missouri
If you reside in St Louis, Missouri and have unreported foreign bank and financial accounts, you may be looking for a St Louis FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
St Louis FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for St Louis FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
St Louis FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining St Louis FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
St Louis FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in St Louis, Missouri. On the contrary, consider international tax attorneys who reside in other states and help St Louis residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including St Louis, Missouri. Thus, if you are looking for a St Louis FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### French Bank Accounts US Tax Obligations | International Tax Lawyer & Attorney
For many years now France has consistently been one of the top five countries for my offshore voluntary disclosure cases. One of the top reasons for such an extensive noncompliance is the fact that the US tax reporting requirements are very diverse and easy to violate by a US owner of French bank and financial accounts. In this article, I will discuss the top three of such French bank accounts US tax obligations.
French Bank Accounts US Tax Obligations: Definition of US Owner
Our first point of departure is to define the term “US owner”.  I use this phrase to refer to US citizens, US permanent residents and individuals who satisfied the Substantial Presence Test requirements.  Note that such persons are generally US tax residents for income tax purposes, unless an exception applies.
French Bank Accounts US Tax Obligations: Two Sets pf Reporting Requirements
A US owner of French bank accounts potentially faces two large sets of US tax reporting requirements: income tax reporting requirements and US information returns.  Some of these requirements may be overlapping and even duplicative. It is important for a US owner of French bank accounts to remember that he may need to comply with both sets of requirements.  Complying with just one is not enough.
French Bank Accounts US Tax Obligations: Income-Reporting Requirements
Let’s start with the first important reporting requirement concerning French Bank accounts: income tax reporting requirements. If the US owner of French bank accounts is a US tax resident for income tax purposes, then he must disclose his worldwide income on his US tax returns. Of course, this includes any income generated by his French bank accounts.
The US owner must disclose his income from foreign bank accounts irrespective of whether he lives in the United States or outside of the country, whether this income is brought to the United States or if it continues to accumulate in his foreign bank accounts and whether the owner already paid French taxes on this income or not. The main rule is that, as long as you are a tax resident of the United States, you must comply with the worldwide income reporting requirement.
This requirement applies to all reportable income as determined by US tax rules. I want to emphasize this point: the worldwide income reporting rule requires US tax residents to disclose all of their foreign income deemed reportable under the US tax rules, not the French rules. Since there are huge differences between the French tax code and the US Internal Revenue Code, there are a lot of potential tax traps for US taxpayers with French bank and financial accounts.
French Bank Accounts US Tax Obligations: Assurance Vie Accounts
Probably the most common tax trap that illustrates well the differences between US tax rules and French tax rules are Assurance Vie accounts.  They are very common among French citizens and non-taxable (except certain social taxes) until there is a withdrawal from the account.  US tax rules completely disregard the preferential tax treatment of the French government. Instead, the IRS taxes Assurance Vie accounts as just an investment account.  Since at least a part of each Assurance Vie account is usually invested in foreign mutual funds, the result is that the US owners of this type of an account are very likely to have extensive and expensive PFIC compliance issues.
French Bank Accounts US Tax Obligations: FBAR
The most important asset reporting requirement that applies to US taxpayers with French bank accounts is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. As long they meet the filing threshold (see below), US taxpayers are required to disclose all of their French bank accounts over which they have signatory authority or in which they have a financial interest (i.e. they own an account directly or indirectly, either individually or jointly).
FBAR is a unique information return. The anomaly begins with the fact that FBAR is not technically a tax form, but a BSA form which has been administered by the IRS since the year 2001. This is why FBAR is not filed together with the tax return but has to be e-filed separately through BSA website.
Second, FBAR also has a very low filing threshold – just $10,000. Moreover, this threshold is determined by taking the highest balances during a calendar year of all of the taxpayer’s foreign accounts (even if these accounts are located in a foreign country other than France) and adding them all up. Sometimes, this results in significant over-reporting of a person’s actual balances, which easily satisfies the reporting threshold.
Finally, FBAR has very severe noncompliance penalties. Its penalties range from non-willful penalties (i.e. potentially a situation where a person simply did not know about FBAR’s existence) to extremely high civil willful penalties and even criminal penalties. In other words, in certain circumstances, FBAR noncompliance may result in actual jail time.
French Bank Accounts US Tax Obligations: FATCA Form 8938
While a relative newcomer, FATCA Form 8938 quickly occupied a special place in US international tax compliance. It may appear that Form 8938 duplicates FBAR with respect to foreign bank account reporting, but there are very important differences between these forms. Let’s focus on the top five differences.
First, unlike FBAR, the taxpayer files Form 8938 together with his US tax return. This means that the Form 8938 noncompliance may keep the statute of limitations open on the filer’s entire tax return indefinitely, thereby potentially subjecting it to an IRS audit indefinitely.
Second, there are differences between FBAR and Form 8938 concerning foreign account information that one needs to disclose on these forms. Form 8938 forces US taxpayers to disclose not only most of the information that is required to be reported on FBAR, but also such details as whether an account was opened or closed in the reporting year, whether it produced any income, how much income was produced, et cetera. This may give the IRS additional information necessary to determine if there was prior tax noncompliance with respect to these accounts.
Third, there are important substantive differences between these two forms with respect to what accounts have to be disclosed. For example, signatory authority accounts must be disclosed on FBAR, but Form 8938 has no such requirement. On the other hand, a paper bond certificate may not need to be reported on FBAR, but it must be disclosed on Form 8938. In general, Form 8938 is likely to apply to a wider range of French assets than FBAR; this is why Form 8938 is often called the “catch-all” form.
Fourth, while FBAR penalties can be extremely severe, Form 8938 sports its own arsenal of formidable noncompliance penalties. In fact, in a non-willful situation, Form 8938 penalties may have an equivalent or even larger impact due to the fact that they have a much broader and affect even the income tax penalties. For example, Form 8938 noncompliance may lead to higher accuracy-related penalties with respect to income-tax noncompliance. Form 8938 penalties may also impact a taxpayer’s ability to utilize foreign tax credit.
Finally, unlike FBAR, Form 8938 comes with a third-party FATCA verification mechanism. Under FATCA, the IRS should receive foreign-account information not only from taxpayers who file Forms 8938, but also from their foreign financial institutions (“FFIs”). This means that it is much easier for the IRS to identify Form 8938 noncompliance than FBAR noncompliance (although, a FATCA-based disclosure by the FFIs may also lead to a fairly fast discovery of FBAR noncompliance).  
Contact Sherayzen Law Office for Professional Help with Your French Bank Accounts US Tax Obligations
If you are a US Person who has undisclosed French bank accounts, contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers around the globe to resolve their past FBAR and FATCA noncompliance, including with respect to financial accounts in France.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Pittsburgh FBAR Attorney | International Tax Lawyer Pennsylvania
If you reside in Pittsburgh, Pennsylvania and have unreported foreign bank and financial accounts, you may be looking for a Pittsburgh FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Pittsburgh FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Pittsburgh FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Pittsburgh FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Pittsburgh FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Pittsburgh FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Pittsburgh, Pennsylvania. On the contrary, consider international tax attorneys who reside in other states and help Pittsburgh residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Pittsburgh, Pennsylvania. Thus, if you are looking for a Pittsburgh FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Phoenix FBAR Attorney | International Tax Lawyer Arizona
If you reside in Phoenix, Arizona and have unreported foreign bank and financial accounts, you may be looking for a Phoenix FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Phoenix FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Phoenix FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Phoenix FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Phoenix FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Phoenix FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Phoenix, Arizona. On the contrary, consider international tax attorneys who reside in other states and help Phoenix residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Phoenix, Arizona. Thus, if you are looking for a Phoenix FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Oklahoma City FBAR Attorney | International Tax Lawyer Oklahoma
If you reside in Oklahoma City, Oklahoma and have unreported foreign bank and financial accounts, you may be looking for a Oklahoma City FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Oklahoma City FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Oklahoma City FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Oklahoma City FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Oklahoma City FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Oklahoma City FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Oklahoma City, Oklahoma. On the contrary, consider international tax attorneys who reside in other states and help Oklahoma City residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Oklahoma City, Oklahoma. Thus, if you are looking for a Oklahoma City FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Foreign Inheritance Tax Attorney Santa Ana | International Tax Lawyers California
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in Santa Ana, California, you need to look for a Foreign Inheritance Tax Attorney Santa Ana. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney Santa Ana: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney Santa Ana: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney Santa Ana: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in Santa Ana and all over the world.  We also have highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney Santa Ana: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Santa Ana, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you!
Hence, if you are looking for a Foreign Inheritance Tax Attorney Santa Ana, contact us now to schedule Your Confidential Consultation!

### Substantial Presence Test Exceptions | Minneapolis Minnesota International Tax Lawyer
In a previous article, I discussed in detail the Substantial Presence Test and I mentioned that there are a number of exceptions to the Test. This means that, even though a person met the requirements of the substantial presence test, he can still avoid the resident alien status for US income tax purposes based on a specific exception.  In this brief essay, I will summarize these Substantial Present Test exceptions.
Substantial Presence Test Exceptions: Closer Connection
The first set of exceptions includes the Closer Connection Exception and the Tax Treaty Exception.  Let’s deal with each one separately.
Under the Closer Connection Exception, an individual who meets the requirements of the Substantial Presence Test is able to escape being a US tax resident for income tax purposes if he can demonstrate a “closer connection” to a foreign country.
In another article, I detail all of the requirements of the Closer Connection Exception.  Here I would like to restate the main requirements under IRC § 7701(b)(3)(B) and Treas. Reg. § 301.7701(b)-2(a):
1.The individual must be present in the United States for fewer than 183 days in the current calendar year;
2.The individual must maintain a tax home in a foreign country during the year;
3.The individual must have a closer connection to that foreign country than to the United States; and
4. An individual must be an eligible individual.
Substantial Presence Test Exceptions: Tax Treaty Exception
The Tax Treaty Exception is very similar to the Closer Connection Exception, but it is based on a completely different concept – the tie-breaker rules of a tax treaty.
 IRC §7701(b)(6) and Treas. Reg. §301.7701(b)-7 provide that an individual who meets the substantial presence test but is a resident of a treaty country under a tie-breaker provision of an income tax treaty may elect to be treated as a nonresident alien for US income tax purposes. This individual will need to make an election on Form 8833, Treaty-Based Return Position Disclosure.
Substantial Presence Test Exceptions: Eight Categories of Exempt Individuals
While the Closer Connection and the Tax Treaty Exceptions deal with someone who actually met the Substantial Presence Test and is trying to escape the its consequences, the second set of exceptions exempts the days spent in the United States from the consideration of the Substantial Presence Test so that the exempt individual never meets the Substantial Presence Test.  This is a very important distinction, because it may greatly affect one’s obligations concerning US international information returns.
Here is a list of categories of exempt persons:
Foreign government-related individuals and their immediate family (26 USC §7701(b)(5)(B))
Teachers and trainees and their immediate family (26 USC §7701(b)(5)(C))
Foreign students on F-, J-, M- or Q-visas (26 USC §7701(b)(5)(D))
Professional athletes temporarily in the US for charitable sporting events (26 USC §7701(b)(5)(A)(iv))
Individuals unable to leave the US due to medical conditions (26 USC §7701(b)(3)(D)(ii))
commuters from Canada and Mexico 26 USC §§7701(b)(7)(B)
foreign vessel crew members 7701(b)(7)(D) and
and persons who travel between two foreign countries with a less than a 24-hour layover in the United States 7701(b)(7)(C)
Substantial Presence Test Exceptions: Note on the Professional Athletes Exception
The “professional athletes who are temporarily present in the United States to compete in a charitable sporting event” category  has very specific requirements for the sport events in order for exemption to apply.  First, the sports event must be organized primarily to benefit §503(c)(3) tax-exempt organization. Second, the net proceeds from the event must be contributed to the benefitted tax-exempt organization. Finally, the event must be carried out substantially by volunteers.
Substantial Presence Test Exceptions: Note on the Medical Condition Exception
Concerning the last category “foreign aliens who are unable to leave the United States because of a medical condition”, Rev. Proc. 2020-20 expanded this medical condition exception to include “COVID-19 Medical Condition Travel Exception” for eligible individuals unable to leave United States during “COVID-19 Emergency Period”. The term COVID-19 Emergency Period is a single period of up to 60 consecutive calendar days selected by an individual starting on or after February 1, 2020 and on or before April 1, 2020 during which the individual is physically present in the United States on each day. An Eligible Individual may claim the COVID-19 Medical Condition Travel Exception in addition to, or instead of, claiming other exceptions from the substantial presence test for which the individual is eligible.
Substantial Presence Test Exceptions: Eligibility is on Day-by-Day Basis
The eligibility for any particular exception is determined on a day-by-day basis. If an alien ceases to qualify for any of these exceptions because of a change in circumstances but remains in the United States, he must count the days present in the United States for the purposes of the substantial presence.  The count must start from the very day that he no longer qualifies for the exception.
Substantial Presence Test Exceptions: Immediate Family
Immediate family can be derivatively eligible for a substantial present test exception only for the following categories: foreign government-related individual, a teacher or trainee (J-visa or Q-visa holder) and a student (F-visa or M-visa holder).  The family of the individuals in the other five categories may only claim an exception based on their own particular facts and circumstances.
Contact Sherayzen Law Office for Professional Help with US International Tax Law
US international tax law is incredibly complex.  This is why you need to contact Sherayzen Law Office for professional help.  Sherayzen Law Office is a highly-experienced leader in US international tax compliance that stands out for its ability to navigate complex international tax issues with creativity, precision and depth.
Contact Us Today to Schedule Your Confidential Consultation!

### Sterling FBAR Attorney | International Tax Lawyer Virginia
If you reside in Sterling, Virginia and have unreported foreign bank and financial accounts, you may be looking for a Sterling FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Sterling FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Sterling FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Sterling FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Sterling FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Sterling FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Sterling, Virginia. On the contrary, consider international tax attorneys who reside in other states and help Sterling residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Sterling, Virginia. Thus, if you are looking for a Sterling FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### McLean FBAR Attorney | International Tax Lawyer Virginia
If you reside in McLean, Virginia and have unreported foreign bank and financial accounts, you may be looking for a McLean FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
McLean FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for McLean FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
McLean FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining McLean FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
McLean FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in McLean, Virginia. On the contrary, consider international tax attorneys who reside in other states and help McLean residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including McLean, Virginia. Thus, if you are looking for a McLean FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Portland Oregon International Tax Attorney: FBAR Case Study for Indian Bank Accounts
https://youtu.be/MvC6XMDvdz4?si=gsLILaQmv2LTFrH_
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Portland, Oregon. As part of this series, I'm doing a review of my cases related to Asian Americans or Asians who became US tax residents.
Today, I'd like to focus on India; on a case which is overall pretty ordinary except in one aspect: the number of accounts. In this case, a married couple from India (they've lived in the United States for a number of years, but they were still here on the H-1 Visa) and they came to me because they discovered the existence of FBAR. What in particular they discovered was is that foreign bank accounts need to be reported on FBAR. In their minds, a bank account really means a bank account, meaning a checking account or a savings account.
When they came to me, they told me that they had 15 bank accounts overall and it is very common in India to spread out your holdings over various banks. They had 15 accounts in four different banks. However, it turns out that instead of having 15 savings or checking accounts, the clients had also over 150 fixed-deposit accounts. In their mind, a fixed-deposit account was not a separate account; it is an account linked to a checking account or savings account.
However, when we talk about FBAR, we have to report all bank accounts separately; whether they are fixed-deposit accounts, checking accounts or savings accounts. We have to report each of them, no matter how short-lived they are - meaning if they were opened and closed even for one day, that would be enough to make it a reportable account for FBAR purposes. It also does not matter whether the funds from these accounts go back to the same checking account or savings account; all of these accounts are reportable. On top of that, this client also had about 10 mutual funds and about 7 (if my memory serves me well) life insurance policies.
I'll talk a little later in another blog about Indian mutual funds and how they should be reported. This case is very important to understand that fixed-deposit accounts have to be separately reflected on FBARs.
It's also important to understand that often times, you have to do your independent investigation of your client assets. A diligent attorney should always do an independent investigation of his clients' assets; not to the point of intruding into clients' affairs but asking the client if he sees something in the bank accounts that does not correspond with reality. The way I discovered there were fixed-deposit accounts was simply looking at the bank statements. It's very important to look at the primary documents in order to understand how many accounts you have and what kind of reporting should be expected on FBAR and Form 8938.
In the next blog, I will continue my series of blogs related to Asians who became US tax residents and Asian Americans.
Thank you for watching, until the next time.

### Foreign Inheritance Tax Attorney San Jose | International Tax Lawyers California
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in San Jose, California, you need to look for a Foreign Inheritance Tax Attorney San Jose. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney San Jose: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney San Jose: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney San Jose: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in San Jose and all over the world.  We also have highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney San Jose: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in San Jose, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you!
Hence, if you are looking for a Foreign Inheritance Tax Attorney San Jose, contact us now to schedule Your Confidential Consultation!

### Herndon FBAR Attorney | International Tax Lawyers Virginia
If you reside in Herndon, Virginia and have unreported foreign bank and financial accounts, you may be looking for a Herndon FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Herndon FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Herndon FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Herndon FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Herndon FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Herndon FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Herndon, Virginia. On the contrary, consider international tax attorneys who reside in other states and help Herndon residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Herndon, Virginia. Thus, if you are looking for a Herndon FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### FBAR Reporting for Chinese Foreign Bank Accounts: A Case Study | FBAR Tax Lawyers Portland Oregon
https://youtu.be/hth0sVMefLM?si=M2j3F71lKtAPkU6t
Good morning and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Portland, Oregon. As part of this series, I'm doing a review of my cases related to Asian Americans or Asians who became US tax residents.
Today, I'd like to talk to you about a small but interesting case related to FBAR reporting. A Chinese couple has lived in the United States for over 20 years and discovered the existence of FBAR. My clients understood that FBAR requires the disclosure of foreign bank accounts.
They came to me and said: "We have four bank accounts" and I said, "Fine, we'll do a voluntary disclosure". They gave me the amounts, they gave me the information and as I was going through the bank accounts, I discovered that there were a lot of deposits and withdrawals; a pattern compatible with that of fixed-deposit accounts. At that point, I asked them: "Besides the four bank accounts you've given me, do you have any other accounts which would be fixed-deposit accounts?" At this point, he said: "I didn't realize that fixed-deposit accounts are treated as separate accounts because all of the money eventually goes back to the main account. Wouldn't we be double-counting the values on these accounts if we were to include all of them separately on the FBAR?"
My answer was: "Indeed, we would be double-counting but FBAR not only permits but requires that kind of double-counting. You have to report the highest balance of each foreign account on the FBAR". It turns out that he had over 20 fixed-deposit accounts during a six-year period that is covered by the SDOP disclosure.
We successfully completed the voluntary disclosure; The client paid the penalty. Of course the penalty for SDOP purposes does not double-count the balances because it is based not on the highest balances but on the end-of-year balances.
The morale of the story is that you have to report each account separately; even if this is just an account that was opened and closed in the same year and even if the money came from and went back to the same savings account or checking account.
In my next blog, I will continue discussing issues related to my cases that I've handled in the past concerning Asian Americans or Asians who became US tax residents.
Thank you for watching, until the next time.

### Fairfax FBAR Attorney | International Tax Lawyers Virginia
If you reside in Fairfax, Virginia and have unreported foreign bank and financial accounts, you may be looking for a Fairfax FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Fairfax FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Fairfax FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Fairfax FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Fairfax FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Fairfax FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Fairfax, Virginia. On the contrary, consider international tax attorneys who reside in other states and help Fairfax residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Fairfax, Virginia. Thus, if you are looking for a Fairfax FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Substantial Presence Test United States Definition | International Tax Lawyer Minneapolis
Foreigners who satisfy the Substantial Presence Test constitute a an important and very large category of resident aliens for US tax purposes. Substantial Presence Test is based on the number of days that an individual is physically present in the country. The definition of “United States” varies depending on a particular Internal Revenue Code (IRC) provision.  This brief essay explores the Substantial Presence Test United States definition.
Substantial Presence Test United States Definition: Background Information
In a previous article, I explored in detail the Substantial Presence Test. I will only provide a summary of the test in this essay.
In reality, there are two substantial presence tests; if an individual meets either test, he is a US tax resident unless an exception applies.
The first substantial presence test is met if a person is physically present in the United States for at least 183 days during the calendar year. 26 USC §7701(b)(3).  
The second test (the so-called “lookback test”) is satisfied if two conditions are met: (1) the person is present in the United States for at least 31 days during the calendar year; and (2) the sum of the days on which this person was present in the country during the current and the two preceding calendar years (multiplied by the fractions found in §7701(b)(3)(A)(ii)) equals to or exceeds 183 days. 26 USC 7701(b)(3)(A).  
Let’s discuss how exactly the lookback test works.  The way to determine to determine whether the 183-day test is met is to add: (a) all days present in the United States during the current calendar year (i.e. the year for which you are trying to determine whether the Substantial Presence Test is met) + (b) one-third of the days spent in the United States in the year immediately preceding the current year + (c) one-sixth of the days spent in the United States in the second year preceding the current calendar year. See 26 USC §7701(b)(3).
Substantial Presence Test United States Definition: Definition of United States
Treas. Regs. §301.7701(b)-1(c)(2)(ii) define “United States” for the purposes of the Substantial Presence Test.  In particular, the regulations state that “United States” includes all fifty states of the United States and the District of Columbia.  Moreover, the definition of “United States” also includes: “the territorial waters of the United States and the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the United States and over which the United States has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources”.  Id.
Moreover, the regulations specifically exclude all possessions and territories of the United States as well as the air space over the United States. Id.  For example, time spent in Puerto Rico will not count toward the substantial presence test. Similarly, if an alien flies over the United States on a plane and never lands, then the IRS will exclude this day from the count.
Contact Sherayzen Law Office for Professional Help with US International Tax Law
The Substantial Presence Test United States Definition is just one of a huge array of complications in US international tax law.  This is why you need to secure the help of Sherayzen Law Office for professional help with US international tax issues, including tax compliance, tax planning and offshore voluntary disclosures.  We have helped hundreds of taxpayers around the world.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Inheritance Tax Attorney San Diego | International Tax Lawyers California
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in San Diego, California, you need to look for a Foreign Inheritance Tax Attorney San Diego. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney San Diego: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney San Diego: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney San Diego: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in San Diego and all over the world.  We also have highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney San Diego: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in San Diego, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you!
Hence, if you are looking for a Foreign Inheritance Tax Attorney San Diego, contact us now to schedule Your Confidential Consultation!

### Green Card US Tax Residency Relationship | International Tax Lawyers Miami
The definition of a US tax resident consists of various categories.  Among them are US Permanent Residents or “green card” holders.  This article explores Green Card US tax residency relationship.
General Rule: Green Card Holders are US Tax Residents
A lawful permanent resident of the United States is a US tax resident. IRC §7701(b)(1)(A)(i). IRC §7701(b)(6) defines the lawful permanent resident as: (1) the individual who has been “lawfully accorded the privilege of residing permanently in the United States as an immigrant in according with the immigrations laws” at any time during the calendar year, and (2) “such status has not been revoked (and has not been administratively or judicially determined to have been abandoned).”
Green Card US Tax Residency: Physical Presence in the United States Does Not Matter
As you can see from the definition above, the green card test does not depend on where the US permanent resident actually resides.  In other words, even if a green card holder spent very little time (just enough to maintain his green card) in the United States, he is still a US tax resident.
Green Card US Tax Residency: Entry into the United States is Critical
Contrary to the actual physical presence after becoming a US tax resident, the entry into the United States with a green card is a highly important event.  As the regulations explain, a green card holder is not a “resident alien” for US tax purposes until he actually enters the United States while holding his green card.  “The residency starting date for an alien who meets the lawful permanent resident test (green card test), described in paragraph (b)(1) of § 301.7701(b)-1, is the first day during the calendar year in which the individual is physically present in the United States as a lawful permanent resident.” §301.7701(b)-4(a).
This means that, if an alien receives a green card but never enters the United States, he will never be a “resident alien” for US tax purposes. Of course, presumably, the green card will eventually lose its validity for failure to maintain it.
However, once the alien enters the United States with his green card, he becomes a resident alien for US tax purposes exactly on that day.  His US tax residency will last until the green card is revoked or he is considered to have abandoned his US permanent residency either judicially or administratively.
Green Card US Tax Residency: US International Tax Implications
Since obtaining a green card is pretty much equivalent to becoming a US tax resident, we must explore the implications of becoming a US tax resident especially from the US international tax perspective.  In a previous article, I already explored in detail the differences between US tax obligations of a resident alien (for US tax purposes) versus nonresident alien. Here, I will highlight the most important of these obligations from the US international tax perspective.
The first obvious US tax consequence of getting a green card and becoming a US tax resident is worldwide income taxation.  The United States government taxes its tax residents on their worldwide income, irrespective of where they earn this income. It also does not matter whether the green card holder’s foreign income is subject to taxation in a foreign country, whether it has been repatriated to the United States, whether it comes from pre-US funds, et cetera.  The obligation to report foreign income on US tax returns is absolute (of course there may be some treaty-based specific exceptions).
Second, a US tax resident may have to report deemed income based on the various anti-deferral tax regimes, such as Subpart F rules, GILTI, et cetera.
Finally, a US tax resident must also comply with all of his US information returns obligations, such as FBAR (officially FinCEN Form 114, the Report of Foreign Bank and Financial Accounts), Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, Form 8938, Form 926, et cetera
Contact Sherayzen Law Office to Understand Your US International Tax Obligations as a Green Card Holder
If you have a green card and you wish to understand your US international tax obligations, you should contact the international tax law firm of Sherayzen Law Office.  We have extensive experience in advising green card holders concerning their US tax obligations, including compliance with US international information returns.  If you have not compliant with your US tax obligations, then we can help bring your US tax affairs into full compliance with US tax laws.
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Inheritance Tax Attorney San Francisco | International Tax Lawyers California
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in San Francisco, California, you need to look for a Foreign Inheritance Tax Attorney San Francisco. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney San Francisco: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney San Francisco: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney San Francisco: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in San Francisco and all over the world.  We also have highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney San Francisco: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in San Francisco, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you! Hence, if you are looking for a Foreign Inheritance Tax Attorney San Francisco, contact us now to schedule Your Confidential Consultation!

### US Owners' Tax Reporting Requirements for Uruguayan Corporations | International Tax Attorney
https://youtu.be/VTDQG_8b7Fs?si=2D_dMc_MFsWEWIvt
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Montevideo, Uruguay and in this blog, I'd like to continue discussing what I started in the previous blog: US international tax reporting requirements for US citizens and US tax residents in general who engage in tax planning here in Uruguay who take advantage of the local territorial system of taxation.
In the previous blog, I discussed the issue of FBAR compliance; today I'd like to discuss the issue of business information reporting requirements concerning Uruguayan corporations owned by US persons.
It's a huge topic and I am just going to outline the main things here to watch out for. First of all you have to determine how you are going to treat this corporation for US international tax reporting purposes. If you are going to treat it as a corporation and maybe by default it is a corporation; then, you will have a form 5471 requirement here in the United States, especially in the first year for sure. Otherwise, it will depend on whether this is a controlled foreign corporation or not.
The other possibility is to us the 'check the box rules' to modify the default status of your Uruguayan company. If for example, it is a default corporation, you can use the check the box rules to treat the corporation either as a partnership, if that is a possibility, that is if you have more than one owner or a disregarded entity. If it's a partnership, you are likely to trigger form 8865 depending on your specific circumstances and particularly your ownership percentage and in the case of a disregarded entity, we're talking about Form 8858.
Besides that, we have to really focus on whether this is a controlled foreign corporation or not. The reason is because you have to understand that the controlled foreign corporation is going to be subject to various anti-deferral tax regimes like Subpart F rules or GILTI tax.
If it is not a controlled foreign corporation, you still need to worry about potential PFIC designation for your company. A PFIC (Passive Foreign Investment Company) is a very complex concept that in my experience only exists really in the United States and nowhere else. It is a concept that has huge US income tax obligations that are absolutely enormous, not to mention that it will make your life a lot harder if you have to use a default methodology.
If you would like to learn more about your US international tax compliance concerning ownership of an Uruguayan corporation, you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Reston FBAR Attorney | International Tax Lawyers Virginia
If you reside in Reston, Virginia and have unreported foreign bank and financial accounts, you may be looking for a Reston FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Reston FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Reston FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Reston FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Reston FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Reston FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Reston, Virginia. On the contrary, consider international tax attorneys who reside in other states and help Reston residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Reston, Virginia. Thus, if you are looking for a Reston FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Chantilly FBAR Attorney | International Tax Lawyers Virginia
If you reside in Chantilly, Virginia and have unreported foreign bank and financial accounts, you may be looking for a Chantilly FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Chantilly FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Chantilly FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Chantilly FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Chantilly FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Chantilly FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Chantilly, Virginia. On the contrary, consider international tax attorneys who reside in other states and help Chantilly residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Chantilly, Virginia. Thus, if you are looking for a Chantilly FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Residents versus Nonresidents: US Tax Differences | International Tax Lawyer Minneapolis
There is a huge difference between the US tax obligations of a US tax resident versus nonresident alien. This brief essay strives to outline the main differences in the US tax treatment of tax residents versus nonresidents.
Residents versus Nonresidents: Worldwide Income Taxation
One of the key differences in the tax treatment of residents versus nonresidents is concerning what income is subject to US taxation.  A resident alien is subject to worldwide income taxation similarly to a US citizen. It does not matter where the income is earned, whether it is subject to taxation in a foreign country, whether it has been repatriated to the United States, whether it comes from pre-US funds, et cetera – a resident alien is always subject to worldwide income taxation.
Moreover, a resident alien may also be subject to highly invasive anti-deferral tax regimes such as Subpart F rules and GILTI tax (see below). Under these regimes, a resident alien may have to recognize income that the IRS deems that he earned, but there was no actual distribution.
On the other hand, a nonresident alien may have to pay US taxes on only four types of income. First, US-source income (that the Internal Revenue Code does not otherwise exclude from taxation) that the IRS considers as FDAP income (fixed, determinable, annual or periodical income) under IRC §871(a) (see below more on this subject). Second, a nonresident alien has to pay US taxes on US-source capital gains.  Third, a nonresident alien has to declare on his US income tax returns all ECI (Effectively Connected Income) income from a trade or business within the United States. Finally, certain other US-source and certain other foreign-source income under highly limited exceptions. All other income is excluded from taxation of nonresident aliens.
Residents versus Nonresidents: Deductions
On the other hand, a resident alien has available (at least hypothetically) a far broader range of deductions, including a more expanded list of itemized deductions (for example, mortgage interest, property taxes, et cetera) and a standard deduction.
A nonresident alien, however, has available a far more limited range of deductions.  First, deductions related to the ECI earnings. Second, only three specific kinds of itemized deductions: casualty/theft losses from property located in the United States, charitable contributions to qualified US charities only and one personal exemption (which is a moot point at the time of this writing). Third, a nonresident alien can only claim a standard deduction in the case of a few income tax treaties that allow the claim of a standard deduction; otherwise, the standard deduction is not available.
Residents versus Nonresidents: Tax Filing Status
If a resident alien marries another resident alien or a US citizen, then the couple may elect to file a joint US tax return. Married Filing Jointly is probably the most beneficial tax filing status in the United States.
On the other hand, nonresident aliens (if they want to keep their nonresident status) married to a resident alien or a US citizen can only file as “married filing separately”.  In most situations, this is the most unfavorable tax filing status from the US tax perspective.
Residents versus Nonresidents: US International Information Returns
Compliance with US international information returns is potentially a huge difference between the US tax burden of residents versus nonresidents. A resident alien may be required to file a bewildering array of US international information returns depending on his particular situation.  A failure to do so may result in the imposition of very high IRS penalties.
The main examples of such returns are: FBAR (officially FinCEN Form 114, the Report of Foreign Bank and Financial Accounts), Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, Form 8938, Form 926, et cetera.
Residents versus Nonresidents: Tax Withholding on US-Source Income
There are several situations in which a payment to a non-US person may be classified as a US-source income and subject to tax withholding under IRC §§1441 and 1442 solely due to the “US resident” classification of the payor.  Here, I am referring to a situation where the US tax code classifies an interest payment as US-source income only because it is a resident alien made the payment. If such a payment were made by a nonresident alien, then it would be foreign-source income not subject to US tax withholding.
The most common example of such a situation involves interest payments.  Under §861(a)(1), interest paid by noncorporate resident of the United States is US-source income potentially subject to tax withholding. However, if the individual is a nonresident alien for US tax purposes, then the interest is not US-source income exempt from US tax withholding, at least under IRC §§1441 and 1442.
As a side note, I should mention that if the interest made by a US tax resident is classified as “portfolio interest” under §871(h), it would be exempt from the 30% tax withholding pursuant to §§871(a)(1) and 881.  There is also a potential for the exclusion from tax withholding under a particular tax treaty. As always, an international tax attorney should analyze each particular set of facts in its own context in order to determine whether income would be subject to US tax withholding.
Residents versus Nonresidents: Anti-deferral Tax Regimes
A US tax resident may be subject to a wide variety of various US anti-deferral tax regimes, such as PFIC (Passive Foreign Investment Company), GILTI, Subpart F rules, et cetera.
Moreover, a situation may occur where US resident classification as resident under the IRC does not impact this particular individual’s US income tax obligations but may affect such obligations of other US persons.  The most common example is the classification of a foreign corporation as a Controlled Foreign Corporation or CFC. 
Imagine where a person is a US tax resident under the IRC but utilizes the “tie-breaker” provisions of an income tax treaty to continue being classified as a nonresident alien. In this case, this individual’s US income tax obligations are the same as before. However, for the purposes of classifying a foreign corporation as a CFC, he remains a US tax resident. For example, if he owns 10% and the other US owners own at least 41% of this foreign corporation, then the corporation itself will become a CFC without any regard to the treaty provisions. See Reg. §301.7701(b)-7(a)(3).
Contact Sherayzen Law Office for Professional Help Regarding US International Tax Law
In this article, I summarized some of the most important US tax differences between US residents versus nonresidents.  There are many more complexities and tax traps in this area of law.
This is precisely why you need to contact Sherayzen Law Office for professional help with your US tax classification and any other US international tax issue. Our firm has extensive experience in advising clients concerning their US tax status and the potential US tax consequences of a particular US tax classification.
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Inheritance Tax Attorney Los Angeles | International Tax Lawyers California
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in Los Angeles, California, you need to look for a Foreign Inheritance Tax Attorney Los Angeles. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney Los Angeles: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney Los Angeles: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney Los Angeles: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in Los Angeles and all over the world.  We also have highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney Los Angeles: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Los Angeles, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you!
Hence, if you are looking for a Foreign Inheritance Tax Attorney Los Angeles, contact us now to schedule Your Confidential Consultation!

### New York FBAR Attorney | International Tax Lawyers New York
If you reside in New York, New York and have unreported foreign bank and financial accounts, you may be looking for a New York FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
New York FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for New York FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
New York FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining New York FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
New York FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in New York, New York. On the contrary, consider international tax attorneys who reside in other states and help New York residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including New York, New York. Thus, if you are looking for a New York FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Lansing FBAR Attorney | International Tax Lawyers Michigan
If you reside in Lansing, Michigan and have unreported foreign bank and financial accounts, you may be looking for a Lansing FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Lansing FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Lansing FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Lansing FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Lansing FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Lansing FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Lansing, Michigan. On the contrary, consider international tax attorneys who reside in other states and help Lansing residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Lansing, Michigan.
Thus, if you are looking for a Lansing FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Kirkland FBAR Attorney | International Tax Lawyers Washington
If you reside in Kirkland, Washington and have unreported foreign bank and financial accounts, you may be looking for a Kirkland FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Kirkland FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Kirkland FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Kirkland FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Kirkland FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Kirkland FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Kirkland, Washington. On the contrary, consider international tax attorneys who reside in other states and help Kirkland residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Kirkland, Washington.
Thus, if you are looking for a Kirkland FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Saving Clause | International Tax Lawyer & Attorney Minneapolis
The Saving Clause is a provision that all US income tax treaties contain. In this brief essay, I will introduce the readers to the Saving Clause, its purpose and its effect.
Saving Clause vs. Savings Clause
The first thing to note is that the proper way to refer to this important tax treaty provision is “saving clause” and not “savings clause” (see, for example, 2016 US Model Income Tax Treaty, article 1(4)).  You will still see sometimes various articles and even tax provisions (for example, §7852(d)(2)) incorrectly use “savings clause”.
Saving Clause: Effect on US Citizens
The Saving Clause provides that the United States may tax its citizens as if the tax treaty were not in effect. Here is a common example of the clause from the US-Spain tax treaty: “Notwithstanding any provision of the Convention except paragraph 4, a Contracting State may tax its residents (as determined under Article 4 (Residence)), and by reason of citizenship may tax its citizens, as if the Convention had not come into effect” (italics added).
In other words, the Saving Clause prevents US citizens who are classified as income tax residents of the treaty country from claiming a different tax treatment that would otherwise be available under the treaty to noncitizens who are residents of the treaty country. For example, a US citizen cannot claim an exemption from certain income otherwise exempt for a noncitizen who is a resident of a treaty country.
Saving Clause: Effect on US Residents
The impact of the Saving Clause on US residents is more complicated.  The Clause usually provides that the United States may tax its residents as determined by a treaty (usually in an Article 4) as if the treaty were not in effect.  Usually, these resident provisions would contain tie-breaker rules. This would mean that an individual who is a resident alien under §7701(b) but a resident of the treaty country under the treaty, then the saving clause cannot deny the individual any of the exemptions from US tax law or reductions in US tax that are provided by the treaty to residents of the treaty country. In such cases, the saving clause would have limited impact on residents.
If, however, a tax treaty does not contain the tie-breaker provisions in its definition of a tax resident (as some old treaties), then the impact of the Saving Clause may be tremendous and even dispositive. In this situation, the Saving Clause assures that an individual who is, at the same time, a resident alien under the Internal Revenue Code IRC) provisions and a resident of the treaty country under the treaty country’s laws will still be taxed as a US resident alien irrespective of the tax treaty.
Saving Clause: Worldwide Income Reporting and Foreign Asset Disclosure Requirements
The application of the Saving Clause may have tremendous impact on an individual’s US tax obligations.  First of all, I remind the readers that, absent treaty limitations, all US tax residents are taxed on their worldwide income. This is the rule irrespective of whether the income is earned, whether it is repatriated to the United States and whether it is subject to foreign tax withholding.
Moreover, US Persons may also be subject to multiple US information return reporting requirements, including FBAR, Form 8938, Form 5471, et cetera.  In this context, it is important to remember that the definition of a “US Person” is broader than the definition of a “resident” for income tax purposes. In other words, a person may be a nonresident for tax purposes due to a tax treaty provision, but he will still be a US Person for the purposes of filing an FBAR or another US information tax return.
Contact Sherayzen Law Office for Professional Help with Your US International Tax Compliance
If you are a US tax resident or a US person, you may be subject to highly complex US international tax requirements.  In order to ensure your full compliance with US international tax provisions, contact Sherayzen Law Office for professional help.
Since 2005, Sherayzen Law Office has helped hundreds of US taxpayers to resolve their prior US tax noncompliance and assure their continuous compliance with US international tax laws.  We have extensive experience with all major US tax compliance requirements such as: worldwide income tax compliance, FBAR, Form 926, Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, FATCA Form 8938, et cetera. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Kansas City FBAR Attorney | International Tax Lawyers Missouri
If you reside in Kansas City, Missouri and have unreported foreign bank and financial accounts, you may be looking for a Kansas City FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Kansas City FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Kansas City FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Kansas City FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Kansas City FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Kansas City FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Kansas City, Missouri. On the contrary, consider international tax attorneys who reside in other states and help Kansas City residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Kansas City, Missouri.
Thus, if you are looking for a Kansas City FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Foreign Inheritance Tax Attorney St Paul MN| International Tax Lawyers Minnesota
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in Saint Paul, Minnesota, you need to look for a Foreign Inheritance Tax Attorney St Paul. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney St Paul: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney St Paul: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney St Paul: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in St Paul and all over the world. We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney St Paul: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in St Paul, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you! Hence, if you are looking for a Foreign Inheritance Tax Attorney St Paul, contact us now to schedule Your Confidential Consultation!

### 2024 FBAR Conversion Rates | FBAR International Tax Lawyer
The 2024 FBAR conversion rates are very important for your US international tax compliance. The reason for their importance is their relation to FBAR (FinCEN Form 114) and the IRS Form 8938. The 2024 FBAR and 2024 Form 8938 instructions both require that 2024 FBAR conversion rates be used to report the required highest balances of foreign financial assets on these forms (in the case of Form 8938, the 2024 FBAR conversion rates is the default choice, not an exclusive one). In other words, the 2024 FBAR conversion rates are used to translate foreign-currency highest balances into US dollars for the purposes of FBAR and Form 8938 compliance.
The U.S. Department of Treasury  already published the 2024 FBAR conversion rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).
Since the 2024 FBAR conversion rates are highly important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2024 FBAR conversion rates (note that the readers still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI70.3500ALBANIA - LEK93.8500ALGERIA - DINAR135.1030ANGOLA - KWANZA912.0000ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR2.7000 ARGENTINA - PESO1052.5000ARMENIA - DRAM390.0000AUSTRALIA - DOLLAR1.6120AUSTRIA - EURO0.9610AZERBAIJAN - MANAT1.7000BAHAMAS - DOLLAR1.0000 BAHRAIN - DINAR0.3770 BANGLADESH - TAKA119.0000BARBADOS - DOLLAR2.0200BELARUS - NEW RUBLEUNAVAILABLE*BELGIUM - EURO0.9610BELIZE - DOLLAR2.0000BENIN - CFA FRANC626.0000BERMUDA - DOLLAR1.0000BOLIVIA - BOLIVIANO6.8600BOSNIA - MARKA1.8800BOTSWANA - PULA13.9670BRAZIL - REAL6.1840BRUNEI - DOLLAR1.3630BULGARIA - LEV NEW1.8800BURKINA FASO - CFA FRANC626.0000BURUNDI - FRANC2900.0000CAMBODIA - RIEL4015.0000CAMEROON - CFA FRANC630.5500CANADA - DOLLAR1.4380CAPE VERDE - ESCUDO105.9900CAYMAN ISLANDS - DOLLAR0.8200CENTRAL AFRICAN REPUBLIC - CFA FRANC630.5500CHAD - CFA FRANC630.5500CHILE - PESO992.6000CHINA - RENMINBI7.2990COLOMBIA - PESO4402.4900COMOROS - FRANC473.2900CONGO - CFA FRANC630.5500COSTA RICA - COLON506.0000COTE D'IVOIRE - CFA FRANC626.0000CROATIA - EURO0.9610CUBA - Chavito1.0000CUBA - PESO24.0000CYPRUS - EURO0.9610CZECH REPUBLIC - KORUNA23.5380DEM. REP. OF CONGO - CONGOLESE FRANC2843.0000DENMARK - KRONE7.1700DJIBOUTI - FRANC177.0000DOMINICAN REPUBLIC - PESO60.7100ECUADOR - DOLARES1.0000EGYPT - POUND50.7900EL SALVADOR - DOLLAR1.0000EQUATORIAL GUINEA - CFA FRANC630.5500ERITREA - NAKFA15.0000ESTONIA - EURO0.9610ESWATINI - LILANGENI18.8500ETHIOPIA - BIRR125.3830EURO ZONE - EURO0.9610FIJI - DOLLAR2.2890FINLAND - EURO0.9610FRANCE - EURO0.9610GABON - CFA FRANC630.5500GAMBIA - DALASI70.0000GEORGIA - LARI2.7800GERMANY - EURO0.9610GHANA - CEDI14.6500GREECE - EURO0.9610GRENADA - EAST CARIBBEAN DOLLAR2.7000GUATEMALA - QUETZAL7.7000GUINEA BISSAU - CFA FRANC626.0000GUINEA - FRANC8602.0000GUYANA - DOLLAR215.0000HAITI - GOURDE130.1930HONDURAS - LEMPIRA25.3150HONG KONG - DOLLAR7.7660HUNGARY - FORINT395.3200ICELAND - KRONA138.1900INDIA - RUPEE85.5770INDONESIA - RUPIAH16067.1300IRAN - RIAL42000.0000IRAQ - DINAR1309.0000IRELAND - EURO0.9610ISRAEL - SHEKEL3.6470ITALY - EURO0.9610JAMAICA - DOLLAR159.0000JAPAN - YEN156.8500JORDAN - DINAR0.7080KAZAKHSTAN - TENGE524.6000KENYA - SHILLING128.8500KOREA - WON1473.2700KOSOVO - EURO0.9610KUWAIT - DINAR0.3080KYRGYZSTAN - SOM86.9990LAOS - KIP21744.0000LATVIA - EURO0.9610LEBANON - POUND89500.0000LESOTHO - MALOTI18.8500LIBERIA - DOLLAR183.0000LIBYA - DINAR4.9040LITHUANIA - EURO0.9610LUXEMBOURG - EURO0.9610MADAGASCAR - ARIARY4620.0000MALAWI - KWACHA1751.0000MALAYSIA - RINGGIT4.4680MALDIVES - RUFIYAA15.4200MALI - CFA FRANC626.0000MALTA - EURO0.9610MARSHALL ISLANDS - DOLLAR1.0000MAURITANIA - OUGUIYA39.7140MAURITIUS - RUPEE46.9300MEXICO - PESO20.7040MICRONESIA - DOLLAR1.0000MOLDOVA - LEU18.3000MONGOLIA - TUGRIK3420.0000MONTENEGRO - EURO0.9610MOROCCO - DIRHAM10.1030MOZAMBIQUE - METICAL 63.2700MYANMAR - KYAT3596.0000NAMIBIA - DOLLAR18.8500NEPAL - RUPEE136.9800NETHERLANDS - EURO0.9610NETHERLANDS ANTILLES - GUILDER1.7800NEW ZEALAND - DOLLAR1.7810NICARAGUA - CORDOBA36.6000NIGER - CFA FRANC626.0000NIGERIA - NAIRA1540.0000NORWAY - KRONE11.3220OMAN - RIAL0.3850PAKISTAN - RUPEE278.4000PALAU - DOLLAR1.0000PANAMA - DOLARES1.0000PAPUA NEW GUINEA - KINA3.9920PARAGUAY - GUARANI7793.7200PERU - SOL3.7570PHILIPPINES - PESO58.0250POLAND - ZLOTY4.1080PORTUGAL - EURO0.9610QATAR - RIYAL3.6450REP. OF N MACEDONIA - DENAR58.8600ROMANIA - NEW LEU4.7790RUSSIA - RUBLE108.0000RWANDA - FRANC1340.0000SAO TOME & PRINCIPE - NEW DOBRAS23.4790SAUDI ARABIA - RIYAL3.7500SENEGAL - CFA FRANC626.0000SERBIA - DINAR112.3200SEYCHELLES - RUPEE14.3550SIERRA LEONE - LEONE22.5900SIERRA LEONE - OLD LEONE21.4000SINGAPORE - DOLLAR1.3630SLOVAK REPUBLIC - EURO0.9610SLOVENIA - EURO0.9610SOLOMON ISLANDS - DOLLAR8.0650SOMALI - SHILLING568.0000SOUTH AFRICA - RAND18.8500SOUTH SUDAN - SUDANESE POUND3900.0000SPAIN - EURO0.9610SRI LANKA - RUPEE293.0000ST LUCIA - E CARIBBEAN DOLLAR2.7000SUDAN - SUDANESE POUND1987.0000SURINAME - GUILDER35.1920SWEDEN - KRONA11.0060SWITZERLAND - FRANC0.9050SYRIA - POUND12625.0000TAIWAN - DOLLAR32.7090TAJIKISTAN - SOMONI10.8500TANZANIA - SHILLING2400.0000THAILAND - BAHT34.3300TIMOR - LESTE DILI1.0000TOGO - CFA FRANC626.0000TONGA - PA'ANGA2.3560TRINIDAD & TOBAGO - DOLLAR6.7660TUNISIA - DINAR3.1800TURKEY - NEW LIRA35.3650TURKMENISTAN - NEW MANAT3.4910UGANDA - SHILLING3674.0000UKRAINE - HRYVNIA42.0420UNITED ARAB EMIRATES - DIRHAM3.6730UNITED KINGDOM - POUND STERLING0.7970URUGUAY - PESO43.6600UZBEKISTAN - SOM12899.9000VANUATU - VATU116.0000VENEZUELA - BOLIVAR SOBERANO51.8970VENEZUELA - FUERTE (OLD)248832.0000VIETNAM - DONG25480.0000WESTERN SAMOA - TALA2.7400YEMEN - RIAL528.0000ZAMBIA - NEW KWACHA27.7750ZIMBABWE - GOLD25.0250
*Note #1: As of the time of this article, the Department of Treasury still has not published the FBAR rate for Belarus. Please, consult the Department of the Treasury for clarification.

### Jacksonville FBAR Attorney | International Tax Lawyer Florida
If you reside in Jacksonville, Florida and have unreported foreign bank and financial accounts, you may be looking for a Jacksonville FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Jacksonville FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Jacksonville FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Jacksonville FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Jacksonville FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Jacksonville FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Jacksonville, Florida. On the contrary, consider international tax attorneys who reside in other states and help Jacksonville residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Jacksonville, Florida.
Thus, if you are looking for a Jacksonville FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Lancaster FBAR Attorney | International Tax Lawyer Pennsylvania
If you reside in Lancaster, Pennsylvania and have unreported foreign bank and financial accounts, you may be looking for a Lancaster FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Lancaster FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Lancaster FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Lancaster FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Lancaster FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Lancaster FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Lancaster, Pennsylvania. On the contrary, consider international tax attorneys who reside in other states and help Lancaster residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Lancaster, Pennsylvania. Thus, if you are looking for a Lancaster FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2025 Tax Season for Tax Year 2024 Starts on January 27, 2025 | Tax Lawyers Minneapolis
On January 10, 2025, the Internal Revenue Service announced that the federal 2025 tax season for the tax year 2024 will start on January 27, 2025.
2025 Tax Season: IRS Expectations on the Number of Tax Returns
The IRS expects more than 140 million individual tax returns for tax year 2024 to be filed ahead of the Tuesday, April 15, 2025 federal tax deadline. More than half of all tax returns are expected to be filed this year with the help of a tax professional. In fact, the IRS encourages taxpayers to use a tax professional to file their tax returns.
2025 Tax Season: IRS Boasts Modernization
The IRS stated that the 2025 tax season will reflect continued IRS progress to modernize and add new tools and features to help taxpayers. The improvements will include: more access to tax account information from text and voice virtual assistants, expanded features on the IRS Individual Online Account, more access to dozens of tax forms through cell phones and tablets and expanded alerts for scams and schemes that threaten taxpayers. 
2025 Tax Season: IRS Direct File Software
Additionally, this tax season, the IRS offers an improved version of its flagship Direct File service with expanded features and availability. This year, Direct File will be available starting January 27 to taxpayers in 25 states. In addition, the IRS Free File program already opened on January 10, 2025. Available only on IRS.gov, IRS Free File Guided Tax Software provides millions of taxpayers with nationwide access to free software tools offered by trusted IRS Free File partners. 
Direct File is a web-based service that works on mobile phones, laptops, tablets or desktop computers. It guides taxpayers through a series of questions to prepare their federal tax return step-by-step. Last year, thousands of Direct File users got help from IRS customer service representatives through a live chat feature in English and Spanish. Once taxpayers have completed their federal tax return, the Direct File system automatically guides them to state tools to complete their state tax filings. 
Sherayzen Law Office does not recommend, however, using this software if you have US international tax compliance issues. The complexity is such that you should only use a professional tax preparer who has profound knowledge and experience in the subject matter.
2025 Tax Season: Improved Service
The IRS is also working to continue the success of the 2023 and 2024 tax filing seasons made possible with additional resources. The past two filing seasons saw levels of service at roughly 85% and wait times averaging less than 5 minutes on the main phone lines.  Moreover, there was a significant increase in the number of taxpayers who used Taxpayer Assistance Centers across the country.
This year, the Direct File users can try a new IRS chat bot to help guide them through the eligibility checker. Live chat will be available in English and Spanish.

### Harrisburg FBAR Attorney | International Tax Lawyer Pennsylvania
If you reside in Harrisburg, Pennsylvania and have unreported foreign bank and financial accounts, you may be looking for a Harrisburg FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Harrisburg FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Harrisburg FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Harrisburg FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Harrisburg FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Harrisburg FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Harrisburg, Pennsylvania. On the contrary, consider international tax attorneys who reside in other states and help Harrisburg residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Harrisburg, Pennsylvania. Thus, if you are looking for a Harrisburg FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Huntsville FBAR Attorney | International Tax Lawyer Alabama
If you reside in Huntsville, Alabama and have unreported foreign bank and financial accounts, you may be looking for a Huntsville FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Huntsville FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Huntsville FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Huntsville FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Huntsville FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Huntsville FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Huntsville, Alabama. On the contrary, consider international tax attorneys who reside in other states and help Huntsville residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Huntsville, Alabama.
Thus, if you are looking for a Huntsville FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2024 FBAR Deadline in 2025 | FinCEN Form 114 International Tax Lawyer & Attorney
The 2024 FBAR deadline is a critical deadline for US taxpayers this calendar year 2025. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2024 FBAR deadline in more detail.
2024 FBAR Deadline: Background Information
The official name of FBAR is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs must be timely e-filed separately from federal tax returns.
Failure to file an FBAR may result in the imposition of heavy FBAR penalties. The FBAR penalties vary from criminal penalties and willful penalties to non-willful penalties. You can find more details about FBAR penalties in this article.
2024 FBAR Deadline: Pre-2016 FBAR Deadline
For the years preceding 2016, US persons needed to file FBARs by June 30 of each year. For example, the 2013 FBAR was due on June 30, 2014. No filing extensions were allowed. The last FBAR that followed the June 30 deadline was the 2015 FBAR; its due date was June 30, 2016. .
2024 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR
For many years, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, many taxpayers simply missed the unusual FBAR filing deadline.
Therefore, the US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline. Starting with 2016 FBAR, Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.
Furthermore, the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. For now, taxpayers do not need to make any specific requests in order for an extension to be granted.
Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. This is the case even if federal law requires a different filing date. For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day.
2024 FBAR Deadline
Based on the current law, for the vast majority of filers, the 2024 FBAR deadline will be April 15, 2025. However, the deadline is automatically extended to October 15, 2025.
The 2024 FBAR must be e-filed through the US Financial Crimes Enforcement Network’s (FinCEN) BSA E-filing system.
Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance
If you have unreported foreign accounts, contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in US international tax compliance and offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers around the globe with their FBAR compliance and FBAR voluntary disclosures; and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Dallas FBAR Attorney | International Tax Lawyer Texas
If you reside in Dallas, Texas and have unreported foreign bank and financial accounts, you may be looking for a Dallas FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Dallas FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Dallas FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Dallas FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Dallas FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Dallas FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Dallas, Texas. On the contrary, consider international tax attorneys who reside in other states and help Dallas residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Dallas, Texas.
Thus, if you are looking for a Dallas FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Foreign Inheritance Tax Attorney Minneapolis | International Tax Lawyer Minnesota
Receiving a foreign inheritance may open a litany of US international tax compliance obligations. Therefore, one of the first things you should do is to seek the help of an international tax attorney who specializes in foreign inheritance reporting.  If you reside in Minneapolis, Minnesota, you need to look for a Foreign Inheritance Tax Attorney Minneapolis. You will find that Sherayzen Law Office Ltd. is very likely to be the perfect fit for you.
Foreign Inheritance Tax Attorney Minneapolis: Why Foreign Inheritance is So Important to Your US international Tax Compliance
There are two main reasons why receiving a foreign inheritance may be a critical event for your US international tax compliance. First, receiving a foreign inheritance means that you have additional assets, income and transactions to report to the IRS.  The way that US international tax law works, it means that it is usually more than just one requirement is triggered. Rather, it may be a set of issues and reporting obligations that require an experienced international tax attorney to resolve them correctly. 
The multitude and complexity of issues can be fairly large: from the reporting of the foreign inheritance itself, income recognition, transfer of cash/assets to the United States to additional reporting requirements concerning newly acquired foreign assets and offshore voluntary disclosures involving prior noncompliance. You should keep in mind that noncompliance with these requirements may result in the assessment of high IRS penalties.
The second reason why a foreign inheritance is so important and so dangerous is the relative complacency with respect to and even complete nonrecognition of the potential US tax consequences of receiving a foreign inheritance with all of the multitude of issues to which I alluded above.  The problem is not just that many US taxpayers are completely ignorant of the fact that a foreign inheritance may require extensive US tax compliance. Even worse, many taxpayers erroneously but ardently believe that a foreign inheritance is something completely unrelated to the United States and should not have any US tax consequences. At best, they may focus on Form 3520 reporting while overlooking the complexity of the rest of the issues involved in receiving a foreign inheritance.
This is precisely why I highly recommend consulting an international tax lawyer with extensive experience in foreign inheritance US tax reporting, such as Sherayzen Law Office, if you have received or about to receive a foreign inheritance.
Foreign Inheritance Tax Attorney Minneapolis: International Tax Lawyer
I just mentioned that you need to seek the help of an international tax attorney rather than just a foreign inheritance tax attorney.  Why is that?
The answer is simple: a foreign inheritance attorney is first and foremost an international tax lawyer – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand and be able to identify related US international tax compliance forms such as Forms 3520-A, 5471, 8858, 8865 cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to these information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly experienced international tax law firm with respect to all of these income tax and information return requirements, including specifically all of the aforementioned forms.
Foreign Inheritance Tax Attorney Minneapolis: Tax Planning
It is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  
Sherayzen Law Office has extensive experience in foreign inheritance US tax planning for its clients in Minneapolis and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Foreign Inheritance Tax Attorney Minneapolis: Offshore Voluntary Disclosures
Perhaps you learned late about your US international tax compliance requirements concerning foreign inheritance. In fact, this is a very common situation. In this case, you will find yourself in a very uncomfortable position of facing potentially multiple high IRS penalties for multiple violations of US international tax law.
For this reason, your foreign inheritance tax attorney must also have a profound understanding of the IRS voluntary disclosure options. In fact, in my experience, a discussion of a foreign inheritance often leads to the identification of past US international tax noncompliance and the immediate discussion of IRS offshore voluntary disclosure to remedy past noncompliance.
Offshore Voluntary Disclosures is a core area of our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Minneapolis, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients around the world with their foreign inheritance US tax compliance. We can help you! Hence, if you are looking for a Foreign Inheritance Tax Attorney Minneapolis, contact us now to schedule Your Confidential Consultation!

### FBAR Obligations for US Owners of Uruguayan Bank Accounts | FBAR Tax Lawyer Montevideo
https://youtu.be/JYkKhkYtKDw?si=0VoxsE8DtVnCCL1_
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Montevideo, Uruguay. I'd like to draw your attention in this blog to the fact that a lot of US taxpayers, who utilize Uruguayan consult - they often focus only on their Uruguayan tax compliance and they keep forgetting about the important US international tax reporting requirements that may apply to the new business structures that they create through with the help of Uruguayan tax consults. One of the first and foremost things you must remember is that if you organize an Uruguayan corporation and open a bank account in Uruguay or outside of Uruguay but not in the United States, then you will have to report your indirect ownership of the account on FBAR and possibly other forms, depending on what exactly happens in these accounts but FBAR would be the main form that you would have to contend with.
The FBAR is obviously a form that is highly important; it has tremendous draconian IRS penalties. You want to make sure that you comply with the form and it's very easy to trigger this form. You just need to have a highest balance in excess of $10,000 at any point during the year and we're talking about aggregate assets; so if you have two accounts, you have to figure out the highest balance for both accounts, add them up and you will see if you are required to file FBAR.
If this is a corporation which you own jointly with someone else and you don't have the majority ownership over the corporation then, you have to look at whether you have signatory authority over the corporate accounts and if you do, then you also have to disclose that signatory authority on FBARs.
In the next blog, I will continue talking about US international tax reporting requirements concerning Uruguayan tax planning for US taxpayers.
Thank you for watching, until the next time.

### Cincinnati FBAR Attorney | International Tax Lawyer Ohio
If you reside in Cincinnati, Ohio and have unreported foreign bank and financial accounts, you may be looking for a Cincinnati FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Cincinnati FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Cincinnati FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Cincinnati FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Cincinnati FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Cincinnati FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Cincinnati, Ohio. On the contrary, consider international tax attorneys who reside in other states and help Cincinnati residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Cincinnati, Ohio.
Thus, if you are looking for a Cincinnati FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2025 Offshore Voluntary Disclosure Options | International Tax Lawyers
As of the beginning of the year 2025, IRS Offshore Voluntary Disclosure continues to be the main way for noncompliant US taxpayers with undisclosed foreign assets and foreign income to bring themselves into full compliance with US international tax laws.  This essay provides a broad overview of the available 2025 offshore voluntary disclosure options.
2025 Offshore Voluntary Disclosure Options: What is Offshore Voluntary Disclosure
The term “offshore voluntary disclosure” refers to a series of legal processes established by the IRS to allow noncompliant US taxpayers to voluntarily come forward and disclose their prior US international tax noncompliance in exchange for more lenient IRS treatment. This leniency can express itself in various ways: avoidance of criminal prosecution, lower and even zero penalties, a shorter voluntary disclosure period, ability to make certain retroactive tax elections, et cetera.
In general, the benefits of a voluntary disclosure usually far outweigh the consequences of a disclosure during a potential IRS audit. There are exceptions, but they are usually limited to mishandled cases where either an improper voluntary disclosure path was chosen or the process of the disclosure was mishandled by the taxpayer (usually) or his tax attorneys. This is why it is important that you chose the right international tax attorney to help you with your offshore voluntary disclosure.
Let’s review the main 2025 offshore voluntary disclosure options and briefly describe them.
2025 Offshore Voluntary Disclosure Options: Streamlined Foreign Offshore Procedures
While the IRS created Streamlined Foreign Offshore Procedures (“SFOP”) already in 2012, it exists in its current form since June of 2014. It is a true tax amnesty program, because its participants do not pay IRS penalties of any kind, even on income tax due. The participants only need to pay the extra tax due on the amended tax returns plus interest on the tax.
Moreover, SFOP preserves SDOP’s non-invasive and limited scope of voluntary disclosure (see below). For example, you only need to amend the tax returns for the past three years and file FBARs for the past six years.
SFOP, however, is available to a limited number of US taxpayers who are able to satisfy its eligibility requirements, particularly those related to non-willfulness certification and physical presence outside of the United States. You should contact Sherayzen Law Office to help you determine whether you meet the eligibility requirements of SFOP.
2025 Offshore Voluntary Disclosure Options: Streamlined Domestic Offshore Procedures
Streamlined Domestic Offshore Procedures (“SDOP”) is currently the flagship voluntary disclosure option for US taxpayers who reside in the United States. While not as generous as SFOP, SDOP is still a very good voluntary disclosure option for non-willful taxpayers: it is simple, limited (in terms of the voluntary disclosure period for which tax returns and FBARs must be filed) and mild (in terms of its penalty structure). There are some drawbacks to SDOP, such as the potential imposition of the Miscellaneous Offshore Penalty on income-tax compliant foreign accounts, but the benefits offered by this option outweigh its deficiencies for most taxpayers.
The reason why the IRS is so generous lies in the fact that this voluntary disclosure option is open only to taxpayers who can certify under the penalty of perjury that they were non-willful with respect to their prior income tax noncompliance, FBAR noncompliance and noncompliance with any other US international information tax return (such as Form 3520, 5471, 8938 et cetera). It will be up to your international tax lawyer to make the determination on whether you are able to make this certification.
Moreover, a taxpayer cannot file a delinquent Form 1040 under the SDOP. SDOP only accepts amended tax returns (i.e Forms 1040X), not original late tax returns.
2025 Offshore Voluntary Disclosure Options: Delinquent FBAR Submission Procedures
Delinquent FBAR Submission Procedures (“DFSP”) is another voluntary disclosure option that fully eliminates IRS penalties. This is not a new option; in fact, in one form or another, officially or unofficially, it has always existed within the IRS procedures. Prior to 2019, it was even written into the OVDP (IRS Offshore Voluntary Disclosure Program) as FAQ#17 (though in a modified version).
While DFSP is highly beneficial to noncompliant US taxpayers, it is available to even fewer number of taxpayers than those who are eligible for SDOP and SFOP. This is the case due to two factors. First, DFSP has a very narrow scope – it applies only to FBARs. Second, DFSP has extremely strict eligibility requirements; even de minimis income tax noncompliance may deprive a taxpayer of the ability to use this option if it is sufficient to require an amendment of a tax return. In other words, DFSP only applies where SDOP, SFOP and VDP (see below) are irrelevant due to absence of unreported income.
2025 Offshore Voluntary Disclosure Options: Delinquent International Information Return Submission Procedures
Delinquent International Information Return Submission Procedures (“DIIRSP”) has a similar history to DFSP. In fact, it was “codified” into OVDP rules as FAQ#18. Similarly to DFSP, DIIRSP also offers the possibility of escaping IRS Penalties. DIIRSP has a broader scope than DFSP and applies to international information returns other than FBAR, such as Form 8938, 3520, 5471, 8865, 926, et cetera.
Since it turned into an independent voluntary disclosure option in 2014, DIIRSP’s eligibility requirements became much harsher. US taxpayers are now required to provide a reasonable cause explanation in order to escape IRS penalties under this option. On the other hand, the fact that there may be unreported income associated with international information returns is not an impediment by itself to participation in DIIRSP.
2025 Offshore Voluntary Disclosure Options: IRS Voluntary Disclosure Practice
The traditional IRS Offshore Voluntary Disclosure practice has existed for a very long time. However, it faded into complete obscurity once the IRS opened its first major OVDP option in 2009. The closure of the 2014 OVDP in September of 2018 has brought this option back to life, but in a new format and for modified purposes.
On November 20, 2018, the IRS has completely revamped this traditional voluntary disclosure option, modified its procedural structure and imposed a new tough (but relatively clear) penalty structure. The IRS officially calls this new version of the traditional voluntary disclosure IRS Voluntary Disclosure Practice (“VDP”).
The chief advantage of VDP is that it is specifically designed to help taxpayers who willfully violated their US tax obligations to come forward to avoid criminal prosecution and lower their civil willful penalties. In other words, VDP is now the main voluntary disclosure option for willful taxpayers.
2025 Offshore Voluntary Disclosure Options: Reasonable Cause Disclosure
Since 2014, the popularity of Reasonable Cause disclosure (also known as “Noisy Disclosure”) has declined substantially due to the introduction of SDOP and SFOP. Nevertheless, Reasonable Cause disclosure continues to be a highly important voluntary disclosure alternative to official IRS voluntary disclosure options. The taxpayer now primarily use this option when SDOP and SFOP are not available for technical (i.e. a failure to meet their eligibility requirements) or even for strategic case reasons (as determined by your international tax attorney).
Reasonable Cause disclosure is based on the actual statutory language; it is not part of any official IRS program. This is a high-risk, high-reward option; so, a taxpayer must take special care in using this option. If a taxpayer is able to satisfy this high burden of proof, then, he will be able to avoid all IRS penalties. If the IRS audits the Reasonable Cause disclosure and disagrees, this taxpayer may face significant IRS penalties and, potentially, years of IRS litigation.
Contact Sherayzen Law Office for Professional Analysis of Your 2025 Offshore Voluntary Disclosure Options
If you have undisclosed foreign assets, contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers from over 75 countries with their voluntary disclosures of foreign assets to the IRS, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Charlotte FBAR Attorney | International Tax Lawyer North Carolina
If you reside in Charlotte, North Carolina and have unreported foreign bank and financial accounts, you may be looking for a Charlotte FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Charlotte FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Charlotte FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Charlotte FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Charlotte FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Charlotte FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Charlotte, North Carolina. On the contrary, consider international tax attorneys who reside in other states and help Charlotte residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Charlotte, North Carolina.
Thus, if you are looking for a Charlotte FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Streamlined Domestic Offshore Procedures Lawyer: 2025 SDOP Eligibility Requirements
The introduction of the Streamlined Domestic Offshore Procedures (SDOP) in 2014 meant that the IRS finally recognized that there was a very large number of U.S. taxpayers who were non-willful with respect to their inability to comply with numerous obscure complex requirements of U.S. tax laws.  Since 2014, SDOP has been a highly successful voluntary disclosure option that I predict will remain as popular in 2025.  For this reason, in this short article, I will review the main five 2025 SDOP eligibility requirements.
2025 SDOP Eligibility Requirements: US Taxpayer
The first main requirement to be able to utilize SDOP is that the applicant is a US taxpayer. In the context of SDOP, this term is equivalent to a US tax resident.  This means that he should be one of the following: a U.S. citizen, U.S. lawful permanent resident, or he must have met the substantial presence test.
The substantial presence test is outlined in 26 U.S.C. 7701(b)(3). In general, under 26 U.S.C. §7701(b)(3), an individual meets the substantial presence test if the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier) equals or exceeds 183 days.
2025 SDOP Eligibility Requirements: Not Eligible for SFOP
The second requirement to participate in SFOP is that the taxpayer fails to meet the non-residency requirements of Streamlined Foreign Offshore Procedures (SFOP). I describe the non-residency requirements of SFOP in detail in this article.
What happens if spouses file a joint tax return and one of the spouses fails the non-residency requirement but the other spouse meets it? In this case, both spouses are still eligible to participate in the SDOP.
2025 SDOP Eligibility Requirements: US Tax Returns Filed
In order to participate in SDOP, the taxpayer must have previously filed a US tax return (if required) for each of the most recent three years for which the US tax return due date (or properly applied for extended due date) has passed.  In other words, a taxpayer cannot file a late original tax return as part of SDOP; he can only amend the returns that were already filed.
2025 SDOP Eligibility Requirements: Foreign Income and Information Return Violations
Another important eligibility requirement for SDOP is that the taxpayer must have failed to report foreign income and pay US taxes on it AND may have failed to file FBAR and/or and/or one or more international information returns (e.g. Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) with respect to the foreign financial asset that generated the foreign income.  In other words, foreign income reporting violation is crucial for the SDOP participation.
2025 SDOP Eligibility Requirements: Non-Willfulness
This is the most important and most critical eligibility requirement to the participation in the Streamlined Domestic Offshore Procedures. The taxpayer’s violations of the applicable US international tax requirements must be non-willful.
The non-willful nature of violations must apply to everything: the failures to report the income from a foreign financial asset, pay tax as required by US tax law, file FBARs and file other international information returns (such as Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621). If the failure to file the FBAR and any other information returns was willful, the participation in the Streamlined Domestic Offshore Procedures is not likely to be possible.
2025 SDOP Eligibility Requirements: SDOP Participation Must Be Timely
Finally, the fifth SDOP eligibility requirement is that the participating taxpayer is not subject to an IRS civil examination or an IRS criminal investigation, irrespective of whether the examination/investigation is related to undisclosed foreign financial assets or involves any of the years subject to the voluntary disclosure. If the taxpayer is already subject to such an examination/investigation, his participation in the Streamlined Domestic Offshore Procedure would not be considered timely.
Contact Sherayzen Law Office for Legal Help With Your Offshore Voluntary Disclosure
If you have undisclosed foreign accounts or any other offshore assets, contact Sherayzen Law Office for professional legal help. Our experienced international tax law firm will thoroughly analyze your case, estimate your current IRS penalty exposure, and determine your eligibility for the available voluntary disclosure options, including the SDOP, SFOP and other voluntary disclosure options. Contact Today Us to Schedule Your Confidential Consultation

### Chicago FBAR Attorney | International Tax Lawyer Illinois
If you reside in Chicago, Illinois and have unreported foreign bank and financial accounts, you may be looking for a Chicago FBAR Attorney.  In this case, you should contact Sherayzen Law Office, Ltd., a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent. Let’s consider the main reasons for it.
Chicago FBAR Attorney: International Tax Lawyer
From the outset, it is very important to understand that, by looking for Chicago FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Chicago FBAR Attorney: Deep Knowledge of US International Tax Law and Offshore Voluntary Disclosures
When retaining Chicago FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Chicago FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Chicago, Illinois. On the contrary, consider international tax attorneys who reside in other states and help Chicago residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Chicago, Illinois.
Thus, if you are looking for a Chicago FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2024 Form 3520-A Deadline in 2025 | International Tax Lawyer & Attorney
Form 3520-A is a very important US international information return. It is a fairly complex form with can significant noncompliance penalties. In order to avoid these penalties, you need to file a correct Form 3520-A timely. In this essay, I will discuss the 2024 Form 3520-A deadline in the calendar year 2025.
2024 Form 3520-A Deadline: Purpose of Form 3520-A
Form 3520-A occupies an important role in US international tax law. Its primary purpose is to obtain certain information about a foreign trust with at least one US person who is treated as an owner of the foreign trust under the grantor trust rules found in the IRC (Internal Revenue Code) §§671-679.
Through Form 3520-A, the IRS collects not only the data about the foreign trust and its US beneficiaries, but also the information concerning interactions between the foreign trust and its US owners. Moreover, Form 3520-A indicates the amount of income a US owner must recognize on his US tax returns (irrespective of whether there was a distribution of this income to the owner).
2024 Form 3520-A Deadline: Who Must File
As I mentioned above, the question of “who must file” Form 3520-A is quite tricky. Generally, a foreign trust with a US owner has responsibility to file Form 3520-A in order for the US owner to satisfy his annual information reporting requirements under IRC §6048(b). Hence, while a foreign trust officially must file Form 3520-A, in reality, it is the responsibility of each US person treated as an owner of any portion of a foreign trust to ensure that the trust files Form 3520-A and furnishes the required annual statements to its US owners and US beneficiaries.
What if the foreign trust fails to file the required Form 3520-A? Then, the US owner must complete a substitute Form 3520-A for the foreign trust and attach this substitute Form 3520-A to the US owner’s Form 3520.
2024 Form 3520-A Deadline: Penalties for Late Filing
If the foreign trust fails to file Form 3520-A timely and its US owner fails to submit a substitute Form 3520-A timely, then the US owner (I emphasize: not the foreign trust, but its US owner) will be subject to heavy Form 3520-A penalties.
The main penalty in this case would be $10,000 or 5% of the gross value of the foreign trust, whichever is higher. The “gross value” here means the portion of the foreign trust’s assets at the end of year treated as owned by US persons.
Additional penalties may apply if noncompliance lasts more than 90 days after the IRS mails a “failure to comply” notice. The US owner also may be subject to the underpayment penalties for failure to report income indicated on Form 3520-A. Finally, criminal penalties may be imposed under IRC §§7203, 7206 and 7207 for failure to file on time and for filing a false or fraudulent return.
2024 Form 3520-A Deadline: Where to File
The foreign trust needs to file Form 3520-A (including the statements on pages 3 and 5) at the following address:
Internal Revenue Service CenterP.O. Box 409101Ogden, UT 84409
I recommend mailing Form 3520-A by US Certified Mail. I want to emphasize for the US readers who are mailing their returns – do NOT attach Form 3520-A to your US tax return.  You must mail Forms 3520-A separately from your US income tax return to the address above.
2024 Form 3520-A Deadline: When to File
The deadline for Form 3520-A can also be tricky. Generally, the due date for Form 3520-A is the 15th of the third month after the end of the trust’s tax year.
However, if you are filing a substitute Form 3520-A with your Form 3520, then your substitute Form 3520-A is due by the due date of Form 3520. The trust must also supply the Foreign Grantor Trust Owner Statement and Foreign Grantor Trust Beneficiary Statement to its US owners and US beneficiaries by the 15th of the third month after the end of the trust’s tax year, unless the foreign trust (or most likely the taxpayer) files an extension.
The foreign trust may file Form 7004 to request an automatic six-month Form 3520-A filing extension (it also applies to the aforementioned Statements). Note that filing Form 7004 is the only way to request this six-month extension. A common procedural tax trap is for people to file an income tax return extension (Form 4868) and think that this would apply to Form 3520-A. This is incorrect – you must separately file Form 7004 to get an extension on your Form 3520-A.
Thus, the current outstanding 2024 Form 3520-A deadline for a calendar-year filer is March 17, 2025 (this year March 15 falls on a Saturday). If the filer timely files Form 7004 prior to March 15, 2025, then the extended 2024 Form 3520-A deadline for this filer would be September 15, 2025.
Contact Sherayzen Law Office for Professional Help With Your 2024 Form 3520-A Deadline
If you are required to file Form 3520-A or if you have not complied with your Form 3520-A reporting requirements in the past, you need to contact Sherayzen Law Office for professional help! Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures (including the ones that involve Form 3520-A) and US international information returns compliance. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Santa Clara FBAR Attorney | International Tax Lawyer California
If you reside in Santa Clara, California and have unreported foreign bank and financial accounts, you may be looking for a Santa Clara FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Santa Clara FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Santa Clara FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Santa Clara FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Santa Clara FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Santa Clara FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Santa Clara, California. On the contrary, consider international tax attorneys who reside in other states and help Santa Clara residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Santa Clara, California. Thus, if you are looking for a Santa Clara FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Happy New Year 2025 from Our Team at Sherayzen Law Office!!!
Dear clients, followers, readers and colleagues:
Mr. Eugene Sherayzen, US international tax attorney, and the entire international tax team of Sherayzen Law Office, Ltd. wishes you a very Happy New Year 2025!!!
Dear clients and prospective clients, in the New Year 2025, you can continue to rely on Sherayzen Law Office for:
Resolution of your prior FBAR, FATCA and other US international tax noncompliance through offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures (SDOP), Streamlined Foreign Offshore Procedures (SFOP), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, IRS Voluntary Disclosure Practice and Reasonable Cause Disclosures;
Help with your IRS audits and examination, including audits of: your prior SDOP and SFOP submissions (as well as other voluntary disclosure options) and your annual international tax compliance. We can also help you fight the imposition of IRS penalties for prior international tax noncompliance, including FBAR penalties, Form 8938 penalties, Form 3520 and 3520-A penalties, Form 5471 penalties, Form 5472 penalties, Form 8865 penalties, Form 926 penalties, et cetera;
Preparation of your annual US international tax compliance, including the reporting of foreign income and preparation of FBAR, FATCA Form 8938 and other US international tax compliance forms such as: Forms 3520, 3520-A, 5471, 8621, 8865, 8938 and 926 and
Your international tax planning (inbound and outbound), including individual and business tax planning, We intend to continue to help US firms with conducting business overseas, US owners of foreign businesses and foreign businesses who wish to expand their presence to the United States (including real estate investors).
In resolving all of your current US international tax issues, we will continue to employ ethical creativity, diligence, professionalism and many years of experience of helping other clients throughout the United States and the world. We will also continue to utilize an individual customized approach to each client’s particular situation.
In 2025, the US international tax compliance requirements will likely grow even more complex, detailed and extensive. The IRS will continue to demand more and more information from US taxpayers, employing its expanding number of revenue agents to enforce US tax laws across the globe and especially in the United States. The political environment and upcoming tax changes for the provisions that are due to expire in 2025 promise more important changes to US international tax law in the near future.
In order to deal with this ever-increasing US tax compliance burden, you will need the professional help of Sherayzen Law Office. In this New Year 2025, we can help you!
Your professional US international tax help is but a phone call away from you! Contact us today to schedule a confidential consultation in this New Year 2025!
HAPPY NEW YEAR 2025 EVERYONE!!!

### 2025 Foreign Earned Income Exclusion | International Tax Lawyer & Attorney
The Foreign Earned Income Exclusion (“FEIE”) is a valuable tax strategy available to US tax residents who live and work abroad. It allows US citizens to exclude a certain amount of foreign earned income from their US taxable income. The IRS adjusts the precise amount every year.  In this article, I will discuss the 2025 Foreign Earned Income Exclusion.
2025 Foreign Earned Income Exclusion: Background Information
FEIE was born out of the fact that the US tax system is unique and taxes its citizens and even more broadly its residents on their worldwide income irrespective of where they reside. In many countries, such taxpayers are subject to local foreign income taxes on the same income. In order to alleviate the potential burden of double taxation, the US Congress enacted Section 911 of the Internal Revenue Code. This section codified FEIE.
Section 911 allows qualifying individuals to exclude a specified amount of foreign earned income from US taxable income. The IRS adjusts this amount every single year.  A taxpayer must use Form 2555 to claim FEIE.
2025 Foreign Earned Income Exclusion: Eligibility
In order to claim FEIE, a taxpayer must meet certain requirements set forth in IRC §911. I will provide only a brief outline of these requirements in this article. They are discussed in more detail in other articles on our website.
First of all, FEIE applies only to foreign earned income, not passive income and not US-source income.
Second, the taxpayer must maintain his tax home in a foreign country. “Tax Home” is a term of art that has its specific meaning.
Third, you must pass either the physical presence test or the bona fide residence test.
2025 Foreign Earned Income Exclusion: Additional Considerations
While FEIE brings a huge benefit of income exclusion, it often is not the best option for US taxpayers who reside overseas. Let’s focus on the four most important considerations.
First, FEIE limits and in some cases completely eliminates the ability to take Foreign Tax Credit (“FTC”). If you use FEIE, you cannot use the FTC to reduce US taxes on income already excluded under the FEIE.  The problem arises when FTC is actually higher than the US tax.  In this case, you may be losing a very important tax strategy to reduce your US taxes not only in the current year, but also in the future.
Second, FEIE may result in ineligibility to take other tax credits normally available to a taxpayer.
Third, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion).
Finally, while not a tax consideration, usage of FEIE by US permanent residents may result in the abandonment of their green card. In other words, FEIE may present a huge risk to the immigration goals of a taxpayer.
2025 Foreign Earned Income Exclusion: Adjustment for 2025
On October 22, 2024, the IRS announced that the foreign earned income exclusion amount under §911(b)(2)(D)(i) is going to be $130,000 for the tax year 2025. This is up from $126,500 in the tax year 2024.
Contact Sherayzen Law Office for Professional Help with Foreign Earned Income Exclusion
The Foreign Earned Income Exclusion is a vital tax tool for US taxpayers working abroad, but it must be used cautiously and after careful consideration of all circumstances.  Hence, if you are a US taxpayer who lives abroad or you are planning to accept a job overseas, you need to secure the help of Sherayzen Law Office, a premier firm in US international tax compliance. We can help you navigate the complexities of FEIE, determine your eligibility for it and build a tax strategy to help you maximize the advantages offered by the Internal Revenue Code.
Contact Us Today to Schedule Your Confidential Consultation!

### Chandler FBAR Attorney | International Tax Lawyer Arizona
If you reside in Chandler, Arizona and have unreported foreign bank and financial accounts, you may be looking for a Chandler FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Chandler FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Chandler FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Chandler FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Chandler FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Chandler FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Chandler, Arizona. On the contrary, consider international tax attorneys who reside in other states and help Chandler residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Chandler, Arizona.
Thus, if you are looking for a Chandler FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2025 Streamlined Domestic Offshore Procedures: Pros and Cons
There is no doubt in my mind that the Streamlined Domestic Offshore Procedures will continue to be the flagship offshore voluntary disclosure option in 2025 for US taxpayers who are not eligible for Streamlined Foreign Offshore Procedures. This is why noncompliant US taxpayers should understand well the main advantages and disadvantages of participating in the 2025 Streamlined Domestic Offshore Procedures.
2025 Streamlined Domestic Offshore Procedures: Background Information and Purpose
The IRS created the Streamlined Domestic Offshore Procedures (usually abbreviated as “SDOP”) on June 18, 2014. Since its introduction, Streamlined Domestic Offshore Procedures quickly eclipsed the then-existing IRS Offshore Voluntary Disclosure Program (“OVDP”) and became the most popular offshore voluntary disclosure option for US taxpayers who reside in the United States. As we discuss the advantages of the 2025 SDOP, you will quickly understand the reason for this meteoric rise in popularity of the SDOP.
The main purpose of the Streamlined Domestic Offshore Procedures is to encourage non-willful US taxpayers to voluntarily resolve their prior noncompliance with US international tax reporting requirements in exchange for a reduced penalty, simplified disclosure procedure and a shorter disclosure period. As long as a taxpayer is eligible to participate in this voluntary disclosure program, SDOP can resolve pretty much any non-willful US international tax noncompliance: foreign income, FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera.
2025 Streamlined Domestic Offshore Procedures: Main Advantages
In exchange for a voluntary disclosure of their prior tax noncompliance through SDOP, US taxpayers escape income tax penalties and pay only a one-time Miscellaneous Offshore Penalty with respect to their prior failures to file the required US international information returns. It is important to emphasize that the Miscellaneous Offshore Penalty replaces not only FBAR penalties, but also penalties for noncompliance with respect to other US international information returns, such as Forms 5471, 8865, 926, et cetera. Depending on the specific circumstances of a case, the Miscellaneous Offshore Penalty would often be lower than the combined penalties for failure to file these forms. In other words, noncompliant taxpayers can greatly reduce their IRS noncompliance penalties through their participation in the Streamlined Domestic Offshore Procedures. This is one of the most important SDOP benefits.
Another advantage of the Streamlined Domestic Offshore Procedures is the limited time scope of this voluntary disclosure option. What I mean by this is that the taxpayers should only submit the forms included in the voluntary disclosure period specified in the SDOP instructions, unless they choose (i.e. not required, actually choose to do so) to do otherwise. Generally, the taxpayers only need to file three (sometime even less) amended US tax returns and six FBARs (sometimes seven and sometimes less than six). This limited disclosure stands in stark contrast with other major voluntary disclosure initiatives, such as 2014 OVDP (which required filings for the past eight years).
Moreover, despite the limited scope of the SDOP filings, taxpayers who utilize the Streamlined Domestic Offshore Procedures are usually able to fully resolve their prior US international tax noncompliance issues, even if the taxpayer does not file anything for these years as part of his SDOP voluntary disclosure filings. This means that the participating taxpayers are able “wipe the slate clean” – i.e. to erase their prior US international tax noncompliance from the time when it began. I should warn, however, that this is not necessarily always the case. I have already encountered efforts from the IRS to open years for which amended tax returns were not submitted (there were specific circumstances, however, in all of these cases that resulted in this increased IRS interference).
The last major advantage of the Streamlined Domestic Offshore Procedures is that this option only requires to establish non-willfulness rather than reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.
2025 Streamlined Domestic Offshore Procedures: Main Disadvantages
Usually, participation in the Streamlined Domestic Offshore Procedures is highly advantageous to noncompliant taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will concentrate only on the three most important of them.
First, this voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years. This requirement is the exact opposite of the Streamlined Foreign Offshore Procedures (“SFOP”) which allows for the late filing of original returns.
The problem is that there is a large segment of taxpayers who were perfectly non-willful in their prior US international tax noncompliance, but they never filed their US tax returns either due to special life circumstances (such as death in the family, illness, unemployment, et cetera), they were negligent or they believed that they did not need to file them (especially in situations where all of their income comes from foreign sources). These taxpayers would be barred from participating in the SDOP.
Second, when they participate in the Streamlined Domestic Offshore Procedures, the taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SDOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.
The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures. By the way, this decision should be made only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.
Finally, participation in the Streamlined Domestic Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP (prior to its closure), SDOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package. This means that going through Streamlined Domestic Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.
Contact Sherayzen Law Office for Professional Help With 2025 Streamlined Domestic Offshore Procedures
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures. We can also help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Birmingham Foreign Trust Attorney | International Tax Lawyers Alabama
If you reside in Birmingham, Alabama, and you are a beneficiary or an owner (by operation of US international tax law) of a foreign trust, you need the help of a Birmingham Foreign Trust Attorney to properly comply with your US international tax obligations.
You should consider retaining Sherayzen Law Office as your Birmingham Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Belize, Bermuda, Canada, Cayman Islands, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and many others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Birmingham Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Birmingham Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Birmingham Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Birmingham Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### 2025 Form 8938 Threshold | US International Tax Lawyers
US taxpayers must file Form 8938 with their US tax returns if they hold foreign financial assets with an aggregate value exceeding a relevant balance threshold. This article discusses the 2025 Form 8938 threshold limits. 
2025 Form 8938 Threshold: Form 8938 Background 
Form 8938 burst into the US international compliance scene in 2011 as a result of the famous Foreign Accounts Tax Compliance Act (FATCA). FATCA was enacted as part of the Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act” or “Act”) which was signed into law by President Obama in 2020.
FATCA revolutionized international tax compliance of the world by forcing foreign banks to report their US-held accounts to the IRS. In essence, it created the third-party verification of foreign accounts that FBAR has always lacked. This third-party verification was supported on the other side by creation of a new requirement to report foreign assets by US taxpayers as part of their US tax returns - Form 8938.
Form 8938’s scope of disclosure is very broad. It generally includes two types of “specified foreign financial assets”: (a) any financial account (also defined very broadly) maintained by a foreign financial institution (again defined broadly); and (b) other specified foreign financial assets not held in an account maintained by a foreign institution.  Other Specified Foreign Financial Assets is a term with a reach far and beyond any other US international tax form, making Form 8938 a unique “catch-all” international tax reporting requirement.
2025 Form 8938 Threshold: Form 8938 is a Dangerous Form
The huge scope of Form 8938 presents a grave danger to US taxpayers, because US Congress armed the form with a wide range of penalties, including a $10,000 failure-to-file fee.  For these reasons, it is highly important to understand when a particular situation triggers the Form 8938 filing requirement. One of the most important filing criteria is the subject of this article -- the 2025 Form 8938 filing threshold limits.
2025 Form 8938 Threshold: Filing Threshold Factors
When considering the Form 8938 threshold requirements, there are two most important factors that influence which filing threshold will apply in a particular situation. First, the filing status of the taxpayer(s): married filing jointly, married filing separately, single, et cetera.
The second factor is whether the taxpayer lives in the United States or lives abroad. 
2025 Form 8938 Threshold: Legal Test for Living Abroad
The IRS will agree that a taxpayer lives abroad if he meets one of the two “presence abroad” tests.
The first presence abroad test is satisfied if the taxpayer is a US citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period of an entire tax year.
The second presence abroad test is satisfied if the taxpayer is a US citizen or resident who is present in a foreign country or countries at least 330 full days during any period of twelve consecutive months in the relevant tax year.
Of course, these tests are almost exact replicas of the test for Foreign Earned Income Exclusion.
2025 Form 8938 Threshold: Taxpayers Living in the United States
Let’s first discuss the Form 8938 filing thresholds for taxpayers who live in the United States category by category:
Unmarried Taxpayers Living in the United States: the taxpayer is required to file Form 8938  if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during that tax year.
Married Taxpayers Filing a Joint Income Tax Return and Living in the United States: if the taxpayer is married and files joint income tax return with his spouse, Form 8938 must be filed if the spouses’ specified foreign financial assets are either more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the tax year.
Married Taxpayers Filing Separate Income Tax Returns and Living in the United States: if the taxpayer is married and lives in the United States, but files a separate income tax return from his spouse, then the reporting threshold is satisfied if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Therefore, this category is very similar to that of the unmarried taxpayer who resides in the United States.
2025 Form 8938 Threshold: Taxpayers Living Abroad
Here are the Form 8938 filing thresholds for taxpayers who live abroad:
Married Taxpayers Filing a Joint Income Tax Return and Living Abroad: if the taxpayer lives abroad (as described above) and files a joint tax return with his spouse, then the reporting threshold is satisfied if the value of all specified foreign financial assets that the spouses own is either more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.
Taxpayers Filing Any Return Other Than Joint Tax Return and Living Abroad: if that taxpayer lives abroad and does not file a joint income tax return (instead he files a different type of tax return such as married filing separately, head of household or unmarried), then the reporting threshold is satisfied if the value of all specified foreign financial assets is either more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the tax year.
2025 Form 8938 Threshold: Specified Domestic Entity
Specified Domestic Entities are also required to file Form 8938. The filing threshold for a specified domestic entity is satisfied if the total value of such an entity’s specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Contact Sherayzen Law Office For Help With IRS Form 8938
The reporting requirements under Form 8938 can be very complex. Moreover, Form 8938 noncompliance often occurs in conjunction with noncompliance with FBAR and other reporting requirements (such as Forms 5471, 8621, 8865 et cetera).  In such cases, filing of a late Form 8938 is often should be done through an IRS offshore voluntary disclosure option in order to reduce additional IRS tax penalties.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including Form 8938. We are highly experienced with Form 8938 issues, including offshore voluntary disclosures involving Form 8938.  We can help you!
Contact us today to schedule your confidential consultation!

### Birmingham FBAR Attorney | International Tax Lawyer Alabama
If you reside in Birmingham, Alabama and have unreported foreign bank and financial accounts, you may be looking for a Birmingham FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Birmingham FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Birmingham FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Birmingham FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Birmingham FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Birmingham FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Birmingham, Alabama. On the contrary, consider international tax attorneys who reside in other states and help Birmingham residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Birmingham, Alabama.
Thus, if you are looking for a Birmingham FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2025 IRS Standard Mileage Rates | IRS Tax Lawyer & Attorney
On December 19, 2024, the IRS updated the optional standard mileage for the calculation of deductible costs of operating an automobile (sedans, vans, pickups and panel trucks) for business, charitable, medical or moving purposes. Let’s discuss in more detail these new 2025 IRS Standard Mileage Rates.
2025 IRS Standard Mileage Rates for Business Usage
For the tax year 2025, the business-use cost of operating a vehicle will be 70 cents per mile. This is 3 cents higher than in 2024. The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile.
As in previous years, a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
2025 IRS Standard Mileage Rates for Medical and Moving Purposes
For the tax year 2025, the medical and moving cost of operating a vehicle will be 21 cents per mile. This is the same as in 2024. The rate for medical and moving purposes is based on the variable costs.
2025 IRS Standard Mileage Rates for Charitable Purposes
For the tax year 2025, the costs of operating a vehicle in the service of charitable organizations will be 14 cents per mile. This is also the same as in 2024. The statute sets charitable rate which remains unchanged.
2025 IRS Standard Mileage Rates vs. Actual Costs vs. Miscellaneous Itemized Deductions
It is important to note that under the Tax Cuts and Jobs Act, taxpayers can no longer claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. With the exception of active duty members of Armed Forces, taxpayers also cannot claim a deduction for moving expenses. Notice-2019-02.
However, taxpayers are not forced to use the standard mileage rates; rather, this is optional. Sherayzen Law Office advises taxpayers that they have the option of calculating the actual costs of using a vehicle rather than using the standard mileage rates. If the actual-cost method is chosen, then all of the actual expenses associated with the business use of a vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.
IRS Notice 2025-05
IRS Notice 2025-05, posted on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. In addition, for employer-provided vehicles, the Notice provides the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2025 for which employers may use the fleet-average valuation rule in § 1.61-21(d)(5)(v) or the vehicle cents-per-mile valuation rule in § 1.61-21(e).

### Hillsboro Foreign Trust Attorney | International Tax Lawyers Oregon
If you live in Hillsboro, Oregon, and you are an owner (by operation of US international tax law) or a beneficiary of a foreign trust, you need to secure the help of a Hillsboro Foreign Trust Attorney to properly comply with your US international tax obligations.
You should consider retaining Sherayzen Law Office as your Hillsboro Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Belize, Bermuda, Canada, Cayman Islands, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and many others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Hillsboro Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Hillsboro Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past tax noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure filed with the IRS.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Hillsboro Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Hillsboro Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### 2024 Form 5471 Deadline in 2025 | International Tax Lawyer & Attorney
IRS Form 5471 is one of the most important and most complex US international information returns. In this brief essay, I will discuss the tax year 2024 Form 5471 deadline in the calendar year 2025.
2024 Form 5471 Deadline: What is Form 5471
Form 5471 is a US international information return. In general, the IRS uses Form 5471 to collect information about certain US persons who are officers, directors, or shareholders in certain foreign corporations. These US persons, in turn, use Form 5471 to satisfy the reporting requirements of the IRC (Internal Revenue Code) §§965, 6038 and 6046 as well as related regulations. In other words, US taxpayers utilize Form 5471 to comply with their reporting obligations concerning their ownership of and transactions with a foreign corporation.
Form 5471, however, is more than just an international information return. It also contains the schedules related to income recognition by US owners of foreign corporations through the operation of anti-deferral tax regimes such as Subpart F rules, 965 tax and GILTI tax.
2024 Form 5471 Deadline: Who Must File It
Determining whether you are required to file a Form 5471 and which schedules you must attach to it may also be very complicated. As a result of the 2017 tax reform, Form 5471 now sports a total of five categories of required filers.  Two of these categories contain three sub-categories. In other words, the instructions to Form 5471 describe now a total of nine categories of filers!
Once you determine that you fall into one of these categories, you must carefully determine which schedules, statements and attachments you must complete in order to fully comply with your Form 5471 obligations.
I should also note that a separate Form 5471 is required for each applicable foreign corporation. This is the case even if one foreign corporation owns the other; there is no consolidated group filing under Form 5471.
2024 Form 5471 Deadline: Complexity
Form 5471 is incredibly complex. It forces its filers to convert foreign financial statements to US GAAP. It further requires reporting of an astounding range of transactions between a foreign corporation and its US owners as well as the affiliates of US owners. Finally, US taxpayers use Form 5471 schedules to calculate the income that they must recognize under the various anti-deferral tax regimes.
Thus, completing a Form 5471 may require a significant effort and a lot of time. This is why you need plan well ahead to make sure that you file your Form 5471 timely.
2024 Form 5471 Deadline: Penalties
A failure to timely file an accurate Form 5471 may result in imposition of large IRS penalties. Moreover, since Form 5471 satisfies a variety of tax obligations, the IRS may assess different penalties under different IRC sections.
For example, a failure to file Form 5471 Schedule M may result in the imposition of a $10,000 penalty pursuant to §6038(a). A failure to file Form 5471 Schedule O is a violation of §6046 and the IRS may assess a separate section 6046 is subject to a $10,000 penalty for each reportable transaction.
2024 Form 5471 Deadline: When to File and Where
All filers (unless they fall under an exception) must attach their Forms 5471 to their income tax returns (if applicable, a partnership return or tax exempt organization return). Both, the income tax return and Form 5471 must be filed by the due date, including extensions, for that return.
In other words, if you are an individual filing Form 1040, your 2024 Form 5471 deadline is April 15, 2025. If you file an extension, the deadline will shift to October 15, 2025.
Contact Sherayzen Law Office for Professional Help With Your 2024 Form 5471 Deadline
If you must file a Form 5471 for the tax year 2024, contact Sherayzen Law Office for professional help. We have successfully helped US taxpayers around the world with their Form 5471 compliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Hillsboro FBAR Attorney | International Tax Lawyer Oregon
If you reside in Hillsboro, Oregon and have unreported foreign bank and financial accounts, you may be looking for a Hillsboro FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Hillsboro FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Hillsboro FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Hillsboro FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Hillsboro FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Hillsboro FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Hillsboro, Oregon. On the contrary, consider international tax attorneys who reside in other states and help Hillsboro residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Hillsboro, Oregon.
Thus, if you are looking for a Hillsboro FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Form 5472 Introduction | International Tax Lawyer & Attorney
In the complex landscape of US tax compliance, IRS Form 5472 plays a crucial role in reporting transactions between foreign-owned US corporations and their related parties. This article serves as a Form 5472 introduction. It explores the purpose of Form 5472, explains its filing requirements and warns about the potential consequences of noncompliance.
Form 5472 Introduction: What is Form 5472 ?
Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is an IRS form used to report certain transactions between a reporting corporation (including a reporting disregarded entity) and certain related parties.  The IRS uses information from Form 5472 to identify potential transfer pricing issues and ensure that transactions between related parties are conducted at arm's length.
Form 5472 Introduction: Who Must File Form 5472 ?
There are generally three categories of entities that must file Form 5472. First, US corporations with 25% or more foreign owners. Pursuant to 26 U.S.C. § 6038A(c)(1), a US corporation is considered 25% foreign-owned if at least one foreign person owns, directly or indirectly, at least 25% of: (a) the total voting power of all classes of stock entitled to vote; or (b) the total value of all classes of stock of the corporation.
The second category of Form 5472 filers are foreign-owned disregarded entities (“FDE”). This is a relatively new addition to Form 5472 filers. This new category was added through Treasury regulations in the mid-2010s.
The final category of Form 5472 filers consists of foreign corporations which engage in trade or business within the United States.
Form 5472 Introduction: Key Concepts Related to Form 5472
Form 5472 requires understanding of at least three key concepts.  First of all, the definition of a “Reporting Corporation”.  Reporting Corporation is basically an entity that must file Form 5472.
The second and a very difficult concept is “related party”.  Related Party can be any direct or indirect 25% foreign shareholder or a person related to the reporting corporation or its 25% foreign shareholder.
The final and also very difficult concept is “reportable transactions”.  Reportable Transaction is any transaction listed in Form 5472 (and as interpreted by relevant Treasury regulations). Form 5472 covers a wide range of transactions.
Form 5472 Introduction: General Disclosure Requirements
In broad terms, the IRS requires Form 5472 filers to disclose the information about the nature and amounts of all reportable transactions between a reporting corporation and its foreign related parties.  
Form 5472 organizes the required information in various parts. Part I requires disclosure of information about the reporting corporation. Part II collects information about all 25% foreign shareholders. Part III discusses other Related Parties. Part IV focuses on the monetary transactions reporting corporations and foreign related parties. Part V is specifically about the reportable transactions of FDEs. Part VI discusses non-monetary and less-than-full-consideration transactions between the reporting corporation and the foreign related party. Finally, Parts VII, VIII and IX contain questions concerning other relevant information.
Form 5472 Introduction: Filing Deadlines and Extensions
Generally, Form 5472 must be filed with the reporting corporation's income tax return by the due date (including extensions) of that return. For calendar year corporations, this is typically April 15th, with a possible extension to October 15th. Corporations that operate on a fiscal year must align the filing deadline with their income tax return deadline.
Form 5472 Introduction: Penalties for Form 5472 Non-Compliance
The IRS imposes severe penalties for failure to file Form 5472 or for filing an incomplete or inaccurate form.   First, there is a $25,000 initial failure to file penalty imposed on each form.
If the IRS notifies the taxpayer about the missing Form 5472 and the taxpayer fails to do anything afterwards for 90 days, then the IRS can assess an additional $25,000 penalty (or a fraction thereof) per each 30-day period.
Criminal penalties under sections 7203, 7206, and 7207 may also apply for failure to submit information or for filing false or fraudulent information.
Conclusion: Contact Sherayzen Law Office for Help With Form 5472 Compliance & Form 5472 Voluntary Disclosures
Navigating the complexities of Form 5472 compliance can be challenging and securing the help of an international tax lawyer is highly recommended.
Sherayzen Law Office is a leading firm in international tax compliance in the United States with extensive experience with Form 5472 and offshore voluntary disclosures concerning delinquent (late) Forms 5472. Whether you're dealing with complex ownership structures, intricate related party transactions, or addressing past non-compliance, Sherayzen Law Office provides tailored solutions to meet your specific needs.
Contact Sherayzen Law Office today for professional help!

### 2024 Form 3520 Deadline in 2025 | Foreign Trust Tax Lawyer & Attorney
Form 3520 is one of the most important US international information returns. Due to its severe penalty structure, it is important to file it timely. In this brief essay, I will discuss the tax year 2024 Form 3520 deadline.
2024 Form 3520 Deadline: What is Form 3520
IRS Form 3520 is a US international information return. The IRS uses this Form to collect information related to foreign trusts, foreign gifts and foreign inheritance. In essence, Form 3520 collects four types of data from US taxpayers:
Certain transactions with foreign trusts;
Ownership of foreign trusts under the rules of sections 671 through 679;
Receipt of certain large gifts from foreign persons; and
Bequests from foreign persons.
It is very important that you file Form 3520 timely, because late filing Form 3520 penalties can be very high. For example, a failure to timely disclose a reportable foreign gift on Form 3520 may result in a penalty as high as 25% of the value of the gift. Initial Form 3520 penalty for a failure to report a property transferred by a US transferor to a foreign trust may be as high as 35% of the gross value of the property.
2024 Form 3520 Deadline: Where to File
Form 3520 reporting is complicated by the fact that this form is not filed with a US tax return. Rather, for the tax year 2024, a Form 3520 with all required attachments should be mailed to the following address:
Internal Revenue Service CenterP.O. Box 409101Ogden, UT 84409
My recommendation is to mail your 2024 Form 3520 by US Certified Mail.
2024 Form 3520 Deadline: When to File
Generally, 2024 Form 3520 deadline will correspond to your US income tax return deadline. In other words, a US person must file his Form 3520 by and including the 15th day of the 4th month following the end of such person’s tax year for US income tax purposes. Same rule applies to Forms 3520 filed by an estate and on behalf of a US decedent. If the due date falls on a Saturday, Sunday, or legal holiday, file by the next day that is not a Saturday, Sunday, or legal holiday.
For individual taxpayers who reside in the United States, this usually means April 15. For example, your 2024 Form 3520 will be due on April 15, 2025.
Moreover, if you are a US citizen or resident and (a) you live outside of the United States and Puerto Rico and your place of business or post of duty is outside the United States and Puerto Rico, OR (b) you are in the military or naval service on duty outside of the United States and Puerto Rico, then your tax deadline will shift to the 15th day of the 6th month (i.e. June 15). In other words, if you satisfy either (a) or (b) above and you are either a US citizen or US resident, then your 2024 Form 3520 will be due on June 17, 2024 (because June 15 is a Saturday this year). You must include a statement with your 2024 Form 3520 showing that you are a U.S. citizen or resident who meets one of these conditions listed above.
Finally, if a US person is granted an extension of time to file an income tax return, the due date for filing Form 3520 shifts to the 15th day of the 10th month following the end of the US person’s tax year. In other words, if you are an individual who filed an extension on your US income tax return, then your 2024 Form 3520 will be due on October 15, 2025.
Contact Sherayzen Law Office for Professional Help With Your 2024 Form 3520 Deadline
If you must file Form 3520 for the tax year 2024 (whether because you are an owner or a beneficiary of a foreign trust, you received a foreign gift or you received a foreign inheritance), contact Sherayzen Law Office for professional help. We have successfully helped US taxpayers around the world with their Form 3520 compliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### First Quarter 2025 IRS Interest Rates on Overpayment & Underpayment of Tax
On November 18, 2024, the IRS announced that the First Quarter 2025 IRS interest rates on overpayment and underpayment of tax will decrease from the Fourth Quarter of 2024.
This means that the First Quarter 2025 IRS interest rates will be as follows:
seven (7) percent for overpayments (six (6) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
five (5) percent for the portion of a corporate overpayment exceeding $10,000.
Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Importance of the First Quarter 2025 IRS Interest Rates
It is important to note that the First Quarter 2025 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses.
First, these rates will determine the interest a taxpayer will get on any IRS refunds. This is also relevant in situations where a taxpayers files amended tax returns, including as part of their offshore volutnary disclosure package.
Second ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended pursuant to Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures and any other offshore voluntary disclosure option.
Finally, the First Quarter 2025 IRS interest rates will be used to calculate PFIC interest on any relevant IRC §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the First Quarter 2025 IRS interest rates.

### Uruguay & International Tax Planning | Montevideo US International Tax Lawyer & Attorney
https://youtu.be/_-Vu58D_TV0?si=dO6UhBMLJq0XWAvA
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm in Montevideo, Uruguay and I've come here because I have a number of meetings with Uruguayan attorneys here. This is a wonderful nation and a wonderful city. It's very small-scale European compared to Buenos Aires, for example which feels more like a large European city.
I'd like to begin this series of Montevideo with a discussion of what place Uruguay has in the international tax system. Uruguay is very well known for its adherence to a territorial system of taxation, which is very different from that of the United States.
People here on most of their income, only pay taxes on certain worldwide passive income for local residents, unless you're a newcomer. In this case the Uruguayan government gives you 11 years of tax-free dividends, interest and other types of income that come from outside of Uruguay, if you become a Uruguayan tax resident with certain exceptions for passive income but overall Uruguay is a territorial system of taxation and as such, offers tremendous opportunities for US taxpayers to properly utilize the Uruguayan tax system to minimize their tax burden in the United States including for US taxpayers who wish to surrender their US tax residency and US taxpayers who wish to give up their US citizenship.
In addition to that, the territorial system of taxation with respect to Uruguayan corporations, is also a very valuable asset for US international tax planning. Overall Uruguay, while it's a small country, has considerable influence - enough to draw the attention of the European Union which has been pressuring Uruguay to change its system and in fact, the Uruguayan government has made a commitment to modify its territorial system of taxation when it comes to IP (intellectual property) income. The details of this commitment are not yet known. What the final law will look like, is not yet known and so as of today, Uruguay continues to be a very attractive place in terms of US international tax planning.
In the next blog, I will continue talking about Uruguay and US international tax reporting requirements.
Thank you for watching, until the next time.

### FinCEN Form 114 Indian Financial Accounts Obligations | FBAR Attorney
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as  “FBAR”, is one of the most important requirements that Indian Americans face as part of their US tax compliance concerning their Indian Financial Accounts. This articles provides an overview of the  Indian American’s FBAR compliance requirements with the particular focus on the FinCEN Form 114 Indian Financial Accounts obligations.
FinCEN Form 114 Indian Financial Accounts: FBAR Background Information
FinCEN Form 114 is a critical requirement for any US person with financial accounts outside the United States. US citizens, residents, and even certain non-residents who have a financial interest or signature authority over foreign financial accounts must file an FBAR if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year.
FBAR was introduced in the early 1970s as part of the Bank Secrecy Act.  Its original purpose was to combat money laundering, tax evasion, and other illicit activities involving undisclosed foreign financial assets. After the 9/11 terrorist attacks, however, Congress turned over the FBAR enforcement to the IRS, effectively turning FBAR into a tax form and one of the most formidable enforcement tools in the IRS arsenal.
What makes FinCEN Form 114 such a great US international tax enforcement weapon is the combination its broad scope of compliance, its low reporting threshold and, most importantly, its draconian noncompliance penalties.  FBAR penalties range from criminal penalties (i.e. a person can actually go to jail for FBAR noncompliance in certain limited circumstances) to horrendous civil willful penalties (imposed on a per account per year basis) to even non-willful penalties.  
While the Supreme court limited in 2023 the non-willful penalties to $10,000 (as adjusted for inflation) per form, FBAR has a statute of limitations of six years. This means that a non-willfulness penalty assessed after January 25, 2024 (until sometime at the end of the January of 2025) can still total $96,702 (inflation is accounted for in this number through the end of 2024).
FinCEN Form 114 Indian Financial Accounts: FBAR’s Broad Definition of “Account”
I mentioned above that the broad scope of FBAR compliance is one of the form’s characteristics that makes it so dangerous. The foundation for the far reach of the form stems from the FBAR’s broad definition of what constitutes a reportable “account” “Account” can be applied a huge variety of financial arrangements including but not limited to:
Bank accounts (such as savings and checking accounts)
Fixed-deposit accounts (each one individually is a separate account)
Mutual funds
Pension accounts (including the Indian PPF accounts)
Insurance policies with a cash-surrender value
Precious metal accounts
Retirement accounts
Basically, any type of a arrangement that involves a fiduciary relationship with a financial institution (which is itself a term of art with a broad definition) with respect to your assets immediately raises a possibility of additional FinCEN Form 114 compliance.  
It is crucial to note that the FBAR filing requirement applies not only to accounts where a US person is the sole owner but also to accounts where they have joint ownership or signature authority. Even accounts where a person only has signing authority, such as an employer’s account, are subject to the FinCEN Form 114 reporting requirement if the $10,000 threshold is met.
FinCEN Form 114 Indian Financial Accounts: Special Challenges in the Context of India
In the specific context of Indian Financial Accounts, such a broad definition of accounts for FinCEN Form 114 purposes leads to unique compliance challenges. Let’s discuss the three most common challenges. First of all, Indian FBAR filers tend to have a very large number of fixed-deposit and Indian mutual fund accounts as long-term savings financial vehicles. Many Indians think that they only have to report only main checking and savings bank accounts.  This is an important error. FBAR filers need to disclose each fixed-deposit and mutual fund account individually.
Second, Indian FinCEN Form 114 filers generally do not think of life insurance policies as something that they need to disclose.  Yet, the FBAR requires the disclosure of each life insurance policy individually.
Third, FBAR filers must disclose Public Provident Fund (“PPF”) accounts on their FBARs.  Many Indian Americans completely forget about these accounts.
I should also mention one more important point about these unique challenges - income tax compliance concerning all of these accounts that many Indian FBAR filers tend to overlook. India has a very different system of taxation from the United States and, usually, a failure to disclose accounts properly on FBAR is also a good indicator of potential US income tax noncompliance.
FinCEN Form 114 Indian Financial Accounts: Offshore Voluntary Disclosure
Now that we have identified the problem, let’s discuss how to best deal with FinCEN Form 114 noncompliance.  First of all, this is an issue that you should discuss with an international tax attorney who can advise on the best course of action based on the specific facts of your case.
One of the common advices that you will receive from your international tax attorney is to engage in an Offshore Voluntary Disclosure option. Offshore Voluntary Disclosure is a reflection of the fact that the IRS cannot possibly audit every single US income tax return. Hence, the IRS offers various offshore voluntary disclosure programs that allow noncompliant US taxpayers to come forward and report their unreported foreign financial accounts and other foreign assets in exchange for a more lenient treatment.
An offshore voluntary disclosure can be a highly-beneficial solution for prior noncompliance. At the same time, it is a highly-complex process that requires extensive knowledge of US tax laws.
Moreover, in the context of FinCEN Form 114 Indian Financial Accounts noncompliance, there are specific challenges that arise from the income tax treatment concerning Indian fixed-deposit accounts as well as Indian mutual fund investments (something that I alluded to above).
In these situations, working with an experienced international tax attorney who understands the intricacies of US tax reporting of Indian financial accounts is crucial. An attorney can help you navigate the voluntary disclosure process and minimize your exposure to penalties.
Contact Sherayzen Law Office for Professional Help with Your FinCEN Form 114 Indian Financial Accounts Compliance
Sherayzen Law Office is a premier US international tax law firm that specializes in FBAR compliance and offshore voluntary disclosures. We have an extensive experience with US tax reporting concerning Indian bank and financial accounts, including in the context of various offshore voluntary disclosure options such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, Reasonable Cause disclosures, et cetera. By working with Sherayzen Law Office, you ensure that your compliance with US tax laws is handled thoroughly and professionally with the goal of protecting you from potential penalties.
Contact Sherayzen Law Office today to schedule your confidential consultation!

### Building IRS Audit Defense Strategy | International Tax Lawyer & Attorney San Antonio
https://youtu.be/gWZp20sgqRE?si=Xz2Hx18Noy12yUQw
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from San Antonio, Texas. This series of blogs is pretty much devoted to IRS audits, specifically IRS audits of foreign assets and foreign income.
In this blog, I would like to discuss an issue that should concern you in every IRS audit. How should your defense be structured? Of course, I'm not going to be talking about the details of that strategy; that's impossible because every strategy has to be based on facts of that particular case. It has to be adapted to the particulars of each case; I'm just talking about what the general plan would be and how you choose your strategy.
There are three most important points when choosing a plan of defense in an IRS audit:
The first one, I've already mentioned, whatever the plan is, it has to be based on the facts of the case - very important. It should not be an abstract plan of defense; it should be one that is based specifically on your facts and circumstances.
The second point is that it should be based on the documentation that you have or may be able to get, because ultimately, in the IRS audit, the party that can produce documents to prove its point is the one that will prevail on that point unless the evidence is unconvincing or fraudulant of course. I want to take this opportunity to say that you should never, never ever submit fraudulant documentation to the IRS. Having said that, it doesn't mean that you cannot produce documentation, that is you can get testimony from a third party or parties about an event that happened. For example, if there was a repair or major repair done to a building that you owned, then you can go to the contractor and get a statement from the contractor that the major repair was done, this is how much was paid to me for doing this and this and this work. Of course, if the builder has the original invoices, even better.
Point number three is that whatever the strategy is that you choose must be logical and should be presented in the form of a story about what had happened. Basically, if your story does not make sense, it's not a good strategy. Strategy must be logical and based on the facts of the case - a logical sequence of events - very important.
If you're being audited by the IRS, and you would like to secure professional help with respect to your IRS audit, you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Orlando Foreign Trust Attorney | International Tax Lawyers Florida
If you live in Orlando, Florida, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Orlando Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Orlando Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Orlando Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Orlando Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Orlando Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Orlando Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Miami Foreign Trust Attorney | International Tax Lawyers Florida
If you live in Miami, Florida, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Miami Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Miami Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Miami Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Miami Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Miami Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Miami Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### FBAR Compliance in San Antonio | FBAR International Tax Lawyer San Antonio Texas
https://youtu.be/kkCs0edQzbE?si=2JQaZ5_Mq4sMIekE
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from San Antonio, Texas and this series of blogs is devoted to IRS audits, how they happen, when they happen and what way is the best way in dealing with them.
In the previous blog, I discussed how one should behave with respect to IRS agents. In this blog I'd like to discuss a slightly different issue and step away a little bit directly from litigation and talk about San Antonio's specific issues. In particular, I want to talk about FBAR compliance for San Antonians: FBAR, the report of foreign bank and financial accounts is one of the most important information returns that one has to file with respect to his foreign bank and financial accounts, specifically with respect to his financial interest in or signatory authority over foreign bank and financial accounts.
In this case, we're talking about foreign accounts which are located outside of the United States of course. When we are talking about FBAR compliance, with respect to San Antonians, you have to understand what countries are most likely to be involved in FBAR compliance. What I'm talking about is specifically with respect to San Antonians. From my experience here, most of the San Antonians, who have to file FBARs, have assets in Mexico, Spain and/or Germany. In reality, you sometimes get people from all over the world; there are people from Sri Lanka, for example. There are also people from England, people from Italy, Colombia and so basically while Spain, Germany and Mexico are the major countries involved in FBAR compliance, these are not the only countries. It is very important to be in compliance with your FBAR requirements; I cannot stress this enough. We're talking about humongous penalties in case of FBAR noncompliance; penalties that may extend to actual jail time depending on the circumstances of the (your) case.
If you would like to learn more about FBAR compliance and you are a resident of San Antonio, call me at (952) 500-8159 or email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Strategy and Behavior During IRS Audit | International Tax Audit Attorney San Antonio Texas
https://youtu.be/ZxxhNnfuRoQ?si=TrsBP7_mQGvjx_lx
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from San Antonio, Texas. In the previous blog, I discussed the importance of full disclosure of facts to your international tax attorney after you receive your IRS letter and after you contact your attorney or retain your attorney with respect to this audit.
In this blog, I would like to discuss the importance of proper behavior with respect to IRS agents. There is an absolutely erroneous opinion which is being propagated by unsavory characters (let's put it this way) that the best strategy in an IRS audit is to be aggressive against the IRS and deny everything, do not sign anything, basically no matter what the facts of your circumstances are, be as hostile to the IRS as possible.
This is absolutely wrong; I cannot tell you how wrong this is. The IRS has tremendous powers to find out about your case to enforce the law against you and to basically punish you for being noncooperative during their investigation and in most cases, but I would say in all cases but as an attorney, I cannot say 'in all cases', in the vast majority of cases, let's put it this way. In the vast majority of cases, the best strategy is the one that is adapted to the facts of the case. In the vast majority of these cases, the strategy is one of cooperation, honesty, disclosure but strong defense of your position. Ethical defense. Logical defense. Defense that does not offend the IRS personally but the one that states your position in the logical, legally, justified way.
You want to have a cordial relationship with the IRS agent. You want the IRS agent to understand that you are not a criminal; that you are not a person who lies. You want them to trust you with respect to what you tell them. They want to trust your ability to deliver on what you promised to deliver.
The strategy that is based on lying to the IRS, hiding from the IRS, swearing at the IRS, fighting them at every point whether it is necessary or not necessary is completely wrong. This is not to say that your defense should not be strong, of course, you must always strongly defend your position as long as it is a justifiable position. There are certain points that sometimes are better to be conceded and explained. The defense of your case will be based on a strategy, not on hostility to the IRS, because hostility to the IRS is usually a counterproductive way to conduct and IRS audit. As I've said: cordial, polite but a strong defense; you will have your position, you will have your facts and this position and these facts should form the basis of your defense against the IRS.
If you would like to learn more about an IRS audit, and if you'd like to secure my help with respect to your defense in an IRS audit, you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
You can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### IRS Audit Preparation With Annual Tax Compliance | IRS International Tax Audit Lawyer San Antonio
https://youtu.be/KoOTIi3zE_s?si=8kH0-Cm_Y8DtpqBS
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from San Antonio, Texas. In this series of blogs, I discuss issues related to IRS audits. In the previous video, I mentioned that the Inflation Reduction Act provided a humongous sum of money to the IRS to hire new IRS agents to conduct field audits. In fact the IRS said that it has plans to increase its staff by 40,000 people; this is an enormous amount of people. This means that the capacity of the IRS to audit US taxpayers is going to increase manifold.
In the previous video, I also mentioned that it is important for taxpayers to start preparing for an IRS audit before it actually happens. What does it mean to be preparing for an IRS audit? First of all, the preparation for an IRS audit must begin before a tax return is ever submitted, meaning that all tax positions that you are taking should be well documented and even better, if they're not only documented but also disclosed to the IRS. That is do not take a position, with respect to a tax issue and not disclose it to the IRS. If the IRS later disagrees with you, they may think that you actually did it intentionally or tried to hide something. In this case, in order to avoid this issue, it is better to basically disclose it in a small statement saying, for example, "based on the IRC section internal revenue code, we're taking the position that this and this and this must happen". That's it; a small statement, you don't have to provide a huge analysis, just disclose it to the IRS either as an IRS audit at that point, the IRS cannot claim willfulness in your approach as long as your position is reasonable of course, based to a degree on certain facts.
Preparation for an IRS audit must happen already when the tax return is being prepared and submitted to the IRS; that's the first stage.
The second stage is to get supporting documentation, organize it and that means not only getting the bank statements or statements from your broker but it also means getting the statements from third parties in support for your position - that's the second stage of preparation.
The final stage of the preparation for an IRS audit involves saving all of that information; that is very important. Many people think that once they have prepared everything and put everything together, that it is enough. In reality, there may be years before an IRS audit happens and if you do not have this information, you will not be able to prove to the IRS that you once had it. Please make sure that you safeguard the information related to a possible audit.
In the next video, I will discuss how an IRS audit begins.
Thank you for watching, until the next time.

### US Retirees in Mexico: US Tax Compliance | International Tax Lawyer & Attorney
https://youtu.be/PIE8sUpETeI?si=a5t8GqxWyoEUWmGx
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from the US-Mexico border near Laredo Texas. In the previous blog, I discussed the multiple US international tax reporting requirements concerning people from Laredo who moved to Mexico or who have business or bank accounts or any other foreign assets in Mexico.
Today I'd like to discuss or focus on the very specific group of US persons who moved to Mexico: US retirees. Unfortunately, too often, US retirees forget that when they retire in Mexico and they open up bank accounts here, they buy houses there, they buy land and they construct on it and later, they may sell it. They forget that all of these actions have US income tax consequences. For this reason, it's important to contact your US international tax attorney as soon as possible if you decide to retire in Mexico. You need to tell your attorney exactly what it is you are planning on doing and why you plan on doing it and how you are planning on doing it. For example, I as your international tax attorney can help you determine what your US international tax reporting requirements are, what the cost of annual compliance would be, etcetera.
If you decide to retire to Mexico, you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### New Series of Vlogs on IRS Audits | International Tax Lawyer & Attorney San Antonio
https://youtu.be/ZxMlcm6jEuM?si=UcSDZ_17cVP7wIvc
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm starting a new series of blogs from San Antonio, Texas. In fact, behind me you will see the famous Alamo, the historical place where the Texians stood up to the Mexicans during their independence war. The whole battle with the Mexicans for independence reminds me of the battle that taxpayers are doing with respect to the IRS US international tax enforcement.
In this series, I'd like to start out with saying that right now, due to the Inflation Reduction Act that just passed in congress, we expect a humongous increase in IRS litigation and IRS audits. This whole series is going to be dedicated to IRS audits. I will cover a little bit of the international tax compliance in this series, but most of it will be focused on audits.
The first thing to say about the IRS audits is that they are never pleasant and it is best to provide documents to the IRS in a manner that would reduce the risk of an IRS audit. However, sometimes, this cannot be done.
Thank you for watching, until the next time.

### Athens FBAR Attorney | International Tax Lawyer Georgia
If you reside in Athens, Georgia and have unreported foreign bank and financial accounts, you may be looking for a Athens FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Athens FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Athens FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Athens FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Athens FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Athens FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Athens, Georgia. On the contrary, consider international tax attorneys who reside in other states and help Athens residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Athens, Georgia.
Thus, if you are looking for a Athens FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Fourth Quarter 2024 IRS Interest Rates on Overpayment & Underpayment of Tax
On August 21, 2024, the IRS announced that the Fourth Quarter 2024 IRS interest rates on overpayment and underpayment of tax will remain the same as in the Third Quarter of 2024.
This means that, the Fourth Quarter 2024 IRS interest rates will be as follows:
eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
eight (8) percent for underpayments;
ten (10) percent for large corporate underpayments; and
five and a half (5.5) of a percent for the portion of a corporate overpayment exceeding $10,000.
How Are the IRS interest Rates Calculated?
Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Let's deal with the overpayment rates first. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Furthermore, under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. Additionally, the readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Pursuant to the IRC §6621(b)(1), the Fourth Quarter 2024 IRS interest rates were computed based on federal short-term rates in January of 2024. 
Why Are the IRS interest Rates Important?
It is important to note that the Fourth Quarter 2024 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. First, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second, the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the Fourth Quarter 2024 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
Given the importance of the IRS interest rates, we at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Fourth Quarter 2024 IRS interest rates.

### Atlanta Foreign Trust Attorney | International Tax Lawyers Georgia
If you live in Atlanta, Georgia, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Atlanta Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Atlanta Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Atlanta Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Atlanta Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Atlanta Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Atlanta Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### San Antonio FBAR Tax Attorney | International Tax Lawyer Texas
If you reside in San Antonio, Texas, and have unreported foreign bank and financial accounts, you may be looking for a San Antonio FBAR Tax Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
San Antonio FBAR Tax Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for San Antonio FBAR Tax Attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
San Antonio FBAR Tax Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining a San Antonio FBAR Tax Attorney, consider the fact that such an attorney’s work is not limited to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
San Antonio FBAR Tax Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in San Antonio, Texas. On the contrary, consider international tax attorneys who reside in other states and help San Antonio residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including San Antonio, Texas. We can help with annual FBAR compliance, FBAR compliance in combination with other international tax forms as well as offshore voluntary disclosures.
Thus, if you are looking for a San Antonio FBAR Tax Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### US Tax Residents in Mexico: US Tax Obligations | International Tax Lawyers Laredo Texas
https://youtu.be/ctI0gxj84EI?si=ZLjOHJ629YXjpazN
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm standing on the border of the United States and Mexico near Laredo, Texas. As you can see, this is the Rio Grande that separates Mexico from the United States and you can see over there, there is the fence from the US side separating the border.
What I would like to talk to you about today is how this fence and this border affect the perception of people with respect to their US international tax compliance requirements and why many of these perceptions are absolutely wrong. A lot of people think that once they cross this river from the United States into Mexico, that their US tax reporting requirements have ended - a lot of people think they're not responsible for anything to Uncle Sam and this is absolutely wrong.
I have seen a lot of examples, by the way of this, where people think that 'Well, I have a business in Mexico; I've crossed the border. I don't own anything to the IRS'. That is not correct. As a US citizen or a US permanent resident who maintains his US permanent residency, that is he's not abandoning his US permanent residency, he is required to disclose his worldwide assets and worldwide income and foreign assets.
In essence, there are two reporting requirements: one is the worldwide income - that is income that is earned anywhere in the world, whether it is inside of the United States or outside of the United States, that income has to be disclosed on your US tax return and you have the obligation to disclose your foreign assets on US information returns as long as you, of course, satisfy the filing threshold. For example, if you have foreign bank accounts, this means that you need to disclose these foreign bank accounts on forms like FBAR and Form 8938 as long as you satisfy the threshold. If you have a foreign business, if it is a foreign corporation, then you have to disclose it on Form 5471 as well as related forms concerning the transactions between you and the corporation, or certain transactions that the corporation performs. For a controlled foreign partnership, it's Form 8865 and if you have a disregarded entity, then it's form 8858, etc etc.
Basically the point being said: if you have foreign assets, you have to disclose them to Uncle Sam irrespective of whether you reside in the United States or outside of the United States on the other side of the border in Mexico. All of these obligations are very important; they carry significant noncompliance penalties and you want to make sure that you avoid them.
The other important thing to understand is that your obligations to the IRS, once you cross the border, not only will they not decrease, they're more likely to increase significantly vis-a-vie what you used to do while you were here in the United States. Again, this is the rule that applies to US tax residents of any type: whether you are a US permanent resident or a US citizen.
If you would like to learn more about your US international tax reporting requirements, you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Start-Up Year PFIC Exception | International Tax Lawyer & Attorney
Passive Foreign Investment Company (PFIC) classification of a foreign corporation may have highly undesirable consequences for its US shareholders.  In addition to high PFIC tax, these taxpayers face expensive and burdensome tax reporting requirements.  This is why US taxpayers and their tax advisers generally try to avoid PFIC designation.  This article explores a possible way to do so by utilizing the Start-Up Year PFIC Exception.
Start-Up Year PFIC Exception: PFIC Background Information
PFIC law is a powerful anti-deferral tax regime. PFIC rules are meant to discourage US investment in PFIC companies by eliminating real or perceived benefits of such an investment.
Any company that meets either the income test or the asset test set forth in 26 USC §1297(a) would generally be considered a PFIC for US tax purposes.  This means that it would subject to taxation based on: (a) default IRC §1291 Fund regime; (b) Qualified Election fund (QEF) regime; or (c) Mark-to-Market (MTM) regime.  All of these methods are punitive in one form or another.
PFICs are reported on Forms 8621. Reporting under IRC §1291 method may prevent a taxpayer from e-filing his US tax returns.
In some cases, even if a corporation meets a PFIC test, it may still avoid PFIC treatment if it meets one of the exceptions.  Start-UP Year PFIC exception is one of them.
Start-Up Year PFIC Exception: Purpose
The legislative history explains that the purpose behind this exception is to avoid PFIC designation for a business that will engage in active business operations but has mostly passive income in its first year.  Staff of the Jt. Comm. on Taxation, General Explanation of the Tax Reform Act of 1986, at 1026 (JCS-10-87) (May 4, 1987) (1986 Bluebook).
Start-Up Year PFIC Exception: Main Test
26 USC §1298(b)(2) sets forth the Start-Up Year Exception. It states that, if a corporation would otherwise be a PFIC in its start-up year, it would not be treated as a PFIC in that year if it means the following test:
No predecessor corporation was a PFIC;
It is established to the IRS's satisfaction that the corporation will not be a PFIC in either of the two years following the start-up year; and
The corporation is not, in fact, a PFIC for either succeeding year.
Despite its apparent simplicity, this test contains important complications.
Start-Up Year PFIC Exception: What is “Start-Up Year”
The first complication arises from the definition of “Start-Up Year”. 26 USC §1298(b) defines this term as the first taxable year in which a corporation earns gross income. In other words, “start-up year” may not actually mean the first year of the corporation’s existence, because a corporation may exist without any income.
What if the corporation has gross income but incurs a net loss? In my opinion, this would qualify as a “start-up year”.
What if the corporation has no gross income whatsoever and just incurs a loss? In my opinion, there is sufficient basis for the argument, based on the strict interpretation of statutory language, that this is still not “start-up year”.
Start-Up Year PFIC Exception: Danger of Prior Interaction With the Asset Test
Another related complication is the fact that this PFIC exception would not apply where a foreign corporation would satisfy the PFIC asset test in a prior year.
For example, let’s suppose that, for the first two years of its existence, a foreign corporation earns no income whatsoever. Since no income is earned, the Start-UP Year PFIC exception would not apply here yet.  If, in one of those years, the corporation satisfies the PFIC asset test, then this corporation would become a PFIC.  This means that, even if the Start-Up Year PFIC exception satisfied in year three, it would not be applicable, because the corporation is already a PFIC under the “once a PFIC, always a PFIC” rule. For example, see 2002 WL 1315676.
Start-Up Year PFIC Exception Only Applies For One Year
The other complication concerning this exception is the fact that it is limited to one year only. This could even mean a short year of one day. In other words, a corporation can only use it once to escape PFIC designation.
Start-Up Year PFIC Exception: Parent Holding Company
The interaction of the exception with the subsidiary look-through rule (which I will explore more in a future article) is very interesting. While it appears that the IRS has not issued any direct guidance on this issue, my analysis shows that the Start-Up Year PFIC exception can be extended to the parent holding company of a start-up corporation under the subsidiary look-through rule.
This conclusion, however, depends very much on the actual fact pattern.  For example, if a foreign holding company is established at the same time as the start-up corporation and the holding company only has its subsidiary’s stock as its asset, then it is very likely that the Start-Up Year PFIC exception would be extended to the holding company.
Contact Sherayzen Law Office for Professional Help With US International Tax 
Start-Up Year PFIC Exception is one of the innumerable intricacies of the highly complex US international tax law.  This is why you need to contact Sherayzen Law Office for professional help with US international tax compliance.
Sherayzen Law Office is a leader in US international tax compliance and planning, including PFIC compliance.  We have a profound knowledge of and extensive experience with US international tax law.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### FBAR Financial Accounts Definition | International Tax Lawyer & Attorney
In the realm of US international tax compliance, few topics are as crucial as the reporting of foreign financial accounts, particularly The Foreign Bank and Financial Accounts Report (FBAR). This article focuses on one specific aspect of FBAR compliance: what accounts need to be disclosed on FBAR.  In particular, we will delve into the intricacies of the scope of the FBAR financial accounts definition.
Please, note that this article is an upgrade of an article that I published almost fifteen years ago.
FBAR Financial Accounts Definition: FBAR Background Information
FBAR is one of the most important US international tax compliance forms.  All US persons must file an FBAR if they have a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding $10,000 at any time during the calendar year (31 USC. § 5314; 31 C.F.R. § 1010.350).
FBAR filing is separate from income tax filing and has its own distinct requirements and deadlines. Also, a taxpayer must comply with his FBAR reporting obligations even if he already reported the same foreign financial accounts elsewhere (such as Form 8621 or Form 8938). US filers must file their FBARs (officially FinCEN Forms 114a) electronically through FinCEN's BSA E-Filing System.
Additionally, FBAR has its own unique and very severe penalty system for noncompliance, including criminal penalties. This is why it is so important to understand what type of accounts should be disclosed on FBAR.
FBAR Financial Accounts Definition: Determining Reportable Accounts
When assessing whether an account qualifies as an FBAR foreign financial account, one should consider:
1. The account's location. The account must be outside the United States - there is special definition for FBAR purposes for what this means.  I will not discuss the definition of “foreign accounts” in this article; instead I will only focus on what type of accounts need to be disclosed.
2. The account type. The main issue is whether this particular foreign asset falls within the definition of a “financial account” - this is the main topic of this article.
3. Your relationship to the account. In other words, do you have a financial interest in or signature authority over the foreign accounts in question.
4. The aggregate value of all foreign financial accounts. Generally, the accounts must exceed $10,000 in the aggregate at any point in the year. I will discuss in another article how this is calculated.
FBAR Financial Accounts Definition: Broad Scope
The definition of “financial account” for FBAR purposes is very broad. It is very important to understand that it is so broad that many taxpayers would not even normally consider certain arrangements as financial accounts.  
In general, if there is a value maintained as part of a fiduciary relationship with a financial institution, it is likely to be a reportable account on FBAR. See 75 Fed. Reg. at 8846. The IRS, however,has stated “an account is not established simply by conducting transactions such as wiring money or purchasing a money order where no relationship has otherwise been established.” Id.
FBAR Financial Accounts Definition: Bank, Securities and Investment Accounts
For the FBAR purposes, financial accounts include all checking, savings, brokerage and securities accounts. 75 Fed. Reg. 8846 defines “securities account” as “an account maintained with a person in the business of buying, selling, holding, or trading stock or other securities.” Id. Securities derivatives and other similar financial instruments held with a financial institution all fall within the definition of a reportable account. However, paper bonds, notes and stock certificates that are not held through a financial institutions are not considered as “financial accounts.”
The  FBAR financial accounts definition also applies to all demand, deposit and time deposit accounts (in other words, CD accounts and their equivalents).
FBAR Financial Accounts Definition: Debit Cards and Prepaid Credit Cards
31 C.F.R. § 1010.350(c) further expands the definition of “account” to foreign debit cards and prepaid credit cards. This definition of an account is an interesting one as even a slight overpayment of a credit card would make it a reportable account for FBAR purposes.
FBAR Financial Accounts Definition: Other Financial Accounts
31 C.F.R. § 1010.350(c)(3) introduces four additional categories of accounts that a filer must include on his FBARs:
Accounts with persons accepting deposits as a financial agency;
Insurance policies with cash value or annuity policies (for example, this definition includes Assurance Vie accounts in France, LIC policies in India and Prudential Life Insurance policies in Hong Kong);
Accounts with commodity futures or options brokers; and
Accounts with mutual funds or similar pooled investments (e.g. mutual funds owned through individual folios in India).
FBAR Financial Accounts Definition: Retirement Plans
Reporting retirement accounts on FBAR probably presents the biggest challenge to US taxpayers. Generally, all foreign retirement accounts would be need to be disclosed on FBAR unless they fall under an exception.
For example, certain US retirement plans (under IRC sections 401(a), 403(a), 403(b), 408, or 408A) are exempt from FBAR reporting. However, US filers need to disclose on their FBARs all of their Canadian RRSP accounts, Singaporean CPF accounts, Australian Superannuation accounts, Israeli retirement accounts and many other types of foreign retirement accounts that these filers may have.
As a separate note, the greatest difficulty concerning foreign retirement accounts is not even FBAR reporting, but potential other requirements as such Form 8938 and, most importantly, Form 3520 and even Form 3520-A.  The latter forms (Forms 3520 and 3520-A) are triggered if the foreign accounts are considered to be “foreign trusts”.  However, this decision to treat foreign accounts as trusts should be done with great care.
FBAR Financial Accounts Definition: Exceptions
Finally, certain categories of foreign financial accounts are exempt from FBAR reporting:
Accounts in US military banking facilities serving US government installations abroad;
Accounts over which most bank officers or employees have only signature authority (unless they have a personal financial interest); and
Accounts over which officers or employees of publicly traded or large privately held US corporations have only signature authority, subject to specific conditions (31 C.F.R. § 1010.350(f)).
Contact Sherayzen Law Office for Professional FBAR Help
FBAR noncompliance is one of the most common and one of the most fearsome problems facing US individual taxpayers with respect to their US international tax compliance. Sherayzen Law Office can help you resolve past FBAR noncompliance and bring your US tax affairs into full compliance with US tax laws.
We are a leading US international tax compliance and FBAR compliance firm.  This is our core specialty in which we have profound knowledge and extensive experience.
Contact us today to discuss your specific FBAR and international tax compliance needs with an experienced tax attorney!

### Foreign Inheritance: US Taxation & Reporting | Form 3520 | International Tax Lawyers Austin
https://youtu.be/yhIoXKy-OvM?si=fTfAuJ8klXYMPxoU
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of vlogs from Austin, Texas. Today, I'd like to talk about a previous client experience here in Texas. I had a client from the United Kingdom who received foreign inheritance and it was not reported, neither were the assets he received in the subsequent years on FBAR, Form 8938 and Form 8621 for PFICs obviously.
We were talking about this situation where he essentially was deeply in noncompliance. We resolved all of the PFIC issues in a very interesting way. It was from awhile ago from the old OVDI program from 2011 and in that case, were were able to choose a different PFIC calculation methodology, mark to market which resulted in recognition of significant losses for the client which pretty much which pretty much wiped out his US income tax liability.
Of course, he still needed to pay the OVDI penalty on his foreign assets but we were able to put them in a middle category where his reporting and his penalty was also lower than what it would've been otherwise. That is in essence an old but very memorable case because of the fact that it came from the United Kingdom with respect to such a wide array of reporting requirements: foreign inheritance, FBAR, 8938, 8621. The only thing he didn't have were foreign businesses; otherwise that would've been even more of a complicated case because a lot of rules were in flux at that point that gave a lot of opportunities with respect to lowering his income tax liability and his offshore penalty.
In the next vlog, I will continue talking about my prior client experience here in Austin, Texas.
Thank you for watching, until the next time.

### Foreign Inheritance & US International Tax Issues | Form 3520 Lawyer & Attorney Austin Texas
https://youtu.be/0Pjku32gaB8?si=02RwGZ2czHRQO4ls
Hello and welcome to Sherayzen Video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from Austin, Texas. In this series of blogs, I'm talking about the US tax reporting requirements that concern immigrants who came to live and work in Austin.
Today, I would like to discuss a very important topic of foreign inheritance. Foreign inheritance, as I've said in one of my seminars, is a Pandora's box of US tax reporting requirements because it's not only about the reporting of foreign inheritance itself, but also the continuous reporting requirements that may stem from the original foreign inheritance. These reporting requirements may continue for many many years and can be very diverse; so let's discuss first things first.
Is foreign inheritance taxable in the United States? The answer is usually 'no'. Of course, US situs property inherited in the United States may be taxed in the United States and the reporting and taxation requirements, will apply to the foreign estate, not to the person who inherited the asset.
The second question is: Is foreign inheritance reportable in the United States? The answer to this question is absolutely, yes. It is highly important that you disclose your foreign inheritance in a timely manner here in the United States. Failure to do so on form 3520, may lead to the imposition of absolutely humongous penalties, up to 25% of the foreign inheritance. I have seen personally, where the IRS imposed penalties like these and I had to fight them.
The other aspect that I mentioned, are the reporting requirements that are associated with foreign inheritance, because usually people inherit assets. That means foreign assets; that means sometimes foreign financial accounts. It may mean foreign businesses; it may mean a foreign trust or beneficiary interest. It may mean other foreign financial assets likely bonds or bond certificates; it also may mean real estate. These foreign assets, which were inherited, may have and usually do have special reporting requirements associated with each of these assets and sometimes, even if they don't, aside from the Form 3520 reporting of inherited real estate, there may not be any other reporting requirements for the real estate because personally, there may be income tax reporting requirements that are tied to your Form 3520 compliance and may reappear all of a sudden 10, 15, 20 years later.
In some cases, a foreign inheritance may be tied to an IRS audit and there, it could be very significant. For example, I've had audits where we had to go back to the 1980s with respect to foreign inheritance and establishing the fair market value of those assets.
Foreign inheritance is not just one reporting requirement; it's a whole family of reporting requirements that may come in sometimes at the time of a foreign inheritance as well as after the foreign inheritance.
If you would like to learn more about your foreign inheritance reporting requirements, you can contact me at eugene@sherayzenlaw.com or call me at (952) 500-8159.
Thank you for watching, until the next time.

### Knoxville FBAR Attorney | International Tax Lawyer Tennessee
If you reside in Knoxville, Tennessee and have unreported foreign bank and financial accounts, you may be looking for a Knoxville FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Knoxville FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Knoxville FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Knoxville FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Knoxville FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Knoxville FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Knoxville, Tennessee. On the contrary, consider international tax attorneys who reside in other states and help Knoxville residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Knoxville, Tennessee.
Thus, if you are looking for a Knoxville FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Taiwanese Bank Accounts & Corporation Voluntary Disclosure Case | FBAR 5471 International Tax Lawyer
https://youtu.be/RIZdc9UojGo?si=mvLpb4ScSQ0TERSf
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'd like to talk to you about a case that I completed about a year and a half ago with respect to a Taiwanese corporation. The case initially, came to me as a couple, an American who married a Tawainese woman, who have lived in the United States for awhile and she eventually became a permanent resident of the United States (still not a Citizen of the United States) and she had foreign bank accounts about which she had no idea because she gave her mother the Power of Attorney to open up bank accounts in her name.
This is very common in Southeast Asia where parents take liberties with their children's finances and often times, they would open up bank accounts without their knowledge. Eventually on one of the trips to Taiwan, she found out from her mother that there were bank accounts that she needed to account for. She started researching what she needed to do with respect to those accounts in the United States and eventually found out about FBAR and the foreign income reporting, Form 8938 reporting, etc. etc. After that, she came to me to fix the problem.
While we were doing this voluntary disclosure, we discovered through a series of indirect hints that something else was going on there. Eventually, it turned out that her father assigned 50% of a Taiwanese corporation to her, also without her knowledge. Now in addition to FBAR, Form 8938 and foreign income reporting, and actually also PFIC reporting; she also needed to file a Form 5471 and she also needed to account for her Taiwanese corporation on Form 8938 because she is a minority owner; it's not a controlled foreign corporation, so the Form 5471 was not required in some of the years; it was only required in the first year.
Eventually we completed the voluntary disclosure and it went through just fine but this is an important lesson to learn, that in a voluntary disclosure, you never know what kind of surprises may come in, even something as unexpected as ownership of a foreign company.
In the next blog, I will continue review of a series of cases that I've done for Asian Americans and Asians who became US Tax Residents.
Thank you for watching, until the next time.

### Fort Collins FBAR Tax Attorney | International Tax Lawyer Colorado
If you reside in Fort Collins, Colorado, and have unreported foreign bank and financial accounts, you may be looking for a Fort Collins FBAR Tax Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Fort Collins FBAR Tax Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Fort Collins FBAR Tax Attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Fort Collins FBAR Tax Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining a Fort Collins FBAR Tax Attorney, consider the fact that such an attorney’s work is not limited to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Fort Collins FBAR Tax Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Fort Collins, Colorado. On the contrary, consider international tax attorneys who reside in other states and help Fort Collins residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Colorado. We can help with annual FBAR compliance, FBAR compliance in combination with other international tax forms as well as offshore voluntary disclosures.
Thus, if you are looking for a Fort Collins FBAR Tax Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Chattanooga FBAR Attorney | International Tax Lawyer Tennessee
If you reside in Chattanooga , Tennessee and have unreported foreign bank and financial accounts, you may be looking for a Chattanooga  FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Chattanooga  FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Chattanooga FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Chattanooga  FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Chattanooga  FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Chattanooga  FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Chattanooga , Tennessee. On the contrary, consider international tax attorneys who reside in other states and help Chattanooga residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Chattanooga , Tennessee.
Thus, if you are looking for a Chattanooga  FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Nashville FBAR Attorney | International Tax Lawyer Tennessee
If you reside in Nashville, Tennessee and have unreported foreign bank and financial accounts, you may be looking for a Nashville FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Nashville FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Nashville FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Nashville FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Nashville FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Nashville FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Nashville, Tennessee. On the contrary, consider international tax attorneys who reside in other states and help Nashville residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Nashville, Tennessee.
Thus, if you are looking for a Nashville FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Colorado Springs FBAR Tax Attorney | International Tax Lawyer Colorado
If you reside in Colorado Springs, Colorado, and have unreported foreign bank and financial accounts, you may be looking for a Colorado Springs FBAR Tax Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Colorado Springs FBAR Tax Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Colorado Springs FBAR Tax Attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Colorado Springs FBAR Tax Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining a Colorado Springs FBAR Tax Attorney, consider the fact that such an attorney’s work is not limited to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Colorado Springs FBAR Tax Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Colorado Springs, Colorado. On the contrary, consider international tax attorneys who reside in other states and help Colorado Springs residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Colorado Springs, Colorado. We can help with annual FBAR compliance, FBAR compliance in combination with other international tax forms as well as offshore voluntary disclosures.
Thus, if you are looking for a Colorado Springs FBAR Tax Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Austin TX: The Hotbed of US International Tax Compliance | FBAR & FATCA Austin Texas
https://youtu.be/-6fyRO2BvoM?si=uEqfFi5aLcVbcOEZ
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm in Austin, Texas. In fact, I'm on the famous 6th Street and you can see behind me that there's the old Driskill Hotel built in 1886.
Since I'm starting out this series of blogs from Austin, I want to say why I came to this city besides meeting with a client here and conducting a consultation here; I came here because I wanted to get to know this great city and as a huge source of clients for my firm. Now, Austin is truly prolific when it comes to clients for my firm. In fact, I would say that it is in the top five cities in the United States. Sometimes, I get more clients from Austin that I get from New York and Boston combined. Why is that? Well, the answer is very simple: there are a lot of immigrants here in Austin that come here from all over the world. They come here from Germany, from Switzerland, from Australia and New Zealand, England, Brazil, Mexico, etc. When these immigrants come to Austin, they usually do not come empty-handed. They still maintain ties to their home countries; they still have assets there, they may be the beneficiary of a foreign trust in New Zealand and they may have received an inheritance in the United Kingdom, they may be running businesses in Mexico. Wherever it is that they have, has US tax reporting consequences here in the United States. Unfortunately, many of them are not aware of these consequences and do not understand them. This is why many of them tend to be non-compliant with US tax reporting requirements and later they will come to me to help them fix it.
In future blogs, I will continue talking about US tax reporting requirements that apply to these immigrants that come to Austin, Texas.
Thank you for watching, until the next time.

### Corpus Christi Foreign Inheritance Lawyer | International Tax Attorney Texas
Retaining a Corpus Christi foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in Corpus Christi, Texas and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your Corpus Christi foreign inheritance lawyer.
Corpus Christi Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a Corpus Christi foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
Corpus Christi Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
Corpus Christi Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in Corpus Christi and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Corpus Christi Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a Corpus Christi Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that your international tax lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Corpus Christi, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Corpus Christi Foreign Inheritance Lawyer: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Corpus Christi, Texas. On the contrary, consider international tax attorneys who reside in other states and help Corpus Christi residents with their FBAR compliance.
Sherayzen Law Office is based in Minneapolis, Minnesota, but we have a large number of clients in Texas, including the Corpus Christi area. Hence, Corpus Christi residents can contact us and retain us to resolve their foreign inheritance issues related to US international tax compliance.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients in Texas with their foreign inheritance. We can help you!
Hence, if you are looking for a Corpus Christi Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### FinCEN Form 114 Introduction | FBAR Tax Lawyer & Attorney San Francisco
https://youtu.be/wCIWlnMdrSw?si=0LJQx-p3YMT0SrvL
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I am in San Francisco, California and today I'm starting a new series of blogs (from San Francisco) and I'd like to start it out traditionally with a discussion of FBARs for residents who reside in San Francisco.
San Francisco is a very interesting city because it is a city where a lot of people want to come to have fun, to work and to invest in real estate. There are other people here from China, France, Italy, Spain, Mexico, Colombia, Germany; basically from all over the world. A lot of these people come here already with a substantial amount of wealth because San Francisco is not a cheap city to live in. This wealth is often distributed among various asset classes, including cash sitting in bank accounts and what these individuals often forget about is that they need to report these foreign bank accounts to the IRS and this is where FBAR comes in: FinCEN Form 114 commonly known as FBAR (foreign bank accounts reporting), full name is report of foreign financial bank accounts. This form is required to be filed by US taxpayers with respect to ownership interest in or signature authority over foreign bank and financial accounts. The non-compliance penalties with respect to this form are steep and can be described as draconian. This is why if you have not reported your foreign bank accounts on FBAR or any other form that I will discuss in future blogs, you can call me at (952) 500-8159 or you can email me at: eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Glenview FBAR Attorney | International Tax Lawyer Kentucky
If you reside in Glenview, Kentucky and have unreported foreign bank and financial accounts, you may be looking for a Glenview FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Glenview FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Glenview FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Glenview FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Glenview FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Glenview FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Glenview, Kentucky. On the contrary, consider international tax attorneys who reside in other states and help Glenview residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Glenview, Kentucky.
Thus, if you are looking for a Glenview FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Closer Connection Exception | International Tax Lawyer & Attorney
The Closer Connection Exception is a very important provision in US international tax law, because it provides a potential way for individuals who meet the Substantial Presence Test to still be treated as nonresident aliens for US income tax purposes. This article explores the Closer Connection Exception, its requirements and its implications for US and foreign taxpayers.
Understanding the Closer Connection Exception
The Closer Connection Exception is found in Internal Revenue Code (IRC) §7701(b)(3)(B) and is further elaborated in Treasury Regulation §301.7701(b)-2. This exception allows an individual who would otherwise be considered a US tax resident under the Substantial Presence Test to be treated as a nonresident alien for income tax purposes if he can demonstrate a "closer connection" to a foreign country.
Key Requirements for the Closer Connection Exception
IRC § 7701(b)(3)(B) and Treas. Reg. § 301.7701(b)-2(a) lay out the Closer Connection Exception eligibility criteria that an an individual must meet:
1.The individual must be present in the United States for fewer than 183 days in the current calendar year;
2.The individual must maintain a tax home in a foreign country during the year;
3.The individual must have a closer connection to that foreign country than to the United States; and
4. An individual must be an eligible individual.
Let’s explore each of these three requirements in detail.
Closer Connection Exception: The 183-Day Rule
The first requirement of the Closer Connection Exception is fairly straightforward: the individual must be present in the United States for fewer than 183 days in the current calendar year. This is a hard limit. Even one additional day of presence will disqualify an individual from claiming this exception.
It is important to emphasize that this 183-day threshold is different from the count of days used in the Substantial Presence Test, which includes a lookback period. For the Closer Connection Exception, only days of physical presence in the United States in the current year are considered. Treas. Reg. §301.7701(b)-2(a)(1).
Closer Connection Exception: Foreign Tax Home Requirement
The second requirement for the Closer Connection Exception is that the individual must maintain a tax home in a foreign country during the year.  IRC §911(d)(3) defines the concept of "tax home" as an individual's principal place of business.  “If the individual has no regular or principal place of business because of the nature of the business, or because the individual is not engaged in carrying on any trade or business within the meaning of section 162(a), then the individual's tax home is the individual's regular place of abode in a real and substantial sense.” Treas. Reg. §301.7701(b)-2(c)(1).  This is obviously a very fact-dependent definition of tax home, which requires exploration of all relevant circumstances (such as the location of the individual’s permanent home, family and even personal belongings).
The individual’s foreign tax home must be in existence for the entire current year. It must also be located in the same foreign country for which the individual is claiming to have the closer connection. Treas. Reg. §301.7701(b)-2(c)(2).
Closer Connection Exception: Closer Connection to Foreign Country
The third and often most complex requirement of the Closer Connection Exception is demonstrating a closer connection to a foreign country than to the United States.  Treasury Regulations state that this requires establishing “that the individual has maintained more significant contacts with the foreign country than with the United States”. Treas. Reg. §301.7701(b)-2(d).  
This analysis of course requires a detailed exploration of all relevant facts and circumstances. Treas. Reg. § 301.7701(b)-2(d)(1) provide the following non-exclusive list of key factors that one must consider in determining whether a closer connection to a foreign country exists:
1.The location of the individual's permanent home;
2.The location of the individual's family;
3.The location of personal belongings;
4.The location of social, political, cultural, or religious organizations with which the individual has a relationship;
5.The location where the individual conducts routine personal banking activities;
6.The location where the individual conducts business activities;
7.The location of the jurisdiction in which the individual holds a driver's license;
8.The location of the jurisdiction in which the individual votes;
9.The country of residence designated by the individual on his forms and documents; and
10. The types of official forms and documents filed by the individual, such as Form 1078 (Certificate of Alien Claiming Residence in the United States), Form W-8 (Certificate of Foreign Status) or Form W-9 (Payer's Request for Taxpayer ldentification Number).
Regarding the first factor, individual’s permanent home, it does not matter whether a permanent home is a house, an apartment or a furnished room. It also does not matter whether the individual owns or rents his home. “It is material, however, that the dwelling be available at all times, continuously, and not solely for stays of short duration.” Treas. Reg. §301.7701(b)-2(d)(1).
Closer Connection Exception: Multiple Foreign Countries
A question arises in this context: what if an individual has connections not to just one, but  two foreign countries? Can an individual have a tax home in two or more countries?
Generally, an individual can have a closer connection to only one foreign country. However, it is possible to have a closer connection to two foreign countries in a single year if the individual moved their tax home during the year. In such cases, the individual can have a closer connection to each country for the part of the year they maintained a tax home in that country.
Treas. Reg. §301.7701(b)-2(e) lays out a detailed legal test in this case of multiple foreign country connections.  In order for an individual to be able to claim the Closer Connection Exception in cases of close contacts with more than one foreign country, this individual must satisfy the following conditions:
(1) The individual maintains a tax home beginning on the first day of the current year in one foreign country;
(2) The individual changes his or her tax home during the current year to a second foreign country;
(3) The individual continues to maintain his or her tax home in the second foreign country for the remainder of the current year;
(4) The individual has a closer connection to each foreign country than to the United States for the period during which the individual maintains a tax home in that foreign country; and
(5) The individual is subject to taxation as a resident pursuant to the internal laws of either foreign country for the entire year or subject to taxation as a resident in both foreign countries for the period during which the individual maintains a tax home in each foreign country.
Closer Connection Exception: Eligible Individual
As stated above, the final condition for the Exception is that an individual must be an eligible individual. Ineligible individuals include: (a) individuals who have applied for status as a lawful permanent resident of the United States (i.e., applied for a green card), and (b) individuals who have an application pending for adjustment of status. IRC §7701(b)(3)(C). 
Treas. Reg. §301.7701(b)-2(f) specifically sets forth the following list of actions which would make an individual ineligible to claim the Closer Connection Exception:
“Affirmative steps to change status to that of a permanent resident include, but are not limited to, the following—
(1) The filing of Immigration and Naturalization Form I-508 (Waiver of Immunities) by the alien;
(2) The filing of Immigration and Naturalization Form I-485 (Application for Status as Permanent Resident) by the alien;
(3) The filing of Immigration and Naturalization Form I-130 (Petition for Alien Relative) on behalf of the alien;
(4) The filing of Immigration and Naturalization Form I-140 (Petition for Prospective Immigrant Employee) on behalf of the alien;
(5) The filing of Department of Labor Form ETA-750 (Application for Alien Employment Certification) on behalf of the alien; or
(6) The filing of Department of State Form OF-230 (Application for Immigrant Visa and Alien Registration) by the alien.”
Closer Connection Exception: Form 8840
To claim the Closer Connection Exception, eligible individuals must file Form 8840, Closer Connection Exception Statement for Aliens, with the IRS. This form must be filed by the due date of the individual's nonresident alien income tax return (Form 1040-NR), including extensions. Form 8840 requires detailed information about the individual's presence in the United States, tax home, and factors demonstrating a closer connection to a foreign country. Failure to timely file this form may result in the individual being unable to claim the exception. Treas. Reg. §301.7701(b)-8(c).
Closer Connection Exception: Interaction with Tax Treaties
It's important to note that the Closer Connection Exception is separate from any residency determinations under tax treaties. An individual who does not qualify for the Closer Connection Exception may still be able to claim nonresident status under a tax treaty's tie-breaker rules. Conversely, qualifying for the Closer Connection Exception may eliminate the need to rely on treaty provisions. See Treas. Reg. §301.7701(b)-7.
Closer Connection Exception: Implications for Other Reporting Requirements
While the Closer Connection Exception can significantly alter an individual's US income tax obligations, it is very important to understand that it may not exempt the individual from all US reporting requirements, particularly information returns such as FBAR and Form 8938.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
US international tax law is extremely complex.  The Closer Connection Exception and its potential impact on an individual's tax status is just an example of this complexity. This is why, if you have assets in or income from foreign countries, you need to seek the professional help of Sherayzen Law Office.  We are a leading US international tax law firm which offers comprehensive support in US international tax compliance (including IRS offshore voluntary disclosures) and US international tax planning. Our deep understanding of and extensive experienced in US international tax law allows us to proffer a professional advice tailored to your specific circumstances.
Contact Us Today to Schedule Your Confidential Consultation!

### Louisville FBAR Attorney | International Tax Lawyer Kentucky
If you reside in Louisville, Kentucky and have unreported foreign bank and financial accounts, you may be looking for a Louisville FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Louisville FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Louisville FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Louisville FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Louisville FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Louisville FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Louisville, Kentucky. On the contrary, consider international tax attorneys who reside in other states and help Louisville residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Louisville, Kentucky.
Thus, if you are looking for a Louisville FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Substantial Presence Test | US International Tax Lawyer & Attorney
The substantial presence test is one of the most important legal tests in the Internal Revenue Code (IRC), because it determines whether a person is a US tax resident solely by virtue of his physical presence in the United States.  Additionally, this Test is essential to the determination of whether a person is a “US Person” for FBAR and Form 8938 purposes. In this article, I will explain the substantial presence test and highlight its main exceptions.
Substantial Presence Test: The Main Rule
In reality, there are two substantial presence tests; if either test is met, a person is considered to be a US tax resident unless an exception applies.
The first substantial presence test is met if a person is physically present in the United States for at least 183 days during the calendar year. 26 USC §7701(b)(3).  
The second substantial presence test (the so-called “lookback test”) is satisfied if two conditions are met: (1) the person is present in the United States for at least 31 days during the calendar year; and (2) the sum of the days on which this person was present in the United States during the current and the two preceding calendar years (multiplied by the fractions found in §7701(b)(3)(A)(ii)) equals to or exceeds 183 days. 26 USC 7701(b)(3)(A).  
Let’s discuss how exactly the lookback test works.  The way to determine to determine whether the 183-day test is met is to add: (a) all days present in the United States during the current calendar year (i.e. the year for which you are trying to determine whether the Substantial Presence Test is met) + (b) one-third of the days spent in the United States in the year immediately preceding the current year + (c) one-sixth of the days spent in the United States in the second year preceding the current calendar year. See 26 USC §7701(b)(3).
Substantial Presence Test: Presence
As one can easily see, a critical issue in the substantial presence test is to determine during which days a person is considered to be “present in the United States”. Pursuant to 26 USC §7701(b)(7)(A), a person is considered to be present in the United States if he is physically present in the United States at any time, however short, during the day, including the days of arrival and departure.
There are limited exceptions under 26 USC §§7701(b)(7)(B) and 7701(b)(7)(C) for: commuters from Canada and Mexico, foreign vessel crew members and persons who travel between two foreign countries with a less than a 24-hour layover in the United States.
Substantial Presence Test: Exempt Persons
In addition to the exceptions above, the Internal Revenue Code contains a large number of categories of persons exempt from the Substantial Presence Test. 26 USC §§7701(b). In other words, the days that these “exempt persons” spend in the United States do not count toward the Substantial Presence Test. Here is a most common list of exempt persons:
Foreign government-related individuals and their immediate family (26 USC §7701(b)(5)(B))
Teachers and trainees and their immediate family (26 USC §7701(b)(5)(C))
Foreign students on F-, J-, M- or Q-visas (26 USC §7701(b)(5)(D))
Professional athletes temporarily in the US for charitable sporting events (26 USC §7701(b)(5)(A)(iv))
Individuals unable to leave the US due to medical conditions (26 USC §7701(b)(3)(D)(ii))
A couple of notes on these categories. First, for the “professional athletes who are temporarily present in the United States to compete in a charitable sporting event” category, the sports event must meet the following requirements for the exemption to apply: (1) it must be organized primarily to benefit §503(c)(3) tax-exempt organization; (2) the net proceeds from the event must be contributed to the benefitted tax-exempt organization; and (3) the event must be carried out substantially by volunteers.
Second, concerning the last category “foreign aliens who are unable to leave the United States because of a medical condition”, Rev. Proc. 2020-20 expanded this medical condition exception to include “COVID-19 Medical Condition Travel Exception” for eligible individuals unable to leave United States during “COVID-19 Emergency Period”. The term COVID-19 Emergency Period is a single period of up to 60 consecutive calendar days selected by an individual starting on or after February 1, 2020 and on or before April 1, 2020 during which the individual is physically present in the United States on each day. An Eligible Individual may claim the COVID-19 Medical Condition Travel Exception in addition to, or instead of, claiming other exceptions from the substantial presence test for which the individual is eligible.
Substantial Presence Test: “Closer Connection” Exception
In addition to exceptions and exemptions listed above, there is one more highly important exception to the Substantial Presence Test called the “Closer Connection” Exception. Under 26 USC §§7701(b)(3)(C), a person is exempt from the application of the Substantial Presence Test if the following four conditions are met:
1) the person is present less than 183 days in the United States during the current year;
2) the person can establish that, during the current year, he had a tax home in a foreign country (obviously, “tax home” is a term of art that has its special significance for the purposes of the “closer connection” exception;
3) the person has a “closer connection” to that foreign country than to the United States; and
4) the person has not applied for a lawful permanent residency status in the United States.
I have addressed the Closer Connection Exception in detail here.
Substantial Presence Test:  Tax Treaty Exception
Tax treaties provide another exception. IRC §7701(b)(6) and Treas. Reg. §301.7701(b)-7 provide that an individual who meets the substantial presence test but is a resident of a treaty country under a tie-breaker provision of an income tax treaty may elect to be treated as a nonresident alien for US tax purposes. This election is made on Form 8833, Treaty-Based Return Position Disclosure.
It's important to note that while this treaty election can significantly affect an individual's US tax obligations, it does not negate the fact that the individual met the substantial presence test. This distinction is crucial for certain reporting requirements, such as FBAR and Form 8938.
Substantial Presence Test: Closer Connection Exception and Treaty Election vs. FBAR
One of the most common pitfalls of US international tax compliance relates to a situation where the substantial presence test is met but either a closer connection exception is claimed or an election is made to be taxed as a resident of another country.  In such a situation, even many practitioners incorrectly conclude that the taxpayer is not required to file FBAR.  This is not the case; even where a tax treaty foreign tax residency election or a closer connection exception claim is made, the taxpayer may still need to file an FBAR. 76 Fed. Reg. 10,234, 10,238; IRM 4.26.16.2.1.2(6) (11-06-15).
I will discuss this FBAR exception to the closer connection and tax treaty exceptions in another article.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
Understanding the nuances of the US international tax law, including the Substantial Presence Test with its numerous exceptions and its implications for both tax residency and FBAR reporting, is essential for individuals who spend significant time in the United States. Given the complexity of these rules and their potential US tax impact, you need qualified professional help to properly navigate these complex rules.
This is why you need to contact Sherayzen Law Office.  Our international tax team is highly knowledgeable and experienced in this area of law. We have helped hundreds of US taxpayers to determine their US tax residency status, and we can help you!  
Contact us today to schedule your confidential consultation!

### FBAR Voluntary Disclosure for Chinese Structured Products | International Tax Lawyer Portland Oregon
https://youtu.be/wMUSl2RsC2Y?si=ihNpPgIV0MFHtyNx
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Portland, Oregon. What I would like to talk about today is a very interesting recent case that I had with respect to a Chinese American who's lived in the United States for many years - over twenty years and became a US citizen and she had accounts at ICBC, the Industrial and Commercial Bank of China in China. In other words, she's had those accounts for a long time and she didn't know about her reporting requirements. No one told her about the fact that she needed to disclose her foreign bank accounts in the United States and she never reported them. Then by accident, she found out about the FBAR requirement and she came to me for help.
The interesting thing about ICBC (and this client in particular) is that she didn't just have regular bank accounts. What she had were structured products. ICBC issued a number of structured products which are not that easy to track. One of the problems with Chinese banks is that often times, they can give you the current information but if you try to dig into the past information, it's not that easy to do. On top of that, it's not easy to track each of these structured products. If a person, say has $300,000 invested in these structured products, she may have anywhere between 15 to 30 structured products at the same time and that is problematic, because keeping track of 30 products is not that easy, especially over a six year period. On top of that, one of the issues that we had is the fact that these structured products - they operate sort of like fixed deposit accounts, except that you can deposit and withdraw money, pretty much at any period of time. Every time you withdraw the money, you actually withdraw the interest as well; so, there's no penalty for it charged by the bank. There's no tax levied on it by the Chinese government, at least there was no tax at that point.
We had quite a bit of work to do trying to keep track of everything over a six-year period of time, keeping all the interest and calculations in line, putting everything together for the Streamlined Domestic Offshore Procedures disclosure. In the end, we succeeded and the disclosure went through just fine but it's something to keep in mind that a lot of people don't realize that these structured products can be troublesome. They're very troublesome in Switzerland but they're also troublesome in China.
Thank you for watching, until the next time.

### Offshore Voluntary Disclosure Must Be Timely | International Tax Lawyers Portland Oregon
https://youtu.be/rF4Mov96Dyg?si=JPc1szzpes_YG2uX
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Oregon - Portland. Now, you can see a train leaving behind me and this kind of reminds me of an important issue: to make sure that you're able to do your voluntary disclosure. You have to make sure that you make this train; that is, that you do your voluntary disclosure timely. If you try to do a voluntary disclosure after an IRS agent already started an investigation into your case, then you won't be able to do a voluntary disclosure; that train has left. What you need to do is to make sure that as soon as you learn about your noncompliance with US tax laws, that you would come to me to discuss your voluntary disclosure options as soon as possible.
Thank you for watching, until the next time.

### Digital Currency Final Regulations: Broad Overview | Cryptocurrency Tax Attorney
On June 28, 2024, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued final regulations requiring brokers to report sales and exchanges of digital assets, including cryptocurrency. These digital currency final regulations aim to improve tax compliance and provide taxpayers with necessary information for accurate tax reporting.
Digital Currency Final Regulations: Scope and Implementation
The new regulations will apply to transactions beginning in calendar year 2025, with reports to be filed on the new Form 1099-DA. These rules primarily affect custodial brokers who take possession of digital assets being sold by their customers, including:
Operators of custodial digital asset trading platforms
Certain digital asset hosted wallet providers
Digital asset kiosks
Certain processors of digital asset payments (PDAPs)
Notably, the regulations do not currently include reporting requirements for non-custodial or decentralized brokers. The Treasury and IRS plan to address these entities in a separate set of regulations in the future.
Digital Currency Final Regulations: Key Provisions
There are six key areas addressed in the final regulations:
Basis, Gain, and Loss Determination: The regulations provide rules for taxpayers to determine their basis, gain, and loss from digital asset transactions. This is very important, because we will now have a more or less clear set of rules to follow.
Backup Withholding: New rules for backup withholding on certain digital asset transactions are included. This is a critical issue, especially in the context of US international tax law.
Real Estate Transactions: Real estate professionals must report the fair market value of digital assets used in real estate transactions with closing dates on or after January 1, 2026. Another key provision aimed to improve tax compliance in this area.
Aggregate Reporting: An optional aggregate reporting method is provided for certain sales of stablecoins and non-fungible tokens (NFTs) that exceed specified thresholds.
PDAP Transactions: Reporting is required on a transactional basis only if customer sales exceed a de minimis threshold.
Basis Reporting: Certain brokers must report basis for transactions occurring on or after January 1, 2026. This is a very good provision for US taxpayers, because cost-basis determination is often very cumbersome when it comes to digital asset gain reporting.
Digital Currency Final Regulations: Transitional Relief and Exceptions
Obviously, the new reporting requirements is an increased compliance burden on affected custodial brokers. In order to ease this burden, the IRS is providing the following transitional and penalty relief:
Notice 2024-56 offers general transitional relief from reporting penalties and backup withholding for brokers making good faith efforts to comply during calendar year 2025.Limited relief from backup withholding is provided for certain digital asset sales in 2026 for brokers using the IRS TIN-matching system.
Notice 2024-57 temporarily exempts six types of transactions from reporting requirements, including wrapping and unwrapping transactions, liquidity provider transactions and staking transactions, among others.
Revenue Procedure 2024-28 allows taxpayers to use reasonable allocation methods for unused basis across wallets or accounts holding the same digital asset.
Digital Currency Final Regulations: IRS Rationale
IRS Commissioner Danny Werfel emphasized the importance of these regulations in addressing potential noncompliance in digital currency transactions. The new reporting requirements are expected to improve detection of noncompliance and provide taxpayers with information to simplify their reporting process.
Werfel also highlighted the need for adequate IRS funding to keep pace with the evolving complexity of the tax system, particularly in relation to new digital assets.
Digital Currency Final Regulations: Impact
These Digital Currency Final Regulations represent a major development in the taxation and reporting of digital asset transactions, in particular with respect to integration of digital assets into the existing tax framework. As the digital asset landscape continues to evolve, further refinements and additional regulations are likely to follow, particularly regarding non-custodial and decentralized brokers. While the regulations provide clarity for many custodial brokers and taxpayers, the full impact of these regulations will become clearer as implementation begins in 2025 and beyond.
Contact Sherayzen Law Office for Professional Tax Help With US International Tax Aspects of Digital Currencies
Given the complex and evolving nature of digital currency regulations, it is crucial to seek expert guidance. Sherayzen Law Office specializes in US international tax law and can provide invaluable assistance in navigating the intricate landscape of digital currency taxation across borders. Contact us today to schedule your confidential consultation!

### Indianapolis FBAR Attorney | International Tax Lawyer Indiana
If you reside in Indianapolis, Indiana and have unreported foreign bank and financial accounts, you may be looking for a Indianapolis FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Indianapolis FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Indianapolis FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Indianapolis FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Indianapolis FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Indianapolis FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Indianapolis, Indiana. On the contrary, consider international tax attorneys who reside in other states and help Indianapolis residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Indianapolis, Indiana.
Thus, if you are looking for a Indianapolis FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Waco Foreign Inheritance Lawyer | International Tax Attorney Texas
Retaining a Waco foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in Waco, Texas and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your Waco foreign inheritance lawyer.
Waco Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a Waco foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
Waco Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
Waco Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a Waco foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in Waco and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Waco Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a Waco Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that a Waco Foreign Inheritance Lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Waco, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Waco Foreign Inheritance Lawyer: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Waco, Texas. On the contrary, consider international tax attorneys who reside in other states and help Waco residents with their FBAR compliance.
Sherayzen Law Office is based in Minneapolis, Minnesota, but we have a large number of clients in Texas, including the Waco area. Hence, Waco residents can contact us and retain us to resolve their foreign inheritance issues related to US international tax compliance.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients in Texas with their foreign inheritance. We can help you!
Hence, if you are looking for a Waco Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### Streamlined Domestic Offshore Disclosure: Japanese Foreign Inheritance | Form 5471 Lawyer Portland Oregon
https://youtu.be/WzgCbkhEZX8?si=cAzh8v-mcX1FYi0e
Good morning and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Portland, Oregon. As part of that series, I'm doing case reviews related to Asian Americans or Asians who became US tax residents.
Today, I'd like to talk about a case related to Japan. About two years ago, I had a case where a married couple came to me. The husband is a US citizen born in the United States and the wife is a US citizen born in Japan. They came to me because they discovered that a foreign inheritance may have US tax consequences. They read something about it, didn't understand it; so, they came to me. It turns out that the wife received a foreign inheritance about three years prior to the time they came to me for an initial consultation. As part of that foreign inheritance, she inherited a series of various stocks, bank accounts - savings - checking and real estate properties.
I took this case and we started working on the voluntary disclosure and discovered some new bank accounts; there were other issues that came up but the most interesting thing that I want to talk to you about is what happened sometime toward the end of the consultation. I received some new documents from the client related to one of her foreign accounts and there was another name on this account (I don't speak Japanese but realized it was not her name). I inquired of the client about it and she said that it was a name of a corporation, so from that we started to investigate further and it turns out that as part of her foreign inheritance, she also inherited a foreign corporation and in reality, the real estate in Japan was owned by that Japanese corporation. Now, after we'd done all of this work with respect to FBAR compliance, Form 8938 compliance, all of a sudden, we had to do work with respect to Form 5471 because this form is used to report US ownership of foreign companies; foreign corporations to be precise. Since this was a controlled foreign corporation, a form 5471 had to be filed for each year. We received the financials from a Japanese lawyer, worked on them, converted them to US GAAP and then completed Forms 5471 and then submitted a voluntary disclosure.
The most important lesson here is that voluntary disclosures almost always contain surprises, even if a client is 100% certain that she found out everything there is to know about her foreign assets; even if she provided a summary of everything. An attorney must always be diligent in his investigation of foreign clients; meaning, you review the documents, minutely review the documents, look at the transactions, see what's going on there, understand the transactions, understand the logic behind the transactions, understand what may be missing because clients sometimes simply do not know what they need to be looking for and it is the job of an attorney to guide them. Too many times, I have seen where accountants and sometimes even attorneys do not do that. But in reality, it is the job of an attorney to make sure that the voluntary disclosure that is being submitted is the best that can be submitted under the circumstances. In the case of this Japanese inheritance, something like a foreign corporation was so well hidden in the documents, that it was only through extra due diligence that I was able to discover it.
In a next blog, I will discuss another case related to Southeast Asia.
Thank you for watching, until the next time.

### Abilene Foreign Inheritance Lawyer | International Tax Attorney Texas
Retaining a Abilene foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in Abilene, Texas and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your Abilene foreign inheritance lawyer.
Abilene Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a Abilene foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
Abilene Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8621, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
Abilene Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a Abilene foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in Abilene and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Abilene Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a Abilene Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that a Abilene Foreign Inheritance Lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Abilene, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Abilene Foreign Inheritance Lawyer: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Abilene, Texas. On the contrary, consider international tax attorneys who reside in other states and help Abilene residents with their FBAR compliance.
Sherayzen Law Office is based in Minneapolis, Minnesota, but we have a large number of clients in Texas, including the Abilene area. Hence, Abilene residents can contact us and retain us to resolve their foreign inheritance issues related to US international tax compliance.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients in Texas with their foreign inheritance. We can help you!
Hence, if you are looking for a Abilene Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### Boulder FBAR Tax Attorney | International Tax Lawyer Colorado
If you reside in Boulder, Colorado, and have unreported foreign bank and financial accounts, you may be looking for a Boulder FBAR Tax Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Boulder FBAR Tax Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Boulder FBAR Tax Attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Boulder FBAR Tax Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining a Boulder FBAR Tax Attorney, consider the fact that such an attorney’s work is not limited to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Boulder FBAR Tax Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Boulder, Colorado. On the contrary, consider international tax attorneys who reside in other states and help Boulder residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Boulder, Colorado.
Thus, if you are looking for a Boulder FBAR Tax Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### PFIC Compliance: Introduction | International Tax Lawyer & Attorney
In the intricate realm of US international tax law, few areas are as challenging and potentially costly as PFIC compliance. Understanding the nuances of Passive Foreign Investment Companies (PFICs) is crucial for US taxpayers with foreign investments. This article provides an introduction to PFIC compliance, outlining key concepts and reporting requirements.
What is PFIC Compliance?
PFIC compliance refers to adhering to the US tax rules and reporting requirements for Passive Foreign Investment Companies. A PFIC is a foreign corporation that meets one of the following tests:
Income Test: 75% or more of its gross income is passive income
Asset Test: 50% or more of its assets generate passive income or are held for the production of passive income
Passive income typically includes dividends, interest, royalties, rental income (unless renting is the active business of the corporation) and capital gains.
The Importance of PFIC Compliance
PFIC compliance is a critical issue for US taxpayers, because the tax consequences of owning PFICs can be severe. The US tax code imposes punitive tax rates and interest charges on certain PFIC distributions and gains, making this area of US tax compliance a high-stakes area of tax law.
Key Aspects of PFIC Compliance
1. Identification: The first step is to identify whether you own any PFICs. This is not an easy process, but, generally speaking, all foreign mutual funds and ETFs are almost automatically PFICs.2. Annual Reporting: A taxpayer must disclose the ownership and income from PFICs annually on Form 8621 for each PFIC owned. Actually, each block of each PFIC will require a separate Form 8621.3. Tax Calculations: Depending on the chosen PFIC regime, complex calculations may be necessary to determine the tax owed on PFIC income.4. Record Keeping: Meticulous record-keeping of all PFIC transactions and values is an absolute must for proper PFIC reporting.
PFIC Compliance Regimes
There are three main tax PFIC reporting regimes (there are other regimes, but we will not deal with them in this article, because these regimes come into effect only in special cases):
1. IRC Section 1291 Fund (Default Method): This is the default PFIC calculation regime which may result in a high tax burden with distributions and gains taxed at the highest ordinary income rate plus an interest charge (called “PFIC interest”).
2. Qualified Electing Fund (QEF): This PFIC regime requires an election and cooperation from the foreign corporation but can result in more favorable tax treatment. Unfortunately, the cooperation from the foreign corporation is going to be the most difficult part.3. Mark-to-Market (MTM): This is another PFIC regime that requires an election. It is available for marketable PFIC stock only and involves annual recognition of gains or losses, even in situations where a PFIC is not sold.
Common Challenges in PFIC Compliance
US tax reporting concerning PFICs presents several challenges:1. Identification: Many taxpayers are unaware of the fact that they own PFICs, leading to inadvertent noncompliance. A failure to properly identify PFICs often forms the basis for a subsequence offshore voluntary disclosure.2. Complexity: PFIC rules are highly complex and often require professional assistance from an international tax law firm, such as Sherayzen Law Office.3. Information Gathering: Obtaining the necessary information for proper PFIC reporting can be difficult, especially in cases where PFICs have been held for many years.4. Retroactive Compliance: Addressing past noncompliance can be particularly complex and costly. This point is especially important in a context of an IRS offshore voluntary disclosure, such as Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures.
PFIC Compliance Penalties
A failure to properly report PFICs can result in significant penalties:1. Failure to file Form 8621 can result in the extension of the statute of limitations.2. Substantial understatement penalties may apply if PFIC income is not properly reported.3. In severe cases, criminal penalties could be imposed for willful noncompliance.
PFIC Compliance for Specific Situations
Taxpayers should be aware that different scenarios may require unique approaches to PFIC compliance. Here are a few common examples:1. Inherited PFICs: Special rules apply when PFICs are acquired through inheritance.2. PFICs Held in Foreign Pensions: The interaction between PFIC rules and foreign pension regulations can be complex.3. PFICs Owned Through Partnerships: Additional reporting may be required for PFICs owned indirectly through partnerships.
Contact Sherayzen Law Office for Professional Help with PFICs
Navigating the complexities of PFIC compliance can be daunting for any taxpayer. This is why you need to contact Sherayzen Law Office for help. We are a leading firm in PFIC compliance in the United States. Our deep understanding of international tax law and extensive experience in PFIC matters allows us to help ensure your PFIC compliance is accurate and up-to-date.
Whether you're dealing with PFIC identification, annual reporting, or addressing past noncompliance, Sherayzen Law Office provides tailored solutions to meet your specific needs. Our team of specialists can guide you through the intricacies of PFIC tax regimes, help you choose the most advantageous compliance method and assist with complex calculations and reporting requirements.
We have helped hundreds of US taxpayers around the world to resolve past PFIC noncompliance in the context of an IRS offshore voluntary disclosure option, such Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures, et cetera. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### McKinney Foreign Inheritance Lawyer | International Tax Attorney Texas
Retaining a McKinney foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in McKinney, Texas and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your McKinney foreign inheritance lawyer.
McKinney Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a McKinney foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
McKinney Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
McKinney Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a McKinney foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in McKinney and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
McKinney Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a McKinney Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that a McKinney Foreign Inheritance Lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in McKinney, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
McKinney Foreign Inheritance Lawyer: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in McKinney, Texas. On the contrary, consider international tax attorneys who reside in other states and help McKinney residents with their FBAR compliance.
Sherayzen Law Office is based in Minneapolis, Minnesota, but we have a large number of clients in Texas, including the McKinney area. Hence, McKinney residents can contact us and retain us to resolve their foreign inheritance issues related to US international tax compliance.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients in Texas with their foreign inheritance. We can help you!
Hence, if you are looking for a McKinney Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### Dallas Foreign Inheritance Lawyer | International Tax Attorney Texas
Retaining a Dallas foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in Dallas, Texas and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your Dallas foreign inheritance lawyer.
Dallas Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a Dallas foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
Dallas Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
Dallas Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a Dallas foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in Dallas and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Dallas Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a Dallas Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that a Dallas Foreign Inheritance Lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Dallas, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Dallas Foreign Inheritance Lawyer: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Dallas, Texas. On the contrary, consider international tax attorneys who reside in other states and help Dallas residents with their FBAR compliance.
Sherayzen Law Office is based in Minneapolis, Minnesota, but we have a large number of clients in Texas, including the Dallas area. Hence, Dallas residents can contact us and retain us to resolve their foreign inheritance issues related to US international tax compliance.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients in Texas with their foreign inheritance. We can help you!
Hence, if you are looking for a Dallas Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### 2024 Form 8938 Threshold | US International Tax Lawyers
US taxpayers must file Form 8938 with their US tax returns if they hold foreign financial assets with an aggregate value exceeding a relevant balance threshold. This article discusses the 2024 Form 8938 threshold limits.
2024 Form 8938 Threshold: Form 8938 Background
Form 8938 burst onto the US international compliance scene in 2011 as a result of the famous Foreign Accounts Tax Compliance Act (FATCA). FATCA was enacted as part of the Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act” or “Act”) which was signed into law by President Obama in 2010.
FATCA revolutionized international tax compliance of the world by forcing foreign banks to report their US-held accounts to the IRS. In essence, it created the third-party verification of foreign accounts that FBAR has always lacked. This third-party verification was supported on the other side by creation of a new requirement to report foreign assets by US taxpayers as part of their US tax returns - Form 8938.
Form 8938’s scope of disclosure is very broad. It generally includes two types of “specified foreign financial assets”: (a) any financial account (also defined very broadly) maintained by a foreign financial institution (again defined broadly); and (b) other specified foreign financial assets not held in an account maintained by a foreign institution.  Other Specified Foreign Financial Assets is a term with a reach far and beyond any other US international tax form, making Form 8938 a unique “catch-all” international tax reporting requirement.
2024 Form 8938 Threshold: Form 8938 is a Dangerous Form
This enormously-grand scope of Form 8938 presents a grave danger to US taxpayers, because US Congress armed the form with a wide range of penalties, including a $10,000 failure-to-file fee.  For these reasons, it is highly important to understand when a particular situation triggers the Form 8938 filing requirement. One of the most important filing criteria is the subject of this article -- the 2024 Form 8938 filing threshold limits.
2024 Form 8938 Threshold: Filing Threshold Factors
When considering the Form 8938 threshold requirements, there are two most important factors that influence which filing threshold will apply in a particular situation. First, the filing status of the taxpayer(s): married filing jointly, married filing separately, single, et cetera.
The second factor is whether the taxpayer lives in the United States or lives abroad.  
2024 Form 8938 Threshold: Legal Test for Living Abroad
The IRS will agree that a taxpayer lives abroad if he meets one of the two “presence abroad” tests.
The first presence abroad test is satisfied if the taxpayer is a US citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period of an entire tax year.
The second presence abroad test is satisfied if the taxpayer is a US citizen or resident who is present in a foreign country or countries at least 330 full days during any period of twelve consecutive months in the relevant tax year.
Of course, these tests are almost exact replicas of the test for Foreign Earned Income Exclusion.
2024 Form 8938 Threshold: Taxpayers Living in the United States
Let’s first discuss the Form 8938 filing thresholds for taxpayers who live in the United States category by category:
1. Unmarried Taxpayers Living in the United States.  The taxpayer is required to file Form 8938 if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during that tax year.
2. Married Taxpayers Filing a Joint Income Tax Return and Living in the United States. If the taxpayer is married and files joint income tax return with his spouse, Form 8938 must be filed if the spouses’ specified foreign financial assets are either more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the tax year.
3. Married Taxpayers Filing Separate Income Tax Returns and Living in the United States. If the taxpayer is married and lives in the United States, but files a separate income tax return from his spouse, then the reporting threshold is satisfied if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Therefore, this category is very similar to that of the unmarried taxpayer who resides in the United States.
2024 Form 8938 Threshold: Taxpayers Living Abroad
Here are the Form 8938 filing thresholds for taxpayers who live abroad:
1. Married Taxpayers Filing a Joint Income Tax Return and Living Abroad.  If the taxpayer lives abroad (as described above) and files a joint tax return with his spouse, then the reporting threshold is satisfied if the value of all specified foreign financial assets that the spouses own is either more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.
2. Taxpayers Filing Any Return Other Than A Joint Tax Return and Living Abroad. If that taxpayer lives abroad and does not file a joint income tax return (instead he files a different type of tax return such as married filing separately, head of household or unmarried), then the reporting threshold is satisfied if the value of all specified foreign financial assets is either more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the tax year.
2024 Form 8938 Threshold: Specified Domestic Entity
Specified Domestic Entities are also required to file Form 8938. The filing threshold for a specified domestic entity is satisfied if the total value of such an entity’s specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Contact Sherayzen Law Office For Help With IRS Form 8938
The reporting requirements under Form 8938 can be very complex. Moreover, Form 8938 noncompliance often occurs in conjunction with noncompliance with FBAR and other reporting requirements (such as Forms 5471, 8621, 8865 et cetera).  In such cases, filing of a late Form 8938 is often should be done through an IRS offshore voluntary disclosure option in order to reduce additional IRS tax penalties.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including Form 8938. We are highly experienced with Form 8938 issues, including offshore voluntary disclosures involving Form 8938.  We can help you!
Contact us today to schedule your confidential consultation!

### Austin Foreign Inheritance Lawyer | International Tax Attorney Texas
Retaining a Austin foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in Austin, Texas and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your Austin foreign inheritance lawyer.
Austin Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a Austin foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
Austin Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
Austin Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a Austin foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in Austin and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Austin Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a Austin Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that a Austin Foreign Inheritance Lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Austin, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Austin Foreign Inheritance Lawyer: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Austin, Texas. On the contrary, consider international tax attorneys who reside in other states and help Austin residents with their FBAR compliance.
Sherayzen Law Office is based in Minneapolis, Minnesota, but we have a large number of clients in Texas, including the Austin area. Hence, Austin residents can contact us and retain us to resolve their foreign inheritance issues related to US international tax compliance.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients in Texas with their foreign inheritance. We can help you!
Hence, if you are looking for a Austin Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### Houston Foreign Inheritance Lawyer | International Tax Attorney Texas
Retaining a Houston foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in Houston, Texas and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your Houston foreign inheritance lawyer.
Houston Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a Houston foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
Houston Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney – i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
Houston Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a Houston foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in Houston and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Houston Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a Houston Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that a Houston Foreign Inheritance Lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Houston, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Houston Foreign Inheritance Lawyer: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Houston, Texas. On the contrary, consider international tax attorneys who reside in other states and help Houston residents with their FBAR compliance.
Sherayzen Law Office is based in Minneapolis, Minnesota, but we have a large number of clients in Texas, including the Houston area. Hence, Houston residents can contact us and retain us to resolve their foreign inheritance issues related to US international tax compliance.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We have helped numerous clients in Texas with their foreign inheritance. We can help you!
Hence, if you are looking for a Houston Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### Foreign Investment Health Insurance in Malaysia & US Tax | US International Tax Lawyer
https://youtu.be/VrcqW1tiBKM?si=x9P7bC7wyRx2Ygxy
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an International tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from Santa Monica, California. The main theme from my blogs from Santa Monica is about US citizens who live outside of the United States. In the previous blog, I discussed the issue of foreign pension compliance and the dangers that these assets can bring to you.
Today, I'd like to discuss a different issue, probably somewhat unexpected for many US taxpayers - the issue of investment health insurance policies. These are extremely rare but they do exist. For example, in Malaysia. In Malaysia, they have investment health insurance policies; basically, a health insurance policy where part of your premium is being invested in PFICs (in a previous blog, I've already discussed what a PFIC is). As you need to cover your health costs, these investments are sold realizing for US tax purposes: PFIC gains and PFIC losses. The compliance concerning foreign investment health insurance policies can be extremely complex.
If you would like to learn more about it, you can contact me at (952) 500-8159 or you can email me: eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Minneapolis Foreign Inheritance Lawyer | International Tax Attorney Minnesota
Retaining a Minneapolis foreign inheritance lawyer to deal with the IRS is very likely to be necessary if you reside in Minneapolis, Minnesota and have received an inheritance from a non-resident alien (i.e. foreign inheritance).  Sherayzen Law Office, Ltd. is a leader in US international tax compliance concerning foreign inheritance, including offshore voluntary disclosures concerning late disclosure of a foreign inheritance, and may be your Minneapolis foreign inheritance lawyer.
Minneapolis Foreign Inheritance Lawyer: Why Foreign Inheritance is Important to Your US international Tax Compliance
Receiving a foreign inheritance requires proper US international tax compliance in five areas: disclosure of foreign inheritance to the IRS, information reporting requirements that are linked to foreign inheritance, classification and recognition of income linked to foreign inheritance (including special requirements concerning inheritance of foreign real estate), inheritance of US-situs property and transfers of cash/assets to the United States.
Each of these areas of foreign inheritance has its own complications, traps and important reporting reporting requirements. These reporting requirements may have important tax implications with potentially high noncompliance IRS penalties.
This is precisely why it is highly recommended to consult a tax lawyer if you received or about to receive foreign inheritance. However, not every tax attorney would be the right fit for your foreign inheritance case.  In order to be properly classified as a Minneapolis foreign inheritance lawyer, the lawyer must be an international tax attorney with extensive experience in various US international tax reporting requirements related to foreign inheritance.
Minneapolis Foreign Inheritance Lawyer: International Tax Attorney
A foreign inheritance lawyer is first and foremost an international tax attorney - i.e. a lawyer with profound knowledge of and extensive experience in US international tax law, particularly in the area of US international tax compliance. This means that a lawyer must be familiar with such common US international tax forms as: Form 3520 (critically important for foreign inheritance reporting) and Form 8938.  He must also understand related US international tax compliance forms such as Forms 3520-A, 5471, 8865, 8858, et cetera.  Of course, every US international tax lawyer must be very familiar with FinCEN Form 114 commonly known as FBAR.
In addition to information returns, an international tax lawyer must be familiar with all types of foreign income reporting.  This requirement includes the knowledge of such distinct areas of international income tax reporting sub-areas as foreign rental income, PFIC compliance, GILTI income, capital gains concerning foreign real estate, et cetera.
Sherayzen Law Office is a highly-experienced and highly-knowledgeable international tax law firm with respect to all of the aforementioned income tax and information return requirements, including all of the aforementioned forms.
Minneapolis Foreign Inheritance Lawyer: Tax Planning
In cases where it is possible, it is highly prudent to engage in tax planning concerning a foreign inheritance. This is important not only for the purpose of limiting future tax burdens, but also to control future US tax compliance costs.  Hence, when you look for a Minneapolis foreign inheritance attorney, you should retain a law firm which has experience with foreign inheritance US tax planning.
Sherayzen Law Office has an extensive experience in foreign inheritance US tax planning for its clients in Minneapolis and all over the world.  We also have a highly valuable experience of combining income tax planning with offshore voluntary disclosures.
Minneapolis Foreign Inheritance Lawyer: Offshore Voluntary Disclosures
When retaining a Minneapolis Foreign Inheritance Lawyer, consider the fact that such an attorney’s work may not limited only to the current or future US international tax compliance. In my experience, a discussion of a foreign inheritance often involves identification and remedying of past US international tax noncompliance. In other words, foreign inheritance issues often lead to engaging in an IRS offshore voluntary disclosure option.
This means that a Minneapolis Foreign Inheritance Lawyer should be very familiar with all offshore voluntary disclosure options.
Offshore Voluntary Disclosures is a core area of the our international tax practice at Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide, including in Minneapolis, to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of all kinds of offshore voluntary disclosures including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), et cetera.
Contact Sherayzen Law Office for Professional Foreign Inheritance Tax Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including foreign inheritance reporting.  We are based in Minneapolis, Minnesota, with an extensive local Minnesota clientele. We have helped numerous clients in Minnesota with their foreign inheritance. We can help you!
Hence, if you are looking for a Minneapolis Foreign Inheritance Lawyer, contact Mr. Sherayzen now to schedule Your Confidential Consultation!

### Milwaukee FBAR Attorney | International Tax Lawyer Wisconsin
If you reside in Milwaukee, Wisconsin and have unreported foreign bank and financial accounts, you may be looking for a Milwaukee FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Milwaukee FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Milwaukee FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Milwaukee FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Milwaukee FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Milwaukee FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Milwaukee, Wisconsin. On the contrary, consider international tax attorneys who reside in other states and help Milwaukee residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Milwaukee, Wisconsin.
Thus, if you are looking for a Milwaukee FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Foreign Life Insurance Policies & US Tax | FBAR and PFIC International Tax Lawyer
https://youtu.be/1b4Pz1xaojo?si=cU1fRbBhRzd41zFJ
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an International tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from Santa Monica, California and these blogs are centered around one issue: US citizens moving to live overseas. In the previous blog, I discussed the issues concerning foreign pensions.
Today, I'd like to talk to you about a different issue: foreign life insurance policies. Many people are not aware of this fact but foreign life insurance policies are reportable assets for US tax purposes. Moreover, they may have real income tax consequences for US tax compliance, especially investment life insurance policies; those are the most dangerous - the so called unit-linked (ULIP) insurance policies because they are likely to be invested in PFICs. In the previous blog, I've already discussed what a PFIC is and why it is so dangerous.
Foreign financial advisors really love their clients investing in these types of assets. The reason being is that they are usually tax-exempt in local countries, so when foreign advisors advise about something like this, they do not take into consideration the fact that they are dealing with a US citizen and for this reason, they may end up getting their US clients in danger.
If you have foreign life insurance policies and you would like to know more about your US tax compliance required for these policies, contact me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### 2024 FBAR Civil Penalties | FBAR International Tax Lawyer & Attorney
This article is an update of prior articles on the FBAR Civil Penalties. Since the US Congress mandated the IRS to adjust FBAR civil penalties for inflation on an annual basis, this article discusses the year 2024 FBAR Civil Penalties.
2024 FBAR Civil Penalties: Overview of the FBAR Penalty System
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”), has always had a very complex, multi-layered system of penalties, which has grown even more complicated over the years. These penalties can be grouped into four categories: criminal, willful, non-willful and negligent.
Of course, the most dreaded penalties are FBAR criminal penalties. Not only is there a criminal fine of up to $500,000, but, in some cases, a person can be sentenced to 10 years in prison for FBAR violations (and these two criminal penalties can be imposed simultaneously). Since the focus of this article is on FBAR civil penalties.
The next category of penalties are FBAR civil penalties imposed for the willful failure to file an FBAR. These penalties are imposed per each violation – i.e. on each account per year, potentially going back six years (the FBAR statute of limitations is six years).
The third category of penalties are FBAR penalties imposed for a non-willful failure to file an FBAR or a filing of an incorrect FBAR. These penalties can be imposed on US persons who do not even know that FBAR exists.
Finally, with respect to business entities, a penalty can be imposed for a negligent failure to file an FBAR or a filing of an incorrect FBAR.
It is important to note that FBAR has its own reasonable cause exception that may be used to fight the assessment of any of the aforementioned civil penalties. Moreover, each of these penalty categories has numerous levels of penalty mitigation that a tax attorney may utilize to lower his client’s FBAR civil penalties.
2024 FBAR Civil Penalties: Penalties Prior to November 2 2015
Prior to November 2, 2015, FBAR penalties were not adjusted for inflation and stayed flat at the levels mandated by Congress. Let’s go over each category of penalties prior to inflation adjustment.
As of November 1, 2015, Willful FBAR penalties were up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation. Again, a violation meant a failure to correctly report an account in any year. Non-willful FBAR penalties were up to $10,000 per violation per year; per US Supreme Court’s decision last year, the penalty should have been imposed on a per form (not per account) basis. Finally, FBAR penalties for negligence were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.
2024 FBAR Civil Penalties: Inflation Adjustment
The situation changed dramatically in 2015. As a result of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Inflation Adjustment Act”), Congress mandated federal agents to: (1) adjust the amounts of civil monetary penalties with an initial “catch-up” adjustment; and (2) make subsequent annual adjustments for inflation. The inflation adjustment applied only to civil penalties.
The “catch-up” adjustment meant a huge increase in penalties, because federal agencies were required to update all of these penalties from the time of their enactment (or the last year Congress adjusted the penalties) through November of 2015. This meant that, in 2015, the penalties jumped to account for all accumulated multi-year inflation. The catch-up adjustment was limited to two and a half times of the original penalty.
Fortunately, the Congress adjusted FBAR penalties in 2004 and the “catch-up” adjustment did not have to go back to the 1970s. It still meant a very large (about 25%) increase in FBAR civil penalties, but it was not as dramatic as some other federal penalties.
2024 FBAR Civil Penalties: Bifurcation of FBAR Penalty System
The biggest problem with the inflation adjustment, however, was the fact that it further complicated the already dense multi-layered FBAR system of civil penalties – FBAR penalties became dependent on the timing of a violation and IRS penalty assessment. In essence, the 2015 Inflation Adjustment Act split the FBAR penalty into two distinct parts.
The first part applies to FBAR violations that occurred on or before November 2, 2015. The old pre-2015 FBAR penalties described above applies to these violations irrespective of when the IRS actually assesses the penalties for these violations. The last FBAR violations definitely eligible for the old statutory penalties are those that were made concerning 2014 FBAR which was due on June 30, 2015. The statute of limitations for the 2014 FBAR ran out on June 30, 2021.
The second part applies to all FBAR violations that occurred after November 2, 2015. For all of these violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred. In other words, if an FBAR violation occurred on October 15, 2017 and the IRS assessed FBAR penalties June 17, 2021, the IRS would use the inflation-adjusted FBAR penalties as of the year 2021, not October 15, 2017.
2024 FBAR Civil Penalties: Penalties Assessed On or After January 25, 2024
Now that we understand the history of FBAR penalties, we can specifically discuss the 2024 FBAR Civil penalties. The first thing to understand is that we are talking about penalties assessed by the IRS on or after January 25, 2024; prior to that date, the 2023 FBAR civil penalties were still effective.
The 2024 Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(C)(i)(I) is $161,166 per violation. Per last year’s court decisions, the term “violation” in the context of willful FBAR penalties means on a “per account for each year” basis described above.
The 2024 Non-Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(B) is $16,117 per violation. The term “violation” in the context of non-willful FBAR penalties at this point has been settled to mean “per form” (rather than per-account) basis.
The 2024 Negligence FBAR penalty imposed under 31 U.S.C. §5321(a)(6)(A) is $1,394; if there is a pattern of negligence under 31 U.S.C. §5321(a)(6)(B), then the penalty goes up to $108,489.
Contact Sherayzen Law Office for Professional Help With Your Prior FBAR Noncompliance
Sherayzen Law Office is a leader in US international tax law and FBAR compliance. We have successfully helped hundreds of clients from over eighty countries resolve their prior FBAR noncompliance, including through various voluntary disclosure programs (such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, et cetera). We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Pension Accounts: Dangers of Improper Tax Treatment | US International Tax Lawyer
https://youtu.be/uZX-ZlevYvg?si=nFZYDREqhS-QJ4Os
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an International tax attorney and owner of Sherayzen Law Office, Ltd.
Today, we are continuing our series of blogs from Santa Monica, California. In the previous blog, I mentioned that foreign pension accounts could be very dangerous for your US tax compliance and I've explained the main reasons for that. In this blog, I'd like to discuss an additional point about foreign pension accounts and that is the danger that stems from how they are being handled by US tax accountants when they file your US tax returns.
There are two types of potential problems:
Your US tax accountant may have no idea how to handle US tax reporting requirements concerning foreign pensions. That is actually a very likely scenario. The issue of US tax requirements concerning foreign pensions is incredibly complex and for this reason, it is important to understand that your tax accountants may simply not know what they're doing.
Is the opposite of that, where tax accountants take the liberty of taking what they believe is the safest passage. For example, they may automatically treat a foreign pension account as a foreign trust and file Form 3520, potentially Form 3520-A. There is no harm in over-compliance. The problem arises when this advice was given in error and a client later-on fails to properly file these forms and these are not simple forms to file, so in that situation, basically he ends up with IRS penalties concerning foreign trust compliance even though he never had a foreign trust. I've had many cases where this was precisely what happened.
If you would like to learn more about your foreign pension compliance, you can call me at (952) 500-8159 or email me: eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### US Tax Expats & Foreign Accounts: US Tax Compliance Implications | FBAR Tax Lawyer California
https://youtu.be/Vzq8HfEouNs?si=yqb1G7U207EbDHSz
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an International tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Santa Monica, California. As you know, our theme for these vlogs is 'US Citizens Living Outside of the United States'. If you move outside of the United States for work, there's a pretty good chance that you may acquire a foreign pension account. It may seem innocent at first; it may seem as if everyone else is doing it but you have to be aware of the fact that foreign pension accounts can spell big trouble for US tax compliance. Not only could these pension accounts be taxable in the United States, but they may have special filing requirements because they could be considered foreign trusts, grantor trusts or non-grantor trusts, and all of these can trigger special US Information returns. I'll be talking about US Information returns in another vlog but for now, you have to be aware (of) these potential requirements and noncompliance with these requirements can draw significant penalties. Again, this is an issue of income tax compliance and US Information tax compliance.
If you would like to learn more about your obligations with respect to foreign pension accounts you can call met at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### PFIC Compliance & Moving Outside US | International Tax Lawyer & Attorney Santa Monica LA
https://youtu.be/NoVda4J6UYg?si=5WSTiuEdEJ5Oqi-s
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an International tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Santa Monica, California. The main theme of my vlog from Santa Monica is about US citizens moving to live outside of the United States. I've mentioned that there are special US International tax requirements that may apply to you as someone who is moving outside of the United States.
One of these topics that we need to discuss is a very complex US law concerning PFICs (passive foreign investment companies). PFICs is a unique law. I've dealt with clients from almost eighty countries and none of those eighty countries have laws similar to PFIC laws. Without getting into too much detail, basically a PFIC is an anti-deferral regime; meaning, that it is a disfavored type of investment. What is a PFIC? A PFIC is basically a foreign corporation that has passive assets which are in excess of 50% of their total assets or receipts of foreign income which is more than 75% of its total income. If 75% of its total income is passive income then it is considered to be a PFIC. The calculations are mind-boggling concerning default PFICs. There are many types of PFICs. Your tax compliance will be a lot more complex if you have them. If you move outside of the United States, a lot of times local financial advisors will advise you to into this mutual fund or that mutual fund or something else and in reality, these types of investments could get you into trouble.
If you would like to learn more about your PFIC compliance, you can contact me directly at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Streamlined Foreign Offshore Procedure | International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=nmTjpcG7vOg&t=2s
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an International tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of vlogs from Austin, TX. I'm standing in front of the IRS campus that processes Offshore Voluntary Disclosures. What I would like to do is to focus on Offshore Voluntary Disclosures in this vlog; in particular, a very important and probably the best voluntary disclosure option that exists right now: Streamlined Foreign Offshore Procedures or SFOP, not to be confused with Streamlined Domestic Offshore Procedures (SDOP). These are two very different options.
Generally speaking, SFOP is better than SDOP as long as you can satisfy the eligibility requirements. What are the eligibility requirements?
We'll highlight the three most important ones:
First, you have to satisfy strict a foreign residency requirement.
Second, you have to be able to certify under the penalty of perjury that you were non-willful with respect to your prior noncompliance with US International tax laws and you have to be able to certify it with respect to both foreign income that was not disclosed on the original US tax returns and US International information returns, each US International information return that applies to your case. If you have to file FBARs, then with respect to FBARs, if it is concerning Form 8938, then you have to certify it with respect to Form 8938. If it is concerning Form 5471, then you have to be able to certify your non-willfulness with respect to Form 5471.
Finally, the third requirement: your foreign income should be from a legal source. This requirement applies to both SDOP and SFOP and it is important to understand that it has to be a legal source from the federal point of view; not from the state point of view.
Let me give you an example: certain drugs which are legal under state law may not be legal under federal law. If some of your income is derived from the sales of those drugs, because they are legal in a certain state, or maybe the sales occurred overseas or you used a foreign subsidiary in order to make this income. It would be considered foreign-source income; so, if that income is legal even under foreign law, there's a lot more stuff which is legal in some of the Central American countries that would not be legal here in the United States. That income would be considered illegal under federal law and so you cannot make a voluntary disclosure. You really have to think from the US federal tax perspective when it comes to determination of whether you can do a voluntary disclosure or you cannot do a voluntary disclosure.
The benefits of the Streamlined Foreign Offshore Procedures are tremendous; it is definitely the best option for US taxpayers for both income tax noncompliance and noncompliance with US International information returns. For example, if you have an FBAR noncompliance and you have income associated with the unreported accounts, Streamlined Foreign Offshore Procedures is the best way. There are no penalties; it is the closest approximation to a true amnesty program that the IRS has ever offered. You just have to pay the extra tax with interest; that's it. There are no penalties imposed on the level of the US International information returns and there are no penalties imposed for income tax noncompliance. It's a really great option. You only have to amend three years of tax returns, you don't have to go back farther. You can actually file late returns under the Streamlined Foreign Offshore Procedures, something that is a big no-no under the Streamlined Domestic Offshore Procedures.
You can resolve your entire US International tax noncompliance in a very easy penalty-free way. It is a great option, but you need to consult with an attorney to make sure that you can certify under the penalty of perjury that you were non-willful. Usually, this type of certification involves a long explanation that would be attached to Form 14653 which is the certification form and that explanation should be drafted by an attorney.
If you would like to learn more about Streamlined Foreign Offshore Procedures, you can call me at (952) 500-8159 or you can email me at: eugene@sherayzenlaw.com
Thank you for watching, until the next time.

### Denver FBAR Tax Attorney | International Tax Lawyer Colorado
If you reside in Denver, Colorado, and have unreported foreign bank and financial accounts, you may be looking for a Denver FBAR Tax Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Denver FBAR Tax Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Denver FBAR Tax Attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Denver FBAR Tax Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining a Denver FBAR Tax Attorney, consider the fact that such an attorney’s work is not limited to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Denver FBAR Tax Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Denver, Colorado. On the contrary, consider international tax attorneys who reside in other states and help Denver residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Denver, Colorado.
Thus, if you are looking for a Denver FBAR Tax Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Third Quarter 2024 IRS Interest Rates on Overpayment & Underpayment of Tax
On May 9, 2024, the IRS announced that the Third Quarter 2024 IRS interest rates on overpayment and underpayment of tax will remain the same as in the Second Quarter of 2024.
This means that, the Third Quarter 2024 IRS interest rates will be as follows:
eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
eight (8) percent for underpayments;
ten (10) percent for large corporate underpayments; and
five and a half (5.5) of a percent for the portion of a corporate overpayment exceeding $10,000.
Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Pursuant to the IRC §6621(b)(1), the Third Quarter 2024 IRS interest rates were computed based on federal short-term rates in January of 2024. 
It is important to note that the Third Quarter 2024 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Third, these rates will determine the interest a taxpayer will get on any IRS refunds.
Third ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the Third Quarter 2024 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Third Quarter 2024 IRS interest rates.

### Moving Outside of the US: Main Tax Considerations | International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=6zozh3J9vVQ&t=1s
Good morning and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I am an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I am welcoming you from Santa Monica, California. Yesterday, I had a very interesting conversation and that conversation, gave me an idea of a whole series of vlogs about steps you should be taking if you are thinking about moving to live outside of the United States. When you leave the United States, you need to take into consideration three very important topics:
First: the loss of a new host nation; what will be your new compliance requirements?
Second: you need to take steps to end your current state tax residency; for example if you live in California, you are a tax resident of California. So what are the steps you should be taking to end it? It's very important because you may find yourself in a very strange situation where your state will still tax your worldwide income even though you don't live in that state.
Finally, and most importantly, you need to understand the US international tax requirements that will apply to you once you move outside of the United States.
These are the topics I will be exploring in the coming days.
Thank you for watching, until the next time.

### US Tax Residency & Living Outside the US | International Tax Lawyer & Attorney Santa Monica CA Blog
https://www.youtube.com/watch?v=sAxI8BriMFc&t=1s
Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I am an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I am continuing my series of vlogs from Santa Monica, California. If you recall, in a previous vlog, I raise the issue of US citizens moving to live outside of the United States. It seems like a good topic to pick, while in California. I've raised three main issues that should be considered by anyone who's leaving the United States.
Local tax compliance
Ending state tax residency
US international tax compliance
I addressed the first two issues in previous vlogs and today I'd like to begin addressing the third one. We'll start with the income tax considerations. When you move outside of the United States, as long as you are a US citizen, you are considered to be a tax resident of the United States no matter to which country you move. Even if you move to North Korea, you still will be a tax resident of the United States.
What does it mean for you? It means that you have the obligation to continue to file US tax returns and to report your worldwide income on the tax returns.
We will continue discussing this topic in more detail in the follow-up vlogs.
Thank you for watching, until the next time.

### Knowledge of FBAR Existence & Willfulness | FBAR Lawyer Beverly Hills Los Angeles California
https://youtu.be/yN5SyUjzmc8?si=LTuC4Vl0MZXHKo0J
Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I am an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, we are continuing our series of vlogs from Beverly Hills, California and today I'd like to talk to you about FBAR compliance and particular where an obligation to file an FBAR was known to the taxpayer but the taxpayer has not acted on it. Is the taxpayer's inaction in and of itself sufficient to automatically prove early non-compliance was willful and the answer is no, automatically no. We have to look at all facts and circumstances but is this a negative fact? Absolutely. The passage of time between the time when the taxpayer learned about the existence of FBAR and when he took action is a very important consideration, not only for the reasonable cause purposes, but also for non-willfulness purposes.
If you would like to learn more about FBAR compliance, in particular the issue of willfulness vs. non-willfulness, in the context of FBAR non-compliance, call me at (952) 500-8159 or you can email me at: eugene@sherayzenlaw.com
Thank you very much and until the next time.

### Worldwide Income Reporting while living outside the US | International Tax Lawyer
https://www.youtube.com/watch?v=PaZOvcA9ajU
Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I am an international tax attorney and owner of Sherayzen Law Office, Ltd.
We are continuing a series of blogs from Santa Monica, California. Today, I'm standing on the beach in front of the Pacific ocean and I'd like to talk to you about a topic I raised last time. Where I said if you decide to move outside of the United States, you continue to be a tax resident of the United States and you have to report your worldwide income on your US tax returns.
Today, I'd like to answer a few questions that often arise in the context of that statement. First of all: Does the worldwide income requirement mean that all of your income have to be disclosed or only elective income or passive income? The answer to that question is ALL income has to be disclosed; all foreign and domestic. It doesn't matter if it's subject to local taxation. It doesn't matter whether it's non-taxable in the local country. Here, you have to operate as a US tax resident by US tax rules, so all of your worldwide income is reportable on your US tax returns.
Does that mean that you won't be able to take advantage of the fact that you are taxed locally? Does it mean that you will be suject to double taxation? Not necessarily. The United States has plenty of tax treaties around the world with many countries, the vast majority of countries and you should be able to take a foreign tax credit to minimize your US tax liability, though it may not be dollar for dollar, there may be complications which is an issue to be discussed in the context of specific facts but you're likely not to be subject to full double taxation. There should be a way for you to plan out your tax affairs and a way to minimize your US tax exposure. We'll continue exploring this subject of US international tax reporting requirements in the following blogs.
Thank you for watching, until the next time.

### Ending State Tax Residency - Moving outside of the US | International Tax Lawyer Santa Monica
https://youtu.be/wZEk3oGbp7Y?si=rUAyEDWWBiIxMWto
Good morning and welcome to Sherayzen Law Office video blog! My name is Eugene Sherayzen; I am an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I am continuing a series of blogs from Santa Monica, California. In previous blogs, I raised the issue of US citizens moving to live outside of the United States and I've addressed the first problem of local tax compliance. Today, I'd like to talk to you about the second problem; that is the ending of state tax residency. Let me be clear about what I mean here; what I mean is ending local state tax residency, obviously not federal tax residency. Regarding federal tax residency, you will have as long as you are a US citizen.
For example, the state of California has its own state tax residency rules and while they consider you a tax resident, they will tax you on your worldwide income. This is similar situation with respect to states like Minnesota, New York, New Jersey - basically all of the states that have income tax and even those who don't also have their own state tax residency rules.
Why is that important? Why do you need to end your state tax residency or at least consider doing so before you leave the United States? For a very simple reason: If you don't, then the state will continue to tax you on your worldwide income even though, technically, you live outside of the United States.
I can give you an example from my Minnesota practice. A client of mine left for the Middle East and thought he ended his Minnesota tax residency; he lived there for four years and then all of a sudden, the state of Minnesota contacted him and argued that he should be paying Minnesota taxes on his worldwide income for all of these four years. The local accountants, unfortunately didn't do a good job; in the interview, they misguided him and he came to me and we took care of this problem. The problem is that there is always a cost in neglecting these types of issues. You need to make sure that you do everything that is required to end your state residency before you leave the United States. For example, if you are required to give notice to your local county, then absolutely do so. If you are required to put your house up for sale, then absolutely do so. If you are required to move your banking outside of the state, then do so. State tax residency rules can be very complex, so it's important that you explore this issue ahead of time and then take care of it before you leave.
Thank you for watching, until the next time.

### High Income Non-Filer IRS Compliance Campaign Update: Notice CP-59 With International Tax Compliance Focus
On February 29, 2024, the IRS announced a major update to one of its compliance campaigns that focuses on high income non-filer taxpayers.  Let’s discuss this major update to the High Income Non-filer IRS Campaign in more detail.
High Income Non-Filer IRS Campaign: Background Information
As part of its extensive tax enforcement planning in the mid-2010s, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.
The first thirteen campaigns were announced by LB&I on January 13, 2017. Since then, there have been numerous campaigns announced by the IRS with a focus on various priority topics. The most recent wave (during the years 2023 and 2024) of the IRS campaigns is due to the additional funding that the Congress allocated to the IRS as part of the Inflation Reduction Act.
This very much applies to High Income Non-Filer Campaign. Without adequate resources, the IRS non-filer program has only run sporadically since 2016 due to severe budget and staff limitations that did not allow to properly work on these cases. With the new Inflation Reduction Act funding available, the IRS has now upgraded and essentially re-launched this campaign.
High Income Non-Filer IRS Campaign: Focus on US international Tax Compliance
Even if you did not read the description of the IRS campaign, the very fact that the Director of the Withholding & International Individual Compliance Practice Area is in charge of this campaign gives away the focus on US international tax compliance.  Moreover, the emphasis is on individuals with potentially high income, not businesses.   
Indeed, High Income Non-Filer IRS Campaign focuses on individuals who have not filed their US tax returns even though they have received high (including foreign-source) income in the past. The very first phrase of the campaign’s description states: “U.S. citizens and resident aliens are subject to tax on worldwide income”.  The campaign, however, applies to all high-income non-filers, not just those who did not report their foreign income.
High Income Non-Filer IRS Campaign: IRS Targets 125,000 Noncompliant Taxpayers
It is very interesting to note that this campaign begins with direct targeting of known individuals -- the IRS already identified 125,000 taxpayers that the agency wishes to contact.  In other words, this is a well-planned campaign with the IRS already knowing who it wants to target.
Where did the IRS get the information about these taxpayers? Mostly, IRS has received third-party information – such as through Forms W-2 and 1099s – indicating these people received high income. Additional information the IRS received from foreign banks and other sources.
High Income Non-Filer IRS Campaign: CP-59 Notice
The IRS has launched the new compliance effort with the IRS CP-59 Notice letters.  The letters already started to go out focusing on taxpayers who have not filed their tax returns since 2017. The mailings include more than 25,000 notices to taxpayers with more than $1 million in income and over 100,000 notices to taxpayers with incomes between $400,000 and $1 million between tax years 2017 and 2021.
Not all letters will go out at the same time. The IRS plans to mail anywhere between 20,000 to 40,000 letters each week, beginning with the filers in the highest-income categories. The IRS noted that some of these non-filers have multiple years included in the case count so the number of taxpayers receiving letters will be smaller than the actual number of notices going out.
High Income Non-Filer IRS Campaign: FBAR Noncompliance Is Also Targeted
This campaign has one very unpleasant side-effect.  In many cases, behind income tax noncompliance, there are likely unreported foreign accounts that needed to be disclosed on FBARs and perhaps even Form 8938. This circumstance can turn the case into something a lot more serious beyond just income tax noncompliance.
High Income Non-Filer IRS Campaign: What to Do If You Receive CP-59 Notice
The first thing to do is not to panic and not to procrastinate. You should take the next step very fast in order to avoid follow-up notices and a full audit with potentially severe consequences.
The second step is to contact immediately Sherayzen Law Office for professional help, especially if your noncompliance involves large amounts of income and US international information returns, such as FBAR or Form 8938. We will analyze the facts of your case, estimate your potential IRS penalty exposure and advise on the way to move forward to deal with the situation.
High Income Non-Filer IRS Campaign: IRS Actions Escalate If Tax Returns Are Not Filed
Taxpayers who fail to respond to the IRS notices will first receive additional notices.  If still no response, the IRS enforcement efforts will escalate to an audit, filing of an unfavorable Substitute for Return (SFR) (without any proper deductions or exemptions), collection actions, a petition to Tax Court and even potentially criminal prosecution.
Contact Sherayzen Law Office if Your Receive Notice CP-59 Concerning Unfiled Returns 
If you are a taxpayer who has not filed his tax returns and you receive an IRS Notice CP-59, contact Sherayzen Law Office for professional help.  We have helped high-net-worth individuals with their US domestic and US international tax compliance as well as audits of their US tax returns. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Garland FBAR Attorney | International Tax Lawyer Texas
If you reside in Garland, Texas and have unreported foreign bank and financial accounts, you may be looking for a Garland FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, consider us in your search. Let’s understand why this is the case.
Garland FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Garland FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Garland FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Garland FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Garland FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Garland, Texas. On the contrary, consider international tax attorneys who reside in other states and help Garland residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Garland, Texas.
Thus, if you are looking for a Garland FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### McKinney Foreign Trust Attorney | International Tax Lawyers Texas
If you live in McKinney, Texas, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a McKinney Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your McKinney Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
McKinney Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
McKinney Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
McKinney Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
McKinney Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### IRS Corporate Jet Audits Campaign | MN IRS Audit Tax Lawyer
On February 21, 2024, the IRS announced that it will begin dozens of audits of business aircraft usage as part of a new tax enforcement campaign. In this short article, I will discuss these new IRS corporate jet audits in more detail.
IRS Corporate Jet Audits: Focus on Personal Use of High-Net Individuals
The IRS announced that it will be auditing the usage of corporate aircraft for personal purposes.  The chief revenue agency of the United States was blunt in identifying who it is targeting -- high-net individuals. The audits will focus on aircraft usage by large corporations, large partnerships and high-income taxpayers and whether, for tax purposes, the use of jets is being properly allocated between business and personal reasons.
Officers, executives, other employees, shareholders and partners often use business aircraft for both business and personal reasons. In general, the Internal Revenue Code allows a business deduction for expenses of maintaining an asset, such as a corporate jet, as long as the company uses the asset for a business purpose. However, the company must allocate use of a company aircraft between business use and personal use. This is a complex area of tax law, and record-keeping can be challenging.
Hence, for someone such as an executive using the company jet for personal travel, the amount of personal usage impacts eligibility for certain business deductions. Use of the company jet for personal travel typically results in income inclusion by the individual using the jet for personal travel and could also impact the business’ eligibility to deduct costs related to the personal travel.
The number of audits related to aircraft usage could increase in the future following initial results and as the IRS continues hiring additional examiners.
IRS Corporate Jet Audits: Funding and Strategies
The IRS was quick to identify  the Inflation Reduction Act as the source of funding of this new IRS campaign. The IRS will be using advanced analytics and resources from the Inflation Reduction Act to more closely examine this area. At the same time, the agency complained that, in the past, it did not have the resources to properly audit this area due to low resources.
“During tax season, millions of people are doing the right thing by filing and paying their taxes, and they should have confidence that everyone is also following the law,” said IRS Commissioner Danny Werfel. “Personal use of corporate jets and other aircraft by executives and others have tax implications, and it’s a complex area where IRS work has been stretched thin. With expanded resources, IRS work in this area will take off. These aircraft audits will help ensure high-income groups aren’t flying under the radar with their tax responsibilities.”
The examination of corporate jet usage is part of the IRS Large Business and International division’s “campaign” program. Campaigns apply different compliance streams to help address areas with a high risk of non-compliance. These efforts include issue-focused examinations, taxpayer outreach and education, tax form changes and focusing on particular issues that present a high risk of noncompliance.
IRS Corporate Jet Audits: Implications for Broader IRS Tax Enforcement
The IRS corporate jet audits are just part of a larger effort of the IRS to step up tax enforcement worldwide. Prior to the Inflation Reduction Act, more than a decade of budget cuts prevented the IRS from keeping pace with the increasingly complicated set of tools that the wealthiest taxpayers use to avoid taxes. The IRS is now taking swift and aggressive action to close this gap with the focus on high-net-worth individuals.
“The IRS continues to increase scrutiny on high-income taxpayers as we work to reverse the historic low audit rates and limited focus that the wealthiest individuals and organizations faced in the years that predated the Inflation Reduction Act,” Werfel said. “We are adding staff and technology to ensure that the taxpayers with the highest income, including partnerships, large corporations and millionaires and billionaires, pay what is legally owed under federal law. The IRS will have more announcements to make in this important area."
Of course, one of the most important areas of the increased IRS tax enforcement is US international tax compliance. This involves compliance with foreign income reporting, FBARs and various other information returns (Forms 3520, 3520-A, 5471, 8865, 8938, et cetera).
Contact Sherayzen Law Office for IRS Audits of Your US International Tax Compliance
If the IRS is auditing your US international tax compliance, including foreign income and foreign asset reporting, contact Sherayzen Law Office for professional help as soon as possible. We have helped taxpayers around the world with the IRS international tax audits. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Second Quarter 2024 IRS Interest Rates on Overpayment & Underpayment of Tax
On February 21, 2024, the IRS announced that the Second Quarter 2024 IRS interest rates on overpayment and underpayment of tax will remain the same as in the First Quarter of 2024.
This means that, the Second Quarter 2024 IRS interest rates will be as follows:
eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
eight (8) percent for underpayments;
ten (10) percent for large corporate underpayments; and
five and a half (5.5) of a percent for the portion of a corporate overpayment exceeding $10,000.
Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Pursuant to the IRC §6621(b)(1), the Second Quarter 2024 IRS interest rates were computed based on federal short-term rates in January of 2024. 
It is important to note that the Second Quarter 2024 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. Second, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the Second Quarter 2024 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the Second Quarter 2024 IRS interest rates.

### McKinney FBAR Attorney | International Tax Lawyer Texas
If you reside in McKinney, Texas and have unreported foreign bank and financial accounts, you may be looking for a McKinney FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
McKinney FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for McKinney FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
McKinney FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining McKinney FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
McKinney FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in McKinney, Texas. On the contrary, consider international tax attorneys who reside in other states and help McKinney residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including McKinney, Texas.
Thus, if you are looking for a McKinney FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Dallas Foreign Trust Attorney | International Tax Lawyers Texas
If you live in Dallas, Texas, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Dallas Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Dallas Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Dallas Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Dallas Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Dallas Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Dallas Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### San Jose FBAR Attorney | International Tax Lawyer California
If you reside in San Jose, California and have unreported foreign bank and financial accounts, you may be looking for a San Jose FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
San Jose FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for San Jose FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
San Jose FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining San Jose FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
San Jose FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in San Jose, California. On the contrary, consider international tax attorneys who reside in other states and help San Jose residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including San Jose, California.
Thus, if you are looking for a San Jose FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Midland FBAR Attorney | International Tax Lawyer Texas
If you reside in Midland, Texas and have unreported foreign bank and financial accounts, you may be looking for a Midland FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Midland FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Midland FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Midland FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Midland FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Midland FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Midland, Texas. On the contrary, consider international tax attorneys who reside in other states and help Midland residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Midland, Texas.
Thus, if you are looking for a Midland FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### TAS Significant Hardship Definition | International Tax Lawyer & Attorney
Sometimes, a taxpayer may find himself in a situation where his problem cannot be resolved through normal IRS channels. In this case, one of the options is to secure the help of the Taxpayer Advocate Service (“TAS”). TAS can issue a Taxpayer Assistance Order (TAO) to require the IRS to desist from a certain action that causes the taxpayer to suffer or about to suffer a significant hardship. At this point a logical question arises: what does “significant hardship” mean in this context? In this article, I will try to answer this question and introduce the readers to the Significant Hardship definition.
Significant Hardship Definition: Background Information
The Taxpayer Advocate Service is an independent organization within the IRS, led by the National Taxpayer Advocate (“NTA”). Each state has at least one Local Taxpayer Advocate (“LTA”), who is independent of the local IRS office and reports directly to the NTA.
 TAS helps individual and business taxpayers resolve problems with the IRS by:
• Ensuring that taxpayer problems not resolved through normal IRS channels are promptly and impartially handled;
• Assisting taxpayers who are facing hardships; identifying issues that impact taxpayer rights, increase taxpayer burden or otherwise create problems for taxpayers, and bringing these issues to the attention of IRS management; and
• Recommending administrative and legislative changes through the National Taxpayer Advocate's Annual Report to Congress.
Pursuant to §7811(a); 7803(c); Reg. §301.7811-1(a)(1), NTA has the authority to issue TAO when the taxpayer is suffering or is about to suffer a significant hardship as a result of the manner in the administration of tax laws, including action or inaction on the part of the IRS. TAO may have broad implications, including obligating the IRS to release a levy, stop a collection action and even stop an audit.
Significant Hardship Definition: General Definition
Treas. Reg. §301.7811-1(a)(4)(ii) defines “significant hardship” as “a serious privation caused or about to be caused to the taxpayer as the result of the particular manner in which the revenue laws are being administered by the IRS.”  Significant hardship includes situations in which “a system or procedure fails to operate as intended or fails to resolve the taxpayer's problem or dispute with the IRS”.
The regulations state a non-exclusive list of four situations that the IRS classifies as significant hardship:
“(A) An immediate threat of adverse action; (B) A delay of more than 30 days in resolving taxpayer account problems; (C) The incurring by the taxpayer of significant costs (including fees for professional representation) if relief is not granted; or (D) Irreparable injury to, or a long-term adverse impact on, the taxpayer if relief is not granted.” Id.
It should be pointed out that even if the taxpayer’s situation falls within any of these four situations (or a similar situation that the NTA agrees that it constitutes significant hardship), it does not mean that NTA will automatically issue TAO.  Rather, NTA must still determine whether the facts and the law support such a dramatic relief for the taxpayer.
Let’s go over each of the four categories of significant hardship one by one.
Significant Hardship Definition: Immediate Threat of Adverse Action
The Treasury Regulations do not detail the definition of this category except to provide the following example of what “immediate threat of adverse action” means:
“The IRS serves a levy on A's bank account. A needs the bank funds to pay for a medically necessary surgical procedure that is scheduled to take place in one week. If the levy is not released, A will lack the funds necessary to have the procedure. A is experiencing an immediate threat of adverse action.”
Significant Hardship Definition: Delay of More Than 30 Days
There are two situations when a delay of more than 30 days may result in significant hardship. First, “when a taxpayer does not receive a response by the date promised by the IRS.” Treas. Reg. §301.7811-1(a)(4)(iii). Second, “when the IRS has established a normal processing time for taking an action and the taxpayer experiences a delay of more than 30 days beyond the normal processing time.” Id.
The regulations give the following example of a delay causing significant hardship: “B files a Form 4506, ‘Request for a Copy of Tax Return.’ B does not receive the photocopy of the tax return after waiting more than 30 days beyond the normal time for processing.”
Significant Hardship Definition: Significant Costs
The Treasury Regulations again do not detail the definition of this category except to provide the following example of what “significant costs” means:
“The IRS sends XYZ, Inc. a notice requesting payment of the outstanding employment taxes and penalties owed by XYZ, Inc. The notice indicates that XYZ, Inc. has small employment tax balances with respect to 12 employment tax quarters totaling $10x. XYZ, Inc. provides documentation to the IRS that it contends shows that if all payments were applied to each quarter correctly, there would be no balance due. The IRS requests additional records and documentation. Because there are 12 quarters involved, to comply with this request XYZ, Inc. asserts that it will need to hire an accountant, who estimates he will charge at least $5x to organize all the records and provide a detailed analysis of how to apply the deposits and payments. XYZ, Inc. is facing significant costs.”  Treas. Reg. §301.7811-1(a)(4)(iv).
Significant Hardship Definition: Irreparable Injury
The IRS again fails to detail the definition of this category beyond providing an example of an “irreparable injury”:
“D has arranged with a bank to refinance his mortgage to lower his monthly payment. D is unable to make the current monthly payment. Unless the monthly payment amount is lowered, D will lose his residence to foreclosure. The IRS refuses to subordinate the Federal tax lien, as permitted by section 6325(d), or discharge the property subject to the lien, as permitted by section 6325(b). As a result, the bank will not allow D to refinance. D is facing an irreparable injury if relief is not granted.” Id.
Contact Sherayzen Law Office for Professional Help with IRS Audits
If the IRS has informed you that your federal tax returns are subject to an audit and you have foreign assets/foreign income, contact Sherayzen Law Office for professional help.  We are a team of dedicated tax professionals, headed by an international tax attorney Mr. Eugene Sherayzen, with extensive experience in IRS audits of US taxpayers with foreign assets. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Big Spring FBAR Attorney | International Tax Lawyer Texas
If you reside in Big Spring, Texas and have unreported foreign bank and financial accounts, you may be looking for a Big Spring FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Big Spring FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Big Spring FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Big Spring FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Big Spring FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Big Spring FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Big Spring, Texas. On the contrary, consider international tax attorneys who reside in other states and help Big Spring residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Big Spring, Texas.
Thus, if you are looking for a Big Spring FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Offshore Voluntary Disclosure: Client Records | International Tax Lawyer
One of the first things a client must get in order to pursue an offshore voluntary disclosure are all of the client records from his former accountant. Sometimes, however, the clients are having difficulty obtaining their documents from their accountants. In this article, I would like to briefly describe an accountant’s obligations with respect to the return of client records to their clients.
Return of Client Records: General Obligation to Return All Client Documents
Subsection 10.28(a) of Circular 230 requires an accountant to promptly return, upon a client's request, any and all of the records of the client that are necessary for the client to comply with his federal tax obligations. Hence, a failure of an accountant to return all clients records to his or her client is a violation of the accountant’s IRS obligations.
Return of Client Records: Documents Included
31 CFR §10.28(b) defines the documents that an accountant must return to his client:
All documents or written or electronic materials provided to the practitioner, or obtained by the practitioner in the course of the practitioner's representation of the client, that preexisted the retention of the practitioner by the client;
All materials that were prepared by the client or a third party (not including an employee or agent of the practitioner) at any time and provided to the practitioner with respect to the subject matter of the representation; and
Any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner, or his or her employee or agent, that was presented to the client with respect to a prior representation if such document is necessary for the taxpayer to comply with his or her current federal tax obligations.
Return of Client Records: Documents Excluded
31 CFR §10.28(b) also expressly excludes from the definition of client records “any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner or the practitioner's firm, employees or agents if the practitioner is withholding such document pending the client's performance of its contractual obligation to pay fees with respect to such document”.
Hence, in most cases, it is important for a client to pay his outstanding fees to the accountant in order to make sure that he has all relevant documents. Later, if he wishes, the client may file a lawsuit against the accountant for negligence (if there are legal grounds for such a lawsuit) to recover the fees paid.
Contact Sherayzen Law Office to Help With the Voluntary Disclosure of Your Prior US Tax Noncompliance
If you have not disclosed your foreign income and/or foreign assets to the IRS in violation of your US tax obligations, you should contact Sherayzen Law Office as soon as possible for professional help.  We have helped hundreds of US taxpayers to bring their tax affairs into compliance with US tax laws, including through a voluntary disclosure such as SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Reasonable Cause Written Advice Standard | International Tax Lawyer
Reliance on a written advice of a tax practitioner (attorney, CPA, etc.) may provide the basis for a reasonable cause exception to imposition of IRS noncompliance or late filing penalties with respect to pretty much every single US international tax compliance requirement. In this short article, I will describe the reasonable cause written advice standard concerning how the written advice should be written in order to satisfy and strengthen your legal case before the IRS.
Reasonable Cause Written Advice Standard: What A Practitioner May Advise On
First of all, it is important to understand that a practitioner may provide a written advice pretty much on any US tax matter.  In other words, a taxpayer may obtain a written advice from a practitioner on any matter concerning the application and/or interpretation of any provision of the Internal Revenue Code, any provision of law impacting the taxpayer’s US tax obligations, any Treasury regulations and any other law or regulation that the IRS administers.
Reasonable Cause Written Advice Standard: What Written Advice Should Include
When he writes a tax advice, the practitioner should make sure that he complies with some important rules:
The practitioner should consider all relevant facts and circumstances that the practitioner knows or would reasonably know. This means that two things must happen: (a) practitioner should conduct a reasonable investigation, including an interview with the taxpayer, to secure the necessary facts; and (b) the taxpayer must disclose all facts that he believes to be relevant and/or the practitioner asked him about. The disclosure of relevant facts by the taxpayer is absolutely crucial to the strength of the reasonable cause exception argument.At the same time, a failure by the practitioner to do a reasonable investigation of relevant facts may in of itself constitute a reasonable cause. He also should not rely on what he believes unreasonable, incorrect, incomplete and/or inconsistent representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) of the taxpayer or any other person.
The practitioner should base his written advice on reasonable factual and legal assumptions (including assumptions of future events).
The practitioner should apply the relevant law to the facts of the case. In other words, a written advice cannot simply state the law and assume that it should apply to the taxpayer’s case without the analysis of whether the facts of this particular case fit the relevant legal standard.
A failure to comply with all of these three rules may not necessarily be lethal to your legal case, but it may greatly affect its strength.
Reasonable Cause Written Advice Standard: Reliance on Advice from Third Parties
Sometimes, a practitioner may incorporate an advice from a third person into his own written advice.  He can do it only if the advice was reasonable in light of all facts and circumstances of the case.
The IRS is clear that such reliance on a third-party advice cannot be reasonable in three circumstances. First, the practitioner knows or reasonably should know that the opinion of the other person is not reliable. Second, the practitioner knows or reasonably should know that the other person does not have the necessary competence and necessary qualifications to provide the advice.  Finally, the practitioner knows or reasonably should know that the other person has a conflict of interest in violation of the IRS Circular 230.
Contact Sherayzen Law Office to Help With the Voluntary Disclosure of Your Prior US Tax Noncompliance
If you have not disclosed your foreign income and/or foreign assets to the IRS in violation of your US tax obligations, contact Sherayzen Law Office as soon as possible for professional help.  We have helped hundreds of US taxpayers to bring their tax affairs into compliance with US tax laws, including through a voluntary disclosure such as SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Mr. Eugene Sherayzen, an international tax attorney, can help you evaluate the strength of your legal case, including whether it meets the reasonable cause standard.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Banque Pictet Deferred Prosecution Agreement | Offshore Voluntary Disclosure Lawyer
On December 4, 2023, Banque Pictet et Cie SA (“Banque Pictet” - a Swiss private bank) entered into a deferred prosecution agreement with the US government. In this article, I will discuss Banque Pictet Deferred Prosecution Agreement and explain its importance.
Banque Pictet Deferred Prosecution Agreement: Facts Leading Up to the Agreement
The Pictet Group was founded in 1805; it is a privately held Swiss financial institution headquartered in Geneva. It has historically operated as a general partnership and, since 2014, as a corporate partnership. A limited number of managing partners, generally eight or fewer, collectively known as “The Salon,” own and manage the Pictet Group.
As of December 31, 2014, the Pictet Group had approximately 3,800 employees in various locations, primarily in Switzerland, but also in Luxembourg, Hong Kong, Singapore and the Bahamas. The Pictet Group operates two main business divisions: institutional asset management and private banking for individuals. From 2008 to 2014, Pictet Group’s private banking division was operated by the group’s following banking entities: the Swiss bank (Banque Pictet & Cie SA); Pictet & Cie (Europe) SA, headquartered in Luxembourg; Bank Pictet & Cie (Asia) Ltd. in Singapore and the Bahamian bank, Pictet Bank & Trust Ltd.
The Pictet Group provided offshore corporation, trust formation and administration services to its US clients. It provided these services first through the Estate Planning and Trust Services unit and later through a wholly owned subsidiary called Rhone Trust and Fiduciary Services SA (“Rhone”).
As of December 31, 2014, the Pictet Group’s private banking division managed or held custody of approximately $165 billion in assets under management (“AUM”). From 2008 to 2014, the Pictet Group served approximately 3,736 private accounts that had US taxpayers as beneficial owners, whose aggregate maximum AUM, including declared assets, was approximately $20 billion.
According to documents filed in Manhattan federal court, even though Pictet Group adopted early measures to confirm that US clients complied with US international tax laws, from 2008 through 2014, the Pictet Group assisted certain US clients with Pictet Group accounts in evading their US tax obligations and otherwise hiding undeclared accounts from the IRS.
In total, from 2008 through 2014, the Pictet Group held 1,637 US Penalty Accounts (I.e. accounts that the Pictet Group and the US Department of Justice agreed that should be subject to penalty as part of the Banque Pictet Deferred Prosecution Agreement) with aggregate maximum AUM of approximately $5.6 billion in January of 2008.  The IRS estimates that the US owners of these accounts collectively evaded approximately $50.6 million in US taxes.
Banque Pictet Deferred Prosecution Agreement: How Pictet Group Assisted Its US Clients Evade US taxes
According to the IRS and the US Department of Justice, the Pictet Group assisted its US clients with evading their US taxes by opening and maintaining undeclared accounts for U.S. taxpayer-clients at the Pictet Group, either directly or through external asset managers. The Pictet Group also maintained accounts of certain US clients within the Pictet Group in a manner that allowed the them to further conceal their undeclared accounts from the IRS.  
As further detailed below, the Pictet Group used a variety of means to assist its US clients in concealing their undeclared accounts, including by:
forming or administering offshore entities in whose name the Pictet Group opened and maintained accounts, some of which were undeclared, for its US clients; 
opening and maintaining undeclared accounts in the names of offshore entities formed by others for for its US clients;
opening and maintaining Private Placement Life Insurance policy accounts, also called insurance wrappers, held in the name of insurance companies but beneficially owned by for its US clients and improperly managed or funded through undeclared accounts at the Pictet Group;
transferring funds from undeclared accounts to accounts nominally held by non-US clients but still controlled by for its US clients via fictitious donations, thus assisting for its US clients in continuing to maintain undeclared funds offshore;
providing traditional Swiss banking products such as hold-mail account services (where account-related mail is held at the bank rather than sent to the client) and coded or numbered accounts and
accepting IRS Forms W-8BEN or Pictet Group’s substitute forms that the group knew or should have known falsely stated or implied under penalty of perjury that offshore entities beneficially owned the assets in the undeclared accounts.
Banque Pictet Deferred Prosecution Agreement: Pictet Group’s Knowledge of Evasion
The IRS and the US Department of Justice state the Pictet Group and certain of its employees knew or should have known that some of their US clients were evading their US tax obligations. In every instance, managing partners approved the opening of new private client relationships and were informed of the closing of US-held accounts, which included some undeclared accounts.
“As it has admitted today, Banque Pictet knowingly conspired to conceal from the IRS the income generated by accounts which held more than $5.6 billion,” said U.S. Attorney Damian Williams for the Southern District of New York.
Banque Pictet Deferred Prosecution Agreement: Fines & Cooperation Requirement
As part of the Deferred Prosecution Agreement, Banque Pictet entered into a deferred prosecution agreement and agreed to pay approximately $122.9 million. This amount consists of: (i) $52,164,201 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2008 and 2014; (ii) $31,844,192 in restitution to the IRS, which represents the unpaid taxes resulting from Banque Pictet’s participation in the conspiracy and (iii) a $38,950,998 penalty.
In addition to the payment, Banque Pictet also agrees under the deferred prosecution agreement to accept responsibility for its conduct by stipulating to the accuracy of an extensive statement of facts. Banque Pictet further agreed to refrain from all future criminal conduct, implement remedial measures and cooperate fully with further investigations into hidden bank accounts. 
Specifically, the Bank agreed to cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding US-owned accounts. The Bank should also disclose information consistent with the Justice Department’s Swiss Bank Program relating to accounts closed between January 1, 2008, and December 31, 2022.
If Banque Pictet continues to comply with its agreement, the United States has agreed to defer prosecution of Banque Pictet for a period of three years, after which time the United States will seek to dismiss the charge against Banque Pictet.
Banque Pictet Deferred Prosecution Agreement: Lessons
The Banque Pictet Deferred Prosecution Agreement is another in a long string of the IRS victories over the now-defeated Swiss bank secrecy system. The IRS is simply “mopping-up” the left-over issues in Switzerland. Yet, this Agreement is still a major event that has repercussions for US taxpayers with undeclared foreign accounts. Let’s look at the major lessons from this case.
First, the Banque Pictet Deferred Prosecution Agreement is likely to continue to impact its former US clients who transferred their funds out of this Swiss bank to another country or another bank in the hopes of avoiding IRS detection of their prior non-compliance. Under the agreement, Banque Pictet will continue to cooperate with the IRS in the identification of such noncompliant U.S. taxpayers.
Second, this continuous winning streak of the IRS over Swiss banks is likely to act as a continuous deterrent for any banks who wish to help noncompliant US clients not only in Switzerland, but other countries as well.
Finally, noncompliant US taxpayers should look very closely at how easily the IRS won over the former bank secrecy bastion of Switzerland and how eagerly the Swiss banks helped (and continue to help) the IRS and the US Department of Justice to pursue their former US clients.  It is important for these taxpayers to realize that there is no true safe haven from the IRS . Even if they have been successfully evading US taxes for years, at any point their noncompliance may be detected by the IRS. These taxpayers should also remember that a deferred prosecution agreement with the bank does not protect any individual US taxpayers from Banque Pictet Deferred Prosecution Agreement
Contact Sherayzen Law Office for Professional Help with Your Undeclared Foreign Accounts
The Banque Pictet Deferred Prosecution Agreement is another reminder on how dangerous the current tax environment is for noncompliant U.S. taxpayers. Therefore, if you have not disclosed your foreign accounts, other foreign assets or foreign income, you contact Sherayzen Law Office as soon as possible. Our team of tax professionals is highly experienced in handling these matters and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Minnesota Streamlined Disclosure Lawyer | International Tax Attorney
Minnesota has a sizable immigrant community with over 9% of the population foreign-born and another more than 7% of the population that has at least one immigrant parent. The top countries of original for immigrants are: Mexico, Somalia, India, Laos and Ethiopia. Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately some of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Minnesota streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Minnesota streamlined disclosure lawyer and outline who belongs to this category of lawyers.
Minnesota Streamlined Disclosure Lawyer: International Tax Attorney
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Minnesota streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.
Minnesota Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Minnesota Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.
This means that you are not limited to Minnesota when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Minnesota or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Minnesota might have had in the past over the out-of-state lawyers. This has already been established in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.
Sherayzen Law Office Can Be Your Minnesota Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRS VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Minnesota, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Amarillo FBAR Attorney | International Tax Lawyer Texas
If you reside in Amarillo, Texas and have unreported foreign bank and financial accounts, you may be looking for a Amarillo FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Amarillo FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Amarillo FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Amarillo FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Amarillo FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Amarillo FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Amarillo, Texas. On the contrary, consider international tax attorneys who reside in other states and help Amarillo residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Amarillo, Texas.
Thus, if you are looking for a Amarillo FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Abilene Foreign Trust Attorney | International Tax Lawyers Texas
If you live in Abilene, Texas, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Abilene Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Abilene Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Abilene Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Abilene Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Abilene Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Abilene Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Corpus Christi FBAR Attorney | International Tax Lawyer Texas
If you reside in Corpus Christi, Texas and have unreported foreign bank and financial accounts, you may be looking for a Corpus Christi FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Corpus Christi FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Corpus Christi FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Corpus Christi FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Corpus Christi FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Corpus Christi FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Corpus Christi, Texas. On the contrary, consider international tax attorneys who reside in other states and help Corpus Christi residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Texas, we help taxpayers who reside throughout the United States, including Corpus Christi, Texas.
Thus, if you are looking for a Corpus Christi FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### IRS Limited Practice Exceptions | Tax Lawyer St Paul Minnesota
Generally, only attorneys, CPAs, enrolled agents and enrolled actuaries can act as taxpayer representatives before the IRS.  However, Circular 230 §10.7 contains several limited exceptions to this general requirement. Let’s explore these IRS limited practice exceptions.
IRS Limited Practice Exceptions: Standard of Conduct
Before we discuss the exceptions, I would like to point out that all non-practitioners who engage in limited practice before the IRS must follow the same standards of conduct as those applicable to practitioners. Circular 230 §10.7(c)(2)(iii).  Moreover, the IRS reserves the right to deny eligibility to engage in limited practice to any individual who has engaged in conduct that may be subject to a sanction under Circular 230 §10.50. See Circular 230 §10.7(c)(2)(ii).
It should be kept in mind that an individual can represent before the IRS not only a taxpayer in the United States, but also any individual or entity who is outside of the United States.
IRS Limited Practice Exceptions: Self-Representation
Obviously, every taxpayer has a basic right to represent himself before the IRS without any enrollment into IRS practice. This right can be found in Circular 230 §10.7(a). Circular 230 §10.7(e) explains that a fiduciary such as a trustee, receiver, guardian, personal representative, administrator, or executor is considered to be the taxpayer, not a representative of a taxpayer.
IRS Limited Practice Exceptions: Relationship-Based Representation
The IRS would permit an individual to represent another taxpayer before the IRS if this individual has some type of a close relationship to the taxpayer (whether the taxpayer is an individual or an entity). Circular 230 §10.7(c)(1) specifically lists the following exceptions:
(i) An individual may represent a member of his or her immediate family.
(ii) A regular full-time employee of an individual employer may represent the employer.
(iii) A general partner or a regular full-time employee of a partnership may represent the partnership.
(iv) A bona fide officer or a regular full-time employee of a corporation (including a parent, subsidiary, or other affiliated corporation), association, or organized group may represent the corporation, association, or organized group.
(v) A regular full-time employee of a trust, receivership, guardianship, or estate may represent the trust, receivership, guardianship, or estate.
(vi) An officer or a regular employee of a governmental unit, agency, or authority may represent the governmental unit, agency, or authority in the course of his or her official duties.
It is important to point out that subclause (iv) does not clash with Form 4764 (Large Case Examination Plan) which allows a corporate taxpayer to designate an employee to discuss tax matters, provide information, discuss adjustments, et cetera.  The reason for it is that the Form 4764 authorization only allows an employee to simply accept materials, deliver materials, provide general explanation. If the employee advocates, negotiates, disputes or does anything else, then he engages in taxpayer representation that requires the filing of Form 2848.
Another important note concerning subclause (iv) is that an employee of a corporation may represent a corporate subsidiary in a tax matter concerning the subsidiary if the parent corporation owns, directly or indirectly, 50% or more of the subsidiary's voting stock and if the employee's services are not rendered in a manner that might misrepresent his professional status.
IRS Limited Practice Exceptions: Specific Matter Representation
Circular 230 §10.7(d) allows the IRS to authorize any individual to represent another person without enrollment for a specific matter. Circular 230 does not really describe what are the requirements for such a specific matter representation. Given past practice, however, we can deduce that Circular 230 is most likely referring to persons who are not active tax practitioners but may possess certain competency in tax matters (such an attorney without a license, a retired CPA, a law student representing his clients through a tax clinic in a law school, etc.).
Sherayzen Law Office Is Auhorized to Practice Before the IRS
Mr. Eugene Sherayzen, the owner of Sherayzen Law Office, is an attorney licensed to practice in the State of Minnesota.  Hence, he is authorized to represent taxpayers before the IRS.
Contact Sherayzen Law Office for professional help with all matters concerning US international tax laws.

### Internal Revenue Manual: Introduction | IRS Audit Lawyer St Paul
Internal Revenue Manual:  Description & Purpose 
Internal Revenue Manual ("IRM") is the primary, official source of IRS instructions to staff that relate to the administration and operation of the IRS. The rules set in the IRM are meant to provide guidance to the IRS employees (including managers) in their daily work life. The IRM is available on the IRS' website. 
From time to time, the IRS also issues interim guidance regarding policy or procedure changes; eventually the IRS would modify IRM to reflect these changes.
Internal Revenue Manual:  Difference Between IRM, IRS Policy Statements and Delegation Orders
One should not confuse IRM with two other types of documents, IRS Policy Statements and Delegation Orders.  While the IRS publishes IRS Policy Statements and Delegation Orders in IRM 1.2.1, et. seq., they are not the same things.
The IRS Policy Statements are basically IRS policies that govern and guide IRS employees in the administration of the IRS itself. The Policy Statements do not contain IRS interpretation of substantive tax provisions or directors to the taxpayers; these are policies just for the IRS staff. Later, the IRS officials would use the Policy Statements to prepare procedures and instructions as part of IRM.
The IRS publishes Delegation Orders in  IRM.12.2, et. seq.. Delegation Orders specify which IRS officials have the authority to approve policies, procedures, documents and actions.
Internal Revenue Manual: Use of IRM
The key issue for US taxpayers is whether they can rely on IRM to invalidate an action of an IRS employee? In other words, if an IRS employee fails to comply with IRS in what otherwise looks like a valid course of action, can the taxpayer challenge the action itself in court?
Generally, the answer is “no”. IRM contains the procedures that govern the internal affairs of the IRS, but these procedures do not have the force of law.  In other words, IRM is suggestive, not mandatory. There is a large array of cases to support this conclusion.  For example, Ward v. Commissioner, 784 F.2d 1424 (9th Cir. 1986) and  Einhorn v. DeWitt, 618 F.2d 347 (5th Cir. 1980) both stated that the IRS’ failure to follow the IRM procedural rules does not invalidate IRS regulations.
In other words, IRM is not binding on the IRS. Its primary use is to be a source of information for the IRS staff and US taxpayers to understand the IRS procedures and and guidelines.  Of course, while nonbinding, the taxpayers can still use IRM to support their arguments and convince an IRS agent to change his position.  This is true not only for US domestic law, but also for US international tax law.
Contact Sherayzen Law Office for Professional International Tax Help
Sherayzen Law Office is a leader in US international tax compliance, including dealing with the IRS as part of IRS audits.  We have helped hundreds of US taxpayers around the world to bring their tax affairs in full compliance with US tax law, and we can help you!  
Contact Us Today to Schedule Your Confidential Consultation!

### Abilene FBAR Attorney | International Tax Lawyer Texas
If you reside in Abilene, Texas and have unreported foreign bank and financial accounts, you may be looking for a Abilene FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, and you should consider us in your search. Let’s understand why this is the case.
Abilene FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Abilene FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Abilene FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Abilene FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Abilene FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Abilene, Texas. On the contrary, consider international tax attorneys who reside in other states and help Abilene residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Abilene, Texas.
Thus, if you are looking for a Abilene FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Florida Streamlined Disclosure Attorney | International Tax Lawyer
Florida has a huge immigrant community with over 21% of the population foreign-born and another more than 12% of the population that has at least one immigrant parent. The top countries of original for immigrants are: Cuba, Haiti, Colombia, Mexico and Jamaica. Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately some of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Florida streamlined Disclosure Attorney for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Florida streamlined Disclosure Attorney and outline who belongs to this category of lawyers.
Florida Streamlined Disclosure Attorney: International Tax Lawyer
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Florida streamlined Disclosure Attorney. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax lawyer.
Florida Streamlined Disclosure Attorney: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Florida Streamlined Disclosure Attorney: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.
This means that you are not limited to Florida when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Florida or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Florida might have had in the past over the out-of-state lawyers. This is the reality in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.
Sherayzen Law Office Can Be Your Florida Streamlined Disclosure Attorney
Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRS VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Florida, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Waco Foreign Trust Attorney | International Tax Lawyer Texas
If you live in Waco, Texas, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Waco Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Waco Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Waco Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Waco Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Waco Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Waco Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Special October 7 FBAR Deadline for 2022 FBAR | International Tax Lawyer
In this calender year 2024, there is a special October 7 FBAR deadline that was created by FinCEN in response to the October 7 terrorist attack against Israel.  Let’s discuss discuss this special October 7 FBAR deadline in more detail.
October 7 FBAR Deadline: Background Information
The terrorist attack on Israel on October 7, 2023 was horrible and its primary affect was on the people who lost their lives, lives of their family members and friends.  The second impact of the terrorist attack and the follow-up Israeli military action was a significant disruption of the US-Israeli taxpayers’ ability to comply with their US tax obligations.  
Recognizing this disruption, the IRS and (later) FinCEN announced an important tax relief for the affected persons from their US tax reporting obligations.
October 7 FBAR Deadline: IRS Notice 2023-71
The IRS reacted first with the IRS Notice 2023-71 that postponed various tax compliance and payment deadlines that occurred and will occur between October 7, 2023 and October 7, 2024 for the affected businesses and individuals.  Thus, the new deadline for all of these tax compliance and payment obligations is October 7, 2024.
Here is an incomplete list of affected deadlines:
2022 extended tax return for individuals who had a valid extension to file their 2022 return due to run out on October 16, 2023.  The tax relief, however, would not affect the tax payments related to these 2022 returns that were due on April 18, 2023. In other words, this is an extension to file, not to pay.
Calendar-year corporations whose 2022 extensions run out on October 16, 2023. Similarly, these corporations have more time to file, but not to pay.
2023 individual and business returns and payments normally due on March 15 and April 15, 2024. So, these individuals and businesses have both more time to file and more time to pay.
Quarterly estimated income tax payments normally due on Jan. 16, April 15, June 17 and Sept. 16, 2024.
Quarterly payroll and excise tax returns normally due on Oct. 31, 2023, and Jan. 31, April 30 and July 31, 2024.
Calendar-year tax-exempt organizations whose extensions run out on Nov. 15, 2023.
Retirement plan contributions and rollovers.
October 7 FBAR Deadline: Why the IRS Postponed Deadlines to October 7 2024
One might have a logical question: why did the IRS create such a strange deadline of October 7, 2024, instead of, for example, April 30, 2025?  The answer lies in Internal Revenue Code (“IRC”) Section 7508A(a), which provides the IRS with authority to postpone the time for only up to one year  for performing certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a terroristic or military action as defined in section 692(c)(2). Section 692(c)(2) defines a terroristic action as “any terroristic activity which a preponderance of the evidence indicates was directed against the United States or any of its allies.” The State of Israel is of course an ally of the United States.
October 7 FBAR Deadline: FinCEN Relief for the Filing of 2022 FBAR
FinCEN soon followed the IRS lead and announced a similar relief to the filing of 2022 FBAR (which was due on October 16, 2023). The relief applies only to individuals and businesses affected by the terrorist action against the State of Israel on October 7, 2023.   The new deadline mirrors the IRS deadline -- October 7, 2024.
October 7 FBAR Deadline: Affected Taxpayers
In its announcement, FinCEN specifically referred to the IRS Announcement on October 13, 2023, for the definition of individuals and businesses eligible for the new 2022 FBAR deadline.  The IRS identified four categories of US taxpayers eligible for the relief:
Any individual whose principal residence or business entity or sole proprietor whose principal place of business is in Israel, the West Bank or Gaza (the covered area).
Any individual, business or sole proprietor, or estate or trust whose books, records or tax preparer is located in the covered area.
Anyone killed, injured, or taken hostage due to the terrorist attacks.
Any individual affiliated with a recognized government or philanthropic organization and who is assisting in the covered area, such as a relief worker.
Contact Sherayzen Law Office for Professional Help With Your FBAR Obligations
If you need help concerning your 2022 FBAR filing obligations or compliance with any other (including delinquent) FBAR obligations, contact Sherayzen Law Office for professional help.  We have helped hundreds of taxpayers around the world, including with foreign accounts in Israel, to bring their tax affairs in full compliance with their US tax laws.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Waco FBAR Attorney | International Tax Lawyer Texas
If you reside in Waco, Texas and have unreported foreign bank and financial accounts, you may be looking for a Waco FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, consider us in your search. Let’s understand why this is the case.
Waco FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Waco FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Waco FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Waco FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Waco FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Waco, Texas. On the contrary, consider international tax attorneys who reside in other states and help Waco residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Waco, Texas.
Thus, if you are looking for a Waco FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### IRS Sports Industry Campaign: Sport Teams and Owners Targeted
On January 16, 2024, the IRS Large Business and International division announced a new compliance campaign: the IRS Sports Industry Campaign.  While the announcement is recent and certain details are not yet available, let’s discuss the general direction of this IRS new compliance tax enforcement effort.
IRS Sports Industry Campaign: Background Information
In the mid-2010s, after extensive tax planning, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.
The first thirteen campaigns were announced by LB&I on January 13, 2017. Then, the IRS added eleven campaigns on November 3, 2017, five campaigns on March 13, 2018, six campaigns on May 21, 2018, five campaigns on July 2, 2018, five campaigns on September 10, 2018, five campaigns on October 30, 2018, and so on.  The IRS Sports Industry campaign is the latest one to be announced at the time of this writing.
IRS Sports Industry Campaign: What Does the IRS Say?
The IRS stated that it will conduct its Sports Industry Losses campaign to identify partnerships within the sports industry that report significant tax losses in order to determine whether the income and deductions driving the losses are reported in compliance with the applicable sections of the Internal Revenue Code.
IRS Sports Industry Campaign: Main Target
It is clear from the announcement that the IRS now decided to target sports teams for the losses that they are reporting.  It is indeed true -- in the industry renowned for its high profits, the reporting of losses may look suspicious.  
However, when one looks at the fact that it is sports-related partnerships who report much of the losses, it becomes clear that the IRS is really after the beneficial owners of these partnerships.  Who are their owners? Ultra high-net-worth individuals, who are at the center of the IRS newly-funded (by the Inflation Reduction Act) effort to bridge the so-called “tax gap”.
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of this campaign, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### June 17 Connecticut Deadline Tax Relief | US Tax Lawyer & Attorney
On January 22, 2024, the Internal Revenue Service announced tax relief for individuals and businesses in parts of Connecticut affected by severe storms, flooding and a potential dam breach that began on January 10, 2024.  These taxpayers now have until June 17, 2024, to file various federal individual and business tax returns and make tax payments.
June 17 Connecticut Deadline: Areas Affected by Tax Relief
The IRS is offering relief to any area designated by the Federal Emergency Management Agency (FEMA). Currently, this includes New London County, including the Mohegan Tribal Nation and Mashantucket Pequot Tribal Nation. Individuals and households that reside or have a business in these localities qualify for tax relief.  The same relief will be available to any other Connecticut localities added later to the disaster area. The current list of eligible localities is always available on the disaster relief page on IRS.gov.
The IRS automatically provides filing and penalty relief to any taxpayer with an IRS address of record located in the disaster area. These taxpayers do not need to contact the agency to get this relief.
It is possible an affected taxpayer may not have an IRS address of record located in the disaster area, for example, because they moved to the disaster area after filing their return. In these kinds of unique circumstances, the affected taxpayer could receive a late filing or late payment penalty notice from the IRS for the postponement period. The taxpayer should call the number on the notice to have the penalty abated.
June 17 Connecticut Deadline:  Deadlines Affected
The tax relief postpones various tax filing and payment deadlines that occurred from January 10, 2024, through June 17, 2024 (“postponement period”). As a result, affected individuals and businesses will have until June 17, 2024, to file returns and pay any taxes that were originally due during this period.
This means, for example, that the June 17, 2024, deadline will now apply to:
Individual income tax returns and payments normally due on April 15, 2024.
2023 contributions to IRAs and health savings accounts for eligible taxpayers.
Quarterly estimated income tax payments normally due on January 16 and April 15, 2024.
Quarterly payroll and excise tax returns normally due on January 31 and April 30, 2024.
Calendar-year partnership and S corporation returns normally due on March 15, 2024.
Calendar-year corporation and fiduciary returns and payments normally due on April 15, 2024.
Calendar-year tax-exempt organization returns normally due on May 15, 2024.
In addition, penalties for failing to make payroll and excise tax deposits due on or after January 10, 2024, and before Jan. 25, 2024, will be abated as long as the deposits are made by January 25, 2024.
The IRS disaster relief page has details on other returns, payments and tax-related actions qualifying for relief during the postponement period.
In addition, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization.
June 17 Connecticut Deadline: Additional Tax Relief
Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred or the return for the prior year. Taxpayers have extra time – up to six months after the due date of the taxpayer's federal income tax return for the disaster year (without regard to any extension of time to file) – to make the election.  Be sure to write the FEMA declaration number – 3604-EM − on any return claiming a loss.
Qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents.
Sherayzen Law Office continues to monitor the situation concerning IRS tax reliefs for natural disasters and other events.

### Oklahoma Streamlined Disclosure Lawyer | International Tax Attorney
Oklahoma is a home to a growing immigrant community with at least 6% of the population foreign-born and another 6% of the population that has at least one immigrant parent. The top countries of original for immigrants are: Mexico, Vietnam, India, Germany (a major surprise to many people) and Guatemala. Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately some of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Oklahoma streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Oklahoma streamlined disclosure lawyer and outline who belongs to this category of lawyers.
Oklahoma Streamlined Disclosure Lawyer: International Tax Attorney
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Oklahoma streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.
Oklahoma Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Oklahoma Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.
This means that you are not limited to Oklahoma when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Oklahoma or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Oklahoma might have had in the past over the out-of-state lawyers. This has already been established in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.
Sherayzen Law Office Can Be Your Oklahoma Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRS VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Oklahoma, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Plano Foreign Trust Attorney | International Tax Lawyer Texas
If you live in Plano, Texas, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Plano Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Plano Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Plano Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Plano Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Plano Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Plano Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Houston FBAR Attorney | International Tax Lawyer Texas
If you reside in Houston, Texas and have unreported foreign bank and financial accounts, you may be looking for a Houston FBAR Attorney.  Sherayzen Law Office, Ltd. is a leader in FBAR compliance, including offshore voluntary disclosures concerning delinquent FBARs, consider us in your search. Let’s understand why this is the case.
Houston FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Houston FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Houston FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Houston FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Houston FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Houston, Texas. On the contrary, consider international tax attorneys who reside in other states and help Houston residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Houston, Texas.
Thus, if you are looking for a Houston FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### First Quarter 2024 IRS Interest Rates on Overpayment & Underpayment of Tax
On November 17, 2023, the IRS announced that the First Quarter 2024 IRS interest rates on overpayment and underpayment of tax will not change from the Fourth Quarter of 2023.
This means that, the First Quarter 2024 IRS interest rates will be as follows:
eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
eight (8) percent for underpayments;
ten (10) percent for large corporate underpayments; and
five and a half (5.5) of a percent for the portion of a corporate overpayment exceeding $10,000.
Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Pursuant to the IRC §6621(b)(1), the First Quarter 2024 IRS interest rates were computed based on federal short-term rates for October 2023 to take effect on November 1, 2023, based on daily compounding.
It is important to note that the First Quarter 2024 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. First, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended pursuant to Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the First Quarter 2024 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the First Quarter 2024 IRS interest rates.

### 2024 SDOP Audit | Streamlined Domestic Offshore Procedures Lawyer
An increasing number of submissions under the Streamlined Domestic Offshore Procedures (SDOP) has been subject to an IRS audit; this trend will undoubtedly continue in 2024. In this article, I will explain what an 2024 SDOP Audit is and what a taxpayer should expect during the Audit.
2024 SDOP Audit: Background Information on Streamlined Domestic Offshore Procedures
Streamlined Domestic Offshore Procedures is a voluntary disclosure option offered by the IRS since June of 2014 to noncompliant US taxpayers to settle their past tax noncompliance concerning foreign assets and foreign income at a reduced penalty rate. In order to participate in SDOP, a taxpayer must meet various eligibility requirements. The most important of these eligibility requirements is non-willfulness of prior noncompliance.
SDOP is likely to be the most convenient and the least expensive voluntary disclosure option for taxpayers who are not eligible for Streamlined Foreign Offshore Procedures and whose prior tax noncompliance was non-willful. 
2024 SDOP Audit: Why SDOP Disclosures Are Subject to IRS Audits
SDOP audits originate within the very nature of SDOP.  SDOP voluntary disclosures have certain eligibility requirements.  Once the disclosures are submitted, the IRS does not immediately subject them to an immediate comprehensive review of whether all eligibility requirements are met.  There is a review process, but initially it focuses on whether the formalities of the SDOP were met.
This is very different from the immediate comprehensive audit-like review of all items as part of the voluntary disclosure process that form part of some other programs, such as prior OVDPs (Offshore Voluntary Disclosure Program) or even current IRS Voluntary Disclosure Practice (VDP). These voluntary disclosure options usually also require the signing of Form 906, the Closing Agreement. SDOP does not have that final stage of signing Form 906.
This means that, if a suspicion arises concerning whether a taxpayer met the SDOP eligibility requirements, the only way for the IRS to resolve it is to audit the entire disclosure, particularly on the issue of non-willfulness. As part of the SDOP process, the IRS reserves the right to audit any SDOP submission at any point within three years after the submission of the original SDOP voluntary disclosure package.
2024 SDOP Audit: Process
The exact process of a Streamlined Submission Audit varies from case to case, but all of such audits have a similar format: initial letter with request for a meeting, meeting with an interview, review of submitted documents and (very likely) additional requests for information, interview of other involved individuals (such as a tax preparer) and, finally, the results of an audit are provided by the IRS to taxpayer(s) and/or the representative indicated on Form 2848.
In other words, your 2024 SDOP Audit would commence in a way very similar to a regular IRS audit: a letter is sent to taxpayers and (if there is a Form 2848 on file) to their representative. The letter explains that the IRS decided to examine certain tax returns (usually all three years of amended tax returns) and asks for submission of all documentation and work papers that were used to prepare the amended returns. Additionally, the letter requests that the taxpayers’ representative (or taxpayers if not represented) contact the IRS agent in charge of the audit to schedule the initial meeting.
During the initial meeting, the IRS agent will review (at least to make sure he or she has what is needed) the documents supplied. In larger cases, the IRS will need a lot more time to later examine all of the submitted documents and see if additional documents are needed. If a case is very small, it is possible for an agent to cover everything in the first meeting, but it is very rare.
Also, during an initial meeting, there is going to be an interview of the taxpayer(s). I will discuss the interview separately in a different article.
Once the review of the initial package of documents is concluded, it is very likely that the IRS agent will have questions and additional document requests. The questions may be answered by the taxpayers’ attorney during a separate meeting with the agent; smaller questions may be settled over the phone.
If additional documentation is needed, an IRS agent will send out an additional request to taxpayers and/or their attorney. The answer will most likely need to be provided in writing (and it is actually better to state your position for the record).
Once the IRS completes its interview of other involved parties and reviews all evidence, it will make its decision and submit the results of the audit to the taxpayers and their tax attorney in writing. The taxpayers’ attorney will need to build a strategy with respect to the taxpayers’ response to the audit results depending on whether the taxpayers agree or disagree with the results of the audit.
Differences Between Your 2024 SDOP Audit and Regular IRS Audit
At first, it may seem that there are no big differences between a regular IRS audit and an SDOP audit. While procedurally this may be correct, substantively it is not.
The greatest difference between the two types of IRS audits is the subject-matter involved. While a regular IRS audit will concentrate on the tax returns only, a Streamlined Submission Audit will involve everything: amended tax returns, FBARs, other information returns and, most importantly, Non-Willfulness Certification. In other words, a Streamlined Submission Audit will focus not only on whether the tax forms are correct, but also on whether the taxpayer was actually non-willful with respect to his prior tax noncompliance.
This difference in the subject-matter examination will carry over to other aspects of a Streamlined Submission Audit: the taxpayers’ interview will focus on their non-willfulness arguments, third-party interviews of original tax preparers become a regular feature (this is very different from a regular IRS audit when tax preparers may never be interviewed), and the final IRS results must necessarily make a decision on whether to challenge the taxpayers’ non-willfulness arguments.
Failure by a taxpayer to sustain his non-willfulness arguments may result in a disaster for the taxpayer with a potential referral to the Tax Division of the US Department of Justice for a criminal investigation.
This is why it is so important for a taxpayer subject to an SDOP Audit to retain the services of an experienced international tax lawyer to handle the audit professionally.
Contact Sherayzen Law Office for Professional Help With Your 2024 SDOP Audit 
If your submission under the Streamlined Domestic Offshore Procedures is being audited by the IRS, contact Sherayzen Law Office as soon as possible. Our international tax law firm is highly experienced in offshore voluntary disclosures (SDOP, SFOP, “noisy disclosures”, “quiet disclosures”, et cetera) and the IRS audits of voluntary disclosures, including the audits of SDOP submissions.
 We can Help You during Your IRS Audit!  Contact Us Today to Schedule Your Confidential Consultation!

### Minneapolis Foreign Trust Attorney | International Tax Lawyer
If you live in Minneapolis, Minnesota, and you are an owner or a beneficiary of a foreign trust, you need to secure the help of a Minneapolis Foreign Trust Attorney to properly comply with US international tax laws.
You should consider retaining Sherayzen Law Office as your Minneapolis Foreign Trust Attorney. Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, India, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others. We also have an experience dealing with trusts organized in the United States that are treated as foreign trusts and, vice versa, trusts organized outside of the United States but treated as US trusts.
Minneapolis Foreign Trust Attorney: Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US international tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors, US trustees and deemed US owners) of a foreign trust.
Minneapolis Foreign Trust Attorney: Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause voluntary disclosure (also known as “Noisy Disclosures” or “Statutory Disclosures”).   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Minneapolis Foreign Trust Attorney: Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Minneapolis Foreign Trust Attorney:  Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance Concerning Your Beneficiary or Ownership Interest in a Foreign Trust
Timing is highly important in cases involving a foreign trust. Hence, if you have a beneficiary or ownership interest in a foreign trust, you contact us in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Denver FBAR Attorney | International Tax Lawyer Colorado
If you reside in Denver, Colorado and have unreported foreign bank and financial accounts, you may be looking for a Denver FBAR Attorney.  Sherayzen Law Office, Ltd. (“Sherayzen Law Office”) is a leader in FBAR compliance and you should consider us in your search. Let’s understand why this is the case.
Denver FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Denver FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Denver FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Denver FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Denver FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Denver, Colorado. On the contrary, consider international tax attorneys who reside in other states and help Denver residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Denver, Colorado.
Thus, if you are looking for a Denver FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Streamlined Domestic Offshore Procedures Lawyer: 2024 SDOP Advantages
Since 2014, Streamlined Domestic Offshore Procedures (“SDOP”) has probably been the most popular offshore voluntary disclosure option, and I predict that it will remain so in the year 2024. In this article, I would like to explore main four 2024 SDOP advantages which US taxpayers should take into account while considering an offshore voluntary disclosure this year.
2024 SDOP Advantages: Background Information and General Requirements
The IRS created the Streamlined Domestic Disclosure as an offshore voluntary disclosure option on June 18, 2014. The IRS specifically the designed Streamlined Domestic Disclosure to address the critique of many practitioners and taxpayers that the 2012 OVDP did not adequately deal with US taxpayers who non-willfully violated their US tax obligations (for example, in cases where the taxpayers simply did not know about the existence of FBAR or Form 8938).
Any taxpayer can participate in the SDOP as long as he satisfies all six parts of this option’s eligibility criteria: US tax residency, not eligible for Streamlined Foreign Offshore Procedures (“SFOP”), original US tax returns filed for the past three years, foreign income and information return (such as FBAR or Form 8938) violations, absence of IRS examination or investigation and non-willfulness.
If a taxpayer satisfies the eligibility criteria, he then must comply with all of the required submissions. The key requirement here is the certification under the penalty of perjury that the taxpayer’s prior tax noncompliance was non-willful. This requirement is the heart of the Streamlined Domestic Disclosure and must be approached with special care.
The other requirements include filing of amended tax returns for the past three years (with all of the necessary information returns), filing FBARs for the past six years, payment of tax due with interest and payment of Miscellaneous Offshore Penalty. Other requirements may also apply depending on the specific situation of a taxpayer.
2024 SDOP Offers a Number of Advantages to Noncompliant US Taxpayers
While the list of the requirements above may seem like a lot of work, in reality, Streamlined Domestic Offshore Procedures definitely offers a number of advantages compared to other offshore voluntary disclosure options. I will discuss in this article only the main four advantages.
Keep in mind that the SDOP may not always be advantages to taxpayers. There are plenty of situations where other offshore voluntary disclosure options may be superior to the SDOP.
I also wish to emphasize that the analysis of advantages or disadvantages of a particular voluntary disclosure option is highly fact-specific. I strongly recommend that you contact Sherayzen Law Office for a detailed analysis of your voluntary disclosure options before you even attempt to proceed with your offshore voluntary disclosure.
2024 SDOP Advantages: Easier Risk Management
One of the greatest advantages (though, the one rarely discussed on the Internet) of the Streamlined Domestic Offshore Procedures is the opportunity this option offers to manage the voluntary disclosure risks. We can be even more precise – to manage the risk-reward ratio.
The 2024 SDOP is a disclosure option that offers a definitive transparent calculation of risks and rewards.  While the risks associated with non-willfulness are not always easy to determine, the rest of the SDOP framework, such as penalty rate, calculation of Penalty Base and other factors are generally (though, not always) much clearer than in riskier disclosure options such Noisy Disclosure, Delinquent International Information Return Submission Procedures (“DIIRSP”) and Reasonable Cause disclosures.
2024 SDOP Advantages: Legal Standard
Closely related to the risk management factor discussed above is another SDOP advantage of a lower legal standard of proof -- non-willfulness. While proving non-willfulness can be a complicated and difficult process, it is still much easier than satisfying the reasonable cause standard.
The reasonable cause standard is immensely more difficult and tougher to meet for a taxpayer. Yet it is the statutory standard for penalty removal for pretty much every US international tax form outside of a voluntary disclosure. Reasonable cause is also the standard for even some other voluntary disclosure programs (for example, DIIRSP). Of course, IRS VDP does not require proving even non-willfulness, but its penalty system is a lot harsher than that of the SDOP.
2024 SDOP Advantages: Relatively Low Penalty Rate
One of the most cited advantages of the 2024 SDOP is the low penalty rate of 5%. This is usually a huge advantage over the very high IRS Voluntary Disclosure Practice (“VDP”) penalty rates or various penalties outside of a voluntary disclosure program (including in many cases FBAR non-willful penalties). This is not always the case, but it is true in most non-willful cases.
2024 SDOP Advantages: Shortened Voluntary Disclosure Period
Finally, another great advantage of Streamlined Domestic Offshore Procedures is the smaller number of years covered by the voluntary disclosure period. Unlike the old OVDP voluntary disclosure period (which used to cover eight years of FBARs and tax returns) and the current VDP voluntary disclosure period of up to six years, SDOP’s voluntary disclosure period only encompasses the years which are covered by a regular statute of limitations.
In other words, it only includes the past six years of FBARs (occasionally seven) and past three years of tax returns. Obviously, this is a lot more convenient than VDP.  It should be noted that a voluntary disclosure that involves an expatriation will require an increased number of amended tax returns.
Contact Sherayzen Law Office for Professional Help with Streamlined Domestic Disclosure
Even with all of its advantages, Streamlined Domestic Offshore Procedures may still be a very complex process that requires professional attention. There are a number of pitfalls that may seriously undermine the advantages of a Streamlined Domestic Disclosure. Sometimes, unrepresented taxpayers may also make mistakes that may have a disastrous result during a subsequent IRS audit.
This is why you need the professional help of Sherayzen Law Office. Our experienced legal team has helped hundreds of US taxpayers resolve their prior noncompliance with US international tax laws, including by using Streamlined Domestic Offsshore Procedures.
We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

### Indiana Streamlined Disclosure Lawyer | International Tax Attorney
Indiana is a home to a small but growing immigrant community with at least 5% of the population foreign-born and another 5% of the population that has at least one immigrant parent. The top countries of original for immigrants are: Mexico, India, China, Myanmar and the Philippines. Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately some of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Indiana streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Indiana streamlined disclosure lawyer and outline who belongs to this category of lawyers.
Indiana Streamlined Disclosure Lawyer: International Tax Attorney
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Indiana streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.
Indiana Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Indiana Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.
This means that you are not limited to Indiana when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Indiana or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Indiana might have had in the past over the out-of-state lawyers. This has already been established in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your Indiana Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRS VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Indiana, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Cambridge FBAR Attorney | International Tax Lawyer Massachusetts
If you reside in Cambridge, Massachusetts and have unreported foreign bank and financial accounts, you may be looking for a Cambridge FBAR Attorney.  Sherayzen Law Office, Ltd. (“Sherayzen Law Office”) is a leader in FBAR compliance and you should consider us in your search. Let’s understand why this is the case.
Cambridge FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Cambridge FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Cambridge FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Cambridge FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Cambridge FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Cambridge, Massachusetts. On the contrary, consider international tax attorneys who reside in other states and help Cambridge residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Cambridge, Massachusetts.
Thus, if you are looking for a Cambridge FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Streamlined Domestic Offshore Procedures Lawyer: 2024 SDOP Eligibility Requirements
The introduction of the Streamlined Domestic Offshore Procedures (SDOP) in 2014 meant that the IRS finally recognized that there was a very large number of U.S. taxpayers who were non-willful with respect to their inability to comply with numerous obscure complex requirements of U.S. tax laws.  Since 2014, SDOP has been a highly successful voluntary disclosure option that I predict will remain as popular in 2024.  For this reason, in this short article, I will review the main six 2024 SDOP eligibility requirements.
2024 SDOP Eligibility Requirements: US Taxpayer
The first main requirement to be able to utilize SDOP is that the applicant is a US taxpayer. In the context of SDOP, this term is equivalent to a US tax resident.  This means that he should be one of the following: a U.S. citizen, U.S. lawful permanent resident, or he must have met the substantial presence test.
The substantial presence test is outlined in 26 U.S.C. 7701(b)(3). In general, under 26 U.S.C. §7701(b)(3), an individual meets the substantial presence test if the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier) equals or exceeds 183 days.
2024 SDOP Eligibility Requirements: Not Eligible for SFOP
The second requirement to participate in SFOP is that the taxpayer fails to meet the non-residency requirements of Streamlined Foreign Offshore Procedures (SFOP). I describe the non-residency requirements of SFOP in detail in this article.
What happens if spouses file a joint tax return and one of the spouses fails the non-residency requirement but the other spouse meets it? In this case, both spouses are still eligible to participate in the SDOP.
2024 SDOP Eligibility Requirements: US Tax Returns Filed
In order to participate in SDOP, the taxpayer must have previously filed a US tax return (if required) for each of the most recent three years for which the US tax return due date (or properly applied for extended due date) has passed.  In other words, a taxpayer cannot file a late original tax return as part of SDOP; he can only amend the returns that were already filed.
2024 SDOP Eligibility Requirements: Foreign Income and Information Return Violations
Another important eligibility requirement for SDOP is that the taxpayer must have failed to report foreign income and pay US taxes on it AND may have failed to file FBAR and/or and/or one or more international information returns (e.g. Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) with respect to the foreign financial asset that generated the foreign income.  In other words, foreign income reporting violation is crucial for the SDOP participation.
2024 SDOP Eligibility Requirements: Non-Willfulness
This is the most important and most critical eligibility requirement to the participation in the Streamlined Domestic Offshore Procedures. The taxpayer’s violations of the applicable US international tax requirements must be non-willful.
The non-willful nature of violations must apply to everything: the failures to report the income from a foreign financial asset, pay tax as required by US tax law, file FBARs and file other international information returns (such as Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621). If the failure to file the FBAR and any other information returns was willful, the participation in the Streamlined Domestic Offshore Procedures is not likely to be possible.
2024 SDOP Eligibility Requirements: SDOP Participation Must Be Timely
Finally, the fifth SDOP eligibility requirement is that the participating taxpayer is not subject to an IRS civil examination or an IRS criminal investigation, irrespective of whether the examination/investigation is related to undisclosed foreign financial assets or involves any of the years subject to the voluntary disclosure. If the taxpayer is already subject to such an examination/investigation, his participation in the Streamlined Domestic Offshore Procedure would not be considered timely.
Contact Sherayzen Law Office for Legal Help With Your Offshore Voluntary Disclosure
If you have undisclosed foreign accounts or any other offshore assets, contact Sherayzen Law Office for professional legal help. Our experienced international tax law firm will thoroughly analyze your case, estimate your current IRS penalty exposure, and determine your eligibility for the available voluntary disclosure options, including the SDOP, SFOP and other voluntary disclosure options.
Contact Today Us to Schedule Your Confidential Consultation!

### Ohio Streamlined Disclosure Lawyer | International Tax Attorney
Ohio has a growing immigrant community with at least 5% of the population foreign-born and another 5% of the population that has at least one immigrant parent. The top countries of original for immigrants are: India, Mexico, China, the Philippines and Canada; more than half of them are naturalized US citizens and more than 42% of them are college educated. Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately a number of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Ohio streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Ohio streamlined disclosure lawyer and outline who belongs to this category of lawyers.
Ohio Streamlined Disclosure Lawyer: International Tax Attorney
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Ohio streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.
Ohio Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Ohio Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.
This means that you are not limited to Ohio when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Ohio or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Ohio might have had in the past over the out-of-state lawyers. This has already been established in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your Ohio Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRS VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Ohio, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Worcester FBAR Attorney | International Tax Lawyer Massachusetts
If you reside in Worcester, Massachusetts, and you have unreported foreign bank and financial accounts, you may be looking for Worcester FBAR Attorney. In your search, please consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s understand why this is the case.
Worcester FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Worcester FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Worcester FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Worcester FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Worcester FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Worcester, Massachusetts. On the contrary, consider international tax attorneys who reside in other states and help Worcester residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Worcester, Massachusetts.
Thus, if you are looking for a Worcester FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Wisconsin Streamlined Disclosure Lawyer | International Tax Attorney
Wisconsin has a small but rapidly growing immigrant community with at least 5% of the population foreign-born and another 5% of the population that has at least one immigrant parent. The top countries of original for immigrants are: Mexico, India, China, Laos and the Philippines.  Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately a number of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Wisconsin streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Wisconsin streamlined disclosure lawyer and outline who belongs to this category of lawyers.
Wisconsin Streamlined Disclosure Lawyer: International Tax Attorney
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax compliance, because these options deal with US international tax laws concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for a Wisconsin streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.
Wisconsin Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Wisconsin Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no connection whatsoever to the SDOP and SFOP.
This means that you are not limited to Wisconsin when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Wisconsin or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Wisconsin might have had in the past over the out-of-state lawyers. This has already been established in today’s post-pandemic world which greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your Wisconsin Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax Minnesota law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, IRSVDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Wisconsin, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2024 IRS Standard Mileage Rates | IRS Tax Lawyer & Attorney
Beginning January 1, 2024, the IRS changed the optional standard mileage for the calculation of deductible costs of operating an automobile (sedans, vans, pickups and panel trucks) for business, charitable, medical or moving purposes. Let’s discuss in more detail these new 2024 IRS Standard Mileage Rates.
2024 IRS Standard Mileage Rates for Business Usage
For the tax year 2024, the business-use cost of operating a vehicle will be 67 cents per mile. This is 1.5 cents higher than in 2023. The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile.
As in previous years, a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
2024 IRS Standard Mileage Rates for Medical and Moving Purposes
For the tax year 2024, the medical and moving cost of operating a vehicle will be 21 cents per mile. This is lower by one cent from 2023. The rate for medical and moving purposes is based on the variable costs.
2024 IRS Standard Mileage Rates for Charitable Purposes
For the tax year 2024, the costs of operating a vehicle in the service of charitable organizations will be 14 cents per mile. The charitable rate is set by statute and remains unchanged.
2024 IRS Standard Mileage Rates vs. Actual Costs vs. Miscellaneous Itemized Deductions
It is important to note that under the Tax Cuts and Jobs Act, taxpayers can no longer claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. With the exception of active duty members of Armed Forces, taxpayers also cannot claim a deduction for moving expenses. Notice-2019-02.
However, taxpayers are not forced to use the standard mileage rates; rather, this is optional. Sherayzen Law Office advises taxpayers that they have the option of calculating the actual costs of using a vehicle rather than using the standard mileage rates. If the actual-cost method is chosen, then all of the actual expenses associated with the business use of a vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.
IRS Notice 2024-08
IRS Notice 2024-08, posted on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. In addition, for employer-provided vehicles, the Notice provides the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2024 for which employers may use the fleet-average valuation rule in § 1.61-21(d)(5)(v) or the vehicle cents-per-mile valuation rule in § 1.61-21(e).

### Boston FBAR Attorney | International Tax Lawyer Massachusetts
If you reside in Boston, Massachusetts, and you have unreported foreign bank and financial accounts, you may be looking for Boston FBAR Attorney. In your search, please consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s understand why this is the case.
Boston FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Boston FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Boston FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Boston FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Boston FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Boston, Massachusetts. On the contrary, consider international tax attorneys who reside in other states and help Boston residents with their FBAR compliance.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Boston, Massachusetts.
Thus, if you are looking for a Boston FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Singapore Solution Fraud Scheme Co-Creator Pleads Guilty |  SDOP lawyer Minneapolis
On December 21, 2023, the IRS and the US Department of Justice announced that Mr. Rolf Schnellmann, a Swiss national, pleaded guilty to conspiring to defraud the United States for his role in the creation and implementation of a fraud scheme related to foreign accounts and foreign income called “Singapore Solution”.  In this small essay, I will discuss the Singapore Solution, the facts of the Schnellmann case and the lessons one can draw from this case.
Singapore Solution: Basic Description of the Tax Evasion Scheme
The idea behind the Singapore Solution is fairly simple. Funds owned secretly (i.e. without a proper disclosure to the IRS on FBAR, Form 8938, et cetera) by US persons in a Swiss bank are first transferred to a series of nominee accounts in other jurisdictions (for example, Hong Kong). In the meantime, the Swiss bankers established (usually indirectly through a law firm) a Singapore-based asset management firm which opens new bank accounts in its name in the Swiss bank. After passing through nominee accounts, the US-owned funds are returned to the Swiss bank and placed in the new bank accounts opened by the asset management firm.
In other words, the Singapore Solution basically represents a circular scheme where the ownership of funds is artificially obscured by involvement of third parties. Obviously, the US owners of the undisclosed funds handsomely compensated the Swiss bankers, the managers of the asset management firm and the nominees for their work.  Also obviously, this scheme crosses the line between asset/tax planning and criminal tax evasion.
Singapore Solution: Basic Facts of Schnellmann Case
According to court documents and statements made in court, Rolf Schnellmann was the head of Allied Finance Trust AG, a Zurich-based financial services company and a subsidiary of the Allied Finance Group in Liechtenstein.  Between 2008 to 2014, Schnellmann and his co-conspirators helped high-net-worth US taxpayers set-up and implement the Singapore Solution concerning their undeclared bank accounts at Privatbank IHAG Zurich AG (IHAG), a Swiss private bank. 
According to the Department of Justice, Schnellmann and his colleagues transferred more than $60 million from the US-owned undeclared IHAG bank accounts through a series of nominee accounts in Hong Kong and other locations before returning the funds to newly opened accounts at IHAG in the name of a Singapore-based asset-management firm that Schnellmann helped establish. IHAG participated in the 2013 IRS Voluntary Disclosure Program for Swiss Banks. Surely, as a result of this process, IHAG disclosed a lot of information concerning the Singapore Solution.  This allowed the IRS to track down not only the noncompliant US clients of that bank, but also the Singapore Solution creators and facilitators, like Mr. Schnellamann.  He was arrested in August of 2023 in Italy and extradited to the United States.
The IRS Criminal Investigation (IRS-CI) conducted the investigation with the help of the US Justice Department’s Office of International Affairs, Interpol, Italian law enforcement authorities, the Prosecutor General’s Office of Trieste and the Italian Ministry of Justice.
Singapore Solution: Consequences of the Guilty Plea for Schnellmann
As a result of the guilty plea, Mr. Schnellmann is scheduled to be sentenced on July 19, 2024. He now faces a maximum penalty of five years in prison, a period of supervised release, restitution and monetary penalties.
Singapore Solution: Lessons
The Schnellmann case and the Singapore Solution that he co-authored allow us to deduce certain lessons.  The first and most obvious, one must respect the difference between legitimate even if aggressive tax planning and criminal tax evasion.  Mr. Schnellmann crossed that line and will pay a high price for it.
Second, US taxpayers must declare their foreign accounts to the IRS on FBAR, Form 8938 and Schedule B of Form 1040.  Failure to do so may bring very painful consequences in the form of high IRS civil and even criminal penalties.
Finally, there is really no safe place for noncompliant taxpayers to hide. Even if they have been lucky to avoid IRS detection of their noncompliance so far, a disclosure from third parties may lead to an IRS investigation that may ultimately result in the discovery of the noncompliance.  In this case, the IRS will most likely impose very heavy penalties for noncompliance (made even heavier by the fact that the IRS had to invest a lot of resources and man-hours into the case).
Contact Sherayzen Law Office for Professional Help With the Voluntary Disclosure of Your Undisclosed Foreign Assets and Foreign Income
For all of these reasons, noncompliant taxpayers should explore their offshore voluntary disclosure options before the IRS finds out about their noncompliance. Otherwise, an IRS audit will make it impossible for them to lower their IRS noncompliance penalties through a voluntary disclosure.
Sherayzen Law Office is a leader in the IRS offshore voluntary disclosures, including disclosures that involve foreign income noncompliance and foreign asset reporting noncompliance (on FBAR, Form 8938, 3520, 3520-A, 5471, 8865, 8858, et cetera).  Led by Mr. Eugene Sherayzen, a highly-experienced international tax attorney, our international tax team has helped hundreds of US taxpayers around the globe to bring their tax affairs into full compliance with the IRS while lowering and sometimes even eliminating IRS penalties.
Contact Us Today to Schedule Your Confidential Consultation!

### Duluth FBAR Attorney | International Tax Lawyer Minnesota
If you reside in Duluth, Minnesota, and you have unreported foreign bank and financial accounts, you may be looking for Duluth FBAR Attorney. In your search, please consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s understand why this is the case.
Duluth FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Duluth FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Duluth FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Duluth FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Contact Sherayzen Law Office for Professional FBAR Help
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Duluth, Minnesota.
Thus, if you are looking for a Duluth FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2023 FBAR Conversion Rates | FBAR International Tax Lawyer
The 2023 FBAR conversion rates are very important for your US international tax compliance. The reason for their importance is their relation to FBAR (FinCEN Form 114) and the IRS Form 8938. The 2023 FBAR and 2023 Form 8938 instructions both require that 2023 FBAR conversion rates be used to report the required highest balances of foreign financial assets on these forms (in the case of Form 8938, the 2023 FBAR conversion rates is the default choice, not an exclusive one). In other words, the 2023 FBAR conversion rates are used to translate foreign-currency highest balances into US dollars for the purposes of FBAR and Form 8938 compliance.
The U.S. Department of Treasury  already published the 2023 FBAR conversion rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).
Since the 2023 FBAR conversion rates are highly important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2023 FBAR conversion rates (note that the readers still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI70.54ALBANIA - LEK93.23ALGERIA - DINAR134.051ANGOLA - KWANZA842.5ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR2.7000 ARGENTINA - PESO827.75ARMENIA - DRAM400AUSTRALIA - DOLLAR1.472AUSTRIA - EURO0.905AZERBAIJAN - NEW MANAT1.7BAHAMAS - DOLLAR1.0000 BAHRAIN - DINAR0.3770 BANGLADESH - TAKA113BARBADOS - DOLLAR2.02BELARUS - NEW RUBLEUNAVAILABLE*BELGIUM - EURO0.905BELIZE - DOLLAR2BENIN - CFA FRANC 589BERMUDA - DOLLAR1BOLIVIA - BOLIVIANO6.86BOSNIA - MARKA1.769BOTSWANA - PULA13.387BRAZIL - REAL4.852BRUNEI - DOLLAR1.32BULGARIA - LEV New1.769BURKINA FASO - CFA FRANC589BURUNDI - FRANC2850CAMBODIA - RIEL4051CAMEROON - CFA FRANC593.41CANADA - DOLLAR1.326CAPE VERDE - ESCUDO99.75CAYMAN ISLANDS - DOLLAR0.82CENTRAL AFRICAN REPUBLIC - CFA FRANC593.41CHAD - CFA FRANC593.41CHILE - PESO880CHINA - RENMINBI7.104COLOMBIA - PESO3873COMOROS - FRANC443.49CONGO - CFA FRANC593.41COSTA RICA - COLON519.22COTE D'IVOIRE - CFA FRANC589CROATIA - EURO0.905CUBA - Chavito1CUBA - PESO24CYPRUS - EURO0.905CZECH REPUBLIC - KORUNA21.731DEM. REP. OF CONGO - FRANC2660DENMARK - KRONE6.744DJIBOUTI - FRANC177DOMINICAN REPUBLIC - PESO57.9ECUADOR - DOLARES1.0000 EGYPT - POUND30.9EL SALVADOR - DOLARES1.0000 EQUATORIAL GUINEA - CFA FRANC593.41ERITREA - NAKFA15ESTONIA - EURO0.905ESWATINI - LILANGENI18.427ETHIOPIA - BIRR55.997EURO ZONE - EURO0.905FIJI - DOLLAR2.165FINLAND - EURO0.905FRANCE - EURO0.905GABON - CFA FRANC593.41GAMBIA - DALASI64GEORGIA - LARI2.665GERMANY - EURO0.905GHANA - CEDI11.9GREECE - EURO0.936GRENADA - EAST CARIBBEAN DOLLAR2.7GUATEMALA - QUETZAL7.815GUINEA BISSAU - CFA FRANC589GUINEA - FRANC8511GUYANA - DOLLAR215HAITI - GOURDE131.23HONDURAS - LEMPIRA24.624HONG KONG - DOLLAR7.811HUNGARY - FORINT345.78ICELAND - KRONA136.04INDIA - RUPEE83.162INDONESIA - RUPIAH15372.69IRAN - RIAL42000IRAQ - DINAR1308IRELAND - EURO0.905  ISRAEL - SHEKEL3.619ITALY - EURO0.905  JAMAICA - DOLLAR154JAPAN - YEN141.47JORDAN - DINAR0.708KAZAKHSTAN - TENGE456.29KENYA - SHILLING156.5KOREA - WON1299.22KOSOVO - EURO0.905KUWAIT - DINAR0.307KYRGYZSTAN - SOM89.062LAOS - KIP20476LATVIA - EURO0.905LEBANON - POUND15000LESOTHO - MALOTI18.427LIBERIA - DOLLAR189LIBYA - DINAR4.754LITHUANIA - EURO0.905LUXEMBOURG - EURO0.905MADAGASCAR - ARIARY4564MALAWI - KWACHA1700MALAYSIA - RINGGIT4.59MALDIVES - RUFIYAA15.42MALI - CFA FRANC589MALTA - EURO0.905MARSHALL ISLANDS - DOLLAR1MAURITANIA - OUGUIYA39.16MAURITIUS - RUPEE43.87MEXICO - PESO16.949MICRONESIA - DOLLAR1MOLDOVA - LEU17.25MONGOLIA - TUGRIK3410.69MONTENEGRO - EURO0.905MOROCCO - DIRHAM9.855MOZAMBIQUE - METICAL 63.25MYANMAR - KYAT3380NAMIBIA - DOLLAR18.427NEPAL - RUPEE133.05NETHERLANDS - EURO0.905NETHERLANDS ANTILLES - GUILDER1.78NEW ZEALAND - DOLLAR1.585NICARAGUA - CORDOBA36.6NIGER - CFA FRANC589NIGERIA - NAIRA910NORWAY - KRONE10.166OMAN - RIAL0.385PAKISTAN - RUPEE276.2PALAU - DOLLAR1PANAMA - DOLARES1PAPUA NEW GUINEA - KINA3.727PARAGUAY - GUARANI7249.99PERU - SOL3.675PHILIPPINES - PESO55.451POLAND - ZLOTY3.924PORTUGAL - EURO0.905QATAR - RIYAL3.645REP. OF N MACEDONIA - DINAR55.45ROMANIA - NEW LEU 4.499RUSSIA - RUBLE89.067RWANDA - FRANC1250SAO TOME & PRINCIPE - NEW DOBRAS22.142SAUDI ARABIA - RIYAL3.75SENEGAL - CFA FRANC589SERBIA - DINAR105.92SEYCHELLES - RUPEE13.473SIERRA LEONE - LEONE22.7SIERRA LEONE - OLD LEONE21.4SINGAPORE - DOLLAR1.32SLOVAK REPUBLIC - EURO0.905SLOVENIA - EURO0.905SOLOMON ISLANDS - DOLLAR8.065SOMALI - SHILLING568SOUTH AFRICA - RAND18.427SOUTH SUDANESE - POUND1070SPAIN - EURO0.905 SRI LANKA - RUPEE323.8ST LUCIA - E CARIBBEAN DOLLAR2.7SUDAN - SUDANESE POUND830SURINAME - GUILDER36.723SWEDEN - KRONA10.031SWITZERLAND - FRANC0.838SYRIA - POUND8585TAIWAN - DOLLAR30.641TAJIKISTAN - SOMONI10.93TANZANIA - SHILLING2505THAILAND - BAHT34.33TIMOR - LESTE DILI1TOGO - CFA FRANC589TONGA - PA'ANGA2.26TRINIDAD & TOBAGO - DOLLAR6.749TUNISIA - DINAR3.064TURKEY - NEW LIRA29.547TURKMENISTAN - NEW MANAT3.491UGANDA - SHILLING3775UKRAINE - HRYVNIA38.089UNITED ARAB EMIRATES - DIRHAM3.673UNITED KINGDOM - POUND STERLING0.786URUGUAY - PESO39.02UZBEKISTAN - SOM12333.77VANUATU - VATU116VENEZUELA - BOLIVAR SOBERANO35.841VENEZUELA - FUERTE (OLD)248832VIETNAM - DONG24260WESTERN SAMOA - TALA2.653YEMEN - RIAL528ZAMBIA - NEW KWACHA 25.71ZIMBABWE - RTGS5801.47
*Note #1: As of the time of this article, the Department of Treasury still has not published the FBAR rate for Belarus. Please, consult the Department of the Treasury for clarification.

### St Paul FBAR Attorney | International Tax Lawyer Minnesota
If you reside in St Paul, Minnesota, and you have unreported foreign bank and financial accounts, you may be looking for St Paul FBAR Attorney. In your search, please consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s understand why this is the case.
St Paul FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for St Paul FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
St Paul FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining St Paul FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
St Paul FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in St Paul, Minnesota. On the contrary, consider international tax attorneys who reside in other states and help St Paul residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including St Paul, Minnesota.
Thus, if you are looking for a St Paul FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### US GAAP Conversion of Foreign Financials: Most Common Issues | Form 5471 Lawyer
Form 5471 generally requires US GAAP (Generally Accepted Accounting Practices) conversion of foreign financial statements for the purposes of reporting book income, because foreign accountants usually prepare these statements based on a different foreign standard.  While Treas. Reg. Reg. §1.964-1(a)(2) contains a limited exception to the US GAAP conversion adjustments for “non-material” items (the same exception applies to tested/income loss calculation for GILTI purposes; see Treas. Reg. §1.951A-2(c)(2) (which refers to Treas. Reg. §1.952-2, which, in turn, mention the “materiality” rules of the §964 regulation)), the translation of foreign financial statements to US GAAP is a common problem for tax professionals who deal with Form 5471.
In this article, I will outline the most common issues related to the conversion of foreign financial statements to US GAAP.
US GAAP Conversion Issues: Depreciation
At the top of the US GAAP adjustments are different methods of depreciation and amortization. These differences cover pretty much all types of depreciable assets: fixed assets and intangible assets (including goodwill).
When we at Sherayzen Law Office prepare Forms 5471 for our clients, it is our standard practice to request that foreign accountants provide a detailed depreciation report, including amounts and dates concerning the purchase/sale of assets, the amortization/depreciation conventions used in foreign financial statements and the methods of accounting for increase/decrease in the value of depreciable assets.
US GAAP Conversion Issues: Inventory
Another very common area of US GAAP adjustments involves inventory. Here there could be an array of variations from FIFO/LIFO to expense capitalization methods and valuation of inventory.  Common problems arise when the inventory valuation adjustments result from related-party transactions.
For example, in one of our cases, our client had contracts of sale drafted between the head office in the United States and a foreign branch office (due to the foreign country’s requirements), making it impossible to directly rely on the foreign branch’s financial statements to determine the Cost of Goods Sold (COGS) due to varying mark-ups on tens of thousands of items.
US GAAP Conversion Issues: Valuation of Assets
One highly-problematic area for US GAAP adjustments is the valuation of assets in the foreign financial statements.  Oftentimes and in a large number of tax jurisdictions, historic cost of assets is replaced with another valuation method allowed by a local accounting standard but not by US GAAP.
We see this problem appear often in tax jurisdictions as varied as Czech Republic, Jamaica, Nigeria, Pakistan, Poland, et cetera.
US GAAP Conversion Issues: Mergers, Dissolutions and Acquisitions
Mergers, dissolutions and acquisitions may result in a bewildering array of differences between foreign financial statements and US GAAP requirements: from income recognition to asset valuation, treatment of reserve, E&P calculations and so on. Sometimes, there may be a break in the continuity of financial statements due to a dissolution of one entity and creation of another entity for US GAAP purposes while entities are treated as one entity in a foreign jurisdiction. I remember one case from Pakistan and one case from Poland where we had to make just an enormous amount of changes to bring these financial statements into compliance with US GAAP precisely due to the issues of mergers and acquisitions.
US GAAP Conversion Issues: Hyperinflation
Hyperinflation may present a US international tax attorney with its own challenges. As it is especially common in Latin America, local financials would incorporate inflationary adjustments that are incompatible with US GAAP.  An international tax lawyer has to identify these adjustments, reverse them and, if necessary, replace with adjustments required by GAAP.
US GAAP Conversion Issues: Reserves
Finally, the last most common area of problems has to do with reserves.  The problem usually arises in situations where local accounting rules permit allocation of certain reserves in a manner incompatible with US GAAP rules.
US GAAP Conversion Issues: Special Case of Consolidated Financial Statements
In a situation where a US parent company of a foreign subsidiary prepares consolidated financial statements, problems may arise with respect to whether these statements provide all relevant information needed to create a GAAP-compliant Form 5471. There are four main areas of concern in this type of cases: artificial consolidations through check-the-box rules, foreign currency fluctuations, deductions related to pensions and transfers within the group.  I will discuss these issues in more detail in a future article.
E&P Adjustments
I want to mention here that, in addition to GAAP adjustments to local financial statements, Form 5471 also requires E&P adjustments to GAAP-compliant financial statements. I will explore this topic in a future article.
Contact Sherayzen Law Office For Professional Help with Form 5471 Preparation and Offshore Voluntary Disclosures
If you are a US person who owns (fully or partially) a foreign corporation and you need to prepare a Form 5471 for a current year or any previous years, then you should contact Sherayzen Law Office for professional help.
Our international tax team, led by an international tax attorney and founder of Sherayzen Law office, Mr. Eugene Sherayzen, is a group of highly experienced and creative tax professionals with profound knowledge of US international tax law and US international tax accounting rules. We have filed hundreds of Forms 5471 in the past helping clients around the globe with their current US tax compliance as well as offshore voluntary disclosures related to prior Form 5471 noncompliance. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Plano FBAR Attorney | International Tax Lawyer Texas
If you reside in Plano, Texas, and you have unreported foreign bank and financial accounts, you may be looking for Plano FBAR Attorney. In your search, please consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s understand why this is the case.
Plano FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Plano FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Plano FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Plano, Texas. On the contrary, consider international tax attorneys who reside in other states and help Plano residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Plano, Texas.
Plano FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Plano FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a Plano FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Galveston FBAR Attorney | International Tax Lawyer Texas
If you are a resident of Galveston, Texas, and you have unreported foreign bank and financial accounts, you may be looking for Galveston FBAR Attorney. In your search, consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s understand why this is the case.
Galveston FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Galveston FBAR attorney, in reality, you are searching for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US international tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Galveston FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Galveston, Texas. On the contrary, consider international tax attorneys who reside in other states and help Galveston residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Galveston, Texas.
Galveston FBAR Attorney: Broad Scope of Compliance and Offshore Voluntary Disclosures
When retaining Galveston FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a Galveston FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### Sugar Land FBAR Attorney | International Tax Lawyer Texas
If you are a resident of Sugar Land (Texas) and you have unreported foreign bank and financial accounts, you may be looking for Sugar Land FBAR Attorney in Texas. In your search, you should consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s understand why this is the case.
Sugar Land FBAR Attorney: International Tax Lawyer
First of all, it is very important to understand that, by looking for Sugar Land FBAR attorney, in reality, you are looking for an international tax lawyer who specializes in FBAR compliance.
The reason for this conclusion is the fact that FBAR enforcement belongs to a very special field of US tax law – US international tax law. FBAR is an information return concerning foreign assets, which necessarily involves US tax compliance concerning foreign assets/foreign income. Moreover, ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Sugar Land FBAR Attorney: Out-Of-State International Tax Lawyer
Whenever you are looking for an attorney who specializes in US international tax law (which is a federal area of law, not a state one), you do not need to limit yourself to lawyers who reside in Sugar Land, Texas. On the contrary, consider international tax attorneys who reside in other states and help Sugar Land residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Sugar Land, Texas.
Sugar Land FBAR Attorney: Broad Scope of Compliance
When retaining Sugar Land FBAR attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen and his team of motivated experienced tax professionals of Sherayzen Law Office have helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a Sugar Land FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### The Woodlands FBAR Attorney | International Tax Lawyer Texas
If you are a resident of The Woodlands (Texas) and you have unreported foreign accounts, you may be looking for The Woodlands FBAR Attorney in Texas. In your search, you should consider Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
The Woodlands FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for The Woodlands FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS in 2001, the term FBAR attorney applies almost exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets/foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
The Woodlands FBAR Attorney: Out-Of-State International Tax Attorney
Further, it is important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in The Woodlands, Texas. On the contrary, consider international tax attorneys who reside in other states and help The Woodlands residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including The Woodlands, Texas.
The Woodlands FBAR Attorney: Broad Scope of Compliance
When retaining The Woodlands FBAR Attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, The Woodlands FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a The Woodlands FBAR Attorney, contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation!

### 2024 Form 5471 Penalties | International Tax Lawyer & Attorney
Failure to timely and correctly submit Form 5471 with a US tax return may lead to an imposition of Form 5471 penalties. In this article, I will discus the most important 2024 Form 5471 penalties that US taxpayers may face if they fail to comply with the Form 5471 requirements.
2024 Form 5471 Penalties: Purpose of Form 5471
We first need to understand the purpose of Form 5471 and broadly identify who may need to file this form. The IRS Form 5471 is an extremely complex form that is used to satisfy the reporting requirements of mainly two esoteric sections of the Internal Revenue Code: 26 U.S.C. § 6038 (“Information reporting with respect to certain foreign corporations and partnerships”) and 26 U.S.C. § 6046 (“Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock”).
It should be noted that Form 5471 is used to satisfy other US tax provisions, especially after the 2017 tax reform. IRS §§ 6038 and 6046, however, are most relevant for our discussion of Form 5471 penalties.
Certain US citizens and US tax residents who are officers, directors or US shareholders of a foreign corporation may need to file Form 5471 and accurately comply with its reporting requirements. Failure to file Form 5471 or failure to file a correct Form 5471 may result in the imposition of steep IRS penalties.
The First Set of 2024 Form 5471 Penalties: Failure to file information required under section 26 U.S.C. § 6038(a)
From the outset, it is important to note that 26 U.S.C. § 6038 applies to two different parts of Form 5471: the Form 5471 proper (i.e. the first six pages containing the identifying information and Schedules A through I plus Schedules H and I-1) and Schedule M of Form 5471. Failure to file either is enough to trigger a $10,000 penalty for each annual accounting period of each foreign corporation. If the IRS sends the taxpayer a notice of a failure to file, an additional $10,000 penalty (per foreign corporation) will be charged for each 30-day period (or fraction thereof), during which the failure continues after the 90-day period in which the notification occurred, has expired. This additional penalty is limited to a maximum of $50,000 for each failed filing.
Furthermore, there is an income tax penalty associated with the failure to comply with 26 U.S.C. § 6038 in a timely manner – the taxpayer may be subject to a 10% reduction of certain available Foreign Tax Credits. A further 5% reduction may be applied for each 3-month period (or fraction thereof), during which the failure to timely report or file continues after the 90-day period of IRS notification has expired. (26 U.S.C. § 6038(c)(2) places certain limitations on this penalty).
The Second Set of 2024 Form 5471 Penalties: Failure to file information required by 26 U.S.C. § 6046 and related regulations (Form 5471 and Schedule O)
In addition to 26 U.S.C. § 6038 Form 5471 penalties, there is also an additional set of Form 5471 penalties associated with 26 U.S.C. § 6046 (Form 5471 and Schedule O). Failure to comply with 26 U.S.C. § 6046 will subject the taxpayer to another $10,000 penalty for each failure to file for each reportable transaction. Additionally, if the failure to report or file continues for more than 90 days after the date the IRS mails notice of this failure, an additional $10,000 penalty will apply for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired. This additional penalty is limited to a maximum of $50,000.
2024 Form 5471 Non-Compliance May Result in Criminal Penalties
In addition to civil penalties under 26 U.S.C. § 6038 and 26 U.S.C. § 6046, criminal penalties may apply to Form 5471 filers in certain circumstances. In particular, a willful failure to file an accurate Form 5471 may activate the broad provisions of 26 U.S.C. § 7203 (“Willful failure to file return, supply information, or pay tax”), 26 U.S.C. § 7206 (“Fraud and false statements”), and 26 U.S.C. § 7207 (“Fraudulent returns, statements, or other documents”).
2024 Form 5471 Penalties and Persons Other Than the Filer
In situations where the filer should have filed Forms 5471 for other persons, but failed to do so, Form 5471 penalties may be extended to these other persons.
Contact Sherayzen Law Office For Help With 2024 Form 5471 Penalties and Compliance
If you partially or fully own a foreign corporation, you may be subject to the Form 5471 requirements. As explained in this article, failure to timely and/or correctly comply with your Form 5471 filing obligations may result in steep Form 5471 penalties.
Contact Sherayzen Law Office today for professional help concerning Form 5471 penalties, including engaging in offshore voluntary disclosures involving Form 5471.
Contact Us Now to Schedule Your Confidential Consultation!

### 2024 Streamlined Domestic Offshore Procedures: Pros and Cons
As was the case in the year 2023, I expect that Streamlined Domestic Offshore Procedures will continue to be the flagship offshore voluntary disclosure option in 2024 for US taxpayers who reside in the United States. This is why noncompliant US taxpayers should understand well the main advantages and disadvantages of participating in the 2024 Streamlined Domestic Offshore Procedures.
2024 Streamlined Domestic Offshore Procedures: Background Information and Purpose
The IRS created the Streamlined Domestic Offshore Procedures (usually abbreviated as “SDOP”) on June 18, 2014, though the Certification forms became available only a few months later. Since its introduction, Streamlined Domestic Offshore Procedures quickly eclipsed the then-existing IRS Offshore Voluntary Disclosure Program (“OVDP”) and became the most popular offshore voluntary disclosure option for US taxpayers who reside in the United States. As we discuss the advantages of the 2024 SDOP, you will quickly understand the reason for this meteoric rise in popularity of the SDOP.
The main purpose of the Streamlined Domestic Offshore Procedures is to encourage non-willful US taxpayers to voluntarily resolve their prior noncompliance with US international tax reporting requirements in exchange for a reduced penalty, simplified disclosure procedure and a shorter disclosure period. Pretty much any non-willful US international tax noncompliance can be resolved through SDOP: foreign income, FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera.
2024 Streamlined Domestic Offshore Procedures: Main Advantages
In exchange for a voluntary disclosure of their prior tax noncompliance through SDOP, US taxpayers escape income tax penalties and pay only a one-time Miscellaneous Offshore Penalty with respect to their prior failures to file the required US international information returns. It is important to emphasize that the Miscellaneous Offshore Penalty replaces not only FBAR penalties, but also penalties for noncompliance with respect to other US international information returns, such as Forms 5471, 8865, 926, et cetera. Depending on the specific circumstances of a case, the Miscellaneous Offshore Penalty is usually below the combined potential penalties normally associated with failure to file these forms. In other words, noncompliant taxpayers can greatly reduce their IRS noncompliance penalties through their participation in the Streamlined Domestic Offshore Procedures. This is one of the most important SDOP benefits.
Another advantage of the Streamlined Domestic Offshore Procedures is the limited procedural scope of this voluntary disclosure option. What I mean by this is that the taxpayers should only submit the forms covered by the general statute of limitations unless they choose (i.e. not required, actually choose to do so) to do otherwise. The taxpayers only need to file three (sometime even less) amended US tax returns and six FBARs (sometimes seven and sometimes less than six). This limited disclosure stands in stark contrast with other major voluntary disclosure initiatives, such as 2014 OVDP (which required filings for the past eight years).
Moreover, despite the limited scope of the SDOP filings, taxpayers who utilize the Streamlined Domestic Offshore Procedures are usually able to fully resolve their prior US international tax noncompliance issues even if these years are not included in the actual SDOP filings. This means that the participating taxpayers are able “wipe the slate clean” – i.e. to erase their prior US international tax noncompliance from the time when it began. I should warn, however, that this is not necessarily always the case; I have already encountered efforts from the IRS to open years for which amended tax returns were not submitted (there were specific circumstances, however, in all of these cases that resulted in this increased IRS interference).
The last major advantage of the Streamlined Domestic Offshore Procedures is that this option only requires to establish non-willfulness rather than reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.
2024 Streamlined Domestic Offshore Procedures: Main Disadvantages
Usually, participation in the Streamlined Domestic Offshore Procedures is highly advantageous to noncompliance taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will concentrate only on the three most important of them.
First, this voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years. This requirement is the exact opposite of the Streamlined Foreign Offshore Procedures (“SFOP”) which allows for the late filing of original returns.
The problem is that there is a large segment of taxpayers who were perfectly non-willful in their prior US international tax noncompliance, but they never filed their US tax returns either due to special life circumstances (such as death in the family, illness, unemployment, et cetera), they were negligent or they believed that they were not required to file them (especially in situations where all of their income comes from foreign sources). These taxpayers would be barred from participating in the SDOP.
Second, when they participate in the Streamlined Domestic Offshore Procedures, the taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SDOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.
The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures. By the way, this decision should be made only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.
Finally, participation in the Streamlined Domestic Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP (prior to its closure), SDOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package This means that going through Streamlined Domestic Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.
Contact Sherayzen Law Office for Professional Help With 2024 Streamlined Domestic Offshore Procedures
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures. We can also help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Happy New Year 2024 From International Tax Law Firm Sherayzen Law Office!!!
Dear clients, followers, readers and colleagues:
Mr. Eugene Sherayzen, an international tax attorney, and the entire international tax team of Sherayzen Law Office, Ltd. wishes you a very Happy New Year 2024!!!
Dear clients and prospective clients, in the New Year 2024, you can continue to rely on Sherayzen Law Office for:
Resolution of your prior FBAR, FATCA and other US international tax noncompliance through offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures (SDOP), Streamlined Foreign Offshore Procedures (SFOP), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, IRS Voluntary Disclosure Practice and Reasonable Cause Disclosures;
Help with your IRS audits and examination, including audits of: your prior SDOP and SFOP submissions (as well as other voluntary disclosure options) and your annual international tax compliance. We can also help you fight the imposition of IRS penalties for prior international tax noncompliance, including FBAR penalties, Form 8938 penalties, Form 3520 and 3520-A penalties, Form 5471 penalties, Form 5472 penalties, Form 8865 penalties, Form 926 penalties, et cetera;
Preparation of your annual US international tax compliance, including the reporting of foreign income and preparation of FBAR, FATCA Form 8938 and other US international tax compliance forms such as: Forms 3520, 3520-A, 5471, 8621, 8865, 8938 and 926 and
Your international tax planning (inbound and outbound), including individual and business tax planning, We intend to continue to help US firms with conducting business overseas, US owners of foreign businesses and foreign businesses who wish to expand their presence to the United States (including real estate investors).
In resolving all of your current US international tax issues, we will continue to employ ethical creativity, diligence, professionalism and many years of experience with helping other clients. We will also continue to utilize an individual, customized approach, understanding each client’s particular situation.
In 2024, the US international tax compliance requirements will likely grow even more complex, detailed and extensive. The IRS will continue to demand more and more information from US taxpayers, employing its expanding number of revenue agents to enforce US tax laws across the globe and especially in the United States.
In order to deal with this ever-increasing US tax compliance burden, you will need the professional help of Sherayzen Law Office. In this New Year 2024, we can help you!
Your professional US international tax help is but a phone call away from you! Contact us today to schedule a confidential consultation in this New Year 2024!
HAPPY NEW YEAR 2024 EVERYONE!!!

### Minnesota FBAR Tax Attorney | International Tax Lawyer
If you are looking for a Minnesota FBAR tax attorney, consider retaining the services of Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Mr. Sherayzen is an international tax attorney and founder of Sherayzen Law Office.
Minnesota FBAR tax attorney: FBAR Specialization of an International Tax Attorney
The definition of a Minnesota FBAR tax attorney includes two major specializations: FBARs and US international tax law in general. With respect to the first specialization,  Mr. Sherayzen has personally filed over a thousand FBARs and has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws.
Mr. Sherayzen also specializes in international tax compliance, including voluntary disclosure of delinquent (i.e. late) FBARs.  He is an international tax attorney who is able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of international tax law.  Together with his highly-experienced team at Sherayzen Law office, Mr. Sherayzen is able to (often as part of an offshore voluntary disclosure) to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and innumerable number of other tasks.
Mr. Sherayzen has an extensive experience with and knowledge of all offshore voluntary disclosure options that involve delinquent FBARs, including; former OVDP/OVDI, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, IRS Voluntary Disclosure Practice and Reasonable Cause Disclosures.
Sherayzen Law Office Legal Team Provides Efficient and Cost-Effective Services
In order to make sure that his work is expeditious and cost-effective, Mr. Sherayzen built a team of tax professionals that he employs within his firm. Each member of the team is trained personally by Mr. Sherayzen and is assigned specific tasks. For example, an international tax accountant helps Mr. Sherayzen prepare the clients’ tax returns while his staff is trained in creating FBARs based on the information already verified by Mr. Sherayzen.
This team of motivated, intelligent and experienced tax professionals allows Sherayzen Law Office to provide an exceptional array of customized offshore voluntary disclosure, international tax planning and international tax compliance services which fully integrate the legal and accounting aspects of international tax compliance and offshore voluntary disclosures in an efficient and cost-effective manner.
Therefore, if you are looking for a Minnesota FBAR tax attorney, please contact Mr. Sherayzen as soon as possible to schedule Your Confidential Consultation

### 2023 Form 3520-A Deadline in 2024 | Foreign Trust Tax Lawyer & Attorney
Form 3520-A is a very important US international information return. It can be very complex and has somewhat tricky filing requirements as well as significant noncompliance penalties. In order to avoid these penalties, you need to file a correct Form 3520-A timely. In this essay, I will discuss the 2023 Form 3520-A deadline in the calendar year 2024.
2023 Form 3520-A Deadline: Purpose of Form 3520-A
Form 3520-A occupies an important role in US international tax law. Its primary purpose is to obtain certain information about a foreign trust with at least one US person who is treated as an owner of the foreign trust under the grantor trust rules found in the IRC (Internal Revenue Code) §§671-679.
Through Form 3520-A, the IRS collects not only the data about the foreign trust and its US beneficiaries, but also the information concerning interactions between the foreign trust and its US owners. Moreover, Form 3520-A indicates the amount of income a US owner must recognize on his US tax returns (irrespective of whether this income was distributed to the owner).
2023 Form 3520-A Deadline: Who Must File
As I mentioned above, the question of “who must file” Form 3520-A is quite tricky. Generally, a foreign trust with a US owner has responsibility to file Form 3520-A in order for the US owner to satisfy his annual information reporting requirements under IRC §6048(b). Hence, while a foreign trust officially must file Form 3520-A, in reality, it is the responsibility of each US person treated as an owner of any portion of a foreign trust to ensure that the trust files Form 3520-A and furnishes the required annual statements to its US owners and US beneficiaries.
What if the foreign trust fails to file the required Form 3520-A? Then, the US owner must complete a substitute Form 3520-A for the foreign trust and attach this substitute Form 3520-A to the US owner’s Form 3520.
2023 Form 3520-A Deadline: Penalties for Late Filing
If the foreign trust fails to file Form 3520-A timely and its US owner fails to submit a substitute Form 3520-A timely, then the US owner (I emphasize: not the foreign trust, but its US owner) will be subject to heavy Form 3520-A penalties.
The main penalty in this case would be $10,000 or 5% of the gross value of the foreign trust, whichever is higher. The “gross value” here means the portion of the foreign trust’s assets at the end of year treated as owned by US persons.
Additional penalties may apply if noncompliance lasts more than 90 days after the IRS mails a “failure to comply” notice. The US owner also may be subject to the underpayment penalties for failure to report income indicated on Form 3520-A. Finally, criminal penalties may be imposed under IRC §§7203, 7206 and 7207 for failure to file on time and for filing a false or fraudulent return.
2023 Form 3520-A Deadline: Where to File
The foreign trust needs to file Form 3520-A (including the statements on pages 3 and 5) at the following address:
Internal Revenue Service CenterP.O. Box 409101Ogden, UT 84409
I recommend mailing Form 3520-A by US Certified Mail. I want to emphasize for the US readers who are mailing their returns – do NOT attach Form 3520-A to your US tax return. It must be mailed separately from your US income tax return to the address I indicated above.
2023 Form 3520-A Deadline: When to File
The deadline for Form 3520-A can also be tricky. Generally, the due date for Form 3520-A is the 15th of the third month after the end of the trust’s tax year.
However, if you are filing a substitute Form 3520-A with your Form 3520, then your substitute Form 3520-A is due by the due date of Form 3520. The trust must also supply the Foreign Grantor Trust Owner Statement and Foreign Grantor Trust Beneficiary Statement to its US owners and US beneficiaries by the 15th of the third month after the end of the trust’s tax year, unless an extension is filed.
The foreign trust may file Form 7004 to request an automatic six-month Form 3520-A filing extension (it also applies to the aforementioned Statements). Note that filing Form 7004 is the only way to request this six-month extension. A common procedural tax trap is for people to file an income tax return extension (Form 4868) and think that this would apply to Form 3520-A. This is incorrect – you must separately file Form 7004 to get an extension on your Form 3520-A.
Thus, the current outstanding 2023 Form 3520-A deadline for a calendar-year filer is March 15, 2024. If Form 7004 is filed, then the extended 2023 Form 3520-A deadline for this filer would be September 16, 2024.
Contact Sherayzen Law Office for Professional Help With Your 2023 Form 3520-A Deadline
If you are required to file Form 3520-A or if you have not complied with your Form 3520-A reporting requirements in the past, you need to contact Sherayzen Law Office for professional help! Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures (including the ones that involve Form 3520-A) and US international information returns compliance. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2023 Form 3520 Deadline in 2024 | Foreign Trust Tax Lawyer & Attorney
Form 3520 is one of the most important US international information returns. Due to its severe penalty structure, it is important to file it timely. In this brief essay, I will discuss the tax year 2023 Form 3520 deadline. 
2023 Form 3520 Deadline: What is Form 3520
IRS Form 3520 is a US international information return used by the IRS to collect information related to foreign trusts, foreign gifts and foreign inheritance. In essence, Form 3520 collects four types of data from US taxpayers:
Certain transactions with foreign trusts;
Ownership of foreign trusts under the rules of sections 671 through 679;
Receipt of certain large gifts from foreign persons; and
Bequests from foreign persons
It is very important that you file Form 3520 timely, because late filing Form 3520 penalties can be very high. For example, a failure to timely disclose a reportable foreign gift on Form 3520 may result in a penalty as high as 25% of the value of the gift. Initial Form 3520 penalty for a failure to report a property transferred by a US transferor to a foreign trust may be as high as 35% of the gross value of the property.
2023 Form 3520 Deadline: Where to File
Form 3520 reporting is complicated by the fact that this form is not filed with a US tax return. Rather, for the tax year 2023, a Form 3520 with all required attachments should be mailed to the following address:
Internal Revenue Service CenterP.O. Box 409101Ogden, UT 84409
My recommendation is to mail your 2023 Form 3520 by US Certified Mail.
2023 Form 3520 Deadline: When to File
Generally, 2023 Form 3520 deadline will correspond to your US income tax return deadline. In other words, a US person must file his Form 3520 by and including the 15th day of the 4th month following the end of such person’s tax year for US income tax purposes. Same rule applies to Forms 3520 filed by an estate and on behalf of a US decedent. If the due date falls on a Saturday, Sunday, or legal holiday, file by the next day that is not a Saturday, Sunday, or legal holiday.
For individual taxpayers who reside in the United States, this usually means April 15. For example, your 2023 Form 3520 will be due on April 15, 2024.
Moreover, if you are a US citizen or resident and (a) you live outside of the United States and Puerto Rico and your place of business or post of duty is outside the United States and Puerto Rico, OR (b) you are in the military or naval service on duty outside of the United States and Puerto Rico, then your tax deadline will shift to the 15th day of the 6th month (i.e. June 15). In other words, if you satisfy either (a) or (b) above and you are either a US citizen or US resident, then your 2023 Form 3520 will be due on June 17, 2024 (because June 15 is a Saturday this year). You must include a statement with your 2023 Form 3520 showing that you are a U.S. citizen or resident who meets one of these conditions listed above.
Finally, if a US person is granted an extension of time to file an income tax return, the due date for filing Form 3520 shifts to the 15th day of the 10th month following the end of the US person’s tax year. In other words, if you are an individual who filed an extension on your US income tax return, then your 2023 Form 3520 will be due on October 15, 2024.
Contact Sherayzen Law Office for Professional Help With Your 2023 Form 3520 Deadline
If you are required to file a Form 3520 for the tax year 2023 (whether because you are an owner or a beneficiary of a foreign trust, you received a foreign gift or you received a foreign inheritance), contact Sherayzen Law Office for professional help. We have successfully helped US taxpayers around the world with their Form 3520 compliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2023 Form 5471 Deadline in 2024 | International Tax Lawyer & Attorney
IRS Form 5471 is one of the most important US international information returns. In this brief essay, I will discuss the tax year 2023 Form 5471 deadline in the calendar year 2024.
2023 Form 5471 Deadline: What is Form 5471
Form 5471 is a US international information return. In general, the IRS uses Form 5471 to collect information about certain US persons who are officers, directors, or shareholders in certain foreign corporations. These US persons, in turn, use Form 5471 to satisfy the reporting requirements of the IRC (Internal Revenue Code) §§965, 6038 and 6046 as well as related regulations. In other words, US taxpayers utilize Form 5471 to comply with their reporting obligations concerning their ownership of and transactions with a foreign corporation.
Form 5471, however, is more than just an international information return. It also contains the relevant schedules related to income recognition by US owners of foreign corporations through the operation of anti-deferral tax regimes such as Subpart F rules, 965 tax and GILTI tax.
2023 Form 5471 Deadline: Who Must File It
Determining whether you are required to file a Form 5471 and which schedules you must attach to it may also be very complicated. As a result of the 2017 tax reform, Form 5471 now sports a total of five categories of required filers; two of these categories contain three sub-categories. In other words, the instructions to Form 5471 describe now a total of nine categories of filers!
Once you determine that you fall into one of these categories, you must carefully determine which schedules, statements and attachments you must complete in order to fully comply with your Form 5471 obligations.
I should also note that a separate Form 5471 is required for each applicable foreign corporation. This is the case even if one foreign corporation owns the other; there is no consolidated group filing under Form 5471.
2023 Form 5471 Deadline: Complexity
Form 5471 is incredibly complex. It forces its filers to convert foreign financial statements to US GAAP. It further requires reporting of an astounding range of transactions between a foreign corporation and its US owners as well as the affiliates of US owners. Finally, as it was already mentioned above, US taxpayers use Form 5471 schedules to calculate the income that they must recognize under the various anti-deferral tax regimes.
Thus, completing a Form 5471 may require a significant effort and a lot of time. This is why you need plan well ahead to make sure that you file your Form 5471 timely.
2023 Form 5471 Deadline: Penalties
A failure to timely file an accurate Form 5471 may result in imposition of large IRS penalties. Moreover, since Form 5471 is used to satisfy a variety of tax obligations, different penalties may be imposed under different IRC sections.
For example, a failure to file Form 5471 Schedule M may result in the imposition of a $10,000 penalty pursuant to §6038(a). A failure to file Form 5471 Schedule O is a violation of §6046 and the IRS may assess a separate section 6046 is subject to a $10,000 penalty for each reportable transaction.
2023 Form 5471 Deadline: When to File and Where
All filers (unless they fall under an exception) must attach their Forms 5471 to their income tax returns (if applicable, a partnership return or tax exempt organization return). Both, the income tax return and Form 5471 must be filed by the due date, including extensions, for that return.
In other words, if you are an individual filing Form 1040, your 2023 Form 5471 deadline is April 15, 2024. If you file an extension, the deadline will shift to October 15, 2024.
Contact Sherayzen Law Office for Professional Help With Your 2023 Form 5471 Deadline
If you are required to file a Form 5471 for the tax year 2023, contact Sherayzen Law Office for professional help. We have successfully helped US taxpayers around the world with their Form 5471 compliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2023 FBAR Deadline in 2024 | FinCEN Form 114 International Tax Lawyer & Attorney
The 2023 FBAR deadline is a critical deadline for US taxpayers this calendar year 2024. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2023 FBAR deadline in more detail.
2023 FBAR Deadline: Background Information
The official name of FBAR is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs must be timely e-filed separately from federal tax returns.
Failure to file an FBAR may result in the imposition of heavy FBAR penalties. The FBAR penalties vary from criminal penalties and willful penalties to non-willful penalties. You can find more details about FBAR penalties in this article.
2023 FBAR Deadline: Pre-2016 FBAR Deadline
For the years preceding 2016, US persons needed to file FBARs by June 30 of each year. For example, the 2013 FBAR was due on June 30, 2014. No filing extensions were allowed. The last FBAR that followed the June 30 deadline was the 2015 FBAR; its due date was June 30, 2016. .
2023 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR
For many years, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, many taxpayers simply missed the unusual FBAR filing deadline.
The US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with the 2016 FBAR. Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.
Furthermore, the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. For now, taxpayers do not need to make any specific requests in order for an extension to be granted.
Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. This is the case even if federal law requires a different filing date. For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day.
2023 FBAR Deadline
Based on the current law, for the vast majority of filers, the 2023 FBAR deadline will be April 15, 2024. However, the deadline is automatically extended to October 15, 2024.
The 2023 FBAR must be e-filed through the US Financial Crimes Enforcement Network’s (FinCEN) BSA E-filing system.
Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance
If you have unreported foreign accounts, contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in US international tax compliance and offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers around the globe with their FBAR compliance and FBAR voluntary disclosures; and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2024 Streamlined Foreign Offshore Procedures | US International Tax Law Firm
Streamlined Foreign Offshore Procedures has been the best voluntary disclosure option since its creation in 2014 for eligible US taxpayers with undisclosed foreign assets and foreign income, and I predict that it will remain so in the year 2024. Let’s discuss in more detail the unique advantages of the 2024 Streamlined Foreign Offshore Procedures.
2024 Streamlined Foreign Offshore Procedures: Background Information and Purpose
The IRS created the current Streamlined Foreign Offshore Procedures (usually abbreviated as “SFOP”) on June 18, 2014, though the Certification forms became available only a few months later. Streamlined Foreign Offshore Procedures quickly became the most popular option for US taxpayers who reside overseas, because it is the only voluntary disclosure option that can truly be called an “amnesty program” with zero penalties.
Why did the IRS create Streamlined Foreign Offshore Procedures and offered such favorable terms? The main reason is that the enforcement of international tax compliance for taxpayers who reside overseas is highly complex and very expensive. Where such noncompliance is willful, the penalty framework and deterrence considerations make it worthwhile for the IRS to engage in these expenses (although, even in these cases, the IRS offers a special voluntary disclosure option). With respect to non-willful taxpayers, however, this logic does not work well.
Hence, the IRS (correctly, in my opinion) decided that it would be in the best interests of the United States to allow noncompliant US taxpayers overseas to voluntarily come forward and resolve their prior tax noncompliance. In order to achieve this goal, the IRS decided to offer such a sweet deal to these taxpayers that it would make no sense for these taxpayers to remain noncompliant. Streamlined Foreign Offshore Procedures is precisely this “sweet deal” meant to encourage non-willful US taxpayers who reside overseas to voluntarily resolve their prior noncompliance with US international tax reporting requirements.
2024 Streamlined Foreign Offshore Procedures: the “Sweet Deal”
Streamlined Foreign Offshore Procedures offers four great advantages to eligible participants. First and most important, it is a true tax amnesty program, because there are no penalties for prior noncompliance. There are no income tax penalties; the taxpayers only need to pay the extra tax owed plus interest. There is also no Offshore Penalty for prior noncompliance with respect to FBAR and other US information tax returns. It is definitely the best deal a taxpayer can ever get when it comes to offshore voluntary disclosure programs.
Second, Streamlined Foreign Offshore Procedures offers a simplified (not simple, though) offshore voluntary disclosure procedure which covers a relatively short disclosure period. Unlike the OVDP (Offshore Voluntary Disclosure Program), SFOP only demands the taxpayers to file tax forms within the general statute of limitations for tax returns (i.e. past three years) and a regular statute of limitations for FBARs (i.e. past six years).
Third, Streamlined Foreign Offshore Procedures allows its participants to resolve their prior non-willful noncompliance with respect to unreported foreign income as well as pretty much any US international information return (FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera).
Finally, the last major advantage of the Streamlined Foreign Offshore Procedures is that this option only requires to establish non-willfulness rather than a reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.
2024 Streamlined Foreign Offshore Procedures: Main Disadvantages
Usually, participation in the Streamlined Foreign Offshore Procedures is highly advantageous to noncompliant taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will briefly discuss three of the most important of them.
First of all, Streamlined Foreign Offshore Procedures is available only to taxpayers who satisfied the program’s foreign residency requirements. Even if you resided outside of the United States during most of each year and you are a bona fide tax resident of a foreign country, you still may not satisfy the strict residency requirements of SFOP.
Second, there is an issue of a shifting burden of proof. When they participate in the Streamlined Foreign Offshore Procedures, taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SFOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.
The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Foreign Offshore Procedures.
Finally, participation in the Streamlined Foreign Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP (now closed) SFOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package. This means that going through Streamlined Foreign Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.
Contact Sherayzen Law Office for Professional Help With 2024 Streamlined Foreign Offshore Procedures
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Foreign Offshore Procedures. We can also help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2024 Offshore Voluntary Disclosure Options | International Tax Lawyer
Even as the year 2023 nears its end, numerous taxpayers continue to be substantially noncompliant with various US international tax laws. Hence, it is important for US taxpayers with undisclosed foreign assets to consider their 2024 offshore voluntary disclosure options. In this essay, I would like to provide an overview of these 2024 offshore voluntary disclosure options.
2024 Offshore Voluntary Disclosure Options: What is Offshore Voluntary Disclosure? 
The term “offshore voluntary disclosure” refers to a series of legal processes established by the IRS to allow noncompliant US taxpayers to voluntarily come forward and disclose their prior US international tax noncompliance in exchange for more lenient IRS treatment. This leniency can express itself in various ways: avoidance of criminal prosecution, lower and even zero penalties, a shorter voluntary disclosure period, ability to make certain retroactive tax elections, et cetera.
In general, the benefits of a voluntary disclosure usually far outweigh the consequences of a disclosure during a potential IRS audit. There are exceptions, but they are usually limited to mishandled cases where either an improper voluntary disclosure path was chosen or the process of the disclosure was mishandled by the taxpayer (usually) or his tax attorneys. This is why it is important that you chose the right international tax attorney to help you with your offshore voluntary disclosure.
Let’s review the main 2024 offshore voluntary disclosure options and briefly describe them.
2024 Offshore Voluntary Disclosure Options: Streamlined Foreign Offshore Procedures
While the Streamlined Foreign Offshore Procedures (“SFOP”) was created already in 2012, it exists in its current form since June of 2014. It is a true tax amnesty program, because its participants do not pay IRS penalties of any kind, even on income tax due. The participants only need to pay the extra tax due on the amended tax returns plus interest on the tax.
Moreover, SFOP preserves SDOP’s non-invasive and limited scope of voluntary disclosure (see below). For example, you only need to amend the tax returns for the past three years and file FBARs for the past six years.
SFOP, however, is available to a limited number of US taxpayers who are able to satisfy its eligibility requirements, particularly those related to non-willfulness certification and physical presence outside of the United States. You should contact Sherayzen Law Office to help you determine whether you meet the eligibility requirements of SFOP.
2024 Offshore Voluntary Disclosure Options: Streamlined Domestic Offshore Procedures
Streamlined Domestic Offshore Procedures (“SDOP”) is currently the flagship voluntary disclosure option for US taxpayers who reside in the United States. While not as generous as SFOP, SDOP is still a very good voluntary disclosure option for non-willful taxpayers: it is simple, limited (in terms of the voluntary disclosure period for which tax returns and FBARs must be filed) and mild (in terms of its penalty structure). There are some drawbacks to SDOP, such as the potential imposition of the Miscellaneous Offshore Penalty on income-tax compliant foreign accounts, but the benefits offered by this option outweigh its deficiencies for most taxpayers.
The reason why the IRS is so generous lies in the fact that this voluntary disclosure option is open only to taxpayers who can certify under the penalty of perjury that they were non-willful with respect to their prior income tax noncompliance, FBAR noncompliance and noncompliance with any other US international information tax return (such as Form 3520, 5471, 8938 et cetera). It will be up to your international tax lawyer to make the determination on whether you are able to make this certification.
Moreover, a taxpayer cannot file a delinquent Form 1040 under the SDOP. SDOP only accepts amended tax returns (i.e Forms 1040X), not original late tax returns.
2024 Offshore Voluntary Disclosure Options: Delinquent FBAR Submission Procedures
Delinquent FBAR Submission Procedures (“DFSP”) is another voluntary disclosure option that fully eliminates IRS penalties. This is not a new option; in fact, in one form or another, officially or unofficially, it has always existed within the IRS procedures. Prior to 2019, it was even written into the OVDP (IRS Offshore Voluntary Disclosure Program) as FAQ#17 (though in a modified version).
While DFSP is highly beneficial to noncompliant US taxpayers, it is available to even fewer number of taxpayers than those who are eligible for SDOP and SFOP. This is the case due to two factors. First, DFSP has a very narrow scope – it applies only to FBARs. Second, DFSP has extremely strict eligibility requirements; even de minimis income tax noncompliance may deprive a taxpayer of the ability to use this option if it is sufficient to require an amendment of a tax return. In other words, DFSP only applies where SDOP, SFOP and VDP (see below) are irrelevant due to absence of unreported income.
2024 Offshore Voluntary Disclosure Options: Delinquent International Information Return Submission Procedures
Delinquent International Information Return Submission Procedures (“DIIRSP”) has a similar history to DFSP. In fact, it was “codified” into OVDP rules as FAQ#18. Similarly to DFSP, DIIRSP also offers the possibility of escaping IRS Penalties. DIIRSP has a broader scope than DFSP and applies to international information returns other than FBAR, such as Form 8938, 3520, 5471, 8865, 926, et cetera.
Since it turned into an independent voluntary disclosure option in 2014, DIIRSP’s eligibility requirements became much harsher. US taxpayers are now required to provide a reasonable cause explanation in order to escape IRS penalties under this option. On the other hand, the fact that there may be unreported income associated with international information returns is not an impediment by itself to participation in DIIRSP.
2024 Offshore Voluntary Disclosure Options: IRS Voluntary Disclosure Practice
The traditional IRS Offshore Voluntary Disclosure practice has existed for a very long time. However, it faded into complete obscurity once the IRS opened its first major OVDP option in 2009. The closure of the 2014 OVDP in September of 2018 has brought this option back to life, but in a new format and for modified purposes.
On November 20, 2018, the IRS has completely revamped this traditional voluntary disclosure option, modified its procedural structure and imposed a new tough (but relatively clear) penalty structure. This new version of the traditional voluntary disclosure is now officially called IRS Voluntary Disclosure Practice (“VDP”).
The chief advantage of VDP is that it is specifically designed to help taxpayers who willfully violated their US tax obligations to come forward to avoid criminal prosecution and lower their civil willful penalties. In other words, VDP is now the main voluntary disclosure option for willful taxpayers.
2024 Offshore Voluntary Disclosure Options: Reasonable Cause Disclosure
Since 2014, the popularity of Reasonable Cause disclosure (also known as “Noisy Disclosure”) has declined substantially due to the introduction of SDOP and SFOP. Nevertheless, Reasonable Cause disclosure continues to be a highly important voluntary disclosure alternative to official IRS voluntary disclosure options. It is now primarily used when SDOP and SFOP are not available for technical (i.e. some of their eligibility requirements are not met) or even strategic reasons.
Reasonable Cause disclosure is based on the actual statutory language; it is not part of any official IRS program. Special care must be taken in using this option, because this is a high-risk, high-reward option. If a taxpayer is able to satisfy this high burden of proof, then, he will be able to avoid all IRS penalties. If the IRS audits the Reasonable Cause disclosure and disagrees, this taxpayer may face significant IRS penalties and, potentially, years of IRS litigation.
Contact Sherayzen Law Office for Professional Analysis of Your 2024 Offshore Voluntary Disclosure Options
If you have undisclosed foreign assets, contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers from over 75 countries with their voluntary disclosures of foreign assets to the IRS, and we can help you!
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### <strong>2023 IRS Quarterly Interest Rates on Overpayment/Underpayment of Tax</strong>
The 2023 IRS quarterly interest rates IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. First, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second, the 2023 IRS quarterly interest rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended under the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the 2023 IRS quarterly interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the 2023 IRS quarterly interest rates.
Below, I lay our the 2023 IRS quarterly interest rates for each quarter.
How the 2023 IRS quarterly Interest Rates Are Calculated
Internal Revenue Code (“IRC”) §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
2023 First Quarter IRS Interest Rates
On November 29, 2022, the IRS announced another increase in the IRS interest rates on overpayment and underpayment of tax.
This means that, effective on January 1, 2023 the First Quarter 2023 IRS interest rates are as follows:
seven (7) percent for overpayments (six (6) percent in the case of a corporation);
seven (7) percent for underpayments;
nine (9) percent for large corporate underpayments; and
four and a half (4.5) of a percent for the portion of a corporate underpayment exceeding $10,000.
2023 Second Quarter IRS Interest Rates
On February 13, 2023, the Internal Revenue Service announced that interest rates would remain the same for the calendar quarter beginning April 1, 2023.  In other words, the first quarter and the second quarter IRS interest rates were exactly the same.
2023 Third Quarter IRS Interest Rates
On May 22, 2023, the Internal Revenue Service announced that interest rates would remain the same for the calendar quarter beginning July 1, 2023.  In other words, the IRS interest rates remained the same for the first three quarters of 2023.
2023 Fourth Quarter IRS Interest Rates
On August 25, 2023, the Internal Revenue Service announced that it would increase the interest rates for the calendar quarter beginning October 1, 2023.
This means that, the Fourth Quarter 2023 IRS interest rates are as follows:
eight (8) percent for overpayments (seven (7) percent in the case of a corporation);
eight (8) percent for underpayments;
ten (10) percent for large corporate underpayments; and
five and a half (5.5) of a percent for the portion of a corporate underpayment exceeding $10,000.

### 2023 Streamlined Domestic Offshore Procedures: Pros and Cons
US taxpayers with undisclosed foreign assets and foreign income need to consider their 2023 offshore voluntary disclosure options. As was the case in the year 2022, I expect that Streamlined Domestic Offshore Procedures will continue to be the flagship voluntary disclosure option in 2023 for US taxpayers who reside in the United States. This is why noncompliant US taxpayers should understand well the main advantages and disadvantages of participating in the 2023 Streamlined Domestic Offshore Procedures.
2023 Streamlined Domestic Offshore Procedures: Background Information and Purpose
The IRS created the Streamlined Domestic Offshore Procedures (usually abbreviated as “SDOP”) on June 18, 2014, though the Certification forms became available only a few months later. Since its introduction, Streamlined Domestic Offshore Procedures quickly eclipsed the then-existing IRS Offshore Voluntary Disclosure Program (“OVDP”) and became the most popular offshore voluntary disclosure option for US taxpayers who reside in the United States. As we discuss the advantages of the 2023 SDOP, you will quickly understand the reason for this meteoric rise in popularity of the SDOP.
The main purpose of the Streamlined Domestic Offshore Procedures is to encourage non-willful US taxpayers to voluntarily resolve their prior noncompliance with US international tax reporting requirements in exchange for a reduced penalty, simplified disclosure procedure and a shorter disclosure period. In other words, SDOP is a voluntary disclosure option to resolve pretty much any non-willful US international tax noncompliance: foreign income, FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera.
2023 Streamlined Domestic Offshore Procedures: Main Advantages
In exchange for a voluntary disclosure of their prior tax noncompliance through SDOP, US taxpayers escape income tax penalties and pay only a one-time Miscellaneous Offshore Penalty with respect to their prior failures to file the required US international information returns. It is important to emphasize that the Miscellaneous Offshore Penalty replaces not only FBAR penalties, but also penalties for noncompliance with respect to other US international information returns, such as Forms 5471, 8865, 926, et cetera. Depending on the specific circumstances of a case, the Miscellaneous Offshore Penalty is usually below the combined usual failure-to-file potential IRS penalties. In other words, noncompliant taxpayers can greatly reduce their IRS noncompliance penalties through their participation in the Streamlined Domestic Offshore Procedures. This is one of the most important SDOP benefits.
Another advantage of the Streamlined Domestic Offshore Procedures is the limited procedural scope of this voluntary disclosure option. What I mean by this is that the taxpayers should only submit the forms covered by the general statute of limitations unless they choose (i.e. not required, actually choose to do so) to do otherwise. The taxpayers only need to file three (sometime even less) amended US tax returns and six FBARs (sometimes seven and sometimes less than six). This limited disclosure stands in stark contrast with other major voluntary disclosure initiatives, such as 2014 OVDP (which required filings for the past eight years).
Moreover, despite the limited scope of the SDOP filings, taxpayers who utilize the Streamlined Domestic Offshore Procedures are usually able to fully resolve their prior US international tax noncompliance issues even if these years are not included in the actual SDOP filings. This means that the participating taxpayers are able “wipe the slate clean” – i.e. to erase their prior US international tax noncompliance from the time when it began. I should warn, however, that this is not necessarily always the case; I have already encountered efforts from the IRS to open years for which amended tax returns were not submitted (there were specific circumstances, however, in all of these cases that resulted in this increased IRS interference).
The last major advantage of the Streamlined Domestic Offshore Procedures is that this option only requires to establish non-willfulness rather than reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.
2023 Streamlined Domestic Offshore Procedures: Main Disadvantages
Usually, participation in the Streamlined Domestic Offshore Procedures is highly advantageous to noncompliance taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will concentrate only on the three most important of them.
First, this voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years. This requirement is the exact opposite of the Streamlined Foreign Offshore Procedures (“SFOP”) which allows for the late filing of original returns.
The problem is that there is a large segment of taxpayers who were perfectly non-willful in their prior US international tax noncompliance, but they never filed their US tax returns either due to special life circumstances (such as death in the family, illness, unemployment, et cetera), they were negligent or they believed that they were not required to file them (especially in situations where all of their income comes from foreign sources). These taxpayers would be barred from participating in the SDOP.
Second, when they participate in the Streamlined Domestic Offshore Procedures, the taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SDOP, the IRS has the burden of proof to establish willfulness; if the IRS cannot carry this burden, then it has no choice but to automatically consider the taxpayer as non-willful.
The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures. By the way, this decision should be made only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.
Finally, participation in the Streamlined Domestic Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP, SDOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package. This means that going through Streamlined Domestic Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.
Contact Sherayzen Law Office for Professional Help With 2023 Streamlined Domestic Offshore Procedures
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures. We can also help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Child FBAR Obligations | FBAR Tax Lawyer & Attorney
Child FBAR filing obligations is a topic that comes up fairly often in my practice. In this short essay, I will discuss whether a child is required to file an FBAR and how it should be done.
Child FBAR Obligations: What is FBAR
FBAR is a common abbreviation for the Report of Foreign Bank and Financial Accounts, officially called FinCEN Form 114, Report of Foreign Bank and Financial Accounts (used to be TD F 90-22.1). This form is used by US persons to report to the IRS a financial interest in or signatory authority over foreign financial accounts.  This is one of the most important forms that US taxpayers need to file in order to comply with their US international tax law requirements. A failure to file an FBAR when required may result in an imposition of severe IRS penalties.
Child FBAR Obligations: No Age Limitations
All US Persons are potentially subject to the FBAR requirement with no regard for their age. In other words, minor children with foreign accounts that satisfy the FBAR filing threshold must file FBARs. Even a newborn infant may have to file an FBAR. See BSA Electronic Filing Requirements For Report of Foreign Bank and Financial Accounts (FinCEN Form 114), p. 6.
Child FBAR Obligations: How to file a Child’s FBAR
While a child is responsible for the filing of his own FBAR, the child’s parent, guardian or other legally responsible person must file the FBAR for the child if the child is unable to do it himself.  Id. In such cases, the responsible person, parent or guardian must sign the FBAR on behalf of the child as “Parent/Guardian filing for child”.
Contact Sherayzen Law Office for Professional Help with Your Child FBAR Obligations
Parents often overlook their children's FBAR obligations.  Time and again, I discover that otherwise fully-compliant taxpayers completely neglected their children’s FBARs.
If your child has not filed the required FBARs or he needs help complying with his current FBAR obligations, contact Sherayzen Law Office for professional help.  We are a highly-experienced team of international tax professionals led by an international tax attorney, Mr. Eugene Sherayzen.  We have helped hundreds of people around the world with their FBAR obligations, including offshore voluntary disclosures, and we can help you!
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### Tax Treaty Election FBAR Obligations | FBAR Lawyer & Attorney
In my practice, I often receive calls from people who are confused about their FBAR obligations.  A recent call raised an important issue of whether a tax treaty election may affect one’s FBAR obligations.  In this brief article, I would like to address this issue of tax treaty election FBAR obligations.
Tax Treaty Election FBAR Obligations: What is FBAR ?
FinCEN Form 114, Report of Foreign Bank and Financial Accounts (used to be TD F 90-22.1) is commonly known as FBAR, the Report of Foreign Bank and Financial Accounts. This form is used by US persons to report to the IRS a financial interest in or signatory authority over foreign financial accounts.  This is one of the most important forms that US taxpayers need to file in order to comply with their US international tax law requirements. A failure to file an FBAR when required may result in an imposition of severe IRS penalties.
Tax Treaty Election FBAR Obligations: US Person
In another article, I already addressed in great detail the definition of a US Person.  Here, I will just briefly state the categories of persons who fall under the definition of a US Person for FBAR purposes:
(1) US citizens;
(2) residents of the United States;
(3) an entity, such as a corporation, partnership and a limited liability company, created or organized in the United States or under the laws of the United States;
(4) a trust formed under the laws of the United States; and
(5) an estate formed under the laws of the United States.
Tax Treaty Election FBAR Obligations: US Person & Tax Treaty Election
Now, we have come to the critical point and the main subject of this essay: would a tax treaty election to be treated as a resident of another country under a valid income tax treaty affect one’s FBAR obligations? In other words, can you elect out of being a US Person by making a tax treaty election?
The main general answer is no – a tax treaty does not and cannot affect FBAR filing obligations. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234 & 238 (Feb. 24, 2011); also, IRM 4.26.16.2.1.2(6) (11-06-15).  If a person meets the definition of a resident alien under IRC §7701(b) (i.e. he meets the FBAR definition of a US Person), even if he is not treated as a resident for income tax purposes due to an election under an income tax treaty, he will still be subject to FBAR.
The main exception to this rule would be an abandonment of US permanent residency through a tax treaty election, because it would affect the definition of a resident alien under IRC §7701(b).
Contact Sherayzen Law Office for Help with Your FBAR Compliance and FBAR Voluntary Disclosure
Sherayzen Law Office specializes in FBAR compliance and Offshore Voluntary Disclosures that involve prior FBAR noncompliance. We have helped hundreds of US taxpayers around the world with their FBAR issues, and we can hep you!
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Excerpt: In my practice, I often receive calls from people who are confused about their FBAR obligations.  A recent call raised an important issue of whether a tax treaty election may affect one’s FBAR obligations.  In this brief article, I would like to address this issue of tax treaty election FBAR obligations.

### Form 114 US Person Definition | FBAR Tax Lawyer
FinCEN Form 114 US Person definition is a highly important component of FBAR and US international tax compliance.  In this essay, I will discuss in detail the FinCEN Form 114 US Person definition and highlight some common issues that arise with respect to this definition.
Form 114 US Person Definition: What is Form 114 and What is its Relation to FBAR ?
FinCEN Form 114, Report of Foreign Bank and Financial Accounts (used to be TD F 90-22.1) is commonly known as FBAR, the Report of Foreign Bank and Financial Accounts. This form is used by US persons to report to the IRS a financial interest in or signatory authority over foreign financial accounts.  This is one of the most important forms that US taxpayers need to file in order to comply with their US international tax law requirements. A failure to file an FBAR when required may result in an imposition of severe IRS penalties.
Form 114 US Person Definition: Only US Persons are Required to File FBARs
It is important to understand that only “US Persons”, as defined by the IRS for the FBAR compliance purposes, are required to file FBARs.  What is the legal basis for this and where does this term “US Person” come from?
BSA (Bank Secrecy Act) §5314(a) states that the Secretary of the Treasury shall require a “resident or citizen of the United States or a person, in, and doing business in, the United States, to keep records, file reports”.  This seems like the FBAR requirement may apply a hugely broad group of people (far beyond US residents and citizens), especially if one takes into account that the “United States” is defined to include all 50 states, the District of Columbia, the territories, and insular possessions of the United States and the Indian lands as defined in the Indian Gaming Regulatory Act. 31 CFR §§1010.350(b) and 1010.100(hhh).  The territories and possessions of the United States include American Samoa, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico, Guam, and the US Virgin Islands (see BSA Electronic Filing Requirements for Report of Foreign Bank and Financial Accounts (FinCEN Form 114), p. 5.).
Despite this initial impression, the actual definition that we use today is much smaller than what is mandated by §5314(a) and it is thanks to BSA §5314(b).  BSA §5314(b) states that the IRS has the discretion to interpret what this provision actually means and who is exempt from the FBAR filing requirement.
Armed with this authority, on February 26, 2010, the IRS issued proposed regulations, which for the first time defined that only “US Persons” needed to file FBARs. This is why we discuss the definition of a US Person when we discuss who is required to file FBARs.
Form 114 US Person Definition: Who is a Person ?
Before we turn to the definition of a “US Person”, we need to discuss who is considered to be a “Person” for the Form 114 purposes. Under 31 CFR §1010.350(b), a “person” includes:  natural persons (US citizens and US residents) and entities, including but not limited to: corporations, partnerships, trusts, or limited liability companies formed under the laws of the United States.  This definition includes entities disregarded for tax purposes (as long as they are US persons).
Additionally, pension and welfare plans are also US entities that need to file FBARs. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234 (Feb. 24, 2011); IRM 4.26.16.2.1.3(3) (06-24-21).  Even though the regulations do not mention it, the Form 114 instructions expand the “person” definition to estates.  It is important to note that, according to page 6 of the FBAR electronic filing instructions, an executor of an estate has a fiduciary obligation to file FBAR on behalf of the estate and on behalf of the decedent in the year following the decedent’s death.
Form 114 US Person Definition: General Definition of a US Person
The definition of a US person includes the following categories of persons:
(1) US citizens;
(2) residents of the United States;
(3) an entity, such as a corporation, partnership and a limited liability company, created or organized in the United States or under the laws of the United States;
(4) a trust formed under the laws of the United States; and
(5) an estate formed under the laws of the United States.
Let’s analyze each of these categories in more detail.
Form 114 US Person Definition: US Citizens
All US citizens are subject to the FBAR filing requirement, even minor children.  The general definition of a US citizen is contained in 8 USC §1401.
Form 114 US Person Definition: US Residents
All US residents are subject to FBAR filing requirements.  Pursuant to 31 CFR §1010.350(b)(2), the definition of “US residents” follows the definition of a resident alien under §7701(b) with one modification – the definition of the “United States” still follows 1010.100(hhh) described above. Also, see IRM 4.26.16.2.1.2 (11-06-15).
There are three classes of US residents: (1) US permanent residents; (2) persons who satisfied the Substantial Presence Test; and (3) persons who elected to be treated as US residents.  Let’s discuss each of these classes of US residents in more detail.
1.  US Permanent Residents (the “Green Card Test”)
A person is considered a US person if at any time during the calendar year the person has been lawfully granted the privilege of residing permanently in the United States under the immigration laws and such status has not been revoked. 26 USC §§7701(b)(1)(A)(i) and 7701(b)(6).
One of the most common issues occurs when a person has been issued a green card and he has not yet physically entered the United States. In such cases, this person would not be considered as a resident alien until he actually physically enters the United States. 26 USC §7701(b)(2)(A)(ii).  Once he enters the country, however, he becomes a US permanent resident and continues to be one until the green card is revoked or considered abandoned either judicially or administratively. See 26 CFR §301.7701(b)-1(b)(2) and 26 CFR §301.7701(b)-1(b)(3).
2.  Substantial Presence Test
Even if a person is not a US permanent resident, he may still be considered a US Person if he meets the IRC §7701(b)(3) substantial presence test.  In reality, there are two substantial presence tests.
The first substantial presence test is met if a person is physically present in the United States for at least 183 days during the calendar year. 26 USC §7701(b)(3).  The second substantial presence test is met if two conditions are satisfied: (1) the person is present in the United States for at least 31 days during the calendar year; and (2) the sum of the days on which this person was present in the United States during the current and the two preceding calendar years (multiplied by the fractions found in §7701(b)(3)(A)(ii)) equals to or exceeds 183 days. 26 USC 7701(b)(3)(A).
Let’s focus on the mechanics of the second calculation.  The way to determine whether the 183-day test is met is to add: (a) all days present in the United States during the current calendar year (i.e. the year for which you are trying to determine whether the Substantial Presence Test is met) + (b) one-third of the days spent in the United States in the year immediately preceding the current year + (c) one-sixth of the days spent in the United States in the second year preceding the current calendar year. See 26 USC §7701(b)(3).
Note that the Internal Revenue Code (IRC) provides a number of important exceptions to the Substantial Presence Test.  In this article, I am just providing the general rule.
3.  Election to be Treated as a US Resident Alien
A person who makes the first-year election to be treated as a US resident alien pursuant to §7701(b)(4) is a US Person for FBAR purposes.   Note, however, that this rule applies only to elections made under this provision.  A nonresident alien spouse of a US person who makes an election under the IRC §§6013(g) and 6013(h) to be treated as a resident alien will not be considered as a US person for the FBAR compliance purposes.  This is an important divergence between the income tax and FBAR rules.
Form 114 US Person Definition: US Entities, Trusts & Estates
Entities (corporations, partnerships, limited liability companies, et cetera), trusts and estates created, organized or formed in the United States or under the laws of the United States are generally considered to be US Persons for FBAR purposes.
A foreign subsidiary of a US parent will not have any FBAR obligations as long as it is not formed, created or organized under the laws of the United States. However, the US parent company may be required to include the foreign accounts of its foreign subsidiary on its FBAR. 31 CFR §1010.350(e)(2)(ii).
Moreover, a foreign entity organized in and under the laws of a foreign country will not be subject to the FBAR requirements even if it elects to be treated as a US entity for US tax purposes. See Amendment to the Bank Secrecy Act Regulations—Reports of Foreign Financial Accounts, 76 Fed. Reg. 10, 234-238 (Feb. 24, 2011).
Contact Sherayzen Law Office for Professional Help with Your FBAR Compliance
If you need questions concerning your FBAR compliance or a voluntary disclosure concerning your prior FBAR noncompliance, contact Sherayzen Law Office for professional help!  Our firm specializes in FBAR compliance and offshore voluntary disclosures to remedy prior FBAR noncompliance.
We have helped hundreds of clients around the world and we can help you! Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: FinCEN Form 114 US Person definition is a highly important component of FBAR and US international tax compliance.  In this essay, I will discuss in detail the FinCEN Form 114 US Person definition and highlight some common issues that arise with respect to this definition.

### 2022 FBAR Conversion Rates | FBAR Tax Lawyer & Attorney
The 2022 FBAR conversion rates are very important for your US international tax compliance. The reason for their importance is their relation to FBAR (FinCEN Form 114) and the IRS Form 8938. The 2022 FBAR and 2022 Form 8938 instructions both require that 2022 FBAR conversion rates be used to report the required highest balances of foreign financial assets on these forms (in the case of Form 8938, the 2022 FBAR conversion rates is the default choice, not an exclusive one). In other words, the 2022 FBAR conversion rates are used to translate foreign-currency highest balances into US dollars for the purposes of FBAR and Form 8938 compliance.
The U.S. Department of Treasury  already published the 2022 FBAR conversion rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).
Since the 2022 FBAR conversion rates are highly important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2022 FBAR conversion rates (note that the readers still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI89.11ALBANIA - LEK106.5ALGERIA - DINAR136.467ANGOLA - KWANZA503.65ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR2.7000 ARGENTINA - PESO183ARMENIA - DRAM400AUSTRALIA - DOLLAR1.471AUSTRIA - EURO0.936AZERBAIJAN - NEW MANAT1.7BAHAMAS - DOLLAR1.0000 BAHRAIN - DINAR0.3770 BANGLADESH - TAKA105BARBADOS - DOLLAR2.02BELARUS - NEW RUBLE2.518BELGIUM - EURO0.936BELIZE - DOLLAR2BENIN - CFA FRANC 614.84BERMUDA - DOLLAR1BOLIVIA - BOLIVIANO6.86BOSNIA - MARKA1.83BOTSWANA - PULA12.739BRAZIL - REAL5.286BRUNEI - DOLLAR1.34BULGARIA - LEV New1.83BURKINA FASO - CFA FRANC614.84BURMA - KYAT2100BURUNDI - FRANC2045.3CAMBODIA - RIEL4051CAMEROON - CFA FRANC613.79CANADA - DOLLAR1.354CAPE VERDE - ESCUDO103.16CAYMAN ISLANDS - DOLLAR0.82CENTRAL AFRICAN REPUBLIC - CFA FRANC613.79CHAD - CFA FRANC613.79CHILE - PESO851.5CHINA - RENMINBI6.897COLOMBIA - PESO4845.83COMOROS - FRANC461.6CONGO - CFA FRANC613.79COSTA RICA - COLON591.36COTE D'IVOIRE - CFA FRANC614.84CROATIA - KUNA6.87CROATIA - EURO0.936*CUBA - Chavito1CYPRUS - EURO0.936CZECH REPUBLIC - KORUNA22.102DEM. REP. OF CONGO - FRANC2012DENMARK - KRONE6.959DJIBOUTI - FRANC177DOMINICAN REPUBLIC - PESO55.72ECUADOR - DOLARES1.0000 EGYPT - POUND24.74**EGYPT - POUND29.5**EL SALVADOR - DOLARES1.0000 EQUATORIAL GUINEA - CFA FRANC613.79ERITREA - NAKFA15ESTONIA - EURO0.936ETHIOPIA - BIRR53.339EURO ZONE - EURO0.936FIJI - DOLLAR2.176FINLAND - EURO0.936FRANCE - EURO0.936GABON - CFA FRANC613.79GAMBIA - DALASI61GEORGIA - LARI2.665GERMANY - EURO0.936GHANA - CEDI9.8***GHANA - CEDI11.5***GREECE - EURO0.936GRENADA - EAST CARIBBEAN DOLLAR2.7GUATEMALA - QUETZAL7.84GUINEA - FRANC8554GUINEA BISSAU - CFA FRANC614.84GUYANA - DOLLAR215HAITI - GOURDE145HONDURAS - LEMPIRA24.552HONG KONG - DOLLAR7.797HUNGARY - FORINT374.63ICELAND - KRONA141.61INDIA - RUPEE82.599INDONESIA - RUPIAH15528.42IRAN - RIAL42000IRAQ - DINAR1458.53IRELAND - EURO0.936  ISRAEL - SHEKEL3.518ITALY - EURO0.936  JAMAICA - DOLLAR150JAPAN - YEN131.83JORDAN - DINAR0.708KAZAKHSTAN - TENGE462.54KENYA - SHILLING123.25KOREA - WON1252.61KOSOVO - EURO0.936KUWAIT - DINAR0.306KYRGYZSTAN - SOM85.68LAOS - KIP17217LATVIA - EURO0.936LEBANON - POUND1500LESOTHO - MALOTI16.948LIBERIA - DOLLAR153.5LIBYA - DINAR4.817LITHUANIA - EURO0.936LUXEMBOURG - EURO0.936MADAGASCAR - ARIARY4360MALAWI - KWACHA1035.49MALAYSIA - RINGGIT4.4MALDIVES - RUFIYAA15.42MALI - CFA FRANC614.84MALTA - EURO0.936MARSHALL ISLANDS - DOLLAR1MAURITANIA - OUGUIYA37MAURITIUS - RUPEE43.85MEXICO - PESO19.546MICRONESIA - DOLLAR1MOLDOVA - LEU19.08MONGOLIA - TUGRIK3443.37MONTENEGRO - EURO0.936MOROCCO - DIRHAM10.48MOZAMBIQUE - METICAL 63.24NAMIBIA - DOLLAR16.948NEPAL - RUPEE132.25NETHERLANDS - EURO0.936NETHERLANDS ANTILLES - GUILDER1.78NEW ZEALAND - DOLLAR1.575NICARAGUA - CORDOBA36.15NIGER - CFA FRANC614.84NIGERIA - NAIRA440NORWAY - KRONE9.831OMAN - RIAL0.385PAKISTAN - RUPEE226.4PANAMA - BALBOANot ListedPANAMA - DOLARES1PAPUA NEW GUINEA - KINA3.431PARAGUAY - GUARANI7309.61PERU - SOL3.786PHILIPPINES - PESO55.606POLAND - ZLOTY4.38PORTUGAL - EURO0.936QATAR - RIYAL3.64REP. OF N MACEDONIA - DINAR57.56REPUBLIC OF PALAU - DOLLAR1ROMANIA - NEW LEU 4.627RUSSIA - RUBLE71.481RWANDA - FRANC1060SAO TOME & PRINCIPE - NEW DOBRAS23.062SAUDI ARABIA - RIYAL3.75SENEGAL - CFA FRANC614.84SERBIA - DINAR109.69SEYCHELLES - RUPEE12.87SIERRA LEONE - LEONE18.8SINGAPORE - DOLLAR1.34SLOVAK REPUBLIC - EURO0.936SLOVENIA - EURO0.936SOLOMON ISLANDS - DOLLAR7.949SOMALI - SHILLING565SOUTH AFRICA - RAND16.948SOUTH SUDANESE - POUND669SPAIN - EURO0.936 SRI LANKA - RUPEE363ST LUCIA - E CARIBBEAN DOLLAR2.7SUDAN - SUDANESE POUND576SURINAME - GUILDER31.714SWAZILAND - LANGENI16.948SWEDEN - KRONA10.386SWITZERLAND - FRANC0.923SYRIA - POUND2510TAIWAN - DOLLAR30.648TAJIKISTAN - SOMONI10.16TANZANIA - SHILLING2329THAILAND - BAHT34.52TIMOR - LESTE DILI1TOGO - CFA FRANC614.84TONGA - PA'ANGA2.261TRINIDAD & TOBAGO - DOLLAR6.765TUNISIA - DINAR3.094TURKEY - NEW LIRA18.711TURKMENISTAN - NEW MANAT3.491UGANDA - SHILLING3715UKRAINE - HRYVNIA36.569UNITED ARAB EMIRATES - DIRHAM3.673UNITED KINGDOM - POUND STERLING0.83URUGUAY - PESO39.95UZBEKISTAN - SOM11224.32VANUATU - VATU119.9VENEZUELA - BOLIVAR SOBERANO17.236****VENEZUELA - BOLIVAR SOBERANO19.23****VENEZUELA - FUERTE (OLD)248832VIETNAM - DONG23610WESTERN SAMOA - TALA2.607YEMEN - RIAL580ZAMBIA - NEW KWACHA 18.1ZIMBABWE - RTGS654.66
*Note #1: the official exchange rate for Euro on December 31, 2022 was 0.936; however, with respect to Croatia the Department of the Treasury lists 0.925.  We believe that this is a mistake.  Please, consult the Department of the Treasury for clarification.
**Note #2: the Treasury Department lists two alternative rates for the Egyptian Pound without clarification which rate should be used for FBAR and Form 8938. We believe that the second rate is correct as it more properly reflects the conversion rate at that time. However, if you wish to follow the safest route, you can use 24.74 conversion rate.  Please, consult the Department of the Treasury for clarification.
***Note #3: the Treasury Department lists two alternative rates for the Ghanan Cedi without clarification which rate should be used for FBAR and Form 8938. We believe that the second rate is correct as it more properly reflects the conversion rate at that time. However, if you wish to follow the safest route, you can use 9.8 conversion rate.  Please, consult the Department of the Treasury for clarification.
****Note #4: the Treasury Department lists two alternative rates for the Venezuelan Bolivar Soberano without clarification which rate should be used for FBAR and Form 8938. We believe that the second rate is correct as it more properly reflects the conversion rate at that time. However, if you wish to follow the safest route, you can use 17.236 conversion rate.  Please, consult the Department of the Treasury for clarification.

### Foreign Account Disclosed on Form 8938 But Not FinCEN Form 114 | FBAR Lawyer Beverly Hills
[embedyt]https://youtu.be/InWE-ULspLg[/embedyt]
Hello and welcome to Sherayzen Law Office video blog; my name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'd like to talk to you about a situation where an account was disclosed on Form 8938 but it was not disclosed on FBAR or as it's known by it's official name, FinCEN Form 114.
Does your disclosure on Form 8938 replace the FBAR nondisclosure? That's a question I often hear from taxpayers who come and talk to me. The answer is no; unfortunately, just because you disclosed an account on Form 8938, that does not in any way eliminate your obligation to report the same account on Form 114 or FBAR.
Will it help your case, that is, will it help your non-willfulness case? Yes, it will but you still have to file your FBARs; you still have to disclose on FBARs all of the foreign accounts that you are required to disclose; otherwise, you are on the hook for the penalties. They may be non-willful penalties, but it will depend on the particular facts and circumstances of your case.
If you would like to know more about your FBAR compliance, you can contact me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com.
Thank you for watching, until the next time.

### Argentina: Escaping Inflation Through Investment in US Companies | US International Tax Attorney
[embedyt]    https://youtu.be/XNsTNdUkmFA   [/embedyt]
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
I'm in Buenos Aires, Argentina and this blog is part of a series of blogs from the city concerning how Argentinians battle inflation. How is it that they are able to escape the affects of inflation, at least those Argentinians that have the ability to do so?
In the previous blog, I discussed the transfer of funds to personal account to personal account, whether directly or indirectly. Today, I'd like to talk about a different type of transaction. A transaction that gives Argentinians an opportunity not only to transfer funds but also to invest them effectively, but at the same time, unlike the first transaction, this transaction brings them in direct contact with US international tax law. This is a transaction where Argentinians, using their Argentinian businesses invest in US businesses that are related to their Argentinian businesses.
One of the biggest businesses here in Argentina is of course beef, beef production and export. Some of the families here in Argentina have already started going about the process of using their exports to the United States as a way to also find a good return on their capital. Now, investing in US entities of course means that they become directly or indirectly US taxpayers with their numerous obligations. For example, let's say that an Argentinian business aquires 50% of a US business. Since the foreign ownership is more than 25%, the corporation now has to file a Form 5472 to describe the transactions between the Argentinian business and their new US subsidiary. This is just one example. If a US business becomes a partnership because of this investment, then you also have to deal with the tax withholding issues as well as the potential obligation of the Argentinian business or the owners of the Argentinian business or Argentinian owners of the investment directly bypassing their Argentinian business to actually file returns here in the United States.
Investment in US businesses is a very powerful way to escape Argentinian inflation, but at the same time it is the one that carries higher risks, higher compliance risks as well as higher risk of being subject to US taxation.
If you would like to learn more about investing in US entities through a foreign business, you can call me at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com. Thank you for watching, until the next time.

### 2022 Required Minimum Distributions | Tax Lawyer Minneapolis
On December 12, 2022, the Internal Revenue Service reminded those who were born in 1950 or earlier that funds in their retirement plans and individual retirement arrangements face important upcoming deadlines for the 2022 required minimum distributions to avoid penalties.
What are the 2022 Required Minimum Distributions?
Required minimum distributions, or RMDs, are minimum amounts that many retirement plans and IRA account owners must generally withdraw annually after they reach age 72. Account owners can delay taking their first RMD until April 1 following the later of the calendar year they reach age 72 or, in a workplace retirement plan, retire. RMDs are taxable income and may be subject to penalties if not timely taken.
IRA 2022 Required Minimum Distributions
IRAs: The RMD rules require traditional IRA, and SEP, SARSEP, and SIMPLE IRA account holders to begin taking distributions at age 72, even if they're still working. Account holders reaching age 72 in 2022 must take their first RMD by April 1, 2023, and the second RMD by December 31, 2023, and each year thereafter.
Roth IRAs do not require distributions while the original owner is alive.
Retirement Plans 2022 Required Minimum Distributions
Retirement Plans: In 401(k), 403(b) and 457(b) plans; profit-sharing and other defined contribution plans; and defined benefit plans, the first RMD is due by April 1 of the later of the year they reach age 72, or the participant is no longer employed (if allowed by the plan). A 5% owner of the employer must begin taking RMDs at age 72. Remember, RMDs may not be rolled over to another IRA or retirement plan.
Who Does the Required Minimum Distributions?
An IRA trustee, or plan administrator, must either report the amount of the RMD to the IRA owner or offer to calculate it. An IRA owner, or trustee, must calculate the RMD separately for each IRA owned. They may be able to withdraw the total amount from one or more of the IRAs. However, RMDs from workplace retirement plans must be taken separately from each plan.
50% tax on the Missed 2022 Required Minimum Distributions
Not taking a required distribution, or not withdrawing enough, could mean a 50% excise tax on the amount not distributed. The IRS has worksheets to calculate the RMD and payout periods.
Special Case: Inherited IRAs
An RMD may be required for an IRA, retirement plan account or Roth IRA inherited from the original owner. Retirement Topics - Beneficiary has information on taking RMDs from an inherited IRA or retirement account and reporting taxable distributions as part of gross income. Publication 559, Survivors, Executors and Administrators, can help those in charge of the estate complete and file federal income tax returns, and explains their responsibility to pay any taxes due on behalf of the decedent or person who has died.
Note on the 2020 Coronavirus-Related Distributions
Since 2020 RMDs were waived, an account owner or beneficiary who received an RMD in 2020 had the option of returning it to their IRA or other qualified plan to avoid paying taxes on that distribution. A 2020 RMD that qualified as a coronavirus-related distribution may be repaid over a 3-year period or have the taxes due on the distribution spread over three years.
A 2020 withdrawal from an inherited IRA could not be repaid to the inherited IRA but may be spread over three years for income inclusion.
Sherayzen Law Office will continue to monitor any news concerning the 2022 RMDs.

### Foreign Account Disclosed on FBAR but not Form 8938 | Los Angeles FBAR Lawyer California
https://www.youtube.com/watch?v=_jhG4lexf4M&t=45s
Good afternoon and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing a series of blogs from Beverly Hills, California.
I'd like to talk to you about the situation where a foreign account was disclosed on FBAR but not on Form 8938. Is that something a taxpayer should be concerned about? And the answer is 'yes'. A disclosure of an account on FBAR does not replace the required Form 8938 disclosure. Just because you disclosed an asset on FBAR does not mean that you will automatically avoid a Form 8938 penalty.
What it means is that you have a stronger case for non-willfulness. Depending on circumstances, you may have a case for reasonable cause; but you still have to take care of that Form 8938 noncompliance.
How to take care of that? It depends on your facts and circumstances. Once an attorney studies your facts, he will be able to determine the most proper way to voluntarily disclose your noncompliance thereby by limiting an potentially eliminating your exposure to Form 8938 penalties.
If you would like to learn more about Form 8938 compliance and what to do in case of Form 8938 noncompliance, you can call me at (952) 500-8159 or you can email me at Eugene@Sherayzenlaw.com. Thank you for watching, until the next time.

### 2022 Fourth Quarter IRS Interest Rates (Underpayment & Overpayment)
On August 15, 2022, the IRS announced that the 2022 Fourth Quarter IRS interest rates will again increase for both underpayment and overpayment cases. This increase closely follows the Federal Reserve’s recent increases in interest rates.
This means that, the 2022 Fourth Quarter IRS interest rates will be as follows:
Six (6) percent for overpayments (five (5) percent in the case of a corporation);
Six (6) percent for underpayments;
eight (8) percent for large corporate underpayments; and
three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the interest rates are determined on a quarterly basis. This means that the next change in the IRS underpayment and overpayment interest rates may occur only for the 1st Quarter of 2023.
The the 2022 Fourth Quarter IRS interest rates are important for many reasons. These are the rates that the IRS uses to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an IRS audit or an amendment of his US tax return. The IRS also utilizes these rates with respect to the calculation of PFIC interest on Section 1291 tax.
As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment interest rates on a regular basis. We often amend our client’s tax returns as part of an offshore voluntary disclosure process. For example, both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures require that a taxpayer amends his prior US tax returns, determines the additional tax liability and calculates the interest on this liability.
Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology. This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.
Finally, it is important to point out that the IRS will use the 2022 Fourth Quarter IRS interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. Surprisingly, we sometimes see this scenario arise in the context of offshore voluntary disclosures.
Sherayzen Law Office continues to track any changes the IRS makes to its overpayment and underpayment interest rates.

### Establishing Cost-Basis in Foreign Real Estate | IRS Audit Tax Lawyer & Attorney
One of the most challenging issues during an IRS audit is establishing cost-basis in foreign real estate.  This issue most frequently comes up in the context of real estate that was obtained through inheritance or gift many years ago.  In this article, based on my IRS audit experiences, I would like to discuss the main challenges and case strategies associated with establishing the cost-basis in foreign real estate in a manner that would satisfy the IRS during an audit.
An important note: I will not be discussing this issue in the context of an IRS audit of an offshore voluntary disclosure and how it would affect the calculation of an Offshore Penalty.  This essay is strictly limited to an IRS audit that involves US international tax issues without the taxpayer ever going through a voluntary disclosure.
Another important note: this article is written more for the benefit of other international tax lawyers, not the general public.
Establishing Cost-Basis in Foreign Real Estate: Importance
Before we discuss the problems associated with establishing the cost-basis in foreign real estate, we need to first understand why this issue is so important.  There are three main consequences to establishing cost-basis in the context of an IRS audit. 
First, the income tax impact of failure to establish cost-basis in a foreign property on the audited taxpayer may be truly disastrous.  Obviously, if you cannot prove any cost-basis in a property (or you can only convince the IRS that there was minimal cost-basis), you will have to recognize all proceeds from the sale of this property as capital gains (or potentially subpart F income if you owned a property though a foreign corporation).
Second, there is a very important psychological impact on the entire audit if you have a large unreported gain from sale of foreign real estate.  The IRS agent in charge of an audit is likely to take a more aggressive position not only on this issue, but also on other issues irrespective of whether they are directly related to unreported gain.   The most frequent victims of this hardened attitude of an IRS agent are the legal arguments in support of a reasonable cause.
Finally, a large gain from a sale of foreign real estate is likely to encourage the IRS to dig deeper and even expand the audit to more years.  In one of my audit cases, an IRS agent initially believed that there was a large capital gain and expanded the audit to five prior years; however, he reversed this decision once I was able to show that the sold real property had a much higher cost-basis due to numerous improvements that were made by my client over a number of years.
In other words, establishing cost-basis in a sold real estate property may be one of the most crucial issues in an IRS audit.
Establishing Cost-Basis in Foreign Real Estate: Top 3 Challenges
The challenges to establishing cost-basis in foreign real estate are highly dependent on the facts of the case.  However, there are three main themes that usually appear in one form or another in every IRS audit case.
The first challenge is absence of documentation.  This is by far the most common and most important battleground between the IRS and the taxpayer during the vast majority of IRS audits in this area, especially if the direct documentation is absent due to passage of time.
The second challenge is the potential opposition from the IRS to proving cost-basis indirectly through usage of circumstantial evidence and third-parties.
The third challenge is establishing the credibility of evidence. For example, in one of my cases, the IRS initially refused to accept a valuation report prepared by a local professional valuation expert because the report lacked a proper explanation of how he arrived at the proposed values.
Establishing Cost-Basis in Foreign Real Estate: Top 4 Strategies for Overcoming Challenges
There are numerous strategies to deal with the cost-basis establishment challenges. Your choice among them should depend on the facts and circumstances of your case.  Sometimes, you will even come up with a brand-new strategy tailored specifically to the unique challenges of your case.
Nevertheless, there are four common themes to the strategies used in overcoming the aforementioned challenges.  First, you need to recreate the logical history of the property and capital improvements to the property in order to convince the IRS that the valuation your client supplied is logical and reasonable.
Second, demonstrate to the IRS agent in charge of your client’s audit that you are a reliable source of information.  The more objective you appear (and you actually are), the more the IRS sees that you will not allow false facts or statements to enter the record, the more the IRS sees that your client shares both of these traits, the more likely the IRS agent will accept your position or be willing to achieve a compromise with you (see below).
Third, utilize indirect and circumstantial evidence as well as third-party affidavits/testimony to support the valuation of the property.  In other words, if you have no ability to directly establish the cost-basis of a property, then you need to find creative ways to build the necessary records and establish their credibility through usage of supporting documents and/or testimony. 
For example, in one of my previous audits, the client had no documentation whatsoever except one isolated receipt to prove the substantial improvements made to her foreign real estate over the past almost forty (!) years.  My solution to this problem was to first get an affidavit from my client fully stating all improvements made with approximate cost based purely on her memory.  Then, I obtained additional signed statements from neighbors largely supporting the estimates as well as the fact that these improvements were indeed made. Finally, I obtained a statement from a local construction company owner who stated that he recalled these improvements and confirmed the estimated amounts.  Additionally, all of the improvements were properly explained by the history of how the property was obtained, for what purpose and why so many improvements were needed.  All of these facts and circumstances were explained in a letter to the IRS agent together with the legal basis (i.e., case law) showing how courts have accepted similar evidence in the past. Under the weight of this substantial record (and some other circumstances of this case), the IRS finally agreed to accept all improvements as part of an overall compromise.
Finally, use creative legal strategies to convince the IRS to accept a different cost-basis in a property through operation of tax rules.  This is a very complex strategy, but it is more commonly employed than one may believe.  For example, in one of my prior audit cases, the IRS agreed to disregard the foreign corporation that owned the foreign property allowing the stepped-up basis for this inherited property.
Contact Sherayzen Law office for Professional Help with IRS Audits Involving Foreign Real Estate
If you have foreign assets and you are audited by the IRS, contact Sherayzen Law Office for professional help.  We have helped hundreds of US taxpayers around the world to bring their tax affairs in full compliance with US tax laws, including during IRS audits.  We can help you!
Contact Us Today to Schedule a Confidential Consultation!

### Tax Residency Starting Date | International Tax Lawyer & Attorney
In situations where a person was not classified as a resident alien at any time in the preceding calendar year and he became a resident alien at some point during current year, a question often arises concerning the tax residency starting date of such a person. This article seeks to provide a succinct overview of this question in three different contexts: US permanent residence, substantial presence test and election to be treated as a tax resident.
Tax Residency Starting Date: General Rule for Green Card Holders
Pursuant to IRC (Internal Revenue Code) §7701(b)(2)(A)(iii), the starting tax residency date for green card holders is the first day in the calendar year in which he or she is physically present in the United States while holding a permanent residence visa.  However, if the green card holder also satisfies the Substantial Presence Test prior to obtaining his green card, the tax residency is the earliest of either the green card test described in the previous sentence or the substantial presence test (see below).
Tax Residency Starting Date: General Rule for the Substantial Presence Test
Generally, under the substantial presence test, the tax residence of an alien starts on the first day of his physical presence in the United States in the year he met the substantial presence test. See IRC §7701(b)(2)(A)(iii).  For example, if an alien meets the requirements of the Substantial presence test in 2022 and his first day of physical presence in the United States was March 1, 2022, then his US tax residency started on March 1, 2022.
Tax Residency Starting Date: Nominal Presence Exception & the Substantial Presence Test
A reader may ask: how does the rule described above work in case of a “nominal presence” in the United States. IRC §7701(b)(2)(C) provides that, for the purposes of determining the residency starting date only, up to ten (10) days of presence in the United States may be disregarded, but only if the alien is able to establish that he had a “closer connection” to a foreign country rather than to the United States on each of those particular ten days (i.e., all continuous days during a visit to the United States may be excluded or none of them). There is some doubt about the validity of this rule, but it has never been contested in court as of the time of this writing.
This rule may lead to a paradoxical result.  For example, if X visits the United States between March 1 and March 10 and leaves on March 10; then later comes back to the United States on May 1 of the same year and meets the substantial presence test, then he may exclude the first ten days in March and his US tax residency will start on May 1.  If, however, X prolongs his visit and leaves on March 12, then none of the days will be excluded (since March 11 and 12 cannot be excluded under the rules) and his US tax residency will commence on March 1.
I want to emphasize that the nominal presence exception only applies in determining an alien's residency starting date. It is completely irrelevant to the determination of whether a taxpayer met the Substantial Presence Test; i.e. the days excluded under the nominal presence exception are still counted toward the Substantial Presence Test calculation.
Tax Residency Starting Date: Additional Requirements for Nominal Presence Exception & Penalty for Noncompliance
The IRS has imposed two additional requirements concerning claiming “nominal presence” exclusion (again, both of them have questionable validity as there is nothing in the statutory language about them).  First, the alien must show that he had a “tax home” in the same foreign country with which he has a closer connection.
Second, Treas. Regs. §301.7701(b)-8(b)(3) requires that an alien who claims the nominal presence exception must file a statement with the IRS as well as attach such statement to his federal tax return for the year in which the termination is requested. The statement must be dated, signed, include a penalty of perjury clause and contain: (a) the first day and last day the alien was present in the United States and the days for which the exemption is being claimed; and (b) sufficient facts to establish that the alien has maintained his/her tax home in and a closer connection to a foreign country during the claimed period. Id.
A failure to file this statement may result in an imposition of a substantial penalty: a complete disallowance of the nominal presence exclusion claim.  Since IRC §7701(b)(8) does not contain the requirement to file any statements with the IRS to claim the nominal presence exception, the penalty stands on shaky legal grounds.  However, as of the time of this writing, there is no case law directly on point.
Additionally, as almost always in US international tax law, there are exceptions to this rule.  First, if the alien shows by clear and convincing evidence that he took: (a) “reasonable actions” to educate himself about the requirement to properly file the statement and (b) “significant affirmative actions” to comply with this requirement, then the IRS may still allow the nominal presence exclusion claim to proceed. Treas. Regs. 301.7701(b)-8(d). 
Second, under Treas. Regs. §301.7701(b)-8(e), the IRS has the discretion to ignore the taxpayer’s failure to file the required nominal presence statement if it is in the best interest of the United States to do so.
Tax Residency Starting Date: Election to Be Treated as a US Tax Resident
In situations where a resident alien elects to be treated as a US tax resident (for example, by filing a joint resident US tax return with his spouse), the tax residency date starts on the first day of the year for which election is made.  See Treas. Regs. §7701(b)(2)(A)(iv).
Contact Sherayzen Law Office for Professional Help with US International Tax Law, Including the Determination of the Tax Residency Starting Date
If you have foreign assets or foreign income or if you are trying to determine your tax residency status in the United States, contact Sherayzen Law Office for professional help.  Our law firm is a leader in US international tax compliance; we have helped hundreds of US taxpayers around the world and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### FATCA and The End of Swiss Bank Secrecy | Chicago International Tax Lawyer & Attorney
https://youtu.be/0n5L1ljmxrw
Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from Chicago, Illinois in the United States and I'm actually in Grant Park, the park where Obama gave his famous speech. It is interesting because it was precisely under the Obama administration that FATCA was passed into law. So, this park has a very special significance for me as an international tax attorney because it was precisely FATCA the Foreign Account Tax Compliance Act, that completely changed the entire landscape of international tax compliance.
Why? Well, because FATCA provided that third party verification that the IRS needed to find out about people who were non-compliant with their FBARs as well as foreign income reporting. It was FATCA that forced foreign banks to affectively report on their US owners of foreign bank accounts. It was FATCA that gave the teeth that the IRS needed together with the US Department of Justice to enforce US international tax laws concerning foreign income and foreign account reporting in Switzerland. In fact, we can say that FATCA was the principle reason why there wasn't Swiss bank tax compliance in 2013 and also ended Swiss Bank Secrecy as we know it.
In a future blog, I will continue talking about US international tax issues that concern Chicago and the people who live here.
Thank you for watching, until the next time.

### Streamlined Domestic Offshore Procedures | International Tax Lawyer & Attorney Austin Texas
https://youtu.be/b24QZnXYQec
Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of blogs from Austin, Texas. I am standing in front of the IRS Campus here in Austin, Texas that processes voluntary disclosures, in particular, Streamlined Disclosures: Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
What I would like to do in this blog is discuss Streamlined Domestic Offshore Procedures. What is it and why it is important. First of all Streamlined Domestic Offshore Procedures is an Offshore Voluntary Disclosure option. In the previous video, I discussed what an Offshore Voluntary Disclosure is. Briefly, let's restate that an Offshore Voluntary Disclosure is basically an option that the IRS provided to US Taxpayers; I should say several options, that the IRS provided to US Taxpayers in order to come forward and resolve their prior non-compliance with US International Tax Laws in exchange for a more lenient treatment: a lower penalty, immunity from criminal prosecution, etc.
Where does Streamlined Domestic Offshore Procedures fit into this picture? Streamlined Domestic Offshore Procedures or SDOP is reserved for non-willful taxpayers. People who, for example, did not know about the fact that FBAR existed or that they didn't know they needed to report their foreign income or there was something that happened that prevented them from learning about it or they were just negligent; not reckless, but just negligent in their compliance. That is they did not consult an attorney in time or there was something else or a another circumstance in their life that prevented them from complying with US International Tax Laws. For these taxpayers who are non-willful, the IRS gave this option and it's a valuable option; it's a good option.
In fact, as far as the voluntary disclosure options go, Streamlined Domestic Offshore Procedures is one of the best options available. The penalty is relatively low; it is 5% of the assets that should have been reported on FBAR or any other International Information return, a one-time 5% penalty on the highest of the past six years. There are no penalties for income tax non-compliance; you just have to pay taxes and interest on the tax but there are limitations to this option.
First of all you cannot file a late return pursuant to Streamlined Domestic Offshore Procedures; you can only amend an already filed return. It can be a problem; especially for taxpayers, who for one reason or another couldn't file all of their US tax returns on time. Second, you have to certify under the penalty of perjury, that you were in fact, non-willful. This subject is very sensitive and very important. Here, you must really talk to an attorney to figure out: are you non-willful according to the US legal standards or are you willful with respect to your noncompliance? There are a lot of facts and circumstances that go into that determination. You really need to talk to an attorney; I cannot stress this enough before you strive to do a voluntary disclosure. The IRS has expressly stated that they will go after the cases where they think people are abusing Streamlined Domestic Offshore Procedures because in reality they were not non-willful but they were willful.
If you would like to know more about Streamlined Domestic Offshore Procedures, you can call me at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com.
Thank you for watching, until the next time.

### 2022 2Q IRS Interest Rates | US International Tax Lawyers
On February 23, 2022, the Internal Revenue Service (“IRS”) announced that the 2022 Second Quarter IRS underpayment and overpayment interest rates (“2022 2Q IRS Interest Rates”) will increase from the first quarter of 2022. This means that, the 2022 2Q IRS interest rates will be as follows:
four (4) percent for overpayments (three (3) percent in the case of a corporation);
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000;
four (4) percent for underpayments; and
six (6) percent for large corporate underpayments.
The second quarter will start on April 1, 2022.
Under the Internal Revenue Code, these interest rates are determined on a quarterly basis. The IRS used the federal short-term rate for February of 2022 to determine the 2022 2Q IRS interest rates. The IRS interest is compounded on a daily basis.
The 2022 2Q IRS interest rates are important for many reasons for US domestic and international tax purposes. For example, the IRS will use these rates to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an amendment of his US tax return through Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. The IRS will also utilize 2022 2Q IRS interest rates with respect to the calculation of PFIC interest on Section 1291 tax.
As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment and overpayment interest rates on a regular basis. Since our specialty is offshore voluntary disclosures, we often amend our client’s tax returns as part of an offshore voluntary disclosure process and calculate the interest owed on any additional US tax liability. In other words these interest rates are relevant to Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, IRS Voluntary Disclosure Practice, Delinquent International Information Return Submission Procedures and Reasonable Cause Disclosures. We also need to take interest payments into account with respect to additional tax liability that arises out of an IRS audit.
Moreover, we regularly have to do PFIC calculations for our clients under the default IRC Section 1291 methodology. This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.
Finally, it is important to point out that the IRS will use the 2022 2Q IRS interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. This situation may also often arise in the context of offshore voluntary disclosures.
Thus, the IRS underpayment and overpayment interest rates have an impact on a lot of basic items in US tax law. Hence, it is important to keep track of changes in these rates on a quarterly basis.

### Offshore Voluntary Disclosure Seminar | MSBA, February 22 2022
On February 22, 2022, Mr. Eugene Sherayzen, an international tax attorney and founder of Sherayzen Law Office, Ltd., presented at a seminar “IRS Voluntary Disclosure Options for U.S. Owners of a Foreign Business” (the “Offshore Voluntary Disclosure Seminar”). The Offshore Voluntary Disclosure Seminar was sponsored by the International Business Law Section of the Minnesota State Bar Association. Due to the ongoing COVID-19 pandemic restrictions, the seminar was conducted online.
Offshore Voluntary Disclosure Seminar: Focus on Business Lawyers’ Needs
The seminar’s structure was shaped by its audience’s needs. Since Mr. Sherayzen presented to a group of mostly international business lawyers, he adopted a relatively broad approach in his presentation in attempt to cover a large number of topics rather than discuss a few points in depth. The idea behind the seminar was to provide international business lawyers with analytical tools to understand if there was problem with a client’s US international tax compliance that would require a utilization of an offshore voluntary disclosure option.
Offshore Voluntary Disclosure Seminar: Three Main Parts
Mr. Sherayzen divided the Offshore Voluntary Disclosure seminar into three parts. In the first and smallest part, he discussed the link between Offshore Voluntary Disclosures and international business law. The second part focused on US international tax reporting requirements. Finally, in the third part, the international tax attorney provided a broad overview of the existing offshore voluntary disclosure options.
Offshore Voluntary Disclosure Seminar: Link between Offshore Voluntary Disclosures and International Business Law
In the first part of the seminar, Mr. Sherayzen discussed the potential relevance of the IRS offshore voluntary disclosure options and US international tax law in general to the audience’s international business law practice. The international tax attorney even described three main scenarios where international business lawyers will need to have awareness of: US international tax reporting requirements and IRS offshore voluntary disclosure options for US owners of a foreign business. At that point, Mr. Sherayzen gave an example from his own practice illustrating his main points.
Offshore Voluntary Disclosure Seminar: Overview of US International Tax Reporting Requirements for US Owners of a Foreign Business
In the next part of the Offshore Voluntary Disclosure seminar, Mr. Sherayzen provided a broad overview of two major categories of US international tax reporting requirements for individual US taxpayers: US international information returns and income tax recognition.
The international tax attorney first focused on international information returns. After defining the term “information return”, Mr. Sherayzen stated that the type of an information return one needs to file should correspond to the type of a foreign entity for which the return is filed. Then, he described three types of entities that may exist under US international tax law: corporations, partnerships and disregarded entities. Mr. Sherayzen proceeded with a discussion of the most common information returns associated with each of them.
Moreover, the attorney explained that FinCEN Form 114 or FBAR is the main form for reporting of foreign bank and financial accounts in a business context. He also warned the audience against a potential tax trap associated with FBAR reporting for foreign business entities.
Then, Mr. Sherayzen proceeded with an explanation of three major categories of income recognition: distributions, passthrough income and US anti-deferral tax regimes. The latter received the most attention due to their complexity. Three anti-deferral tax regimes were covered: PFICs, Subpart F rules and GILTI.
Offshore Voluntary Disclosure Seminar: Offshore Voluntary Disclosure Options
Mr. Sherayzen began this last major part of his presentation with a definition of the term “offshore voluntary disclosure”. Then, he focused on explaining two critical factors in choosing a voluntary disclosure option: (a) willfulness vs. non-willfulness; and (b) reasonable cause.
After defining these highly-important terms, the attorney laid out all major offshore voluntary disclosure options available to US owners of a foreign business. The presentation covered: IRS Voluntary Disclosure Practice, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause (Noisy) Disclosure.
Mr. Sherayzen also discussed the concept of quiet disclosure and why it presented potentially huge risks to noncompliant taxpayers. He emphasized that the IRS stated in the past that it would specifically target this type of a disclosure.
Offshore Voluntary Disclosure Seminar: Conclusion
The international tax attorney concluded the seminar with a concise due diligence plan of action for business lawyers. He emphasized that, upon discovery of potential US international tax noncompliance, business lawyers should not attempt to fix it themselves. Rather, he argued, they need to contact an international tax attorney for professional help.
Contact Sherayzen Law Office for Professional Help
If you are a US owner of a foreign business and you have not properly complied with your US international tax reporting requirements, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the globe to bring their US tax affairs into full compliance with US international tax law, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Offshore Voluntary Disclosure: Introduction | International Tax Lawyer & Attorney Texas
https://youtu.be/MHJK-zAT9Bw
Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I am standing in front of the IRS Campus here in Austin, Texas that processes Offshore Voluntary Disclosures, in particular Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. This is the perfect spot and the perfect time to talk about what an Offshore Voluntary Disclosure is.
Let's begin with the fact that, US taxpayers must report their foreign income and foreign assets to the IRS. If they fail to do that, they face potentially multiple and very large IRS penalties. The IRS doesn't have the resources to audit every single US taxpayer; so, what they prefer to do is to allow US taxpayers to voluntarily resolve their prior US international tax non-compliance.
How exactly they do that depends on the facts and circumstances of each person. The IRS created these Offshore Voluntary Disclosure options which are basically programs for US taxpayers to voluntarily come forward, disclose their prior non-compliance with US international tax laws in exchange for a more lenient tax treatment. How lenient? It depends on the facts and circumstances and it depends on the voluntary disclosure option that you are using.
For example, if you are using an IRS Voluntary Disclosure Practice, that may mean a significant penalty because that option is reserved mostly for willful taxpayers. On the other hand, if you're using the Streamlined Domestic Offshore Procedures, for example, you will get a much more lenient tax treatment because it is reserved for non-willful taxpayers and of course, if you also reside outside of the United States, the IRS gives you the best option: the Streamlined Foreign Offshore Procedures.
In my next blog, I will continue talking about Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Thank you for watching, until the next time.

### Austin Business Trip | February 2022 | International Tax Lawyer & Attorney
In early February of 2022, Mr. Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., traveled to Austin, Texas. Let’s discuss this Austin business trip in more detail.
Austin Business Trip: Goals
While the business trip to Austin was very short, Mr. Sherayzen set forth three main goals for the trip: (1) meeting with a client; (2) familiarizing himself with the city, which is a major source of clients to the firm; and (3) conducting important marketing activities to promote the firm.
All of these goals were accomplished (though #2 may still need more work) despite the fact that he came to Austin at the worst possible moment – right after a winter storm when the temperatures plummeted to the twenties (Fahrenheit) from the usual upper fifties/lower sixties and there was still ice on the roads.
Austin Business Trip: Client Meeting
The first goal was very easy to achieve as the meeting with a client was set prior to his arrival to Austin.
Austin Business Trip: Getting to Know Austin
The weather and the brevity of the Austin business trip presented a formidable challenge to the second goal. Despite these problems, Mr. Sherayzen was able to familiarize himself with the old-city Austin. Even more important, he was able to visit the IRS campus in Austin that processes streamlined disclosures: Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Both of these options are known as Streamlined Compliance Procedures.
Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures belong to the core practice of Sherayzen Law Office. This is why visiting the Austin IRS campus was an indispensable part of the Mr. Sherayzen’s trip to this city.
One may ask: why does Mr. Sherayzen want to know Austin in person? The answer is very simple: he wants to understand how his clients live, what their particular needs are, what logistical problems they may be facing and what are the peculiarities of their everyday life. At Sherayzen Law Office, we take an extra step in delivering customized services to our clients; for this reason, we strive to understand not only the financial situation of our clients, but also their logistics.
Austin Business Trip: Marketing
Marketing is Mr. Sherayzen’s crucial goal in almost every business trip. Nothing can replace the authenticity of marketing materials made in the city where the client lives. For this reason, more than two-thirds of his trip to Austin was devoted to marketing activities.
Given the presence of an IRS campus in Austin, offshore voluntary disclosures of course constituted the focus of these marketing activities. Besides Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures, Mr. Sherayzen also covered IRS Voluntary Disclosure Practice and other voluntary disclosure options.
Additionally, as always, Mr. Sherayzen promoted the awareness of the FBAR and FATCA reporting requirements in his marketing activities. The attorney also covered important US international tax information returns such as: Forms 8865, 5471, 3520, 3520-A, et cetera.
Austin Business Trip is Part of a Major Marketing Strategy
The Austin business trip is merely one part of a major marketing strategy that Sherayzen Law Office launched last year. It is projected that this strategy will run through the end of the year 2027.
Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure and US International Tax Compliance
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance and offshore voluntary disclosures. We help clients with their US international tax compliance issues throughout the world, including in all fifty states of the United States.
Contact Us Today to Schedule Your Confidential Consultation!

### Austin TX IRS Campus for Processing Streamlined Disclosures | International Tax Lawyer & Attorney
https://youtu.be/osc3gJIWo8A
Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Austin, TX. Today, is a very special day because Austin has a very important significance for me. This is the place where the IRS has it's campus and where it accepts all of the Streamlined Disclosures: Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Disclosures.
In fact, I am standing right in front of the building where the IRS accepts Offshore Voluntary Disclosures: 3651 Hwy 35 as you can see. This is the place where you would send your Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures and this is a huge IRS campus. I can't really enter it because it's Sunday, it's closed and on top of that it is blocked off, but here I am. This is where the voluntary disclosures go.
Thank you for watching, until the next time.

### Mexican Accounts & FBAR Reporting | Mexico FBAR Lawyer & Attorney
https://youtu.be/APFj3kAGnfo
Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I am continuing my series of blogs from Mexico City. In the previous blog, I talked about FBAR, Form 8938, Form 8621 and Schedule B reporting concerning foreign bank and financial accounts. Today, I'd like to talk about what type of accounts are actually reportable and I'd like to focus specifically on Mexico. What type of Mexican accounts are reportable? First of all, your regular checking and savings accounts are important and fixed-deposit accounts are important. You will notice that fixed-deposit accounts are reported as separate accounts from checking accounts and savings accounts. It doesn't matter if they are to renew or change the account numbers; it doesn't really matter. What matters is that there is an account number associated with the fixed deposits and that's what gets reported on the FBAR. The same rule applies to Form 8938.
Besides the regular checking, savings and fixed-deposit accounts, also all of your investment accounts and securities accounts are reportable on FBAR. Life insurance policies: if you have a life insurance contract, that's also going to be reportable on FBAR. Investments in gold, silver and other precious metals that are placed in a general bank vault - that would be reportable on FBAR as well. Basically, what you're looking for is a fiduciary relationship between the financial institution and you where the financial institution has access to the assets that it holds on your behalf along with an account number associated with that access.
There are other possible assets that won't fall neatly within the categories I described, but may also be reportable on FBAR, for example, prepaid credit cards. Here, you'll want to disclose everything to your international tax attorney to make sure that all of the assets are reported on your FBAR.
In the next blog, I will continue talking about US International tax compliance concerning Mexican assets.
Thank you for watching, until the next time.

### Tax Year 2021 Foreign Account Reporting: Introduction | FBAR International Tax Lawyer
https://youtu.be/3hId4wfvT4Y
Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm continuing my series of vlogs from Mexico City. I'm in the Colonia Reforma Social and I'm thinking about your upcoming tax year 2021 tax compliance. Right now, I'd like to focus, just on your foreign financial accounts. For the tax year 2021, you will need to file certain forms for your foreign accounts.
For example, if your accounts exceed $10,000, then you will have to file an FBAR; if your accounts exceed $100,000 and you reside in the United States, then you will have to file a Form 8938. If your foreign accounts contain PFICs (passive income), then you will have to file Forms 8621. In other words, having foreign financial accounts will result in a fairly substantial amount of US tax reporting requirements depending on the actual balances that you have on your foreign financial accounts. The lower you have, the lower the compliance you have. The higher the balances that you have on your bank and financial accounts, the more compliance you will have to do.
Now, keep in mind that you also need disclose the ownership of foreign accounts, irrespective of whether you have to file FBAR, Form 8938 or Form 8621 on Schedule B. You will have to indicate that you do not have to file an FBAR if you really do not have to do it.
In the next blog, I will continue talking about your 2021 FBAR compliance.
Thank you for watching, until the next time.

### 2021 Form 3520-A Deadline in 2022 | Foreign Trust Tax Lawyer & Attorney
Form 3520-A is a very important US international information return. It can be very complex and has somewhat tricky filing requirements as well as significant noncompliance penalties. In order to avoid these penalties, you need to file a correct Form 3520-A timely. In this essay, I will discuss the 2021 Form 3520-A deadline in the calendar year 2022.
2021 Form 3520-A Deadline: Purpose of Form 3520-A
Form 3520-A occupies an important role in US international tax law. Its primary purpose is to supply certain information about a foreign trust with at least one US person who is treated as an owner of the foreign trust under the grantor trust rules found in the IRC (Internal Revenue Code) §§671-679.
Through Form 3520-A, the IRS collects not only the data about the foreign trust and its US beneficiaries, but also the information concerning interactions between the foreign trust and its US owners. Moreover, Form 3520-A indicates the amount of income a US owner must recognize on his US tax returns (irrespective of whether this income was distributed to the owner).
2021 Form 3520-A Deadline: Who Must File
As I mentioned above, the question of “who must file” Form 3520-A is quite tricky. Generally, a foreign trust with a US owner has responsibility to file Form 3520-A in order for the US owner to satisfy his annual information reporting requirements under IRC §6048(b). Hence, while a foreign trust officially must file Form 3520-A, in reality, it is the responsibility of each US person treated as an owner of any portion of a foreign trust to ensure that the trust files Form 3520-A and furnishes the required annual statements to its US owners and US beneficiaries.
What if the foreign trust fails to file the required Form 3520-A? Then, the US owner must complete a substitute Form 3520-A for the foreign trust and attach this substitute Form 3520-A to the US owner’s Form 3520.
2021 Form 3520-A Deadline: Penalties for Late Filing
If the foreign trust fails to file Form 3520-A timely and its US owner fails to submit a substitute Form 3520-A timely, then the US owner (I emphasize: not the foreign trust, but its US owner) will be subject to heavy Form 3520-A penalties.
The main penalty in this case would be $10,000 or 5% of the gross value of the foreign trust, whichever is higher. The “gross value” here means the portion of the foreign trust’s assets at the end of year treated as owned by US persons.
Additional penalties may apply if noncompliance lasts more than 90 days after the IRS mails a “failure to comply” notice. The US owner also may be subject to the underpayment penalties for failure to report income indicated on Form 3520-A. Finally, criminal penalties may be imposed under IRC §§7203, 7206 and 7207 for failure to file on time and for filing a false or fraudulent return.
2021 Form 3520-A Deadline: Where to File
The foreign trust needs to file Form 3520-A (including the statements on pages 3 and 5) at the following address:
Internal Revenue Service CenterP.O. Box 409101Ogden, UT 84409
I recommend mailing Form 3520-A by US Certified Mail. I want to emphasize for the US readers who are mailing their returns – do NOT attach Form 3520-A to your US tax return. It must be mailed separately from your US income tax return to the address I indicated above.
2021 Form 3520-A Deadline: When to File
The deadline for Form 3520-A can also be tricky. Generally, the due date for Form 3520-A is the 15th of the third month after the end of the trust's tax year.
However, if you are filing a substitute Form 3520-A with your Form 3520, then your substitute Form 3520-A is due by the due date of Form 3520. The trust must also supply the Foreign Grantor Trust Owner Statement and Foreign Grantor Trust Beneficiary Statement to its US owners and US beneficiaries by the 15th of the third month after the end of the trust's tax year, unless an extension is filed.
The foreign trust may file Form 7004 to request an automatic six-month Form 3520-A filing extension (it also applies to the aforementioned Statements). Note that filing Form 7004 is the only way to request this six-month extension. A common procedural tax trap is for people to file an income tax return extension (Form 4868) and think that this would apply to Form 3520-A. This is incorrect – you must separately file Form 7004 to get an extension on your Form 3520-A.
Thus, the current outstanding 2021 Form 3520-A deadline for a calendar-year filer is March 15, 2022. If Form 7004 is filed, then the extended 2021 Form 3520-A deadline for this filer would be September 15, 2022.
Contact Sherayzen Law Office for Professional Help With Your 2021 Form 3520-A Deadline
If you are required to file Form 3520-A or if you have not complied with your Form 3520-A reporting requirements in the past, you need to contact Sherayzen Law Office for professional help! Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures (including the ones that involve Form 3520-A) and US international information returns compliance. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Preparing for the Tax Year 2021 Compliance | US International Tax Lawyer
https://youtu.be/myULRbfySsE
Good morning and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
I am continuing with a series of vlogs from Mexico City and today I'd like to talk about the upcoming tax season for the tax year 2021. The tax season started at the end of January 2022, and you might as well be preparing for it now, especially if you have foreign assets like foreign business ownership interests and foreign corporations, foreign partnerships or foreign disregarded entities, also if your have foreign financial accounts because you are looking at a significant amount of compliance, which has increased since the last year.
It's not just a matter of doing the same thing that you have done in the past, it's also a matter of taking into account the extra compliance that will come into play this year.
What you need to do right now is to start gathering all of the information for the calendar year 2021; put everything together: financial statements for the foreign corporations, financial statements for foreign trusts, if you are a beneficiary or owner of a foreign trust, financial statements for foreign partnerships, as well as things like fixed asset appreciation reports and things as simple as foreign bank account statements that will cover the entire year 2021.
In the next blog, I will continue talking more about your tax year 2021 tax compliance.
Thank you for watching, until the next time.

### Austin Streamlined Disclosure Lawyer | International Tax Attorney
Austin is a fast-growing city which attracts a large number of immigrants with assets in foreign countries. These assets may also generate foreign income which their owners must disclose on their US tax returns. Unfortunately many of these new residents of Austin have not correctly reported their foreign assets and foreign income to the IRS. Once they realize it, they have to grapple with a fact that their noncompliance may have exposed them to large IRS penalties. Since the majority of these persons are non-willful in their prior noncompliance, they naturally seek help from an Austin streamlined disclosure lawyer to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP), but they do not fully know what the term “Austin streamlined disclosure lawyer” truly means.
In this essay, I will explore the definition of an Austin streamlined disclosure lawyer and explain why out-of-state lawyers and law firms, such as Sherayzen Law Office, should be included in the definition of this term.
Austin Streamlined Disclosure Lawyer: International Tax Attorney
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax law, because these options deal with US international tax compliance concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of a lawyer you are looking for when you search for a Austin streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.
Austin Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Austin Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures are highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no relation whatsoever to the SDOP and SFOP.
This means that you are not limited to Austin when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Austin or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Austin might have had in the past over the out-of-state lawyers. This is especially true in our today’s world where the pandemic greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your Austin Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Austin, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2021 Form 5471 Deadline in 2022 | Foreign Business Tax Lawyer & Attorney
IRS Form 5471 is one of the most important US international information returns. In this brief essay, I will discuss the tax year 2021 Form 5471 deadline in the calendar year 2022.
2021 Form 5471 Deadline: What is Form 5471
Form 5471 is a US international information return. In general, the IRS uses Form 5471 to collect information about certain US persons who are officers, directors, or shareholders in certain foreign corporations. These US persons, in turn, use Form 5471 to satisfy the reporting requirements of the IRC (Internal Revenue Code) §§965, 6038 and 6046 as well as related regulations. In other words, US taxpayers utilize Form 5471 to comply with their reporting obligations concerning their ownership of and transactions with a foreign corporation.
Form 5471, however, is more than just an international information return. It also contains the relevant schedules related to income recognition by US owners of foreign corporations through the operation of anti-deferral tax regimes such as Subpart F rules, 965 tax and GILTI tax.
2021 Form 5471 Deadline: Who Must File It
Determining whether you are required to file a Form 5471 and which schedules you must attach to it may also be very complicated. As a result of the 2017 tax reform, Form 5471 now sports a total of five categories of required filers; two of these categories contain three sub-categories. In other words, the instructions to Form 5471 describe now a total of nine categories of filers!
Once you determine that you fall into one of these categories, you must carefully determine which schedules, statements and attachments you must complete in order to fully comply with your Form 5471 obligations.
I should also note that a separate Form 5471 is required for each applicable foreign corporation. This is the case even if one foreign corporation owns the other; there is no consolidated group filing under Form 5471.
2021 Form 5471 Deadline: Complexity
Form 5471 is incredibly complex. It forces its filers to convert foreign financial statements to US GAAP. It further requires reporting of an astounding range of transactions between a foreign corporation and its US owners as well as the affiliates of US owners. Finally, as it was already mentioned above, US taxpayers use Form 5471 schedules to calculate the income that they must recognize under the various anti-deferral tax regimes.
Thus, completing a Form 5471 may require a significant effort and a lot of time. This is why you need plan well ahead to make sure that you file your Form 5471 timely.
2021 Form 5471 Deadline: Penalties
A failure to timely file an accurate Form 5471 may result in imposition of large IRS penalties. Moreover, since Form 5471 is used to satisfy a variety of tax obligations, different penalties may be imposed under different IRC sections.
For example, a failure to file Form 5471 Schedule M may result in the imposition of a $10,000 penalty pursuant to §6038(a). A failure to file Form 5471 Schedule O is a violation of §6046 and the IRS may assess a separate section 6046 is subject to a $10,000 penalty for each reportable transaction.
2021 Form 5471 Deadline: When to File and Where
All filers (unless they fall under an exception) must attach their Forms 5471 to their income tax returns (if applicable, a partnership return or tax exempt organization return). Both, the income tax return and Form 5471 must be filed by the due date, including extensions, for that return.
In other words, if you are an individual filing Form 1040, your 2021 Form 5471 deadline is April 18, 2022. If you file an extension, the deadline will shift to October 17, 2022.
Contact Sherayzen Law Office for Professional Help With Your 2021 Form 5471 Deadline
If you are required to file a Form 5471 for the tax year 2021, contact Sherayzen Law Office for professional help. We have successfully helped US taxpayers around the world with their Form 5471 compliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2021 Form 3520 Deadline in 2022 | Foreign Trust Tax Lawyer & Attorney
The beginning of a new tax season starts the clock on completing the required US international information returns, including Form 3520. In this brief essay, I will discuss the tax year 2021 Form 3520 deadline.
2021 Form 3520 Deadline: What is Form 3520 ?
IRS Form 3520 is a US international information return used by the IRS to collect information related to foreign trusts, foreign gifts and foreign inheritance. In essence, Form 3520 collects four types of data from US taxpayers:
Certain transactions with foreign trusts;
Ownership of foreign trusts under the rules of sections 671 through 679;
Receipt of certain large gifts from foreign persons; and
Bequests from foreign persons.
It is very important that you file Form 3520 timely, because late filing Form 3520 penalties can be very high. For example, a failure to timely disclose a reportable foreign gift on Form 3520 may result in a penalty as high as 25% of the value of the gift. Initial Form 3520 penalty for a failure to report a property transferred by a US transferor to a foreign trust may be as high as 35% of the gross value of the property.
2021 Form 3520 Deadline: Where to File
Form 3520 reporting is complicated by the fact that this form is not filed with a US tax return. Rather, for the tax year 2021, a Form 3520 with all required attachments should be mailed to the following address:
Internal Revenue Service CenterP.O. Box 409101Ogden, UT 84409
My recommendation is to mail your 2021 Form 3520 by US Certified Mail.
2021 Form 3520 Deadline: When to File
Generally, 2021 Form 3520 deadline will correspond to your US income tax return deadline. In other words, a US person must file his Form 3520 by and including the 15th day of the 4th month following the end of such person’s tax year for US income tax purposes. Same rule applies to Forms 3520 filed by an estate and on behalf of a US decedent. If the due date falls on a Saturday, Sunday, or legal holiday, file by the next day that is not a Saturday, Sunday, or legal holiday.
For individual taxpayers who reside in the United States, this usually means April 15. However, due to the fact that April 15 is a legal holiday this year, your 2021 Form 3520 will be due on April 18, 2022.
Moreover, if you are a US citizen or resident and (a) you live outside of the United States and Puerto Rico and your place of business or post of duty is outside the United States and Puerto Rico, OR (b) you are in the military or naval service on duty outside of the United States and Puerto Rico, then your tax deadline will shift to the 15th day of the 6th month (i.e. June 15). In other words, if you satisfy either (a) or (b) above and you are either a US citizen or US resident, then your 2021 Form 3520 will be due on June 15, 2022. You must include a statement with your 2021 Form 3520 showing that you are a U.S. citizen or resident who meets one of these conditions listed above.
Finally, if a US person is granted an extension of time to file an income tax return, the due date for filing Form 3520 shifts to the 15th day of the 10th month following the end of the US person’s tax year. In other words, if you are an individual who filed an extension on your US income tax return, then your 2021 Form 3520 will be due on October 17, 2022 (because October 15 falls on a Saturday this year).
Contact Sherayzen Law Office for Professional Help With Your 2021 Form 3520 Deadline
If you are required to file a Form 3520 for the tax year 2021 (whether because you are an owner or a beneficiary of a foreign trust, you received a foreign gift or you received a foreign inheritance), contact Sherayzen Law Office for professional help. We have successfully helped US taxpayers around the world with their Form 3520 compliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2021 FBAR Deadline in 2022 | FinCEN Form 114 International Tax Lawyer & Attorney
The 2021 FBAR deadline is a critical deadline for US taxpayers this calendar year 2022. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2021 FBAR deadline in more detail.
2021 FBAR Deadline: Background Information
The official name of FBAR is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs must be timely e-filed separately from federal tax returns.
Failure to file an FBAR may result in the imposition of heavy FBAR penalties. The FBAR penalties vary from criminal penalties and willful penalties to non-willful penalties. You can find more details about FBAR penalties in this article.
2021 FBAR Deadline: Pre-2016 FBAR Deadline
For the years preceding 2016, US persons needed to file FBARs by June 30 of each year. For example, the 2013 FBAR was due on June 30, 2014. No filing extensions were allowed.
The last FBAR that followed the June 30 deadline was the 2015 FBAR; its due date was June 30, 2016. Due to the six-year FBAR statute of limitations, however, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. The 2015 FBAR’s statute of limitations will expire only this year – on June 30, 2022.
2021 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR
For many years, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, many taxpayers simply missed the unusual FBAR filing deadline.
The US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR. Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.
Furthermore, during the transition period (which continues to this date), the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. Taxpayers do not need to make any specific requests in order for an extension to be granted.
Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. This is the case even if federal law requires a different filing date. For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day.
2021 FBAR Deadline
Based on the current law, the 2021 FBAR deadline will be April 18, 2022. However, it is automatically extended to October 17, 2022.
The 2021 FBAR must be e-filed through the US Financial Crimes Enforcement Network’s (FinCEN) BSA E-filing system.
Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance
If you have unreported foreign accounts, contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in US international tax compliance and offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers around the globe with their FBAR compliance and FBAR voluntary disclosures; and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2022 Offshore Voluntary Disclosure Options | US International Tax Lawyers
While the year 2021 has ended, numerous taxpayers continue to be substantially noncompliant with various US international tax laws. Hence, it is important for US taxpayers with undisclosed foreign assets to consider their 2022 offshore voluntary disclosure options. In this essay, I would like to provide an overview of these 2022 offshore voluntary disclosure options.
2022 Offshore Voluntary Disclosure Options: What is Offshore Voluntary Disclosure
The term “offshore voluntary disclosure” refers to a series of legal processes established by the IRS to allow noncompliant US taxpayers to voluntarily come forward and disclose their prior US international tax noncompliance in exchange for more lenient IRS treatment. This leniency can express itself in various ways: avoidance of criminal prosecution, lower and even zero penalties, a shorter voluntary disclosure period, ability to make certain retroactive tax elections, et cetera.
In general, the benefits of a voluntary disclosure usually far outweigh the consequences of a disclosure during a potential IRS audit. There are exceptions, but they are usually limited to mishandled cases where either an improper voluntary disclosure path was chosen or the process of the disclosure was mishandled by the taxpayer (usually) or his tax attorneys. This is why it is important that you chose the right international tax attorney to help you with your offshore voluntary disclosure.
Let’s review the main 2022 offshore voluntary disclosure options and briefly describe them.
2022 Offshore Voluntary Disclosure Options: Streamlined Foreign Offshore Procedures
While Streamlined Foreign Offshore Procedures (“SFOP”) was created already in 2012, it exists in its current form since June of 2014. It is a true tax amnesty program, because its participants do not pay IRS penalties of any kind, even on income tax due. The participants only need to pay the extra tax due on the amended tax returns plus interest on the tax.
Moreover, SFOP preserves SDOP’s non-invasive and limited scope of voluntary disclosure (see below). For example, you only need to amend the tax returns for the past three years and file FBARs for the past six years.
SFOP, however, is available to a limited number of US taxpayers who are able to satisfy its eligibility requirements, particularly those related to non-willfulness certification and physical presence outside of the United States. You should contact Sherayzen Law Office to help you determine whether you meet the eligibility requirements of SFOP.
2022 Offshore Voluntary Disclosure Options: Streamlined Domestic Offshore Procedures
Streamlined Domestic Offshore Procedures (“SDOP”) is currently the flagship voluntary disclosure option for US taxpayers who reside in the United States. While not as generous as SFOP, SDOP is still a very good voluntary disclosure option for non-willful taxpayers: it is simple, limited (in terms of the voluntary disclosure period for which tax returns and FBARs must be filed) and mild (in terms of its penalty structure). There are some drawbacks to SDOP, such as the potential imposition of the Miscellaneous Offshore Penalty on income-tax compliant foreign accounts, but the benefits offered by this option outweigh its deficiencies for most taxpayers.
The reason why the IRS is so generous lies in the fact that this voluntary disclosure option is open only to taxpayers who can certify under the penalty of perjury that they were non-willful with respect to their prior income tax noncompliance, FBAR noncompliance and noncompliance with any other US international information tax return (such as Form 3520, 5471, 8938 et cetera). It will be up to your international tax lawyer to make the determination on whether you are able to make this certification.
Moreover, a taxpayer cannot file a delinquent Form 1040 under the SDOP. SDOP only accepts amended tax returns (i.e Forms 1040X), not original late tax returns.
2022 Offshore Voluntary Disclosure Options: Delinquent FBAR Submission Procedures
Delinquent FBAR Submission Procedures (“DFSP”) is another voluntary disclosure option that fully eliminates IRS penalties. This is not a new option; in fact, in one form or another, officially or unofficially, it has always existed within the IRS procedures. Prior to 2019, it was even written into the OVDP (IRS Offshore Voluntary Disclosure Program) as FAQ#17 (though in a modified version).
While DFSP is highly beneficial to noncompliant US taxpayers, it is available to even fewer number of taxpayers than those who are eligible for SDOP and SFOP. This is the case due to two factors. First, DFSP has a very narrow scope – it applies only to FBARs. Second, DFSP has extremely strict eligibility requirements; even de minimis income tax noncompliance may deprive a taxpayer of the ability to use this option if it is sufficient to require an amendment of a tax return. In other words, DFSP only applies where SDOP, SFOP and VDP (see below) are irrelevant due to absence of unreported income.
2022 Offshore Voluntary Disclosure Options: Delinquent International Information Return Submission Procedures
Delinquent International Information Return Submission Procedures (“DIIRSP”) has a similar history to DFSP. In fact, it was “codified” into OVDP rules as FAQ#18. Similarly to DFSP, DIIRSP also offers the possibility of escaping IRS Penalties. DIIRSP has a broader scope than DFSP and applies to international information returns other than FBAR, such as Form 8938, 3520, 5471, 8865, 926, et cetera.
Since it turned into an independent voluntary disclosure option in 2014, DIIRSP’s eligibility requirements became much harsher. US taxpayers are now required to provide a reasonable cause explanation in order to escape IRS penalties under this option. On the other hand, the fact that there may be unreported income associated with international information returns is not an impediment by itself to participation in DIIRSP.
2022 Offshore Voluntary Disclosure Options: IRS Voluntary Disclosure Practice
The traditional IRS Offshore Voluntary Disclosure practice has existed for a very long time. However, it faded into complete obscurity once the IRS opened its first major OVDP option in 2009. The closure of the 2014 OVDP in September of 2018 has brought this option back to life.
On November 20, 2018, the IRS has completely revamped this traditional voluntary disclosure option, modified its procedural structure and imposed a new tough (but relatively clear) penalty structure. This new version of the traditional voluntary disclosure is now officially called IRS Voluntary Disclosure Practice (“VDP”).
The chief advantage of VDP is that it is specifically designed to help taxpayers who willfully violated their US tax obligations to come forward to avoid criminal prosecution and lower their civil willful penalties. In other words, VDP is now the main voluntary disclosure option for willful taxpayers.
2022 Offshore Voluntary Disclosure Options: Reasonable Cause Disclosure
Since 2014, the popularity of Reasonable Cause disclosure (also known as “Noisy Disclosure”) has declined substantially due to the introduction of SDOP and SFOP. Nevertheless, Reasonable Cause disclosure continues to be a highly important voluntary disclosure alternative to official IRS voluntary disclosure options. It is now primarily used when SDOP and SFOP are not available for technical reasons (i.e. some of their eligibility requirements are not met).
Reasonable Cause disclosure is based on the actual statutory language; it is not part of any official IRS program. Special care must be taken in using this option, because this is a high-risk, high-reward option. If a taxpayer is able to satisfy this high burden of proof, then, he will be able to avoid all IRS penalties. If the IRS audits the Reasonable Cause disclosure and disagrees, this taxpayer may face significant IRS penalties and, potentially, years of IRS litigation.
Contact Sherayzen Law Office for Professional Analysis of Your 2022 Offshore Voluntary Disclosure Options
If you have undisclosed foreign assets, contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers from over 70 countries with their voluntary disclosures of foreign assets to the IRS, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### San Antonio FBAR Attorney | International Tax Lawyers Texas
If you have foreign financial accounts and reside in San Antonio (Texas), you would be looking for a San Antonio FBAR Attorney in Texas. In your search, you could consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
San Antonio FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for a San Antonio FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
San Antonio FBAR Attorney: Out-Of-State International Tax Attorney
It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in San Antonio, Texas. On the contrary, you should consider international tax attorneys who reside in other states and help San Antonio residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including San Antonio, Texas.
San Antonio FBAR Attorney: Broad Scope of Compliance
When retaining a San Antonio FBAR Attorney, you should consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Contact Sherayzen Law Office If You Need A San Antonio FBAR Attorney
Sherayzen Law Office has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for an attorney to help with your FBAR compliance, contact Sherayzen Law Office to secure Your Confidential Consultation!

### 2021 FBAR Conversion Rates | FBAR Tax Lawyer & Attorney
The 2021 FBAR conversion rates are highly important in US international tax compliance. The 2021 FBAR and 2021 Form 8938 instructions both require that 2021 FBAR conversion rates be used to report the required highest balances of foreign financial assets on these forms (in the case of Form 8938, the 2021 FBAR conversion rates is the default choice, not an exclusive one). In other words, the 2021 FBAR conversion rates are used to translate foreign-currency highest balances into US dollars for the purposes of FBAR and Form 8938 compliance.
The U.S. Department of Treasury  already published the 2021 FBAR conversion rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).
Since the 2021 FBAR conversion rates are highly important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2021 FBAR conversion rates (note that the readers still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
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### San Diego FBAR Attorney | International Tax Lawyers California
If you have foreign financial accounts and reside in San Diego (California), you would be looking for a San Diego FBAR Attorney in California. In your search, you could consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
San Diego FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for a San Diego FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
San Diego FBAR Attorney: Out-Of-State International Tax Attorney
It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in San Diego, California. On the contrary, you could consider international tax attorneys who reside in other states and help San Diego residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including San Diego, California.
San Diego FBAR Attorney: Broad Scope of Compliance 
When retaining a San Diego FBAR Attorney, you should consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Contact Sherayzen Law Office If You Need A San Diego FBAR Attorney 
Sherayzen Law Office has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for an attorney to help with your FBAR compliance, contact Sherayzen Law Office as soon as possible to secure Your Confidential Consultation!

### Factual Basis & Tax Planning | International Tax Lawyer & Attorney
In a previous article, I discussed the necessity of balancing international tax planning priorities in order to obtain an optimal tax result. In this article, I will explain why international tax planning should be based on a carefully-studied factual basis.
Factual Basis as the Foundation for International Tax Planning
Young inexperienced lawyers often come up with a particular tax strategy and then they try to implement it independent of the actual facts on the ground. Irrespective of how brilliant such a strategy would be in the abstract, it is almost always doomed to become a failure.
Why? The answer is very simple: these lawyers turn international tax planning on its head. They build the second level of a house without ever building a foundation for it. No matter how well they plan out a strategy, it will fall apart almost immediately when it comes in conflict with the facts – how the business is run, its capital structure, its needs, its goals, its cash flow source, its operating model, its E&P, its foreign tax credit and numerous other important considerations.
Hence, the starting point of any tax planning should be a careful factual study of the business.
Studying Factual Basis as a Way to Uncover Potential Opportunities
In my practice, I have found that a careful study of a business may generate a number of potential planning opportunities that may have otherwise been ignored. For example, during a study of a company’s loan structure, one can sometimes find opportunities to treat these loans as equity investments and utilize much better currency exchange rates to build up the client’s basis in the company (potentially even resulting in a reversal of an entire capital gain upon the sale of this company).
Factual Basis: Four Most Important Components
While an attorney should study all relevant facts, there are four main components that he must cover. The components are: (1) organizational chart and capital structure; (2) operating model; (3) tax status and characteristics; and (4) analysis of financial statements. Let’s analyze each component in more detail.
Factual Basis Components: Organizational Chart and Capital Structure
You should start your factual analysis by building the organizational chart of the business and understanding its capital structure. What you need to do is to understand each entity within the corporate structure and the place it occupies in the overall business structure, identify the tax status of each business, understand the sources of cash and where it is used, create a diagram of debt and equity instruments (including whether these are related or unrelated party instruments), study how the business operates across the entire corporate structure, uncover which currencies are used in business (as well as any currency hedging) and review the withholding tax exposure/compliance.
This first component is likely to help you to identify the tax inefficiencies of the existing corporate structure and seek structural alternatives. I recommend that at this stage you plan for creating a more tax-efficient financing of foreign affiliates to maximize foreign country deductions, minimize tax imposed on interest income, reduce withholding tax and assure sufficient cash flow throughout the structure.
Factual Basis Components: Operating Model
The second component of your factual analysis (though it will probably come at about the same time as you start working on the first component) is the operating model of the business. In other words, what type of a business is it: manufacturing, sales, services or IP (development, ownership and/or usage of IP)? How does the business operate: local country manufacturing, local distributing/franchising, global service contracts, et cetera?
I recommend that you especially focus here (as a goal of your tax planning strategy) on: tax-efficient structuring of current and anticipated foreign operations to maximize tax deferral, tax-efficient financing of capital needs and development of strategy concerning IP development and licensing.
Factual Basis Components: Tax Characteristics
The third component is the one that tax attorneys are likely to like the most, because it is very close to their training and professional interest – the study of the tax characteristics of the corporate structure: income/losses, NOL, AMT, foreign tax credit position (carryovers), E&P, transfer pricing, local tax position and PTI (previously taxed income through Subpart F, 965 tax, GILTI tax, et cetera).
The focus of your tax planning goals here are centered around foreign tax credit, repatriation of earnings, minimizing Subpart F income and transfer pricing (i.e. allocation of profits between the US head office and its foreign affiliate companies).
Factual Basis Components: Financial Statements
Finally, the fourth component of your factual basis study consists of the financial statement analysis. You need to carefully review the financial statement with the focus on: Effective Tax Rate (“ETR”) reconciliation, deferred tax analysis, reinvestment, valuation and foreign currency. The focus of your tax planning goals here should be on low-tax deferral structures (for example, through indefinite reinvestment outside of the United States at a lower tax rate) and the most optimal foreign tax credit utilization.
Contact Sherayzen Law Office for Professional Help With International Tax Planning
If your US company conducts business outside of the United States, contact Sherayzen Law Office for professional help with your international business tax planning. We have helped companies plan their inbound and outbound transactions for US and foreign companies, and we can help you!

### Los Angeles FBAR Attorney | International Tax Lawyer California
If you have foreign financial accounts and reside in Los Angeles (California), you would be looking for a Los Angeles FBAR Attorney in California. In your search, you might consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
Los Angeles FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for a Los Angeles FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Los Angeles FBAR Attorney: Out-Of-State International Tax Attorney
It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in Los Angeles, California. On the contrary, you should consider international tax attorneys who reside in other states and help Los Angeles residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Los Angeles, California.
Los Angeles FBAR Attorney: Broad Scope of Compliance
When retaining a Los Angeles FBAR Attorney, you should consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Contact Sherayzen Law Office If You Need A Los Angeles FBAR Attorney
Sherayzen Law Office has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for an attorney to help with your FBAR compliance, contact Sherayzen Law Office as soon as possible to secure Your Confidential Consultation!

### Subsidiary vs. Branch | International Business Tax Lawyer Minneapolis
For the purposes of US international tax laws, it is very important to distinguish a subsidiary from a branch. Let’s define both terms in this short essay.
Subsidiary vs. Branch: Definition of a Branch
A branch is a direct form of doing business by a corporation in another country where the corporation retains the direct title of the assets used in the branch’s business. In other words, a branch is a direct extension of the corporation to another country.
Most importantly, there is no separate legal identity between a corporation’s branch in one country and its head office in another. It is all the same company doing business in two countries.
One of the practical advantages of a branch is that it usually requires a lot less effort to establish a branch than a subsidiary. However, it is not always the case – for example, in Kazakhstan, creation of a branch is a very formal process.  Moreover, while the legal formalities may not be that complicated, the tax consequences of having a branch in another country may be far more complex.
Subsidiary vs. Branch: Definition of a Subsidiary
A subsidiary is a complete opposite of a branch. It is a separately-chartered foreign corporation owned by a US parent corporation. In other words, a subsidiary has its own legal identity separate from that of its parent US corporation. In the eyes of a local jurisdiction, the US corporation is merely a shareholder of its foreign subsidiary; the US corporation is not directly doing any business in the foreign jurisdiction.
Of course, a situation can be reversed: it can be a foreign parent corporation that organizes a US subsidiary. In this case, the foreign parent company will have its separate identity from its US subsidiary. It will be merely a shareholder of the US company in the eyes of the IRS.
As a separate legal entity, subsidiaries will usually have a host of legal and tax duties in the jurisdiction where they are organized.
Subsidiary vs. Branch: Forced Tax Similarities
Despite these legal differences, the US tax treatment of a subsidiary and a branch created some artificial similarities between these two forms of business. The reason for these similarities is the huge potential for tax deferral through subsidiaries.
The basic trend here is to minimize the advantages of a separate legal identity of a subsidiary, making it a lot more similar to a branch when it comes to tax treatment. The IRS has achieved this through the usage of a number of anti-deferral regimes, such as Subpart F rules and GILTI tax, as well as transfer pricing rules.
Contact Sherayzen Law Office to Determine Whether a Branch or a Subsidiary is Best for Your Business
Whether you are a US business entity who wishes to do business overseas or a foreign entity that wishes to do business in the United States, you can contact Sherayzen Law Office for professional help. We have helped domestic and foreign businesses with their US international tax planning concerning their inbound and outbound transactions, and we can help you!

### San Francisco FBAR Attorney | International Tax Lawyer California
If you have foreign financial accounts and reside in San Francisco (California), you should be looking for a San Francisco FBAR Attorney in California. In your search, you could consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
San Francisco FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for a San Francisco FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
San Francisco FBAR Attorney: Out-Of-State International Tax Attorney
It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in San Francisco, California. On the contrary, you could consider international tax attorneys who reside in other states and help San Francisco residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including San Francisco, California.
San Francisco FBAR Attorney: Broad Scope of Compliance
When retaining a San Francisco FBAR Attorney, you should consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Contact Sherayzen Law Office If You Need A San Francisco FBAR Attorney
Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are a resident of San Francisco looking for an FBAR help, contact Sherayzen Law Office as soon as possible to secure Your Confidential Consultation!

### International Tax Planning Priorities for US Corporations
Sometimes, I encounter in my practice one particularly damaging belief concerning international tax planning for US corporations that engage in cross-border transactions and maintain a foreign subsidiary or a network of foreign subsidiaries. This is a belief that international tax planning for such corporations should only focus on the reduction of its US taxes above all other considerations. I reject this one-sided view and argue for balancing of international tax planning priorities for such US corporations. In this article, I will discuss the top priorities that are subject to balancing during proper international tax planning for US corporations who operate overseas.
International Tax Planning Priorities: Tax Planning Should Correspond to Dynamic Facts
Before we outline international tax planning priorities, we need to state a rule that seems very obvious but, unfortunately, is often overlooked – tax planning must correspond to the factual situation around which the planning is done. Since a factual situation of a business is prone to rapid changes, tax planning either needs to pro-actively respond to these dynamic facts or, in cases where it is not possible, adjust to these facts as soon as possible in order to avoid a negative tax impact in the future.
This means that engaging in business transactions that spread over multiple taxing jurisdictions requires continuous tax planning, continuous monitoring of the factual background in which these transactions take place and continuous assessment of tax consequences of these activities.
This rule also means that tax planning must respond to the facts generated by the required business transaction rather than create business transactions purely to save taxes. I should point out that such purely tax-motivated schemes are also unlikely to pass judicial review.
International Tax Planning Priorities: Lower US Tax Liability
There is no question that ethically lowering US tax liability based on the opportunities and incentives present in the Internal Revenue Code is one of the most important priorities of international tax planning. As I stated above, however, this is not the only priority.
International Tax Planning Priorities: Lower Foreign Tax Liability
It is not just the US tax liability of the head office that we should be concerned about. International tax planning should also seek to lower foreign tax liability of its subsidiaries. Moreover, if lowering US tax liability comes at the cost of increasing foreign tax liability or missing an opportunity to minimize it, this outcome may not be optimal for the overall corporate structure.
International Tax Planning Priorities: Maximizing Corporate Earnings
This is a key issue that many practitioners and business owners often miss in US international tax planning. Tax planning is not only about lowering taxes at any cost. If a business is continuously losing a significant amount of money (not strategically recognizing losses, but its profits are actually reduced) because of tax planning, then such tax planning may not be worth the effort.
Effective tax planning means that a tax practitioner should coordinate tax saving efforts with business priorities. Business planning will always see to utilize corporate cash and personnel in a way that maximizes profits. Moreover, business planning will also seek to creatively allocate and move excess cash flow between corporate subsidiaries (and the head office) for the same purpose.
It is precisely the latter function of business planning that requires the most attention of international tax attorneys, because it may result in significant tax costs (which may more than offset the benefit of business planning). At the same time, tax planning must be done in such a way as to minimize the damage it can do to the business’ ability to move cash across the entire corporate structure.
Contact Sherayzen Law Office for International Tax Planning Help
At Sherayzen Law Office, we understand these priorities and the need to balance them before finalizing international tax planning. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Partnership Definition | International Business Tax Lawyers
Defining a partnership as “foreign” or “domestic” can be highly important for US tax purposes. In this article, I will explain the foreign partnership definition and explain its significance.
Foreign Partnership Definition: Importance
There may be important US international tax law consequences that stem from whether a partnership is classified as “foreign” or “domestic”. These consequences may encompass not only income tax compliance, but also the type of information returns that may have to be filed. Even tax withholding requirements may be affected by this classification.
Let me give you a few examples of where foreign partnership directly appears in the IRC (Internal Revenue Code) in order for you to appreciate the significance of the foreign partnership definition. The term foreign partnership appears in such diverse provisions as IRC §6046A (filing of information returns by U.S. persons with regard to acquisition, disposition, or substantial change of interest in foreign partnership - this is the famous IRS Form 8865), §3401(d)(2) (wage withholding), §168(h)(5) (tax-exempt entity leasing rules) and even tax withholding rules for disposition of US real property under §1445.
The main reason for this significance of the foreign partnership definition lies in §7701(a)(30), which states that a foreign partnership is not a “US Person”, a highly important term of art in US international tax law. The implications of being a “foreign person” rather than a “US person” can be huge, extending as far as affecting anti-deferral tax regimes.
Foreign Partnership Definition: Formal Partnership
Let’s delve now into the foreign partnership definition. Our starting point is §7701(a)(5); it states that a partnership is considered to be foreign as long as it is “not domestic”. §7701(a)(4) defines domestic partnership as those which were “created or organized in the United States, or under the law of the United States or of any State.”
Under §7701(a)(9), the term “United States” includes only the states and the District of Columbia. In other words, if a partnership is formally organized in any place other than the fifty states of the United States and the District of Columbia, it is a foreign partnership.
What about partnerships created or organized in US possessions? The IRS and the courts have consistently stated that they are foreign (though there are more examples of these rulings with respect to corporations rather than partnerships).
What if a partnership is chartered both in the United States and another country? Without delving too deeply into legal analysis, pursuant to Treas. Reg. §301.7701-5(a), such a partnership would be classified as a domestic entity
Foreign Partnership Definition: Common Law/Private Agreement Partnerships
The above definition only works well in cases where a partnership is formally created or organized under the laws of a country. However, it is also possible for the IRS to classify a contractual relationship as a partnership for tax purposes. In these cases, the determination of whether a partnership is a foreign or domestic for US international tax purposes is a lot more difficult.
At this point, there is no absolute clarity provided by the IRS on this issue. However, there are two main approaches for determining whether a deemed partnership is domestic or foreign that may be acceptable to the IRS: (1) the contract’s governing law; and (2) primary location of the business of the deemed partnership. Let’s review these approaches.
Foreign Partnership Definition for Deemed Partnerships: Governing Law Approach
The governing law approach to classification of partnerships as foreign or domestic states that a partnership should be classified as foreign or domestic depending on the governing law which controls the agreement that gave rise to the deemed partnership.
The IRS often likes this approach, because it pretty much mimics the foreign partnership definition for formal partnerships described above. In other words, while in a formal partnership we look at the place of organization, the governing law approach for deemed partnerships basically looks at the jurisdiction which controls the legal enforcement of the partnership agreement. Both approaches are based on the premise that the foreign partnership definition should depend on whether the partners’ rights and duties are defined under domestic or foreign law.
Foreign Partnership Definition for Deemed Partnerships: Business Location Approach
The primary location of business approach, on the other hand, seeks to classify a deemed partnership not based on where the partners’ rights and duties are defined, but based on where the business of the partnership is actually conducted. The advantage of this approach is that it is closer to business reality and does not artificially classify a partnership based on which law governs it.
There are, however, problems with this approach which make the IRS like it a lot less. First of all, it is very difficult to apply this approach to a partnership with extensive business operations within and outside of the United States. Second, the classification of the same partnership may often switch depending on the shift in the volume of its US operations versus foreign operations.
Contact Sherayzen Law Office for Help With Foreign Partnership Definition
If you are unclear about the classification of your partnership for US tax purposes or you wish to change the existing classification for US tax planning purposes, contact the US international tax law firm of Sherayzen Law Office for professional help. We Can Help You!

### Berkeley FBAR Attorney | International Tax Lawyers California
If you have foreign financial accounts and reside in Berkeley (California), you would be looking for a Berkeley FBAR Attorney in California. In your search, consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
Berkeley FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for a Berkeley FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Berkeley FBAR Attorney: Out-Of-State International Tax Attorney
It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in Berkeley, California. On the contrary, consider international tax attorneys who reside in other states and help Berkeley residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Berkeley, California.
Berkeley FBAR Attorney: Broad Scope of Compliance
When retaining a Berkeley FBAR Attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Contact Sherayzen Law Office If You Need A Berkeley FBAR Attorney
Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a Berkeley FBAR Attorney, contact Mr. Sherayzen as soon as possible to secure Your Confidential Consultation!

### Happy New Year 2022 From Sherayzen Law Office!!!
Dear clients, followers, readers and colleagues:
Sherayzen Law Office wishes you a very Happy New Year 2022!!!
For those of you who are currently not in compliance with their US international tax reporting obligations, including FBAR or FinCEN Form 114, we wish you to successfully resolve your prior noncompliance in this new year 2022 with a minimal amount of IRS penalties!
Dear friends, in the year 2022, you can continue to rely on Sherayzen Law Office for your annual US international tax compliance (including the preparation of FBAR and other US international tax compliance forms such as: Forms 3520, 3520-A, 5471, 8621, 8865, 8938 and 926), your international tax planning (inbound and outbound) and your offshore voluntary disclosures (including: Streamlined Domestic Offshore Procedures (SDOP), Streamlined Foreign Offshore Procedures (SFOP), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, IRS Voluntary Disclosure Practice and Reasonable Cause Disclosures).
In 2022, we will also continue to help you with your IRS audits and examination, including audits of: your prior SDOP and SFOP submissions (as well as other voluntary disclosure options) and your annual international tax compliance. We can also help you fight the imposition of IRS penalties for prior international tax noncompliance, including Form 3520 and 3520-A penalties, Form 5471 penalties, Form 5472 penalties, Form 8865 penalties, Form 926 penalties, et cetera.
In 2022, the US international tax compliance requirements are going to grow more complex, detailed and extensive. The IRS will continue to demand more and more information from US taxpayers, introducing heretofore unknown reporting obligations such as Schedules K-2 and K-3.
In order to deal with this ever-increasing US tax compliance burden, you will need the professional help of Sherayzen Law Office. In this New Year 2022, we can help you!
Your professional US international tax help is but a phone call away from you! Contact us today to schedule a confidential consultation in this New Year 2022!
HAPPY NEW YEAR 2022 EVERYONE!!!

### Form 8938 Does Not Replace FBAR Reporting | FBAR Tax Lawyer & Attorney
https://www.youtube.com/watch?v=kevQLgzBuuo
Hello, and welcome to Sherayzen Law Office video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I'd like to talk to you about the situation where an account was disclosed on Form 8938 but it was not disclosed on FBAR or as it's know by it's official name, FinCEN Form 114.
Does your disclosure on Form 8938 replace the FBAR nondisclosure? That's a question I often hear from taxpayers who come to me for help; and the answer is 'no'. Unfortunately, just because you disclosed an account on Form 8938, that does not in any way eliminate your obligation to report the same account on Form 114 (or FBAR).
Will it help your non-willfulness case? Yes, it will but you still have to file your FBARs. You still have to disclose on your FBARs all of the foreign accounts you are required to disclose, otherwise you are on the hook for the penalties, even if they are not willful-type penalties; they may be non-willful penalties. It will depend on the particular facts and circumstances of your case.
If you would like to know more about your FBAR compliance, you can contact me (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com.
Thank you for watching, until the next time.

### Oakland FBAR Attorney | International Tax Lawyers California
If you reside in Oakland (California) and have foreign accounts, you would be looking for a Oakland FBAR Attorney in California. In your search, consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
Oakland FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for a Oakland FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Oakland FBAR Attorney: Out-Of-State International Tax Attorney
It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in Oakland, California. On the contrary, you should consider international tax attorneys who reside in other states and help Oakland residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Oakland, California.
Oakland FBAR Attorney: Broad Scope of Compliance
When retaining a Oakland FBAR Attorney, you should consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, an FBAR attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Contact Sherayzen Law Office If You Need An Oakland FBAR Attorney
Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a Oakland FBAR Attorney, you should contact Mr. Sherayzen as soon as possible to secure Your Confidential Consultation!

### Sacramento FBAR Attorney | International Tax Lawyer California
If you are a resident of Sacramento (California) and you have foreign accounts, you would be looking for a Sacramento FBAR Attorney in California. In your search, you could consider out-of-state attorneys such as Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Let’s explore in more detail why this is the case.
Sacramento FBAR Attorney: International Tax Attorney
First of all, it is very important to understand that, by looking for a Sacramento FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance.
Ever since the FBAR enforcement was turned over to the IRS (in 2001), the term FBAR attorney applies almost exclusively to tax attorneys.
Moreover, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
Sacramento FBAR Attorney: Out-Of-State International Tax Attorney
Further, it is important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in Sacramento, California. On the contrary, consider international tax attorneys who reside in other states and help Sacramento residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Sacramento, California.
Sacramento FBAR Attorney: Broad Scope of Compliance
When retaining a Sacramento FBAR Attorney, consider the fact that such an attorney’s work is not limited only to the preparation and filing of FBARs. Rather, the attorney should be able to deliver a variety of tax services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, a Sacramento FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a Sacramento FBAR Attorney, contact Mr. Sherayzen as soon as possible to secure Your Confidential Consultation!

### Bozeman FBAR Attorney | FATCA Tax Lawyer Montana
If you are looking for a Bozeman FBAR Attorney in Montana, the recommendation is that you retain the services of Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Mr. Sherayzen is an FBAR Attorney and founder of Sherayzen Law Office.
Bozeman FBAR Attorney: International Tax Attorney
It is very important to understand that, by looking for a Bozeman FBAR attorney, in reality, you are looking for an international tax attorney whose specialty includes FBAR compliance. Let’s understand why this is the case.
First of all, an FBAR attorney is a tax attorney, because FBAR enforcement has been turned over to the IRS since 2001.
Second, FBAR enforcement belongs to a very special field of US tax law – US international tax law. The reason for this is simple: FBAR is an information return concerning foreign assets (which also implies foreign income) and the tax compliance concerning foreign assets and foreign income belongs to US international tax law. Hence, when you look for an FBAR attorney, you are looking for an international tax attorney with a specialty in FBAR compliance.
It is further important to note that, since you are looking for an attorney who specializes in US international tax law (i.e. a federal area of law), you do not need to limit yourself to lawyers who reside in Bozeman, Montana. On the contrary, consider international tax attorneys who reside in other states and help Bozeman residents with their FBAR compliance.
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance, including FBARs. While our office is in Minneapolis, Minnesota, we help taxpayers who reside throughout the United States, including Bozeman, Montana.
Bozeman FBAR Attorney: Broad Scope of Compliance
The work of a Bozeman FBAR Attorney is not limited only to the preparation and filing of FBARs. Rather, a Bozeman FBAR Attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of US international tax law, including the various offshore voluntary disclosure options concerning delinquent FBARs.
Moreover, as part of an offshore voluntary disclosure, a Bozeman FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and complete an innumerable number of other tasks.
Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws. This work included the preparation and filing of offshore voluntary disclosures concerning delinquent FBARs. Sherayzen Law Office offers help with all kinds of offshore voluntary disclosure options, including: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures.
Thus, if you are looking for a Bozeman FBAR Attorney, contact Mr. Sherayzen as soon as possible to secure Your Confidential Consultation!

### Oregon Streamlined Disclosure Lawyer | International Tax Attorney
Oregon is a lovely state which hosts a number of immigrants from many different countries (especially in Portland, but also Salem and Eugene). Many of these new US taxpayers own assets in foreign countries and receive income generated by these assets. Unfortunately a number of these taxpayers are not in compliance with their US international tax obligations and want to participate in Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for an Oregon streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I would like to explain the definition of Oregon streamlined disclosure lawyer and outline who belongs to this category of lawyers.
Oregon Streamlined Disclosure Lawyer: International Tax Attorney
From the outset, It is important to understand that all voluntary disclosures, including the Streamlined options, form part of US international tax law, because these options deal with US international tax compliance concerning foreign assets and foreign income. The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of lawyer you are looking for when you search for an Oregon streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax attorney.
Oregon Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax attorney would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax attorney who specializes in offshore voluntary disclosures and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), IRS VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Oregon Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures is highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no relation whatsoever to the SDOP and SFOP.
This means that you are not limited to Oregon when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Oregon or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Oregon might have had in the past over the out-of-state lawyers. This is especially true in today’s world where the pandemic greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your Oregon Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Oregon, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Real Estate US Taxpayer Definition | International Tax Lawyer
This essay seeks to identify those considered to be a “US Taxpayer” with respect to reporting foreign real estate or income from it to the IRS. In other words, today, I will discuss the foreign real estate US Taxpayer definition.
Foreign Real Estate US Taxpayer Definition: IRC §7701(a)
The definition of “US taxpayer” for the purposes of foreign real estate is equivalent to the definition of US tax resident or “US Person” in IRC §7701(a). “US Persons" are equivalent to “US taxpayers” for the purposes of this article.
Note that, under §7701(a)(1), a person “shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation”. In other words, a “person” may mean not only an individual, but also a business entity, trust or estate.
Foreign Real Estate US Taxpayer Definition: General Definition
Under §7701(a)(30), a “US Person” means a US citizen, US resident alien, domestic partnership, domestic corporation, any estate that is not a foreign estate and a trust that satisfies both conditions of §7701(a)(30)(E). Let’s discuss each of these categories of US Persons in more detail.
Foreign Real Estate US Taxpayer Definition: Individuals Who Are US Persons
As I stated above, all US citizens and US resident aliens are considered US Persons. In the vast majority of cases, it is fairly easy to determine who a US citizen is; most complications occur with respect to “accidental Americans” and Americans with only one parent who is a US citizen.
A US resident alien is a more complex term. It includes US Permanent Residents (i.e. “green card” holders) as well as all persons who satisfied the Substantial Presence Test (unless an exception applies) and all persons who declared themselves as US tax residents. This means that a person may be a US resident for tax purposes, but not for immigration purposes. This situation creates a lot of confusion among people who marry US persons or who come to the United States to work; many of them believe themselves to be Non-US Persons, but in reality they are US tax residents.
Foreign Real Estate US Taxpayer Definition: Domestic Corporations & Partnerships
Under §7701(a)(4), corporations and partnerships are considered US Persons if they are created or organized in the United States or under the laws of the United States or any of its states. In the case of partnerships, the IRS may issue regulations that provide otherwise, but the IRS has not done so yet. Conversely, a corporation or a partnership is a Non-US Person if it is not organized in the United States.
Pursuant to §7701(a)(9), the definition of the United States for the purposes of §7701(a)(4) includes only the 50 States and the District of Columbia. In other words, §7701(a)(9) excludes all US territories and possessions from the definition of the United States. For example, a corporation formed in Guam is a Non-US Person!
The biggest complication that one would encounter in this area of law is with respect to common-law partnerships. The determination of their US tax residency may be a lot more complex, because they are not officially organized under the laws of any state.
Foreign Real Estate US Taxpayer Definition: Domestic Trust
A trust is a US Person if it satisfies both tests contained in §7701(a)(30)(E). The first test is a “court test”: a court within the United States must be able to exercise primary supervision administration. The second test is a “control test”: one or more US persons must have the authority to control all substantial decisions of the trust. Failure to meet either test will result in the trust being a Non-US Person with huge implications for US tax purposes.
Foreign Real Estate US Taxpayer Definition: Domestic Estate
While all other definitions described above define a domestic entity and state that a foreign entity is not a domestic one, it is exactly the opposite with estates. Under §7701(a)(30)(D), an estate is a US Person if it is not a foreign estate described in §7701(a)(31).
§7701(a)(31)(A) defines foreign estate as estate “the income of which, from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income under subtitle A”.
Contact Sherayzen Law Office for Professional Help with Your Foreign Real Estate Reporting Obligations in the United States
If you are a US person who owns foreign real estate and you have questions concerning your US tax compliance concerning owning foreign real estate, selling real estate or reporting income generated by foreign real estate, contact Sherayzen Law Office for professional help. We have helped US taxpayers around the world with their foreign real estate US tax obligations, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2022 Form 5471 Penalties | International Tax Lawyer & Attorney
Failure to timely and correctly submit Form 5471 with a US tax return may lead to an imposition of Form 5471 penalties. In this article, I will discus the most important 2022 Form 5471 penalties that US taxpayers may face if they fail to comply with the Form 5471 requirements.
2022 Form 5471 Penalties: Purpose of Form 5471
We first need to understand the purpose of Form 5471 and broadly identify who may need to file this form. The IRS Form 5471 is an extremely complex form that is used to satisfy the reporting requirements of mainly two esoteric sections of the Internal Revenue Code: 26 U.S.C. § 6038 (“Information reporting with respect to certain foreign corporations and partnerships”) and 26 U.S.C. § 6046 (“Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock”).
It should be noted that Form 5471 is used to satisfy other US tax provisions, especially after the 2017 tax reform. IRS §§ 6038 and 6046, however, are most relevant for our discussion of Form 5471 penalties.
Certain US citizens and US tax residents who are officers, directors or US shareholders of a foreign corporation may need to file Form 5471 and accurately comply with its reporting requirements. Failure to file Form 5471 or failure to file a correct Form 5471 may result in the imposition of steep IRS penalties.
The First Set of 2022 Form 5471 Penalties: Failure to file information required under section 26 U.S.C. § 6038(a)
From the outset, it is important to note that 26 U.S.C. § 6038 applies to two different parts of Form 5471: the Form 5471 proper (i.e. the first six pages containing the identifying information and Schedules A through I plus Schedules H and I-1) and Schedule M of Form 5471. Failure to file either is enough to trigger a $10,000 penalty for each annual accounting period of each foreign corporation. If the IRS sends the taxpayer a notice of a failure to file, an additional $10,000 penalty (per foreign corporation) will be charged for each 30-day period (or fraction thereof), during which the failure continues after the 90-day period in which the notification occurred, has expired. This additional penalty is limited to a maximum of $50,000 for each failed filing.
Furthermore, there is an income tax penalty associated with the failure to comply with 26 U.S.C. § 6038 in a timely manner – the taxpayer may be subject to a 10% reduction of certain available Foreign Tax Credits. A further 5% reduction may be applied for each 3-month period (or fraction thereof), during which the failure to timely report or file continues after the 90-day period of IRS notification has expired. (26 U.S.C. § 6038(c)(2) places certain limitations on this penalty).
The Second Set of 2022 Form 5471 Penalties: Failure to file information required by 26 U.S.C. § 6046 and related regulations (Form 5471 and Schedule O)
In addition to 26 U.S.C. § 6038 Form 5471 penalties, there is also an additional set of Form 5471 penalties associated with 26 U.S.C. § 6046 (Form 5471 and Schedule O). Failure to comply with 26 U.S.C. § 6046 will subject the taxpayer to another $10,000 penalty for each failure for each reportable transaction. Additionally, if the failure to report or file continues for more than 90 days after the date the IRS mails notice of this failure, an additional $10,000 penalty will apply for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired. This additional penalty is limited to a maximum of $50,000.
2022 Form 5471 Non-Compliance May Result in Criminal Penalties
In addition to civil penalties under 26 U.S.C. § 6038 and 26 U.S.C. § 6046, criminal penalties may apply to Form 5471 filers in certain circumstances. In particular, a willful failure to file an accurate Form 5471 may activate the broad provisions of 26 U.S.C. § 7203 (“Willful failure to file return, supply information, or pay tax”), 26 U.S.C. § 7206 (“Fraud and false statements”), and 26 U.S.C. § 7207 (“Fraudulent returns, statements, or other documents”).
2022 Form 5471 Penalties and Persons Other Than the Filer
In situations where the filer should have filed Forms 5471 for other persons, but failed to do so, Form 5471 penalties may be extended to these other persons.
Contact Sherayzen Law Office NOW For Help With 2022 Form 5471 Penalties and Compliance
If you partially or fully own a foreign corporation, you may be subject to the Form 5471 requirements. As explained in this article, failure to timely and/or correctly comply with your Form 5471 filing obligations may result in steep Form 5471 penalties.
Contact Sherayzen Law Office today. We can help you prepare and file your Form 5471 as part of your annual compliance as well as help deal with the Form 5471 voluntary disclosure concerning your past Form 5471 noncompliance.
Contact Us Now to Schedule Your Confidential Consultation!

### 2022 Streamlined Foreign Offshore Procedures | International Tax Lawyer
Streamlined Foreign Offshore Procedures has been the best voluntary disclosure option for eligible US taxpayers with undisclosed foreign assets and foreign income, and I predict that it will remain so in the year 2022. Let’s discuss in more detail the unique advantages of the 2022 Streamlined Foreign Offshore Procedures.
2022 Streamlined Foreign Offshore Procedures: Background Information and Purpose
The IRS created the current Streamlined Foreign Offshore Procedures (usually abbreviated as “SFOP”) on June 18, 2014, though the Certification forms became available only a few months later. Streamlined Foreign Offshore Procedures quickly became the most popular option for US taxpayers who reside overseas, because it is the only voluntary disclosure option that can truly be called an “amnesty program”.
Why did the IRS create Streamlined Foreign Offshore Procedures and offered such favorable terms? The problem is that the enforcement of international tax compliance for taxpayers who reside overseas is highly complex and very expensive. Where such noncompliance is willful, the penalty framework and deterrence considerations make it worthwhile for the IRS to engage in these expenses (although, even in these cases, the IRS offered a special voluntary disclosure option). With respect to non-willful taxpayers, however, this logic does not work well.
Hence, the IRS (correctly, in my opinion) decided that it would be in the best interests of the United States to allow noncompliant US taxpayers overseas voluntarily came forward and resolve their prior tax noncompliance. In order to achieve this goal, the IRS decided to offer such a sweet deal to these taxpayers that it would make no sense for these taxpayers to remain noncompliant. Streamlined Foreign Offshore Procedures is precisely this “sweet deal” meant to encourage non-willful US taxpayers who reside overseas to voluntarily resolve their prior noncompliance with US international tax reporting requirements.
2022 Streamlined Foreign Offshore Procedures: the “Sweet Deal”
Streamlined Foreign Offshore Procedures offers four great advantages to eligible participants. First and most important, it is a true tax amnesty program, because there are no penalties for prior noncompliance. There are no income tax penalties; the taxpayers only need to pay the extra tax owed plus interest. There is also no Offshore Penalty for prior noncompliance with respect to FBAR and other US information tax returns. It is definitely the best deal a taxpayer can ever get when it comes to offshore voluntary disclosure programs.
Second, Streamlined Foreign Offshore Procedures offers a simplified (not simple, though) offshore voluntary disclosure procedure which covers a relatively short disclosure period. Unlike the now closed OVDP (Offshore Voluntary Disclosure Program), SFOP only demands the taxpayers to file tax forms within the general statute of limitations for tax returns (i.e. past three years) and a regular statute of limitations for FBARs (i.e. past six years).
Third, Streamlined Foreign Offshore Procedures allows its participants to resolve their prior non-willful noncompliance with respect to unreported foreign income as well as pretty much any US international information return (FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera).
Finally, the last major advantage of the Streamlined Foreign Offshore Procedures is that this option only requires to establish non-willfulness rather than a reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.
2022 Streamlined Foreign Offshore Procedures: Main Disadvantages
Usually, participation in the Streamlined Foreign Offshore Procedures is highly advantageous to noncompliant taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will briefly discuss three of the most important of them.
First of all, Streamlined Foreign Offshore Procedures is available only to taxpayers who satisfied the program’s foreign residency requirements. Even if you resided outside of the United States during most of each year and you are a bona fide tax resident of a foreign country, you still may not satisfy the strict residency requirements of SFOP.
Second, there is an issue of a shifting burden of proof. When they participate in the Streamlined Foreign Offshore Procedures, taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SFOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.
The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Foreign Offshore Procedures.
Finally, participation in the Streamlined Foreign Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP, SFOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package. This means that going through Streamlined Foreign Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.
Contact Sherayzen Law Office for Professional Help With 2022 Streamlined Foreign Offshore Procedures
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Foreign Offshore Procedures. We can also help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Florida Streamlined Disclosure Lawyer | International Tax Attorney
Florida is one of the most favorite destinations for immigrants as well as US citizens who do business overseas. Many of these taxpayers own assets in foreign countries and receive income generated by these assets. For this reason, Florida is also one of the leading states when it comes to individuals who wish to go through Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP). These individuals often look for a Florida streamlined disclosure lawyer for professional help, but they do not understand what this term really means. In this essay, I will explain who would be included within the definition of Florida streamlined disclosure lawyer.
Florida Streamlined Disclosure Lawyer: International Tax Lawyer
From the outset, It is important to understand that both SDOP and SFOP are part of US international tax law, because these options deal with US international tax compliance concerning foreign assets and foreign income. In order to be more precise, I should say that SDOP and SFOP fall within a very specific sub-area of US international law – IRS offshore voluntary disclosures.
The knowledge that SDOP and SFOP are part of US international tax law makes you better understand what kind of a lawyer you are looking for when you search for a Florida streamlined disclosure lawyer. In reality, when you are seeking help with the SDOP and SFOP filings, you are searching for an international tax lawyer.
Florida Streamlined Disclosure Lawyer: Specialty in Offshore Voluntary Disclosures
As I stated above, SDOP and SFOP form part of a very specific sub-area of offshore voluntary disclosures. This means that not every international tax lawyer would be able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax lawyer who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Florida Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures are highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer lives and works) does not matter. I already hinted at why this is the case above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law. In other words, the local law has no relation whatsoever to the SDOP and SFOP.
This means that you are not limited to Florida when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Florida or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Florida might have had in the past over out-of-state lawyers. This is especially true in our world today where the pandemic has greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your Florida Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Florida, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2022 Streamlined Domestic Offshore Procedures: Pros and Cons
As the year 2021 winds down, US taxpayers with undisclosed foreign assets and foreign income need to consider their 2022 offshore voluntary disclosure options. As it has been the case since the second half of 2014 (really the year 2018 when the 2014 OVDP was closed), I expect that Streamlined Domestic Offshore Procedures will continue to be the flagship voluntary disclosure option in 2022 for US taxpayers who reside in the United States. This is why noncompliant US taxpayers should understand well the main advantages and disadvantages of participating in the 2022 Streamlined Domestic Offshore Procedures.
2022 Streamlined Domestic Offshore Procedures: Background Information and Purpose
The IRS created the Streamlined Domestic Offshore Procedures (usually abbreviated as “SDOP”) on June 18, 2014, though the Certification forms became available only a few months later. Since its introduction, Streamlined Domestic Offshore Procedures quickly eclipsed the then-existing IRS Offshore Voluntary Disclosure Program (“OVDP”) and became the most popular offshore voluntary disclosure option for US taxpayers who reside in the United States. As we discuss the advantages of the 2022 SDOP, you will quickly understand the reason for this meteoric rise in popularity of the SDOP.
The main purpose of the Streamlined Domestic Offshore Procedures is to encourage non-willful US taxpayers to voluntarily resolve their prior noncompliance with US international tax reporting requirements in exchange for a reduced penalty, simplified disclosure procedure and a shorter disclosure period. Pretty much any non-willful US international tax noncompliance can be resolved through SDOP: foreign income, FBAR, Form 8938, Form 5471, Form 8621, Form 926, et cetera.
2022 Streamlined Domestic Offshore Procedures: Main Advantages
In exchange for a voluntary disclosure of their prior tax noncompliance through SDOP, US taxpayers escape income tax penalties and pay only a one-time Miscellaneous Offshore Penalty with respect to their prior failures to file the required US international information returns. It is important to emphasize that the Miscellaneous Offshore Penalty replaces not only FBAR penalties, but also penalties for noncompliance with respect to other US international information returns, such as Forms 5471, 8865, 926, et cetera. Depending on the specific circumstances of a case, the Miscellaneous Offshore Penalty is usually below the combined potential penalties normally associated with failure to file these forms. In other words, noncompliant taxpayers can greatly reduce their IRS noncompliance penalties through their participation in the Streamlined Domestic Offshore Procedures. This is one of the most important SDOP benefits.
Another advantage of the Streamlined Domestic Offshore Procedures is the limited procedural scope of this voluntary disclosure option. What I mean by this is that the taxpayers should only submit the forms covered by the general statute of limitations unless they choose (i.e. not required, actually choose to do so) to do otherwise. The taxpayers only need to file three (sometime even less) amended US tax returns and six FBARs (sometimes seven and sometimes less than six). This limited disclosure stands in stark contrast with other major voluntary disclosure initiatives, such as 2014 OVDP (which required filings for the past eight years).
Moreover, despite the limited scope of the SDOP filings, taxpayers who utilize the Streamlined Domestic Offshore Procedures are usually able to fully resolve their prior US international tax noncompliance issues even if these years are not included in the actual SDOP filings. This means that the participating taxpayers are able “wipe the slate clean” – i.e. to erase their prior US international tax noncompliance from the time when it began. I should warn, however, that this is not necessarily always the case; I have already encountered efforts from the IRS to open years for which amended tax returns were not submitted (there were specific circumstances, however, in all of these cases that resulted in this increased IRS interference).
The last major advantage of the Streamlined Domestic Offshore Procedures is that this option only requires to establish non-willfulness rather than reasonable cause. Non-willfulness is a much easier legal standard to satisfy (be careful, this is NOT an “easy standard”, just an easier one) than reasonable cause.
2022 Streamlined Domestic Offshore Procedures: Main Disadvantages
Usually, participation in the Streamlined Domestic Offshore Procedures is highly advantageous to noncompliance taxpayers. However, there are some disadvantages and shortcomings in this program. In this article, I will concentrate only on the three most important of them.
First, this voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years. This requirement is the exact opposite of the Streamlined Foreign Offshore Procedures (“SFOP”) which allows for the late filing of original returns.
The problem is that there is a large segment of taxpayers who were perfectly non-willful in their prior US international tax noncompliance, but they never filed their US tax returns either due to special life circumstances (such as death in the family, illness, unemployment, et cetera), they were negligent or they believed that they were not required to file them (especially in situations where all of their income comes from foreign sources). These taxpayers would be barred from participating in the SDOP.
Second, when they participate in the Streamlined Domestic Offshore Procedures, the taxpayers have the burden of proof to establish their non-willfulness with respect to their inability to timely report their foreign income as well as file FBARs and other US international information returns. Outside of the SDOP, the IRS has the burden of proof to establish willfulness; if it cannot carry this burden, then the taxpayer is automatically considered non-willful.
The problem is that most cases have positive and negative facts at the same time. This means that a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness. In many of these cases, the burden of proof may play a critical role in determining whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures. By the way, this decision should be made only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.
Finally, participation in the Streamlined Domestic Offshore Procedures does not provide a definitive closure to its participants. Unlike OVDP, SDOP does not offer a Closing Agreement without an audit; there may be a follow-up audit after the IRS processes your voluntary disclosure package This means that going through Streamlined Domestic Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years. If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification.
Contact Sherayzen Law Office for Professional Help With 2022 Streamlined Domestic Offshore Procedures
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures. We can also help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Texas Streamlined Disclosure Lawyer | FBAR FATCA Tax Attorney
The increased emigration to Texas of foreigners and Americans from other states resulted in a higher portion of Texans with undisclosed foreign assets. The vast majority of these Texans are non-willful with respect to their prior reporting noncompliance and, once they discover their prior noncompliance, they look for professional help resolve their US tax noncompliance through Streamlined Domestic Offshore Procedures – i.e. they look for a Texas streamlined disclosure lawyer. In this essay, I explain who should be included within the definition of a Texas streamlined disclosure lawyer.
Texas Streamlined Disclosure Lawyer: International Tax Lawyer
It is important to understand that an offshore voluntary disclosure of noncompliance concerning foreign assets and foreign income generated by these assets falls within a specific sub-area of US international tax law. In other words, an offshore voluntary disclosure is part of US international tax law. This means that, when you are looking for a lawyer who can help you with Streamlined Domestic Offshore Procedures, you are searching for an international tax lawyer.
Texas Streamlined Disclosure Lawyer: Voluntary Disclosure Expertise
Not every international tax lawyer, however, is able to conduct the necessary legal analysis required to successfully complete an offshore voluntary disclosure, including Streamlined Domestic Offshore Procedures. Only a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law will be fit for this job.
This means that you are looking for an international tax lawyer who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Texas Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures are highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer resides) does not matter. The reason for it is also very simple and I already stated it above: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law; the local Texan law has no connection whatsoever to the SDOP (even though the mailing address for the SDOP voluntary disclosure package is in Texas).
This means that you are not limited to Texas when you are looking for a lawyer who can help you with your streamlined disclosure. Any international tax lawyer who specializes in this field may be able to help you, irrespective of whether this lawyer resides in Texas or Minnesota.
Moreover, the development of modern means of communications has pretty much eliminated any communication advantages that a lawyer in Texas might have had in the past over the out-of-state lawyers. This is especially true in today’s world where the pandemic greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your Texas Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in Texas, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### California Streamlined Disclosure Lawyer | FBAR FATCA Tax Attorney
If you are a California resident with undisclosed foreign assets and you believe that you were non-willful with respect to your prior reporting noncompliance, you would be looking for professional help to bring your US tax affairs into full compliance with US international tax law through Streamlined Domestic Offshore Procedures. In other words, you are looking for a California streamlined disclosure lawyer. In this essay, I would like to analyze everyone included within the definition of a California streamlined disclosure lawyer.
California Streamlined Disclosure Lawyer: International Tax Lawyer
The first point to understand is that all California streamlined disclosure lawyers are international tax lawyers. The reason for this is very simple: an offshore voluntary disclosure of noncompliance concerning foreign assets and foreign income generated by these assets falls within a specific sub-area of US international tax law. In other words, an offshore voluntary disclosure is part of US international tax law. This means that, when you are looking for a lawyer who can help you with Streamlined Domestic Offshore Procedures, you are searching for an international tax lawyer.
California Streamlined Disclosure Lawyer: Voluntary Disclosure Expertise
You are not searching, however, for just any international tax lawyer. You want to find a lawyer who has developed expertise in a very narrow sub-field of offshore voluntary disclosures within US international tax law.
This means that you are looking for an international tax lawyer who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure options include: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
California Streamlined Disclosure Lawyer: Geographical Location Does Not Matter
While the expertise and experience in offshore voluntary disclosures are highly important in choosing your international tax lawyer, the geographical location (i.e. the city where the lawyer resides) does not matter. The reason for it is also very simple: offshore voluntary disclosure options were all created by the IRS and form part of US international (i.e. federal) law; the local California law has no influence over how SDOP will be processed. This means that any international tax lawyer who specializes in this field may be able to help you irrespective of whether this lawyer resides in California or Minnesota.
Moreover, the development of modern means of communications pretty much eliminated any communication advantages that a lawyer in California might have had in the past over the out-of-state lawyers. This is especially true in our world today where the pandemic greatly reduced the number of face-to-face meetings.
Sherayzen Law Office May Be Your California Streamlined Disclosure Lawyer
Sherayzen Law Office, Ltd. is a highly-experienced international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped our US clients around the globe, including in California, with the preparation and filing of their Streamlined Domestic Offshore Procedures disclosure. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Offshore Accounts Voluntary Disclosure Lawyer Spring Texas
If you have undisclosed foreign accounts and you are a resident of Spring, Texas, it is important for you to understand your options in terms of who can help you with the voluntary disclosure of your noncompliant offshore accounts. In this article, I will help you understand your offshore accounts voluntary disclosure lawyer Spring Texas options (I am adding the location - Spring, Texas - in an attempt to match your potential search keyword).
Offshore Accounts Voluntary Disclosure Lawyer Spring Texas: International Tax Lawyer
Since the issue that concerns you is offshore voluntary disclosure of noncompliance concerning foreign accounts and foreign income generated by these accounts, you are dealing with US international tax law (i.e. federal law) and you need help from a US international tax lawyer. In fact, you can easily replace your search words Offshore Accounts Voluntary Disclosure Lawyers with a search for International Tax Lawyer.
Alternatively, you can also search for FBAR Tax Lawyer Spring Texas, because your foreign account reporting noncompliance will most likely involve FinCEN Form 114, commonly known as FBAR. However, you should understand that an FBAR lawyer is still an international tax attorney, because FBAR is part of US international tax compliance.
Offshore Accounts Voluntary Disclosure Lawyer Spring Texas: Voluntary Disclosure Expertise
In selecting your international tax lawyer, it is vital to understand that you need a lawyer who specializes in offshore voluntary disclosure and who is familiar with the various offshore voluntary disclosure options. Offshore voluntary disclosure covers: SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), DFSP (Delinquent FBAR Submission Procedures), DIIRSP (Delinquent International Information Return Submission Procedures), VDP (IRS Voluntary Disclosure Practice) and Reasonable Cause disclosures. Each of these options has it pros and cons, which may have tremendous legal and tax (and, in certain cases, even immigration) implications for your case.
Offshore Accounts Voluntary Disclosure Lawyer Spring Texas: Geographical Location Does Not Matter
While the expertise and experience of your offshore voluntary disclosure lawyer are highly important, the geographical location (i.e. the city where the lawyer resides) does not matter. Obviously, the term Offshore Accounts Voluntary Disclosure Lawyer Spring Texas applies to lawyers who reside in Spring, Texas.
It is important to understand, however, that this term also applies to lawyers who reside outside of Spring, Texas, but offer their offshore voluntary disclosure services to the residents of this city. This is the case because offshore voluntary disclosures concern US international (i.e. federal) tax law. The locality of a lawyer should not affect his ability to deliver his US international tax services to you.
Sherayzen Law Office is Included in the Definition of Offshore Accounts Voluntary Disclosure Lawyer Spring Texas
Sherayzen Law Office, Ltd. is an international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP, SFOP, DFSP, DIIRSP, VDP and Reasonable Cause disclosures. Our professional tax team, led by attorney Eugene Sherayzen, has successfully helped hundreds of US clients around the globe, including in city of Spring, Texas, with their offshore voluntary disclosures. We can also help you!
Contact Us Today to Schedule Your Confidential Consultation!

### First Quarter 2022 IRS Interest Rates on Overpayment & Underpayment of Tax
On November 23, 2021, the IRS announced that the First Quarter 2022 IRS interest rates on overpayment and underpayment of tax will not change from the Fourth Quarter of 2021.
This means that, the First Quarter 2022 IRS interest rates will be as follows:
three (3) percent for overpayments (two (2) percent in the case of a corporation);
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) of a percent for the portion of a corporate overpayment exceeding $10,000.
Internal Revenue Code ("IRC") §6621 establishes the IRS interest rates on overpayments and underpayments of tax. Under §6621(a)(1), the overpayment rate is the sum of the federal short-term rate plus 3 percentage points for individuals and 2 percentage points in cases of a corporation. There is an exception to this rule: with respect to a corporate overpayment of tax exceeding $10,000 for a taxable period of time, the rate is the sum of the federal short-term rate plus one-half of a percentage point.
Under §6621(a)(2), the underpayment rate is the sum of the federal short-term rate plus 3 percentage points. Again, there is an exception for a large corporate underpayment: in such cases, §6621(c) requires the underpayment rate to be the sum of the relevant federal short-term rate plus 5 percentage points. The readers should see §6621(c) and §301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
Pursuant to the IRC §6621(b)(1), the First Quarter 2022 IRS interest rates were computed based on federal short-term rates for October 2021 to take effect on November 1, 2021, based on daily compounding. The IRS determined that the federal short-term rate for October of 2021, rounded to the nearest full percent, was zero.
It is important to note that the First Quarter 2022 IRS interest rates are relevant for a great variety of purposes. Let’s highlight three of its most important uses. First, these rates will determine the interest a taxpayer will get on any IRS refunds.
Second ,the rates will also be used to establish the interest to be added to any additional US tax liability on amended or audited tax returns. This also applies to the tax returns that were amended under the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Finally, the First Quarter 2022 IRS interest rates will be used to calculate PFIC interest on any relevant §1291 PFIC tax. This PFIC interest will be reported on the relevant Form 8621 and ultimately Form 1040.
We at Sherayzen Law Office constantly deal with the IRS interest rates on overpayments and underpayments of tax. This is why we closely follow any changes in these IRS interest rates, including the First Quarter 2022 IRS interest rates.

### Certification of Non-Willfulness: Required Length | Streamlined Domestic Offshore Procedures Lawyer
https://www.youtube.com/watch?v=CXA_6i0RWcM
Hello, and welcome to Sherayzen Law Office video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, we're continuing our series of blogs from Beverly Hills, California. I'd like to go back to the issue that I've already touched upon in a previous blog; that is, the certification of non-willfulness. I mentioned and described, to a certain degree the attachment that must go with your Form 14654 or Form 14653: the certification of non-willfulness for SDOP and certification of non-willfulness for SFOP respectively.
What I'd like to talk to you about today is how extensive this attachment needs to be. I've seen non-willfulness statements that are only a few pages long or sometimes only a few paragraphs long. Neither will likely prove satisfactory. Maybe, if the case is very simple, sometimes you can fit it into a few pages, though, I doubt it.
In my experience, to properly state the case for non-willfulness and state it to the degree that it would satisfy the IRS; one cannot be stingy with facts and with arguments. The bigger your non-willfulness statement, the more direct, the more forthcoming, the more detailed it is along with the sequence of events that makes logical sense, the better off you are. The stronger your argument of non-willfulness will be, the more likely that looking at a statement like this, the IRS is not going to audit your Offshore Voluntary Disclosure.
That is: a good non-willfulness statement is the key to reducing your potential audit exposure in the Voluntary Disclosure.
If you would like to learn more about SDOP or SFOP, please call me at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com.
Thank you for watching, until the next time.

### CFC Income Recognition: Five Groups | International Tax Lawyer & Attorney
Ownership of a Controlled Foreign Corporation (“CFC”) presents unique income tax challenges under US international tax law. One of them is the fact that US shareholders of a CFC may have to recognize CFC income on their US tax returns beyond what is required under US domestic tax laws. In this article, I will introduce the readers to the main five CFC income recognition groups.
CFC Income Recognition: General Definitions of “CFC” and “US Shareholder”
Before we describe the five main CFC income recognition groups, we should briefly define the US international tax concepts of “CFC” and “US Shareholder”. I will provide only a general definition of both here; there are some specific circumstances that may modify this definition.
Generally, a foreign corporation is a CFC if US shareholders own more than 50% of the corporation’s stock. One determines the percentage of stock ownership either based on the value of stocks or the voting rights associated with these stocks.
A person is considered to be a US Shareholder if this person is a US person that owns more 10% or more of the total voting power or the total value of all classes of stock in a foreign corporation. Besides the direct ownership of stock, one should also include this US person’s indirect ownership of stock as well as any stock he (or it) owns constructively by the operation of any of the attribution rules of IRC §958(b). These rules are described in detail in other articles on sherayzenlaw.com.
CFC Income Recognition As A Special Set of US International Tax Rules
When we talk about “CFC income recognition”, we mean a set of special US international tax rules that require US shareholders of a CFC to recognize income from the CFC that would not be normally taxed. In other words, this is income that no one would recognize under the normal US domestic tax rules or even any other US international tax rules.
CFC Income Recognition: Five Main Groups
The CFC income recognition rules force US shareholders of a CFC to increase their gross income only by certain types of income of a CFC. There are five main groups of this special CFC income:
§951(a)(1)(A): subpart F income earned by a CFC;Former §951(a)(1)(A)(ii) and former §951(a)(1)(A)(iii) (both repealed by the 2017 tax reform, but still relevant for the years beginning before January 1, 2018): previously excluded subpart F income withdrawn from certain types of investments;§951(a)(1)(B): investments in certain types of US property;§951A: GILTI (Global Intangible Low-Taxed Income) income starting January 1, 2018; and§59A: base erosion minimum tax starting January 1, 2019.
Note that these are not the only rules that may accelerate recognition of CFC income. As stated above, these five groups of income are the ones that apply only to US shareholders of a CFC. However, there are other tax rules that apply to CFCs as well as other types of corporations.
Contact Sherayzen Law Office Concerning CFC Income Recognition Rules
Each of the aforementioned five groups of CFC income contains a huge amount of highly complex rules and exceptions. There are also important rules for the interaction of these categories with each other as well as other general US tax rules. It is very easy to get into trouble in this area of law without the help of an experienced international tax lawyer.
If you are US shareholder of a CFC contact Sherayzen Law Office for professional tax help. We have successfully helped US shareholders around the world with their US tax compliance concerning their ownership of CFCs, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Brazilian Mutual Funds: US Tax Obligations | International Tax Lawyer & Attorney
It is a common, almost default practice in Brazil to invest in Brazilian mutual funds. While this practice is perfectly innocent for majority of Brazilians, it may present a huge compliance issue for Brazilians who are also US taxpayers. The problem is that this type of an investment draws at least two important US tax reporting requirements – FBAR and Form 8621. In this article, I will provide a broad overview of each of these requirements concerning Brazilian mutual funds.
Brazilian Mutual Funds: FBAR Reporting
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”, is undoubtedly the most important requirement that applies to US taxpayers with Brazilian mutual funds. As long they meet the filing threshold, US taxpayers are required to disclose all of their Brazilian mutual funds on FBAR.
The threshold is very easy to meet for two reasons. First, it is very low, just $10,000. Second, this threshold is determined by taking the calendar-year highest balances of all of the taxpayer’s foreign accounts and adding them all up. Sometimes, this results in significant over-reporting of a person’s actual balances, which easily satisfies the FBAR reporting threshold.
What makes FBAR compliance so important is its draconian penalty system. FBAR noncompliance may result in severe noncompliance penalties, even criminal penalties. The 2025 Civil FBAR Penalties and the IRS FBAR Tax Lawyer & Attorney willful penalties are huge and are imposed on a per-account basis. Even if the taxpayer did not know about the existence of FBAR, the IRS may still impose large non-willful FBAR penalties.
Brazilian Mutual Funds: Form 8621 PFIC Reporting
The biggest practical problem with Brazilian mutual funds, however, lies in the fact that all of these funds are classified as Passive Foreign Investment Companies or PFICs under US international tax law. This is bad news for US taxpayers, because being an owner of a PFIC means a substantial tax compliance burden, especially under the default IRC Section 1291 rules.
There are four PFIC problems that make PFIC tax compliance so burdensome to US owners of foreign mutual funds. First, the PFIC tax and PFIC interest can be substantial. Moreover, since PFIC tax and PFIC interest are calculated independent of a taxpayer’s actual tax bracket, a taxpayer with Brazilian mutual funds may see a significant rise in his US tax liability. It may occur even in a situation where a taxpayer may not otherwise owe any tax to the IRS. This fact may also be significant in the context of an offshore voluntary disclosure.
Second, PFIC calculations may be very complex and expensive. The professional fees for PFIC calculations may easily outstrip all other professional fees related to other aspects of your US tax compliance.
Third, the actual disclosure of PFIC income occurs on Form 8621 before it is entered into your personal or business tax return. This information return must be filed with your US tax return. Unfortunately, since the vast majority of tax software programs (consumer and professional) do not support Form 8621 compliance, it is very likely that you will not be able to e-file your US tax return; rather, you may have to mail it.
Finally, Form 8621 is a very obscure requirement known mostly to a handful of US tax professionals who specialize in US international tax compliance (such as Sherayzen Law Office). This means that your local tax accountants are unlikely to be able to do PFIC calculations. Rather, in order to stay in full US tax compliance, you will have to secure help from someone among a very small number of PFIC specialists, like Mr. Eugene Sherayzen of Sherayzen Law Office, that exist in the United States.
Contact Sherayzen Law Office for Professional Help With US Tax Reporting of Your Brazilian Mutual Funds
If you are a US owner of Brazilian mutual funds, contact Sherayzen Law Office for professional assistance. We have helped hundreds of US taxpayers resolve their US tax compliance issues concerning foreign mutual funds, including Brazilian mutual funds, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2021 FBAR Civil Penalties | IRS FBAR Tax Lawyer & Attorney
As if they were not high enough, the US Congress has obligated the IRS to adjust FBAR civil penalties for inflation on an annual basis. In this article, I will provide a broad overview of the current FBAR penalty system and describe the current 2021 FBAR civil penalties.
2021 FBAR Civil Penalties: Overview of the FBAR Penalty System
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”), has always had a very complex, multi-layered system of penalties, which has grown even more complicated over the years. These penalties can be grouped into four categories: criminal, willful, non-willful and negligent.
Of course, the most dreaded penalties are FBAR criminal penalties. Not only is there a criminal fine of up to $500,000, but, in some case, a person can be sentenced to 10 years in prison for FBAR violation (and these two criminal penalties can be imposed simultaneously). Since the focus of this article is on FBAR civil penalties, I will not devote more time to the discussion of FBAR criminal penalties here.
The next category of penalties are FBAR civil penalties imposed for the willful failure to file an FBAR. These penalties are imposed per each violation – i.e. on each account per year, potentially going back six years (the FBAR statute of limitations is six years).
The third category of penalties are FBAR penalties imposed for a non-willful failure to file an FBAR or a filing of an incorrect FBAR. These penalties can be imposed on US persons who do not even know that FBAR exists.
Finally, with respect to business entities, a penalty can be imposed for a negligent failure to file an FBAR or a filing of an incorrect FBAR.
It is important to note that FBAR has its own reasonable cause exception that may be used to fight the assessment of any of the aforementioned civil penalties. Moreover, each of these penalty categories has numerous levels of penalty mitigation that a tax attorney may utilize to lower his client’s FBAR civil penalties.
2021 FBAR Civil Penalties: Penalties Prior to November 2 2015
Prior to November 2, 2015, FBAR penalties were not adjusted for inflation and stayed flat at the levels mandated by Congress. Let’s go over each category of penalties prior to inflation adjustment.
As of November 1, 2015, Willful FBAR penalties were up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation. Again, a violation meant a failure to correctly report an account in any year. Non-willful FBAR penalties were up to $10,000 per violation per year; it is far less clear what “violation” meant in this context. At that time, the IRS took a clear position that non-willful FBAR penalties are imposed on a per account basis similarly to willful penalties, but the validity of this position has been heavily compromised by recent court decisions. Finally, FBAR penalties for negligence were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.
2021 FBAR Civil Penalties: Inflation Adjustment
The situation changed dramatically in 2015. As a result of the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Inflation Adjustment Act”), Congress mandated federal agents to: (1) adjust the amounts of civil monetary penalties with an initial “catch-up” adjustment; and (2) make subsequent annual adjustments for inflation. The inflation adjustment applied only to civil penalties.
The “catch-up” adjustment meant a huge increase in penalties, because federal agencies were required to update all of these penalties from the time of their enactment (or the last year the Congress adjusted the penalties) through November of 2015. This meant that, in 2015, the penalties jumped to account for all accumulated multi-year inflation. The catch-up adjustment was limited to two and a half times of the original penalty.
Fortunately, the Congress adjusted FBAR penalties in 2004 and the “catch-up” adjustment did not have to go back to the 1970s. It still meant a very large (about 25%) increase in FBAR civil penalties, but it was not as dramatic as some other federal penalties.
2021 FBAR Civil Penalties: Bifurcation of FBAR Penalty System
The biggest problem with the inflation adjustment, however, was the fact that it further complicated the already dense multi-layered FBAR system of civil penalties – FBAR penalties became dependent on the timing of a violation and IRS penalty assessment. In essence, the 2015 Inflation Adjustment Act split the FBAR penalty into two distinct parts.
The first part applies to FBAR violations that occurred on or before November 2, 2015. The old pre-2015 FBAR penalties described above applies to these violations irrespective of when the IRS actually assesses the penalties for these violations. The last FBAR violations definitely eligible for the old statutory penalties are those that were made concerning 2014 FBAR which was due on June 30, 2015. The statute of limitations for the 2014 FBAR ran out on June 30, 2021.
The second part applies to all FBAR violations that occurred after November 2, 2015. For all of these violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred. In other words, if an FBAR violation occurred on October 15, 2017 and the IRS assessed FBAR penalties June 17, 2021, the IRS would use the inflation-adjusted FBAR penalties as of the year 2021, not October 15, 2017.
2021 FBAR Civil Penalties: Penalties Assessed On or After January 28, 2021
Now that we understand the history of FBAR penalties, we can specifically discuss the 2021 FBAR civil penalties. The first thing to understand is that we are talking about penalties assessed by the IRS on or after January 28, 2021; prior to that date, the 2020 FBAR civil penalties were still effective.
The 2021 Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(C)(i)(I) is $136,399 per violation. So far, for willful FBAR penalties, “violation” is applied on a “per account for each year” basis described above. Last year (i.e. penalties assessed after February 19, 2020 and before January 28, 2021), the willful penalty was $134,806.
The 2021 Non-Willful FBAR penalty imposed under 31 U.S.C. §5321(a)(5)(B) is $13,640 per violation; last year, the non-willful penalty was $13,481. The term “violation” in the context of non-willful FBAR penalties at this point has not been settled. Starting last year and culminating with the recent 11th Circuit court decision, the courts have been applying the term “violation” on a per-form (rather than per-account) basis. It other words, a taxpayer can argue that a non-willful violation of $13,481 should be applied per each delinquent FBAR rather than each account reported on an FBAR. This is of course a highly beneficial approach (for taxpayers) to FBAR penalty imposition, but it is still a struggle to get the IRS to accept this position.
The 2021 Negligence FBAR penalty imposed under 31 U.S.C. §5321(a)(6)(A) is $1,166; if there is a pattern of negligence under 31 U.S.C. §5321(a)(6)(B), then the penalty goes up to $90,743. Last year, the respective amounts were $1,146 and $89,170.
Contact Sherayzen Law Office for Professional Help With Your Prior FBAR Noncompliance
Sherayzen Law Office is a leader in US international tax law and FBAR compliance. We have successfully helped hundreds of clients from over seventy countries resolve their prior FBAR noncompliance concerning disclosure of their foreign bank and financial accounts. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Pakistani Bank Accounts FBAR & FATCA Compliance | International Tax Lawyer
Over the past couple of years, I have seen a rise in the number of clients with Pakistani bank accounts. This increase is undoubtedly tied to the last year’s changes to Pakistani tax laws, which now require a disclosure of certain foreign assets for certain Pakistani tax residents. These new laws created for the very first time awareness among Pakistani taxpayers that foreign assets may be subject to a separate disclosure. For Pakistanis who are also US Persons, this awareness created further inquiries into their US tax reporting of their Pakistani bank accounts. In this article, I will discuss the two most important US tax reporting requirements that may be applicable to US taxpayers with Pakistani bank accounts - FBAR and FATCA Form 8938.
Pakistani Bank Accounts: Income-Reporting Requirements
Before we delve into our discussion of FBAR and FATCA, it is important to address the income tax reporting requirements concerning foreign accounts in general as well as Pakistani accounts in particular. If you are a tax resident of the United States, you are subject to the worldwide income reporting requirement and you must disclose all income generated by your Pakistani bank accounts on your personal US tax return.
This is an absolute rule with almost no exceptions. It does not matter whether you live outside of the United States or reside in the United States, whether this income is brought to the United States or if it continues to accumulate in your foreign bank accounts, or whether you already paid Pakistani taxes on this income or not. As long as you are a tax resident of the United States, you must comply with the worldwide income reporting requirement.
This requirement applies to all reportable income as determined by US tax rules. I want to emphasize this point: the worldwide income reporting rule requires US tax residents to disclose all of their foreign income deemed reportable under the US tax rules, not the Pakistani rules. Since there are huge differences between the Pakistani tax code and the US Internal Revenue Code, this is a potential tax trap for US taxpayers with Pakistani bank accounts.
Pakistani Bank Accounts: Asset Disclosure In General
As I mentioned above, under FATCA (Foreign Account Tax Compliance Act) as well as the BSA (Bank Secrecy Act of 1970), Pakistani bank accounts may be subject to multiple asset disclosure requirements. FinCEN Form 114 (FBAR) and FATCA Form 8938 are undoubtedly the most important among these requirements.
Pakistani Bank Accounts: FBAR
The most important requirement that applies to US taxpayers with Pakistani bank accounts is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. As long they meet the filing threshold (see below), US taxpayers are required to disclose all of their Pakistani bank accounts over which they have signatory authority or in which they have a financial interest (i.e. they own an account directly or indirectly, either individually or jointly).
FBAR is a unique information return. The anomaly begins with the fact that FBAR is not technically a tax form, but a BSA form which has been administered by the IRS since the year 2001. This is why FBAR is not filed together with the tax return, but has to be e-filed separately through BSA website.
Second, FBAR also has a very low filing threshold - just $10,000. Moreover, this threshold is determined by taking the highest balances during a calendar year of all of the taxpayer’s foreign accounts (even if these accounts are located in another country in addition to Pakistan) and adding them all up. Sometimes, this results in significant over-reporting of a person’s actual balances, which easily satisfies the reporting threshold.
Finally, FBAR has the most severe noncompliance penalties among all information returns concerning foreign asset disclosure. Its penalties range from non-willful penalties (i.e. potentially a situation where a person simply did not know about FBAR’s existence) to extremely high civil willful penalties and even criminal penalties. In other words, in certain circumstances, FBAR noncompliance may result in actual jail time.
Pakistani Bank Accounts: FATCA Form 8938
While a relative newcomer, FATCA Form 8938 quickly occupied a special place in US international tax compliance. It may appear that Form 8938 duplicates FBAR with respect to foreign bank account reporting, but there are very important differences between these forms. Let’s focus on the top five differences.
First of all, unlike FBAR, it is filed with a US tax return and forms part of the return. This means that the Form 8938 noncompliance may keep the statute of limitations open on the entire tax return indefinitely, potentially subjecting it to an IRS audit indefinitely.
Second, there are differences in how information concerning foreign accounts is being disclosed on FBAR and Form 8938. Form 8938 forces US taxpayers to disclose not only most of the information that is required to be reported on FBAR, but also such details as whether an account was opened or closed in the reporting year, whether it produced any income, how much income was produced, et cetera. This may give the IRS additional information necessary to determine if there was prior tax noncompliance with respect to these accounts.
Third, there are important substantive differences between these two forms with respect to what accounts have to be disclosed. For example, signatory authority accounts must be disclosed on FBAR, but Form 8938 has no such requirement. On the other hand, a bond certificate may not need to be reported on FBAR, but it must be disclosed on Form 8938. In general, Form 8938 is likely to apply to a wider range of Pakistani assets than FBAR; this is why it is often called the “catch-all” form.
Fourth, while FBAR penalties are extremely severe, Form 8938 sports its own arsenal of noncompliance penalties. While they are theoretically lower than FBAR penalties, the Form 8938 penalties may have an equivalent impact due to the fact that they have a much wider range. For example, Form 8938 noncompliance may lead to higher accuracy-related penalties with respect to income-tax noncompliance. A taxpayer’s ability to utilize foreign tax credit may also be impacted by the Form 8938 penalties.
Finally, unlike FBAR, Form 8938 comes with a third-party FATCA verification mechanism. Under FATCA, the IRS should receive foreign-account information not only from taxpayers who file Forms 8938, but also from their foreign financial institutions. This means that it is much easier for the IRS to identify Form 8938 noncompliance than that of FBAR. It also means that Form 8938 noncompliance may have a higher chance to be investigated and penalized by the IRS.
Contact Sherayzen Law Office for Professional Help With US Tax Reporting of Your Pakistani Bank Accounts
If you are a US Person who has undisclosed Pakistani bank accounts, contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers around the globe to resolve their past FBAR and FATCA noncompliance, including with respect to financial accounts in Pakistan We can help you!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: US international tax attorney discusses FBAR and FATCA compliance concerning Pakistani bank accounts.

### Certification of Non-Willfulness | Offshore Voluntary Disclosure Tax Lawyer & Attorney
https://www.youtube.com/watch?v=6_3z8C-wMX0
Hello, and welcome to Sherayzen Law Office video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
We are continuing our series of vlogs from Beverly Hills, California and today, I'd like to talk to you about probably the most critical document that you need to submit as part of your Streamlined Domestic Offshore Procedures. Actually, as a matter of fact, it is also the most critical document that you would have to submit as part of your Streamlined Foreign Offshore Procedures. 
This document is the Certification of Non-Willfulness. The Certification of Non-Willfulness, Form 14654, in the case of Streamlined Domestic Offshore Procedures or Form 14653, in the case of Streamlined Foreign Offshore Procedures, in of itself is not a complex form. In fact, most of it's language is already  determined by the IRS. All you need to do is input certain numbers/certain amounts; so, that part, while it's critical to do correctly, is not the most crucial part of your Streamlined Disclosure.  The most crucial part, and something that most people do not realize, is the explanation, the attachment, that has to go with your Form 14654 or Form 14653.  
That explanation is a critical part of your Offshore Voluntary Disclosure.
It must state all relevant facts
Describe the circumstances that led to non-compliance
State (and this is the critical part) the legal case that will form the crux of your legal argument for non-willfulness
Proving non-willfulness is critical; if you cannot prove non-willfulness, you cannot do a Streamlined Domestic Offshore Procedures or a Streamlined Foreign Offshore Procedures, for that matter.
If you would like to know more about the SDOP process or the process for establishing non-willfulness as part of the SDOP, please call me at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com
Thank you for watching, until the next time.

### Streamlined Domestic Offshore Procedures FBARs | SDOP FBAR Tax Lawyer
https://www.youtube.com/watch?v=i0G76-a8Us4
Hello, and welcome to Sherayzen Law Office video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
I'm continuing a series of blogs from Beverly Hills, California. Today, I'd like to discuss the FBARs that must be submitted as part of an SDOP disclosure. Now, this is actually pretty normal because the IRS Statute of Limitations is six years, so it is logical that the IRS would require you to submit correct FBARs for the period that encompasses the entire Statue of Limitations for the FBAR.
What is important to emphasize though, is when FBARs are submitted as part of the Streamlined Domestic Offshore Procedures, they have to expressly state so. In other words, FBARs must state, (there's a special option 'other' which you can chose when you file the FBAR) in that section: "This FBAR is filed pursuant to Streamlined Domestic Offshore Procedures". Again, to repeat myself, the explanation for each FBAR e-filed as part of the SDOP disclosure, must expressly state: "This FBAR is filed pursuant to Streamlined Domestic Offshore Procedures".
Additionally, and this is completely voluntary, but I believe is useful, that it is a good idea to state the most important non-willfulness arguments in the same explanation, when you file your FBARs.
If you would like to learn more about the SDOP process, you can call me at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com. 
Thank you for watching, until the next time.

### International Tax Attorney Beverly Hills LA California | SDOP - Amended Tax Returns
https://www.youtube.com/watch?v=cJ-X1BlelGM
Hello, and welcome to Sherayzen Law Office video Blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, we are continuing our series of blogs from Beverly Hills and I would like to talk about Streamlined Domestic Offshore Procedures, in particular, I'd like to talk about the Amended Tax Returns that have to be filed as part of the SDOP process.  
You may know as part of the SDOP, that you have to submit amended tax returns for the past three years. The question is: why do you have to amend them? It may seem like an obvious question; but unfortunately, too often, people make mistakes. 
Let's list the three most important things that amended tax returns have to disclose. First of all, they have to disclose correctly, unreported foreign income. Second, they have to disclose unreported foreign assets, on the information returns obviously, such as form 8938, form 8621 and so on and so forth. Finally, the third thing, and a bit of a surprise for many people, the amended tax returns have to disclose US-source income; meaning, that they have to correct the original mistakes that were made by the accountants, tax software or by the taxpayers themselves, on the amended tax returns, as part the SDOP submission.
This is where a lot of people make mistakes, even accountants. Not only is it foreign income tax compliance that has to be reflected, but US tax compliance has to be reflected on the amended tax returns.
If you would like to know more about the Streamlined Domestic Offshore Procedures, you can call me at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com.
Thank you for watching, until the next time.

### International Tax Attorney Beverly Hills LA California | Introduction
https://www.youtube.com/watch?v=LYwm49Xy_9E
Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international Tax Attorney and owner of Sherayzen Law Office, Ltd.
Today, I am actually in Beverly Hills, LA and one of the reasons I came here is that I wanted to do a blog about why LA is such a good source of clients for my business. 
As paradoxical as that sounds, if you think about it, LA in general, and Beverly Hills, in particular, has a lot of people who come from all over the world. People who are Spaniards, Russians, Chinese, Americans from other states, Indians - all kinds of people who come to LA.
A lot of them, when they come to the United States, to LA in particular, have assets. Now, LA is an expensive city and Beverly Hills is especially expensive. So, that means that the people who come here with assets (these are not small assets) unfortunately, may not know that they have to disclose them and because they don't know that they have to disclose them, the end result of this is that they never disclose them until something happens, by accident or intention, they find out that they have not been in compliance with US Tax Reporting requirements for a long while, and then they have to do some type of voluntary disclosure and they come to me to do so. This is why LA is such a good source of clients for my business. 
In the next videos, I will talk more about the offshore voluntary disclosures. Thank you for watching, until the next time.

### International Tax Lawyers Dallas | Difference between US Domestic and US International Tax Law
https://www.youtube.com/watch?v=X1EQlKodWew&t=1s
Let me give you one example which illustrates very well the difference between US Domestic Tax Law and US International Tax Law.
This comes actually, from sort of a combination of two cases in which I was involved. You have a situation where two clients come to a Business Lawyer and they say, "We want to start a company. We want to start a joint venture; we already have the Capital. We are working on our marketing plan; everything's fine; we're ready to start doing this."   
Let me actually draw this. This is a Domestic situation; you have a US Corp which has cash, just cash nothing else. This is year one. Let's say this company was created in November. Year two, the company continues to have more than 50% of it's assets as cash.
In this example, nothing happens; for US Tax Purposes, nothing really happens. It's a Domestic Corp owned by two US Persons… let's make it interesting; let's make it 50/50. Fifty percent Foreign and fifty percent US. There's a (Form) 5472 requirement, most likely if there are reportable transactions. Nothing really happens to the Entity itself.
Now we have a situation where it's a Foreign Corporation; Fifty percent owned US and fifty percent Foreign Person. Same situation: first year, the company was founded in November, 100% cash; then we go into the second year, same situation, still more than 50% cash.
Here, (first year) nothing happens; here in the year two, this company becomes a PFIC (Passive Foreign Investment Company). What this means, unless an election is being made, (and there are various elections and we're not going to get into detail) but let's just discuss the Default method of PFIC calculations. 
In this situation, there is a Dividend in year three; it will be subject to a long-term Capital Gains rate, 15 - 20 percent depending on the income level of your Client and possibly an ObamaCare Net Investment Tax of 3.8% on top of that. 
Here, it's going to be a completely different treatment; if there is a Distribution in year three, most likely, I would estimate about 40% will be treated as ordinary income and about 60% will be subject to a 39.6% tax.
This is US Domestic; this is US International. Just because it's an International, all-of-a-sudden we raised our tax liability by about 20%. A Business Lawyer who thinks that this is the same… you can see what will happen once the Client files his tax returns. 
It's definitely something to be aware of. In these situations I was involved in, the Business Lawyer failed to advise about the difference. Unfortunately, once the PFIC stigma is attached; you cannot get rid of it. Once a PFIC, always a PFIC. You can get rid of it (not to get into too much detail) but it will require Redistribution of the Shares in essence. 
That's a very important illustration of how US International Tax Law may be different from US Domestic Law.

### FATCA Tax Lawyer: Introduction to FATCA
https://www.youtube.com/watch?v=URjRTR7DHqI
Hello, my name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I would like to introduce to you one of the most feared pieces of US Tax Legislation that recently reshaped the entire legal landscape of International Tax Compliance. I'm talking about FATCA. Even an introduction to FATCA is an immensely complex topic, but I intend to simplify it as much as possible for you. Obviously, with every simplification, important details are likely to be left out. This is why this is an educational video and does not constitute legal advice.
FATCA stands for 'Foreign Account Tax Compliance Act'. The US Congress enacted FATCA in the year 2010 to specifically target tax noncompliance of US Taxpayers with undisclosed foreign accounts. After a long preparatory period, FATCA was fully implemented in July of 2014.
The law and the accompanying regulations are complex and voluminous; but, for the purposes of this introduction, in essence, there are two parts of FATCA that apply to different persons at a different time.
The first part of FATCA lead to the creation of IRS Form 8938. Form 8938 obligates US Taxpayers to disclose various information with respect to what is called: Specified Foreign Assets, including foreign financial accounts.
Since 2011, as long as specific requirements are met, Form 8938 must be filed by US Taxpayers with their US Tax Returns. While Form 8938 is a very useful tax compliance instrument for the IRS, it is not the most important part of FATCA.
The second part of FATCA is the key part of this legislation because it introduces a radical new notion that foreign financial institutions, let's call them FFIs, should be forced to report identifying information about their US Account Holders to the IRS. This is the most feared part of FATCA because the IRS no longer needs to find an undisclosed foreign account which is a process that requires a substantial investment of time and resources; rather now under FATCA, the FFIs themselves will report all of their foreign accounts owned by US Persons to the IRS and they will do this reporting to the IRS not only with respect to all new accounts but also with respect to older accounts or if we use a more technical term: pre existing accounts.
In essence, FATCA has turned all foreign financial institutions into IRS informants when it comes to foreign financial accounts held by US Persons. This means that the risk of the IRS discovery of an undisclosed foreign account of a US Person has increased exponentially and in many cases may now be almost a certainty.
The high risk of the IRS discovery of undisclosed foreign accounts makes any continued noncompliance by US Persons a reckless gamble, which becomes more and more dangerous with each passing day. This is why, if you have undisclosed foreign accounts, contact me as soon as possible.
For many years now, I've been helping US Taxpayers like you around the globe to bring your US Tax affairs into full compliance. I will thoroughly analyze the facts of your case, determine your current penalty exposure and advise you with respect to your voluntary disclosure options. Once you choose your voluntary disclosure path, my firm will prepare all the necessary legal documents and tax forms and I will negotiate the final settlement of your case with the IRS. So, call me now to schedule your initial consultation. Remember, contacting my firm is confidential.

### Indian Mutual Funds & US Person’s Tax Obligations | International Tax Attorney
After having handled so many offshore voluntary disclosures for my Indian and Indian-American clients, I can clearly see that US tax reporting obligations concerning Indian mutual funds is one of the most troublesome areas for my clients. In this article, I will focus on the three most important US tax reporting requirements that may be applicable to US taxpayers with Indian mutual funds - FBAR, FATCA Form 8938 and Form 8621.
Indian Mutual Funds: FBAR Reporting
The first and most important requirement that applies to US taxpayers with Indian mutual funds is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. As long they meet the filing threshold, US taxpayers are required to disclose all of their Indian mutual funds on FBAR.
FBAR is a very dangerous form. On the one hand, it is very easy to fall into noncompliance with this form due to its very low filing threshold - just $10,000. Moreover, this threshold is determined by taking the calendar-year highest balances of all of the taxpayer’s foreign accounts (even if these accounts are located in another country in addition to India) and adding them all up. Sometimes, this results in significant over-reporting of a person’s actual balances, which easily satisfies the FBAR reporting threshold.
On the other hand, FBAR has the most severe noncompliance penalties among all information returns concerning foreign asset disclosure. Its penalties range from non-willful penalties (i.e. potentially a situation where a person simply did not know about FBAR’s existence) to extremely high civil willful penalties and even criminal penalties. In other words, in certain circumstances, FBAR noncompliance may result in actual jail time.
Indian Mutual Funds: FATCA Form 8938
When it comes to the FATCA Form 8938 compliance, a taxpayer with Indian mutual funds will find it fairly easy as long as he correctly files his Forms 8621 (see below) and indicates on Form 8938 how many of these forms were filed with the tax return. This ease of reporting is meant to alleviate double-reporting of foreign mutual funds on a US tax return.
It is important to emphasize three points with respect to Form 8938 compliance for taxpayers with Indian mutual funds. First, even if you file Forms 8621, Form 8938 must still be attached to your tax return as long as you meet the relevant filing threshold (and the assets listed on Forms 8621 must be counted toward the threshold). Failure to file a Form 8938 may still draw a penalty in these circumstances and keep the statute of limitations open on your entire US tax return.
Second, Form 8938 and Form 8621 compliance does not in any way affect your obligation to file FBARs. This is the case even if this means that the same assets are reported three times.
Third, unlike FBAR, Form 8938 comes with a third-party FATCA verification mechanism. Under FATCA, the IRS should receive foreign-account information not only from taxpayers who file Forms 8938, but also from their foreign financial institutions. This means that it is much easier for the IRS to identify Form 8938 (and thereby Form 8621) noncompliance than that of FBAR. It also means that a Form 8938 noncompliance may have a higher chance to be investigated and penalized by the IRS.
Indian Mutual Funds: Form 8621 PFIC Reporting
We now come to the most critical difference in US tax compliance between foreign mutual funds and most other foreign assets.  All foreign mutual funds, including the funds incorporated in India, are classified as PFICs or Passive Foreign Investment Companies under US international tax law.
While I will not explain here the complex PFIC calculations and the various PFIC elections that may be available to a US taxpayer with foreign mutual funds, I wish to discuss four most important points concerning PFIC compliance.
First, pursuant to the worldwide income reporting requirement, all US tax residents must calculate and disclose their PFIC income on their US tax returns. This is a significant compliance burden as PFIC calculations can be very complex and expensive. The professional fees for PFIC calculations may easily outstrip all other professional fees related to other aspects of your US tax compliance.
Second, since PFIC tax and PFIC interest are calculated independent of a taxpayer’s actual tax bracket, a taxpayer with Indian mutual funds may see a significant rise in his US tax liability.  It may occur even in a situation where a taxpayer may not otherwise owe any tax to the IRS. This fact may be especially significant in a voluntary disclosure context.
Third, the actual disclosure of PFIC income occurs on Form 8621 before it is entered into your personal or business tax return.  This information return must be filed with your US tax return. Unfortunately, since the vast majority of tax software programs (consumer and professional) do not support Form 8621 compliance, it is very likely that you will not be able to e-file your US tax return; rather, you may have to mail it.
Finally, Form 8621 is a very obscure requirement known mostly to a handful of US tax professionals who specialize in US international tax compliance (such as Sherayzen Law Office). This means that the majority of US taxpayers are not even aware of the fact that they need to comply with their Form 8621 reporting obligations.  In other words, they believe themselves to be in compliance with US tax laws even though, in reality, they are not.  Thus, the obscurity and complexity of Form 8621 pushes many US taxpayers into tax noncompliance. 
Contact Sherayzen Law Office for Professional Help With US Tax Reporting of Your Indian Mutual Funds
If you are a US taxpayer with Indian mutual funds, contact Sherayzen Law Office for professional We have helped hundreds of US taxpayers with foreign mutual funds, including Indian mutual funds, to resolve their past FBAR, FATCA and PFIC noncompliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### FDAP Income: Introduction | US International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=FQ-_AvxxaLA&t=7s
Let's go to another chart. Remember when I said we were going to discuss a situation where a non-US person does not engage in US trade or business activities? In this case, we have to ask: Is this US-source income classified as FDAP income (fixed determinable, annual or periodic) FDAP income generally includes passive investment income: interest, dividends, rents, royalties, etc.; but, it may also include some active income like US-source salaries as well as US-sourced deeds from the sale of intangible properties. However, please remember that except US real estate, non-ECI capital gains from the sale of tangible property of a non-US person are generally exempt from US taxation. 
This is why, for example, foreign persons who own stocks in the United States, when they sell them, they are not subject to US tax withholding. They are going to be paying taxes in their home countries on the capital gains but they are not going to be paying taxes in the United States.  
If this indeed is an FDAP income, then we have to ask whether it is subject to a treaty exemption or to a special tax provision in the Internal Revenue Code, which would exempt this FDAP income from taxation. If it is subject to any of these exceptions, then this FDAP income will not be taxed in the United States. However, if it is not subject to any treaty exemption, then it would be taxed at 30% withholding rate on gross income. Or a treaty rate - here, treaties play a crucial role in lowering tax liability. That's why it is very important that when you invest in the United States, when you engage in an inbound transaction, to invest in the right foreign jurisdiction; so you have to do some foreign treaty shopping.

### Effectively Connected Income: Introduction | US International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=R3sGlYDPzgI&t=2s
Let's suppose we find a US trade does exist. If it doesn't, then we'll talk about the FDAP a little bit later in the presentation.
If a non-US person engages in US trade or business activities, then the next question is: Is the income that he derives connected to these US trade or business activities, called ECI or Effectively Connected Income? Now, ECI is arguably the most important concept concerning inbound transactions. It may be the only source of income, per se, that is inbound, but ECI is such a central concept and a complex issue as well. 
Basically, ECI includes three different types of income:
All active US-source income: One thing to keep in mind is the attraction rule; I give you an example here. A German corporation sells washing machines through a US office in the United States; in addition, it sells dryers directly to the distributors in the United States, but without any involvement of that US office. The sales are structured so that they are considered to be US-source income. For one reason or another, let's say they signed a contract here in the United States. Even though the sale of dryers is not related to a US trade or business, because of the attraction rule, the income from both the washing machines and the dryers is considered to be the same. Obviously, this is all active-source income. 
The second category: General passive US-source income - sales of capital assets and other passive income is considered to be ECI, if this income passes one of two tests: the Asset-Use test and the Business Activities test. I gave you the definition; but we wont have the time to go into more details on this. But, be aware that even passive US-source income may be considered ECI. 
What I mentioned before: Certain foreign-sourced income may be considered ECI; generally speaking, in order for this to happen, the non-US person has to have an office or other permanent establishment here in the United States. 
Only these three types of income which I have listed are related to this exception from the general rule that foreign-sourced income of a non-US person is non-taxable in the United States.   
Let's suppose that we indeed had ECI income. The next question is going to be: How is the income going to be taxed? There are special tax regimes that exist in the United States, for example, Branch taxes or BEAT, which is something that was introduced by the 2017 tax reform. If an ECI income falls under the special tax regime, it's going to be taxed according to the special tax regime; however, if no special tax regime applies, the ECI is going to be taxed at US graduated rates, including, by the way that's important to keep in mind, including capital gains tax rates.

### Tax Definition of "US Trade and Business Activities" | US International Tax Lawyers
https://www.youtube.com/watch?v=oa1HhjoOGEw&t=4s
Let's suppose it is indeed US-source income; then the next question that we have to deal with is whether this non-US person engages in US trade or business activities. Just to repeat myself, if it is not a US-sourced income, generally speaking, it's not taxable; but you see here and there that in order to get there, we still have to find out if this income is somehow effectively connected to a US trade or business. 
The issue of US trade or business activities is another complex issue. As I've said, all of the questions that are contained in this flowchart - all of them are complex with exceptions upon exceptions; all with difficulties. As I've said before, a lot of things concerning inbound transactions are fact-dependent. It is even more-so when we talk about US trade or business activities because there is no actual definition of what a US trade or business activity is; it is highly factually-dependant. However, based on the cases and the IRS guidance I've given you sort of a general rule: A US trade or business exists if the foreign corporation activities within the United States are considerable, continuous and regular.
Let's deal with a few examples to help us figure out what we're looking at; common examples are: 
'Consistent attempts to market products and services in the United States', is considered to be a US trade or business. This is very important, especially in situations concerning intellectual property and situations where the intellectual property is actually outside of the United States. Marketing within the United States may unintentionally result in US-source income.
On the other hand, clerical or collection-related activities do not produce US trade or business. This is also very common; I'm pretty sure that a lot of you have dealt with a situation like this before where a foreign person sets up an LLC, say in Delaware, simply to collect the payments for the work performed overseas or for royalties related to intellectual property which is located overseas. Just setting up an office for an LLC in the United States for collection-related activities will not result in US-source income.
Another common issue concerns agents. If there is an agent of a US corporation in the United States that has the authority to conclude contracts, and he regularly exercises this authority; then this would be sufficient to find that a US trade or business exists.

### US Source-of-Income Rules | MSBA Seminar 01282021 | International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=Kw7o8ZoBSoA
Once we have established that this is a non-US Person, the next question is: Is this person getting a US-source income? This is a critical question of huge importance and huge complexity. Why is it important? Because non-US Persons generally, (there are exceptions) are taxed on their US-sourced income. This means that if the income that this person is getting is not US-sourced income, then it's not taxed in the United States at all. On the other hand if it's a US-source income, then we have to go through a more complex situation. By the way, if it's not a US-sourced income, as I have mentioned, we still have to look into whether this is an effectively-connected income. I will discuss this a little bit later during the presentation. 
Now, I imagine this is a complex issue in how you determine what is US-source income and what is not US-source income. I am going to simplify this analysis; it's basically a three-step process. First, you have to classify the income; that is, is it interest, is it dividends, royalties, income from services, etcetera. Then you have to find the particular tax provision that applies to this particular class of income, and the final step is to apply the particular facts of your client's case to that tax provision. 
Let's go over a few of the most common examples:
Interest income:  Interest income is generally sourced to the residence of the obligor. Most often, 'obligor' means 'by the power'. Not always, but most often. This rule applies to individuals, corporations and partnerships. Now the interesting thing is that this may lead to some very unusual situations. For example, if a US Person resides in France and this US Person is an obligor and the obligee, a French person resides in the United States, and the US Person pays interest on the income on his obligation, on the loan; then, this interest would be classified as foreign-sourced income, more precisely French-sourced income, even though it's a US person who is paying it. Again, rather than solve the obligor, not the nationality. 
Dividends:  aside from some limited exceptions, it depends on whether the corporation that pays the dividend is a foreign corporation or a domestic corporation. Dividends paid by a US corporation is always US-sourced income; dividends paid by a foreign corporation is almost always a foreign-sourced income but there is this important 25% income exception. Basically, if 25% or more of the corporation's gross income for the past three years was ECI income that is effectively connected to the trade of business in the United States, then you have to apportion this dividend between the percentage income between the ECI income verses foreign-source income. Think about what it means: that a foreign dividend from a foreign company, incorporated in a foreign country, and this dividend is paid out to a foreign person who lives in a foreign country, actually may result in US-source income. This is a paradox; this tells you just how complex US International Tax Law is. Prior to 2005, unless there was an exception and there were a number of exceptions, including treaty exceptions, but technically speaking, if no exception applies, this person would have been expected to file a US tax return and pay US tax on that US portion of his foreign dividend. Of course, that would almost never happen but there was some litigation in the early years.
Rents and Royalties:  sourced to the place where the property is used. This rule is going to be very important with respect to tax planning that involves intellectual property.
Sales of Personal Property:  extremely complex because you really have to dig into the facts of the case. In general, sales of personal property are sourced to the residence of the seller. There are special rules, depreciable personal property and there are special rules concerning a situation where there is a permanent establishment outside of the United States or inside of the United States, actually, as well. The biggest issue, and this is going to be very relevant for the purposes of inbound transactions, is sale of inventory; this situation is very common. For example, a few years ago, I had a case where a foreign parent was producing some goods, inventory and basically sending it to a distribution center here in the United States. The general rule here is that inventory sales are sourced to the place of sale; that's very important - sourced to the place of sale. What is the place of sale? Generally speaking, the place of sale is where the title is passed, but it gets a lot more complex; there are some exceptions that I have given to you. For tax planning purposes, this is a huge issue when it comes to inbound transactions.
Sale of US Real Property:  generally, US-source income, even if this real property is held through another entity. 
Income from Services:  that is sourced to the place where the services are performed. For example, if you go to France, and perform some work there and get paid for that work, even though you are a US Citizen, even if you don't reside in France, the payment that you receive for the services you performed in France is going to be considered French-sourced income. It gets more complex if you perform services in more than one country, then you have to apportion the payment between these countries and the usual method is time-basis allocation.

### MSBA IBLS CLE January 28 2021: Definition of US Person | International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=R_cUs6k4wm8&t=2s
The first question, when a client comes to the office, should be: "Is it a US Person?" I say 'it' because a client may not be only an individual but also a corporation, a trust or an estate. This question may not be that easy to answer, as it may appear in the beginning. 
Let's talk about individuals first, who are US Persons? US Citizens and US Tax Residents. Now, 'US Citizens' is not a very complex category; although, there are some complexities. For example, if in the case of 'Accidental Americans', when the person was born in the United States but never lived here - that person spent their entire life outside of the United States, or when a person has one US parent and one non-US parent. In general, it's not that difficult to verify if a person is a US Citizen or not. 
'US Tax Residents' is a more complex issue because it includes green card holders, that is, US permanent residents, the Substantial Presence Test - so basically, people who were here for enough time to pass the Substantial Presence Test and people who declare themselves as US Tax Residents. Now you may ask, who in their right mind would declare themselves a US Tax Resident? It actually happens quite often and I can tell you that in many cases, people do that without even understanding that they have declared themselves a US Tax Resident. For example, when you have one US spouse and one non-US spouse and they file a joint tax return - the non-US spouse just declared herself to be a US Tax Resident. 
The second category of US Persons concerns corporations and partnerships, basically business entities. The rule here generally, I emphasize the word generally, is that any corporation or partnership organized under the laws of the United States or any of its 50 states, is a US Person. 
Trusts are more complex. In order for a trust to be a US Person, it must meet both the court test and the US control test under the IRC Section 7701(a)30(e). I am going to over-generalize here; generally, if one of the trustees is a US Person and the trust document allows for a US court to exercise a jurisdiction over the trust's administration, the test will be satisfied. That is, this trust would be a US trust; both tests must be satisfied in order for the trust to be a US trust. 
Regarding estates, that doesn't happen very often in the foreign direct investment situation, but generally speaking, a US estate is any estate that is not described in Section 7701(a)31. I provided a definition for you here. You can read it; it basically has to do with US-source income and what is includable in the gross income of Subtitle A. Now, the important thing to understand is that if you are dealing with a US person, you are not dealing with an inbound transaction, that is this entire tax-framework that I am discussing, doesn't apply to US Persons. You have to look at a different set of rules. Us Persons, by the way, are taxed on their worldwide income. If this is not a US Person, then we deal with the inbound transactions tax frame.

### 2020 FBAR Conversion Rates | FBAR Tax Lawyer & Attorney
The 2020 FBAR conversion rates are highly important in US international tax compliance. The 2020 FBAR and 2020 Form 8938 instructions both require that 2020 FBAR conversion rates be used to report the required highest balances of foreign financial assets on these forms (in the case of Form 8938, the 2020 FBAR conversion rates is the default choice, not an exclusive one). In other words, the 2020 FBAR conversion rates are used to translate foreign-currency highest balances into US dollars for the purposes of FBAR and Form 8938 compliance.
The U.S. Department of Treasury  already published the 2020 FBAR conversion rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).
Since the 2020 FBAR conversion rates are highly important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2020 FBAR conversion rates (note that the readers still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI77.0900ALBANIA - LEK100.3500ALGERIA - DINAR132.2120 ANGOLA - KWANZA649.6000ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR2.7000 ARGENTINA - PESO89.2500ARMENIA - DRAM515.0000AUSTRALIA - DOLLAR1.2940AUSTRIA - EURO0.8150 AZERBAIJAN - NEW MANAT1.7000   BAHAMAS - DOLLAR1.0000 BAHRAIN - DINAR0.3770 BANGLADESH - TAKA85.0000  BARBADOS - DOLLAR2.0200 BELARUS - NEW RUBLE2.5980BELGIUM - EURO0.8150BELIZE - DOLLAR2.0000 BENIN - CFA FRANC529.0000  BERMUDA - DOLLAR1.0000 BOLIVIA - BOLIVIANO6.8100BOSNIA - MARKA1.5940BOTSWANA - PULA10.7990 BRAZIL - REAL5.1940BRUNEI - DOLLAR1.3220BULGARIA - LEV1.5940BURKINA FASO - CFA FRANC529.0000BURMA-KYAT1,326.0000BURUNDI - FRANC1,930.6100CAMBODIA (KHMER) - RIEL4,051.0000CAMEROON - CFA FRANC529.2600CANADA - DOLLAR1.2750CAPE VERDE - ESCUDO89.8300CAYMAN ISLANDS - DOLLAR0.8200CENTRAL AFRICAN REPUBLIC - CFA FRANC529.2600CHAD - CFA FRANC529.2600CHILE - PESO709.7500CHINA - RENMINBI6.5400COLOMBIA - PESO3,414.5000COMOROS - FRANC400.6200CONGO - CFA FRANC529.2600COSTA RICA - COLON609.1000COTE D'IVOIRE - CFA FRANC529.0000CROATIA - KUNA5.9500CUBA - Chavito1.0000 CYPRUS - EURO0.8150 CZECH REPUBLIC - KORUNA20.7540 DEM. REP. OF CONGO - FRANC1,966.4800DENMARK - KRONE6.0650DJIBOUTI - FRANC177.0000DOMINICAN REPUBLIC - PESO58.1400ECUADOR - DOLARES1.0000 EGYPT - POUND15.6900EL SALVADOR - DOLARES1.0000 EQUATORIAL GUINEA - CFA FRANC529.2600ERITREA - NAKFA15.0000ESTONIA - EURO0.8150 ETHIOPIA - BIRR39.1810EURO ZONE - EURO0.8150 FIJI - DOLLAR2.0040FINLAND - EURO0.8150 FRANCE - EURO0.8150 GABON - CFA FRANC529.2600GAMBIA - DALASI52.0000GEORGIA - LARI3.2700GERMANY - EURO0.8150 GHANA - CEDI5.8100GREECE - EURO0.8150GRENADA - EAST CARIBBEAN DOLLAR2.7000GUATEMALA - QUENTZAL7.7800GUINEA BISSAU - CFA FRANC529.0000GUINEA - FRANC9,990.0000GUYANA - DOLLAR215.0000HAITI - GOURDE71.6060HONDURAS - LEMPIRA25.0000HONG KONG - DOLLAR7.7530HUNGARY - FORINT296.7600ICELAND - KRONA127.1100INDIA - RUPEE73.0340INDONESIA - RUPIAH14,028.0000IRAN - RIAL42,000.0000IRAQ - DINAR1,138.0000IRELAND - EURO0.8150ISRAEL - SHEKEL3.2130ITALY - EURO0.8150JAMAICA - DOLLAR150.0000JAPAN - YEN103.0800JORDAN - DINAR0.7080KAZAKHSTAN - TENGE421.2700KENYA - SHILLING109.1000KOREA - WON1,087.6600KOSOVO - EURO0.8150  KUWAIT - DINAR0.3040KYRGYZSTAN - SOM82.6500LAOS - KIP9,280.0000LATVIA - EURO0.8150 LEBANON - POUND1,500.0000LESOTHO - MALOTI14.6730LIBERIA - DOLLAR163.0000LIBYA - DINAR1.3330LITHUANIA - EURO0.8150 LUXEMBOURG - EURO0.8150MADAGASCAR - ARIARY3,824.8000MALAWI - KWACHA820.0000MALAYSIA - RINGGIT4.0200 MALDIVES - RUFIYAA15.4200MALI - CFA FRANC529.0000MALTA - EURO0.8150MARSHALL ISLANDS - DOLLAR1.0000 MARTINIQUE - EURO0.8150MAURITANIA - OUGUIYA37.0000MAURITIUS - RUPEE39.5500MEXICO - PESO19.9130MICRONESIA - DOLLAR1.0000 MOLDOVA - LEU17.0800MONGOLIA - TUGRIK2,849.7700MONTENEGRO - EURO0.8150MOROCCO - DIRHAM8.9170MOZAMBIQUE - METICAL 74.2000NAMIBIA - DOLLAR14.6730NEPAL - RUPEE117.0000NETHERLANDS - EURO0.8150NETHERLANDS ANTILLES - GUILDER1.7800NEW ZEALAND - DOLLAR1.3830NICARAGUA - CORDOBA34.9000NIGER - CFA FRANC529.0000NIGERIA - NAIRA385.0000NORWAY - KRONE8.5300OMAN - RIAL0.3850PAKISTAN - RUPEE159.7500PANAMA - BALBOA1.0000 PANAMA - DOLARES1.0000  PAPUA NEW GUINEA - KINA3.5090PARAGUAY - GUARANI6,891.9600PERU - SOL3.6190PHILIPPINES - PESO48.1730POLAND - ZLOTY3.7130PORTUGAL - EURO0.8150QATAR - RIYAL3.6400REP. OF N MACEDONIA - DINAR50.1300REPUBLIC OF PALAU - DOLLAR1.0000 ROMANIA - NEW LEU 3.9660RUSSIA - RUBLE74.4600RWANDA - FRANC950.0000SAO TOME & PRINCIPE - NEW DOBRAS20.0510SAUDI ARABIA - RIYAL3.7500SENEGAL - CFA FRANC529.0000SERBIA - DINAR95.8000SEYCHELLES - RUPEE20.9100SIERRA LEONE - LEONE9,997.0000SINGAPORE - DOLLAR1.3220SLOVAK REPUBLIC - EURO0.8150SLOVENIA - EURO0.8150SOLOMON ISLANDS - DOLLAR7.7340SOMALI - SHILLING575.0000SOUTH AFRICA - RAND14.6730SOUTH SUDANESE - POUND177.0000SPAIN - EURO0.8150SRI LANKA - RUPEE185.0000ST LUCIA - E CARIBBEAN DOLLAR2.7000SUDAN - SUDANESE POUND55.0000SURINAME - GUILDER14.2900SWAZILAND - LANGENI14.6730 SWEDEN - KRONA8.1720SWITZERLAND - FRANC0.8810SYRIA - POUND1,256.0000TAIWAN - DOLLAR28.0740TAJIKISTAN - SOMONI11.3250TANZANIA - SHILLING2,314.0000THAILAND - BAHT29.9200TIMOR - LESTE DILI1.0000 TOGO - CFA FRANC529.0000TONGA - PA'ANGA2.1980TRINIDAD & TOBAGO - DOLLAR6.6980TUNISIA - DINAR2.6830TURKEY - LIRA7.4240TURKMENISTAN - NEW MANAT3.4910UGANDA - SHILLING3,649.0000UKRAINE - HRYVNIA28.3000UNITED ARAB EMIRATES - DIRHAM3.6730UNITED KINGDOM - POUND STERLING0.7320URUGUAY - PESO42.1400UZBEKISTAN - SOM10,471.9200VANUATU - VATU106.2300VENEZUELA - BOLIVAR SOBERANO1,104,430.5870VENEZUELA - FUERTE (OLD)248,832.0000VIETNAM - DONG23,070.0000WESTERN SAMOA - TALA2.4440YEMEN - RIAL480.0000ZAMBIA - NEW KWACHA21.1400 ZIMBABWE - RTGS79.7420

### 2020 FBAR Deadline in 2021 | FinCEN Form 114 International Tax Lawyer & Attorney
The 2020 FBAR deadline is one of the most important deadlines for US taxpayers this calendar year 2021. What makes FBAR so important are the draconian FBAR penalties which may be imposed on noncompliant taxpayers. Let’s discuss the 2020 FBAR deadline in more detail.
2020 FBAR Deadline: Background Information
The official name of FBAR is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs must be timely e-filed separately from federal tax returns.
Failure to file an FBAR may result in the imposition of heavy FBAR penalties.  The FBAR penalties vary from criminal penalties and willful penalties to non-willful penalties. You can find more details about FBAR penalties in this article.
2020 FBAR Deadline: Pre-2016 FBAR Deadline
For the years preceding 2016, US persons needed to file FBARs by June 30 of each year. For example, the 2013 FBAR was due on June 30, 2014. No filing extensions were allowed.
The last FBAR that followed the June 30 deadline was the 2015 FBAR; its due date was June 30, 2016. Due to the six-year FBAR statute of limitations, however, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. The 2015 FBAR’s statute of limitations will expire only on June 30, 2022.
2020 FBAR Deadline: Changes to FBAR Deadline Starting with the 2016 FBAR
For many years, the strange FBAR filing rules greatly confused US taxpayers. First of all, it was difficult to learn about the existence of the form. Second, many taxpayers simply missed the unusual FBAR filing deadline.
The US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR. Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.
Furthermore, during the transition period (which continues to this date), the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. Taxpayers do not need to make any specific requests in order for an extension to be granted.
Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. This is the case even if federal law requires a different filing date. For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day.
2020 FBAR Deadline
Based on the current law, the 2020 FBAR deadline will be April 15, 2021. However, it is automatically extended to October 15, 2021.
The 2020 FBAR must be e-filed through the US Financial Crimes Enforcement Network’s (FinCEN) BSA E-filing system. 
Contact Sherayzen Law Office for Professional Help With Your FBAR Compliance
If you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in US international tax compliance and offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers around the globe with their FBAR compliance and FBAR voluntary disclosures; and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2021 Tax Filing Season for Tax Year 2020 Starts on February 12 2021
On January 15, 2021, the IRS announced that the 2021 tax filing season for the tax year 2020 will start on Friday, February 12, 2021. On that day, the IRS will begin accepting and processing 2020 tax year returns.
The February 12 start date for individual tax return filers allows the IRS time to do additional programming and testing of IRS systems following the December 27 tax law changes that provided a second round of Economic Impact Payments and other benefits. This programming work is critical to ensuring IRS systems run smoothly. If the 2021 tax filing season were to open without the correct programming in place, then there could be a delay in issuing refunds to taxpayers. These changes ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.
"Planning for the nation's filing season process is a massive undertaking, and IRS teams have been working non-stop to prepare for this as well as delivering Economic Impact Payments in record time," said IRS Commissioner Chuck Rettig. "Given the pandemic, this is one of the nation's most important filing seasons ever. This start date will ensure that people get their needed tax refunds quickly while also making sure they receive any remaining stimulus payments they are eligible for as quickly as possible."
Last year's average tax refund was more than $2,500. More than 150 million tax returns are expected to be filed during the 2021 Tax Filing Season, with the vast majority before the Thursday, April 15, 2021, deadline.
Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.
The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check 'Where's My Refund' on the IRS website IRS.gov under 'Refunds' for their personalized refund date. Overall, the IRS anticipates nine out of 10 taxpayers will receive their refund within 21 days of when they file electronically with direct deposit if there are no issues with their tax return.
Here are some important 2021 Tax Season deadlines:
A. Estimated Tax Deadlines: April 15, 2021; June 15, 2021; September 15, 2021; and January 15, 2022.
B. Individual Income Tax Returns: April 15, 2021 for US taxpayers who live in the United States; June 15, 2021, for US taxpayers who live outside of the United States (their tax payment deadline is still April 15); October 15, 2021, for extended tax returns; December 15, 2021, special extension for US taxpayers who reside overseas.
C. Partnership and S-Corporations: March 15, 2021; if extended, September 15, 2021.
D. C-Corporations: April 15, 2021; if extended, October 15, 2021.
E. Forms 3520-A: for calendar-year foreign trusts, March 15, 2021; extension is possible until September 15, 2021.
F. Form 3520: April 15, 2021; extension is possible until October 15, 2021.
G. FBARs: April 15, 2021; extension is possible until October 15, 2021.
H. International Information Returns filed with US tax returns (Forms 5471, 8621, 8865, 926, et cetera): same deadline as for the US income tax return with which these international information returns are filed.

### January 28 2021 Inbound Transactions Seminar | US International Tax Lawyer
On January 28, 2021, Mr. Eugene Sherayzen, an international tax attorney and founder of Sherayzen Law Office, Ltd., co-presented with a business lawyer a seminar titled “Investing in US Businesses by Foreign Persons - Common Business and Tax Considerations” (the “Inbound Transactions Seminar”). The Inbound Transactions Seminar was sponsored by the International Business Law Section of the Minnesota State Bar Association. Due to the ongoing COVID-19 pandemic, the seminar was conducted online.
Mr. Sherayzen began his part of the Inbound Transactions Seminar with an explanation of the term “inbound transactions” and how it differs from “outbound transactions”. He then laid out a flowchart which represented the entire analytical tax framework for inbound transactions; the tax attorney warned the audience that, due to time restraints, the breadth of the subject matter only allowed him to generally highlight the most important parts of this framework.
Then, Mr. Sherayzen proceeded with an explanation of each main issue listed on the inbound transactions tax framework flowchart.   First, he discussed the explanation of the concept of a US person and how it related to the flowcharted.  The international tax attorney provided definitions for all four categories of US persons: individuals, business entities (corporations and partnerships), trusts and estates.
Then, Mr. Sherayzen focused on the second part of the flowchart – US income sourcing rules. After the general explanation of the significance of the income sourcing rules, the international tax attorney discussed in general terms the application of these rules to specific types of income: interest, dividends, rents, royalties, sales of personal property, sales of inventory, sales of real estate and income from services.  Despite the time limitations, he was even able to provide a few examples of some of the most paradoxical outcomes of some of the US source-of-income rules.
The third part of the Inbound Transactions Seminar was devoted to the definition of “US trade or business activities”, an important tax term. Mr. Sherayzen provided a general definition and gave some specific examples, warning the audience that this is a highly fact-dependent issue.
In the next two parts of the seminar, the international tax attorney explained one of the most important terms in US taxation – ECI or Effectively Connected Income.  Mr. Sherayzen not only went over all three ECI income categories but he also explained how ECI should be taxed.  He also mentioned the affect of specific tax regimes (such as BEAT and branch taxes) on the taxation of ECI.
After finishing the left side of the flowchart (the part that was devoted to the analysis of the ECI of US trade and business activities), Mr. Sherayzen switched to the explanation of inbound transactions that do not involve US trade or business activities. In this last part of his presentation, the international tax attorney discussed the definition of FDAP income and the potential Internal Revenue Code and treaty exemptions from US taxation. 
While the ongoing pandemic currently limits the number of options for conducting seminars, Mr. Sherayzen already plans future talks in 2021 on the subjects of US international tax compliance and US international tax planning.

### Inbound Transactions: Non-US Person Definition | International Tax Attorney
In a previous article, I described the analytical framework for conducting tax analysis of inbound transactions. In this article, I will focus on the first issue of this framework – the Non-US Person definition.
Non-US Person Definition: Importance in the Context of Inbound Transactions
Before we delve into the issue of Non-US Person definition, we need to understand why this definition is so important in the context of inbound transactions.  
The significance of this definition comes from the fact that the extent of exposure to US taxation depends on whether a person is classified as a US-Person or a Non-US Person. A US person is taxed on his worldwide income and may be subject to a huge array of US reporting requirements.  A Non-US Person, however, may only be taxed by the IRS with respect to income earned from US investments or US businesses (even then, there are a number of exceptions).  Hence, the classification of US Person versus Non-US Person may have a huge practical impact on a person’s US tax exposure.
Non-US Person Definition: Everyone Who Is Not a US-Person
There is no definition of “Non-US Person” in the Internal Revenue Code (“IRC”); there is not even a definition of a “foreign person”. 
Rather, one needs to look at the IRC §7701(a) to look for identification of categories of persons who are considered “domestic”.  Anyone who is not a “domestic person” is a foreign person or, for our purposes, a Non-US Person.
Non-US Person Definition: What Does “Person” Mean
Before we analyze who is considered to be a “US Person”, we should first clarify who a “person” is.  Under §7701(a)(1), a person “shall be construed to mean and include an individual, a trust, estate, partnership, association, company or corporation”.  In other words, a “person” may mean not only an individual, but also a business entity, trust or estate. 
Non-US Person Definition: General Definition of US Person
Under §7701(a)(30), a “US Person” means a US citizen, US resident alien, domestic partnership, domestic corporation, any estate that is not a foreign estate and a trust that satisfies both condition of §7701(a)(30)(E).  Almost each of these categories is highly complex and needs a special definition.  I will not cover here every detail, but I will provide certain general definitions with respect to each category.
Non-US Person Definition: Individuals Who Are US Persons
As I stated above, all US citizens and US resident aliens are considered US Persons. In the vast majority of cases, it is fairly easy to determine who is a US citizen; most complications occur with “accidental Americans” and Americans with only one parent who is a US citizen.  
A US resident alien is a more complex term. It includes not only US Permanent Residents (i.e. “green card” holders), but also all persons who satisfied the Substantial Presence Test and all persons who declared themselves as US tax residents.  This means that a person may be a US resident for tax purposes, but not for immigration purposes. This situation creates a lot of confusion among people who marry US persons or who come to the United States to work; many of them believe themselves to be Non-US Persons, but in reality they are US tax residents. 
Non-US Person Definition: Domestic Corporations & Partnerships
Under §7701(a)(4), corporations and partnerships are considered US Persons if they are created or organized in the United States or under the laws of the United States or any of its states.  In the case of partnerships, the IRS may issue regulations that provide otherwise, but the IRS has not done so yet.  Conversely, a corporation or a partnership is a Non-US Person if it is not organized in the United States. 
Pursuant to §7701(a)(9), the definition of the United States for the purposes of §7701(a)(4) includes only the 50 States and the District of Columbia.  In other words, §7701(a)(9) excludes all US territories and possessions from the definition of the United States. For example, a corporation formed in Guam is a Non-US Person!
Non-US Person Definition: Domestic Trust
A trust is a US Person if it satisfies both tests contained in §7701(a)(30)(E). The first test is a “court test”: a court within the United States must be able to exercise primary supervisorial administration.  The second test is a “control test”: one or more US persons must have the authority to control all substantial decisions of the trust.  Failure to meet either test will result in the trust being a Non-US Person with huge implications for US tax purposes.
Non-US Person Definition: Domestic Estate
While all other definitions described above define a domestic entity and state that a foreign entity is not a domestic one, it is exactly the opposite with estates. Under §7701(a)(30)(D), an estate is a US Person if it is not a foreign estate described in §7701(a)(31).  §7701(a)(31)(A) defines a foreign estate as: “the income of which, from sources without the United States which is not effectively connected with the conduct of a trade or business within the United States, is not includible in gross income under subtitle A”. 
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance
Sherayzen Law Office is a leader in US international tax compliance.  We have advised hundreds of clients around the globe with respect to their US international tax compliance, international tax planning (including investment into US companies) and offshore voluntary disclosures.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Inbound Transactions Tax Framework | US International Tax Lawyer & Attorney
Inbound transactions deal with Non-US persons who operate in and/or derive income from the United States. This introductory essay opens a series of articles concerning US taxation of inbound transactions. Today, I will set forth the general inbound transactions tax framework; in future articles, I will explore in more detail each element of this framework.
Inbound Transactions Tax Framework: General Guiding Principals
US taxation of inbound transactions is mainly based on the following guiding principle – nexus to the United States. In other words, the US government taxes Non-US persons in a different manner depending on the level and extent of a Non-US person’s activities in the United States. 
The more extensive and regular these activities are, the more likely the income derived from these activities to be taxed by the IRS on a net-income basis (as opposed to gross income) at graduated tax rates. On the other hand, if a Non-US person’s activities are limited, less frequent and more passive, then they are likely to be subject to a completely different type of taxation – the one based on gross income at a set rate.
This “US nexus” principal is subject to numerous exceptions due to the fact that the inbound transactions tax framework incorporates two additional goals.  The first goal is the US government’s attempt to design the framework in a manner which would attract foreign investments into the United States.  For this reason, the Internal Revenue Code (“IRC”) may exclude entire categories of income from US taxation either directly or by altering the source-of-income rules (i.e. excluding certain income from the definition of “US-source income”).
Second, as a counter to the “attraction of foreign investments” principal, the US government wishes to make sure that all income of Non-US persons that needs to be taxed is actually taxed and there is no inappropriate non-taxation of US-source income. As a result of the IRS efforts to ensure the effectiveness of this principal, certain types of income are subject to special regimes of taxation.  The most prominent example is the taxation of foreign investments in US real property.
Finally, one should remember to consult US income tax treaties for country-specific exceptions. In particular, treaties often modify tax-withholding provisions with respect to various categories of US-source income.
Inbound Transactions Tax Framework: Main Test
The analytical framework for the taxation of inbound transactions is comprised of a test with seven critical questions.  The answers to each question will point us to the right sections of the Internal Revenue Code and establish the correct tax treatment for specific types of income.
Is the person who derives the income is a US person or a Non-US person?  
Obviously, if the answer to the question is “US person”, then we are not dealing with an inbound transaction, but a domestic investment.  Hence, the taxation of a transaction or investment should be examined under a different tax framework (the one that applies to US persons) than the inbound transactions tax framework.  
The difference between these tax frameworks is huge.  A US person is subject to worldwide income taxation, whereas a Non-US person is generally taxed only on the income derived from US business activities and US investments. 
2. Is it a US-source income?
The question whether a Non-US person derives US-source income or foreign-source income is of huge importance and complexity. The answer to this question involves the analysis of relevant source-of-income rules as modified by a relevant tax treaty. 
Generally, Non-US persons are taxed only on their US-source income.  This means that if it is determined that the income is derived from a foreign-source, none of it is likely to be subject to US taxation.  However, certain types of foreign-source income deemed “effectively connected” with US business activities may still be taxed in the United States.  Hence, even if the answer to this question #2 is “no”, you must still continue your analysis by answering question #4 below.
3. Does the Non-US person engage in US trade or business activities?
The determination of whether a Non-US person engages in “trade or business within the United States” depends highly on the facts of a case. In a future article, I will discuss in more detail what the IRS and the courts have determined this term of art to mean.
4. Is the income effectively connected to these US trade or business activities?
The term “effectively connected income” or ECI is one of the most important concepts in US international tax law.  It may include not only US-source income generated by a US trade or business, but also certain foreign-source income closely related to a US trade or business. In a future article, I will explore ECI in more detail.
5. Is the ECI subject to a special tax regime such as BEAT or Branch Tax?
The ECI of a foreign person may be subject to a special tax regime related to US companies owned by a foreign person or US branches of a foreign corporation.  I will discuss each of these regimes in more detail in the future.
6. If the Non-US person is not engaged in US trade or business activities, is his US-source income classified as FDAP (Fixed, Determinable, Annual or Periodic) income?
FDAP income typically includes passive investment income, such as interest, dividends, rents and royalties. Unless modified by a treaty, FDAP income is subject to a 30% tax withholding on gross income. I will cover FDAP income in more detail in the future.
7. Is this FDAP income subject to an IRC or Treaty Exemption?
In order to promote foreign investment into the United States, certain types of FDAP income are entirely exempted rom US taxation.  These exemptions can be found in the IRC or a relevant tax treaty. Again, I will discuss FDAP exemptions in more details in a future article. 
Inbound Transactions Tax Framework: Information Returns
In addition to income tax considerations, it is important to remember that the answers to the questions above may lead to the determination of additional compliance requirements in the form of information returns. For example, if a Non-US person engages in a US trade or business through a foreign-owned US corporation, then this corporation may likely have to file Form 5472. A failure to file relevant information returns may lead to an imposition of significant IRS penalties.
Contact Sherayzen Law Office for Professional Help With US Tax Compliance and Planning
If you are a Non-US person who has income from the United States or engages in business activities in the United States, contact Sherayzen Law Office for professional help with your US tax compliance.  We have helped hundreds of taxpayers around the world and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### FATCA Lawyer: Connection Between UBS Case and FATCA
https://www.youtube.com/watch?v=CJfroEa5Hqc
Hello, and welcome to Sherayzen Law Office video blog; my name is Eugene Sherayzen and I'm an international Tax Attorney and owner of Sherayzen Law Office, Ltd.
Today, we are continuing our blog from Zurich, Switzerland and as you can see, we have UBS in the background; this is the UBS headquarters (in Switzerland). What I would like to talk about today, is what happened after UBS caved in to the IRS demands to turn over the names of US taxpayers who own accounts at UBS. 
This happened in 2008. What happened next is quite remarkable. Basically, once one of the largest Swiss banks admitted that it can be bullied into submission by the IRS, the rest of the banks started to follow suit. The influence of the US Government grew enormously from that point on. The next thing that happened after the UBS defeat was the creation of the 2009 Offshore Voluntary Disclosure Program or OVDP. During the program, which was extremely successful, the IRS has collected an enormous amount of information about Swiss banks sufficient for it to make the next step and the next step was the enactment of FATCA. 
FATCA is a huge topic. Let's just say that FATCA revolutionized the entire legal landscape of International Tax Compliance. FATCA pretty much put an end to unlimited bank secrecy that existed prior to the 2008 UBS case. Next time, we will discuss more of what FATCA meant for International Tax Compliance and then we'll also talk about the 2011 OVDI Program and the 2012 OVDP with it's successor, the 2014 OVDP Program (now closed).
Thank you for watching, until the next time.

### 2020 FBAR Criminal Penalties | FBAR International Tax Lawyers
2020 FBAR criminal penalties is a potential threat to any US taxpayer who willfully failed to file his FBARs or knowingly filed a false FBAR. In this essay, I would like to review the 2020 FBAR criminal penalties that these noncompliant US taxpayers may have to face.
2020 FBAR Criminal Penalties: Background Information
A lot of US taxpayers do not understand why the 2020 FBAR criminal penalties are so shockingly severe. These taxpayers question why failing to file a form that has nothing do with income tax calculation should potentially result in a jail sentence.
The answer to this questions lies in the legislative history of FBAR. First of all, it is important to understand that FBAR is not a tax form. The Report of Foreign Bank and Financial Accounts (“FBAR”) was born in 1970 out of the Bank Secrecy Act (“BSA”), in particular 31 U.S.C. §5314. This means that the initial primary purpose of the form was to fight financial crimes, money laundering and terrorism. In other words, FBAR was not initially created to combat tax evasion.
Rather, FBAR criminal penalties were structured from the very beginning for the purpose of punishing criminals engaged in financial crimes and/or terrorism. This is why the FBAR penalties are so severe and easily surpass the penalties of any tax form.
It was only 30 years later, after the enaction of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), that the enforcement of FBAR was turned over to the IRS allegedly to fight terrorism. Instead, the IRS almost immediately commenced using FBAR to fight the tax evasion schemes that utilized offshore accounts.
The Congress liked the IRS initiative and responded with the American Jobs Creation Act of 2004 (“2004 Jobs Act”). The 2004 Jobs Act further increased the FBAR existing penalties and created an new non-willful penalty of up to $10,000 per violation.
2020 FBAR Criminal Penalties: Description
Now that we understand why the 2020 FBAR criminal penalties are so severe, let’s describe what these penalties actually may be. There are three different 2020 FBAR criminal penalties associated with different FBAR violations.
First, a criminal penalty may be imposed under 26 U.S.C. 5322(a) and 31 C.F.R. § 103.59(b) for willful failure to file FBAR or retain records of a foreign account. The penalty is up to $250,000 or 5 years in prison or both.
Second, when the willful failure to file FBAR is combined with a violation of other US laws or the failure to file FBAR is “part of a pattern of any illegal activity involving more than $100,000 in a 12-month period”, then the IRS has the option of imposing a criminal penalty under 26 U.S.C. 5322(b) and 31 C.F.R. § 103.59(c). In this case, the penalty jumps to incredible $500,000 or 10 years in prison or both.
Finally, if a person willingly and knowingly files a false, fictitious or fraudulent FBAR, he may be penalized under 31 C.F.R. § 103.59(d). The penalty in this case may be $10,000 or 5 years or both.
Contact Sherayzen Law Office for Help With Past FBAR Violations
If you were required to file an FBAR but you have not done it, contact Sherayzen Law Office to explore your voluntary disclosure options. Our international tax law firm specializes in FBAR compliance and we have helped hundreds of US taxpayers around the world to resolve their past FBAR noncompliance while reducing and, in some cases, even eliminating their FBAR penalties.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### FBAR Voluntary Disclosure | International Tax Lawyer & Attorney
I often receive calls from prospective clients who talk about FBAR voluntary disclosure. They usually have no clear idea of what is meant by this term and what its requirements are. In this article, I will discuss this concept of FBAR Voluntary Disclosure and explain how this concept covers a variety of offshore voluntary disclosure options.
FBAR Voluntary Disclosure: What is FBAR?
Before we discuss the meaning of FBAR Voluntary Disclosure, we need to understand what “FBAR” is. FBAR is an acronym for Report of Foreign Bank and Financial Accounts, officially known as FinCEN Form 114. US Persons must file FBAR to report their financial interest in or signatory authority or any other authority over foreign bank and financial accounts if the aggregate value of these accounts exceeds $10,000 at any point during a calendar year.
FBAR Voluntary Disclosure: Why FBAR Compliance Is So Important?
US taxpayers who fail to comply with their FBAR obligations may find themselves in an extremely difficult legal position, because FBAR has a highly complex and an exceptionally severe penalty system, which includes even criminal penalties for FBAR noncompliance. The form’s civil penalties include not only willful penalties, but also non-willful penalties – i.e. the IRS can assess FBAR penalties even if a taxpayer's failure to file his FBARs was unintentional and accidental.
FBAR Voluntary Disclosure: What is Voluntary Disclosure?
“Voluntary disclosure” is a process by which taxpayers voluntarily self-correct their past noncompliance. When this process involves foreign assets, it is called “offshore voluntary disclosure”.
FBAR Voluntary Disclosure: Offshore Voluntary Disclosure Options (Tax Year 2020)
The IRS has created a number of voluntary disclosure programs to encourage taxpayers to come forward and correct their past US tax noncompliance. These offshore voluntary disclosure options include: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures (effectively discontinued several weeks ago), IRS Criminal Investigation Voluntary Disclosure Practice (used to be called “Traditional IRS Voluntary Disclosure”) and the now-closed OVDP (Offshore Voluntary Disclosure Process) and OVDI (Offshore Voluntary Disclosure Initiative).
Moreover, there is also a voluntary disclosure based on Reasonable Cause exception that is sometimes called “noisy disclosure”.  This is not an official IRS voluntary disclosure program, but simply a voluntary disclosure venue based on specific provisions in the Internal Revenue Code.
Finally, some taxpayers attempt to do “quiet disclosures”. A quiet disclosure can mean a range of actions voluntarily taken by a taxpayer to comply with US international tax laws without officially informing the IRS about his past noncompliance with them. In other words, a taxpayer never takes advantage of any of the voluntary disclosure options and does not claim Reasonable Cause Exception defense; rather, he either files amended tax returns or simply starts to comply with US international tax laws without doing anything about his past noncompliance.
The IRS strongly disfavors quiet disclosures and does not consider them to be voluntary disclosures. In fact, the IRS has officially stated that the agency will try to identify the taxpayers who are doing it and audit them in order to impose penalties for past noncompliance.
FBAR Voluntary Disclosure Versus Offshore Voluntary Disclosure
You probably already noticed that I never listed “FBAR Voluntary Disclosure” as a voluntary disclosure option. The reason is because it is not an official voluntary disclosure option. Rather, FBAR Voluntary Disclosure is merely a term that refers to any offshore voluntary disclosure option involving past FBAR noncompliance (such as Streamlined Domestic Offshore Procedures).
Hence, when a prospective client calls me to discuss his FBAR voluntary disclosure, I know that he does not mean any specific offshore voluntary disclosure program but merely wishes to know what option he should use to voluntarily correct his past FBAR noncompliance.
Contact Sherayzen Law Office About Your FBAR Voluntary Disclosure
If you have not filed your required FBARs for prior years, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a leader in offshore voluntary disclosures involving FBARs – this is our core specialty.
We have filed thousands of FBARs for hundreds of clients all over the world. We have prepared hundreds of voluntary disclosures under all offshore voluntary disclosure options, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Beware of Flat-Fee Lawyers Doing Streamlined Domestic Offshore Procedures
Recently, I received a number of phone calls and emails from people who complained about incorrect filing of their Streamlined Domestic Offshore Procedures (“SDOP”) packages by lawyers who took their cases on a flat-fee basis.  In this article, I would like to discuss why a flat fee is generally not well-suited for a proper SDOP preparation and why clients should critically examine all facts and circumstances before retaining flat-fee lawyers.
A small disclosure: the analysis below is my opinion and the result of my prior experience with SDOPs.  Moreover, I am only describing general trends and there are certainly exceptions which may be applicable to a specific case.  Hence, the readers should consider my conclusions in this article carefully and apply them only after examining all facts and circumstances related to a specific lawyer before making their final decision on whether to retain him.
Flat-Fee Lawyers versus Hourly-Rate Lawyers
The two main business models that exist in the professional tax community in the United States with respect to billing their clients are the hourly-rate model and the flat-fee model.  The hourly-rate model means that an attorney’s fees will depend on the amount of time he actually worked on the case.  The flat-fee model charges one fee that covers a lawyer’s work irrespective of how much time he actually spends on a case. 
Both billing models have their advantages and disadvantages.  Generally, the chief advantage of an hourly-rate model is potentially higher quality of work.  The hourly-rate model has a built-in incentive for attorneys to do as accurate and detailed work as possible, maximizing the quality of the final work product.  An hourly-rate attorney is likely to take more time to explore the documents, uncover hidden problems of the case and properly resolve them.
The disadvantage of an hourly-rate model is that it cannot make an absolutely accurate prediction of what the legal fees will ultimately be.  However, this problem is usually mitigated by estimates – as long as he knows all main facts of the case, an experienced attorney can usually predict the range of his legal fees to cover the case.  Only a discovery of substantial unexpected issues (that were not discussed or left unresolved during the initial consultation) will substantially alter the estimate, because more time would be needed to resolve these new issues.
The chief advantage of the flat-fee model is the certainty of the legal fee - the client knows exactly how much he will pay.  A secondary advantage of this model is the built-in incentive for flat-fee lawyers to complete their cases as fast as possible.
However, this advantage is undermined by several serious disadvantages.  First, the flat-fee model provides a powerful incentive for lawyers to spend the least amount of time on a client’s case in order to maximize their profits; in other words, the flat-fee model has a potential for undermining the quality of a lawyer’s work product. Of course, it does not happen in every case, but the potential for such abuse is always present in the flat-fee model.
Second, closely-related to the first problem, the flat-fee model discourages lawyers from engaging in a thorough analysis of their clients’ cases.  This may later result in undiscovered issues that may later expose a client to a higher risk of an unfavorable outcome of the case. Again this does not happen in every case, but I have repeatedly seen this problem occur in voluntary disclosures handled by flat-fee lawyers and CPAs.
Finally, a client may actually over-pay for a flat-fee lawyer’s services compared to an hourly-rate attorney, because a flat-fee lawyer is likely to set his fees at a high level to make sure that he remains profitable irrespective of potential surprises contained in the case.  Of course, there is a risk for flat-fee lawyers that the reverse may occur – i.e. despite being set to a high level, the fee is still too small compared to issues involved in a case. 
The effective usage of either one of these billing models differs depending on where they are applied. In situations where the facts are simple and legal issues are clear, a flat-fee model may be preferable. However, where one deals with a complex legal situation and the facts cannot all be easily established during an initial consultation, the hourly-rate model with its emphasis on thoroughness and quality of legal work is likely to be the best choice.
Flat-Fee Lawyers Can Be An Inferior Choice for Streamlined Domestic Offshore Procedures
In my opinion and based on the analysis above, in the context of an SDOP voluntary disclosure, a flat-fee engagement is particularly dangerous because of the nature of offshore voluntary disclosure cases.
Voluntary disclosures are likely to deal with complex US international tax compliance issues and unclear factual patterns. It may be difficult to identify all legal issues and all US international tax reporting requirements during an initial consultation.  There are too many facts that clients may simply not have at their disposal during an initial consultation. Moreover, additional issues and questions are likely to arise after the documents are processed.  I once had a situation where I discovered that a client had an additional foreign corporation with millions of dollars only several months after the initial consultation – the corporation was already closed and the client forgot about it.
For these reasons, SDOP and offshore voluntary disclosures in general require an individualized, detailed and thorough approach as well as a hard-to-determine (during an initial consultation) depth of legal analysis which is generally ill-fit for a flat-fee engagement. A flat-fee lawyer is unlikely to accurately estimate how much time is required to complete a client’s case and, hence, unlikely to accurately set his flat fee for the case.  
This can cause a huge conflict of interest as the case progresses. I have seen a number of cases where, in an attempt to remain profitable, flat-fee lawyers did their analysis too fast and failed to properly identify all relevant tax issues; as a result, the voluntary disclosures (including SDOP disclosures) done by them had to amended later by my firm. This caused significant additional financial costs and mental stress to my clients. 
In my opinion, this potential conflict of interest makes the flat-fee model unsuitable for the vast majority of the SDOP cases.
Beware of Some Flat-Fee Lawyers Including Unnecessary Services Into the Flat Fee
This applies only to a tiny minority of flat-fee lawyers.  I have observed several times where flat-fee lawyers included irrelevant services that the client never used to increase the flat fee for the case (for example, audit fees for years not included in the SDOP). My recommendation is that, if you decide to go with a flat-fee arrangement, you should make sure that it includes only the services that you will likely use.
Contact Sherayzen Law Office for Professional Help With Streamlined Domestic Offshore Procedures
Sherayzen Law Office is a leader in SDOP disclosures.  We have helped clients from over 70 countries with their offshore voluntary disclosures, including SDOPs.  Our firm follows an hourly-rate billing model, because we value the quality of our work above all other considerations.  Of course, we make every effort to make our fees reasonable and competitive, but our priority is the peace of mind of our clients who know that they can rely on the creativity of our legal solutions and the high quality of our work.
Contact Us Today to Schedule Your Confidential Consultation!

### October 31 2020 FBAR Deadline | FBAR Tax Lawyer & Attorney
US taxpayers can still timely file their 2019 FBAR (Report of Foreign Bank and Financial Accounts) by the new October 31 2020 FBAR deadline. This FBAR deadline extension is highly unusual and requires some explanation.
October 31 2020 FBAR Deadline: What is FBAR?
The Report of Foreign Bank and Financial Accounts (“FBAR”) is officially known as FinCen Form 114. This form must be filed by US persons with an ownership interest in or signatory authority or any other authority over foreign bank and financial accounts if the aggregate value of such accounts exceeds $10,000 at any point during a calendar year. This is a very important US international information return; a failure to timely and correctly file an FBAR may result in an imposition of draconian FBAR penalties. This is why it is so important to learn about FBAR deadlines.
October 31 2020 FBAR Deadline & FinCEN Mistake
The 2019 FBAR deadline extension became possible as a result of an incorrect message posted by FinCEN on its BSA (Bank Secrecy Act) website. On October 14, 2020, FinCEN posted a message that incorrectly stated that the 2019 FBAR deadline was extended to December 31, 2020 for all FBAR filers. Within twenty-four hours, FinCEN removed the message.
On October 16, 2020, FinCEN posted a corrected message that stated that the extension to December 31, 2020, was intended only for victims of recent natural disasters listed in FinCEN’s October 6, 2020 notice.  
Since, however, there were filers who have missed the October 15 deadline due to the incorrect October 14 message, FinCEN decided to allow these filers to have an extra couple of weeks to file their 2019 FBARs.  For this reason, FinCEN established a new October 31 2020 FBAR deadline for all FBAR filers (except those who were victims of natural disasters listed in the aforementioned October 6 list). 
October 31 2020 FBAR Deadline & December 31 2020 FBAR Deadline
Thus, there are two separate FBAR filing deadline extensions still outstanding.  The first one is the October 31 2020 FBAR deadline which applies to all FBAR filers except the ones who are also eligible for the second deadline extension.   
The second deadline extension to December 31, 2020 applies only to victims of natural disasters listed in FinCEN’s October 6, 2020 notice. 
Contact Sherayzen Law Office for Professional Help with FBAR Compliance
Sherayzen Law Office is a leading US international tax law firm that specializes in US international tax law and FBAR compliance. We have filed thousands of FBARs for our clients. We have also helped US taxpayers from over 70 countries to deal with FBAR filing violations for prior years, including as part of a voluntary disclosure (such as Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures and Reasonable Cause disclosures). Our FBAR clients include individuals, corporations, partnerships, estates, trusts and disregarded entities.
We can help you!  Contact Us Today To Schedule Your Confidential Consultation!

### 26 U.S.C. Subpart A: Taxation of Recipients of Corporation Distributions
This article is a second installment of our series of articles on corporate distributions. Today’s topic is the description of 26 U.S.C. Subpart A, which contains the most important tax provisions for our subsequent discussions of this subject.
26 U.S.C. Subpart A: Purpose
26 U.S.C Subpart A is the first part of Part I of Subchapter C, which deals with corporate distributions and adjustments. The main purpose of Subpart A is to establish the rules for taxation of recipients of corporate distributions. In other words, this section of the Internal Revenue Code deals with a situation where a corporation distributes or is deemed to have distributed something – a property, stocks, et cetera – to its shareholders.  The focus here is not on the corporation, but on how its shareholders should be taxed. 
26 U.S.C. Subpart A: §§301-307
26 U.S.C. Subpart A contains seven tax sections: IRC (Internal Revenue Code) §§301-307.  All of these provisions are very important for both US domestic and international tax purposes. 
IRC §301 establishes a general tax framework for corporate distributions and specifically deals with the distributions of property classified as dividends under IRC §316.  
IRC §§302-304 describe the tax rules related to redemptions of stock (as defined in §317(b)), including some very specific situations.  For example, §303 deals with distributions in redemption of stock to pay death taxes.  The main provision, however, is §302 with its four tests which are highly important for determining whether a redemption of stock will be treated as a sale under §1001 or a corporate distribution under §301. 
IRC §305 focuses on the special tax rules concerning stock dividends.  It establishes the general rule that stock dividends are not taxable, but it also contains numerous exceptions to the general rule. More exceptions to the general rule may be found in §306.
IRC §306 deals with dispositions of “§306 stock” as defined in §306(c). §306 is very important to taxpayers because, with a few exceptions, it treats a disposition of §306 stock as ordinary income. This section also contains a loss non-recognition provision.
Finally, IRC §307 explains the calculation of cost-basis of stock received by shareholders as a result of a §305(a) distribution.  This section has very important implications not only to stock dividends in general, but also to stock dividends made by a PFIC (Passive Foreign Investment Company). The calculation of PFIC tax and PFIC interest with respect to a disposition of such PFIC stock dividends are directly influenced by §307.
Contact Sherayzen Law Office for Professional Tax Help Concerning Corporate Distributions
Sherayzen Law Office is an international tax law firm highly-experienced in US and foreign corporate transactions, including corporate distributions. We have helped our clients around the world not only to engage in proper US tax planning concerning cash, property and stock distributions from US and foreign corporations, but also resolve any prior US tax noncompliance issues (including conducting offshore voluntary disclosures). We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### US Tax Reporting of Foreign Investment Accounts | FBAR Lawyer
https://www.youtube.com/watch?v=1Q6psHgXht8
Hello, and welcome to Sherayzen Law Office video blog; my name is Eugene Sherayzen and I'm an international Tax Attorney and owner of Sherayzen Law Office, Ltd.
Today, we're continuing our series of blogs from Zurich, Switzerland and in fact, we are standing in front of Swissquote. This is the company that trades Swiss stocks and the reason why it's important is because there are still a lot of taxpayers with Swiss stocks who do not realize that even if they disclose their Foreign Bank Accounts, they also have to disclose their Foreign Stock Trading Accounts and Foreign Mutual Funds. All of this has to be disclosed to the IRS.
Now, how do you disclose it? There are two main forms that you need to worry about: FBAR, the Foreign Bank and Financial Accounts Report or Form 8938 which is attached to your tax return. Also, if you are investing in Foreign Mutual Funds, e.g. Swiss Mutual Funds through Swissquote, you also need to disclose them on Form 8621, which is quite complex.
If you would like to learn more about what you need to do in order to stay in US Tax Compliance, with respect to your Foreign Investment Accounts, you can contact me directly at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com.
Thank you for watching, until the next time.

### Foreign Accounts & US Tax Residency | International Tax Lawyer United States
https://www.youtube.com/watch?v=dVjSS27DEEE
Hello, and welcome to Sherayzen Law Office video blog; my name is Eugene Sherayzen and I'm an international Tax Attorney and owner of Sherayzen Law Office, Ltd.
Today, we're continuing our series of blogs from the Czech Republic. I would like to talk to you about persons who are US Taxpayers and who have Undisclosed Bank Accounts and other Foreign Assets in the Czech Republic.
What is it that they need to do once they find out about their prior tax noncompliance? First of all, we need to figure out who is a US Tax Resident. "US Tax Resident", is a broad category; it includes all US Citizens, all US Permanent Residents and everyone who satisfied the Substantial Presence Test. 
Now this definition, in its pure form, applies only to the income tax return. When we talk about forms like FBAR, Form 8938 and other similar US International Information Returns, the definition changes. It doesn't change much but it does change a little bit. For FBAR purposes we're talking about US Persons; if we are talking about Form 8938, we're talking about Specified Individuals and Specified Domestic Entities.
The difference between these definitions, as I said, is very small, but there are differences. In some instances, you can be a non-resident alien for income tax purposes and still have to file FBAR. Similarly, you may have to file FBAR but you don't have to file Form 8938. It is the job of your International Tax Attorney to determine which form applies to you, whether you are a US Tax Resident for a certain form and a non-resident with respect to an income tax return.
The most important thing is if you fall into any of the categories that I've mentioned, you are a US Tax Resident for income tax purposes. So, whether you are US Citizen, a US Permanent Resident or you satisfied the Substantial Presence Test, if you satisfy any of these requirements, then you have to disclose your Foreign Accounts and if you have not disclosed your accounts, then at that point you need to contact an International Tax Attorney; that's the first step that you need to do.  
Contact me in order to determine what your penalty exposure is and what the best way is to conduct your Voluntary Disclosure.
You can call me at (952) 500-8159 or you can email me at Eugene@SherayzenLaw.com.
Thank you for watching!

### Introduction to Corporate Distributions | US Business Tax Law Firm
This essay opens our new series of articles which focuses on corporate distributions. The new series will cover the classification, statutory structure and tax treatment of various types of corporation distributions, including redemptions of corporate stock.  This first article seeks to introduce the readers to the overall US statutory tax structure concerning corporate distributions. 
Corporation Distributions: Legal Philosophy for Varying Treatment
In the United States, the tax code provisions with respect to corporate distributions were written based on the belief that stock ownership bestows on its owner an inherent right to determine the right to receive distributions from a corporation. 
Generally, a corporation can make distributions from three types of sources.  First, a corporation can distribute funds from its accumulated earnings, to be even more precise accumulated Earnings and Profits (E&P). Second, a corporation may also distribute some or all of the invested capital to its shareholders.  Finally, in certain circumstances, a corporation may distribute funds or property in excess of invested capital. 
Moreover, certain corporate distributions may in reality be made in lieu of other types of transactions, such as payment for services. Additionally, some corporate distributions may be made in the form of stocks in the corporation, which may or may not modify the ownership of the corporation and which may or may not entitle shareholders to additional (perhaps unequal) future distribution of profits.
This varied nature of corporate distributions lays the foundation for their dissimilar tax treatment under the Internal Revenue Code (IRC). 
Corporation Distributions: General Treatment under §301
IRC §301 generally governs the tax treatment of corporation distributions.  This section classifies these distributions either as dividends, return of capital or capital gain (most likely, long-term capital gain).  In a future article, I will discuss §301 in more detail.
Corporation Distributions: Special Case of Stock Dividends
The IRC treats distribution of stock dividends in a different manner than distribution of cash and property.  Under §305(a), certain stock distributions are not taxable distributions.  However, §305 contains numerous exceptions to this general rule; if any of these exceptions apply, then such stock distributions are governed by §301.  
Moreover, additional exceptions to §305(a) are contained in §306. If a stock distribution is classified as a §306 stock, then the disposition of this stock will be treated as ordinary income.  In a future article, I will discuss §§305 and 306 in more detail.
Corporation Distributions: Special Case of Stock Redemptions
Stock redemptions is a special kind of a corporate distribution. §317(b) defines redemption of stock as a corporation’s acquisition of “its stock from a shareholder in exchange for property, whether or not the stock so acquired is cancelled, retired, or held as treasury stock.”  
§302 governs the tax treatment of stock redemptions.  In general, it provides for two potential legal paths of stock redemptions.  First, if a stock redemption satisfies any of the four §302(b) tests, then it will be treated as a sales transaction under §1001.  Assuming that the redeemed stock satisfied the §1221 definition of a capital asset, the capital gain/loss tax provisions will apply.
On the other hand, if none of the §302(b) tests are met, then the stock redemption will be treated as a corporate distribution under §301. Again, in a future article, I will discuss stock redemptions in more detail.
Corporate Distributions in the Context of US International Tax Law
All of these tax provisions concerning corporate distributions are relevant to US shareholders of foreign corporations.  In fact, in the context of US international tax law, these tax sections become even more complex and may have far graver consequences for US shareholders than under purely domestic tax law.  These consequences may be in the form of higher tax burden (for example, due to an anti-deferral tax regime such as Subpart F rules) or increased compliance burden (for example, triggering the filing of international information returns such as Form 5471 or Form 926).   
A failure to recognize these differences between the application of aforementioned tax provisions in the domestic context from the international one may result in the imposition of severe IRS noncompliance penalties.
Contact Sherayzen Law Office for Professional Tax Help Concerning Corporation Distributions
Sherayzen Law Office is an international tax law firm highly-experienced in US and foreign corporate transactions, including corporate distributions. We have helped our clients around the world not only to engage in proper US tax planning concerning cash, property and stock distributions from US and foreign corporations, but also resolve any prior US tax noncompliance issues (including conducting offshore voluntary disclosures). We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### The Tinkov Case: Concealment of Foreign Assets During Expatriation
On March 5, 2020, the Internal Revenue Service (“IRS”) and the U.S. Department of Justice (“DOJ”) announced that Mr. Oleg Tinkov was arrested in London in connection with an indictment concerning concealment of about $1 billion in foreign assets and the expatriation income in connection with these assets.  Let’s discuss the Tinkov case in more detail.
The Tinkov Case: Alleged Facts
According to the indictment, Oleg Tinkov was the indirect majority shareholder of a branchless online bank that provided its customers with financial and bank services.  The indictment alleges that, as a result of an initial public offering (IPO) on the London Stock Exchange in 2013, Tinkov beneficially owned more than $1 billion worth of the bank’s shares.  He allegedly owned these shares through a British Virgin Island (“BVI”) structure.
The indictment further alleges that three days after the IPO, Mr. Tinkov renounced his U.S. citizenship or expatriated.  Expatriation is a taxable event subject to the expatriation tax.  As a an expatriated individual, Mr. Tinkov should have reported to the IRS the gain from the constructive sale of his worldwide assets and pay the expatriation tax on such a gain to the IRS.  Yet, he allegedly never did it.
Instead, Mr. Tinkov filed an allegedly false 2013 tax return with the IRS that reported income of less than $206,000.  Moreover, the IRS further alleges that he filed a false 2013 Initial and Annual Expatriation Statement reporting that his net worth was $300,000.
The Tinkov Case: Potential Noncompliance Penalties
If convicted, Mr. Tinkov faces a maximum sentence of three years in prison on each count. He also faces a period of supervised release, restitution, and monetary penalties. Other penalties (including Form 5471, Form 8938 and FBAR penalties) may be imposed.
The Tinkov Case: Presumption of Innocence
The readers should remember that an indictment is a mere allegation that crimes have been committed. The defendant (in this case, Mr. Tinkov) is presumed innocent until proven guilty beyond a reasonable doubt.
The Tinkov Case: Lessons from This Case
The Tinkov Case offers a number of useful lessons concerning US international tax compliance, particularly U.S. expatriation tax laws. Let’s concentrate on the three most important lessons.
First, a U.S. citizen or a long-term U.S. permanent resident must carefully consider all tax consequences of expatriation. Such a taxpayer must engage in careful, detailed tax planning prior to expatriation. Mr. Tinkov did not do such planning and renounced his U.S. citizenship merely three days before the IPO. By that time, the value of his assets was already easily established beyond reasonable dispute.
Second, one must be very careful and accurate with one’s disclosure to the IRS.  Mr. Tinkov’s 2013 U.S. tax return and the Expatriation Statement contained information vastly different from the one that the IRS was able to acquire during its investigation.  It is no wonder that the IRS concluded that he willfully filed false returns to the IRS, especially since it does not appear that his submissions to the IRS attempted to explain the gap between the returns and the information that IRS had or acquired later during an investigation.
Finally, expatriation cases involving sophisticated tax structures, especially those incorporated in an offshore tax-free jurisdiction, are likely to face a closer scrutiny and even a criminal investigation by the IRS. We have seen the confirmation of this fact in many cases already. In this case, Mr. Tinkov’s BVI corporation, which protected his indirect ownership of his online bank, was a huge red flag.  His attorneys should have predicted that this structure alone would invite an IRS investigation of his expatriation. 
Contact Sherayzen Law Office for Professional Help With Your U.S. International Tax Compliance and Offshore Voluntary Disclosures
If you are a U.S. taxpayer with assets in a foreign country, contact Sherayzen Law Office for professional help with your U.S. international tax compliance. If you have already violated U.S. international tax laws concerning disclosure of your foreign assets, foreign income or expatriation, then you need to secure help as soon as possible to conduct an offshore voluntary disclosure to lower your IRS penalties.
We have helped hundreds of US taxpayers around the globe with their U.S. international tax compliance and offshore voluntary disclosures. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### International Tax Law Firm | Sherayzen Law Office, Ltd.
https://www.youtube.com/watch?v=qIJmmM-MXmA
This seminar is organized by the International Business Law Section and co-sponsored by the Trust Law Section of the Minnesota State Bar Association. My name is Eugene Sherayzen and I'll be your speaker today. 
First, a few words about myself; then we'll get to the subject matter of today's presentation.
I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd., a law firm that specializes in International Tax Compliance, in particular, Offshore Voluntary Disclosures, International Tax Planning and Annual US International Tax Compliance.
Over the course of my practice, I've conducted literally hundreds of Offshore Voluntary Disclosures of every type, including the IRS Offshore Voluntary Disclosure Program, the last version which closed on September 28, 2018, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent Information Return Submissions and Reasonable Cause Disclosures.
Every year, I've filed hundreds of income and information tax returns as part of my Annual Compliance and International Tax Practice.
As of the end of 2018, I've dealt with assets in over 70 countries and I have conducted Tax Compliance with respect to pretty much every major asset class and every type of major Business Tax Transaction. So, we're talking about disclosure of Foreign Bank and Financial Accounts, Foreign Business Ownership, Foreign Corporations, Foreign Partnerships, Foreign Trusts, Foreign Gifts and Foreign Inheritance.
Here is the list of most countries where the clients of Sherayzen Law Office, Ltd. have assets:  Australia, Canada, Cook Islands, New Zealand, Western Europe (Austria, Belgium, France, Germany, Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Monaco, Portugal, Spain, Sweden, Switzerland and United Kingdom), Eastern Europe (Belarus, Croatia, Cyprus, Czech Republic, Hungary, Lithuania, Poland, Russian Federation and Ukraine), Asia (Bangladesh, China, Hong Kong, India, Japan, Kazakhstan, Philippines, Singapore, South Korea, Thailand, Uzbekistan and Vietnam), Middle East (Dubai, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman and Turkey), Africa (Cote D’Ivore, Ethiopia, Morocco, Nigeria and Sudan), the Caribbean region (Bahamas, Barbados, Jamaica, Saint Kitts and Nevis, Trinidad & Tobago and Cayman Islands), and Latin America (Argentina, Belize, Brazil, Chile, Colombia, Costa Rica, El Salvador, Nicaragua, Mexico, Panama and Paraguay). 
Here is the list of states of the United States in which you can retain Sherayzen Law Office's international tax services:  Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

### Julius Baer & Importance of FATCA Compliance | Zurich FATCA Tax Lawyer
https://www.youtube.com/watch?v=sLP_j_meHJo
Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd. 
Today, we are continuing our vlog from Zurich, Switzerland. We are standing in front of the Julius Baer or Baer Bank here in downtown Zurich. Julius Baer is a Multinational Private Bank which was investigated by the IRS and entered into the anti-prosecution deferral agreement with the US Department of Justice in 2016; it paid over $500 million dollars in Penalties and agreed to disclose all of its US Clients to the Department of Justice.
A bank which does not comply with US Tax Reporting Requirements, which assists US Taxpayers in hiding foreign income or foreign assets is likely to draw the wrath of the US Department of Justice and may face criminal prosecution from the US Government.
This is why it is important for Foreign Financial Institutions to stay in Compliance with FATCA and CRS. If you are a banker who is interested in developing a FATCA Compliance Program for your bank, contact me directly at (952) 500-8159 or email me at eugene@sherayzenlaw.com.
Thank you for watching, until the next time.

### §318 Entity-Member Attribution Summary | International Tax Lawyer
In a previous article, I discussed the IRC (Internal Revenue Code) §318 sidewise attribution limitation. This limitation was the last piece in the jigsaw puzzle of the §318 entity-member attribution rules; now, we are ready to summarize these rules in light of this exception.  This is the purpose of this article – state the §318 Entity-Member Attribution summary.
§318 Entity-Member Attribution Summary: Definition of Member
For the purpose of this §318 Entity-Member Attribution summary, I am using the word “member” to describe partners, shareholders and beneficiaries.
§318 Entity-Member Attribution Summary: Limitations
This summary of §318 entity-member attribution rules is limited only to situations where a member owns at  50% of the value of stock (in case of a corporation) and a beneficiary of a trust does not hold a remote and contingent interest in a trust. The readers need to keep these limitations in mind as they apply the summary below to a particular fact pattern.
Moreover, the readers must remember that this summary of the §318 Entity-Member attribution rules may be altered when one applies it within the context of a specific tax provision.  Hence, the readers must check for any modification of these §318 attribution rules contained in that specific tax provision.
§318 Entity-Member Attribution Summary
Now that we understand the limitations above, we can state the following summary of the §318 Entity-Member attribution rules:
All corporate stock is attributed to an entity from its member irrespective of whether the member owns this stock actually or constructively;
If corporate stock is attributed from an entity to its member, such attribution will be done on a proportionate basis; and
The following corporate stock is attributed from an entity to its member on a proportionate basis:
(a). Corporate stock which the entity actually owns;
(b). Corporate stock which the entity constructively owns under the option rules; and
(c). Corporate stock which the entity constructively owns because it is a member of some other entity.
Contact Sherayzen Law Office for Professional Help With US International Tax Law Compliance
US international tax law is incredibly complex and the penalties for noncompliance are exceptionally severe.  This means that an attempt to navigate through the maze of US international tax laws without assistance of an experienced professional will most likely produce unfavorable and even catastrophic results. 
Contact Sherayzen Law Office for professional help with US international tax law.  We are a highly experienced, creative and ethical team of professionals dedicated to helping our clients resolve their past, present and future US international tax compliance issues.  We have helped clients with assets in over 70 countries around the world, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Streamlined Disclosure vs. Current Tax Compliance | SDOP Lawyer
https://www.youtube.com/watch?v=f58jfEk-JHk
Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I would like to discuss with you one of the most interesting problems that almost every taxpayer faces when he does a Voluntary Disclosure: the issue of current Tax Compliance. Let me explain what I mean by this.
Let's suppose that you discovered (that) you have not filed your form 8938 or perhaps FBAR; let's say you haven't done that for a number of years. At this point you're not able to obtain all the documentation necessary to complete the amended tax forms or to complete the necessary tax forms in order to file your Voluntary Disclosure. So, in essence what you're facing is an issue of whether to disclose your foreign accounts and potential past non-compliance at this point or to wait and then disclose everything when you file your Voluntary Disclosure.
The temptation is to file the tax documents as they are without disclosing anything with respect to your foreign accounts and foreign income. However, this temptation must be resisted at all costs. Let me explain why.
If you file your tax forms without the disclosure of foreign accounts and foreign income and you know that you must disclose these foreign accounts and income, then you're doing it with knowledge; in other words, the IRS may allege that you are doing this willfully. If you are doing this willfully, then it's going to be very hard for you to participate, later on in the Streamlined Voluntary Disclosure.
The concern that many taxpayers have with disclosing foreign accounts that even if they don't have all the documentation is that they are afraid that the IRS will find out about it and will commence an investigation and thereby prevent any possibility of participating in a Voluntary Disclosure Program. This, of course, is a valid concern. The issue really is 'how much time will it take to complete the Voluntary Disclosure documentation.' If it takes three years, then yes, this is a huge concern. If it takes less, then it's less of a concern. If it takes just two or three months, maybe half a year, you should have enough time to complete your Voluntary Disclosure.
Let's suppose the worst-case scenario: you file your current year compliance correctly or as accurately as you could have filed it and let's suppose that the IRS finds out about it before you could do the Voluntary Disclosure, then at the very least, you will have an argument at that point that you were trying to disclose this and this will support your non-willfulness later on during the IRS Audit.
On the other hand, if you don't disclose anything and the IRS finds out about your prior tax non-compliance, then at that point, what you will be facing is a potentially willful situation; in other words willful penalties and maybe even Criminal Penalties.
If you would like to discuss your Voluntary Disclosure more, contact me as soon as possible; you can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com.
Thank you for watching, until the next time.

### US Tax Residency | International Tax Lawyer
https://www.youtube.com/watch?v=mZE8YQJTgb4&t=5s
Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I'm an International Tax Attorney, founder and owner of Sherayzen Law Office, Ltd.
Today, I would like to discuss with you one of the most fundamental concepts of US International Tax Law: US Tax Residency. Specifically, US Tax Residency for Individuals, in the context of the US Income Tax only. 
When a Client comes into my office, one of the first things I want to find out about him is whether he's considered a US Tax Resident or a US Person. For our purposes, these concepts are interchangeable.
Why is that important? If he's a US Tax Resident, then a whole avalanche of US Tax Reporting Requirements apply to him: the Worldwide Income Requirement, the FBAR, Form 8938, 8621, 5471 etc. etc. On the other hand, if he is not a US Tax Resident, then none of these requirements would apply to him.
How do we figure out if a Client is a US Tax Resident? There are three categories of US Tax Residents. The first are US Citizens; a US Citizen is always a US Tax Resident. This is dramatically different from almost all other countries in the world except Eritrea. 
In the majority of other jurisdictions, if a citizen resides outside of their country, then he's a resident of that country, not a resident of the home country. The United States is different; if a US Citizen resides in another country, he is still a Tax Resident of the United States. He can reside on the moon; he can reside on Mars; he is still a US Tax Resident.
The second category of US Tax Residents consists of US Permanent Residents. A US Permanent Resident is always a US Tax Resident. At this point it's important to clear up a confusion that exists regarding the concepts of US Tax Residency versus US Permanent Residency. A US Permanent Resident, as I said, is always a US Tax Resident; but a US Tax Resident can be a person who is not a US Permanent Resident and not a US Citizen. It is important to distinguish between these two concepts and not to confuse them.
Let's turn to the final category of US Tax Residents: Foreign Persons who satisfied the requirements of the Substantial Presence Test. Under the Substantial Presence Test, a Foreign Person is considered to be a US Tax Resident if he is physically present in the United States for at least 183 days in the past three years. The calculation of the 183 days is a little bit peculiar; you take all of the days that you spend in the current year and plus 1/3 of the days you spent in the prior year, plus 1/6 of the days that you spent in the year before that. 
Let's use an example to illustrate how the Substantial Presence Test works. Let's say Pierre, a citizen of France is sent by his company to work in the United States for one hundred twenty days in each of the years: 2014, 2015 and 2016 on an L1 Visa. We are trying to figure out whether Pierre is a US Tax Resident in the year 2016. For these purposes, we will take 1/6 of the days he spent in the United States in the year 2014 which is 120 divided by 6 = 20 plus 1/3 of the days he spent in the United States in the year 2015 which is 120 divided by 3 = 40. Forty plus twenty = 60 plus all of the days he spent in the United States in the year 2016 which is 120 days; So 120 plus 60 = 180 which is below the 183 day threshold. This means that Pierre was not a US Tax Resident in the year 2016. 
I hope that this short presentation has helped you clear up this important concept of US Tax Residency. Thank you for watching, until the next time.

### Why Are FBAR Penalties So High? | International Tax Attorney
https://www.youtube.com/watch?v=RYsuIk8Sqpk
Now that we've talked about the Income Reporting Requirements, let's talk about the Information returns. Again, I'm going to limit myself to the most common Information Returns, simply because otherwise we will be talking about it for quite awhile, longer than the time allotted.
The most dangerous and the most important Information return that exists is FBAR. How many people here have heard of FBAR? (A few raised hands in the audience)
FBAR is the report of Foreign Bank and Financial Accounts. It's official name is FinCEN Form 114; it used to have a very lovely name, 'TD F 90-22.1'. The FinCEN Form 114 replaced TD F 90-22.1 about three years ago; but I still remember it and I can say without hesitation, how impressive this form was to me.
Why is it so important? If you look at your handout on the right-hand side, where the listed of penalties are referenced, it becomes very clear why compliance with this form is a Centerpiece of US Tax Compliance; US Tax Enforcement efforts are focused on this form. Very few people know that FBAR is actually not a tax form in of itself and comes form Title 31, Bank Secrecy Act that was passed in 1970.
The Internal Revenue Code, Title 26 partially explains why the penalties are so high with respect to the FBAR. Originally it was not meant to fight Tax Evasion but to fight Money Laundering and Financial Crimes so, the penalties there naturally are associated with Criminal Activities.
What happened after 2001 is that the function of enforcing the FBARs was turned over to the IRS and ever since that time, the FBAR turned into a Tax Enforcement mechanism and a very effective one, due to the penalties associated with it.

### International Tax Law Firm
https://www.youtube.com/watch?v=yjBbf_oKBTg
At this point I will switch over to English (laughter) because any discussion of International Tax Law requires precision, which my French, unfortunately cannot convey at this point.
Before we delve into the subject matter of today's discussion, I would like to give you some background information so that you have an idea about who I am and what it is I do.
My name is Eugene Sherayzen and I've been an International Tax Attorney for about eleven years now; I started practicing Law right after I finished Law School and got my Attorney License in 2005. All these years, I've been devoted to building my own Law Firm, Sherayzen Law Office, Ltd. which specializes in International Tax Compliance, in particular Offshore Voluntary Disclosures; this is by far the largest area of my practice in International Tax Law but I also do International Tax Planning and Annual US Tax Compliance.
The nature of my practice is such that I have a very wide-range of Clients, from school teachers, to owners of Multimillion dollar businesses, to families of Chiefs of African tribes, to Foreign Businesses that invest in the United States, to US Businesses who wish to expand overseas etc., etc.
These Clients come from various Countries. I've had Clients from every Continent in which there is a permanent human settlement except Greenland (but that is a subject of discussion, of dispute as I understand, no one really knows whether it's an Island or a Continent as this matter isn't settled just yet).
I did attempt to count how many Countries I've dealt with over these years and I have come up with a number which is over sixty, and this is not counting the Consultations from obscure Countries; of Consultations from ships, sometimes people call me while they're still at sea.

### International Tax Lawyer Minneapolis
https://www.youtube.com/watch?v=KHmjam0MYnM
Buona Sera, Seniorie Seniorie!
My name is Eugene Sherayzen and I am an International Tax Attorney. Before we delve into the subject matter of today's presentation, I would like to give you some background information so that you have an idea of who I am and what it is that I do.
I've been an International Tax Attorney for about 11 years; I started practising law right after I graduated from Law school, passed the Bar and got my License all in one year, in 2005. I've devoted all these years between 2005 and to the present time to expanding my own Law Firm - Sherayzen Law Office, Ltd., which specializes in International Tax Compliance, in particular Offshore Voluntary Disclosures (this is the core area of my practice), but I also do Annual US Tax Compliance and International Tax Planning.
The nature of my practice is such that I have a very diverse Client base with Clients coming from over 60 Countries from every Continent permanently inhabited by human beings.
The majority of my Clients come from Europe both Western and Eastern, Southeast Asia, Canada and of course the United States. A significant number of my Clients come from Latin America and the Middle East and a small number of Clients come from Australia and some African countries like Nigeria. 
There are several unique aspects of my firm that I would like to share with you today. First, we're the only boutique law firm that offers such a wide range of International Tax Services; only very large Accounting and Law Firms do what I do on a regular basis. Second, we combine the Legal and the Accounting aspects of International Tax Practice in one firm. 
This is unique; maybe firms like Ernst & Young do that but what it does is that it allows my firm to handle the entire case from the beginning to the end by itself without the necessity of retaining outside Accountants or Lawyers.
Finally, we are a truly International Law Firm because we offer services in three languages: English, Russian and Spanish… no Italian yet, though in a year or two I hope to add French and then we'll see about the Italian.

### International Tax Lawyers Madison | Importance of Avoiding International Tax Mistakes
https://www.youtube.com/watch?v=5g5mg40piEo
Let's begin by answering a philosophical question. Why should you care? I mean after all, all of you here are Business Lawyers; So what if you make a Tax Mistake intentionally or unintentionally? After all you're not Tax Lawyers. 
Let me pose that question to you because all of you are here today for a reason; why do you care? Why did you come here? Why do you think it's important for Business Lawyers to know how to avoid making International Tax Mistakes? 
Any takers?
Audience member answer: "To keep our Clients out of jail."
Okay, Good one! 
Any other….?
Second audience member answer: "The Tax Consequences will affect the Bottom Line…. of your Business."
Third audience member answer: "It will keep us out of jail too. That helps; don't you think?"
Other comment: "So far, so good." (Laughter)
Unknown audience member comment: "I think just to do anything confidently, you've got to know a lot about everything."
Perfect; and I think all of you are right! If I were to summarize it, I would say that a Client will not appreciate if a Business Deal that you pulled together, no matter how perfect it is from the Business World Perspective, results in a tremendous increase in the Client's Tax Liability, exposing the Client to huge IRS Civil Penalties and potentially Criminal Penalties because the Client could end up in jail for International Tax Noncompliance.
From the tax perspective, a badly structured Business Deal will boomerang back to you; first, in the form of losing a Client (because the Client will not stay with you after that), second, you might be facing a Legal Malpractice Lawsuit (which was mentioned here earlier) and the third thing is that potentially,  it could be an Ethical Violation because you would be advising in a very Specialized Area in which you have no knowledge or experience. You might be endangering your Attorney License at that point.

### Every Business Transaction Has Tax Consequences | International Tax Lawyers Indianapolis
https://www.youtube.com/watch?v=5Y9mVxOQN9U&t=3s
Now that we have established why we should care about making International Tax Mistakes, let's discuss the five strategic traps which would expose you as Business Lawyers to making International Tax Mistakes.
I will follow along in this handout that you all have; hopefully everyone has it. Let's start with the Business Purity Trap. A Business Purity Trap is an assumption that there is a purely Business Transaction that has no connection to Tax Law whatsoever and because there's no connection to International Tax Law; obviously, there is no need to ask a Tax Advisor about this Transaction.
You cannot imagine how many times I see this. In one area where I see this most often is Business Formation, when Business Lawyers advise their Clients to form Business Entities and structure Business Transactions in a way that would entail information of different Business Entities throughout the world. Obviously, this gets their Clients into trouble because every Business Transaction has Tax Consequences.
Let me repeat that: Every Business Transaction has Tax Consequences.

### Example of the Business Purity Trap | International Tax Attorney Florida
https://www.youtube.com/watch?v=D5lY42P7Ibw&t=1s
Let me give you an example from my practice; it's a fairly recent example. I had a Client who was operating a business in one of the Southern states of the United States. 
Let's say he had a product and that product wasn't doing that well in the United States; so what he decided to do was to go to China to see if he could find a Market there. He went to China and found some people interested in that product. He then went to his Business Lawyer and the Lawyer said, "If you are going to operate in China, you shouldn't be operating from the United States. Why don't you open up a Company in Hong Kong?"
So the Client said, "That sounds like a great idea; why not open a Company in Hong Kong?" He then opens a Company in Hong Kong, then he goes to Lithuania. In Lithuania he decided that this was another country where he could potentially find clients for his product. He again talked to the Business Lawyer and the Business Lawyer suggested that he open a Company in Lithuania. The Client then goes to Russia (this is a Russian speaking client) and meets a friend and the friend says, "I like your business; why don't we operate together?" The Client responded, "The Company in Lithuania is mine and I don't really want any Partners."
They both go to the Client's Business Lawyer and the Business Lawyer suggested, "Very easy; why don't you form a Company, a joint venture in Russia and then operate from there." So then they own this Company together. Then he gets interested in another product and creates another Company. Then he goes to Poland because he thinks that in order to operate in Europe he would be better off having Accounts in Poland. Without the advice of the Business Lawyer he opens another Company in Poland by himself - six Companies total.
No Tax Advisor ever was consulted about opening up these Companies. Years go by, then he comes to me for a completely different issue but I'm a very detailed-oriented person as a Tax Attorney should be and I started asking about his other activities around the world and uncovering one Company after another. Then we realize that he's got six Companies for three years and some of them for a little longer, for which no forms 5471 were filed: six Companies, six forms 5471 X 3, that's eighteen X $10,000 penalties. 
The Business Lawyer exposed his Client to $180,000 in penalties; for a Client with assets this size (this is not a Multinational company), that is a huge hit. 
Remember, all Business Transactions have Tax Consequences.

### Why You Should Not Dabble in International Tax Law | International Tax Lawyers Chicago
https://www.youtube.com/watch?v=poNVFspl8jI
Let's go to the next one: the Tax Dabble Trap. This is basically a belief that the Business Lawyer can advise on some or any International Tax issues related to Business Transactions even though he's not a practicing Tax Attorney.  
Oftentimes this belief, comes from prior experience. Meaning a Business Lawyer perhaps was involved ten years ago in a similar deal and an Accountant was present and the Accountant advised on this as the Business Lawyer recalls that situation. He may think, "This is a similar deal; why do I need an Accountant? Why do I need an Attorney? I can do it myself." He then starts advising on Tax Issues believing that his advice is exactly the same as it was ten years ago.
Perhaps the contributing factor to this belief is a bit of hubris which is present in all attorneys, myself included. If you remember the song, "Anything you can do, I can do better. I can do anything better than you." It's exactly that kind of attitude; it's exactly that kind of attitude which is completely false in International Tax Law.
You cannot dabble in International Tax Law for two reasons. First, it's extremely complex. You may think that this advice was given to you ten years ago by an Accountant or even a Tax Attorney is correct but perhaps there were some details, something in the facts of that particular case that influenced that advice. In a different situation, which might be very similar but yet slightly different and that slight difference might make a world of difference in terms of what kind of advice should be given.
The second reason is that this is a tremendously dynamic area of Law. International Tax Law changes all the time. Today, you don't have to report this asset; tomorrow there are three reporting requirements. Yesterday, it was not taxed; today it is taxed. Yesterday it was entitled to a Long-Term Capital Gains treatment. Today it's not or vice versa.

### Example of the Tax Dabble Trap | Rochester MN International Tax Lawyer
https://www.youtube.com/watch?v=Bhkx9IbTyIQ
Some years ago a Client (he was not a client at that time) inherited a Foreign Corporation. It was a mid-sized Foreign Corporation, and he was not the only owner there, but a partial owner, a minority owner.  
In a Foreign country, the classification of 'Entity' may not be exactly in line with the US Tax Classification. So to figure out whether this is a Corporation or a Partnership, you really have to look into how this company operates and what the law says (in) how it operates.
He came to a Business Lawyer and actually there was an Accountant involved in this case as well. (We'll talk about the next trap after that and why the Accountant may not have been the best choice there). An Accountant was involved there but the chief role was played by the Business Lawyer. The Business Lawyer was involved some years before in another Transaction. In that transaction, he was advised by the Accountant that the Form 5471 had to be filed and about the penalties associated with the form.
He told the Client, "We don't know what kind of Entity this is and I know about this Form 5471 and based on what the Accountant told me, I don't think your Entity is actually a Corporation; I think it's a Partnership. You are a minority owner; that means that Form 8865 doesn't apply and you don't have the 5471 form requirement. That will be an easier way to get rid of the IRS Penalties associated with Form 5471."  
What he forgot about… well, two things is - one little detail about income. If it's a Partnership, it's a Pass Through Entity. That means that this Client was in Income Tax Non-Compliance since the time he inherited the Company. For this Client, that would mean that he was underreporting about 90% of his income in each year.
The second issue, is obviously the one I have already mentioned. You have to look at what the law says, what the Local Law says. How did the Company operate before? You cannot just randomly say: this a Foreign Partnership and this is a Foreign Corporation just because some of the details are here or some of the details are not here. 
In the end, we were able to go back. It was a Corporation, not a Partnership so we were able to file a 5471 Voluntary Disclosure and were able to end that issue without any penalties. But if the IRS had audited his tax returns and discovered that he underreported his income by 90%, tremendous penalties would have ensued.

### International Tax Lawyers San Diego | Tax Law Uniformity Trap
https://www.youtube.com/watch?v=TALQOORCb90&t=1s
The Tax Dabble Trap sort of flows into the next trap; the Tax Law Uniformity Trap. In the same way the Business Lawyer believes he may be competent enough to advise on International Tax Law, he might think that there is no difference between US International Tax Law and US Domestic Law. For that person, that Lawyer, there's only Tax Law and this is not correct. 
This is exactly what the Tax Law Uniformity Trap is: the assumption that US Domestic Law and US International Tax Law are the same and this is false.
Let me give you sort of an analogy; think about pies. If you were to look at the US Domestic Tax Law, that's your baked dough, that bottom part of the pie and International Tax Law is a big level of thick rich cream on top of that pie. There is a deep inter-relationship between the two. International Tax Law is obviously part of the overall US Tax Law but International Tax Law is different, it has a different structure, different texture, different taste if you wanted to continue this analogy.  
It's important to remember that Tax Consequences on the International level may not be the same as Tax Consequences on the US level.

### International Tax Lawyers Des Moines | Special Treatment of Foreign Owners of a US Corporation
https://www.youtube.com/watch?v=WZw5YwJvVA0
There's also a belief that a Foreign Client who owns a US Corporation is in the same position as a US Client who owns a Domestic Corporation, which is also false. 
I think everyone probably knows here that an S Corporation cannot be owned by a foreign person.
There's also such an interesting form called a Form 5472, just to give you an example, which requires the Domestic Corporation to report certain transactions between the corporation and the 25% or more foreign owner(s) of that corporation and there's a $10,000 penalty associated with the form for not filing it and which can go up to $50,000.

### International Tax Attorney New York | Why an International Tax Lawyer is Superior to An Accountant
https://www.youtube.com/watch?v=9wUX7VNPuvg&t=3s
Let's say that the Business Lawyer understands that he shouldn't be advising on International Tax Law issues himself; let's say that he understands that he shouldn't be dabbling in International Tax Law. Let's say that he understands this: the difference between US Domestic Law and US International Tax Law.
Then the next question is: Did he choose the right advisor? Now we're getting into the fourth: the tax professionals equality trap which is basically an assumption that 'all US Tax Practitioners are equally competent to advise on US International Tax Laws'.
Remember that pie that I described about the difference between them? Let's put it this way: In the US, the great majority, more than 95% of US Tax Accountants never get out of the baked crust. They don't know about the thick huge level of cream on top of that pie which is called US International Tax Law; they don't know about it. So, one of the biggest problems that I've seen is when Business Lawyers bring in US Accountants into advising on something like this.   
I can tell you that 90% of my cases, of my Offshore Voluntary Disclosure cases come after an Accountant already advised on that case; 90%, that's a horrific percentage. The clients were trying to do what they were thinking they should be doing.
But it's that the Accounting Profession operates in a different way; the Accounting Profession operates in a different model. You have to really get to the top of the top of the Accounting Profession before you start getting Accountants who know about this, about US International Tax Law. If you think about it, how do Accountants make their money? By adopting an individualized customized approach to tax returns? No; by turning out as many tax returns as possible within the given time, because they have to standardize, otherwise they won't get out as many tax returns and their profits will go down.
Lawyers operate in a different way. We charge hourly; so, for us customization, specialization, individualization of the case- that's very important. We look at each individual and each company and look at that specific set of circumstances and we analyze that set of circumstances. We think about what could happen to that client; what are the requirements that may apply to him? How can we avoid the penalties? How can we structure that particular transaction better? 
I can tell you, unfortunately that's not the case for most of the Accountants, even if they think they are doing that.

### International Tax Lawyers Grand Rapids | Why Accountants Should Not Advise on International Tax Law
https://www.youtube.com/watch?v=wwcNN_jCzWA&t=1s
The first example consists of a case I was not really involved in but I was brought in to consult on that case. But I really like it as an illustration of what happens when Business Lawyers fall into the Tax Professionals Equality Trap. 
In that case there was a Chinese individual who came to a Business Lawyer, a Business slash Immigration Lawyer and they were starting a business in the United States and as a way for the Chinese individual to obtain his green card eventually. What happened there was they brought in an Accountant; an Accountant who the Lawyer knew for about twenty years. So, the Tax Accountant looks at this and says, "Okay, fine." The Accountant knew about the FBARs at least. FBARs are the report of each Foreign Bank and Financial Account.
The Accountant said, "Well, he has to file the FBARs. But for these Companies, there's nothing in particular; these are just Foreign Companies, what do we really care? For US Tax Purposes all we really need to disclose… 'did you hear about the form 8938?' is that they own and the company and that's it."
The reason why a lot more Accountants know about Form 8938 right now is because it is part of the Tax Return first of all, but second, that there has been much more awareness about this form and the Accountants have received some training on it.
So, I was invited to… something triggered my invitation, let's put it this way, into that situation. By this time, they had already filed the Tax Returns for two years and this guy owned one company, which owned ten other companies, which owned God knows how many subsidiaries. The amount of Forms 5471….. and not Forms 8938 because 8938 only applies where Forms 5471 do not have to be filed; so the Accountant was wrong on that issue as well. On top of that there are all kinds of complex rules. A lot of these were Controlled Foreign Corporations and the Subpart F rules kicked in and it was absolutely a huge mess.
What went wrong here? What went wrong obviously was that a wrong Tax Advisor was brought in this case.

### International Tax Lawyers Boston | You Need an International Tax Attorney for US International Tax Law
https://www.youtube.com/watch?v=BnLQKnviOKA
Let me give you another example and this comes in the Voluntary Disclosure context. This time the client was a Canadian Citizen and a Permanent Resident of the United States. He received a Foreign Inheritance; and when I say a Foreign Inheritance, I mean non-Canadian and non-US.
The question really was: Where should he declare himself a Tax Resident? In the United States or …. and I apologize the year in which the inheritance occurred, he was not yet a Permanent Resident; he was just here in the United States. He satisfied the Substantial Presence Test but he was not a US Permanent Resident at that point. So the question was: Where should he be a Tax Resident, in Canada or should he be a Tax Resident in the United States? 
He came to a Business Lawyer in New York. The Business Lawyer actually brought in an Accountant from a very large firm. And what they did is they said, 'Okay'. It's very interesting because it shows you to some degree the way that a lot of Accountants are thinking. Their primary goal was to avoid US Tax Liability so they declared my client as a Non-Resident of the United States and as a Canadian Resident avoiding all of the taxes which were associated with the income from that Foreign Inheritance.
The problem was that there were sufficient Foreign Tax Credits first of all to offset most of that tax liability; there was some but not much. But in Canada, Foreign Inheritance is actually taxed unlike in the United States where it would have to be only declared, in Canada it would have to be taxed. 
Because they were late, they were facing penalties. So they had a Canadian Attorney negotiating some sort of a settlement with Canadian Authorities for (anonymously) five or six years. (My client was only part of that larger family that received that Inheritance). 
By thinking very narrowly about only US Tax Liabilities, they exposed the client to a much larger Foreign Tax Liability. In the end, he declared himself a US Tax Resident; we did a Voluntary Disclosure on the Income. He paid some taxes but he paid a set of penalties in Canada and didn't pay a set of taxes on his Foreign Inheritance in the United States because there is no Foreign Inheritance tax in the United States.
That shows you that you really need, when it comes to International Tax issues, you really need an International Tax Attorney if you want to approach that problem correctly and properly.

### International Tax Lawyers Seattle | Foreign Exceptionalism Trap
https://www.youtube.com/watch?v=-ckl5sLgRPs&t=1s
The Foreign Exceptionalism Trap: This is a belief that certain business transactions or events that occur completely outside of the United States do not have any US Tax Consequences for US Persons involved in these transactions. 
This is probably one of the most dangerous traps. One of the most common and one of the most dangerous.
It's very dangerous because it's completely false. If a US Person is involved in a transaction, there will be US Tax Consequences no matter where the transaction takes place. I want to repeat that: no matter where a transaction takes place there will be US Tax Consequences. 
It might be in the form of tax; it might be in the form of the tax reporting but there will be US Tax Consequences. This trap usually occurs when there is a complete and full reliance on Foreign Accountants and Foreign Tax Advisors in general. 
It's usually associated, obviously with the failure to coordinate this entire transaction with a US International Tax Attorney.

### Foreign Trust Lawyer St Paul Minnesota | Example of the Linguistic Uniformity Trap
https://www.youtube.com/watch?v=j98Jodj-Ips&t=1s
I want to share with you an example from my practice: a case which has to do more with Foreign Trusts rather than anything else but it can be equally applicable to a Corporate situation.
My client was a beneficiary of a Foreign Trust (actually several, but that doesn't really matter because the one we are talking about here is the one where the problem appeared) and that trust in the language, the actual Trust Agreement… let me go back a little bit; the trust was formed in the United Kingdom so all the documents were in English. I received the Trust Agreement from the Trustee and I reviewed the Trust Agreement and in the Trust Agreement, it says that my client is entitled to 'all income'; so, income has to be distributed every year. 
If income has to be distributed every year for US Tax Purposes, it's a Simple Trust as apposed to a Complex Trust where a client would be entitled to only a partial income or no income and whether the Trustee has a discretion in distributing that income.  
In the UK, those Complex Trusts are known as Discretionary Trusts. At first when I looked at it I thought: 'Okay, income, income, income distribution. Income is income right?' But then for some reason I started wondering: 'Income, is it really Income? What does it mean by Income?' My experience has taught me to doubt everything and I was right to do that because in the United States 'income' means all income: Capital Gains and Ordinary Income, Dividends, whatever - all of that is income.
In the United Kingdom, 'income' means really Ordinary Income. Capital Gains is a completely different category. So, in reality my initial conclusion that this trust was a Simple Trust was erroneous. 
You ask: Why do we care if it's a Simple Trust or a Complex Trust? The problem is if it's a Simple Trust then all of the income including Capital Gains are deemed to be Distributed to the client and the client has to pay taxes on that income on his tax return; whereas, if it's a Complex Trust then we only count the income to which he is entitled as being distributed. So that ordinary income, in that case was Rental Income to the client and the Capital Gains were kept off the tax returns.
So this is a very good illustration of the Linguistic Uniformity Trap: Doubt Everything!

### Prague FBAR Video Blog | International Tax Lawyers Czech Republic
https://www.youtube.com/watch?v=MNt-iDWy2iE
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd.
With this video we're beginning a series of blogs from the Czech Republic, Prague. Why the Czech Republic? Why Prague? Because there are a lot of US Tax Residents who reside in Prague who have foreign bank accounts and who have not filed their FBARs or otherwise declared their accounts to the IRS.
Stay tuned for future updates. Thank you for watching, until the next time.

### Form 8938 International Tax Lawyers
https://www.youtube.com/watch?v=vOiYN-oXj1w
Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen; I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd.
We're continuing a series of blogs from the Czech Republic, Prague. Today, I would like to talk about Form 8938. Form 8938 was born out of FATCA and it is a form that is used by US Persons to report their Foreign Financial Accounts and other Specified Foreign Assets.
If you would like to learn more about Form 8938, go on my website: SherayzenLaw.com or contact me directly (952) 500-8159. 
Thank you for watching, until the the next time.

### Your Best International Tax Law Firm | Sherayzen Law Office, Ltd.
https://www.youtube.com/watch?v=bABOYbAu1g0
Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen; I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd. We're continuing our series of blogs from Prague, Czech Republic. 
If you look at this statue behind us, we have Hercules fighting fighting a dragon. This is the same way that Sherayzen Law Office is fighting for its clients against the IRS.
We're devoted to our client's cases and we will use everything at our disposal: our creativity, our knowledge of US Tax Laws and our dedication to our client's cases to make sure that you get the best results possible and reduce your FBAR Penalties.
If you would like to learn more about Sherayzen Law Office and how we can help you, go on the firm's website: SherayzenLaw.com or contact me directly at (952) 500-8159.
Thank you for watching, until the next time.

### Streamlined Foreign Offshore Procedures
https://www.youtube.com/watch?v=fe_REzNUpRo
Hello and welcome to Sherayzen Law Office Video Blog; my name is Eugene Sherayzen and I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd.
Today, we're continuing a series of blogs from the Czech Republic and looking at this beautiful place, I'm thinking about an opportunity. An opportunity to settle your FBAR Noncompliance without paying any penalties whatsoever. This opportunity is called Streamlined Foreign Offshore Procedures.
In Prague, there are a lot of US Persons who reside and live here and bank here. Most of them will most likely be eligible to take this opportunity of Streamlined Foreign Offshore Procedures to settle their IRS Noncompliance.
If you would like to learn more about this opportunity you can visit my firm's website: SherayzenLaw.com or you can contact me directly at (952) 500-8159.
Thank you for watching, until the next time.
Please, read our blog and our main page on Streamlined Foreign Offshore Procedures ("SFOP") in order to learn more about this highly important IRS offshore voluntary disclosure option for taxpayers who reside overseas.  It is important to understand all of the eligibility requirements as well as the filing requirements of SFOP. 
There are four eligibility requirements for SFOP.  However, the fourth requirement is rarely mentioned.  Additionally, there are five filing requirements under the SFOP.
Who Can Help Me Understand, Prepare and File My Voluntary Disclosure Using Streamlined Foreign Offshore Procedures?
You should contact the experienced international tax firm of Sherayzen Law Office. International tax attorney Eugene Sherayzen and his team will help help you understand SFOP, evaluate whether you meet the SFOP eligibility requirements, prepare and file all of the legal and tax documents required under SFOP, and defend your voluntary disclosure position(s) against the IRS in case of a subsequent audit.

### International Tax Lawyers Corpus Christi | International Tax Law and Equality
https://www.youtube.com/watch?v=ZQw_-HsX43o&t=1s
International Tax Law is inherently unequal. Whether it is because of the lobbying efforts on how the laws were passed. Whatever the reason, it is inherently unequal. 
That natural impulse toward equality should be resisted, resisted at all costs. Don't think that the US Domestic Law is equal to US International Tax Law; don't think that every tax advisor is equal when it comes to advising on International Tax Law.

### International Tax Lawyers San Francisco | Example of Foreign Exceptionalism Trap
https://www.youtube.com/watch?v=6-PpdvrOpzA
This is a case which I know very well by heart because this case took four years to complete. It involved a very large number of companies and I'm very proud of that case because there were only two possibilities there. Either my client will pay millions in penalties or he will pay zero; he paid zero, so I'm very proud of that.
One part of that case was a situation (and this all takes place in Eastern Europe), in that particular country the law was passed which allowed the companies to change one business form into another. So what I mean is that a Corporation can become a Partnership; a Partnership can become a Corporation. For US Tax Purposes there are really only three: 
A Partnership
A Corporation
A Disregarded Entity
A company could not become a Disregarded Entity under the Local Law. In this situation the Corporation was a real estate company with some strange outside transactions which have nothing to do with what we are going to be discussing.
This company owned a lot of real estate and they decided to take advantage of that Local Law and they switched the company from the Corporation into the Partnership. Under the law, you didn't have to do anything to the financial statements so the financial statements continued to be filed in exactly the same form as they were filed before. 
So basically, let's say that the switch occurred sometime in February of 2010; the Corporation would file the Foreign Tax Returns through the end of January and then the Partnership would begin where the Corporation left off from February to the end of the year.  
To advise about that switch there were four total advisors; one was a US Accountant in New York but he didn't input much really. Let's put it this way, he was brought in but didn't advise on anything. The most important advisors were the local International Tax Advisors; (there were three of them). One was a guy who actually knows a lot; I know him because I worked with him for years so this guy actually is a professional; but he's not a US Tax Professional. He's a very very bright guy so when I had an issue and I wanted to explore how things should be done in this country, I would go to him. He really knows his stuff. 
In this case, he didn't know his stuff completely because he wasn't a US International Tax Attorney; so what he did is he said to the client: 'From our perspective, as we see, the Local Law will dominate and therefore US Tax Law has no input here whatsoever. Why does the US - the Law Care? What does it have to do with which is basically switching one company to the other? Nothing is being recognized; no income tax consequences. What's the problem? No problem.' So the other two advisors agreed. 
The transaction took place and then some years later I received this case and we're talking about a Voluntary Disclosure content so I have to go back eight years. So when I go back eight years, I see that there's this inexplicable change in the name first of all because the name was changed at the end because one was a Corporation and the other one was a Partnership. The second one is that I saw these interesting financials. Here's one financial for January and then the another set of financials from February to December and I asked my client what was going on there.
Gradually after some back and forth and discussing this case with a local international tax advisor, I realized what happened.
Do you want to know for US Tax Purposes what this was? A Dissolution of the Corporation and a Formation of the Partnership. That means there were Tax Consequences, and huge Tax Consequences. Because it was also a Controlled Foreign Corporation, there was a Subpart F income recognition. Now, we worked hard, we worked hard where we could minimize the tax liability etc. etc. (I forgot to mention the most important thing here however, there was a Business Lawyer involved.) A US Business Lawyer was involved in this transaction because the US Business Lawyer was also a real estate expert. So he came in; the reason why they were making this change more for real estate purposes to make it easier to dispose of real estate; that was really the reason.
So, he was there but he said: 'I don't know; these are your Local International Tax Advisors, not really a problem.'
This is a great illustration of the Foreign Exceptionalism Trap and how it is a very dangerous thing and this is just one example. I can give you dozens of examples on this issue where I personally was involved in cases where this was a repeated problem, one case after another and it continues on despite the fact that there is FATCA in place.
How many people here have heard of FATCA the Foreign Account Tax Compliance Act? Despite the fact that there are huge changes in the European Union in terms of the Tax Information Exchange and the growing awareness of this problem of US really Exceptionalism more than anything else. 
Despite all that, this problem is ever-present. Because a lot of you are involved in International Business Transactions; I want to make sure that I convey that to you.

### FBAR Criminal Penalties
https://www.youtube.com/watch?v=35Tb3w7d4IU&t=2s
Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen and I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd.
We're continuing a series of blogs from the Czech Republic, Prague. Today I would like to talk more about FBAR Penalties. In a recent blog, I described the Civil FBAR Penalties and today I would like to answer a question that worries a lot of US Taxpayers with Undisclosed Foreign Accounts, including foreign accounts in the Czech Republic.
Can FBAR Penalties be Criminal? The answer unfortunately, is Yes. The FBAR Penalties in grave situations may carry a sentence of up to five years in prison and if the FBAR Penalties are combined with noncompliance with other US Tax Laws then the potential sentence can be increased to up to ten years in prison.
If you would like to learn more about FBAR Criminal Penalties and how to avoid them, go on my website: Sherayzenlaw.com or contact me directly at (952) 500-8159 or email me at: eugene@sherayzenlaw.com. 
Thank you for watching, until the next time.

### International Tax Lawyer Twin Cities | Introduction to Law Firm
https://www.youtube.com/watch?v=5mtVBIWtxB4
Before we delve into the subject matter of today's discussion, I'd like to introduce myself so that you know a little bit about who I am and what it is I do. 
I know that about half of you already know but the other half does not. As I've just said in my crude French a minute ago, I'm an international Tax Lawyer and owner of Sherayzen Law Office, Ltd., a law firm that specializes in International Tax Compliance, in particular Offshore Voluntary Disclosures and this is by far my biggest area of law or sub-area: Annual US Tax Compliance, IRS Audits and Appeals and International Tax Planning.
I've dealt with clients from over 60 countries with assets around the world including Francophone countries like France, Belgium, and Switzerland - the French part of Switzerland and even some French speaking African countries.
Unfortunately, I only offer my services in three languages at this point: English, Russian and Spanish but maybe in a couple of years I'll do it in French as well.

### US Business Tax Lawyer | Tax Definition of Business Owner
https://www.youtube.com/watch?v=av5y9q5YnRU
The Tax Owner is really a Holder of Economic Interest, not necessarily the Legal owner of the actual entity. 
Let me clarify that with an example. Let's say this is a Taxpayer; this is the LLC and he owns 100% of that LLC. The LLC owns 50% of the Limited Partnership. The Taxpayer owns 50% of the Limited Partnership. 
How many entities do we have for US Tax Purposes? Does anyone want to take a gander? The Taxpayer is not an entity. There's a maximum of two available.
Anyone else want to guess? None. There are no entities for US Tax Purposes here. 
This is Disregarded because it's 100% owned. Because there's one, a single Holder of Economic Interest, the Taxpayer from both sides is basically that the Taxpayer's being treated as 100% Disregarded Entity.
You cannot have a one Partner; there's always got to be at least two Partners. So, the Taxpayer owns the assets of the LP and the LLC directly for US Tax Purposes. That's what I mean by the Holder of Economic Interest.

### International Tax Lawyers Duluth | Definition of US Owners
https://www.youtube.com/watch?v=3E75C3eWVuU
US Owners: I listed out for you what US Owner means. 
It's US Citizens, US Tax Residents, meaning Permanent Residents and a person who has satisfied the US Presence Test, Non-residents who declare themselves as Tax Residents for the purposes of filing a joint tax return are also considered to be US Owners. 
Residents of Puerto Rico and all other US Possessions are also considered to be US Owners.

### Determination of Whether a Business Entity Exists | FACC Seminar October 19 2017
https://www.youtube.com/watch?v=fikNOUG9PK0&t=1s
The question of a Business Entity actually involves a complex analysis and I lay out some of it here; it is a very simplified analysis but basically the very first question that we have to ask is: Is there a Business Entity?
I'm going to jump to the point 1b right away. Suppose that 'Pierre' a French National and let's say 'John' a US National come together in Paris over a glass of wine and they decide: 'You know what? Why don't we sell product X on the streets of Paris? We're going to sell it together; then divide it up - profits and that's it. Each of us will report it on the French Tax Return: our share of profit and that's it.' 
Did they create an entity? Or let's put it this way: Do you think they created an entity under French Law? Audience member answer: 'No.' Most likely, No. French Law is a civil law system; they wouldn't apply the Common Law Partnership concept. 
But US Law would and when it comes to determining whether there is or there isn't a business entity in existence, it's the US Federal Law that will dominate. We always go to US Federal Law to determine whether there is identity or not and probably in this case they created a Common Law Partnership which means they have created a Partnership for tax purposes which I will explain the difference in a second.
The second question that we have to ask is: Is this a Business Entity or Trust? I'm not going to spend much time on it because it's a huge topic, but one thing I will mention here just so that I know that some of you may have clients or deal with investment trusts outside of the United States if an Investment Trust happens to have one class of beneficiaries, most likely it is a Trust. If it has more than one class of beneficiaries, most likely it is a Corporation.

### International Tax Lawyers Indianapolis | Default Classification of Foreign Businesses
https://www.youtube.com/watch?v=W0dOI2JyV7s
Once we decide that this is a business entity, then our next question we have to ask is: What type of an entity is it?
There are three choices available when it comes to US International Tax Law:
a Corporation
a Partnership or
a Disregarded Entity
The equivalent here of a Disregarded Entity is precisely this; in the United States, a single member LLC would be considered a Disregarded Entity. It doesn't exist for tax purposes. There's only taxpayer; there's nothing else.
For legal purposes there is an LLC, but for tax purposes there isn't. To be honest with you, it's really hard to find a Disregarded Entity outside of the United States for US Tax Purposes unless someone makes a specific election to do so. We'll talk about that election in a second. But what I want to do is I want to give you sort of two examples from France and I'd like you to tell me if this is a Partnership, a Corporation or a Disregarded Entity. 
Let's talk about Societe Civile; Societe Civile is a noncommercial partnership. (I took the definitions off their website; so it's interesting for our purposes here.) "Heavily formed by members of the Professions Liberale - so farmers or those engaged in so-called intellectual activities including, writers, researchers or any type of consultant." A Societe Civile can elect to pay corporate tax or not; so it may pay or it may not pay. If not, each Shareholder will include the portion of the entity's profits or losses on his personal tax return.
Is this a Partnership or a Corporation or Impossible to Tell at this point based on what I said? Does anyone want to guess? (Member of audience guess) "It's impossible to tell." 
Why? Well, let's hold off on this one and talk about the second one. 
A Societe a Responsibilitie Limitee a SARL which is a very very common Entity and it's also very common for US Taxpayers who come to France when they want to form some kind of business will usually open up a SARL. So a SARL must have between 2 to 50 Shareholders and a Managing Director who is usually paid a salary. A SARL can elect under circumstances to pay Corporate Tax rather than having its income included on the Director's personal income tax declaration. Corporation Partnership, Impossible To Tell? Corporation? Why do you think so? (inaudible answer) 
Okay, okay, but now remember we're dealing with US International Tax Law; so just because an Entity is classified as a Corporation under Local Law does not in any way mean that it would be a Corporation under US Law. That's an important point to remember. The answer to both is: it is impossible to tell because I didn't give you the most important piece of information.
And actually the only one that really matters: Limited Liability. I didn't say in either case whether the owners, the members of each entity had Limited Liability. This is the only test that matters. If all members of a Foreign Entity have Limited Liability, it is a Corporation. If at least one of them does not; it's a Partnership as long as there are more than two members of/in the company.  
If there is One Member and there is no Limited Liability it's basically a Disregarded Entity. So it all hinges on the issue of Limited Liability.

### International Tax Lawyers Colorado Springs | Definition of Limited Liability
https://www.youtube.com/watch?v=2zowXjXNHK0&t=3s
The question is: What is a Limited Liability? It is important to understand that a Limited Liability is a situation where a member has no personal liability for the debts of or claims against the entity by the reason of being a member.
The determination of Limited Liability is made based on the local law; so even though the general framework, whether a company is a corporation or a partnership, is determined by US Law. The very fact, the most important factor of whether a person/member has Limited Liability or not is determined by local law. So in this case it would be French Law.
Comment: 'So you are saying that this is what the IRS code says?' Exactly! These are straight from the regulations. 
Do you think organizational documents would matter.. of the company? Answer: 'Yes'. Partially, yes; as long as local law says that: yes, it is possible for the entity and its organizational documents to assign Limited Liability or to remove Limited Liability from the member.

### International Tax Attorney Edina | Per Se Corporations
https://www.youtube.com/watch?v=IlAJykVwBCU
There is one important exception to this rule: Per Se Corporations. 
The IRS publishes a list of Per Se Corporations per country. There can be only one choice for this corporation; it was always a corporation, nothing else; this entity will always be a corporation. 
In France a Societe a Limitee is a SA; in Canada it would be a company or a corporation. If either name appears in the title of the entity, it would be a corporation.

### Assurance Vie US Tax Compliance | FBAR FATCA Tax Lawyer
https://www.youtube.com/watch?v=n7IhBc2j8OE&t=7s
Hello and welcome to Sherayzen Law Office Video blog. My name is Eugene Sherayzen and I'm an international tax attorney.
Today we're doing a video from Milwaukee, Wisconsin and I was just walking on the streets and I heard French being spoken by two gentlemen, and it put me to mind about Assurance Vie Accounts.
Assurance Vie Accounts are a very common investment in France. Virtually everyone in the French middle class has them. But whenever a French citizen comes to the United States he runs into various problems with respect to reporting the Assurance Vie Accounts.
For example, a lot of Frenchmen do not know that once they become US Tax Residents they are required to report Assurance Vie Accounts on FBARs and if they meet the Form 8938 threshold, they will also be required to report them on forms 8938.
The second problem which is very common with French people who come to the United States is the issue of reporting income from the Assurance Vie Accounts. As you may already know, the income on the Assurance Vie Accounts is not taxable in France; however, it is taxable in the United States and most of Assurance Vie Accounts consist of two parts.
The first part is the investments; investments, usually in foreign mutual funds. The second part of Assurance Vie Accounts consists of the Euro-fund part and basically this is cash that is sitting in the account and just accumulates interest.
Now the interest is calculated under the specific rules which are associated with these Euro capital, but for US Tax Purposes this is just purely interest income.
So the first part which is the investments is the most complicated one because the second one really if you can figure out the interest income, the fees which are withdrawn by the bank from this interest income as well as social taxes which are being imposed by the French government on that income - then it becomes pretty easy. You just figure out what the gross income is; you convert it to US Dollars and you report it on your US Tax Return.
I will not talk today about the issue of deductibility or accrued ability of French Social Taxes. This is a different issue and a complicated one and an unsettled one as well.
But the first part, the investments is complicated because they're usually considered to be PFICs for US Tax Purposes. As such, they are required to be disclosed on your US Tax Return on forms 8621 even if you didn't have any transactions.
PFICs require very complex calculations and the part of PFIC gains or PFIC dividend income which are considered to be acts of distribution is going to be taxed at the highest marginal tax in existence plus the interest rate which is being calculated once you allocate your PFIC income throughout the holding period on a per-share basis.
Sounds very complex? It is; it requires a lot of calculations. Most of the information is not readily available; the French banks are not required by the French government to keep this information on file or more importantly to disclose it to French Taxpayers. Only US Taxpayers who need to report these Assurance Vie Accounts on their US Tax Returns, only they need this information and in order to get it, it's a pain. It may take anywhere between three to nine months to get this information depending on the French institution, depending on whether you have contact with the French bank. If you don't, it takes longer; usually it requires either a personal visit to a French bank or it may require actually a letter, a good old-fashioned paper letter being mailed to the French bank which holds the Assurance Vie Investments.
So, in short, there are a lot of issues associated with owning Assurance Vie Accounts by US Taxpayers.
If you would like to learn more about Assurance Vie Accounts and the associated US Tax Compliance requirements or you would like to get help with respect to US Tax Compliance, or if you were or think you may be required to comply with US Tax Requirements and haven't done that yet and now you're thinking about possible Voluntary Disclosure Options, contact Sherayzen Law Office.
Our professional team headed by myself, Eugene Sherayzen an International Tax Attorney will review thoroughly all of your documents, prepare all of the tax forms and then I will be drafting all of the legal documents associated with submitting your Voluntary Disclosure.
So call or email me now to further discuss your Assurance Vie Accounts. Thank you for watching and until the next time.

### Lokata Accounts in Poland & US Tax Compliance | FBAR Lawyers
https://www.youtube.com/watch?v=mYmJxb1OpIo&t=3s
Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen and I'm an International Tax Attorney and today I would like to talk with you about accounts called Lokatas; these are Polish accounts and basically what they are for US Tax Purposes are fixed-deposit accounts like CD accounts in the United States.
A lot of Polish citizens who come to live and work in the United States do not realize that these Lokata accounts need to be reported here in the United States. The reporting has to be done not only from the income tax perspective but also from the perspective of information returns; in other words, US Taxpayers who have Lokata accounts in Poland have to disclose their foreign accounts on forms FBAR and potentially form 8938 as well as to report the income from those foreign accounts on their US Tax Returns, usually form 1040.
Now why is it a problem? Why is it that a lot of US Taxpayers who have these Lokata accounts not report them or do not report income from them? Well, one of the problems is that a lot of these accounts are opened automatically by Polish banks. In other words, these banks open them up automatically; these are Sweep Accounts. They sweep the balance from the savings account and they open up these accounts and they can open them for as little as one day; usually they're open for at least a month. Some of them are long-term; they can be a year or even two years; but it's uncommon for Lokata to be open for more than one year.
Because these are automatic accounts created by banks, a lot of US Taxpayers don't realize that they have to be reported separately from their main savings accounts.
Failure to report Lokata accounts may lead to FBAR Penalties and Form 8938 Penalties in addition to income tax penalties with Accuracy-related Penalties and if the failure to report was intentional, you could also be looking at a 75% Fraud Penalty.
Now, Sherayzen Law Office can help you properly report the income from your Lokata accounts on your US Tax Returns as well as disclose the accounts themselves on the appropriate information returns such as FBAR or Form 8938.
If you would like to learn more about your US Tax Compliance concerning Lokata accounts, you can contact me directly at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com.
Thank you for watching until the next time.

### FBAR Noncompliance - Doing Nothing is Not an Option | FBAR Law Firm
https://www.youtube.com/watch?v=7OvWe5Fw3Fw&t=6s
Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen; I'm an International Tax Attorney and owner of Sherayzen Law Office, Ltd.
Today, I'm on a train in Eastern Europe and this is the perfect time to share my thoughts about unfiled FBARs. What I'm talking about is a situation where a taxpayer discovers all-of-a-sudden that he needed to file FBARs for prior years and he never did.
In this situation a taxpayer really has three options. First: do nothing; second, a Quiet Disclosure and finally, a real Voluntary Disclosure.
Today, I'd like to talk about the first option: Do Nothing; because this is often the first thing that comes to your mind, right? You discover noncompliance; you know you are panicking; you don't know what to do. You are worried about the FBAR Penalties; they're horrendous: criminal penalties, willful penalties and you think that maybe it's better just to bury your head in the sand and do nothing.
The obvious advantage that you see behind this strategy, or so-called strategy is that if the IRS never discovers your past FBAR noncompliance, basically you can get away without ever paying FBAR Penalties.
The problem is that this is not a strategy; this is just hope. A hope which is based on nothing. In fact, this is an irrational hope, a hope born out of desperation. The reason for it is because the US Government has signed treaties with countries all over the world that make the discovery of noncompliant taxpayers an ever-present danger and an ever-increasing danger.
There are all kinds of treaties. There are FATCA treaties: the Foreign Account Tax Compliance Act treaties. There are bilateral agreements, multilateral agreements, mutual assistance treaties, information exchange treaties - all of that body of treaties basically makes it extremely unlikely that a taxpayer can get away with FBAR noncompliance in today's world.
So in essence, doing nothing with respect to your unfiled FBARs is not just dangerous; it's reckless and the consequences could be not just disastrous but life-altering, especially if the IRS deems your noncompliance a willful one.
So if you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible. Remember, doing nothing is not an option; it's a Russian Roulette. So, contact me today for professional help at (952) 500-8159 or send me an email at: eugene@sherayzenlaw.com.
Thank you for watching, until the next time.

### FATCA Lawyer Boulder CO | Three Main Parts of FATCA
https://www.youtube.com/watch?v=SgywoWi4xiM&t=2s
Now FATCA, when it came out in 2010, was a revolutionary piece of legislation. It completely changed not only US Tax Compliance but the entire landscape of International Tax Compliance. After FATCA, we have OECD countries developing a Common Reporting Standard, the CRS to which the US did not join for very interesting reasons; that could be a topic of a CLE in of itself.
But, FATCA affects pretty much everyone who is doing business internationally. Why is that? Well, there are the three parts of FATCA that I would like to discuss today. There are some different provisions of FATCA which do not quite fall within those three parts; but they're not important for today's discussion, or at least not directly important.
The first part of FATCA is the requirement by Foreign Financial Institutions to report assets owned by US Persons to the IRS directly or indirectly; it depends on the FATCA enforcement treaty. So in essence, all the Foreign Financial Institutions are now forced to become agents of the IRS, reporting agents. In essence it's that third party verification of US Tax Compliance that has been completely absent from US Tax Law; it just never existed before. For example FBARs, they don't have any third party verification. That's why as an information return, FBARs actually have very limited utility.
Now why would Foreign Financial Institutions comply with it? There's a second part of FATCA: a 30% withholding tax on the gross amount of transactions. Can you imagine that a 30% withholding tax on the entire value of the transaction, not on the gain, loss it doesn't matter just on the gross value? So this means that if say Institution A which is FATCA compliant and there's an Institution B which is not FATCA compliant and then your client comes to Institution A and says, 'Here, I'm sending $100,000 to Institution B, Institution A is going to withhold 30% tax from that $100,000 and send the rest of it to Institution B and obviously when the clients, the other party comes in to collect, they will see that instead of $100,000 there is about $70,000; that's a pretty big difference. It could be the entire profit margin.
And because every institution is linked to another institution (so basically we have a system where all FATCA compliant institutions are forcing all of the FATCA noncompliant banks to become FATCA compliant); otherwise there's not going to be any dealing between them.  
So under the first part of FATCA, the Foreign Financial Institutions provide this information so they're a third party verification. But verification of what? 
And then there's a third part of FATCA which really came into the tax landscape without as much fanfare as the first part. The first part, people have heard about: there have been protests, letters to congressmen, organizations, lobbying against it: what have you. But the third part of FATCA, and this is form 8938, it came in sort of in a very quiet way, in gradually but very early on already in 2011.

### Indianapolis Form 8938 Lawyer | The Compliance Burden of Form 8938
https://www.youtube.com/watch?v=XnPo7WRGP6s
Form 8938, even though it does not share the same amount of penalties (and we will talk about penalties in a little bit later), still it's importance is much more significant than that of FBAR.
The reason being is that not only are the US Persons required to report their Foreign Financial Accounts, which is very similar to FBAR, but they're also required to disclose pretty much every type of a financial instrument.
In your handout you see here 'Specified Foreign Financial Assets' under the column, under line I it should say: 'Specified Foreign Financial Assets'; this is a huge paragraph of assets. All of these assets must be disclosed on the form 8938.
So, we have Foreign Financial Accounts, we have Assets Held for Investment and not held in a financial institution, so we are talking about stocks and securities issued by a non US Person, any interest in a foreign entity, any interest in a foreign partnership, any financial instrument or contract including interest rate swaps, currency swaps, basis swaps, interest rate caps, bonds, notes, debentures, options, derivatives; I mean we're talking about a whole range of financial assets that have to be now disclosed on form 8938 and they were never required to be disclosed in the same format at least before.
It's a huge compliance burden obviously.

### Form 8938 Penalties & Statute of Limitations | FATCA Tax Law Firm New York
https://www.youtube.com/watch?v=RloP2GjRlu8
In order to force 'Specified Persons' to report all of this; there's a set of penalties. 'Failure to File': $10,000 per form. If the IRS sends out a notice and within 90 days the person still does not file the form the penalty accumulates at about $10,000 per month capped at $50,000.
Accuracy-related penalty: if underpayment of tax is related to a transaction involved any of these 'Specified Foreign Financial Assets' the accuracy-related penalties go automatically to 40%.
The civil fraud penalty is actually similar to a regular civil fraud penalty, it's 75%. Criminal Penalties are possible as well. Usually they're combined with something - a very substantial income tax noncompliance. We have not really seen yet at least yet because remember this is a fairly new form; we have not really seen form 8938 criminal penalties being imposed. It's probably coming down the road but not yet.
And then there are significant implications for the 'Statute of Limitations'. With respect to the examinations, the Statute of Limitations basically the ability of the IRS to go back and open up a tax return until you file a form 8938, the Statute of Limitations never starts to run. Basically, the return is open forever. So the IRS can go back today and impose the penalties for the form 8938 that was not filed with the 2011 tax return.
And by opening up the tax return they can find other things and other penalties may accumulate; but there's another aspect of it. The Statute of Limitations on the assessment of tax. So we are talking about this situation where it doesn't matter; (and this is a trick for you) it doesn't matter that the form 8938 was even required to be filed as long as the Specified Foreign Financial Assets are involved and the failure to report was of more than $5,000 of income from those Specified Foreign Financial Assets, the Statute of Limitations automatically goes up from 3 years to 6 years. Again, even if form 8938 filing threshold was not met.
These are very significant penalties. And now we can appreciate and understand then that when IRS adds a new category of filers to form 8938, this means a significant burden for those, to those filers and we can appreciate that we need to understand exactly who needs to file that form and when they need to file it and how this determination is being made.

### Specified Domestic Entity Definition | Boston Form 8938 Lawyer
https://www.youtube.com/watch?v=Yp1E5lqp-VM&t=3s
In my handout you see that here the general definition of under the 'Specified Domestic Entity' table we see the general definition here directly from the Treasury Regulations 1.6038D-6(a) and it says: 'A specified domestic entity is a domestic corporation, a domestic partnership or a trust described in IRC Section 7701(a)(30)(E), if such a corporation, partnership, or trust is formed or availed of for the purpose of holding, directly or indirectly, 'Specified Foreign Financial Assets'.
Wow, what a sentence, huh?! Let's read it again. 'A Specified Domestic Entity' is a domestic corporation, domestic partnership and a trust described in IRC Section 7701(a)(30)(E), if such a corporation, partnership or trust is formed or availed of for the purposes of holding directly or indirectly 'Specified Foreign Financial Assets'.
You know, one of the reasons why I love international tax law is because every clause requires further interpretation. Let's see, pretty much everything here is subject to further analysis. Let's take this sentence apart. So we see here 'Specified Foreign Financial Assets'; we already talked about them; we have a full description of them or I shouldn't say full description of them; it's as comprehensive as I can make them. At this point obviously there are assets with equivalent to the assets that you have listed in your handout and that would be required to be reported on form 8938.
A domestic corporation is pretty easy to understand. It's a corporation formed under the laws of any of the States of the United States. Partnership: for the purpose of not getting into any complexities sketches; let's assume it's the same thing - any partnership formed under the laws of the States of the United States.
In actuality, there are certain rules which can make an entity that is formed in the United States a foreign partnership. We're not going to touch those today.
And then a trust described in IRC Section 7701(a)(L)(1)(830)E, basically they're talking about 'Domestic Trust'. There's a Section 7701(a)(30)(E); it describes two tests: the control test and the court test that must be met in order for the trust to be designated as a domestic trust.
Okay, now we're going to get to the most interesting part: 'Formed or Availed of' for purposes of holding 'Specified Foreign Financial Assets'. Now you know if you just read the sentence, you would think the IRS is talking about an entity formed with the intention of holding 'Specified Foreign Financial Assets'. That there's going to be a discussion of intent, that something we have to dig into the evidence, dig into the facts: what was the purpose of establishing the entity? Nothing like that. It has, the intent here has no role whatsoever.
'Formed or Availed of' for purposes of holding 'Specified Foreign Financial Assets' - it actually means slightly different things for foreign corporations and partnerships vs. trusts, but it actually means compliant with specific requirements.
Now what are these 'specific requirements'? Let's start with the corporations of partnerships because it's a more complex analysis. Here on the second box, I have a description, a general description that a corporation of a partnership have to pass a closely-held test and a passive test.

### Who is Required to File Form 8938? | International Tax Lawyer New York
https://www.youtube.com/watch?v=j5OvnWHlw5A&t=4s
Who is required to file Form 8938? 'Specified Persons'. Okay, we are getting real close to our discussion of 'Specified Domestic Entity'.
Specified Persons until 2016, or if you want to be more technical, until all the tax years that start after December 31, 2015, if you want to take the direct line and use that exact language.
Specified Persons included US Citizens, US Tax Residents and that of course includes all the US Green-Card Holders and all of the persons who satisfied the Substantial Presence Test, all of the non-resident aliens who chose to declare themselves tax residents for the purpose of filing a joint tax return and residents of Puerto Rico and Possessions, US Possessions. So we're talking about Guam, American Samoa and the North Mariana Islands.
Does anyone see here a common thread throughout this category of pre 2016 categories of filers? Does anyone want to take a guess? We're talking about citizens, tax residents… (inaudible) exactly! All of them are individuals. So what happened this year is that now it's no longer just individuals; businesses are required to file form 8938; businesses that satisfy the requirement of 'Specified Domestic Entity'.

### Domestic Trust as a Specified Domestic Entity | Trust Tax Lawyer Manhattan
https://www.youtube.com/watch?v=MNdO-sKrQH4
If the 'Specified Individual' is a current beneficiary of the trust then the trust is considered a 'Specified Domestic Entity'. What it means is that any type of a US Beneficiary will make the trust a Specified Domestic Entity by definition; it's very easy for a 'Specified Trust' to be a Specified Domestic Entity.
Now what does it mean 'Current Beneficiary'? It basically means that the beneficiary either receives a distribution or is entitled to a distribution, even if the distribution is never made, even if the distribution is in the discretion of the trustees. So in essence any type of Complex or Simple trust, it doesn't really matter, as long as there is a US beneficiary.
Is everyone familiar with a 'Complex Trust' vs 'Simple Trust? A Simple Trust is where basically all of the income of the trust is required to be distributed on an annual basis to the beneficiary and the Complex Trust is a situation where there is a discretion or an impart of income that is a requirement of the distribution to the beneficiary.

### Check-the-Box Rules Introduction | International Tax Lawyer Delaware
https://www.youtube.com/watch?v=cUhn_13B2Ug
Let's put it put it this way: a majority of foreign companies would be considered as foreign corporations under US Law except the check-the-box rules, that's a major exception. You can choose what the company will be irrespective of its default classification under US Tax Law.
So, in your example if the US Company, a limited liability partnership would create a SARL outside of the United States and transfer the assets, (I'm going to use this example a little bit later again, because it's going to be very interesting as with respect to pointing out a specific reporting requirements), so in this case, if they were to transfer all the assets to that SARL company, and they would file a form 8832 choosing for this company to be treated as a partnership, no problem. The IRS will accept its designation as a partnership as long as it's properly named, timely and properly.
If this were SA as I've mentioned a societe limitee, then check-the-box rules would not apply. Per Se corporations are always corporations; Check-the-Box rule exception does not apply.

### Check-the-Box Rules Have Tax Consequences | International Tax Lawyers Miami
https://www.youtube.com/watch?v=eDWX91TIvJo&t=2s
But you have to be conscious of the fact that if you're going to change the classification of a foreign entity, you have to be extremely careful because the very fact that you change the classification of an entity could result in huge, absolutely huge tax liability to your clients.
I'll give you an example from my practice. My client owned a Polish partnership. How do I know that it was a partnership? One of the owners did not have? Any guess? Limited Liability; that's right.
So, it was a Polish partnership. He was the 55% owner of the company, okay? He also owned a Polish corporation; he was a 98% owner of it, okay? A Controlled Foreign Partnership, he (my client was a US Citizen),  a Controlled Foreign Corporation. As a result of a change in the local Polish laws, they decided that it may well be a good idea to switch this company to a corporation, (sorry) to partnership and this company to corporation. This was a real estate and this was trade. In reality this partnership didn't do anything directly. But most importantly, most important for our purposes: they were switching this; so, they were switching exactly the opposite: the corporation and the partnership.
In this case, a Polish partnership to a Polish corporation and a Polish corporation to a Polish partnership, in the same country, everything outside of the United States. This company did not have any built-in gains. It was a trading company.  It didn't really have anything except inventory; it didn't really have any assets of importance.
This one had real estate, so you can imagine, and this was real estate development company; so, there were really some built-in gains here in the assets.
For the purposes of US International Tax Law, what had happened here, by the way, this happened on the same day; so what happened here was that this Polish partnership contributed to its assets in return to the corporate shares and immediately dissolved. Distributing the shares of a corporation to, shares to the Taxpayer, okay? a US Citizen In this case; there was no tax liability. There could have been but in this particular partnership, let's just say for the moment that there's not any, but there was no tax liability, but there's a potential for the partnership distribution without any (but) in actual gain; so, in this case nothing, no tax consequences.
In this case, what happened for US Tax purposes, is that the corporation distributed all of the assets to its shareholders at Fair Market Value. So there were big, big gains here and then the assets were treated as contributed into the partnership at the Fair Market Value. On top of that, this is a Controlled Foreign Corporation. (Later you'll learn toward the end of my presentation) that since this is a CFC, Controlled Foreign Corporation, Subpart F rules kicked in and prevented the gain from being treated as a capital gain.
There were other stretches that I utilized to lower the tax liability, but that's a different point; when I first looked at, it I saw this; when I looked at it a second time, I started working it and that's a different story.
You have to be very conscious that when you check the box; it's not as if this is some insignificant event and you just check the box; it's a real dissolution of the entity and a real creation of another one. Even though, I should mention that in both cases, under the Polish accounting, they did not do anything to distinguish the Polish accounting to the pre-dissolution from the post-dissolution; for them for Polish purposes, it was a change of name. In both cases with no tax consequences whatsoever. They did not treat it as a taxable event at all.
So, obviously he had Polish tax advisors and they said, 'No problem, we'll then switch it; it's going to be pretty good for you'. But, he never took into account the fact that as a US Citizen, he's taxable on his worldwide income and he would be taxed very much on this even though it never left Poland, and even under Polish law, it didn't mean anything.

### James Bond & Worldwide Income Tax Reporting | International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=2MdVO_RNdxg&t=1s
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd. And today we are continuing our blog from the Czech Republic in Karlovy Vary. And in making this video one of my clients was a fan of James Bond. This is the place where 'Casino Royale' was filmed in 2006.
And an interesting thought occurred to me: 'that had James Bond been a resident of the United States, the winnings that he made in this casino would have been taxed in the United States even though he made them here in Karlovy Vary in the Czech Republic.' The reason for this is the unique rule in US International Tax Law that US Tax Residents, irrespective of their physical residence must report their worldwide income on their US Tax Returns.
So, James Bond, if he were a green card-holder, even though he was not in the United States would have to declare his income from Casino Pupp on his US Tax Returns.
Thank you for watching until next time…

### FBAR and Form 8938 May Both Be Required | FBAR FATCA Lawyer
https://www.youtube.com/watch?v=gpm2E43Fy_E
FBAR requirements are a separate requirement form from Form 8938. The FBAR requirement does not replace the requirement to file a Form 8938; it's in addition to. So, if you own the assets individually, you might have to file a Form 8938 and FBAR at the same time. And not really at the same time because of a change in the FBAR deadline.
An entity, the domestic entities never have to file Form 8938 but they did have to file FBARs. So the change is really more affecting domestic entities and you know very specific, specified domestic entities with respect to reporting foreign assets.

### US Cryptocurrency Taxation | Cryptocurrency Tax Lawyer & Attorney
https://www.youtube.com/watch?v=AbgijxGisMs&t=1s
Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I am an international tax attorney and owner of Sherayzen Law Office, Ltd. 
Today we are continuing our series of blogs from the Czech Republic and I would like to discuss a very interesting issue. An issue that concerns the growing sector of our economy, indeed a growing sector of world economy: Cryptocurrency.
Today, I would like to discuss how cryptocurrency is taxed from a US perspective. The first and most important thing to understand is that despite its name, cryptocurrency, the IRS would not treat any of the digital currencies as actual currency or money. From the IRS perspective, cryptocurrency is property.
So when you sell cryptocurrency, you generate capital gains. They may be short-term capital gains or long-term capital gains but never-the-less, these will be capital gains. Where do you disclose capital gains? On your US Tax Return, on your Schedule D of Form 1040.
What if you exchange one currency for another? Would this be treated as a reportable event for US Tax Purposes? Yes, absolutely. Barter exchanges are treated as taxable events. So, let's say you have Bitcoin, and you have Ethereum. Let's say you decided to exchange 100 Bitcoins for whatever the nominal equivilant number of Ethereum coins. This type of an exchange would be taxable in the United States and reportable in the United States.
An interesting issue arises: what if you were to lose the password to for your for your Bitcoins, for your wallet? Is this a loss or not? Right now we don't have a clear idea on this issue, but it's an interesting issue to explore. If we were to take the UK law as a potential guide for how the IRS might address this issue, we would say that, yes as long as you can persuade the IRS that the password has been irrefutably lost, then you can claim a capital loss. What if Bitcoins were stolen from you? That is an interesting issue as well because under the UK law, these Bitcoins are still owned by you, despite being stolen. How would the IRS look at it? Right now, we do not know ; it is too early to say and there hasn't been sufficient guidance on this point.
If you would like to find out more about how your cryptocurrency will be taxed in the United States and how to properly report it in the United States, you should call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com. Thank you for watching, until the next time.

### Asian Americans in Europe: US Tax Compliance | International Tax Attorney
https://www.youtube.com/watch?v=K06Gnc1yvEk&t=2s
Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen; I'm an international tax attorney and owner of Sherayzen Law Office Ltd.
Today, we are continuing our series of blogs from the Czech Republic and we're here in Karlovy Vary and while walking the streets of Karlovy Vary, I noticed an interesting phenomenon. There are a lot of people from China, South Korea, and Southeast Asia here in Karlovy Vary; some of them are here as tourists; some of them reside in Europe; and some of them actually reside in the United States. 
For those who reside in the United States, the issue of US Tax Compliance should be ever-present on their minds. The problem is that a lot of those individuals open foreign bank accounts here in the Czech Republic or elsewhere in Europe and they forget to disclose them and once the IRS finds out about it, the IRS will impose penalties, civil & potentially even criminal. The penalties can be wide-in-range from FBAR penalties to Form 8938 penalties and even penalties associated with PFIC compliance.
If you would like to learn more about your US Tax Compliance requirements, you should contact me directly at (952) 500-8159 or email me at eugene@sherayzenlaw.com.
Thank you for watching, until next time.

### July 15 Deferral: More Deadlines Affected | US International Tax News
On April 9, 2020, the IRS announced additional relief to taxpayers by moving the due date for more deadlines to July 15, 2020.  Let’s discuss this additional July 15 Deferral in more detail.
July 15 Deferral: Background Information
On March 13, 2020, in response to the 2019 coronavirus (also called “COVID-19") pandemic, President Trump issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.  This declaration instructed the Treasury Department to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency pursuant to 26 U.S.C. §7508A(a).
Section 7508A of the Internal Revenue Code provides the Secretary of the Treasury with authority to postpone the time for performing certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a federally-declared disaster as defined in section 165(i)(5)(A). Pursuant to section 7508A(a), a period of up to one year may be disregarded in determining whether the performance of certain acts is timely under the internal revenue laws.
On March 18, 2020, the IRS issued Notice 2020-17 to postpone April 15 tax payment deadlines from April 15 to July 15, 2020.  A few days later, on March 21, 2020 (the actual relief occurred even earlier on March 20, 2020), among other measures, the IRS announced a new notice 2020-18 for the extension of all April 15 deadlines to July 15, 2020.  This extension applied only to the April 15 deadlines.
Later, on March 27, 2020, the IRS issued Notice 2020-20, which amplified the earlier notice 2020-18 and postponed certain federal gift tax return filings and payments to July 15, 2020.
July 15 Deferral: More Deadlines Affected
On April 9, 2020, the IRS took another decisive step forward and issued Notice 2020-23.  This notice extends to July 15 all tax deadlines that fall on or after April 1, 2020 and July 14, 2020.  This deferral applies to all tax filing and tax payment deadlines.   
The July 15 deferral of deadlines applies to all taxpayers – individuals, trusts, estates, corporations and other non-corporate tax filers.
July 15 Deferral: Taxpayers Residing Abroad
Americans who reside abroad usually get an automatic extension to file their tax returns until June 15, but they are required to pay taxes due by April 15.  Notice 2020-23 defers the tax payment and the tax filing deadlines from April 15 and June 15 respectively to July 15, 2020.
July 15 Deferral: Individual Tax Returns
Notice 2020-23 applies to the following types of individual tax returns and tax payments:
Form 1040, U.S. Individual Income Tax Return, 1040-SR, U.S. Tax Return for Seniors;
1040-NR, U.S. Nonresident Alien Income Tax Return;
1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents;
1040-PR, Self-Employment Tax Return - Puerto Rico; and
1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico);
July 15 Deferral: Corporate Tax Returns
Notice 2020-23 applies to the following types of corporate tax returns and tax payments (irrespective of whether they are calendar-year or fiscal-year taxpayers):
Form 1120, U.S. Corporation Income Tax Return;
1120-C, U.S. Income Tax Return for Cooperative Associations;
1120-F, U.S. Income Tax Return of a Foreign Corporation;
1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation;
1120-H, U.S. Income Tax Return for Homeowners Associations;
1120-L, U.S. Life Insurance Company Income Tax Return;
1120-ND, Return for Nuclear Decommissioning Funds and Certain Related Persons;
1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return;
1120-POL, U.S. Income Tax Return for Certain Political Organizations;
1120-REIT, U.S. Income Tax Return for Real Estate Investment Trusts;
1120-RIC, U.S. Income Tax Return for Regulated Investment Companies;
1120-S, U.S. Income Tax Return for an S Corporation; and 
1120-SF, U.S. Income Tax Return for Settlement Funds (Under Section 468B).
July 15 Deferral: Partnership Tax Returns
Notice 2020-23 applies to the following types of partnership calendar-year and fiscal-year tax returns:
Form 1065, U.S. Return of Partnership Income; and
Form 1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return.
July 15 Deferral: Estate, Gift and Trust Tax Returns
Notice 2020-23 applies to the following types of estate, gift and trust tax returns (including all tax payments required to be made under these returns):
Form 1041, U.S. Income Tax Return for Estates and Trusts;
1041-N, U.S. Income Tax Return for Electing Alaska Native Settlement Trusts;
1041-QFT, U.S. Income Tax Return for Qualified Funeral Trusts;
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return (for estate of a citizen or resident of the United States), including for filings pursuant to Revenue Procedure 2017-34;
706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return (for estate of a nonresident not a citizen of the United States);
706-A, United States Additional Estate Tax Return;
706-QDT, U.S. Estate Tax Return for Qualified Domestic Trusts;
706-GS(T), Generation-Skipping Transfer Tax Return for Terminations;
706-GS(D), Generation-Skipping Transfer Tax Return for Distributions;
706-GS(D-1), Notification of Distribution from a Generation-Skipping Trust (including the due date for providing such form to a beneficiary);
Form 8971, Information Regarding Beneficiaries Acquiring Property from a Decedent and any supplemental Form 8971, including all requirements contained in section 6035(a) of the Code; and
Estate tax payments of principal or interest due as a result of an election made under sections 6166, 6161, or 6163 and annual recertification requirements under section 6166 of the Code.
July 15 Deferral: Tax-Exempt Tax Returns
Notice 2020-23 applies to Form 990-T, Exempt Organization Business Income Tax Return (and proxy tax under section 6033(e) of the Code).
July 15 Deferral: Excise Taxes
Notice 2020-23 applies to excise tax payments on investment income and return filings on Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation as well as excise tax payments and return filings on Form 4720, Return of Certain Excise Taxes under Chapters 41 and 42 of the Internal Revenue Code.
July 15 Deferral: Quarterly Estimated Tax Payments
Notice 2020-23 applies to various types of quarterly estimated income tax payments calculated on or submitted with the following forms:
990-W, Estimated Tax on Unrelated Business Taxable Income for Tax-Exempt Organizations,
1040-ES, Estimated Tax for Individuals;
1040-ES (NR), U.S. Estimated Tax for Nonresident Alien Individuals;
1040-ES (PR), Estimated Federal Tax on Self Employment Income and on Household Employees (Residents of Puerto Rico);
1041-ES, Estimated Income Tax for Estates; and Trusts; and 
1120-W, Estimated Tax for Corporations.
July 15 Deferral: Certain Other Affected Taxpayers and Elections; Tax Court Deadlines
Notice 2020-23 also applies to any person performing a time-sensitive action listed in either § 301.7508A-1(c)(1)(iv) – (vi) of the Procedure and Administration Regulations or Revenue Procedure 2018-58, 2018-50 IRB 990 (December 10, 2018), which is due to be performed on or after April 1, 2020, and before July 15, 2020 (“Specified Time-Sensitive Action”).  For purposes of this notice, the term Specified Time-Sensitive Action also includes an investment at the election of a taxpayer due to be made during the 180-day period described in the IRS §1400Z-2(a)(1)(A).
Affected Taxpayers also have until July 15, 2020, to perform all Specified Time-Sensitive Actions, that are due to be performed on or after April 1, 2020, and before July 15, 2020. This relief includes the time for filing all petitions with the Tax Court, or for review of a decision rendered by the Tax Court, filing a claim for credit or refund of any tax, and bringing suit upon a claim for credit or refund of any tax. This notice does not provide relief for the time period for filing a petition with the Tax Court, or for filing a claim or bringing a suit for credit or refund if that period expired before April 1, 2020.
July 15 Deferral: Schedules, Elections and Other Forms
Notice 2020-23 applies not only to the aforementioned forms (hereinafter “Specified Forms), but also to schedules, returns, and other forms that are filed as attachments to the Specified Forms or are required to be filed by the due date of the Specified Forms.  For example, this affects Schedule H and Schedule SE.  
Moreover, elections that are made or required to be made on a timely filed Specified Form (or attachment to a Specified Form) shall be timely made if filed on such Specified Form or attachment, as appropriate, on or before July 15, 2020
July 15 Deferral: International Information Returns and 965 Tax Payments
Notice 2020-23 applies to all US international information returns including forms 3520, 5471, 5472, 8621 (including PFIC elections), 8858, 8865, and 8938. Furthermore, the Notice applies to installment payments under section 965(h) due on or after April 1, 2020, and before July 15, 2020.
This is highly important to Sherayzen Law Office clients’ because almost all of our clients must file these forms and many are required to make 965 installment tax payments.
July 15 Deferral: 2016 Unclaimed Refunds 
For 2016 tax returns, the normal April 15 deadline to claim a refund has also been extended to July 15, 2020. The law provides a three-year window of opportunity to claim a refund.  If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. Notice 2020-23 requires taxpayers to properly address, mail and ensure the tax return is postmarked by the July 15, 2020, date.
July 15 Deferral: IRS Audits, IRS Appeals and Amended Tax Returns
Notice 2020-23 provides a 30-day postponement for “Affected Taxpayers” with respect to “Time-Sensitive IRS Actions” if the last date for performance of the action is on or after April 6, 2020, and before July 15, 2020.
Notice 2020-23 defines “Affected Taxpayers” as: 
Persons who are currently under examination (including an investigation to determine liability for an assessable penalty under subchapter B of Chapter 68); 
Persons whose cases are with the Independent Office of Appeals; and
Persons who, during the period beginning on or after April 6, 2020 and ending before July 15, 2020, file written documents described in section 6501(c)(7) of the Code (amended returns) or submit payments with respect to a tax for which the time for assessment would otherwise expire during this period. 
Notice 2020-23 defines “Time Sensitive IRS Action” as actions described in § 301.7508A-1(c)(2).
July 15 Deferral: Extension of time to file beyond July 15
It is still possible to request an extension of time beyond July 15, 2020 (to October 15, 2020). In order to do it, individual taxpayers must file Form 4868 and business taxpayers must file Form 7004.  Both forms should be filed by July 15, 2020.
Taxpayers should keep in mind that an extension to file is not an extension to pay taxes.  Taxpayers must estimated their tax liability and pay any taxes owed by July 15, 2020, even if they request an extension to file forms.

### Worldwide Income Reporting Myths | US International Tax Lawyer & Attorney
https://www.youtube.com/watch?v=lWgYcwx45Cg
Hi and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen and I'm an international tax attorney and owner of Sherayzen Law Office, Ltd. and today we are continuing our series of blogs from the Czech Republic. Right now, I'm on the way to Prague from Karlovy Vary and I wanted to make this blog about the Worldwide Income Reporting, particularly about the myths which surround the worldwide reporting requirement.
The general rule is that if you are a US Tax Resident that you must disclose your worldwide income on your US Tax Returns; but there are a number of myths on the internet especially which say that there are certain exceptions to this requirement. So, lets go over these worldwide income reporting myths.
The most frequent and the most dangerous myth is the 'local taxation' myth. Under the 'local taxation' myth, a taxpayer believes that he doesn't have to report his income, his foreign income because it is subject to local taxation. So, for example if you have a foreign account in the Czech Republic and there's tax withholding on all the income produced by the account then you don't have to report the income. And sometimes some people even believe that you don't even have to report the account itself. This is a completely false assumption; there is no basis for it whatsoever. Even if income is subject to local taxation, it still needs to be reported on your US Tax Return.
The second myth which is also very common is that you only pay taxes in the jurisdiction where you earned the income; the so called 'territorial taxation' myth. This myth is very popular for a very good reason. A lot of countries actually would not tax income that is earned in another jurisdiction. Unfortunately, the United States is not one of them. Under US Tax Law irrespective of where the income is earned, it's taxed in the United States as long as you are a US Tax Resident. The fact that it's earned in another jurisdiction has no influence on the tax law whatsoever.
And then finally, there is an interesting belief that is held by some people is that there is some sort of 'de minimis' exception to the worldwide reporting requirement. And that is also not correct. There is no de minimis exception to the worldwide income reporting requirement. Even if you earn one dollar of foreign income, you still need to report it. Even if you earn ten dollars, one hundred dollars, it doesn't matter; you still have to report it. Now I believe the reason why this myth exists is because of the $10,000 interest in the foreign account requirement for FBAR purposes. So FBAR as you may know is an information return that US Persons must file in the United States. It's not part of the internal revenue code but it is administered by the IRS. And in order to be subject to FBAR filing requirement, you have to have at least $10,000 in your foreign accounts. Technically speaking, the highest aggregate value should be in excess of $10,000, but that amount $10,000 kind of sticks in people's minds and they think this is the amount of income that you have to have in order for foreign income to be reportable on your US Tax Return. That is also not true: $10,000 is something that is relevant to FBAR only and has nothing to do with actual income, it has to do with balances.
So, these are the three most common worldwide income exception myths. If you follow any one of them, you are most likely not in compliance with US Tax Laws and if this is the case, I suggest that you contact me as soon as possible. You can call me at (952) 500-8159 or you can email me at eugene@sherayzenlaw.com. Thank you for watching and until the next time.

### Employee Retention Credit | US Tax Lawyers & Attorneys
On March 31, 2020, the IRS launched the Employee Retention Credit.  This new tax credit is designed to encourage businesses to keep employees on their payroll.  Let’s discuss the Employee Retention Credit in more detail.
Employee Retention Credit: Eligibility Criteria
Two categories of employers are not eligible to apply for the Employee Retention Credit: (a) state and local governments and their instrumentalities; and (b) small businesses who take certain small business loans.
The rest of the employers (including tax-exempt organizations) regardless of size can apply as long as they fall within one of the following two categories.  
The first category includes all businesses which were fully or  partially suspended by government order due to COVID-19 during the calendar quarter.  It appears that this category applies to the state “shelter-in-place” orders.
The second category includes businesses with gross receipts below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in  2019, they no longer qualify after the end of that quarter.
Employee Retention Credit: Credit Calculation
The amount of the credit is 50% of qualifying wages paid up to $10,000 in total. Wages paid after March 12, 2020, and before January 1, 2021, are eligible for the credit. The definition of wages includes not only cash payments, but also a portion of the cost of employer-provided health care insurance.
Employee Retention Credit: Qualified Wages
Qualifying wages are based on the average number of employees in 2019.  There is an important difference, however, in the calculation of qualified wages based on the size of an employer.
With respect to employers with less than 100 employees: the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full time and were paid for full time work, the employer still receives the credit.
With respect to employers with more than 100 employees: if the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.
Employee Retention Credit: Application Process
Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.
Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter of 2020. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19. Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.
Sherayzen Law Office will continue to follow closely the tax developments concerning the COVID-19 tax relief.

### §318 Sidewise Attribution Limitation | US International Tax Attorney
This article explores the third main limitation on the general IRC (Internal Revenue Code) §318 corporate stock re-attribution rules – §318 Sidewise Attribution Limitation.
§318 Sidewise Attribution Limitation: What is “Sidewise Attribution”?
A sidewise attribution occurs when corporate stock owned by an owner of a business entity (or a beneficiary of a trust or estate) is first attributed to this business entity (or estate or trust) and then re-attributed again to another owner of the same business entity (or another beneficiary of the same trust or estate).   In other words, stock deemed to be owned by an entity due to the ownership of that stock by an owner or beneficiary of the entity is re-attributed “sidewise” to another owner or beneficiary of the same entity. 
Sidewise attribution may have far-reaching income tax and tax reporting consequences, because it may result in a person with no real ownership of a corporation being treated as an owner of this corporation’s stock simply because a member of another entity (in which the first person also has an ownership interest) happens to own corporate stock of this corporation.
§318 Sidewise Attribution Limitation: §318(a)(5)(C) Prohibition
§318(a)(5)(C) describes the §318 Sidewise Attribution Limitation. Under §318(a)(5)(C), stock constructively owned by a partnership, estate, trust or corporation pursuant to §318(a)(3) is not treated as owned by this partnership, estate, trust or corporation for the purpose of treating a partner, beneficiary, or shareholder as owner of the stock.  In other words, the sidewise attribution limitation prevents re-attribution of corporate stock to an owner of an entity where such stock is constructively-owned by an entity solely by virtue of ownership of this stock by another owner of the entity.
Let’s look at the following example to illustrate the §318 Sidewise Attribution Limitation: A and B are unrelated persons, they equally own a partnership P and A owns 100 shares of corporation X’s stock.  In this situation, partnership P is a constructive owner of A’s 100 shares of X under §318(a)(3)(A).  Without any sideways limitation, B would have been also treated as an owner of these 100 shares of X due to §318(a)(2)(A).  Under §318(a)(5)(C), however, none of these stocks are attributed to B.
§318 Sidewise Attribution Limitation: Attribution from Actual Ownership Not Affected
It is important to emphasize that §318(a)(5)(C) applies only to the re-attribution of stock constructively owned as a result of the application of §318(a)(3).  This prohibition does not affect the §318(a)(2) attribution of stock actually owned by an entity to its beneficiary, partner, or shareholder.
§318 Sidewise Attribution Limitation: Re-Attribution Under Other Rules
Additionally, stock constructively owned under §318(a)(3) may still be re-attributed under an attribution rule other than §318(a)(2).  In other words, stock constructively owned under §318(a)(3) may still be re-attributed under the upstream corporate attribution rules or the option attribution rules of §318(a)(4) (see Treas. Reg. §1.318-4(c)(2)).
Moreover, re-attribution under the §318 family attribution rules still possible. A potential situation for such re-attribution would arise in a situation where corporate stock is attributed from an entity to its member and from this member to a qualified family member of the same entity. Berenbaum v. Commissioner, 369 F.2d 337 (10th Cir. 1966), rev'g T.C. Memo 1965-147.
Let’s look at a couple of examples to understand better the interaction between the §318 Sidewise Attribution Limitation and the re-attribution rules other than §318(a)(2).  
Here is the first hypothetical fact pattern: A is a beneficiary of a trust T, B is another beneficiary of T, T is a beneficiary of an estate, and A owns 100 shares of a C-corporation X.  Under §318(a)(3)(B), T is a constructive owner of 100 shares of X.  Since T is a constructive owner of A’s shares of X, these shares are re-attributed to the estate under §318(a)(3)(A); §318(a)(5)(C) does not apply to this type of a re-attribution since it is not a sidewise attribution. On the other hand, the §318 Sidewise Attribution Limitation would prevent the re-attribution of A’s shares of X to B that otherwise would have occurred under §318(a)(2)(B).  
Note, however, that, if B is A’s son (or other qualified relative under the §318 family attribution rules), then the re-attribution of A’s stocks of X to B is possible under §318(a)(1)(A). 
Let’s now look at another fact pattern to understand the power of the option rule attribution vis-a-vis §318(a)(5)(C): A and B are beneficiaries of a trust T; T has an option to buy corporate stock from A.  The most important point to understand here is the fact that T is considered here as an owner of A’s stock not under the upstream trust attribution rules of §318(a)(3)(B), but under the option attribution rules of §318(a)(4).  Hence, the sidewise attribution limitation under §318(a)(5)(C) does not apply and B becomes a constructive owner of a his proportional part of A’s stock under the downstream trust attribution rules of §318(a)(2)(B).
Contact Sherayzen Law Office for Professional Help With US International Tax Law Compliance
US international tax law is incredibly complex and the penalties for noncompliance are exceptionally severe.  This means that an attempt to navigate through the maze of US international tax laws without assistance of an experienced professional will most likely produce unfavorable and even catastrophic results. 
Contact Sherayzen Law Office for professional help with US international tax law.  We are a highly experienced, creative and ethical team of professionals dedicated to helping our clients resolve their past, present and future US international tax compliance issues.  We have helped clients with assets in over 70 countries around the world, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Critical Business Exemption | Minnesota Shelter-In-Place Order
On March 25 , 2020, the Honorable Tim Walz, Governor of the State of Minnesota, issued a "Shelter-In-Place" Emergency Executive Order 20-20.  The Executive Order mandates all persons in Minnesota to stay at home or in their place residence, unless they go out to engage in certain activities or do work for a business which is designated as a critical business (in some states, critical business is called "essential business").  I will first discuss the definition of the critical business exemption and its importance; then, I will provide a list of industries that fall under the critical business exemption based on NAICS codes.
 Critical Business Exemption: Importance 
The critical business exemption is very important for many business and tax reasons.  Let's briefly discuss the two most important of them. 
First, from a business perspective, it is very important for business to continue to operate; a shutdown of two weeks may deal a critical blow to a business' ability to remain profitable and meet all of its clients' demands.  Hence, the very existence of a business may depend on its eligibility for a critical business exemption.
Second, a non-exempt business will have to make a tough choice between laying off all of its employees and paying forced leave of absence. Prior to April 1, 2020, the forced leave of absence will not be compensated by the federal government.  Starting April 1, 2020, however, pursuant to the Families First Coronavirus Response Act ("FFCRA"), employees are entitled to certain paid leave as well as potentially expanded family and medical leave for COVID-19 related reasons.  In return, eligible employers will receive a compensation from the federal government in the form of a Paid Sick Leave Tax Credit.  
These are just two of numerous examples of the importance of the critical business exemption.
Critical Business Exemption: Definition Sources
In order for a business to exempt its workers from the requirements of the Governor's Executive Order 20-20, two conditions must be satisfied: (1) a business must fall within the definition of a critical business, and (2) a worker cannot perform work duties from home.
There are three resources that provide guidance to help you determine if your business is in a critical industry:
 The U.S. Department of Homeland Security’s Memorandum on Identification of Essential Critical Infrastructure Workers During COVID-19 Response ("CISA").  This is the federal government's definition of critical industries.   The aforementioned is Governor’s Executive Order 20-20.  The order sets forth all sources of the critical business exemption definition as well as certain general categories of exempt businesses.  The designation of critical industries based on NAICS Codes.  This the most detailed and most comprehensive list of critical industries for many businesses.  I provided the list below as it existed as of March 26, 2020.
The analysis should start from CISA categories. If your business does not fall within any of the CISA categories, then you proceed with the examination of the categories listed in the Executive Order 20-20.  Finally, if neither of the first two sources provides an answer (for example, if you are a tax accountant, this would be the case), then you need to look at the NAICS Codes.   If your business falls within any of the critical industry categories described in either of these documents, then, you will satisfy the first condition for exempting your workers from Minnesota Shelter-in-Place order. 
Critical Business Exemption:  Inability to Perform Work Duties from Home
If a business belongs to one of the critical industries, an employee can leave home to work only if he cannot perform his duties from home.  It is important to understand that Executive Order 20-20 requires all employees who can work from home to do so, even if they are eligible for a critical business exemption.
Critical Business Exemption:  NAICS Codes
For the convenience of the readers, I provided this list of companies eligible (and ineligible) for Minnesota critical business exemption based on NAICS Codes.  This list was originally published by MN DEED (Minnesota Department of Employment and Economic Development); it is up-to-date through March 26, 2020.
 As a Minnesota-based US international tax law firm which deals with highly-confidential information, Sherayzen Law Office falls within an exemption under NAICS code 5412.
   Industry Description      Industry Code      Critical   Industry   
  Oilseed and Grain Farming
  1111
  YES
  Vegetable and Melon Farming
  1112
  YES
     Fruit and Tree Nut Farming   
  1113
  YES
     Greenhouse, Nursery, and Floriculture Production   
  1114
  YES
     Other Crop Farming   
  1119
  YES
     Cattle Ranching and Farming   
  1121
  YES
     Hog and Pig Farming   
  1122
  YES
     Poultry and Egg Production   
  1123
  YES
     Other Animal Production   
  1129
  YES
  Timber Tract Operations
  1131
  YES
     Forest Nurseries and Gathering of Forest Products   
  1132
  YES
  Logging
  1133
  YES
  Fishing
  1141
  YES
     Hunting and Trapping   
  1142
  YES
     Support Activities for Crop Production   
  1151
  YES
     Support Activities for Animal Production   
  1152
  YES
     Support Activities for Forestry   
  1153
  YES
  Oil and Gas Extraction
  2111
  YES
  Metal Ore Mining
  2122
  YES
  Nonmetallic Mineral Mining and Quarrying
  2123
  NO
     Support Activities for Mining   
  2131
  YES
     Residential Building Construction   
  2361
  YES
  Nonresidential Building Construction
  2362
  YES
  Utility System Construction
  2371
  YES
     Land Subdivision   
  2372
  YES
     Highway, Street and Bridge Construction   
  2373
  YES
     Other Heavy and Civil Engineering Construction   
  2379
  YES
     Foundation, Structure and Building Exterior Contractors   
  2381
  YES
  Building Equipment Contractors
  2382
  YES
  Building Finishing Contractors
  2383
  YES
     Other Specialty Trade Contractors   
  2389
  YES
     Grain and Oilseed Milling   
  3112
  YES
     Sugar and Confectionery Product Manufacturing   
  3113
  YES
     Fruit and Vegetable Preserving and Specialty Food Manufacturing   
  3114
  YES
  Dairy Product Manufacturing
  3115
  YES
     Animal Slaughtering and Processing   
  3116
  YES
  Bakeries and Tortilla Manufacturing
  3118
  YES
     Other Food Manufacturing   
  3119
  YES
  Beverage Manufacturing
  3121
  YES
  Fabric Mills
  3132
  NO
  Textile Furnishings Mills
  3141
  NO
     Other Textile Product Mills   
  3149
  NO
     Cut and Sew Apparel Manufacturing   
  3152
  NO
     Leather and Hide Tanning and Finishing   
  3161
  NO
  Sawmills and Wood Preservation
  3211
  NO
     Veneer, Plywood and Engineered Wood Product Manufacturing   
  3212
  NO
     Other Wood Product Manufacturing   
  3219
  YES
     Pulp, Paper and Paperboard Mills   
  3221
  YES
  Converted Paper Product Manufacturing
  3222
  YES
     Printing and Related Support Activities   
  3231
  NO
     Petroleum and Coal Products Manufacturing   
  3241
  YES
     Basic Chemical Manufacturing   
  3251
  YES
     Resin, Synthetic Rubber and Artificial Synthetic Fibers and Filaments Manufacturing  
  3252
  NO
     Pesticide, Fertilizer and Other Agricultural Chemical Manufacturing   
  3253
  YES
     Pharmaceutical and Medicine Manufacturing   
  3254
  YES
     Paint, Coating and Adhesive Manufacturing   
  3255
  NO
     Soap, Cleaning Compound and Toilet Preparation Manufacturing   
  3256
  YES
     Other Chemical Product and Preparation Manufacturing   
  3259
  YES
  Plastics Product Manufacturing
  3261
  YES
  Rubber Product Manufacturing
  3262
  YES
  Glass and Glass Product Manufacturing
  3272
  NO
     Cement and Concrete Product Manufacturing   
  3273
  NO
     Other Nonmetallic Mineral Product Manufacturing   
  3279
  NO
     Steel Product Manufacturing from Purchased Steel   
  3312
  YES
     Alumina and Aluminum Production and Processing   
  3313
  YES
  Foundries
  3315
  YES
     Forging and Stamping   
  3321
  YES
     Cutlery and Handtool Manufacturing   
  3322
  NO
   Industry Description      Industry Code      Critical   Industry   
  Architectural and Structural Metals Manufacturing
  3323
  NO
     Boiler, Tank and Shipping Container Manufacturing   
  3324
  YES
  Hardware Manufacturing
  3325
  NO
  Spring and Wire Product Manufacturing
  3326
  NO
     Machine Shops, Turned Product and Screw, Nut and Bolt Manufacturing   
  3327
  YES
     Coating, Engraving, Heat Treating and Allied Activities   
  3328
  NO
     Other Fabricated Metal Product Manufacturing   
  3329
  NO
     Agriculture, Construction and Mining Machinery Manufacturing   
  3331
  YES
  Industrial Machinery Manufacturing
  3332
  YES
  Commercial
  and Service Industry Machinery Manufacturing
  3333
  YES
     Ventilation, Heating, Air-Conditioning and Commercial Refrigeration Equipment Manufacturing   
  3334
  YES
  Metalworking Machinery Manufacturing
  3335
  NO
     Engine, Turbine and Power Transmission Equipment Manufacturing   
  3336
  NO
  Other
  General
  Purpose Machinery Manufacturing
  3339
  NO
     Computer and Peripheral Equipment Manufacturing   
  3341
  YES
     Communications Equipment Manufacturing   
  3342
  YES
     Audio and Video Equipment Manufacturing   
  3343
  YES
     Semiconductor and Other Electronic Component Manufacturing   
  3344
  YES
     Navigational, Measuring, Electromedical and Control Instruments   Manufacturing   
  3345
  YES
     Manufacturing and Reproducing Magnetic and Optical Media   
  3346
  NO
  Electrical Equipment Manufacturing
  3353
  YES
     Other Electrical Equipment and Component Manufacturing   
  3359
  YES
     Motor Vehicle Manufacturing   
  3361
  NO
     Motor Vehicle Body and Trailer Manufacturing   
  3362
  NO
     Motor Vehicle Parts Manufacturing   
  3363
  NO
     Aerospace Product and Parts Manufacturing   
  3364
  NO
  Railroad Rolling Stock Manufacturing
  3365
  NO
     Ship and Boat Building   
  3366
  NO
     Other Transportation Equipment Manufacturing   
  3369
  NO
     Household and Institutional Furniture and Kitchen Cabinet Manufacturing   
  3371
  NO
     Office Furniture (including Fixtures) Manufacturing   
  3372
  NO
     Other Furniture Related Product Manufacturing   
  3379
  NO
     Medical Equipment and Supplies Manufacturing   
  3391
  YES
     Other Miscellaneous Manufacturing   
  3399
  NO
     Electric Power Generation, Transmission and Distribution   
  2211
  YES
     Natural Gas Distribution   
  2212
  YES
     Water, Sewage and Other Systems   
  2213
  YES
     Motor Vehicle and Motor Vehicle Parts and Supplies Merchant Wholesalers   
  4231
  YES
  Furniture and
  Home Furnishing Merchant Wholesalers
  4232
  NO
     Lumber and Other Construction Materials Merchant Wholesalers   
  4233
  YES
     Professional and Commercial Equipment and Supplies Merchant Wholesalers   
  4234
  YES
     Metal and Mineral (except Petroleum) Merchant Wholesalers   
  4235
  YES
     Electrical and Electronic Goods Merchant Wholesalers   
  4236
  YES
     Hardware, Plumbing, Heating Equipment and Supplies Merchant Wholesalers   
  4237
  YES
     Machinery, Equipment and Supplies Merchant Wholesalers   
  4238
  YES
  Miscellaneous Durable Goods Merchant Wholesalers
  4239
  NO
     Paper and Paper Product Merchant Wholesalers   
  4241
  YES
  Drugs and Druggists' Sundries Merchant
  Wholesalers
  4242
  YES
     Apparel, Piece Goods and Notions Merchant Wholesalers   
  4243
  NO
     Grocery and Related Product Merchant Wholesalers   
  4244
  YES
     Farm Product Raw Material Merchant Wholesalers   
  4245
  YES
  Chemical and
  Allied Products Merchant
  Wholesalers
  4246
  YES
     Petroleum and Petroleum Products Merchant Wholesalers   
  4247
  YES
     Beer, Wine and Distilled Alcoholic Beverage Merchant Wholesalers   
  4248
  YES
     Miscellaneous Nondurable Goods Merchant Wholesalers   
  4249
  YES
     Wholesale Electronic Markets, Agents and Brokers   
  4251
  YES
  Automobile Dealers
  4411
  NO
     Other Motor Vehicle Dealers   
  4412
  NO
     Automotive Parts,  Accessories and Tire Stores   
  4413
  YES
  Furniture Stores
  4421
  NO
  Home Furnishings Stores
  4422
  NO
     Electronics and Appliance Stores   
  4431
  NO
     Building Material and Supplies Dealers   
  4441
  YES
     Lawn and Garden Equipment and Supplies Stores   
  4442
  NO
  Grocery Stores
  4451
  YES
  Specialty Food Stores
  4452
  YES
     Beer, Wine and Liquor Stores   
  4453
  YES
     Health and Personal Care Stores   
  4461
  YES
   Industry Description      Industry Code      Critical   Industry      Gasoline Stations   
  4471
  YES
  Clothing Stores
  4481
  NO
  Shoe Stores
  4482
  NO
     Jewelry, Luggage and Leather Goods Stores   
  4483
  NO
     Sporting Goods, Hobby and Musical Instrument Stores   
  4511
  NO
     Book, Periodical and Music Stores   
  4512
  NO
  Department
  Stores
  4522
  YES
     General Merchandise Stores, including Warehouse Clubs and Supercenters   
  4523
  YES
  Florists
  4531
  NO
     Office Supplies, Stationery and Gift Stores   
  4532
  NO
  Used Merchandise Stores
  4533
  NO
     Other Miscellaneous Store Retailers   
  4539
  NO
     Electronic Shopping and Mail-Order Houses   
  4541
  NO
  Vending Machine Operators
  4542
  NO
  Direct Selling Establishments
  4543
  NO
  Scheduled Air Transportation
  4811
  YES
     Nonscheduled Air Transportation   
  4812
  YES
  Rail Transportation
  4821
  YES
     Deep Sea, Coastal and Great Lakes Water Transportation   
  4831
  YES
     Inland Water Transportation   
  4832
  YES
     General Freight Trucking   
  4841
  YES
     Specialized Freight Trucking   
  4842
  YES
     Urban Transit Systems   
  4851
  YES
     Taxi and Limousine Service   
  4853
  YES
     School and Employee Bus Transportation   
  4854
  YES
     Other Transit and Ground Passenger Transportation   
  4859
  YES
     Pipeline Transportation of Crude Oil   
  4861
  YES
     Pipeline Transportation of Natural Gas   
  4862
  YES
     Other Pipeline Transportation   
  4869
  YES
     Scenic and Sightseeing Transportation, Land   
  4871
  NO
     Scenic and Sightseeing Transportation, Water   
  4872
  NO
     Support Activities for Air Transportation   
  4881
  YES
     Support Activities for Rail Transportation   
  4882
  YES
     Support Activities for Water Transportation   
  4883
  YES
     Support Activities for Road Transportation   
  4884
  YES
  Freight Transportation Arrangement
  4885
  YES
     Other Support Activities for Transportation   
  4889
  YES
  Postal Service
  4911
  YES
  Couriers
  4921
  YES
     Local Messengers and Local Delivery   
  4922
  YES
     Warehousing and Storage   
  4931
  YES
     Newspaper, Periodical, Book and Directory Publishers   
  5111
  YES
  Software Publishers
  5112
  YES
     Motion Picture and Video Industries   
  5121
  NO
  Sound Recording Industries
  5122
  NO
     Radio and Television Broadcasting   
  5151
  YES
     Cable and Other Subscription Programming   
  5152
  YES
  Telecommunications Resellers
  5173
  YES
     Data Processing, Hosting and Related Services   
  5182
  YES
     Other Information Services   
  5191
  YES
     Monetary Authorities - Central   Bank   
  5211
  YES
  Depository Credit Intermediation
  5221
  YES
  Nondepository Credit Intermediation
  5222
  YES
  Activities Related to Credit Intermediation
  5223
  YES
  Securities and Commodity Contracts Intermediation and
  Brokerage
  5231
  YES
  Securities and Commodity Exchanges
  5232
  YES
     Other Financial Investment Activities   
  5239
  YES
  Insurance Carriers
  5241
  YES
     Agencies, Brokerages and Other Insurance Related Activities   
  5242
  YES
  Lessors of Real Estate
  5311
  YES
     Offices of Real Estate Agents and Brokers   
  5312
  YES
  Activities Related to Real Estate
  5313
  YES
     Automotive Equipment Rental and Leasing   
  5321
  NO
  Consumer Goods Rental
  5322
  NO
     General Rental Centers   
  5323
  NO
     Commercial and Industrial Machinery and Equipment Rental and Leasing   
  5324
  NO
  Lessors of Nonfinancial Intangible Assets (except Copyrighted Works)
  5331
  NO
  Legal Services
  5411
  YES
   Industry Description      Industry Code      Critical   Industry      Accounting, Tax Preparation, Bookkeeping and Payroll Services   
  5412
  YES
     Architectural, Engineering and Related Services   
  5413
  YES
  Specialized Design Services
  5414
  NO
     Computer Systems Design and Related Services   
  5415
  YES
     Management, Scientific and Technical Consulting Services   
  5416
  YES
  Scientific Research and Development Services
  5417
  YES
     Advertising and Related Services   
  5418
  NO
     Other  Professional, Scientific and Technical Services   
  5419
  YES
     Management of Companies and Enterprises   
  5511
  YES
  Office Administrative Services
  5611
  NO
  Facilities Support Services
  5612
  YES
     Employment Services   
  5613
  NO
  Business Support Services
  5614
  NO
  Travel Arrangement
  and Reservation Services
  5615
  NO
     Investigation and Security Services   
  5616
  YES
  Services to Buildings and Dwellings
  5617
  YES
     Other Support Services   
  5619
  NO
  Waste Collection
  5621
  YES
     Waste Treatment and Disposal   
  5622
  YES
     Remediation and Other Waste Management   Services   
  5629
  YES
     Elementary and Secondary Schools   
  6111
  YES
  Junior Colleges
  6112
  YES
     Colleges, Universities and Professional Schools   
  6113
  YES
     Business Schools and Computer and Management Training   
  6114
  YES
     Technical and Trade Schools   
  6115
  YES
     Other Schools and Instruction   
  6116
  YES
     Educational Support Services   
  6117
  YES
  Offices of Physicians
  6211
  YES
  Offices of Dentists
  6212
  YES
  Offices of Other Health Practitioners
  6213
  YES
  Outpatient Care Centers
  6214
  YES
     Medical and Diagnostic Laboratories   
  6215
  YES
     Home Health Care Services   
  6216
  YES
     Other Ambulatory Health Care Services   
  6219
  YES
     General Medical and Surgical Hospitals   
  6221
  YES
  Psychiatric and Substance Abuse Hospitals
  6222
  YES
  Specialty (except Psychiatric and Substance Abuse) Hospitals
  6223
  YES
     Nursing Care Facilities (Skilled Nursing Facilities)   
  6231
  YES
     Residential Intellectual and Developmental Disability, Mental Health and Substance Abuse Facilities   
  6232
  YES
     Continuing Care Retirement Communities and Assisted Living Facilities for the   Elderly   
  6233
  YES
     Other Residential Care Facilities   
  6239
  YES
     Individual and Family Services   
  6241
  YES
     Community Food and Housing and Emergency and Other Relief Services   
  6242
  YES
  Vocational Rehabilitation Services
  6243
  YES
     Child Day Care Services   
  6244
  YES
     Performing Arts Companies   
  7111
  NO
     Spectator Sports   
  7112
  NO
     Promoters of Performing Arts, Sports, and   Similar Events   
  7113
  NO
     Agents and Managers for Artists, Athletes, Entertainers and Other Public Figures   
  7114
  NO
     Independent Artists, Writers and Performers   
  7115
  NO
     Museums, Historical Sites and Similar Institution   
  7121
  NO
     Amusement Parks and Arcades   
  7131
  NO
  Gambling Industries
  7132
  NO
     Other Amusement and Recreation Industries   
  7139
  NO
     Traveler  Accommodation   
  7211
  NO
     RV (Recreational Vehicle) Parks and Recreational Camps   
  7212
  YES
     Rooming and Boarding Houses   
  7213
  NO
  Special Food Services
  7223
  YES
     Drinking Places (Alcoholic Beverages)   
  7224
  NO
  Restaurants
  7225
  YES
     Automotive Repair and Maintenance   
  8111
  YES
     Electronic and Precision Equipment Repair and Maintenance   
  8112
  NO
     Commercial and Industrial Machinery and Equipment (except Automotive and Electronic) Repair and Maintenance   
  8113
  NO
     Personal and Household Goods Repair and Maintenance   
  8114
  NO
  Personal Care Services
  8121
  NO
  Death Care Services
  8122
  YES
     Drycleaning and Laundry Services   
  8123
  YES
     Other Personal Services   
  8129
  YES
   Industry Description      Industry Code      Critical   Industry   
  Religious Organizations
  8131
  YES
     Grantmaking and Giving Services   
  8132
  NO
  Social Advocacy Organizations
  8133
  NO
  Civic and Social Organizations
  8134
  NO
     Business, Professional, Labor, Political and Similar Organizations   
  8139
  NO
  Private Households
  8141
  YES
     Executive, Legislative and Other General Government Support   
  9211
  YES
     Justice, Public Order and Safety Activities
  9221
  YES
     Administration of Human Resource Programs   
  9231
  YES
  Administration of Environmental Quality Programs
  9241
  YES
     Administration of Housing Programs, Urban Planning and Community Development   
  9251
  YES
     Administration of Economic Programs   
  9261
  YES
  Space Research and Technology
  9271
  NO
  National Security and International Affairs
  9281
  YES

### Coronavirus Offshore Voluntary Disclosure: Problems & Opportunities
The advancement of coronavirus in the United States and around the world has significantly disrupted the normal conditions and assumptions for a US taxpayer who engages in an offshore voluntary disclosure of his unreported foreign income and foreign assets. I will refer to a voluntary disclosure conducted in this context of the coronavirus disruptions as Coronavirus Offshore Voluntary Disclosure. In this essay, I would like to discuss the most unique problems and opportunities that arise in the context of a Coronavirus Offshore Voluntary Disclosure.
Coronavirus Offshore Voluntary Disclosure: Most Important Problems
The spread of coronavirus created two important problems to conducting an offshore voluntary disclosure of foreign assets and foreign income.
The first and most significant problem is the ability of taxpayers to obtain the information necessary for the correct completion of US international information returns such as FBAR (FinCEN Form 114), Form 8938, Form 8865, Form 5471, et cetera. Oftentimes, in order to complete these returns, taxpayers have to retrieve information from many years ago.
This is a difficult task even without the coronavirus, because electronic access is often limited to just a few years.  In cases that involve small and regional banks, the electronic access to information may simply not exist. Hence, a taxpayer often has to engage in a long process of mailing letters to banks requesting information; it is also a standard practice for taxpayers to personally travel to a foreign financial institution to obtain the necessary information.  
The coronavirus prohibitions have made such travel virtually impossible due to cancellation of flights between countries. Even traveling within a country has been severely impacted. Moreover, there have been significant disruptions to ability of taxpayers to access financial institutions in the quarantined areas, such as northern Italy. Many financial institutions have simply closed their branches and ceased to operate in a normal way.
The combination of all of these factors has significantly curtailed taxpayers’ ability to collect the vital information necessary for the completion of an offshore voluntary disclosure.
The second most important problem caused by the coronavirus panic are communication disruptions.  During a voluntary disclosure, taxpayers need to have access to their financial advisors and their international tax attorney.  I've already explained above how the coronavirus bank closures have affected such communications. 
The most significant communication issue between a taxpayer and his international tax attorney has been limited to mailing documents, particularly securing an original signature for Certifications of Non-Willfulness, Reasonable Cause Statements, amended tax returns and certain other IRS documents (such as Extension of Statute of Limitations in the context of an IRS audit).  The coronavirus containment procedures have affected the flow of regular mail around the world and have caused significant delays in obtaining signed documents from clients.
It should mentioned that the normal communications between a client and his attorney were not significantly impacted.  If there were any communication problems, this is most likely the result of the attorney’s failure to take advantage of modern means of communication.  
Sherayzen Law Office’s usage of email, phone, Skype, Viber and certain other platforms for information exchange and other modern means of communication has assured continuous and uninterrupted communication between our firm and our clients.  We have also encouraged and helped our clients to adopt certain procedures to mitigate other problems that have risen as a result of the coronavirus panic.
Coronavirus Offshore Voluntary Disclosure: Unique Opportunities
The coronavirus panic created not only unusual problems, but also unique opportunities for taxpayers with undisclosed foreign assets and foreign income. I will discuss here the two most important coronavirus opportunities. 
First, the spread of this virus has given more time for noncompliant US taxpayers to bring their tax affairs into compliance with US tax laws. Not only has the IRS ability to pursue new international tax cases has been impacted by the virus, but the IRS moved the tax filing deadline to July 15, 2020. This means that taxpayers suddenly have three more months to work on their offshore voluntary disclosures without any interruption with respect to current tax compliance.
Second, more time means that taxpayers now can plan for and adopt more complex and beneficial strategies with respect to their offshore voluntary disclosures. For example, taxpayers who were planning to file extensions can now adopt a strategy to shift their voluntary disclosure period by timely filing their 2019 tax returns and 2019 FBARs.
Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure
If you have undisclosed foreign bank accounts and other foreign assets, contact Sherayzen Law Office for professional help. We have successfully helped hundreds of US taxpayers to bring their tax affairs into full compliance with US tax laws, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### New July 15 Deadline for 2019 Tax Compliance | International Tax News
On March 21, 2020, the IRS moved the federal income tax filing and tax payment due date from April 15, 2020, to July 15, 2020.   Let’s discuss the new July 15 deadline in more detail.
July 15 Deadline: Why the IRS Moved the Tax Deadline to July 15, 2020?
The IRS moved the deadline because of the huge logistical problems that have arisen as a result of the spread of the coronavirus pandemic in the United States.  The coronavirus panic as well as the imposition of what can be described as curfew and other restrictive safety measures in many states have dramatically reduced the ability of tax professionals to effectively and timely help their clients.  
It would have been unfair and unreasonable to require taxpayers to file their tax returns by April 15 during this unprecedented national crisis.   Hence, President Trump and the IRS decided to prevent this injustice and moved the tax filing and tax payment deadlines to July 15, 2020. This was the right move to make and it is applauded by tax professionals around the country.
The legal authority for the deferral of the April 15 deadline came from President Trump’s emergency declaration last week pursuant to the Stafford Act. The Stafford Act (enacted in 1988) is a federal law designed to bring an orderly and systematic means of federal natural disaster and emergency assistance for state and local governments in carrying out their responsibilities to aid citizens.
July 15 Deadline: What Returns Are Affected?
The deferment of the April 15 deadline applies to all taxpayers – individuals, corporations, trusts, estates and other non-corporate filers, including those who pay self-employment tax.  In other words, all Forms 1040, 1041, 1120, et cetera are now due on July 15.
All international information returns which are filed separately or together with the income tax returns are also now due on July 15, 2020. This includes FBAR, Forms 8938, 3520, 5471, 5472, 8865 and other US international information returns.
July 15 Deadline: When are the Tax Payments Due?
All tax payments which are generally due on April 15 are now due on July 15, 2020.
July 15 Deadline: Do I Need to Do Anything Else to Obtain Tax Return Deferral?
Taxpayers do not need to file any additional forms or call the IRS to qualify for this federal tax filing and payment relief.   This deferral to July 15, 2020, automatically applies to all of the aforementioned taxpayers.
July 15 Deadline: Is Extension to October Still Possible?
This automatic deferral does not affect the ability of taxpayers to request extension of the July 15 deadline to October 15.  Individuals will need to file a Form 4868 in order to request such an extension.  Businesses will need to file a Form 7004 to request this extension.
July 15 Deadline: Can I file Before July 15, 2020?
Taxpayers can still file their tax returns prior to July 15, 2020.  The IRS promises to issue most refunds within 21 days if returns are e-filed. 
New IRS Updates Possible
The IRS will continue to monitor issues related to the COVID-19 virus. New updates will be posted on a special coronavirus page on IRS.gov. 
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance
The extended July 15 deadline is especially welcome for US taxpayers with foreign assets. The delays caused by coronavirus now become irrelevant and there is plenty of time to finalize both, 2019 US international tax compliance forms and offshore voluntary disclosures.
If you have undisclosed foreign assets and foreign income, contact Sherayzen Law Office for professional assistance.  We have successfully helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance with US tax laws, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Coronavirus & Chinese Offshore Voluntary Disclosures | SDOP Tax Law Firm
The ongoing coronavirus pandemic has disrupted many areas of human activity around the planet.  The coronavirus even affected the IRS offshore voluntary disclosures concerning US taxpayers’ unreported financial assets and income in China (“Chinese Offshore Voluntary Disclosures”).  In fact, the impact of coronavirus on the Chinese Offshore Voluntary Disclosures has been severe and extremely disruptive. Let’s look at the top three ways in which coronavirus has disrupted the Chinese Offshore Voluntary Disclosures.
Coronavirus & Chinese Offshore Voluntary Disclosures: Access to Information
The first and most important disruption caused by coronavirus is reduced access to information necessary to complete offshore voluntary disclosures. As a result of the quarantine measures, many financial institutions in China are either closed or work only limited hours. Hence, it has become much harder to obtain relevant information from the Chinese financial institutions, particularly with respect to certain complex investment products and investment insurance policies.
Moreover, as a result of the suspension of travel between China and the United States, many taxpayers are unable to travel to China to obtain the necessary documents. In many cases, internet access to financial data in China is limited to only a few years, whereas taxpayers often need to go back at least six years to obtain the necessary information to accurately complete their delinquent FBARs. In most instances, a taxpayer needs to personally visit his financial institution to collect this older data. At this point, this is almost impossible.
Coronavirus & Chinese Offshore Voluntary Disclosures: Mailing of Signed Documents
With respect to US taxpayers who are currently in China, many of them have limited ability to execute the documents necessary to complete offshore voluntary disclosures and mail them to their international tax attorneys in the United States.
Coronavirus & Chinese Offshore Voluntary Disclosures: Case Schedule
As a result of the two factors above as well as the current communication disruptions in the United States, the coronavirus has caused long delays in the voluntary disclosures that involve undisclosed financial assets in China.  The schedule disruptions can last from weeks to months; in fact, in some cases, it is too early to be able to fully assess the impact of coronavirus on an offshore voluntary disclosure schedule.  
While Sherayzen Law Office has been able to minimize the impact of coronavirus on the Chinese Offshore Voluntary Disclosures, certain delays still exist due to clients’ inability to obtain the necessary information.
Contact Sherayzen Law Office for Help With Chinese Offshore Voluntary Disclosures 
If you have undisclosed financial accounts or foreign businesses in China, contact Sherayzen Law Office for professional help as soon as possible. While the disruptions caused by coronavirus have been severe, by employing careful planning, we can still help you maximize your ability to complete your offshore voluntary disclosure in an accurate and timely manner.
We have already helped hundreds of US taxpayers like you, including in China, to successfully bring their financial and business affairs in full compliance with US tax laws.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Family Re-Attribution Limitation Under §318 | International Tax Lawyers
This article explores the second limitation on the IRC (Internal Revenue Code) §318 re-attribution rule – family re-attribution limitation.
Family Re-Attribution Limitation: General §318 Re-Attribution Rule
The general §318 re-attribution rule states that a constructively-owned corporate stock should be treated as actually owned for the purpose of further re-attribution of stock to other persons. §318(a)(5)(A).  This re-attribution should occur with respect to other persons considered related persons under §318.
As I stated in another article, unless checked, the general §318 re-attribution rule may ultimately cause persons completely unrelated to the actual owners of corporate stock to be considered as constructive owners of this stock.  For this reason, the IRS imposed a number of limitations on this re-attribution rule.  One of the limitations concerns specifically §318 family attribution rules. 
Family Re-Attribution Limitation: No Family Re-Attribution
Under §318(a)(5)(B), corporate stock constructively owned by a person pursuant to the §318 family attribution rules is not considered as owned by this person for the purpose of re-attributing stock ownership to another family member.  
This rule is clear: stock attributed to one family member cannot be re-attributed for the second time to another family member. The idea of this rule is also very clear – to prevent re-attribution of stock to remote family members. 
Family Re-Attribution Limitation: Examples
Let’s look at a couple of hypothetical examples to gain deeper understanding of the family re-attribution limitation.  
First hypothetical: grandfather GF owns 100 shares of X corporation. Under the family attribution rules, this ownership is attributed to GF’s son, A.  However, due to §318(a)(5)(B), this constructively-owned stock cannot be attributed for the second time to A’s wife and A’s son.
Second hypothetical: X, a C-corporation has 200 shares outstanding; A owns 100 shares, S (A’s son) owns 40 shares and D (A’s daughter) owns 60 shares.  Under §318(a)(1)(A)(ii): A actually owns 100 shares and constructively owns his children’s 100 shares; S actually owns 40 shares and constructively owns his mother’s 100 shares; D actually owns 60 shares and constructively owns her mother’s 100 shares.  
However, due to the re-attribution limitations under §318(a)(5)(B), the shares A constructively owns are not re-attributed from one child to another.  Hence, 40 shares of S are not re-attributed to D through their father’s constructive ownership of shares actually owned by S. Similarly, D’s 60 shares are not re-attributed to S through A’s constructive ownership of D’s shares.
Family Re-Attribution Limitation: Interaction with the §318 Option Attribution Rule
It is important to understand that §318(a)(5)(B) does not per se prohibit the re-attribution of stock to another family member. Rather, this re-attribution limitation only applies to stock constructively owned under the §318 family attribution rules.  However, the stock may still be re-attributed to another family member through the operation of another rule such as the §318 option attribution rule.
The most prominent example of such a situation is situations where ownership of stock is imputed under both §318 family attribution rule and §318 option attribution rule at the same time.  Under §318(a)(5)(D), if a stock is attributed under both, §318 family attribution rules and §318 option attribution rules, then the option rules take priority.  This means that, if both rules apply, the option rule governs and the person is deemed to own stock under the option rule rather than under the family rule.
In situations where corporate stock is deemed to be owned under both, family and option attribution rules, the option rule will allow the re-attribution of stock to another family member. In such cases, §318(a)(5)(B) is powerless to stop the application of re-attribution due to the precedence of the option rules. 
Family Re-Attribution Limitation: Example of the Option Rule Family Re-Attribution
Let’s look at an example to illustrate the §318 option attribution rule and the §318 family attribution rules interaction with respect to family re-attribution limitation. Let’s suppose that S, son of F, directly owns 100 shares of X, a C-corporation; F has an option to buy all 100 shares from S; D, F’s daughter and S’ sister, does not actually own any shares of X or a contract to buy any shares of X.  The issue is whether D is deemed to own any shares of X.
F constructively owns all of his son’s shares of X under the family attribution rules and the option attribution rules. Normally, no shares would be attributed to D due to the family re-attribution limitations, but, in this case, F actually owns an option to buy all 100 shares.  The option attribution rule holds preeminence over the family re-attribution limitation.  Hence, F is deemed to own S’ shares under the option rule first and foremost; as a consequence, these shares are then re-attributed to D.  Thus, D is treated as an owner of all of S’ 100 shares of X.
Family Re-Attribution Limitation: Advanced Summary of Family Attribution Rules
Now that we have a more advanced understanding of the family attribution rules and the limits placed on the family re-attribution limitations, we can modify our earlier definition of the §318 family attribution rules in the following manner: where A and B are family members within the meaning of §318(a)(1), A is deemed to own: (1) all corporate stocks actually owned by B; (2) all corporate stocks constructively owned by B under the §318 option attribution rules; and (3) all stocks constructively owned by B pursuant to §318(a)(2) – i.e. due to the fact that he is a beneficiary of a trust, a partner in a partnership or a shareholder of a corporation.
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US international tax law is incredibly complex and the penalties for noncompliance are severe.  This means that an attempt to navigate through the maze of US international tax laws without assistance of an experienced professional will most likely produce unfavorable and even catastrophic results. 
Contact Sherayzen Law Office for professional help with US international tax law.  We are a highly experienced, creative and ethical team of tax professionals dedicated to helping our clients resolve US international tax compliance issues.  Led by our founder, Mr. Eugene Sherayzen (an international tax attorney), we have helped hundreds of clients with assets in over 70 countries around the world, and we can help you!
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### Hindu Undivided Family (HUF) US Tax Classification | Foreign Trust Lawyer
This article continues a series of articles concerning US tax classification of unusual foreign entities; our focus is on the determination whether these entities should be classified as foreign business entities or foreign trusts. Today’s topic is the Hindu Undivided Family, the preferred legal entity for managing family estates for a large number of wealthy Indian families.
A word of caution, the description of the Hindu Undivided Family (“HUF”) provided below is necessarily a general one.  This article sacrifices detail for the sake of clarity.  
Hindu Undivided Family: Purpose
The main purpose of HUF is to manage family-owned property. I want to emphasize that this is not a property owned by one or two members individually or jointly; rather, the entire family owns the property.
Hindu Undivided Family: Lineal Descendants From a Common Ancestor
HUF is an entity that applies to and gives rights only to lineal descendants from a common ancestor as well as their wives and unmarried daughters.  Married daughters are not considered members of their fathers’ families; instead, upon marriage, they become members of their husbands’ families. 
These lineal descendants are called coparceners.  They have the right to enjoy distributions from HUF and even have a right to demand partition in the HUF property.
Hindu Undivided Family: Management
The head of the family (called “karta”) manages the HUF property on behalf of the family. Usually, karta is a senior male, but recently women also started to occupy this role. Karta is prohibited from contributing property to HUF.
Hindu Undivided Family: Legal Classification Under Indian Law
HUF exists as a separate juridical entity for Indian tax purposes.  It is defined on the basis of Hindu personal law. The Hindu personal law states that the joint and undivided family is a normal condition of Hindu society where all members of a Hindu family are living in a state of union. 
It is important to emphasize this special legal position of HUF, because all other Indian entities are defined in the Indian company law. HUF is an exception in having Hindu personal law as its legal basis.
Hindu Undivided Family: Potential US Tax Classification
As of the time of this writing, the IRS has not ruled on the proper US tax classification of HUF.  Therefore, at this time, we can only speculate about how the IRS will treat HUF under US tax law.
Under 26 CFR §301.7701-4(a) “trust” is defined as an arrangement created by will or by an inter vivos declaration whereby trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules provided in chancery or probate courts. Usually the beneficiaries of such a trust do no more than accept the benefits thereof and are not the voluntary planners or creators of the trust arrangement. However, the beneficiaries of such a trust may be the persons who create it and it will be recognized as a trust if it was created for the purposes of protecting or conserving the trust property for beneficiaries who stand in the same relation to the trust as they would if the trust had been created by others for them. Generally, an arrangement will be treated as a trust if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit.
Thus, if it is established that HUF was created for the purpose of vesting trustees responsibility for the protection and conservation of property for beneficiaries and not to carry out business, then, it should be classified as a foreign trust under US tax law.  If, however, the facts and circumstances in a particular case indicate that a HUF was established primarily for commercial purposes as opposed to the purpose of protecting or conserving property on behalf of the beneficiaries, then this HUF will most likely be classified as a business entity under §301.7701-2(a).
Additionally, there are certain additional features of HUF that may further support its classification as a foreign trust.  For example, the role of karta appears to be analogous to a trustee in most cases, whereas coparceners are likely to be considered beneficiaries for US tax purposes (especially if they do not take any active role in the management of HUF property). 
Thus, based on the analysis above, it appears that, in most cases, the IRS is likely to rule that HUF is a trust under US tax law.  I want to emphasize the limitation “in most cases”; I believe that a US tax treatment of HUF will depend on the specific facts and circumstances concerning a specific HUF.
Hindu Undivided Family: US International Tax Compliance Implications
The precise US tax classification of HUF may have far-reaching consequences for US international tax compliance of coparceners who are US tax residents (i.e. green card holders or persons who satisfied the substantial presence test) and US citizens (collectively “US Persons”).  A whole host of US international tax reporting requirements as well income tax requirements will apply to such individuals. 
For example, if HUF is classified as a trust, then coparceners who are US persons may have to file Forms 3520 and 8938 as well as FBARs.  Moreover, they may have to deal with the onerous consequences of the “throwback tax” on distributions of accumulated trust income.  Other requirements may also apply in this situation. 
If, however, HUF is classified as a corporation, then such coparceners may have to file Form 5471 and 8938.  If this is a Controlled Foreign Corporation (“CFC”), they will have to deal with all kinds of anti-deferral regimes, including GILTI tax.  If this is not a CFC, then the PFIC regime may be a problem.  Again, additional requirements may apply in such situations.
If HUF is classified as a partnership, then Form 8865 will have to be filed every year and income from 8865 Schedule K-1 will have to be reported on such a coparcener’s US federal income tax return. Once again, additional requirements may apply in such situations.
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We have successfully helped hundreds of Indian clients with their US income tax compliance issues, and we can help you!
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### §318 Double-Inclusion Prohibition | International Tax Lawyers Tampa FL
In a previous article, I discussed the IRC (Internal Revenue Code) §318 general rule on the re-attribution of corporate stock; in that context, I mentioned that there are certain restrictions on §318 re-attribution.  Today, I would like to discuss one of such restrictions – §318 double-inclusion prohibition. 
§318 Double-Inclusion Prohibition: General Re-Attribution Rule
Before we discuss the §318 double-inclusion prohibition, let’s recall the general §318 re-attribution rule.  Under §318(a)(5)(A), stock constructively owned by a shareholder under any of the §318 attribution rules is deemed to be actually owned for the purposes of re-attribution to others.
The problem with this rule is that it can allow the re-attribution of stock to spread uncontrollably to include persons who have little to no relationship to the actual stock owners.  This is precisely why Congress chose to impose certain limitations on the general rule so that the §318 re-attribution applies only to related persons with a real connection to the actual owners. One of these limitations is the prohibition on double-inclusion.
§318 Double-Inclusion Prohibition: Re-Attribution is Counted Only Once 
Under Treas. Reg. §1.318-1(b)(2), corporate stock held by any one person will be included only once in the computation of ownership. This is the §318 double-inclusion prohibition rule.
It is important to note, however, that even though the stock ownership is counted only once, it should be counted “in the manner in which it will impute to the person concerned the largest total stock ownership”. Id.
§318 Double-Inclusion Prohibition: Example
The best way to understand the §318 double-inclusion prohibition is to look at the following example. Assume that husband and wife, H and W, equally own a partnership P (i.e. 50% each); H also owns 100% of the outstanding stocks of a C-corporation X.
Under §318(a)(1)(A)(i), W constructively owns all of her husband’s shares of X.  Since H and W are partners of P, under the partnership upstream attribution rules, all stock owned by them is attributed to P.  Since each spouse owns 100% of X (one actually and one constructively), does it mean that P owns 200% of X? No, this absurd result is prevented by Treas. Reg. §1.318-1(b)(2), which limits the attribution of X’s shares from H and W to P to a total of 100%.
Contact Sherayzen Law Office for Professional Help With US International Tax Law Compliance
US international tax law is incredibly complex and the penalties for noncompliance are exceptionally severe.  This means that an attempt to navigate through the maze of US international tax laws without assistance of an experienced professional will most likely produce unfavorable and even catastrophic results. 
This is why you should contact Sherayzen Law Office for professional help with US international tax law.  We are a highly experienced, creative and ethical team of professionals dedicated to helping our clients resolve their past, present and future US international tax compliance issues.  We have helped clients with assets in over 70 countries around the world, and we can help you!
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### 2020 2Q IRS Interest Rates | US International Tax Law Firm
On February 28, 2020, the Internal Revenue Service (“IRS”) announced that the 2020 Second Quarter IRS underpayment and overpayment interest rates (“2020 2Q IRS Interest Rates”) will not change from the first quarter of 2020.  This means that, the 2020 2Q IRS interest rates will be as follows:
five (5) percent for overpayments (four (4) percent in the case of a corporation);
 two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
 five (5) percent for underpayments; and
 seven (7) percent for large corporate underpayments. 
Under the Internal Revenue Code, these interest rates are determined on a quarterly basis. The IRS used the federal short-term rate for February of 2020 to determine the 2020 2Q IRS interest rates. The IRS interest is compounded on a daily basis.
The 2020 2Q IRS interest rates are important to not just US domestic tax law, but also US international tax law. For example, the IRS will use these rates to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an amendment of his US tax return through Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. The IRS will also utilize 2020 2Q IRS interest rates with respect to the calculation of PFIC interest on Section 1291 tax. 
As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment and overpayment interest rates on a regular basis.  Since our specialty is offshore voluntary disclosures, we often amend our client’s tax returns as part of an offshore voluntary disclosure process and calculate the interest owed on any additional US tax liability. We also need to take interest payments into account with respect to additional tax liability that arises out of an IRS audit.
Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology.  This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.
Finally, it is important to point out that the IRS will use the 2020 2Q IRS interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. This situation may also often arise in the context of offshore voluntary disclosures. 
Thus, the IRS underpayment and overpayment interest rates have an impact on a lot of basic items in US tax law.  Hence, it is important to keep track of changes in these rates on a quarterly basis.

### 2020 SDOP Penalty | Offshore Voluntary Disclosure International Tax Attorney
In an earlier article, I discussed the advantages of the Streamlined Domestic Offshore Procedures (“SDOP”) in the year 2020. Among the advantages, I mentioned the SDOP Miscellaneous Offshore Penalty (hereinafter “SDOP Penalty”), but never explained this concept.  The focus of this article is on the 2020 SDOP Penalty and how one generally should calculate it.
It is important to keep in mind that this is an educational article which aims to provide a general overview of the calculation of the Miscellaneous Offshore Penalty in common situations. In providing this general overview of the 2020 SDOP Penalty, the article necessarily glosses over some complex issues that may change the determination of the Penalty in a particular case.  In order to calculate your SDOP Penalty properly, the readers should contact Sherayzen Law Office, an experienced international tax law firm, for a legal advice based on their specific facts and circumstances
2020 SDOP Penalty: Background Information
In 2014, the IRS created SDOP as a way to mitigate the harshness of the IRS Offshore Voluntary Disclosure Program now closed (“OVDP”) for non-willful taxpayers. Not only did SDOP offer a shorter voluntary disclosure period and less paperwork than OVDP, but it also replaced the OVDP multi-layered penalty structure with a lower Miscellaneous Offshore Penalty.  This SDOP Miscellaneous Offshore Penalty (hereinafter “SDOP Penalty”) stills exists in 2020 and its calculation methodology is still the same (with the exception of a few clarifications provided by the IRS at a later time).
2020 SDOP Penalty: General Description
A taxpayer who utilizes the Streamlined Domestic Offshore Procedures to make the voluntary disclosure of his foreign assets and foreign income must pay a 5% SDOP Penalty. This penalty is paid in lieu of the penalties associated with the delinquent filings of FBARs, Forms 8938, Forms 5471 and other information returns.
The calculation of the SDOP Penalty is very different from calculation of penalties in other offshore voluntary disclosure programs in terms of its time period and the determination of the penalty base. Let’s explore each of these factors separately.
2020 SDOP Penalty: Time Period
The SDOP Penalty equals to 5% of the highest aggregate balance/value of the end-of-year taxpayer’s penalty base (see below) in any of the years in the covered tax return period and the covered FBAR period.  Generally, “covered tax return period” is the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed.  “Covered FBAR period” means the most recent six years for which the FBAR due date has passed.
Thus, usually, SDOP Penalty is imposed on the past six years covered by the FBAR statute of limitations. However, this is not always the case; in some cases the three-year tax covered tax return period does not completely overlap with the six-year covered FBAR period.
2020 SDOP Penalty: Penalty Base
The concept of “penalty base” is one of most critical considerations in any voluntary disclosure.  Generally, penalty base means the assets that are subject to a penalty.   Hence when I refer to the SDOP penalty base, I mean the assets which are subject to the SDOP Penalty.
Generally, the SDOP Penalty applies to any foreign financial asset in a given year within the covered SDOP time period if one of the following is true:
The asset should have been, but was not, reported on an FBAR (FinCEN Form 114) for that year;
The asset should have been, but was not, reported on a Form 8938 for that year; or
If the asset was properly reported for that year, but gross income in respect of the asset was not reported in that year.
A foreign financial asset that falls within any one of these three categories should be added to the penalty base.                                    
There are two more important features of the SDOP Penalty base that need to be taken into account. First, the definition of “foreign financial assets” includes not only foreign bank and financials accounts listed on FBAR, but also all foreign financial assets reportable on Form 8938. This means that many more assets in addition to foreign financial accounts may be subject to the SDOP Penalty, including assets listed on Forms 5471 and 8865.
Moreover, the SDOP Penalty base covers more exotic foreign financial assets such as: certain forms of indebtedness issued by a foreign person (such as a note, bond, debenture, an interest in a foreign trust, foreign swaps, foreign options, foreign derivatives, et cetera.  The exact determination of what assets should falls in the SDOP Penalty base should be made by an international tax attorney.
The second important feature of the SDOP Penalty is the potential divorce between income tax noncompliance and penalty imposition.  Unlike the 2014 OVDP (which closed in 2018), the SDOP Penalty applies to assets which never produced any income.  In other words, a bank account that was not reported on FBAR would still be included in the SDOP Penalty base even if it never produced any income. 
2020 SDOP Penalty: Calculation of Highest Aggregate Value of Assets
The 2020 SDOP Penalty is imposed on highest aggregate balance/value of a taxpayer’s foreign financial assets that are included in the SDOP Penalty base during the years in the covered tax return period and the covered FBAR period.  The calculation of the “highest balance/value” is a three-step process. 
First, for each relevant year, you need to determine the end-of-year value of each asset included in the Penalty base. Such value should be in US dollars.
Second, aggregate the end-of-year values/balances per each year in the covered tax return period and the covered FBAR period.
Finally, select the highest aggregate balance/value from among those years and calculate the 5% value of this balance.  This is your 2020 SDOP Penalty.
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### §318 Re-attribution: General Rule | International Tax Lawyers Miami
This article continues a series of articles on the Internal Revenue Code (“IRC”) §318 constructive ownership rules.  Today, I would like to focus on the §318 re-attribution rule.  In this article, I will explain the general §318 re-attribution rule and mention the exceptions.  I will discuss the exceptions in more detail in future articles.
§318 Re-attribution: General Rule
Generally, under the IRC §318(a)(5)(A), stock constructively owned by a shareholder under any of the §318 attribution rule is deemed to be actually owned for the purposes of re-attribution to others.  In other words, except for limitations mentioned below, the constructive ownership of stock can be further attributed to other persons. 
For example, if a husband owns stocks in Corporation Y and his wife is deemed to owned these stocks under the family attribution rules of §318(a)(1)(A)(i), then these constructively-owned stocks can be further attributed from the wife to Corporation X under the shareholder-to-corporation rules of §318(a)(3)(C) if the wife owns 50% or more of the value of stocks issued by Corporation X.
§318 Re-attribution: Great Burden on Taxpayers
The breadth of the §318 re-attribution rule can present a huge challenge to taxpayers.  Both individuals and entities must maintain correct ownership records to allow their tax attorneys to properly determine their ownership of stock under §318 and their consequent tax obligations.
The dangerous reach of the §318 re-attribution rule can be demonstrated by the following example.  Let’s suppose that corporation X has 200 shares outstanding and all of the shares are owned as follows: H owns 100 shares, his wife W owns 60 shares and his son S owns 40 shares.  Additionally, H owns 25% in partnership P. 
Under the §318 family attribution rules, H actually owns 100 shares and constructively owns another 100 shares (i.e. his wife’s and his son’s shares) of X.  Under §318(a)(5)(A), H’s constructive ownership of 100 shares is deemed to be actual ownership for the purposes of re-attribution of stock. Consequently, under the partner-to-partnership rules of §318(a)(3)(A), 100% ownership of X is now attributed to P.
This can get even worse.  Assuming the same facts, what if P also actually owns 50% of the value of the stock of corporation Y?  Then, under §318(a)(3)(C), Y would be a constructive owner of 100% of X, because these shares were attributed first to H and, then, from H to P. 
§318 Re-attribution: Restrictions
It is obvious that, without any limitations, such an extensive re-attribution of stock can easily get out of hand and spread to cover persons who have no relationship to the original owners.  For this purpose, the US Congress imposed certain restrictions on the re-attribution of stock under §318(a)(5)(A).  Each provision §318(a)(5)(B)–§318(a)(5)(D) imposes limitations on re-attribution of stock where the relationship between the original owner and the person subject to stock re-attribution no longer justifies the assertion of constructive ownership.  I will detail these restrictions in future articles. 
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We are an international tax law firm that specializes in US international tax compliance and offshore voluntary disclosures.  We have successfully helped hundreds of US taxpayers worldwide with their US international tax compliance, and we can help you!
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### Liechtenstein Stiftung: US Tax Classification | Foreign Trust Tax Lawyer
This article continues a series of articles on foreign trust classification with respect to various foreign entities. Today’s topic is the US tax treatment of a Liechtenstein Stiftung.
Liechtenstein Stiftung: Formation
A Liechtenstein Stiftung, or Foundation, is a legal entity under Liechtenstein law.  It may be formed by filing a foundation charter or by will or testamentary disposition. A Stiftung is entered into the Register in Liechtenstein and must have a minimum amount of initial capital. 
Liechtenstein Stiftung: Purpose
A Stiftung may be a family foundation established to provide benefits to members of a designated family or a charitable or religious foundation. A Stiftung cannot be organized to engage in the active conduct of a business, but Liechtenstein law provides that, in certain cases, commercial activities may be undertaken by a Stiftung if such activities serve its noncommercial purposes.
Liechtenstein Stiftung: Beneficiaries
A Stiftung exists for the benefit of those persons who are named as beneficiaries in its formation documents. The Founder transfers specific assets to the Stiftung that are then endowed for specific purposes. The assets pass from the personal estate of the Founder to the Stiftung.
Liechtenstein Stiftung: Governance 
The Founder sets the objectives of a Stiftung and appoints its administrators which are organized into a Council of Members. The Founder may appoint himself as an administrator.
The duties and obligations of the administrators are set forth in the Stiftung's articles and includes the conduct of the Stiftung’s affairs. This includes the investment and management of its assets and the distribution of income and/or capital to the beneficiaries as per the provisions of the Stiftung's articles. Under Liechtenstein law, the administrators are responsible for the proper management and conservation of the Stiftung's assets. The Founder may reserve for himself the right to discharge and appoint administrators.
Liechtenstein Stiftung: Limited Liability
A Stiftung only has legal liability up to the amount of its contributed capital and net assets and it cannot be made liable for liabilities in excess of them.
Liechtenstein Stiftung: Legal Background Under US Tax Law
26 CFR §301.7701-1(a) provides that the Internal Revenue Code (“Code”) prescribes the classification of various organizations for federal tax purposes. Whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend upon whether the organization is recognized as an entity under local law.
26 CFR §301.7701-1(b) of the regulations provides that the classification of organizations that are recognized as separate entities is determined under §§301.7701-2, 301.7701-3, and 301.7701-4 unless a provision of the Code provides for special treatment of that organization.
26 CFR §301.7701-4(a) of the regulations provides that, in general, the term “trust” as used in the Code refers to an arrangement created by will or by an inter vivos declaration whereby trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules provided in chancery or probate courts. Usually the beneficiaries of such a trust do no more than accept the benefits thereof and are not the voluntary planners or creators of the trust arrangement. However, the beneficiaries of such a trust may be the persons who create it and it will be recognized as a trust under the Code if it was created for the purposes of protecting or conserving the trust property for beneficiaries who stand in the same relation to the trust as they would if the trust had been created by others for them. Generally, an arrangement will be treated as a trust under the Code if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit.
Furthermore, 26 CFR §301.7701-4(a) provides that there are other arrangements which are known as trusts because the legal title to property is conveyed to trustees for the benefit of beneficiaries, but which are not classified as trusts for purposes of the Code, because they are not simply arrangements to protect or conserve the property for the beneficiaries. These trusts, which are often known as business or commercial trusts, generally are created by the beneficiaries simply as a device to carry on a profit-making business which normally would have been carried on through business organizations that are classified as corporations or partnerships under the Code. However, the fact that the corpus of the trust is not supplied by the beneficiaries is not sufficient reason in itself for classifying the arrangement as an ordinary trust rather than as an association or partnership. 
Thus, the fact that any organization is technically cast in the trust form, by conveying title to property to trustees for the benefit of persons designated as beneficiaries, will not change the real character of the organization if the organization is more properly classified as a business entity under §301.7701-2.  Hence, foreign entities must be analyzed on a case-by-case basis to determine their true classification under US tax law.
Liechtenstein Stiftung: US Tax Treatment
The IRS has determined that, generally (and it is important to emphasize the word “generally”), a Liechtenstein Stiftung should be classified as a trust under US tax law. IRS Chief Counsel Advice Memorandum, AM 2009-012.  The IRS believes that, in most cases, “the Stiftung's primary purpose is to protect or conserve the property transferred to the Stiftung for the Stiftung's beneficiaries and is usually not established primarily for actively carrying on business activities.” Id.
If, however, the facts and circumstances in a particular case indicate that “a Stiftung was established primarily for commercial purposes as opposed to the purpose of protecting or conserving property on behalf of the beneficiaries, the Stiftung in such case may be properly classified as a business entity under §301.7701-2(a).” Id.
Thus, a taxpayer who is a beneficiary or Founder of a Liechtenstein Stiftung must retain a US international tax lawyer to examine the specific facts and circumstances in each case in order to determine the US tax classification of a particular Stiftung.
Contact Sherayzen Law Office for Professional Help Concerning Proper US Tax Classification of a Liechtenstein Stiftung
Determining the proper classification of a Liechtenstein Stiftung is very important for its beneficiaries and Founders who are US tax residents, because such classification will have a direct impact on these taxpayers’ US international tax compliance, including determining whether Form 3520 or Form 5471 has to be filed.
This is why, if you are a beneficiary and/or a Founder of a Liechtenstein Stiftung, contact Sherayzen Law Office for professional help with your US tax compliance. We have successfully helped US taxpayers from over 70 countries with their US international tax compliance issues, including classification of foreign business entities and foreign trusts. We can help you!
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### Liechtenstein Anstalt: US Tax Treatment | Foreign Trust Lawyer & Attorney
Over the years, the IRS has made a number of rulings with respect to whether certain foreign entities should be considered trusts for US tax purposes.  In this article, I would like to discuss the US tax classification of Liechtenstein Anstalt based on the 2009 IRS Chief Counsel Advice Memorandum, AM 2009-012.
Liechtenstein Anstalt: Creation of the Entity
The word “anstalt” means “establishment”.  Any natural and legal person can form an Anstalt.  Such a person is called a “Founder”. 
A person may form an Anstalt for himself or for another party pursuant to a power of attorney or through a fiduciary arrangement. In most cases, Founders are Liechtenstein attorneys or trust companies that protect the anonymity of the actual owner or beneficiary of the Anstalt.
In order to create an Anstalt, the Founder signs Anstalt’s articles.  The legal personality of Anstalt is created once the Founder submits to the government registry its articles, the constitutive declaration, proof that capital has been paid in and evidence that the official registration fees have been paid. 
Liechtenstein Anstalt: Founder’s Powers
The Founder has the same powers with respect to an Anstalt that are generally attributed to shareholders in a company. Additionally, the Founder possesses “Founder's rights”, which provide unlimited control and powers of administration (including the power to dismiss directors, distribute profits and liquidate the Anstalt). The Founder may transfer the rights given to him by law and by the articles, in whole or in part, to one or more assignees or successors. The Founder's rights may also pass through inheritance.
Liechtenstein Anstalt: Board of Directors
An Anstalt must have a Board of Directors (called a Board of Management or Administration) to represent it in its dealings with third parties. In most cases, the Founder will be a member of the Board. The Founder usually appoints the members of the Board for a term of three years, but may appoint for lesser or longer terms. The Board may consist of one or more natural or legal persons. At least one member of the Board authorized to represent the Anstalt and conduct business on its behalf must have a registered office in Liechtenstein. This member must also be authorized to practice as a lawyer, trustee or auditor, or have other qualifications recognized by the government.
The Board has power with respect to all matters that are not specifically reserved to the Founder. The Founder may give authority to the Board to exercise some or all of the Founder's rights. The Board may give signatory or agency authority to its own members or to others on behalf of the Anstalt. The Board may assign its management and executive responsibilities partially or completely to one or more of its members or to third persons. In carrying out its management and representation functions, the Board must observe all limitations on its authority contained in the articles in instructions and/or regulations issued by the Founder.
Liechtenstein Anstalt: Beneficiaries and Power of Appointment
The Anstalt's beneficiaries are those natural or legal persons designated by the Founder, or the person holding the Founder's rights, as entitled to receive the profits and/or liquidation proceeds of the Anstalt. The right to appoint beneficiaries is usually set forth in the articles and may be reserved to the Founder or granted to the Board or to third persons. If no beneficiaries are appointed, the Founder or his successors are presumed to be the beneficiaries.
Liechtenstein Anstalt: No Shares
The capital of an Anstalt is usually not divided into shares. 
Liechtenstein Anstalt: Limited Liability
The liability of an Anstalt is limited to the extent of its assets. No personal liability extends to the Founder, the Anstalt's Board or the beneficiaries.
Liechtenstein Anstalt: Ability to Conduct Business
Anstalts may hold patents and trademarks, hold interests in other companies and may conduct any type of business except banking. If the articles permit the Anstalt to engage in commercial or industrial activities or a trade, the Anstalt is required to keep proper books and records as well as prepare annual financial statements.
In fact, in most cases, the primary purpose for the establishment of an Anstalt is to conduct an active trade or business and to distribute the income and profits therefrom to the beneficiaries of the Anstalt. The beneficiaries of an Anstalt are usually the previous owners of the business assets contributed to the Anstalt and, in most situations, the Founder acts as a nominee or agent of the beneficiaries in conducting the active trade or business of the Anstalt.
Liechtenstein Anstalt: US Tax Treatment
Based on this description of Liechtenstein Anstalts, the IRS held that a Liechtenstein Anstalt is generally not a trust, but a business entity under Treas. Reg.§301.7701-2(a).  This decision would apply in a majority of cases where the primary purpose of a Liechtenstein Anstalt is to actively carry on business activities. 
This decision, however, should not be applied automatically to all Liechtenstein Anstalts.  Rather, the IRS stated that, in cases where the facts and circumstances indicate that a Liechtenstein Anstalt was created “for the primary purpose of protecting or conserving the property of the Anstalt on behalf of beneficiaries, the Anstalt in such a case may be properly classified as a trust under §301.7701-4.” IRS, Chief Counsel Advice Memorandum, AM 2009-012 - Section 7701 - Definitions.  Thus, the critical issue in the analysis of whether a Liechtenstein Anstalt should be treated as a trust is whether it was established primarily to conduct a trade or business or to protect and conserve assets for the designated beneficiaries of the Anstalt.
Moreover, in order for a Liechtenstein Anstalt to qualify for trust classification, all elements of a trust must be present: (1) a grantor, (2) a trustee that has legal title and a legal duty to protect and conserve the assets for the designated beneficiaries, (3) assets, and (4) designated beneficiaries. See Swan v. Commissioner, 24 T.C. 829 (1955), aff'd and rev'd on other grounds, 247 F 2d 144 (2d Cir. 1957). 
Contact Sherayzen Law Office for Professional Help Concerning Proper US Tax Classification of a Liechtenstein Anstalt as well as Form 5471 and Form 3520 Compliance
Determining the proper classification of a Liechtenstein Anstalt is very important for its beneficiaries and Founders who are US tax residents, because classification of an Anstalt has a direct impact on these taxpayers’ US international tax compliance, including determining whether Form 3520 or Form 5471 has to be filed.  Such determination of US tax treatment of a Liechtenstein Anstalt should be done by an experienced international tax law firm.
This is why, if you are a beneficiary and/or a Founder of a Liechtenstein Anstalt, contact Sherayzen Law Office for professional help with your US tax compliance.  We have successfully helped US taxpayers from over 70 countries with their US international tax compliance issues, including classification of foreign business entities and foreign trusts.  We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### New Form 1040-SR for Seniors | US Tax Lawyers & Attorneys
For the very first time, the IRS has created a new tax form called Form "1040-SR". “SR” here standards for “seniors”.  The idea is that the new form will be used by senior taxpayers.  Let’s discuss Form 1040-SR in more detail.
Form 1040-SR: Reasons for Its Creation
The reason for the creation of Form 1040-SR was the Bipartisan Budget Act of 2018. The Act obligated the IRS to create a new form for seniors.
Form 1040-SR: Eligibility
Taxpayers born before Jan. 2, 1955 (i.e. those who are 65 years old or older), have the option to file Form 1040-SR whether they are working, not working or retired. Married couples filing a joint return can use the new form regardless of whether one or both spouses are age 65 or older or retired.
Form 1040-SR: Differences from Regular Form 1040
The principal difference between the regular Form 1040 and Form 1040-SR is a larger font and better readability.  
Otherwise, all lines and checkboxes on the new form mirror the Form 1040, and both forms use all the same attached schedules and forms. The new form allows income reporting from other sources common to seniors such as investment income, Social Security and distributions from qualified retirement plans, annuities or similar deferred-payment arrangements. Both forms use the same “building block” approach introduced last year that can be supplemented with additional Schedules 1, 2 and 3 as needed. 
Many taxpayers with basic tax situations can file Form 1040 or 1040-SR with no additional schedules.  However, taxpayers with international tax exposure will most likely need additional schedules.
Seniors can use Form 1040-SR to file their 2019 federal income tax return, which is normally due on April 15, 2020 but has been extended to July 15, 2020 because of the Coronavirus. The revised 2019 Form 1040 Instructions cover both versions of Form 1040.
Seniors With Foreign Assets and Foreign Income Still Need to Comply With US International Tax Requirements
Sherayzen Law Office wishes to warn seniors that using Form 1040-SR does not relieve seniors of their obligation to comply with US international tax reporting requirements concerning their foreign assets and foreign income.
US tax residents must disclose their worldwide income on their US tax returns even if they are filing Form a 1040-SR this year. Similarly, all US international information returns must be filed with the senior version of Form 1040. Finally, foreign accounts must be disclosed not only on FBAR, but also on Schedule B of Form 1040-SR and possibly Form 8938.
If you have undisclosed foreign assets and foreign income for prior years, should contact Sherayzen Law Office for professional help with the offshore voluntary disclosure of your past noncompliance with US international tax reporting requirements. We have successfully helped hundreds of US taxpayers resolve their prior US tax noncompliance issues, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Form 114 Trust Filers | FBAR Tax Lawyer & Attorney Nevada Las Vegas
FinCEN Form 114 trust filers constitute a highly problematic category of FBAR filers. Form 114 trust filers are problematic not so much because the FBAR requirement itself is unclear, but, rather, because the trustees do not realize that this requirement applies to them. In this article, I would like to educate potential Form 114 trust filers about the FBAR requirement and when it applies to them.
Form 114 Trust Filers: FBAR Background Information
The Report of Foreign Bank and Financial Accounts, FinCEN Form 114, commonly known as FBAR, was created in the 1970s as a result of the Bank Secrecy Act of 1970. Originally designed to fight financial crimes and terrorism, FBAR turned into a formidable weapon for the IRS after 2001 to fight US international tax noncompliance.
The biggest reason why FBAR became such a useful tool to fight US international tax compliance are the draconian penalties associated with FBAR noncompliance. FBAR has a full range of penalties from criminal (i.e. a person actually going to jail for FBAR noncompliance) to non-willful (which may apply in situations when a person did not even know that FBAR existed).
A US person must file FBAR if he has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of these foreign financial accounts exceeds $10,000 at any time during the calendar year. Prior to 2016 FBAR, the FBAR deadline was June 30 of each year. Starting 2016 FBAR, the FBAR deadline is aligned with the tax return deadline, including automatic extension to October 15 (this is still true as of the tax year 2021). This may change in the future years.
FinCEN Form 114 Trust Filers: Trusts Must File FBARs
All US persons who meet the FBAR filing requirements must file the form by the required deadline. The term “US persons” includes not just individuals and businesses, but also estates and trusts. A trustee’s failure to timely file an accurate FBAR may result in the imposition of FBAR penalties on the trust.
All types of trusts (as long as they are US persons) must file FBARs, including non-grantor trusts and grantor trusts. It is important to emphasize that the fact that all trust income passes to the grantor or another owner of the trust does not absolve the trust from its obligation to file FBARs.
Contact Sherayzen Law Office for Professional Help With FinCEN Form 114 Trust Filings and Trust Offshore Voluntary Disclosures
Unfortunately, many trustees still miss the fact that they must file FBARs on behalf of the trust.  As I stated above, this may expose the trust to significant FBAR penalties.
Hence, if you are a trustee of a trust which has not complied with its FinCEN Form 114 obligations, then contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers, including trusts, to resolve their prior FinCEN Form 114 noncompliance. We can help you!
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### §318 Option Attribution | International Tax Lawyers United States
A previous article defined “option” for the purposes of the IRC (Internal Revenue Code) §318(a)(4).  Today, I will discuss the main §318 option attribution rule.
§318 Option Attribution: Main Rule
Under §318(a)(4), “if any person has an option to acquire stock, such stock shall be considered as owned by such person.” For the purposes of §318 option attribution rules, an option to acquire an option to acquire stock is also considered an option to acquire stock. Id. It does not matter whether the option to acquire an option is granted by the corporation or by a shareholder.
Additionally, a series of options to acquire an option to acquire stock is considered an option to acquire stock Id.; in other words, the owner of a series of options is the constructive owner of the stock. That is the subject of this series.
Let’s use the following example to illustrate §318 option attribution: A and B each own 10 shares in X, a C-corporation; A has an option to acquire 5 shares of X owned by B; A also has an option to acquire an option to acquire B’s other 5 shares of X; finally, A has an option to acquire 5 unissued shares of X.  The issue is: how many shares does A own?
By applying the rules above, A would actually and constructively own a total of 25 shares: 10 shares that he actually owns and 15 shares the he constructively owns under §318(a)(4) (all 10 shares of X owned by B plus 5 unissued shares of X).
§318 Option Attribution: Special Case of Convertible Debentures
Pursuant to Rev. Rul. 68-601, an owner of a convertible debenture (i.e. a debenture that can be converted into stock of a corporation) is deemed to be in the same position as a an option owner for the purposes of §318(a)(4) as long as he has the right to obtain the stock at his election.  In other words, an owner of such a convertible debenture is a constructive owner of the stock into which the debenture can be converted. 
Moreover, by drawing an analogy to the main §318 option attribution rule, an option to acquire a convertible debenture would be treated in the same manner under §318 as an option to acquire an option to acquire stock. Hence, the owner of an option to acquire a convertible debenture is a constructive owner fo the stock into which this debenture can be converted.
§318 Option Attribution vs. §318 Family Member Attribution
There are certain situations where stocks may be attributed to an individual under both, §318(a)(1) (i.e. family attribution rules) and the §318(a)(4) (i.e. option attribution rules).  Since there are differences in legal effect, it is important to understand which rule governs in such situations.
Under §318(a)(5)(D), §318 option attribution supercedes the §318 family attribution. In other words, where an individual is deemed to be a constructive owner of shares under both rules, only the §318 option constructive ownership rules will apply to him.
This primacy of option attribution over family attribution may have a highly important tax impact in certain situations, such as the tax treatment of redemption of stock by a corporation.  Let’s analyze an example to illustrate the disparate impact of these two attribution rules in the context of the §302(c)(2) waiver. 
Let’s use the following hypothetical situation: W, an individual, owns 10 shares of X, a C-corporation; her husband, H, owns the remaining 40 shares of X; W has an option to purchase all of H’s shares of X. W redeems all l0 shares of X with the idea to establish a complete termination of her interest in the corporation once she waives the attribution of H’s shares to her by using the §302(c)(2) waiver (we assume here that she also fulfills all other requirements under §302).  Will this strategy work in this case?
The answer is no. The problem is that the waiver under §302(c)(2) is available only for attribution from a family member.  While it is true that W is a constructive owner of H’s 40 shares by the operation of family attribution rules, she is also the constructive owner of the same shares under the §318 option attribution rules.  Since option attribution supercedes family attribution, she cannot use the §302 waiver.  This means that W cannot establish a complete termination of her interest in X and the redemption of her 10 stocks will be treated as a dividend (with no cost-basis offset against the proceeds) as opposed to a sale.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
If you own foreign assets, including foreign business entities, you have the daunting obligation to meet all of your complex US international tax compliance requirements; otherwise, you may have to face the wrath of the IRS in the form of high noncompliance penalties.  In order to successfully meet your US international tax compliance obligations, you need the professional help of Sherayzen Law Office.
We are an international tax law firm that specializes in US international tax compliance and offshore voluntary disclosures.  We have successfully helped hundreds of US taxpayers worldwide with their US international tax compliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### §318 Option Definition | US International Tax Lawyer & Attorney
This article continues our series of articles on the IRC (Internal Revenue Code) §318 constructive ownership rules.  In this article, I would like to introduce the readers to the infamous §318 option attribution rules. Before we delve into the discussion of the constructive ownership rules for options, however, it is important to understand what “option” actually means for the purpose of §318. Hence, today, I will focus on the §318 option definition. 
§318 Option Definition: Main Rule
An option is a right to obtain stock at a certain price and date.  I want to emphasize that option is not an obligation, it is a right which a taxpayer may or may not ever exercise.
Such a broad §318 option definition includes a great variety of options: options to purchase stock, option to acquire unissued stocks (as long as a shareholder has the right to obtain stock at his election – see Rev. Rul. 68-601), certain warrants and debentures that may be converted into stocks (as long as there are no contingencies, other than time, that must be met before the conversions rights can be exercised  – see FSA 200244003), et cetera. 
§318 Option Definition: Rights Not Considered Options
Not all rights to acquire stock, however, are considered options for the purposes of §318 option definition.  There is a large number of exceptions, but all of them are centered around the concept of some type of restrictions on the exercise of the option. I will list below the five most popular exceptions which are not considered options under §318(a)(4):
First, a right to acquire stock is not an option if the optionee does not have control over the exercise of the option.  For example, if there are many contingencies which can prevent exercise of an option, then this is not an option of the purposes of §318(a)(4). See FSA 199915007.
Second, a corporation’s right to buy back its own stocks is not an option for the purposes of §318. Rev. Rul. 69-562. 
Third, a right of first refusal is not an option for the purposes of §318.  For example, if the right to purchase stock is contingent on the obligor’s decision to sell, then this is not an option under §318(a)(4). TAM 8106008.  We can even broaden the rule not only to a right of first refusal, but to almost all situations where the exercise of option depends on the other party’s decision to sell.
Fourth, certain stock appreciation rights are not options if they only entitle the owner of these rights to cash benefits, but do not permit acquisition of stock.  Of course, if contract entitles the owner to the right to acquire stocks, then such stock appreciation rights may actually be options §318. See PLR 9341019.
Finally, the right to acquire stocks is not an option under §318 if such transfer is restricted and requires consent. For example, the IRS held in TAM 9410003 that such an arrangement (i.e. restriction on the transfer of shares without other shareholders’ consent) combined with the right of first refusal did not constitute an option to acquire those shares.
§318 Option Definition: Exceptions to Restrictions
I would like to warn the readers, however, that not all restrictions on exercise of an option automatically exclude a right to acquire a stock from the §318 option definition. We can outline two broad exceptions to restrictions here.
First, where the control over the decision to exercise the option rests with the holder of the right to purchase a stock, such a restriction is insufficient to prevent this arrangement to be treated as an option.  See Rev. Rul. 68-601.
Second, where the restriction is fixed in time.  For example, under FSA 200244003, a warrant is an option if there are no contingencies or limitations on the right to exercise other than time limitation.  Similarly, if the right to acquire shares can only be exercised on a fixed date, it is an option. Rev. Rul. 89-64.
Contact Sherayzen Law Office for Professional Help With US International Tax Law Concerning Foreign Corporations
If you are an owner of a foreign corporation, you are facing a very difficult task of working through the enormous complexity of US international tax compliance requirements and trying to avoid the high IRS noncompliance penalties.  In order to be successful in this matter, you need the professional help of Sherayzen Law Office.
We are an international tax law firm that specializes in US international tax compliance and offshore voluntary disclosures.  We have successfully helped hundreds of US taxpayers worldwide with this issue, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### §318 Upstream Corporate Attribution | International Tax Lawyers Florida
In a previous article, I discussed the rules for the downstream attribution of corporate stocks under the IRC (Internal Revenue Code) §318.  Today, I would like to discuss the §318 upstream corporate attribution rules.
§318 Upstream Corporate Attribution: Two Types of Attribution
There are two types of §318 corporate attribution rules: downstream and upstream.   Under the downstream corporate attribution rules, stocks owned by a corporation are attributed to this corporation’s shareholders.  The upstream corporate attribution rules are exactly the opposite: stocks (in another corporation) owned by shareholders are attributed to the corporation. This article will focus on the upstream attribution rules.
§318 Upstream Corporate Attribution: Main Rule
Under §318(a)(3)(C), a corporation is deemed to be the constructive owner of all stocks owned directly or indirectly by its 50% shareholder.   The 50% threshold is determined by value of the stock in the corporation. Id.
Of course, this rule applies only to stocks owned by shareholders in another corporation; a corporation can never be a constructive owner of its own stock under §318(a)(3)(C).  Treas. Reg. §1.318-1(b)(1).
§318 Upstream Corporate Attribution: 50% Threshold
“In determining the 50-percent requirement of section 318(a)(2)(C) and (3)(C), all of the stock owned actually and constructively by the person concerned shall be aggregated.” Treas. Reg. §1.318-1(b)(3).  In other words, for the purpose of upstream corporate attribution under §318, all actual and constructive ownership of a shareholder should be considered in order to determine whether th 50% value ownership threshold is met.
Let’s consider the following hypothetical to illustrate this rule: H owns 50% of value of the stock of X, a C-corporation, while his wife W owns 50% of the value of stock in Y, another C-corporation; the rest of Y’s stock is owned by unrelated third-parties. The question is how much of X’s stock ownership is attributed to Y.
We should begin our analysis by stating that, under the family attribution rules of §318(a)(1)(A), H’s shares in X are attributed to W; in other words, W is a constructive owner of 50% of the value of X’s stock. Since W is a 50% value-owner of Y’s stock, Y is deemed to own the stock actually and constructively owned by W under the operation of §318 upstream corporate attribution rules.  This means that Y constructively owns 50% of X’s stock, even though W has no actual ownership of X.
§318 Upstream Corporate Attribution: S-Corporations
It should be emphasized that the §318 upstream corporate attribution rules do not apply to S-corporations with respect to attribution of corporate stock between an S-corporation and its shareholders.   Rather, in such cases, S-corporation is treated as a partnership and its shareholders as partners. See §318(a)(5)(E).  Hence, corporate stocks owned by a shareholder are fully attributed to the S-corporation irrespective of the value ownership of a shareholder in the S-corporation.
Keep in mind, however, that the usual constructive ownership rules for corporations and shareholders apply for the purpose of determination of whether any person owns stock in an S-corporation.
Contact Sherayzen Law Office for Professional Help With US International Tax Law Concerning Foreign Corporations and Other Foreign Businesses
If you are an owner of a foreign corporation or any other foreign business entity, you are facing a very difficult task of working through the enormous complexity of US international tax compliance and trying to avoid the high IRS noncompliance penalties.  In order to be successful in this matter, you need the professional help of Sherayzen Law Office.
We are an international tax law firm that specializes in US international tax compliance and offshore voluntary disclosures.  We have successfully helped hundreds of US taxpayers worldwide with this issue, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### §318 Downstream Corporate Attribution | Corporate Tax Lawyer & Attorney
This article continues a series of articles on the constructive ownership rules of the IRC (Internal Revenue Code) §318.  Today, we will discuss corporate attribution rules, even more specifically the §318 downstream corporate attribution rules.
§318 Downstream Corporate Attribution: Two Types of Attribution
There are two types of §318 corporate attribution rules: downstream and upstream.  Under the downstream corporate attribution rules, stocks owned by a corporation are attributed to this corporation’s shareholders.  The upstream corporate attribution rules are exactly the opposite: stocks (in another corporation) owned by shareholders are attributed to the corporation. As stated above, this article will focus on the downstream attribution rules; the upstream attribution rules will be covered in a future article.
§318 Downstream Corporate Attribution: Main Rule
Under §318(a)(2)(C), if a person owns, directly and indirectly, 50% or more in value of the stock “such person shall be considered as owning the stock owned, directly or indirectly, by or for such corporation, in that proportion which the value of the stock which such person so owns bears to the value of all the stock in such corporation.”
There are two critical parts of this downstream attribution rule: 50% threshold and proportionality. Let’s discuss each part in more detail.
§318 Downstream Corporate Attribution: 50% Threshold
A person must own directly or indirectly 50% or more of the stock value of a corporation in order for the §318 corporate attribution rules to apply.  Under Treas. Reg. §1.318-1(b)(3), in determining whether the 50% threshold is satisfied, one must aggregate all stocks that the person actually and constructively owns.    
The valuation of stocks should be determined in reference to the relative rights of the outstanding stock of a corporation. All restrictions, such as limitations on transferability, should be considered.  On the other hand, the presence or absence of control of the corporation is irrelevant.  This means that the value of stocks may differ from the voting power associated with these stocks. 
Let’s use the following fact scenario to demonstrate the potential complexity of stock valuation: C, a C-corporation, has two classes of stocks – 100 shares of common stock with a value of $1 each and 50 shares of preferred stock with a value of $1 each (i.e. the total value of common stock is $100 and the total value of preferred stock is $50) – with only common stocks having voting rights; A owns 60 shares of common stock and 10 shares of preferred stock (i.e. his common stock is worth $60 and his preferred stock $10); C owns all of the outstanding shares of another corporation, X.  The issue is how many shares of X should be attributed to A?
The answer is none. A does not constructively own any of X’s shares because his total value of C’s stocks is below 50% (the value of his stocks is $60 + $10 = $70, but the total value of C’s stocks is $100 + $50 = $150).  The fact that A controls C through his 60% voting power is irrelevant.
§318 Downstream Corporate Attribution: Proportionality
As it was stated above, if the 50% corporate ownership threshold is met, then the shareholder will be considered a constructive owner of shares owned by the corporation in another corporation in proportion to the value of his stock.  
While this looks like a straightforward rule, there is one problem. Whether the 50% threshold is satisfied should be determined by the combination of actual and constructive stock ownership. Does it mean that the attribution of corporate stocks under §318 should be in proportion to the value of both actual and constructive ownership combined? Or, does the proportionality of attribution based solely on the actual stock ownership in the holding corporation?
As of the time of this writing, the IRS still has not issued any guidance on this problem.  Hence, taking either position is fine by an attorney as long as it is reasonable under the facts. 
§318 Downstream Corporate Attribution: S-Corporations
It should be emphasized that the §318 downstream corporate attribution rules do not apply S-corporations with respect to attribution of corporate stock between an S-corporation and its shareholders.   Rather, in such cases, the S-corporation is treated as a partnership and its shareholders as partners. See §318(a)(5)(E).  Hence, generally, corporate stocks owned by an S-corporation are attributed on a proportionate basis even to shareholders who own less than 50% of the value of the S-corporation stock. 
Keep in mind, however, that the usual constructive ownership rules for corporations and shareholders apply for the purpose of determination of whether any person owns stock in an S-corporation.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
US tax law is incredibly complex, and this complexity increases even more at the international level. US taxpayers who deal with US international tax law without assistance of an experienced international tax lawyer run an enormous risk of violating US tax laws and incurring high IRS penalties.
Sherayzen Law Office is a highly experienced international tax law firm which specializes in US international tax compliance and offshore voluntary disclosures. We have helped hundreds of US taxpayers to successfully resolve their US international tax compliance issues, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 2020 IRS Standard Mileage Rates | IRS Tax Lawyer & Attorney
Beginning January 1, 2020, the IRS changed the optional standard mileage for the calculation of deductible costs of operating an automobile (sedans, vans, pickups and panel trucks) for business, charitable, medical or moving purposes.  Let's discuss in more detail these new 2020 IRS Standard Mileage Rates.
2020 IRS Standard Mileage Rates for Business Usage
For the tax year 2020, the business-use cost of operating a vehicle will be 57.5 cents per mile.  This is half a cent lower from 2019. The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile. 
As in previous years, a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.
2020 IRS Standard Mileage Rates for Medical and Moving Purposes
For the tax year 2020, the medical and moving cost of operating a vehicle will be 17 cents per mile.  This is lower by three cents from 2019. The rate for medical and moving purposes is based on the variable costs.
2020 IRS Standard Mileage Rates for Charitable Purposes
For the tax year 2020, the costs of operating a vehicle in the service of charitable organizations will be 14 cents per mile. The charitable rate is set by statute and remains unchanged.
2020 IRS Standard Mileage Rates vs. Actual Costs vs. Miscellaneous Itemized Deductions
It is important to note that under the Tax Cuts and Jobs Act, taxpayers can no longer claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. With the exception of active duty members of Armed Forces, taxpayers also cannot claim a deduction for moving expenses.  Notice-2019-02. 
However, taxpayers are not forced to use the standard mileage rates; rather, this is optional. Sherayzen Law Office advises taxpayers that they have the option of calculating the actual costs of using a vehicle rather than using the standard mileage rates.  If the actual-cost method is chosen, then all of the actual expenses associated with the business use of a vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.
IRS Notice 2020-05
IRS Notice 2020-05, posted on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.  In addition, for employer-provided vehicles, the Notice provides the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers may use the fleet-average valuation rule in § 1.61-21(d)(5)(v) or the vehicle cents-per-mile valuation rule in § 1.61-21(e).

### Indian US Dollar Remittances | International Tax Lawyer & Attorney
For some years now, India has remained at the top of all countries that receive remittances in US dollars.  A lot of these funds flow from Indian-Americans and Indians who reside in the United States.  The problem is that a lot of them are not in compliance with respect to their US international tax obligations that arise as a result of these Indian US dollar remittances.
Indian US Dollar Remittances: India Has Been the Top Recipient
For many years now, India has been one of the top countries in turn of US dollar remittances; lately it has occupied the number one spot.  For example, in 2018, India received about $78.6 billion from overseas; China was a distant with only $67.4 billion followed by Mexico ($35.7 billion), the Philippines ($33.8 billion) and Egypt ($28.9 billion). 
One of the biggest (if not the biggest) sources of these Indian US dollar remittances has been the United States.  In fact, according to the World Bank, one of the reasons why Indian US dollar remittances were so high in 2018 was a better economic performance of the US economy.  Hence, we can safely conclude that a large number of Indian-Americans and Indians who reside in the United States send a large portion of their US earnings back to India.
Indian US Dollar Remittances: US International Tax Compliance Issues
The biggest problem with Indian US dollar remittances is their potential for triggering various US international tax compliance requirements, because these remittances are made by US tax residents. Oftentimes, the repatriated funds are sitting in Indian bank accounts or they are invested in Indian stocks, bonds, mutual funds and structured products. Moreover, some of these funds are used to purchase real estate which is rented out to third parties. Still other funds are used to finance business ventures in India.
Such usage of repatriated funds may result in the obligation not only to report Indian income in the United States , but also to file numerous US information returns such as: Report of Foreign Bank and Financial Accounts (FinCEN Form 114 better known as FBAR), Forms 8938, 8621, 5471 and others. Failure to report foreign income and file these information returns may result in the imposition of draconian IRS penalties and even a criminal prosecution.
Indian US Dollar Remittances: Unawareness Among Indians of US Tax Compliance Requirements 
The high potential of Indian US dollar remittances to give rise to US tax compliance issues is combined with a widespread unawareness of these issues among Indians and Indian-Americans.  Many of these taxpayers are not even aware of the fact that they are considered US tax residents.  Others simply have never heard of the requirement to disclose foreign accounts and other foreign assets in the United States.  Still others cling to erroneous ideas and various incorrect myths concerning US tax system.
The rise of various US tax compliance requirements as a result of remittances of funds to India and the widespread ignorance of these requirements among Indians is a bad combination, because it creates the potential for the imposition of the aforementioned draconian IRS penalties on Indians who are not even conscious of the fact that they need to report their worldwide income. 
Contact Sherayzen Law Office for Professional Help With US International Tax Compliance and Offshore Voluntary Disclosures Concerning Remittances of US Earnings to India
If you are an Indian who resides in the United States and you sent part of your US earnings to India, contact Sherayzen Law Office for professional help. We have successfully helped hundreds of Indians and Indian-Americans to resolve their US international tax compliance issues, including conducting offshore voluntary disclosures (such as Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures) with respect to past US tax noncompliance. We can help you!
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### §318 Employee Trust Attribution | Foreign Trust US Tax Law Firm
In a previous article, I explained special §318 rules concerning grantor trusts as an exception to the general §318 trust attribution rules.  Today, I will discuss the special §318 employee trust attribution rules as another exception to the general §318 trust attribution rules.
§318 Employee Trust Attribution: Focus on Tax-Exempt Employee Trusts
First of all, it is important to define the type of employee trust which is the subject of today’s article.  The focus is on employee trusts described in §401(a) and which are tax-exempt under §501(a), collectively “tax-exempt employee trusts”.  In other words, we are discussing mostly trusts which were created under qualified pension, profit-sharing and stock bonus plans.
§318 Employee Trust Attribution: Main Rule – No Attribution to Tax-Exempt Employee Trusts
Under §§318(a)(2)(B)(i) and 318(a)(3)(B)(i), there is no downstream and upstream (respectively) attribution of stock between a tax-exempt employee trust and its beneficiaries.  In other words, there is no §318 attribution of corporate stocks from a tax-exempt employee trust to its beneficiaries and there is no §318 attribution of corporate stocks from the beneficiaries to the trust.
Under §501(b), the non-attribution rule applies even in situations where a tax-exempt employee trust is subject to tax on its unrelated business income. 
§318 Employee Trust Attribution: Certain Exceptions to Non-Attribution
The non-attribution rule with respect to tax-exempt employee trusts is reasonable and just.  There are, however, certain exceptions to this rule. 
A major exception concerns ESOP trusts. Under Petersen v. Commissioner, 924 F.3d 1111 (10th Cir. 2019), the non-attribution of stock ownership from tax-exempt trust to employee beneficiaries does not apply to certain ESOP trusts.
Moreover, certain tax-avoidance transactions will render the non-attribution rule inapplicable.  For example, under §409(p)(3)(B), an individual is deemed to own stocks held by an ESOP trust for the purposes of determining whether there has been a prohibited allocation of S-corporation stock to a disqualified person. 
§318 Employee Trust Attribution: Special Case of “Loss Corporations”
A “loss corporation” presents an interesting set of issues with respect to §318 employee trust attribution rules.  
Let’s first define the loss corporation. The IRC §382(k)(1) provides the following definition of a loss corporation: “a corporation that is entitled to use a net operating loss carryover or having a net operating loss for the taxable year in which the ownership change occurs. Such term shall include any corporation entitled to use a carryforward of disallowed interest described in section 381(c)(20). Except to the extent provided in regulations, such term includes any corporation with a net unrealized built-in loss.”  
The IRC §382(g) defines “ownership change” as a two-step process.  First, there must be an “owner shift”, which means with respect to a 5% shareholder, that there is a change in the respective ownership of stock of a corporation, and such change “affects the percentage of stock of such corporation owned by any person who is a 5-percent shareholder before or after such change.”  Second, the ownership change occurs if, immediately after any owner shift, “the percentage of the stock of the loss corporation owned by 1 or more 5-percent shareholders has increased by more than 50 percentage points” over “the lowest percentage of stock of the loss corporation (or any predecessor corporation) owned by such shareholders at any time during the testing period.” Id. The testing period is three years. §382(i).
Now that we know what a loss corporation is, we can analyze its interaction with the §318 employee trust attribution rules.  Generally, under §318(a)(2)(B)(i), the participants in a qualified plan under which a tax-exempt employee trust is established are not treated as owners of any shares of a “loss corporation” owned by the trust.
This general rule, however, contains an important exception where the IRS will treat beneficiaries of the tax-exempt employee trust as owners of the loss corporation for certain §382 purposes.  See 114 Reg. §1.382-10, T.D. 9269, 71 Fed. Reg. 36,676 (June 28, 2006), applicable to all distributions after June 23, 2006 (for distributions on or before June 23, 2006, see former Reg. §1.382-10T).  
Why do we have this exception?  The problem is that, by blocking the operation of general §318 trust attribution rules, a distribution of stocks in a loss corporation by the tax-exempt employee trust to the plan beneficiaries may cause an “ownership change” since the beneficiaries are not treated as owners of any interest in a loss corporation.  Once the ownership change occurs, §382 may limit the amount of taxable income that can be offset by certain loss carryovers and recognized built-in losses of the loss corporation.  Hence, the IRS enacted this exception to §318(a)(2)(B)(i) for certain §382 purposes.  This is one of many examples of “an exception to an exception” that saturate the Internal Revenue Code.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
US tax law is incredibly complex (as the discussion of the loss corporation and its interaction with §318 employee trust attribution rules demonstrates); the complexity increases even more at the international level. US taxpayers who deal with US international tax law without the assistance of an experienced international tax lawyer run an enormous risk of violating US tax laws and incurring high IRS penalties.
Sherayzen Law Office is a highly experienced international tax law firm which specializes in US international tax compliance and offshore voluntary disclosures. We have helped hundreds of US taxpayers to successfully resolve their US international tax compliance issues, and We Can Help You!
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### §318 Grantor Trust Attribution | Foreign Trust Tax Lawyer & Attorney
In previous articles, I discussed the §318 downstream and upstream attribution rules; in that context, I also mentioned that there were special rules concerning grantor trusts and tax-exempt employee trusts.  This article will cover the special §318 grantor trust attribution rules.
§318 Grantor Trust Attribution: Definition of Grantor Trust
A grantor trust is any trust which, under the IRC §§671–677 and 679, is taxed as if owned in whole or in part by the trust’s creator.  This means that the grantor (or “settlor”) must include all items of income, deduction, and credit which are attributable to that portion of the trust property of which he is deemed the owner.
§318 Grantor Trust Attribution: Downstream and Upstream Attribution to Grantors
The grantor trusts are subject to both, upstream and downstream attribution of stocks.  Under §318(a)(2)(B)(ii) (downstream attribution), the grantor constructively owns all stocks owned directly or indirectly by the trust.  Under §318(a)(3)(B)(ii), the trust constructively owns all stocks owned by the grantor. 
§318 Grantor Trust Attribution: Interaction With Other §318 Attribution Rules
Surprisingly, there is no IRS guidance on how the special §318 grantor trust rules interact with other §318 trust attribution rules. At first, it appears that other constructive ownership rules would apply only to beneficiaries of a trust other than the grantor.  
This, however, is not at all certain; an opposite conclusion can be reached that the Congress intended the exclusive application of its special grantor trust attribution rules. Hence, in some situations, it would not be a frivolous position for a taxpayer to state that the grantor trust rules of §318 replace all other §318 trust attribution rules with respect to grantor trusts.
§318 Grantor Trust Attribution: Illustration
Let’s illustrate the operation of the §318 grantor trust attribution rules with an example.  Here are the hypothetical facts: G, an individual, creates Trust T; under §676, he is treated as owner of Trust T because he reserved the right to revoke the trust; there are two beneficiaries, A and B (nephews of G), who have a 50% vested interest in T.  X, a C-corporation, has issued 100 shares and divided them equally (i.e. 25 shares each) between four shareholders, G, X, A and B.  The issue is determination of ownership of X shares under the §318 trust attribution rules.  
Let’s begin with G.  He actually owns 25 shares and is deemed to own all shares owned by the grantor trust T.  In other words, G owns a total of 50 shares. 
T actually owns 25 shares and constructively owns all of G’s 25 shares. Its further ownership of X’s shares will depend on whether the general §318 downstream trust attribution rules supplement the §318 grantor trust rules.  If they do, then T would be deemed a constructive owner of another 50 shares of X stock held by A and B – i.e. T will be deemed to a 100% owner of X.  If, however, the special §318 grantor trust rules replace the other grantor trust attribution rules, then T’s ownership will stay at 50 shares total.
Similarly, if the grantor trust rules supplement other trust attribution rules, then A and B each will be deemed to own 50% of X through their 50% beneficiary interest in T.  If the grantor trust rules overrule all other §318 trust attribution rules, then there will be no attribution of T’s stock to the beneficiaries and vice-versa. 
A final note on this example.  A and B would not be deemed to own any of G’s shares due to §318(a)(5)(C) prohibition on re-attribution of G’s stocks to the beneficiaries because these stocks were already attributed to the trust.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
The complexity and importance of US international tax law (in which §318 construction ownership rules play an important role) makes it extremely risky for US taxpayers to operate without assistance from an experienced international tax lawyer.
Sherayzen Law Office is a highly experienced international tax law firm which specializes in US international tax compliance and offshore voluntary disclosures. We have helped hundreds of US taxpayers to successfully resolve their US international tax compliance issues, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### §318 Upstream Trust Attribution | US Foreign Trust Tax Lawyer & Attorney
In a previous article, I discussed the Internal Revenue Code (“IRC”) §318 downstream trust attribution rules.  Today, I would like to focus on the §318 upstream trust attribution rules.
§318 Upstream Trust Attribution: Downstream vs. Upstream
There are two types of §318 trust attribution: downstream and upstream. In a previous article, I already covered the downstream attribution rules which attribute the ownership of corporate stocks owned by a trust to its beneficiaries. The upstream attribution rules are exactly the opposite: they attribute the ownership of corporate stocks owned by beneficiaries to the trust. This article focuses just on the upstream attribution.
§318 Upstream Trust Attribution: Main Rule
Under §318(a)(3)(B)(i), all corporate shares owned directly or indirectly by a beneficiary of a trust are considered owned by the trust, unless the beneficiary's interest is a remote contingent interest.  Notice that the proportionality rule does not apply to upstream trust attribution under §318.
For example: if trust T owns 25 shares of X, a C-corporation, and A owns another 25 shares of X, as long as A has a beneficiary interest in T which is not a remote contingent interest, then T will constructively own all of A’s shares of X – i.e. T will own 50 shares of X. 
§318 Upstream Trust Attribution: Contingent Interest
If a beneficiary's interest in a trust is both, remote and contingent, then there is no attribution of stock ownership from the beneficiary to the trust.  Hence, the key issue with respect to upstream trust attribution is classification of a beneficiary’s interest in the trust – is it a remote contingent interest or not?  Let’s first define what a contingent interest is and then discuss when such an interest is considered remote.
A contingent interest is defined as interest that is not vested. This means that the beneficiary has no present right to trust property and has no present interest in a property with respect to future enjoyment of the trust property.  In other words, this interest can only be activated by an occurrence of an intervening event.
§318 Upstream Trust Attribution: Remote Contingent Interest
A contingent interest is remote if “under the maximum exercise of discretion by the trustee in favor of such beneficiary, the value of such interest, computed actuarially, is 5 percent or less of the value of the trust property.” §318(a)(3)(B)(i).
Let’s use an example to demonstrate how this rule works.  The fact scenario is as follows: trust T owns 40 shares in X, a C-corporation; A, an individual beneficiary, has a contingent (not vested) remainder in the trust which has a value computed actuarially equal to 3% of the value of the trust property; A also owns the remaining 60 shares of X (X issued a total of 100 shares).  
In this situation, A’s beneficiary’s interest is contingent because it is not vested and it is remote because its value is less than 5% of the value of the trust property.  Hence, no shares of X are attributed from A to T, because A has a remote contingent interest.  
It should be noted that T’s shares in X are still attributed to A under the §318 downstream attribution rules; hence, A would constructively own 1.2 shares of X.
§318 Upstream Trust Attribution: Special Situations
I wish to conclude this article with a discussion of two special situations.
First, if beneficiaries are entitled to trust corpus, this is a vested interest.  This is case even if the life tenant in the trust’s property has the right to exercise power of appointment in favor of others.  Of course, if such right is actually exercised in favor of others, then the beneficiary will lose its vested interest in the trust.
Second, if a beneficiary interest is conditioned upon surviving a life interest, it is considered a contingent beneficiary interest.  For example, in Rev. Rul. 76-213, the IRS stated that a beneficiary had a contingent interest, because his remainder interest in the trust would terminate if the beneficiary predeceased the life tenant.
§318 Upstream Trust Attribution: Grantor Trusts and Employee Trusts
While it is beyond the scope of this article to describe them in detail, there are special rules that apply to the attribution of stock from grantor trusts and employee trusts. I will discuss these rules in more detail in future articles.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
The complexity and importance of US international tax law (in which §318 constructive ownership rules play an important role) makes it extremely risky for US taxpayers to operate without assistance from an experienced international tax lawyer.
Sherayzen Law Office is a highly experienced international tax law firm which specializes in US international tax compliance and offshore voluntary disclosures. We have helped hundreds of US taxpayers to successfully resolve their US international tax compliance issues, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### US Information Returns: Introduction | International Tax Lawyer Minnesota
In this article, I would like to introduce the readers to the concept of US information returns; I will also explore the differences between US information returns and US tax returns.
US Information Returns: Two Types of Returns
The US tax system is a self-assessment system where taxpayers must file certain forms or returns developed by the IRS in order to report information required by the Internal Revenue Code and the Treasury Regulations.  The Internal Revenue Code specifies the due date for these returns.
There are two primary types of returns: tax returns and information returns.  A tax return is a form that a taxpayer uses to compute the tax that he owes to the IRS.  A tax return requires the taxpayer to set forth the relevant information and amounts for this computation. 
On the other hand, the IRS requires US taxpayers to file information returns in order to obtain information on transactions and payments to taxpayers that may affect the information reflected on tax returns.  In other words, the IRS uses information returns not to compute the tax liability, but to obtain information (or verification of information) to make sure that the tax returns were properly filed. 
US Information Returns: Hybrid Returns
This ideal distinction between the two types of returns is often not preserved.  Instead, there are many hybrid returns which possess the features of both, tax returns and information returns.  For example, Part III of Form 1040 Schedule B is an information return which forms part of the overall tax return (i.e. Form 1040).  Similarly, Form 8621 is a US international information return that is a hybrid return for the reporting of ownership of PFICs and calculation of PFIC tax at the same time. 
US Information Returns: Domestic vs. International
The information returns are subdivided into two categories: domestic and international.  The domestic information returns are usually filed by third parties with respect to US-source income or income under the supervision of a domestic financial institution. For example, US brokers provide Forms 1099-INT to report US-source interest income and foreign interest income that the taxpayer earned by investing through a domestic financial institution. 
It should be mentioned that, due to the implementation of FATCA (Foreign Account Tax Compliance Act), some foreign subsidiaries of US banks also began to issue Forms 1099 to US taxpayers with respect to foreign income from their foreign accounts.  The most prominent example is Citibank. However, this is a tiny minority of foreign financial institutions at this point.
On the other hand, international information returns primarily report information concerning foreign assets, foreign income and foreign transactions; there are even information returns concerning foreign owners of US businesses.  Usually, these returns are filed not by third parties, but by taxpayers directly – individuals, businesses, trusts and estates.  For example, Form 5471 is an international tax return which US taxpayers must file to report their ownership of a foreign corporation, its financial statements and its certain transactions.  
US Information Returns: High Civil Penalties
One of the most distinguishing characteristics of information returns are high noncompliance civil penalties. This is very different from tax returns.
The tax return civil penalties are calculate based on a taxpayer’s unpaid income tax liability.  The worst case scenario is a civil fraud penalty of 75% of unpaid tax liability.  This is followed by negligence, failure-to-file and accuracy penalties.
The noncompliance penalties for information returns, however, do not depend on whether there was ever any tax liability connected with the failure to file an accurate information return; in fact, many information return penalties are imposed in a situation where there is no income tax noncompliance at all.  This is logical, because pure information returns would never have any income tax noncompliance directly related to them.  
Hence, in order to enforce compliance with information returns, the IRS imposes objective noncompliance penalties per each unfiled or incorrect information return.  This divorce between income tax noncompliance and information return penalties, however, may produce extremely unjust results.  For example, failure to file a Form 5471 for a foreign corporation which never produced any revenue may result in the imposition of a $10,000 penalty.
It should be emphasized that the domestic information return penalties are much smaller in size than those imposed for noncompliance with international information returns.  Again the logic is clear: since the temptation to avoid compliance with US international tax laws is much greater overseas, Congress wanted to raise the stakes for such noncompliant taxpayers in order to make the risk of noncompliance intolerable for most taxpayers. 
US Information Returns: Special Case of FBAR
The IRS may impose the most severe penalties out of all information returns for a failure to file a correct FinCEN Form 114, commonly known as “FBAR”. The paradox of these penalties is that FBAR is not a tax form, but a Bank Secrecy Act information return. FBAR was created to fight financial crimes, not for tax enforcement. Its penalties were originally meant to deter and punish criminals, not induce self-compliance with US tax laws – this is precisely why FBAR penalties may easily exceed the penalties imposed with respect to any other US international information return.
So, why is the IRS able to use FBAR as a tax information return and impose FBAR penalties? The reason is that the US Congress turned over FBAR enforcement to the IRS after September 11, 2001. Since then, even though FBAR is not part of the Internal Revenue Code, the IRS has used this form as an information return for tax purposes.
Contact Sherayzen Law Office for Professional Help With US International Information Return Compliance and Penalties
If the IRS imposed penalties on your noncompliance with US international information returns, contact Sherayzen Law Office for professional help.
We are a highly experienced US international tax law firm dedicated to helping US taxpayers around the world with their US international tax compliance. In particular, we have helped hundreds of US taxpayers to avoid or lower their IRS penalties with respect to virtually all types of US international information returns, including FBARs, Forms 8938, 8865, 8621, 5471, 3520, 926, et cetera. We can help you!
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### International Tax Lawyers Los Angeles | Linguistic Uniformity Trap
[av_video src='https://www.youtube.com/watch?v=lE_Q3fTXLug' mobile_image='https://img.youtube.com/vi/lE_Q3fTXLug/maxresdefault.jpg' attachment='25066' attachment_size='' format='16-9' width='16' height='9' conditional_play='' av_uid='av-k10x1fek']
As I was preparing for this presentation today, it occurred to me that there is a sixth trap which is not really common but it does exist. It's not really even limited to Business Lawyers; it really exists throughout the profession but because it's such an important trap, I decided to share it with you.
I call it the Linguistic Uniformity Trap. It's basically a belief that same tax terms have the same meaning, especially when we're talking about English-speaking countries.
The term 'Capital Gain' would mean the same thing in the United States and in the UK; that's a belief. Sometimes it's true and sometimes it's not. 
--
If you would like to learn more, you should contact me directly at eugene@sherayzenlaw.com or call me at (952) 500-8159.

### FinCEN Form 114 Estate Filers | FBAR Tax Lawyer & Attorney
Many taxpayers and even tax professionals are completely unaware of the fact that FBAR needs to be filed not just by individuals, businesses and trusts, but also by estates. In this article, I will discuss FinCEN Form 114 Estate filers (i.e. estates that need to file FinCEN Form 114).
FinCEN Form 114 Estate filers: FBAR Background Information
FinCEN Form 114, commonly known as FBAR, was created in the 1970s as a result of the Bank Secrecy Act of 1970. The original purpose of the form was to fight financial crimes and terrorism; FinCEN was in charge of FBAR rulemaking and FBAR enforcement. After September 11, 2001, the US Congress turned over the function of FBAR enforcement to the IRS.
While the initial justification for the IRS involvement was fighting terrorism, it soon became clear that the IRS would use its new FBAR powers for international tax enforcement. This is exactly what happened; FinCEN Form 114 turned into the most formidable and scary weapon of the IRS to force US taxpayers to turn over their foreign bank account information.
FinCEN Form 114 Estate filers: FBAR Filing Requirements
If a US person has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of these foreign financial accounts exceeds $10,000 at any time during the calendar year, then he has to file FBAR for that year. FBAR requires its filers determine the highest value of each of his accounts in “native” currency (i.e. the currency in which the account is denominated) first and then report this highest balance in US dollars. The Department of the Treasury publishes every year special FBAR currency conversion rates.
Prior to 2016 FBAR, the FBAR deadline was June 30 of each year. Starting 2016 FBAR, the FBAR deadline is aligned with the tax return deadline; as of the tax year 2019, the FBAR deadline is automatically extended to October 15.  This may change in the future years.
FinCEN Form 114 Estate filers: Estates Must File FBARs
It is not just individuals, businesses and trusts who are required to file FinCEN Form 114. Estates must also file FBARs for any foreign accounts in the estate.  It should be remembered that indirect ownership of foreign accounts (for example, through corporate shares in the estate) may also result in the requirement to file FBARs.  Failure to file FinCEN Form 114 timely may result in the imposition of FBAR penalties on the estate.
FinCEN Form 114 Estate filers: Executor Liability for Decedent’s FBAR Noncompliance
If you are an executor of an estate and you discovered that the decedent should have filed FinCEN Forms 114 for prior years but never did so, then you need to explore your offshore voluntary disclosure options as soon as possible. There is a powerful incentive for the executors to resolve the decedent’s FBAR noncompliance – failure do so may result in the imposition of FBAR penalties on the executor of the estate.
Contact Sherayzen Law Office for Professional Help With FinCEN Form 114 Estate Filings and Offshore Voluntary Disclosure
If you are an executor or a personal representative of an estate and there is a reason to believe that the decedent failed to file FBARs in the past, then contact Sherayzen Law Office for professional help as soon as possible. 
We have helped hundreds of US taxpayers, including estates, to successfully resolve their FinCEN Form 114 noncompliance. We can help you!
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### §318 Downstream Trust Attribution | Foreign Trust Tax Lawyer & Attorney
The attribution of stock ownership to constructive owners is a highly important feature of US domestic and international tax law.  The Internal Revenue Code (“IRC”) §318 contains complex constructive ownership rules concerning corporate stock; these rules vary depending on a specific §318 relationship. This article focuses on an important category of §318 relationships – trusts.  Since these rules are very broad, I will discuss today only the §318 downstream trust attribution rules; the upstream rules and important exceptions to both sets of rules will be covered in later articles.
§318 Trust Attribution: Downstream vs. Upstream Attribution
Similarly to other §318 attribution rules, there are two types of §318 trust attribution: downstream and upstream.  The downstream attribution rules attribute the ownership of corporate stocks owned by a trust to its beneficiaries.  The upstream attribution rules are exactly the opposite: they attribute the ownership of corporate stocks owned by beneficiaries to the trust. As I stated above, this article focuses on the downstream attribution.
§318 Downstream Trust Attribution: Attribution from Trust to Beneficiary
Under §318(a)(2)(B)(i), corporate stocks owned, directly or indirectly, by or for a trust are considered owned by the trust’s beneficiaries in proportion to their actuarial interests in the trust.  
Notice that the size of the actuarial interest does not matter. Moreover, §318(a)(2)(B) will apply even if the beneficiary does not have any present interest in a trust, but only a remainder interest (also calculated on an actuarial basis).  This rule is the exact opposite of the §318 estate attribution rules.
Furthermore, the decision to attribute shares based on the actuarial interest, rather than actual one, may result in a paradoxical result where stocks are attributed to a person who will never become the actual owner of the shares.
§318 Downstream Trust Attribution: Determination of Actuarial Interest
Treas. Reg. §1.318-3 stated that, in determining a beneficiary's actuarial interest in a trust, the IRS will use the factors and methods prescribed (for estate tax purposes) in 26 CFR § 20.2031-7. 
The attribution of shares from the trust to its beneficiary should be made on the basis of the beneficiary’s actuarial interest at the time of the transaction affected by the stock ownership. 
§318 Downstream Trust Attribution: Unstable Proportionality        
The adoption of the attribution of stock based on the actuarial interest in a trust creates a constant calculation problem for beneficiaries, because the actuarial interest of the beneficiary in a trust varies from year to year.  The variation of actuarial interest means that the number of shares attributed from a trust to its beneficiary will change every year. 
For example, the actuarial interest of a beneficiary with a life estate in a trust will decrease every year as he ages.  On the other hand, the actuarial interest of the owner of the remainder interest in the trust will increase with each year.  Hence, the number of stocks attributed to the life tenant will decrease each year, while the attribution of stocks to the holder of the remainder interest will increase each year.
§318 Downstream Trust Attribution: Special Presumption Concerning Power of Appointment
Based on 95 Rev. Proc. 77-37, §3.05 (operating rules for private letter rulings), the IRS has adopted a special presumption with respect to when children will be considered beneficiaries for the purpose of §318 trust attribution rules.  In order to understand this rule, we need to describe the setting in which it will most likely apply.
Oftentimes, estate plans are set up where the surviving spouse will have a life interest in a trust’s income and a power of appointment over the trust corpus.  In such situation, estate planners often insert a clause that, if a spouse fails to exercise the power of appointment, the trust corpus will automatically go to the children.  
In this situation, the IRS stated that, absent evidence that the power of appointment was exercised differently, it is presumed that it was exercised in favor of the children.  By adopting this presumption, the children are immediately considered beneficiaries for the purpose of the stock attribution rules under §318.
§318 Downstream Trust Attribution: Planning to Avoid Attribution
In order to prevent the application of the trust attribution rules under §318, a beneficiary must renounce his entire interest in the trust. See Rev. Rul. 71-211.  Such renunciation is valid only if it is irrevocable and binding under local law.
§318 Downstream Trust Attribution: Special Case of Voting Trusts
Under Rev. Rul. 71-262 and CCA 200409001, §318(a)(2)(B) does not apply in the context of a voting trust (i.e. where trustee has the right to vote the stock held in trust, but the dividends are paid to the certificate holder).  This is because the certificate holder is deemed to be the owner of the shares and there is no attribution of ownership from the trust. 
§318 Downstream Trust Attribution: Grantor Trusts and Employee Trusts
While it is beyond the scope of this article to describe them in detail, there are special rules that apply to the attribution of stock from grantor trusts and employee trusts.  I will discuss these rules in more detail in the future.
Contact Sherayzen Law Office for Professional Help With US Tax Issues Concerning Foreign Trusts
If you are considered an owner or a beneficiary of a foreign trust, contact Sherayzen Law Office for professional help with your US tax compliance issues. Our firm is highly experienced in US international tax law, including foreign trust compliance. We have also helped taxpayers around the world with their offshore voluntary disclosures involving foreign trusts.
Contact Us Today to Schedule Your Confidential Consultation!

### §318 Upstream Estate Attribution | International Tax Lawyer & Attorney
This article continues a series of articles concerning the constructive ownership rules of the Internal Revenue Code (“IRC”) §318.  Today’s focus is on the §318 upstream estate attribution rules.
§318 Estate Attribution Rules: Downstream Attribution vs. Upstream Attribution
There are two types of the IRC §318 estate attribution rules: downstream and upstream.  In a previous article, I discussed the downstream attribution rules concerning attribution of ownership of corporate stocks held by an estate to its beneficiaries.  This brief article focuses on the upstream attribution rules, which means rules governing the attribution to the estate of corporate stocks held by its beneficiaries.
§318 Upstream Estate Attribution: Main Rule
The IRC §318(a)(3)(A) states the general rule for the upstream estate attribution of beneficiaries’ corporate stock: irrespective of the proportion of his beneficiary interest in the estate, all corporate stocks owned directly or indirectly by a beneficiary are deemed to be owned by the estate.  
Notice the difference here between the downstream and the upstream estate attribution rules. §318 downstream estate attribution rules attribute the ownership of corporate stock proportionately from an estate to its beneficiaries.  The upstream attribution rules under §318, however, completely disregard the proportionality rule; instead, all of the stocks of a beneficiary are attributed to the estate even if he has only 1% interest in the estate. 
For example, let’s suppose that W owns 100 shares in corporation X; then, H dies and leaves one-tenth of his property to W.  Due to the fact that W is a beneficiary of H’s estate, the estate constructively owns all of W’s 100 shares in X.
§318 Upstream Estate Attribution: No Re-Attribution    
I already stated this rule in another article on estate attribution, but it is also important to re-state it here.  §318 estate attribution rules contain a prohibition on re-attribution of stocks.  Under §318(a)(5)(C), a beneficiary’s stock constructively owned by an estate through the operation of the §318 estate attribution rules cannot be attributed to another beneficiary. 
Contact Sherayzen Law Office for Professional Help With US International Business Tax Law
If you have questions concerning US business tax in general and US international business tax law specifically, contact Sherayzen Law Office for professional help.  We are a highly-experienced tax law firm that specializes in US international tax law, including offshore voluntary disclosures, US international tax compliance for businesses and individuals and US international tax planning.
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### §318 Estate Beneficiary Definition | US International Tax Law Firm
The Internal Revenue Code (“IRC”) §318 contains corporate stock attribution rules between an estate and its beneficiaries.  In order to apply these rules correctly, one must understand how §318 defines “beneficiary” for the purposes of upstream and downstream estate attribution rules.  This articles will introduce the readers to this §318 estate beneficiary definition. 
§318 Estate Beneficiary Definition: General Rule
Treas. Regs. §1.318-3(a) defines “beneficiary” for the purposes of §318 attribution rules (on a separate note, pursuant to Rev. Rul. 71-353, the attribution rules for the personal holding company provisions, collapsible corporation provisions (now repealed), and affiliated group provisions also use this definition of a beneficiary).  
Treas. Regs. §1.318-3(a) states that “the term beneficiary includes any person entitled to receive property of a decedent pursuant to a will or pursuant to laws of descent and distribution.” Hence, in order to be considered a beneficiary under §318 , a person must have a direct present interest in the property of the estate or in income generated by that property. 
Moreover, a person entitled to property not subject to administration by the executor is not a beneficiary for purposes of the §318 estate attribution rules unless the property is subject to the executor's claim for a share of the federal estate tax. 
§318 Estate Beneficiary Definition: Certain Specific Cases
This definition of beneficiary produces interesting results in some specific cases which are actually quite common.  
Let’s first see the result of the application of the §318 estate beneficiary definition to life estates. A person with a life estate in estate property is a beneficiary.  On the other hand, if a person owns only a remainder interest (i.e. an interest that vests only after the death of the life tenant), then he is not a beneficiary. 
A beneficiary of life insurance proceeds is not considered a beneficiary for the §318 estate attribution rule purposes.  This is because this is not a property subject to administration by the executor. 
Similarly, an executor or administrator is usually not a beneficiary simply by virtue of occupying either of these positions. The main exception to this rule is a situation where an executor or administrator is otherwise considered a beneficiary.
Finally, a residuary testamentary trust presents a very interesting and complex issue.  Under Rev. Rul. 67-24, it may be treated as a beneficiary of an estate before the residue of the estate is actually transferred to it.  Moreover, it appears that such a trust (in that case, it was an unfunded testamentary trust) needs to worry about the §318(a)(3)(B) trust attribution rules.
§318 Estate Beneficiary Definition: Cessation of Beneficiary Status 
It is important to note that §318 estate attribution rules cease to operate with respect to a person who stops being a beneficiary. See Tres. Reg. §1.318-3(a).  There is an exception to this rule though: pursuant to Rev. Rul. 60-18, a residuary legatee does not stop being a beneficiary until the estate is closed. “Residual legatee” is a person named in a will to receive any residue left in an estate after the bequests of specific items are made.
When does a person stop being a beneficiary for the purposes of §318? Treas. Reg. Reg. §1.318-3(a) sets forth the following criteria that must be met for a person to no longer be considered a beneficiary: (a) the person has received all property to which he is entitled; (b) ”when he no longer has a claim against the estate arising out of having been a beneficiary”; and (c) “when there is only a remote possibility that it will be necessary for the estate to seek the return of property or to seek payment from him by contribution or otherwise to satisfy claims against the estate or expenses of administration”.
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If you have questions concerning US business tax in general and US international business tax law specifically, contact Sherayzen Law Office for professional help.  We are a highly-experienced tax law firm that specializes in US international tax law, including offshore voluntary disclosures, US international tax compliance for businesses and individuals and US international tax planning.
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### §318 Downstream Estate Attribution | International Tax Lawyer & Attorney
This article continues a series of articles on the Internal Revenue Code (“IRC”) §318 constructive ownership rules.  Today, the topic is §318 estate attribution rules – i.e. attribution of ownership of corporate stock from estate to its beneficiaries and vice versa.  Since this is a long topic, I will divide it into three articles.  This article focuses on the §318 downstream estate attribution rules.
§318 Estate Attribution Rules: Two Types
There are two types of the IRC §318 estate attribution rules: downstream and upstream.  The downstream attribution rules attribute the ownership of corporate stocks owned by an estate to its beneficiaries.  On the other hand, the upstream attribution rules attribute the ownership of corporate stocks owned by beneficiaries to the estate.  As I stated above, this article focuses on the first type – i.e. §318 downstream estate attribution rules.
§318 Downstream Estate Attribution: Attribution from Estate to Beneficiary
Under the IRS §318(a)(2)(A), corporate stock owned directly or indirectly by or on behalf of an estate is deemed to be owned proportionately by its beneficiaries.  It is very important to understand that the actual disposition of estate property by the testator does not matter to the proportionate attribution of estate property between the beneficiaries.  Thus, even if the will demands that all corporate stocks be inherited by only one beneficiary, the ownership of these stocks will be attributed to all beneficiaries in proportion to their respective interests in the estate.
Three questions arise with respect to the application of this §318 downstream estate attribution rule: (1) What stocks are considered to be owned by the estate? (2) Who is deemed to be a beneficiary of an estate? and (3) How does the proportionality rule work?
§318 Downstream Estate Attribution: Stocks Owned by Estate
Treas. Regs. §1.318-3(a) defines when an estate is deemed to be an owner of corporate stock for the §318 attribution purposes.  It states that corporate stocks (as well as any other property) shall be considered as owned by an estate if “such property is subject to administration by the executor or administrator for the purpose of paying claims against the estate and expenses of administration.” This is the case even if the legal title to the stock vests immediately upon death in the decedent's heirs, legatees, or devisees under local law. Id.
§318 Downstream Estate Attribution: Definition of a Beneficiary
I address the definition of a beneficiary for the §318 attribution purposes in more detail in another article.  Here, I will only state the general rule.
Treas. Regs. §1.318-3(a) states that “the term beneficiary includes any person entitled to receive property of a decedent pursuant to a will or pursuant to laws of descent and distribution.”  Hence, in order to be considered a beneficiary under §318, a person must have a direct present interest in the property of the estate or in income generated by that property. 
§318 Downstream Estate Attribution: Proportionality
As in many other cases concerning attribution proportionality, there is very little guidance from the IRS and Treasury regulations concerning determination of a beneficiary’s proportionate interest in an estate.  Hence, an attorney has a considerable freedom in determining the reasonable methodology with respect to the application of the proportionality requirement. It appears that one method may be particularly acceptable to the IRS: measuring the relative values of each beneficiary's interest.
§318 Downstream Estate Attribution: No Re-Attribution    
Similarly to many other IRC provisions concerning constructive ownership, §318 estate attribution rules contain a prohibition on re-attribution of stocks.  Under §318(a)(5)(C), a beneficiary’s stock constructively owned by an estate through the operation of the §318 estate attribution rules cannot be attributed to another beneficiary.  
§318 Downstream Estate Attribution: Example    
Let’s conclude this article with an illustration of how the §318 downstream estate attribution rules actually work.  The proposed hypothetical scenario is as follows: an estate owns 100 of the total 200 outstanding shares of X, a South Dakota C-corporation; A is entitled to 50% of the property of the estate and actually owns 24 shares of X; B owns 36 shares of X and has a life estate in the other 50% of the estate; and C owns 40 shares of X and only has a remainder interest in the estate after the death of B.  Here is how the §318 estate attribution constructive rules would work in this case:
A actually owns 24 shares of X and constructively owns another 50 shares of X through his 50% beneficiary interest in the estate.  In other words, A’s total ownership of X equals 74 shares.
B actually owns 36 shares of X and constructively owns another 50 shares of X through his life estate; his total number of shares of X equals 86.
Finally, C owns 40 shares of X only. He does not have any constructive ownership of any shares of X, because his remainder interest in the estate is not a present interest in the estate; hence, he is not a beneficiary of the estate.
Contact Sherayzen Law Office for Professional Help With §318 Downstream Estate Attribution Rules
The constructive ownership rules of §318 are crucial to proper identification of US tax reporting requirements with respect domestic and especially foreign business entities.  Hence, if you a beneficiary of an estate or an executor/administrator of an estate that owns stocks in a domestic or foreign corporation, contact Sherayzen Law Office for professional help with §318 estate attribution rules.
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### 2020 SDOP Eligibility Requirements | SDOP Tax Lawyer & Attorney
In a recent article, I mentioned that Streamlined Domestic Offshore Procedures (“SDOP”) will continue to be the most important voluntary disclosure option in 2020 for US taxpayers who reside in the United States. However, not all taxpayers will qualify to participate in the 2020 SDOP. In this article, I will discuss the main 2020 SDOP eligibility requirements.
2020 SDOP Eligibility Requirements: Background Information
The IRS introduced Streamlined Domestic Offshore Procedures in June of 2014 as part of the most radical overhaul of offshore voluntary disclosure process since the introduction of the Offshore Voluntary Disclosure Program (“OVDP”) in 2009.
The IRS created SDOP first to supplement OVDP, not to replace it. The idea was to mitigate the OVDP’s rigidity by streamlining the voluntary disclosure process for taxpayers who non-willfully failed to comply with US international tax requirements. 
Almost from the start, SDOP grew in popularity and quickly eclipsed OVDP.  Tens of thousands of taxpayers utilized this option to lower IRS penalties in a relatively (i.e. relative to OVDP) fast and painless way.   As a result, SDOP continues to exist even today while the 2014 OVDP was closed in September of 2018.
2020 SDOP Eligibility Requirements: Five Main Eligibility Requirements
In order to quality to participate in the SDOP, taxpayers must meet all of the following requirements: (1) US residence; (2) US tax return filing compliance; (3) US international tax noncompliance; (4) non-willfulness; and (5) no IRS examination.  Let’s discuss each requirement in more detail.
2020 SDOP Eligibility Requirements: US Residence
In order to participate in SDOP, a taxpayer must be a US tax resident who did not meet any of non-residence tests of Streamlined Foreign Offshore Procedures. This requirements applies differently to two categories of taxpayers.
The first category consists of US citizens and US permanent residents (i.e. “green card” holders).  In order to satisfy the 2020 SDOP eligibility requirements, these taxpayers must have a US abode and must not physically reside outside of the United States for more than 329 full days in each of the past three years. I explore what this means further in a future article on Streamlined Foreign Offshore Procedures. 
The second category of taxpayers includes all individuals who are not US citizens and US permanent residents.  In order for these individuals to be eligible to participate in SDOP, they must satisfy the substantial presence test in each of the past three years. Generally, under 26 U.S.C. §7701(b)(3), an individual meets the substantial presence test if the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier) equals or exceeds 183 days.  There are many exceptions to this rule, but they are outside of the scope of this article.
2020 SDOP Eligibility Requirements: Filing of US Tax Returns
In order to participate in the SDOP, a taxpayer must have previously filed a US tax return for each of the most recent three years for which the US tax return due date (or properly applied for extended due date) has passed.  There is an exception to this rule for situations where a taxpayer’s income was below the tax return filing threshold and he was not required to file the tax return for that year.
2020 SDOP Eligibility Requirements: International Tax Noncompliance
An SDOP disclosure must have some relationship to US international tax noncompliance. A taxpayer must have failed to report income from a foreign financial asset and must have failed to file FBAR or any other US international information return, such as Forms 3520, 3520-A, 5471, 8865, 8938, 8621, 926, et cetera.
2020 SDOP Eligibility Requirements: Non-Willfulness
This is the most important and most difficult eligibility requirement for participating in SDOP: taxpayer’s violations of US international tax law must be non-willful. Moreover, they must be non-willful with respect to each aspect of the voluntary disclosure: FBARs, each international information return and foreign income. In other words, if a taxpayer was non-willful with respect to non-filing of Form 5471, but willful with respect to non-filing of FBARs, then, his entire eligibility to participate in SDOP is compromised.
SDOP provides the following definition of non-willfulness: “non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”  Obviously, proving non-willfulness is a matter highly dependent on facts and requires an individual approach to each client’s case.  It is the job of an international tax attorney to make good use of the facts and determine whether non-willfulness can be established. 
2020 SDOP Eligibility Requirements: Taxpayer Not Subject to Examination
Finally, a taxpayer who wishes to participate in SDOP must not be subject to an IRS civil examination or an IRS criminal investigation.  Whether all relevant years are subject to an examination or just a few of them is irrelevant; it does not even matter whether the examination is focused on a particular international information return. In all of these cases, the taxpayer will most likely lose eligibility to conduct his voluntary disclosure through SDOP. 
Contact Sherayzen Law Office for Professional Help With the Determination of Whether You Satisfied the 2020 SDOP Eligibility Requirements
If you have undisclosed foreign accounts or any other offshore assets and you wish to know whether you are eligible to participate in the 2020 SDOP, contact Sherayzen Law Office for professional legal help. Our experienced international tax law firm will thoroughly analyze your case, determine your SDOP eligibility, examine all alternative voluntary disclosure options and skillfully prepare the necessary tax and legal documents necessary to complete your offshore voluntary disclosure.
We have helped hundreds of US taxpayers with their offshore voluntary disclosures, and we can help you!
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### §318 Partnership Attribution | International Corporate Tax Lawyers
This article continues a series of articles on the Internal Revenue Code (“IRC”) §318 constructive ownership rules.  In this essay, we will discuss the §318 partnership attribution rules – i.e. attribution of ownership of shares from partnership to partners and vice versa.
§318 Partnership Attribution Rules: Two Types
There are two types of the IRC §318 partnership attribution rules: downstream and upstream.  The downstream attribution rules attribute the ownership of corporate stocks owned by a partnership to its partners.  The upstream attribution rules attribute the ownership of corporate stocks owned by partners to the partnership.  Let’s explore both types of attribution rules in more detail.
§318 Partnership Attribution Rules: Attribution from Partnership to Partners
Pursuant to §318(a)(2)(A), corporate stocks owned, either directly or indirectly, by or on behalf of a partnership is deemed constructively owned by its partners proportionately. Interestingly, the attribution of corporate stock from a partnership to its partners continues to happen even if the partnership does not do any business or stops all of its operation.  See Baker Commodities, Inc. v. Commissioner 415 F.2d 519 (9th Cir. 1969); Sorem v. Commissioner 40 T.C. 206 (1963), rev'd on other grounds, 334 F.2d 275 (10th Cir. 1964).
The biggest problem with applying §318(a)(2)(A) is determining what “proportionate attribution” means. Where a partner owns the same interest in capital, profits and losses of a partnership, the proportionality is easy to apply.  However, in situations where a partner owns varying interests in capital, profits and losses, it is much more difficult. 
Unfortunately, this problem is not addressed at all by the IRS or courts – the proportionality of attribution is not defined in any IRC provision, Treasury Regulations and even case law. Looking at Treas. Reg. §1.318-2(c) Ex. 1, however, it is likely that the IRS will accept a position where proportionality of attribution is based on the “facts-and-circumstances” test of §704(b).
§318 Partnership Attribution Rules: Attribution from Partners to Partnership
Under §318(a)(3)(A), a partnership constructively owns corporate stocks owned by a partner.  There are no limitations on the attribution – all stocks held by a partner are deemed to be owned by the partnership irrespective of the percentage of an ownership interest in the partnership held by the partner.  There is no de minimis rule that would apply to §318(a)(3)(A).
For example, assume that partner P (an individual) owns 25% in a partnership X.  P also owns 100 shares out of the total 200 shares outstanding of Y corporation; X owns the remaining 100 shares. Under §318(a)(3)(A), X actually owns 100 shares of Y and constructively owns P’s 100 shares of Y; in other words, X owns 100% of Y.
§318 Partnership Attribution Rules: Certain Attributions Not Allowed
There are two special §318 rules concerning partnership attributions that I would like to mention in this article.  First, there is no partner-to-partner attribution of stock under the §318 partnership attribution rules.  In other words, stocks owned by a partner will not be owned by another partner simply by virtue of both partners having an ownership interest in the same partnership (however, this does not mean that stocks may not be attributed through another provision of §318).
Second, §318(a)(5)(C) prevents re-attribution of stocks that were already attributed from a partner to the partnership.  This means that, where stocks are attributed from a partner to a partnership, they cannot be then re-attributed from the partnership to another partner. 
§318 Partnership Attribution Rules: S-Corporations
Under §318(a)(5)(E), an S-corporation and its shareholders are respectively considered to be a partnership and its partners. Hence, corporate stocks owned by an S-corporation are attributed to its shareholders proportionately to each shareholder’s ownership of the S-corporation’s stock.  Also, stocks owned by shareholders are deemed to be owned by the S-corporation.  
It is important to emphasize that §318 partnership attribution rules do not apply to the stock of the S-corporation. Id.  In other words, §318 does not treat shareholders in an S-corporation as being constructive owners of the stock of the S-corporation itself.  
§318 Partnership Attribution Rules: Comprehensive Example
I would like to finish this article with a comprehensive example of how §318 partnership attribution rules work. Let’s suppose that A and B own Y partnership in equal portions (i.e. 50% each); Y owns 120 shares of X, a C-corporation, out of the total 200 outstanding shares; another 80 shares are owned by A.  
Let’s analyze each parties’ actual and constructive ownership of X. A actually owns 80 shares and constructively owns half of Y’s ownership of X shares (60 shares) under §318(a)(2)(A) – i.e. he owns a total of 140 shares.
B constructively owns half of Y’s ownership of X shares – i.e. 60 shares.  He does not constructively own any of A’s shares, because there is no partner-to-partner attribution of stocks and there is no attribution to B of A’s shares that were attributed to Y.
Finally, Y actually owns 120 shares and constructively owns all of A’s 80 shares.  In other words, Y is deemed to be a 100% owner of X. 
Contact Sherayzen Law Office for Professional Help With §318 Partnership Attribution Rules
The constructive ownership rules of §318 are crucial to proper identification of US tax reporting requirements with respect domestic and especially foreign business entities.  Hence, if you are a partner in a partnership that owns stocks in a domestic or foreign corporation, contact Sherayzen Law Office for professional help with §318 partnership attribution rules.
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### Ukrainian FATCA IGA Enters Into Force | FATCA Tax Lawyer & Attorney
On November 18, 2019, the Ukrainian FATCA IGA entered into force.  Sherayzen Law Office already wrote on this subject a little more than three years ago.  This essay updates the status of the Ukrainian FATCA IGA.
Ukrainian FATCA IGA: Background Information
The Foreign Account Tax Compliance Act (FATCA) was enacted into law in 2010 and quickly caused a revolution in the area of international tax information exchange. While FATCA is very complex, its basic purpose is clear – improving US international tax compliance through new information reporting standards.  The revolutionary aspect of FATCA was to force foreign financial institutions (“FFIs”) to comply these new information reporting standards through what essentially amounted to FATCA tax withholding penalties. In other words, FATCA turned FFIs throughout the world into IRS informants.
Using brutal economic force on the FFIs, however, may be considered by many foreign countries as a violation of their sovereignty, because FFIs are not US taxpayers.  In order to enforce FATCA effectively, the United States has worked to enlist the cooperation of the FFIs’ home countries.  The ultimate products of these negotiations have been FATCA implementation treaties, officially called FATCA IGAs (Intergovernmental Agreements).  The Ukrainian FATCA IGA is just one example of such a treaty.
Ukrainian FATCA IGA: History and Current Status
On November 9, 2016, the Ukrainian government authorized the Ukrainian FATCA IGA for signature.  On February 7, 2017, the IGA was signed. Since November 18, 2019, it has been in force. 
Ukrainian FATCA IGA: Model 1 FATCA Agreement
The Ukrainian FATCA IGA is a Model 1 FATCA Agreement.  In order to understand what this means, we need to explore the two types of FATCA IGAs – Model 1 and Model 2. The Model 2 FATCA treaty requires FFIs to individually enter into an FFI Agreement with the IRS in order to report the required FATCA information directly to the IRS (for example, Switzerland signed a Model 2 treaty).
On the other hand, the Model 1 treaty requires FFIs in a “partner country” (i.e. the country that signed a Model 1 FATCA agreement) to report the required FATCA information regarding US accounts to the local tax authorities. Then, the tax authorities of the partner country share this information with the IRS.  
Thus, the Ukrainian FFIs will report FATCA information to the Ukrainian tax authorities first.  Then, the Ukrainian IRS will turn over this information to the IRS.
Impact of Ukranian FATCA IGA on Noncompliant US Taxpayers
The implementation of the Ukrainian FATCA IGA means that the Ukrainian FFIs either have already implemented or will soon implement the necessary KYC (Know Your Client) procedures.  Using these procedures, the FFIs will collect the required FATCA information concerning their US customers and send this information to the Ukranian tax authorities, which, in turn, will share this information with the IRS.  
Then, the IRS will process this information in order to identify noncompliant US taxpayers.  Once it reaches this point, the IRS will most likely investigate these persons and determine whether to conduct a civil audit or proceed with a criminal prosecution. 
In other words, since November 18, 2019, US taxpayers who have undisclosed foreign accounts in Ukraine have been at an ever-increasing risk of the IRS detection.  Once their noncompliance is verified by the IRS, these taxpayers, may face the imposition of draconian IRS penalties and potentially even a criminal prosecution.
Contact Sherayzen Law Office for Professional Help Undisclosed Ukrainian Foreign Accounts and Other Assets
If you have undisclosed Ukrainian assets (including Ukrainian bank accounts) and/or Ukrainian-source income, contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers around the globe (including Ukrainians) to resolve their past US tax noncompliance issues, and we can help you!
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### 2019 FBAR Conversion Rates | FBAR Tax Lawyer & Attorney
The 2019 FBAR conversion rates are highly important in US international tax compliance. The 2019 FBAR and 2019 Form 8938 instructions both require that 2019 FBAR conversion rates be used to report the required highest balances of foreign financial assets on these forms (in the case of Form 8938, the 2019 FBAR conversion rates is the default choice, not an exclusive one).  In other words, the 2019 FBAR conversion rates are used to translate foreign-currency highest balances into US dollars for the purposes of FBAR and Form 8938 compliance.
The U.S. Department of Treasury  already published the 2019 FBAR conversion rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).
Since the 2019 FBAR conversion rates are highly important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2019 FBAR conversion rates (note that the readers still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI77.6250 ALBANIA - LEK108.2100   ALGERIA - DINAR118.7800  ANGOLA - KWANZA475.0000  ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR2.7000 ARGENTINA - PESO59.8700 ARMENIA - DRAM475.0000  AUSTRALIA - DOLLAR1.4250  AUSTRIA - EURO0.8900  AZERBAIJAN - NEW MANAT1.7000   BAHAMAS - DOLLAR1.0000 BAHRAIN - DINAR0.3770 BANGLADESH - TAKA85.0000  BARBADOS - DOLLAR2.0200 BELARUS - NEW RUBLE2.1040   BELGIUM - EURO0.8900 BELIZE - DOLLAR2.0000 BENIN - CFA FRANC582.0000  BERMUDA - DOLLAR1.0000 BOLIVIA - BOLIVIANO6.8300   BOSNIA - MARKA1.7410   BOTSWANA - PULA10.5490   BRAZIL - REAL4.0200 BRUNEI - DOLLAR1.3450   BULGARIA - LEV1.7410  BURKINA FASO - CFA FRANC582.0000 BURMA-KYAT1,475.0000 BURUNDI - FRANC1,850.0000  CAMBODIA (KHMER) - RIEL4,051.0000 CAMEROON - CFA FRANC578.1200 CANADA - DOLLAR1.3000CAPE VERDE - ESCUDO99.2910  CAYMAN ISLANDS - DOLLAR0.8200 CENTRAL AFRICAN REPUBLIC - CFA FRANC578.1200   CHAD - CFA FRANC578.1200   CHILE - PESO751.4800   CHINA - RENMINBI6.9610 COLOMBIA - PESO3,278.7500 COMOROS - FRANC439.0600 CONGO - CFA FRANC578.1200 COSTA RICA - COLON569.6500 COTE D'IVOIRE - CFA FRANC582.0000 CROATIA - KUNA6.4900 CUBA - Chavito1.0000 CYPRUS - EURO0.8900   CZECH REPUBLIC - KORUNA22.1650 DEM. REP. OF CONGO - FRANC1,650.0000DENMARK - KRONE6.6520 DJIBOUTI - FRANC177.0000 DOMINICAN REPUBLIC - PESO52.6600   ECUADOR - DOLARES1.0000 EGYPT - POUND16.0000   EL SALVADOR - DOLARES1.0000 EQUATORIAL GUINEA - CFA FRANC578.1200 ERITREA - NAKFA15.0000 ESTONIA - EURO0.8900  ETHIOPIA - BIRR31.8000 EURO ZONE - EURO0.8900   FIJI - DOLLAR2.1420   FINLAND - EURO0.8900  FRANCE - EURO0.8900   GABON - CFA FRANC578.1200 GAMBIA - DALASI51.0000 GEORGIA - LARI2.8700 GERMANY - EURO0.8900   GHANA - CEDI5.6600 GREECE - EURO0.8900 GRENADA - EAST CARIBBEAN DOLLAR2.7000 GUATEMALA - QUENTZAL7.6900 GUINEA BISSAU - CFA FRANC582.0000 GUINEA - FRANC9,380.0000 GUYANA - DOLLAR215.0000 HAITI - GOURDE87.6550 HONDURAS - LEMPIRA25.0000 HONG KONG - DOLLAR7.7860 HUNGARY - FORINT294.2900 ICELAND - KRONA120.7600 INDIA - RUPEE71.0000 INDONESIA - RUPIAH13,895.0000 IRAN - RIAL42,000.0000 IRAQ - DINAR1,138.0000 IRELAND - EURO0.8900 ISRAEL - SHEKEL3.4540 ITALY - EURO0.8900  JAMAICA - DOLLAR136.0000 JAPAN - YEN108.5300  JERUSALEM - SHEKEL3.4540 JORDAN - DINAR0.7080 KAZAKHSTAN - TENGE381.1800 KENYA - SHILLING101.2500 KOREA - WON1,153.7000 KOSOVO - EURO0.8900  KUWAIT - DINAR0.3030 KYRGYZSTAN - SOM69.6000 LAOS - KIP8,865.0000  LATVIA - EURO0.8900 LEBANON - POUND1500.0000 LESOTHO - MALOTI14.0560 LIBERIA - DOLLAR186.9900 LIBYA - DINAR1.3960   LITHUANIA - EURO0.8900  LUXEMBOURG - EURO0.8900 MADAGASCAR - ARIARY3,627.2000 MALAWI - KWACHA760.0000 MALAYSIA - RINGGIT4.0890   MALDIVES - RUFIYAA15.4200 MALI - CFA FRANC582.0000 MALTA - EURO0.8900 MARSHALL ISLANDS - DOLLAR1.0000 MARTINIQUE - EURO0.8900 MAURITANIA - OUGUIYA37.0000 MAURITIUS - RUPEE36.2000 MEXICO - PESO18.8920 MICRONESIA - DOLLAR1.0000 MOLDOVA - LEU17.1000 MONGOLIA - TUGRIK2,733.5200 MONTENEGRO - EURO0.8900 MOROCCO - DIRHAM9.5970 MOZAMBIQUE - METICAL 60.8500 NAMIBIA - DOLLAR14.0560 NEPAL - RUPEE113.7500 NETHERLANDS - EURO0.8900 NETHERLANDS ANTILLES - GUILDER1.7800 NEW ZEALAND - DOLLAR1.4830 NICARAGUA - CORDOBA33.8000 NIGER - CFA FRANC582.0000 NIGERIA - NAIRA361.0000 NORWAY - KRONE8.7820 OMAN - RIAL0.3850 PAKISTAN - RUPEE154.8500 PANAMA - BALBOA1.0000 PANAMA - DOLARES1.0000  PAPUA NEW GUINEA - KINA3.3110 PARAGUAY - GUARANI6,442.3301 PERU - SOL3.3140 PHILIPPINES - PESO50.6400 POLAND - ZLOTY3.7890 PORTUGAL - EURO0.8900 QATAR - RIYAL3.6400 REP. OF N MACEDONIA - DINAR54.7600 REPUBLIC OF PALAU - DOLLAR1.0000 ROMANIA - NEW LEU4.2560  RUSSIA - RUBLE62.2730 RWANDA - FRANC925.0000 SAO TOME & PRINCIPE - NEW DOBRAS22.1220 SAUDI ARABIA - RIYAL3.7500 SENEGAL - CFA FRANC582.0000 SERBIA - DINAR104.9200 SEYCHELLES - RUPEE13.6200 SIERRA LEONE - LEONE9,639.5898 SINGAPORE - DOLLAR1.3450 SLOVAK REPUBLIC - EURO0.8900 SLOVENIA - EURO0.8900 SOLOMON ISLANDS - DOLLAR8.0650 SOMALI - SHILLING575.0000 SOUTH AFRICA - RAND14.0560 SOUTH SUDANESE - POUND160.0000 SPAIN - EURO0.8900  SRI LANKA - RUPEE181.3000 ST LUCIA - E CARIBBEAN DOLLAR2.7000 SUDAN - SUDANESE POUND45.0000 SURINAME - GUILDER7.5200 SWAZILAND - LANGENI14.0560 SWEDEN - KRONA9.3010 SWITZERLAND - FRANC0.9660 SYRIA - POUND435.0000 TAIWAN - DOLLAR29.9420 TAJIKISTAN - SOMONI9.6500 TANZANIA - SHILLING2,293.0000   THAILAND - BAHT29.7700 TIMOR - LESTE DILI1.0000 TOGO - CFA FRANC582.0000 TONGA - PA'ANGA2.2090 TRINIDAD & TOBAGO - DOLLAR6.6970 TUNISIA - DINAR2.7720  TURKEY - LIRA5.9420 TURKMENISTAN - NEW MANAT3.4910 UGANDA - SHILLING3,660.0000 UKRAINE - HRYVNIA23.6900  UNITED ARAB EMIRATES - DIRHAM3.6730 UNITED KINGDOM - POUND STERLING0.7580 URUGUAY - PESO37.1300 UZBEKISTAN - SOM9,500.0000 VANUATU - VATU112.8000 VENEZUELA - BOLIVAR SOBERANO70,675.7400VENEZUELA - FUERTE (OLD)248,832.0000 VIETNAM - DONG23,171.0000 WESTERN SAMOA - TALA2.5370 YEMEN - RIAL480.0000 ZAMBIA - NEW KWACHA14.0500  ZIMBABWE - RTGS16.2800

### 2020 Streamlined Domestic Offshore Procedures: Pros and Cons
Noncompliant US taxpayers with undisclosed foreign assets and foreign income should consider their voluntary disclosure options in this new year 2020. Similarly to 2019, I expect that this year Streamlined Domestic Offshore Procedures will continue to be the flagship voluntary disclosure option for such taxpayers who reside in the United States. In order for the readers to better understand why I make this assertion, I would like to discuss the advantages and disadvantages of participating in the 2020 Streamlined Domestic Offshore Procedures.
2020 Streamlined Domestic Offshore Procedures: Background Information and Purpose
The IRS created the Streamlined Domestic Offshore Procedures (sometimes abbreviated as “SDOP”) on June 18, 2014, though the Certification forms became available only a few months later. Since its introduction, Streamlined Domestic Offshore Procedures quickly eclipsed the then-existing IRS Offshore Voluntary Disclosure Program (“OVDP”) and became the most popular offshore voluntary disclosure option.
The main purpose of the Streamlined Domestic Offshore Procedures is to encourage noncompliant US taxpayers to voluntarily resolve their prior non-willful noncompliance with US international tax compliance requirements. These requirements include all US international information returns such as FBAR, Form 8938, Form 5471, Form 8621, Form 3520, Form 926, et cetera.
2020 Streamlined Domestic Offshore Procedures: Main Advantages
In exchange for this voluntary disclosure of their prior tax noncompliance, US taxpayers escape income tax penalties and pay only a one-time Miscellaneous Offshore Penalty with respect to their prior failures to file the required US international information returns. The Miscellaneous Offshore Penalty is usually far below the potential penalties normally associated with failure to file these forms.  In other words, noncompliant taxpayers can greatly reduce their IRS noncompliance penalties through their participation in the Streamlined Domestic Offshore Procedures. This is one of the most important SDOP benefits.
Another advantage of the Streamlined Domestic Offshore Procedures is the limited scope of this voluntary disclosure option. Taxpayers only need to file a small number of amended US tax returns (usually three) and FBARs (usually six) – in other words, the filings are limited to regular statute of limitations without any expansions (as opposed to OVDP which required filings for the past eight years).
Moreover, despite the limited scope of the SDOP filings, taxpayers who utilize the Streamlined Domestic Offshore Procedures are able to fully resolve their prior US international tax noncompliance issues even if these years are not included in the actual SDOP filings. This means that the participating taxpayers are able “wipe the slate clean” – i.e. to erase their prior US international tax noncompliance from the time when it began.
The last major advantage of the Streamlined Domestic Offshore Procedures is that this option only requires to establish non-willfulness rather than reasonable cause.  Non-willfulness is a much easier legal standard to satisfy (be careful, I am not saying that this is an “easy standard”, just an easier one) than reasonable cause.
2020 Streamlined Domestic Offshore Procedures: Main Disadvantages
For the purpose of this article, I will discuss only two major disadvantages to the Streamlined Domestic Offshore Procedures. First, the eligibility requirements are strict. This voluntary disclosure option is open only to taxpayers who filed their US tax returns for prior years and who are able to certify under the penalty of perjury that their prior noncompliance was non-willful. This certification has to be made specifically with respect to unreported foreign income, FBARs and each other international information return.
Most cases have positive and negative facts at the same time. Hence, a lot of taxpayers are actually in the “gray” area between willfulness and non-willfulness.  This means that it is not easy to make a decision on whether a taxpayer is eligible to participate in the Streamlined Domestic Offshore Procedures.  This decision should be done only by an experienced international tax attorney who specializes in this area of law, such as Mr. Eugene Sherayzen of Sherayzen Law Office.
The second major disadvantage of the Streamlined Domestic Offshore Procedures is lack of a definitive closure; there may be a follow-up audit after the IRS processes your voluntary disclosure package.  Unlike OVDP, Streamlined Domestic Offshore Procedures does not offer a Closing Agreement without an audit. This means that going through Streamlined Domestic Offshore Procedures may not be the end of your case; the IRS can actually audit you over the next three years.  If this happens, the audit of your voluntary disclosure will focus not only on the correctness of your disclosure, but also on the truthfulness and correctness of your non-willfulness certification. 
Contact Sherayzen Law Office for Professional Help With 2020 Streamlined Domestic Offshore Procedures
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office for professional help with your offshore voluntary disclosure. We have successfully helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, including Streamlined Domestic Offshore Procedures. We can also help you!
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### IRC §318 Family Attribution | International Tax Law Firm Minnesota
In a previous article, I outlined six main relationship categories of the Internal Revenue Code (“IRC”) §318.  In this article, I will focus on the first of these categories: the IRC §318 family attribution rules.
§318 Family Attribution: General Rule
§318(a)(1)(A) describes the §318 family attribution rule .  It states that an individual is a constructive owner of shares owned (directly and indirectly) by his spouse, children, grandchildren and parents.  While it appears to be simple, this general rule has a number of exceptions and complications.
§318 Family Attribution: Certain Exceptions for Spouses
Under §318(a)(1)(A)(i), ownership of stock held by a spouse who is legally separated under a decree of divorce or separate maintenance is not attributed to her spouse.  However, based on the §318 legislative history and Commissioner v. Ostler, 237 F.2d 501 (9th Cir. 1956), it appears that an interlocutory decree of divorce would not prevent the attribution of stock ownership between spouses, because such decree is not final.
§318 Family Attribution: Special Cases Involving Children and Grandchildren
§318(a)(1)(B) expands the attribution of shares from children to shares held by legally adopted children.  Without legal adoption, however, shares owned by a step-child cannot be attributed to step-parents and step-grandparents. Similarly, absent legal adoption of a step-child, there is no attribution from a step-parent to the step-child. 
Treas. Reg. §1.318-2(b) also makes it clear that there is no attribution of shares owned by grandparents to their grandchildren.  Only shares owned by grandchildren can be attributed to their grandparents.  For example, if a grandfather and a grandson each own 100 shares of X, a C-corporation, the grandfather will be deemed to own 200 shares while the grandson's stock ownership will be based only on his actual ownership of 100 shares.
Also, note that great-grandchildren are not listed under §318(a)(1).  Hence, the shares owned by great-grandchildren are not attributed to great-grandparents; this is different from §267.
§318 Family Attribution: Other Relatives
The §318 definition of family excludes aunts, uncles, nieces, nephews and cousins; this treatment is identical to that of §267.  Moreover, unlike §267(c)(4), there is no attribution of stock between siblings under §318(a)(1). 
§318 Family Attribution: Prohibition of Double Attribution
Treas. Reg. §1.318-4(b) explains that §318 family attribution rules do not allow double attribution of stock among family members. Under §318(a)(5)(B), stock deemed owned through a family member under §318(a)(1)(A) may not be re-attributed to another family member under the family attribution rules of §318.
For example, let’s say that mother M, daughter D and son S each own one-third of the outstanding shares of X corporation; each of them owns 100 shares.  Under §318(a)(1)(A), M owns 100 shares and is deemed to own her children’s 200 shares.  On the other hand, D actually owns 100 shares and is deemed to own her mother’s 100 shares – i.e. 200 shares total; under §318(a)(5)(B), while M is deemed to own 100 of S, there is no re-attribution of S’ 100 shares to D.  In other words, §318(a)(5)(B) prevents the attribution of brother’s stock to his sister through the deemed ownership of brother’s stock by their mother. Also, as explained above, there is no family attribution of stocks between siblings. 
§318 Family Attribution: Special Rule Concerning §302(c)(2)
IRC §302(c)(2) relates to redemptions of corporate stock and contains a special rule concerning the waiver of §318 family attribution of stocks. This section permits the termination of attribution of stock from family members when a shareholder severs ties with the corporation.   The purpose of this rule is to allow such a shareholder to report capital gains instead of dividends upon the redemption of corporate stock.
§318 Family Attribution: Multiple Control of Corporation Possible
The upshot of the §318 rules is the expansion of stock ownership to an extent where multiple related parties may be deemed to be in control of a corporation (and even be deemed as owners of all shares of the corporation) at the same time. 
For example, let’s suppose that there are five family members: husband (H), wife (W), son (S), H’s mother (i.e. grandmother - M) and son of S (i.e. grandson - G). Each of them actually owns 100 shares of corporation Y; there are 500 shares outstanding in total.  Let’s analyze each of these person’s actual and constructive ownership of shares under the §318 family attribution rules.
H owns all 500 shares under the §318 family attribution rules.  He actually owns 100 shares; the rest of the shares are attributed to him from his mother, his wife, son and grandson. 
W owns 400 shares under the §318 family attribution rules. She actually owns 100 shares and constructively owns 300 shares that belong to her husband, son and grandson.  However, she does not own 100 shares owned by her mother-in-law and the re-attribution of ownership of these shares through her husband is prevented by §318(a)(5)(B).
M owns 300 shares under the §318 family attribution rules. She actually owns 100 shares and is deemed to own 100 shares owned by her son and 100 shares owned by her grandson.  M, however, is not deemed to own stocks held by her daughter-in-law W and her great-grandson G.
S owns 400 shares under the §318 family attribution rules. He actually owns 100 shares and constructively owns 200 shares owned by his parents and 100 shares owned by his son. S, however, does not constructively own shares held by his grandmother.
Finally, G owns 200 shares under the §318 family attribution rules. He actually owns 100 shares and constructively owns 100 shares held by his father S. G, however, does not constructively own shares held by his grandparents H and M as well as his great-grandmother M.
Thus, even though each family member actually owns only 100 shares, four of them (out of the total five) are deemed to be in control of the corporation and H is deemed to own the entire corporation.  If we transfer this scenario to US international tax law, we can immediately see that the application of §318 constructive ownership rules through family attribution may greatly increase the tax compliance burden for this family.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
IRC §318 is but a tiny part of the incredible voluminous US domestic and international tax law.  US international tax law is not only very complex, but it is also very severe with respect to noncompliant taxpayers.  In other words, it is very easy to get yourself into trouble with respect to US international tax compliance and, once this happens, you may be subject to high IRS penalties.
In order to avoid such an undesirable result, you need the help of Sherayzen Law Office.  We are a highly-experienced US international tax law firm that has helped clients from over 70 countries with their US international tax compliance. We can help you!
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### 2020 Offshore Voluntary Disclosure Options | US International Tax Lawyers
As the new year 2020 begins, it is important for US taxpayers with undisclosed foreign assets to consider their 2020 offshore voluntary disclosure options. Unlike last year, there have not been any drastic changes to the voluntary disclosure options since 2019. In this article, I would like to generally explore the 2020 offshore voluntary disclosure options available to US taxpayers who wish to reduce their IRS penalties by voluntarily resolving their prior US tax noncompliance concerning foreign assets and foreign income.
2020 Offshore Voluntary Disclosure Options: Streamlined Domestic Offshore Procedures
The Streamlined Domestic Offshore Procedures (“SDOP”) is currently the flagship voluntary disclosure option for US taxpayers who reside in the United States. SDOP is a highly beneficial voluntary disclosure option to non-willful taxpayers: it is simple, limited (in terms of the voluntary disclosure period for which tax returns and FBARs must be filed) and mild (in terms of its penalty structure). There are some drawbacks to SDOP, such as the imposition of the Miscellaneous Offshore Penalty on income-tax compliant foreign accounts, but the benefits offered by this option outweigh its deficiencies for most taxpayers.
The main challenge of SDOP is its requirement that a taxpayer certifies under the penalty of perjury that he was non-willful with respect to his prior income tax noncompliance, FBAR noncompliance and noncompliance with any other US international information tax return (such as Form 8938, 3520, 5471, et cetera). This is a huge problem for willful taxpayers and taxpayers who are in the “gray” area between willfulness and non-willfulness. It will be up to your international tax lawyer to make the determination on whether you are able to make this certification.
2020 Offshore Voluntary Disclosure Options: Streamlined Foreign Offshore Procedures
Streamlined Foreign Offshore Procedures (“SFOP”) is very similar to SDOP (in fact, both options were created in 2014), but it is even more beneficial to taxpayers who are able to satisfy SFOP’s eligibility requirements – this is a true amnesty program, because its participants do not pay IRS penalties of any kind, even on income tax due (taxpayers only need to pay the interest on additional tax due). Moreover, SFOP preserves SDOP’s non-invasive and limited scope of voluntary disclosure.
SFOP, however, is available to a much more limited number of US taxpayers who are able to satisfy its eligibility requirements, particularly those related to non-willfulness certification and physical presence outside of the United States. Again, you should contact Sherayzen Law Office to help you determine whether you meet the eligibility requirements of SFOP.
2020 Offshore Voluntary Disclosure Options: Delinquent FBAR Submission Procedures
Delinquent FBAR Submission Procedures (“DFSP”) is another voluntary disclosure option that fully eliminates IRS penalties. This is not a new option; in fact, in one form or another, it has always existed within the IRS procedures. Prior to 2014, it was even written into the OVDP (IRS Offshore Voluntary Disclosure Program) as FAQ#17.
While DFSP is highly beneficial to noncompliant US taxpayers, it is available to even fewer number of taxpayers than those who are eligible for SDOP and SFOP. This is the case due to two factors. First, DFSP has a very narrow scope – it applies only to FBARs. Second, DFSP has extremely strict eligibility requirements; even de minimis income tax noncompliance will deprive a taxpayer of the ability to use this option.
2020 Offshore Voluntary Disclosure Options: Delinquent International Information Return Submission Procedures
Delinquent International Information Return Submission Procedures (“DIIRSP”) has a very similar history to DFSP. In fact, it was “codified” into OVDP rules as FAQ#18. Similarly to DFSP, DIIRSP also offers the possibility of escaping IRS Penalties. DIIRSP has a broader scope than DFSP and applies to international information returns other than FBAR, such as Form 8938, 3520, 5471, 8865, 926, et cetera.
Since it turned into an independent voluntary disclosure option in 2014, DIIRSP’s eligibility requirements became much harsher. US taxpayers are now required to provide a reasonable cause explanation in order to escape IRS penalties under this option. On the other hand, the fact that there may be unreported income associated with international information returns is not an impediment by itself to participation in DIIRSP.
2020 Offshore Voluntary Disclosure Options: Modified IRS Traditional Voluntary Disclosure Program
The traditional IRS Offshore Voluntary Disclosure Program (“TVDP”) has existed for a very long time. However, it faded into a complete obscurity once the IRS opened its first major OVDP option in 2009. The closure of 2014 OVDP in September of 2018 has brought TVDP back to life, but in a modified format.
On November 20, 2018, the IRS has completely revamped the TVDP’s procedural structure and clarified the penalty imposition rules. I am almost tempted to call this new version of TVDP as “2018 TVDP”!
The main benefit of TVDP is that it is now the main voluntary disclosure option for taxpayers who willfully violated their US tax obligations. If you are willful taxpayer, contact Sherayzen Law Office to explore your voluntary disclosure option under the TVDP.
2020 Offshore Voluntary Disclosure Options: Reasonable Cause Disclosure
Since 2014, the popularity of Reasonable Cause disclosure (also known as “Noisy Disclosure”) has declined substantially due to the introduction of SDOP and SFOP.  Nevertheless, Reasonable Cause disclosure continues to be a highly important voluntary disclosure alternative to official IRS voluntary disclosure options. In fact, the closure of the 2014 OVDP in September of 2018 has led to some resurgence of Reasonable Cause disclosures.  
Reasonable Cause disclosure is based on the actual statutory language; it is not part of any official IRS program. Special care must be taken in using this option, because this is a high-risk, high-reward option. If a taxpayer is able to satisfy his high burden of proof, then, he will be able to avoid IRS penalties. If the IRS audits the Reasonable Cause disclosure and disagrees, this taxpayer may face significant IRS penalties and, potentially, years of IRS litigation.
Contact Sherayzen Law Office for Professional Analysis of Your 2020 Offshore Voluntary Disclosure Options
If you have undisclosed foreign assets, contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers from over 70 countries with their voluntary disclosures of foreign assets to the IRS, and we can help you!
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### 2019 Tax Filing Season for Individual Filers Opens on January 27 2020
On January 6, 2020, the IRS announced that the 2019 tax filing season will commence on Monday, January 27, 2020. In other words, on that date, the IRS will begin accepting and processing the 2019 tax returns.
This year the deadline for the filing of the 2019 tax returns as well as any payment of taxes owed is April 15, 2020. The IRS expects that individual taxpayers will file more than 150 million tax returns for the tax year 2019; the vast majority of them should come in prior to the April deadline. 
This is not the case, however, for US taxpayers with exposure to international tax requirements.  Usually, most of these taxpayers file extensions in order to properly prepare all of the required international information returns by the extended deadline in October.  Often, such tax filing extensions are necessary in order to obtain the necessary information from foreign countries which may operate on a fiscal year rather than a calendar year.  However, even in such cases, taxpayers are expected to pay at least 90% of the tax owed by April 15, 2020.
Moreover, it should be mentioned that taxpayers who reside overseas receive an automatic tax filing extension. For such taxpayers, the 2019 tax filing season will commence also on January 27, 2020, but their tax return filing deadline is June 15, 2020.
The IRS is certain that it will be ready for the 2019 tax filing season by January 27, 2020. In other words, the agency believes that it will not only be able to process the returns smoothly, but all of its security systems will be operational by that date.  The IRS also believes that, by January 27, 2020, it will address the potential impact of recent tax legislation on 2019 tax returns
The IRS encourages everyone to e-file their 2019 tax returns.  This, however, is not always possible for US taxpayers who have to file international information returns due to software limitations. 
Contact Sherayzen Law Office for Professional Help With Your 2019 Tax Filing Season If You Have To Comply With US International Tax Filing Requirements
Sherayzen Law Office helps US and foreign persons with their US international tax compliance requirements, including the filing of all required international information returns such as FBAR, FATCA Form 8938, Form 3520, Form 3520-A, Form 5471, Form 8865, Form 8858, Form 926 and other relevant forms.  
With respect to taxpayers who have not been in full compliance with these requirements in the past, Sherayzen Law Office helps you to choose, prepare and file the relevant offshore voluntary disclosure option, including Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures, Delinquent FBAR Submission Procedures, Reasonable Cause Noisy Disclosures and Modified IRS Traditional Voluntary Disclosures. 
 Contact Us Today to Schedule Your Confidential Consultation!

### Partnership Related Party Loss Disallowance | Tax Lawyer & Attorney
In a series of articles concerning Internal Revenue Code (“IRC”) §267, I discussed various rules concerning related party loss disallowance.  In this article, I would like to focus on special rules concerning partnership related party loss disallowance.
Partnership Related Party Loss Disallowance: Main IRC Provisions
Three IRC sections are most relevant to special rules of partnership related party loss disallowance. §707(b)(1) governs the disallowance of losses with respect to transactions between a partnership and its members as well as certain transactions between partnerships with common partners. §267(a)(1) contains the main rule concerning losses on sales or exchanges between a partnership and any person other than a member of the partnership (a third party), including another partnership.  Finally, there are special provisions under §267(a)(2) which are applicable to partnerships. Let’s discuss each of these provisions in more detail.
Partnership Related Party Loss Disallowance: §707(b)(1)
§707(b)(1) disallows a loss from a direct or indirect sale or exchange of property (other than a partnership interest) when such sale or exchange occurs between: “(A) a partnership and a person owning, directly or indirectly, more than 50 percent of the capital interest, or the profits interest, in such partnership, or (B) two partnerships in which the same persons own, directly or indirectly, more than 50 percent of the capital interests or profits interests.”
It is important to note that the ownership the capital or profits interest in a partnership by a partner may be direct or indirect. For example, in TAM 201737011, the IRS disallowed the losses of a  hedge fund upon its transfer of securities to trading accounts owned by taxpayer who held greater than 50% interest in capital or profits of hedge fund.
Furthermore, it should be noted that §707(b)(1) incorporates §267(d) in order to mitigate the impact of loss disallowance. This means that the transferee may offset future gain on a sale or exchange of the affected property by the disallowed loss.
Partnership Related Party Loss Disallowance: Expansion of §707(b)(1) to Related Persons
Prior to 1985, §707(b)(1) applied strictly to partners.  In September of 1985, the IRS dramatically expanded the application of §707(b)(1) to certain persons related to partners by incorporating the constructive ownership rules of §267(c)(1), §267(c)(2), §267(c)(4) and §267(c)(5). “Under these rules, ownership of a capital or profits interest in a partnership may be attributed to a person who is not a partner as defined in section 761(b) in order that another partner may be considered the constructive owner of such interest under section 267(c).” Treas. Reg. §1.707-1(b)(3). Note, however, that §707(b)(1)(A) does not apply to a constructive owner of a partnership interest since he is not a partner as defined in §761(b). Id.
Treas. Reg. §1.707-1(b)(3) provides an illustration of this expansion of §707(b)(1):
“For example, where trust T is a partner in the partnership ABT, and AW, A's wife, is the sole beneficiary of the trust, the ownership of a capital and profits interest in the partnership by T will be attributed to AW only for the purpose of further attributing the ownership of such interest to A. See section 267(c) (1) and (5). If A, B, and T are equal partners, then A will be considered as owning more than 50 percent of the capital and profits interest in the partnership, and losses on transactions between him and the partnership will be disallowed by section 707(b)(1)(A). However, a loss sustained by AW on a sale or exchange of property with the partnership would not be disallowed by section 707, but will be disallowed to the extent provided in paragraph (b) of § 1.267(b)-1.”
In this context, it should be noted that the validity of Treas. Reg. §1.267(b)-1(b)(1) is currently in question. There is definitely an unsettled conflict between these regulations and the expanded version of §707(b)(1).
Partnership Related Party Loss Disallowance: Transactions Between Partnerships and Third Parties
As it was mentioned above, the IRC §267(a)(1) contains a special rule concerning losses which occur between between a partnership and a third party (i.e. someone other than a partner).   Under this rule, the transaction is treated as if it happened between the third party and individual members of the partnership; this is a type of a look-through rule.
The disallowance rules of §267 govern as long as the third party and a partner are considered to be related parties under any of the relationships described in §267(b).  In other words, if 267(b) applies in this context, then no deductions will be allowed with respect to transactions between the third party and the partnership “ (i) To the related partner to the extent of his distributive share of partnership deductions for losses or unpaid expenses or interest resulting from such transactions, and (ii) To the other person to the extent the related partner acquires an interest in any property sold to or exchanged with the partnership by such other person at a loss, or to the extent of the related partner's distributive share of the unpaid expenses or interest payable to the partnership by the other person as a result of such transaction.”  Treas. Reg. §1.267(b)-1(b)(1).
Partnership Related Party Loss Disallowance: Transactions Between Certain Partnerships
As a result of the Tax Reform Act of 1984, §267(a)(1) rules were expanded to disallow loss realized on transactions between certain partnerships. “Certain partnerships” include two types of partnerships.  
First, partnerships that have one or more common partners.  A “common partner” is a partner who owns directly, indirectly, or constructively any capital or profits interest in each of the partnerships. Treas. Reg. §1.267(a)-2T(c) Q&A-2.
Second, a situation where a partner in one partnership and one or more partners in another partnership are related parties within the meaning of §267(b). Id. 
The amount of the disallowed loss is generally the greater of: (1) either the amount that would have been disallowed if the transaction had occurred between the “selling partnership and the separate partners of the purchasing partnership (in proportion to their respective interests in the purchasing partnership)”; or (2) the amount that would have been disallowed if the transaction had occurred between “the separate partners of the selling partnership (in proportion to their respective interests in the selling partnership) and the purchasing partnership.” Id. There is an exception: there will be no disallowance of loss if the disallowed amount is less than 5% of the total loss from the sale or exchange. Id.
It should be noted that §267(a)(1) also applies to S-corporations. §267(a)(1) disallows losses realized in transactions between an S corporation and its shareholder holding more than 50%-in-value of the stock.
Partnership Related Party Loss Disallowance: Deferral of a Deductible Payment Under §267(a)(2)
The Tax Reform Act of 1984 affected not only §267(a)(1), but also expanded the deferral of an otherwise deductible payment between certain partnerships under §267(a)(2).  These “certain partnerships” are the same as those described in the expanded rules of §267(a)(1): (i) partnerships that have one or more common partners and (ii) a partner in one partnership and one or more partners in another partnership are related parties within the meaning of §267(b) (without §267(e) modification). See Treas. Reg. §1.267(a)-2T(c) Q&A-3.
The amount of deferred deduction is the greater of: (1) the amount that would have been deferred if the transaction that gave rise to the otherwise allowable deduction had occurred “between the payor partnership and the separate partners of the payee partnership (in proportion to their respective interests in the payee partnership)”, or (2) the amount that would have been deferred if such transaction had occurred “between the separate partners of the payor partnership (in proportion to their respective interests in the payor partnership) and the payee partnership.” Id.  Similarly to 267(a)(1), there is an exception: no deferral shall occur if the amount that would be deferred is less than 5% of the otherwise allowable deduction. Id.
It should be noted that the status of some provision of the expanded §267(a)(2) is unclear at this point, because §707(b)(1) was amended in 1986 specifically in reference to §267(a)(2) income-deduction matching rules.  As amended, §707(b)(1) state that partnerships in which the same persons own more than 50% of the capital interest or profits interests are treated as related under §267(b).  It appears that, with respect to such partnerships, §707(b)(1) overrides the rules described in Reg. §1.267(a)-2T(c) Q&A-3.
Partnership Related Party Loss Disallowance: Additional Deferrals Under §267(a)(2)
With respect to the §267(a)(2) limitations on deductions for payment to related persons, a partnership and its members are treated as related persons under §267(e). As already described above, §707(b)(1) (last sentence) extended this rule to transactions between commonly owned partnerships. 
Additionally, under §§267(e)(1)(C) and §267(e)(1)(D), a partnership and a person owning any profits or capital interest in a partnership in which the partnership also holds such an interest (and any persons related to these parties within the meaning of §707(b)(1) or §267(b)) are also related persons. 
Finally, §267(a)(2) also applies to S-corporations in an almost identical way as it applies to regular partnerships: the deduction for a payment to a related person is delayed until the recipient includes the payment in his gross income. As a result of the Tax Reform Act of 1984, §267(e) treats an S-corporation and any of its shareholders (regardless of amount of stock owned) as related persons. 
§§267(e)(1)(C) and §267(e)(1)(D) further expand the definition of related persons to situations where a transaction occurs between an S-corporation and a person owning any profits or capital interest in a partnership in which the S-corporation also holds such an interest (and any persons related to these parties within the meaning of §707(b)(1) or §267(b)).
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US tax law concerning partnerships and S-corporations is incredibly complex. The rules concerning the partnership related party loss disallowance is just one example of this complexity. 
This is why you need the professional help of the experienced tax law firm of Sherayzen Law Office.  We have helped clients throughout the United States and the world with US tax laws concerning partnerships (domestic and foreign) and S-corporations.  We can help you!
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### §318 Relationship Categories | International Business Tax Lawyer & Attorney
In a previous article I discussed the importance of the Internal Revenue Code (“IRC”) §318 constructive stock ownership rules.  Today, I would like to introduce the readers to the various §318 relationship categories – i.e. what types of taxpayers are affected by this section’s constructive ownership rules. 
§318 Relationship Categories: Related Persons
Congress created IRC §318 constructive ownership rules to prevent or minimize the possibility of using business transactions between related persons for tax avoidance purposes.  In other words, in order for §318 to be relevant, there must be some type of a close relationship between persons engaged in a business transaction. 
It is important to point out that one should not confuse §267 definition of related persons with the one described in §318. These are two completely separate sets of rules that apply to different situations.
§318 Relationship Categories: Six Main Categories
§318 deals specifically with six main categories of related individuals and entities.  I will list them here with only a general description; in future articles, I will address each of these §318 relationship categories specifically.
Family members: certain family members are treated as related persons for §318.  Again, the §318 definition of “family” should not be confused with the §267 definition.Partnerships and partners: unlike §267, the constructive ownership rules of §318 are both “upstream” and “downstream”.  In other words, the attribution of stock ownership works both ways: from partners to partnership and from partnership to partners.  Additionally, one must remember that an S-corporation and its shareholders are treated respectively as a partnership and partners for the purposes of §318.Estates and beneficiaries: the IRS §318 constructive ownership rules with respect to estates and beneficiaries are quite unique and invasive.  They also work downstream and upstream – i.e. the stocks owned by estate are attributed to its beneficiaries and vice-versa.  Trusts and beneficiaries: again, the stock ownership attribution rules of §318 between a trust and its beneficiaries can be downstream and upstream.  Stock owned, directly or indirectly, by or for a trust is considered owned by its beneficiaries in proportion to their actuarial interests in the trust. The upstream relationship is more complex: while generally all stocks owned directly or indirectly by a beneficiary of a trust is considered owned by the trust, there are important exceptions.Corporations and shareholders: surprisingly, §318 attribution rules between a corporation and its shareholders also contain both downstream and upstream provisions.  The application of these rules, however, is limited to persons who own directly and indirectly 50% or more of the value of stocks in the corporation. Again, the corporate attribution rules under §318 apply only to C-corporations; S-corporations are treated as partnerships for the purposes of this section.Holders of stock options: unlike §267, the constructive stock ownership rules of §318 are expanded to options.  §318(a)(4) classifies a holder of an option to acquire stock as the owner of that stock.  There are detailed rules for defining what an “option” is for the §318 purposes. Interestingly, the stock option attribution rule supersedes the family member attribution rules (which often results in a more extensive constructive ownership).
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US business tax law is incredibly complex.  In fact, an ordinary taxpayer who attempts to decipher it on his own is likely to get himself into deep trouble; this is especially the case, if one deals with the international aspects of US business tax law.
This is why you need to contact Sherayzen Law Office for professional help.  We have helped business owners around the world with their US tax planning and US tax compliance, and we can help you!
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### IRC §318 Importance | International Tax Lawyer & Attorney
It is difficult to overstate the significant role the Internal Revenue Code (“IRC”) §318 plays in US corporate tax law and US international tax law.  In this article, I will explain the §318 importance and list out major IRC provisions which reference §318.
IRC §318 Importance: Fundamental Purpose
§318 sets forth the circumstances when the ownership of stock is attributed from one person or entity to another. This is one of the most important sections of the Internal Revenue Code, because it contains a set of constructive stock ownership rules which affect a bewildering variety of IRC tax provisions.
It is important to point out that §318 constructive ownership rules do not apply throughout the IRC. Rather, §318 applies only when it is expressly adopted by a specific tax section.
IRC §318 Importance: Non-Exclusive List of IRC Sections
The IRC §318 importance is extensive in both domestic and international tax provisions of the Internal Revenue Code.  The CFC (controlled foreign corporation) rules, FIRPTA, FTC (foreign tax credit rules), BEAT, FATCA and so on – all of these US international tax laws adopted §318 for at least one purpose.  The §318 importance can even be seen in the 2017 tax reform (for example, the FDII rules).
The following is a non-exclusive list of major IRC sections which adopted the §318 constructive stock ownership rules:
• §59A(g)(3) (related party under BEAT rules) • §105(h)(5)(B) • §168(h)(6)(F)(iii)(III) • §250(b)(5)(D) (sales or services to related party under FDII rules by reference to §954(d)(3) and §958) • §263A(e)(2)(B)(ii) • §267A(b)(2) (related party amounts in hybrid transaction by reference to §954(d)(3) and §958) • §269A(b)(2) • §269B(e)(2)(B) • §301(e)(2) • §302(c) (stock redemptions) • §304 (redemptions by related corporations) • §306(b)(1)(A) (disposition or redemption of §306 stock) • §338(h)(3) • §355(d)(8)(A) • §356(a)(2) • §367(c)(2) • §382(l)(3)(A) (net operating loss carryovers) • §409(n)(1) • §409(p)(3)(B) • §414(m)(6)(B) • §416(i)(1)(B) (key employee for top heavy plans) • §441(i)(2)(B) • §453(f)(1)(A) • §465(c)(7)(D)(iii), §465(c)(7)(E)(i) (at-risk loss limitations) • §469(j)(2)(B) (passive activity loss limitations) • §512(b)(13)(D)(ii) (unrelated business taxable income from controlled entity) • §856(d)(5) (REIT rental income) • §871(h)(3)(C) (portfolio interest withholding tax exemption) • §881(b)(3)(B) (portfolio interest withholding tax exemption) • §897(c)(6)(C) (FIRPTA rules) • §898(b)(2)(B) (adopting §958‘s modified §318 rules for determination of foreign corporation's tax year) • §904(h)(6) (foreign tax credit re-sourcing rules) • §951(b) (U.S. shareholder of controlled foreign corporation (CFC) by reference to §958(b)) • §954(d)(3) (CFC related party rules by reference to §958) • §958(b) (CFC rules) • §1042(b)(2) • §1060(e)(2)(B) • §1061(d)(2)(A) (transfer of partnership interest received for performance of services) • §1239(b)(2) • §1372(b) • §1471(e) (imposing FATCA reporting requirements on foreign financial institution members of an expanded affiliated group determined under §954(d)(3)’s control test, which adopts §958‘s modified §318 rules) • §2036(b)(2) • §6038(e)(2) (information reporting for controlled foreign corporations) • §6038A(c)(5) • §7704(d)(3)(B)
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Trying to comply with the extremely complex provisions of US international tax law on your own is even worse than playing Russian roulette.  In all likelihood, you will soon find yourself in the ever-deepening pit of legal problems and IRS penalties from which it will be very difficult to extricate yourself. 
This is why, if you are US taxpayer with US international tax law issues, you need to contact Sherayzen Law Office for professional help.  We have helped hundreds of US taxpayers around the globe to bring themselves into full compliance with US tax laws, and we can help you!
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### The IRS Hiring Spree in 2019 and 2020 | Tax Lawyer & Attorney
The IRS stated in December of 2019 that it hired about 9,500 people during the fiscal year 2019 and it is trying to add another about 5,300 employees as soon as possible. This new IRS hiring spree is meant to reverse the long-term declining trend in IRS employment.
The IRS Hiring Spree: 2009-2018 Trend
Between 2009 and 2017, the IRS suffered a spectacular loss in employees.  From about 95,000 employees in 2009, the number of employees dropped to less than 75,000 in 2018.  In other words, the IRS lost about 20,000 employees during these years.  These losses were mostly due to budget cuts.
The IRS Hiring Spree: 2019-2020 Trend Change
While the IRS did not receive all of the funds it requested, the Trump administration was able to secure sufficient funds for the agency to start hiring again.  The fiscal year 2019 saw a complete reversal in the trend with about 9,500 employees added.  This is definitely not the end of the IRS hiring spree – the IRS is planning to add another 5,300 employees in early 2020.
The IRS Hiring Spree: What It Means to US Taxpayers
This huge hiring spree at the IRS will have a direct impact on US taxpayers.  On the one hand, the IRS customer service should improve with the larger number of representatives. 
On the other hand, such a huge inflow of future IRS agents means an inevitable rise in IRS enforcement efforts, particularly IRS audits.  Reinforced by hundreds of additional examiners, the IRS will be able to expand audits everywhere, including international tax audits concerning FBAR and FATCA compliance. 
US taxpayers with undisclosed foreign assets and foreign income should keep in mind this impending wave of IRS FBAR and FATCA audits.  Rather than just wait for the IRS to discover their prior noncompliance with US tax laws, these taxpayers should explore their offshore voluntary disclosure options with an experienced international tax attorney as soon as possible.
Contact Sherayzen Law Office for Professional Help with IRS International Tax Audits
Mr. Eugene Sherayzen is a highly experienced international tax attorney and owner of international tax law firm, Sherayzen Law Office, Ltd.  He and his law firm have successfully helped hundreds of US taxpayers to resolve their prior noncompliance with US international tax laws.  We can help you!
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### §267 Family Attribution | International Tax Lawyer & Attorney
In a previous article, I introduced the constructive ownership rules of the Internal Revenue Code (“IRC”) §267.  Today, I would like to discuss one of them in more detail – §267 family attribution.
§267 Family Attribution: General Rule
The §267 family attribution rule is described in §267(c)(2).  It states that, for the purposes of determining whether an individual is a related party under §267, this individual is considered as a constructive owner of stocks owned, directly or indirectly, by or for his family.
§267 Family Attribution: Who is a Family Member
The critical question for §267(c)(2) is the definition of family. §267(c)(4) provides the answer to this question: “the family of an individual shall include only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants.”
Under Treas. Reg. §1.267(c)-1(a)(4), if any such family relationship was formed through legal adoption, such adoption is given full legal force for the purposes of §267(c)(2).  “Ancestors” here include parents and grandparents; it appears that great-grandparents should also be family members for the purposes of §267 family member attribution. Id.  The term “lineal descendants” includes children and grandchildren. Id.
Neither §267 and relevant Treasury regulations contain any reference to aunts and uncles.  There is, however, a reason to believe that aunts and uncles are not family members for the purpose of §267(c)(2).  This argument is based on the fact that, prior to its repeal in 2004, the definition of family in §544(a)(2) (which was part of the foreign personal holding company provisions) was identical to that of §267(c)(4).  The IRS held in Rev. Rul. 59-43 that aunts and uncles are not family members for the purposes of §544(a)(2); hence, the same logic should apply to §267(c)(2).
Furthermore, neither step-parents nor step-children are family members for the purposes of §267(c)(2) (see Rev. Rul. 71-50 and DeBoer v. Commissioner, 16 T.C. 662 (1951), aff'd per curiam, 194 F.2d 289 (2d Cir. 1952)).  Based on Tilles v. Commissioner, 38 B.T.A. 545 (1938), aff'd, 113 F.2d 907 (8th Cir. 1940), nieces or nephews are also not family members.  Nor are the in-laws.
§267 Family Attribution: Attribution and Limitations
Under the §267 family attribution rule, any family member will be the constructive owner of any other family member’s stocks. This will be the case even if the person to whom the stock ownership is attributed has no direct or even indirect ownership of stock in the corporation (see Reg. §1.267(c)-1(a)(2)). 
On the other hand, §267(c)(5) prevents the double-attribution of stock.  In other words, a stock constructively owned under the family attribution rules may not be owned by another person under §267(c)(2).  For example, if stock ownership is attributed to an individual’s wife under §267(c)(2), §267(c)(5) prevents further attribution of stock ownership to the wife’s mother.
§267 Family Attribution: Other Doctrines Should Be Considered
It is important to emphasize that a lawyer should always be on the lookout for other doctrines which may intervene with the attribution under §267(c)(2).  For example, where a wife transfers property to her husband in anticipation of the sale of that property by the husband to her brother, §267(c)(5) double-attribution limitation may be ignored by the application of the “substance over form” principle by a court.  The “step transaction” doctrine should always be a concern in such transactions.
Contact Sherayzen Law Office for Professional Help With US Tax Law
US tax law is extremely complex. An ordinary person will simply get lost in this labyrinth of tax rules, exceptions and requirements. Once you get into trouble with US tax law, it is much more difficult and expensive to extricate yourself from it due to high IRS penalties.
This is why it is important to contact Sherayzen Law Office for professional help with US tax law as soon as possible. We have helped hundreds of US taxpayers around the world to successfully resolve their US tax compliance and US tax planning issues. We can help you!
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### §267 Entity-to-Member Attribution | International Tax Lawyer & Attorney
In a previous article, I introduced the Internal Revenue Code (“IRC”) §267 constructive ownership rules. Today, I would like to focus specifically on the §267 entity-to-member attribution rule.
§267 Entity-to-Member Attribution: General Rule
§267(c)(1) describes the  §267 entity-to-member attribution rule.  It states that stocks owned by a corporation, partnership, estate or trust will be treated as owned proportionately by its shareholders, partners, or beneficiaries.
Let’s use an example to explain §267(c)(1).  Let’s imagine that Peter and Mary (both US citizens who are not family members within the meaning of §267(c)(4)) own 70% and 30% respectively of shares of X, a C-corporation organized in South Dakota.  X owns 100% of shares of N, a Nevada C-corporation.
In this situation, under §267(c)(1), Peter and Mary constructively own 70% and 30% of shares of N. Hence, pursuant to §267(b)(2), Peter is considered to be a related person with respect to X and N corporations due to actual constructive ownership of 70% of shares of both corporations (since this is higher than the 50%-of-value threshold demanded by §267(b)(2)).
Also, note that X and N are related persons, because, pursuant to §267(b)(3), they are members of the same controlled group. §267(b)(3) relies on §267(f) for the definition of the “controlled group”; §267(f), in turn, mostly adopts §1563 definition of controlled group (the main difference is that §267(f) reduces the required level of ownership to more than 50% of voting power and value of the stock as opposed to more than 80% demanded by §1563).
§267 Entity-to-Member Attribution: How Stock is Attributed
The §267(c)(1) is a downstream attribution rule. This means that the attribution of stock flows only in one direction – from entity to the shareholder, partner or beneficiary. There is no “upstream attribution” from shareholder, partner, or beneficiary to the corporation, partnership, estate or trust. Note that this differs from the attribution rules for many corporate transactions governed by §318. 
Section 267(c)(1) fails to specify the manner in which attributed stock ownership should be apportioned.  The most convincing authority for the apportionment of attributed stocks can be found in case law, particularly Hickman v. Commissioner, 30 T.C. Memo 1972-208. In that case, the Tax Court determined that stock would be attributed from a trust to its beneficiaries proportionately based on the fair market value without any discount for indirect ownership. Actuarial value apportionment was also rejected.
§267 Entity-to-Member Attribution: Chain Ownership
It is important to understand that stock constructively owned by a shareholder, partner, or beneficiary pursuant to §267(c)(1) is treated as actually owned for the purposes of further attribution.  In other words, the constructive ownership of a shareholder, partner or beneficiary may be further attributed to others. Moreover, such attribution does not have to be under §267(c)(1); rather, any other attribution category can be used (for example, family member stock attribution).
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US tax law is extremely complex. An ordinary person will simply get lost in this labyrinth of tax rules, exceptions and requirements. Once you get into trouble with US tax law, it is much more difficult and expensive to extricate yourself from it due to high IRS penalties.
This is why it is important to contact Sherayzen Law Office for professional help with US tax law as soon as possible. We have helped hundreds of US taxpayers around the world to successfully resolve their US tax compliance and US tax planning issues. We can help you!
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### §267 Constructive Ownership Rules | International Tax Lawyer & Attorney
In a previous article, I discussed the related person definition for the purposes of the Internal Revenue Code (“IRC”) §267.  That article, however, focused on the definition itself rather than on a host of supplementary rules necessary to fully understand this definition.  In this article, I would like to discuss one set of these rules – §267 constructive ownership rules.
§267 Constructive Ownership Rules: Purpose of §267(c)
During my initial discussion of the §267 related person definition, I focused only on the actual ownership by related persons.  Congress, however, realized that the actual ownership limitations can be easily circumvented by utilizing individuals and entities closely connected to the related persons. 
Hence, it enacted §267(c) and §267(e)(3) to expand the application of the related person definition to include the ownership by closely-connected individuals and entities.  In other words, even where an individual or entity does not meet any of the §267(a) and (b) tests through his actual ownership, these tests may be met when his actual ownership is added to other persons’ ownership through the operation of §267(c) and §267(e) rules. These are the so-called §267 constructive ownership rules.
§267 Constructive Ownership Rules: Two Parts of the Rules
As explained in a previous article, the related person definition can be found in two different parts of §267 – thirteen categories of §267(b) and one category of §267(a)(2).  Similarly, the constructive ownership rules are divided into two separate sections: §267(c) applies to the entire section and §267(e)(3) applies only to §267(a)(2).
§267 Constructive Ownership Rules: Three General Types of Ownership Attribution
§267(c) sets forth three general types of constructive ownership attribution rules:
Entity-to-owner or beneficiary stock attribution – i.e. “stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries” §267(c)(1). I wish to emphasize there that §267(c)(1) applies to any type of an entity: corporations, partnerships, estates and trusts;Family member stock attribution – i.e. stocks owned by family members are treated as constructively owned by the related person (see §267(c)(2)). §267(c)(4) defines “family of an individual” to include: “only his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants”; andPartner-to-partner stock attribution – i.e. “an individual owning … any stock in a corporation shall be considered as owning the stock owned, directly or indirectly, by or for his partner” §267(c)(3).  This is a unique rule which is rarely found among other constructive ownership rules of the Internal Revenue Code.
§267 Constructive Ownership Rules: Chain Ownership Attribution
Generally, a taxpayer who is deemed to own stock under the §267 constructive ownership rules is treated as the actual owner of the stock. In other words, the stock that he constructively owns can be used for further attribution of ownership to others – this is the so-called “chain ownership attribution”. 
There are three exceptions to this rule.  I will mention here only one: §267(c)(5) limits attribution of ownership through a chain of related persons in the case of family member or partnership attribution.
§267 Constructive Ownership Rules: Fourth Type of Ownership Attribution
§267(e)(3) sets forth special constructive ownership rules for determining ownership of a capital or profits interest in a partnership; as it was mentioned above, this rule applies only to the deduction limitation rules of §267(a)(2). This fourth type of ownership attribution is basically an exception to the first three types of §267(c).  
§267(e)(3) states that, for the purposes of determining ownership of a capital interest or profits interest of a partnership, §267(c) constructive ownership rules apply except that: (1) partner-to-partner stock attribution of §267(c)(3) shall not apply, and (2) with respect to interest owned (directly and indirectly) by and for C-corporation “shall be considered as owned by or for any shareholder only if such shareholder owns (directly or indirectly) 5 percent or more in value of the stock of such corporation” §267(e)(3)(B).
Contact Sherayzen Law Office for Professional Help With US Tax Law
US tax law is extremely complex, especially US international tax law.  An ordinary person will simply get lost in this labyrinth of tax rules, exceptions and requirements.  Once you get into trouble with US tax law, it is much more difficult and expensive to extricate yourself from it due to high IRS penalties.
This is why it is important to contact Sherayzen Law Office for professional help with US tax law as soon as possible.  We have helped hundreds of US taxpayers around the world to successfully resolve their US tax compliance and US tax planning issues.  We can help you!
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### Related Person Definition - IRC §267 | International Tax Lawyer & Attorney
Internal Revenue Code (“IRC”) §267 imposes significant restrictions on the ability of related persons to recognize loss from a transaction that involves a sale or exchange of property.  Hence, it is important for a tax attorney who advises on such a transaction to understand the concept of a “related person” in order to properly advise his client.  In this article, I will discuss the general related person definition; in a future article, I will discuss the related person definition in a more specific context.
Related Person Definition: IRC §267(b) and IRC §267(a)(2)
The related person definition is set forth in two part of IRC §267.  The first and most comprehensive description of related persons can be found in IRC §267(b) – this description is used throughout IRC §267.  The second part is found §267(a)(2) and it applies for the purposes of §267(a)(2) only.  Let’s discuss both parts of the related party definition in more detail.
Related Person Definition: Thirteen Categories of IRC §267(b)
IRC §267(b) describes the following thirteen categories of related persons:
1). Family Members;
2). A corporation and an individual shareholder who owns more than 50% of the value of the stock;
3). Two corporations which are members of the same controlled group. Pursuant to §267(b)(3), the term “controlled group” is similar to the definition used for the purposes of the affiliated corporation rules, but with merely a 50% instead of 80% common ownership requirement;
4). A grantor and a fiduciary of any trust;
5). Fiduciaries of different trusts if the same person is the grantor of both trusts;
6). A fiduciary of a trust and a beneficiary of that trust;
7). A fiduciary of a trust and a beneficiary of another trust as long as the same person is the grantor of both trusts;
8).  A corporation and a fiduciary of a trust that owns more than 50% of the value of the stock (also, if the trust’s grantor owns more than 50% of the value of the stock);
9).  A tax-exempt organization and a person or individual or the individual’s family member who controls the organization;
10). A corporation and a partnership if the same person owns more than 50% of the value of the corporate stock and more than 50% of the capital or profits interest in the partnership;
11). Two or more S-corporations owned more than 50% by the same person;
12). An S-corporation and a C-corporation if the same person owns more than 50% of the value of each; and
13). An executor and a beneficiary of an estate (there is an exception where a sale of property is made to satisfy a pecuniary bequest).
Related Person Definition: IRC §267(a)(2) Category
As it was mentioned above, the fourteenth category of related persons is described in §267(a)(2). This section contains the income-deduction matching provision (i.e. deduction can be taken in a related party transaction by a related party only when an income is recognized by the second party).  For the purposes of §267(a)(2), a personal service corporation (within the meaning of IRC §441(i)(2)) and any employee-owner (within the meaning of §269A(b)(2), as modified by §441(i)(2)) are related as persons under IRC §267.
Related Person Definition: Special Rules for Pass-Through Entities
While I will not cover them over here, it is important to note that special rules exist with respect to pass-through entities such as partnerships and S-corporation.  These rules can be found in two separate code provisions. IRC §707(b)(1) governs disallowance of losses on transactions between a partnership and its members. IRC §267(a)(1) governs losses on sales or exchanges between a partnership and any person other than a member of the partnership (a third party).
Related Person Definition: Constructive Ownership Rules
Moreover, I would like to emphasize that the determination of whether a person or entity satisfies any of the IRC §267 categories of the related person definition is not limited to the actual ownership percentage of such person or entity.  Rather, §267(c) contains elaborate constructive ownership rules that force one to include in the analysis the ownership by closely connected individuals or entities.
Contact Sherayzen Law Office for Professional Help With IRC §267 Related Person Definition and Other Business Tax Issues
US tax law is incredibly complex; the related person definition of IRC §267 is just one example of this complexity.  In order to safely navigate through the labyrinth of US tax laws, you need an experienced tax attorney. 
This is why you should contact Sherayzen Law Office for professional help.  Our legal team, headed by an international tax attorney Eugene Sherayzen, is highly experienced in helping US taxpayers with proper individual and business tax planning and tax compliance. We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Happy New Year 2020 from Sherayzen Law Office!
Sherayzen Law Office wishes everyone a very happy and prosperous New Year 2020! We also wish you stay in full US tax compliance with US international tax laws while your tax burden decreases! 
And, we are here to help our clients to turn these wishes into reality! In the year 2020, Sherayzen Law Office will continue to help its clients with all US international tax law issues, including compliance with FATCA, FBAR and all US international information returns such as Forms 3520, 5471, 8621, 8865 and others.
Moreover, Sherayzen Law Office will continue its leadership in the area of offshore voluntary disclosures, helping its clients to bring themselves into full compliance with US tax laws while lowering and, in some cases, even eliminating numerous IRS penalties. We will continue to do all types of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures (“SDOP”), Streamlined Foreign Offshore Procedures (“SFOP”), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, Modified Traditional Voluntary Disclosure, Reasonable Cause Disclosures and others.
If you are audited by the IRS with respect to your compliance with FBAR, FATCA or any other international information return filing requirements during any point of the new year 2020, then you can advantage of Sherayzen Law Office’s services with respect to IRS audits. We have helped clients throughout the worldwide with IRS audits, including audits related to foreign corporations and offshore voluntary disclosures (e.g. SDOP IRS audit or SFOP IRS audit).
Furthermore, during the new year 2020, Sherayzen Law Office will continue to create new creative and ethical tax plans and implement the old ones in order to allow our clients to take full advantage of the benefits offered by the Internal Revenue Code.
At Sherayzen Law Office, we look at the new year 2020 as an exciting opportunity to continue to deliver top-quality US international tax services to our clients around the globe. Helping people and their businesses with their US international tax issues is our goal!
Contact us directly by phone or email to schedule your confidential consultation!
Happy New Year 2020 to you and your family!

### IRC §267 Purpose | International Tax Lawyer & Attorney Austin TX
This brief essay explores the IRC §267 purpose of existence – i.e. Why did Congress decide to enact IRC §267 and in what situations does it generally apply?
IRC §267 Purpose: Problematic Scenarios
When Congress enacted IRC §267, it meant to address a very specific problem in the context of two scenarios. The problem was the rise of a large number of tax minimization strategies based on transactions between persons with shared economic interests (for example, a transaction between a father and his son). The IRS calls such persons with shared economic interests “related persons”. 
In particular, these related person transaction strategies focused on two different scenarios. The first scenario was the creation of an artificial loss on the sale or exchange of property between related persons.  The second scenario involved transactions between related persons where one of them recognized a deduction while the other one did not recognize any income from the same transaction.
IRC §267 Purpose: Limitations on Related Person Tax Planning
Given the high potential of related person transactions to artificially lower tax liability of all parties involved, Congress enacted IRC §267. The main purpose of IRC §267 is to impose severe limitations on the ability of related persons to realize losses from sales of property to related persons and take deductions with respect to transactions involving related persons.  
It should be emphasized that IRC §267 does not impose an absolute limitation on one’s ability to take losses.  For example, once a property is sold to an unrelated person, IRC §267(d) allows the seller to offset recognized gain by the previously disallowed loss. In other words, the IRC §267 purpose is to handicap the ability of related persons to artificially lower their federal tax liability, not to deprive related persons from recognizing legitimate losses in transactions with unrelated persons. 
Contact Sherayzen Law Office for Professional Help With IRC §267 
If you have a transaction involving related persons, contact Sherayzen Law Office for professional help with US business tax planning.  We have helped taxpayers around the globe with the US tax planning, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Attribution Rules: Introduction | International Tax Lawyer & Attorney
One of the most popular tax reduction strategies is based on shifting an ownership interest in an entity or property to related persons or related entities.  In order to prevent the abuse of this strategy, the US Congress has enacted a large number of attribution rules.  In this brief essay, I will introduce the concept of attribution rules and list the most important attribution rules in the Internal Revenue Code (“IRC”).
Attribution Rules: Definition and Purpose
The IRC attribution rules are designed to prevent taxpayers from shifting an ownership interest to related persons or entities. They achieve this result through a set of indirect and constructive ownership rules that shift the ownership interest assigned to third parties back to the taxpayer.  In other words, the rules disregard the formal assignment of an ownership interest to a related third party and re-assign the ownership interest back to the assignor for specific determination purposes.
For example, in the context of determining whether a foreign corporation is a Controlled Foreign Corporation, all shares owned by the spouse of a taxpayer are deemed to be owned by the taxpayer if both spouses are US persons. 
Attribution Rules: Design Similarities and Differences
The IRC contains a great variety of attribution rules.  All of them are very detailed and have achieved a remarkable degree of specificity. Behind this specificity, all of the rules are always concerned with the substance of a transaction rather than its form.  Hence, there always lurks a general question of whether there was a tax avoidance motive when a taxpayer entered into a transaction.
In spite of the fact that they share similar goals, the rules differ from each other in design. Most of these differences can be traced back to legislative history.
List of Most Important Attribution Rules
Here is a list of the most important attribution rules in the IRC (all section references are to the IRC):
1. The constructive ownership rules of §267, which apply to disallow certain deductions and losses incurred in transactions between related parties;
2. The constructive ownership rules of §318, which apply in corporate-shareholder transactions and other transactions, including certain foreign transactions expressly referenced in §6038(e).
3. The constructive ownership rules of §544; these are the personal holding company rules which apply to determine when a corporation will be subject to income tax on undistributed income.
3a. While they are now repealed, the foreign personal holding company rules of §554 are still important. In the past, they applied to determine whether US shareholders of a foreign corporation would be taxed on deemed distributions which were not actually made;
4. Highly important Subpart F constructive ownership rules of §958, which apply to determine when US shareholders of a Controlled Foreign Corporation should be taxed on deemed distributions which are not actually made;
5. The PFIC constructive ownership rules of §1298, which apply to determine whether a US shareholder is subject to the unfavorable rules concerning certain distributions by a PFIC and sales of PFIC stock; and
6. The controlled group constructive ownership rules of §1563 which determine whether related corporations are subject to the limitations and benefits prescribed for commonly controlled groups.
This is not a comprehensive list of all attribution rules, there are other rules which apply in more specific situations. 
Contact Sherayzen Law Office for Professional Help With the Attribution Rules
The rules of ownership attribution are highly complex. A failure to comply with them may result in the imposition of high IRS penalties.  
This is why you need to contact the highly experienced international tax law firm of Sherayzen Law Office.  We have helped US taxpayers around the globe to deal with the US tax rules concerning ownership attribution, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 2020 First Quarter IRS Interest Rates | International Tax Lawyers
On December 6, 2019, the Internal Revenue Service (“IRS”) announced that the 2020 First Quarter IRS underpayment and overpayment interest rates will not change from the 4th Quarter of 2019.  This means that, the 2020 First Quarter IRS underpayment and overpayment interest rates will be as follows:
five (5) percent for overpayments (four (4) percent in the case of a corporation);
 two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
 five (5) percent for underpayments; and
 seven (7) percent for large corporate underpayments. 
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. The IRS used the federal short-term rate for October of 2019 to determine the 2020 First Quarter IRS interest rates. The IRS interest is compounded on a daily basis.
2010 First Quarter IRS interest rates are important to US international tax lawyers and taxpayers. The IRS uses these rates to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an IRS audit or an amendment of his US tax return. The IRS also utilizes these rates with respect to the calculation of PFIC interest on Section 1291 tax. 
As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment interest rates on a regular basis.  We often amend our client’s tax returns as part of an offshore voluntary disclosure process.  For example, both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures require that a taxpayer amends his prior US tax returns, determines the additional tax liability and calculates the interest on this liability.  
Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology.  This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.
Finally, it is important to point out that the IRS will use the 2020 First Quarter IRS overpayment interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. This situation may often arise in the context of offshore voluntary disclosures.

### IRS Statute of Limitations | US International Tax Lawyer Zurich
[av_video src='https://www.youtube.com/watch?v=0P91eMHAOvE' mobile_image='https://img.youtube.com/vi/0P91eMHAOvE/maxresdefault.jpg' attachment='25066' attachment_size='' format='16-9' width='16' height='9' conditional_play='' av_uid='av-k10x1fek']
 "Hello and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I'm an international tax attorney and owner of Sherayzen Law Office, Ltd.
Today, I would like to discuss with you an interesting and very important concept in US Tax Law:  Statute of Limitations. The Statute of Limitations basically means that there is a certain period of time when the IRS can go back and open up a certain tax form or an entire tax return for examination. The general Statute of Limitation under US Tax Law for a normal 1040 is three years; however, there are a number of important exceptions. One of the exceptions for example is when you do not disclose more than 25% of your income on your US Tax Returns. In this case, the Statute of Limitations extends to six years.
Now if you also fail to file an international information return with your US Tax Return, then you may be facing a situation where the Statute of Limitations never starts to run. In other words, the IRS can go back in time and open up that form forever, potentially forever. I have had in my personal practice situations where during an audit and IRS would go back 18, 20 years to open up a tax return for examination and imposition of penalties.
US Tax Law is filled with concepts like this, complex concepts, and it's important to understand them before you make your decision on how to proceed with respect to the reporting of your foreign assets and foreign income.
If you would like to know more about US Tax Law or you would like to have a consultation, with respect to a specific international tax issue, you should contact me directly at: (952) 500-8159 or email me at: eugene@sherayzenlaw.com.
Thank you for watching until the next time.

### Post-OVDP Audits | Offshore Voluntary Disclosure Lawyer & Attorney
A significant number of US taxpayers who went through the OVDP mistakenly believed that they were immune from the IRS post-OVDP audits concerning their post-voluntary disclosure compliance.  Sherayzen Law Office has repeatedly warned in the past that these taxpayers were mistaken with respect to their exposure to potential post-OVDP audits.  The recent announcement of a new IRS compliance campaign concerning post-OVDP tax compliance confirmed the correctness of Sherayzen Law Office’s analysis.
Post-OVDP Audits: OVDP Background Information
The IRS created the Offshore Voluntary Disclosure Program (“OVDP”) as an incentive for US taxpayers to come forward and disclose their prior willful and non-willful noncompliance with US tax reporting requirements concerning foreign assets and foreign income. In exchange for the voluntary disclosure, the taxpayers paid a significantly lower penalty than what they otherwise could have had to pay outside of the OVDP. Moreover, taxpayers also received protection from IRS criminal prosecution of their prior tax noncompliance.
OVDP is not just one program, but a series of programs.  The initial one was created in the early 2000s, but it was a relatively small and unknown program.  The first program that became influential was the 2009 OVDP.  The 2009 OVDP was created on the heels of the IRS victory in the UBS case and it closed on October 15, 2009.
Then, after the passage of the Foreign Account Tax Compliance Act (“FATCA”) in 2010, the IRS created the 2011 Offshore Voluntary Disclosure Initiative (“2011 OVDI”).  The 2011 OVDI was a hugely popular program.  Its success led to the creation of 2012 OVDP and, finally, 2014 OVDP.  
The implementation of FATCA had materially altered the IRS interest in the OVDP while the number of the OVDP participants precipitously dropped due to the success of the Streamlined Compliance Initiatives (i.e. Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures). The 2014 OVDP program was closed on September 28, 2018.
Post-OVDP Audits: False Sense of Security After OVDP
Some of the OVDP participants have mistakenly treated their OVDP disclosure as a remedy capable of curing not only their past tax noncompliance, but also future compliance issues. In other words, after going through the OVDP, these taxpayers relaxed their commitment to their ongoing annual compliance. Some of them started filing their FBARs irregularly or stopped filing them altogether while others under-reported their foreign income. Still others engaged in a different conduct overseas without realizing that their new way of doing business gave rise to a different set of US reporting requirements.
Many of these taxpayers also erroneously believed that, by going through the OVDP, they were taken off the “IRS radar”.  This means that they felt that the IRS was highly unlikely to audit them after their voluntary disclosure.
Post-OVDP Audits: IRS Noticed Noncompliance Among OVDP Participants
In reality, as Sherayzen Law Office had suspected, the IRS engaged in extensive analysis of the OVDP participants’ behavior after their voluntary disclosure.  Of course, it was not difficult for the IRS to monitor them, because the IRS already had a full list of the OVDP participants at its disposal.  Some of the data came from field audits while other information was derived from FATCA and data analysis.  
As a result of its analysis, the IRS discovered the aforementioned disturbing noncompliance trends among former OVDP participants.
Post-OVDP Audits: July of 2019 IRS Compliance Campaign 
After it uncovered these noncompliance trends among the former OVDP participants, the IRS announced in July of 2019 a campaign to specifically target taxpayers who went through the OVDP.  As part of this campaign, the IRS will send out soft letters and conduct post-OVDP audits.
Post-OVDP Audits: Potentially Disastrous Consequences for Noncompliant Taxpayers
The targets of this IRS compliance campaign will be in a particularly difficult legal situation for two main reasons. First, during a post-OVDP audit, the taxpayers are unlikely to be able to claim non-willfulness with respect to their post-OVDP tax noncompliance because of the knowledge of US tax requirements that they acquired during their voluntary disclosures. In fact, it is difficult to see how non-willfulness can be established in any way other than claims based on new and/or extraordinary circumstances.
Second, since it is not likely that they will be able to establish non-willfulness, taxpayers will most likely face willful penalties during an IRS audit, perhaps even civil and criminal fraud penalties.  The IRS is unlikely to be lenient with taxpayers who already benefitted from a voluntary disclosure and persisted in their noncompliance afterwards.  In other words, a post-OVDP audit may result in disastrous consequences for noncompliant taxpayers.
Contact Sherayzen Law Office for Professional Help With Post-OVDP Audits
Given the particularly dangerous nature of a post-OVDP audit, a taxpayer subject to this type of an IRS audit must retain an experienced international tax attorney as soon as he is notified about the commencement of the audit.  Failure to do so may severely damage the taxpayer’s ability to defend against subsequent IRS penalties.
This is why you need to contact Sherayzen Law Office as soon as possible.  We are a highly-experienced international tax law firm that has helped hundreds of US taxpayers to resolve their past noncompliance with US tax laws, including in the context of an IRS audit. We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### The Norman Case: Willful FBAR Penalty Upheld | FBAR Lawyers Miami
On November 8, 2019, the Federal Circuit Court of Appeals (the “Court”) upheld the decision of the Court of Federal Claims to uphold the IRS assessment of a willful FBAR penalty in the amount of $803,530 with respect to Ms. Mindy Norman’s failure to file her 2007 FBAR. The Norman case deserves special attention because of its facts and circumstances and how the Court interpreted them to uphold the willful FBAR penalty.
The Norman Case: Facts of the Case
Ms. Norman is a school teacher. In 1999, she opened a bank account with UBS bank in Switzerland.  It was a “numbered account” – i.e. income and asset statements referred to the account number only; Ms. Norman’s name and address did not appear anywhere on the account statements. Between 2001 and 2008, the highest balance of the account ranged between about $1.5 million and $2.5 million.  
The Court described how Ms. Norman was actively engaged in managing and controlling her account.  She had frequent contacts with her UBS banker in person and over the phone; she decided how to invest her funds and she signed a request with UBS to prohibit investment in US securities on her behalf (which could have triggered a disclosure of the existence of the account to the IRS).  In 2002, she withdrew between $10,000 and $100,000 in cash from the account.  In 2008 she closed the account when UBS informed her that it would cooperate with the IRS in identifying noncompliant US taxpayers who engaged in tax fraud; it should also be noted that the IRS presented into evidence UBS client contact records which stated that Ms. Norman exhibited “surprise and displeasure” when she was informed about the UBS decision. 
Sometime in the year 2008, Ms. Norman signed her 2007 US tax return which, it appears, contained a Schedule B which stated (in Part III) that she had no foreign accounts.  Moreover, she signed this return after her accountant sent her a questionnaire with a question concerning foreign accounts.
Also in 2008, Ms. Norman obtained a referral to an accountant.  It appears that the accountant advised her to do a quiet disclosure, filing her amended returns and late FBARs. The quiet disclosure triggered the subsequent IRS audit.
The Court found that, during the audit interview, Ms. Norman made numerous false statements, including denying the knowledge of the existence of her foreign account prior to 2009.  She also submitted a letter to the IRS re-affirming her lack of knowledge about the existence of this account.  
Then, after retaining an attorney, Ms. Norman completely reversed herself in her second letter, stating that she did in fact know about the existence of the account. She further explained that her failure to timely file her FBARs occurred due to her belief that none of the funds in the account were hers and she was not a de-facto owner of the account.
The Norman Case: Penalty Imposition and the Appeals
It appears that the false statements and radical shifts in claims about what she knew about her account completely damaged her credibility with the IRS agent in charge of the audit.  Hence, the IRS found that Ms. Norman willfully failed to file her FBAR and assessed a penalty of $803,530.
Ms. Norman paid the penalty in full and filed a complaint with the Court of Federal Claims requesting a refund. The Court of Federal Claims sustained the penalty; hence, Ms. Norman appealed to the Federal Circuit Court of Appeals.  The Court upheld the penalty imposition.
The Norman Case: Issues on the Appeal
Ms. Norman raised three issues on the appeal: (1) the Court of Federal Claims erred in finding that she willfully violated the FBAR requirement; (2) a 1987 Treasury regulation limits the FBAR willful penalty to $100,000; and (3) a penalty so high violates the 8th Amendment.  The Court did not consider the 8th Amendment argument for procedural reasons.
The Norman Case: Recklessness as part of Willfulness
At the heart of the dispute over the imposition of the willful penalty was whether the IRS can use recklessness in its determination of willfulness. It is important to point out here that the IRS imposed the willful penalty even though it could not prove that Ms. Norman actually knew about the existence of FBAR. Rather, it relied on recklessness in its imposition of the willful FBAR penalty.
In the appeal, Ms. Norman argued that one can only violate the FBAR requirement if one has the actual knowledge of the existence of the form. She adopted a strict interpretation of willfulness as the one found in the Internal Revenue Manual (“IRM”): “willfulness is shown by the person’s knowledge of the reporting requirements and the person’s conscious choice not to comply with the requirements.”
The Court, however, did not agree with this interpretation.  First of all, it pointed to the well-established law that the IRM is not binding in courts.  The courts in several circuits have determined that recklessness should be considered as willfulness. Second, the IRM itself stated that actual knowledge of FBAR is not required for the imposition of a willful penalty.  Rather, the IRM allowed for the possibility of the imposition of a willful penalty where the failure to learn about FBAR is combined with other factors, such as attempts to conceal the existence of the account and the amounts involved.
Then, the Court explained its reasoning for believing that Ms. Norman’s behavior was reckless: she opened the foreign account, actively managed it, withdrew money from it and failed to declare it on her signed 2007 tax return. The fact that Ms. Norman made contradictory and false statements to the IRS during the audit further damaged her credibility with respect to her non-willfulness claims.
The Norman Case: 1987 Treasury Regulation No Longer Valid
Ms. Norman also argued that a 1987 regulation limited the willful FBAR penalty to $100,000.  The Court disagreed, because this regulation was rendered invalid by the language found in the 2004 amendment to 31 U.S.C. §5321(a)(5)(C).
The Norman Case: Most Important Lessons for Audited US Taxpayers with Undisclosed Foreign Accounts 
The Norman case contains many important lessons for US taxpayers who have undisclosed foreign accounts and who are audited by the IRS.  Let’s concentrate on the three most important ones.
First and foremost, do not lie to the IRS; lying to the IRS is almost certain to backfire. In the Norman case, the taxpayer had good facts on her side at the beginning, but her actions during the audit made them almost irrelevant. Ms. Norman’s false statements damaged her credibility not only with the IRS, but also with the courts. It made her appear as a person undeserving of sympathy; someone who deserved to be punished by the IRS.
Second, Ms. Norman fell prey to an incorrect advice from her accountant and did a quiet disclosure.  Given how dangerous her situation was as a result of an impending disclosure of her foreign account by UBS, doing a quiet disclosure in 2008 was a mistake.  Instead, a full open voluntary disclosure should have been done either through the traditional IRS voluntary disclosure option or a noisy disclosure (unfortunately, the 2009 OVDP was not yet an option in 2008). 
Finally, the Norman case highlights the importance of having the appropriate professional counsel. During her quiet disclosure and the subsequent IRS audit Ms. Norman did not hire the right professional to assist her until it was too late – the damage to the case became irreversible. Instead of retaining the right international tax attorney, she chose to rely on an accountant. In the context of an offshore voluntary disclosure and especially an IRS audit involving offshore assets, relying on an accountant is almost always a mistake – only an experienced international tax attorney is right choice.
Contact Sherayzen Law Office for Professional Help With Your US Tax Compliance and an IRS Audit Concerning Foreign Accounts and Foreign Income
If you have undisclosed foreign accounts and you wish to resolve your US tax noncompliance before the IRS finds you, you need to secure competent legal help. If you are already subject to an IRS audit, then you need to retain an international tax attorney as soon as you receive the initial audit letter. As stated above, Ms. Norman paid a very high price for a failure to do so timely; you should avoid making this mistake.
For this reason, contact Sherayzen Law Office for professional help as soon as possible.  Our team of tax professionals headed by the highly experienced international tax attorney, Mr. Eugene Sherayzen, have helped hundreds of US taxpayers to resolve their prior US tax noncompliance issues and successfully conclude IRS international tax audits. We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### New FBAR Filing Verification Submission Process | FBAR Lawyer & Attorney
On November 19, 2019, the IRS announced changes to the current FBAR filing verification submission process. The change is technical, but not without importance.
New FBAR Filing Verification Submission Process: FBAR Background Information
FBAR is a common name for FinCEN Form 114 (formerly known as TD F 90-22.1), Report of Foreign Bank and Financial Accounts. US Persons must use this form to report their ownership of or signatory authority or any other authority over foreign bank and financial accounts as long as these accounts’ aggregate balance exceeds the FBAR filing threshold. Despite its official name, the IRS has administered the form since 2001, not FinCEN.
FBAR is one of the most important US international information returns. FBAR noncompliance may lead to the imposition of severe civil and criminal penalties. Hence, it is of absolute importance for US persons to timely and properly file this form.
New FBAR Filing Verification Submission Process: Rules Prior to November 19 2019
Prior to November 19, 2019, US persons who wanted to verify whether their FBARs were filed could obtain the relevant information for up to five FBARs by simply calling 1-866-270-0733 (the IRS FBAR Hotline) and selecting option 1. IRM 4.26.16.4.13(4). In this case, the IRS representatives would provide the verbal verification for free. The filers could make this request sixty days after the date of filing. Id.
If, however, a filer wished to request information concerning more than five forms or he wanted to obtain paper copies of filed FBARs, then he would need to do so in writing.  For written verifications, there was a $5.00 fee for verifying five or fewer forms and a $1.00 fee for each additional form.  Id.  The IRS charged $0.15 per copy of the entire FBAR. Id. Written requests should have been accompanied by payment in accordance with IRM 4.26.16.4.13(4)(b).
New FBAR Filing Verification Submission Process: New November 19 2019 Rules
On November 19, 2019, the IRS issued a memorandum which contained interim guidance concerning the process by which the IRS would accept the requests for FBAR filing verifications.  The memorandum introduced the following revisions to the FBAR filing verification process. 
Effective as of the date of this memorandum, the IRS no longer accepts verbal verification requests; all requests must be submitted in writing.  Hence, the existing fee structure in IRM 4.26.16.4.13(4)(b) now applies to all verification requests. 
The IRS has stated that this procedural change is necessary to provide documentary evidence of all verification inquiries and IRS response to them. This new interim guidance will be incorporated into IRM 4.26.16 within the next two years from the date of issuance of the memorandum.
New FBAR Filing Verification Submission Process: Making a Proper Written Request
The written request for FBAR filing verification should include the filer's name, Taxpayer Identification Number, and filing period(s). Tax practitioners requesting verifications for their clients must also make these requests in writing, and provide a copy of the Form 2848, Power of Attorney and Declaration of Representative, authorizing them to receive the FBAR information. The same fee structure as described above (i.e. a $5.00 fee for verifying five or fewer forms, a $1.00 fee for each additional form, and copies for an additional fee of $0.15) will continue to apply. Checks or money orders should be made payable to the “United States Treasury”.
Written requests and payments for FBAR filing verifications and copies of filed FBARs should be mailed to:
IRS Detroit Federal Building
Compliance Review Team
Attn.: Verification
P.O. Box 32063
Detroit, MI 48232-0063
In response to written requests, the IRS will send a letter stating whether the record shows that an FBAR was filed and if so, the date filed. If a copy of a paper-filed FBAR was requested, a copy will be included with IRS letter.
Contact Sherayzen Law Office for Professional Help with FBAR Compliance
The new FBAR filing verification process will be especially relevant in the context of offshore voluntary disclosures. Oftentimes, taxpayers do not have copies of their prior FBARs; and it is necessary to obtain these copies in order to properly calculate the penalty exposure as well as use them as evidence of non-willfulness (or find out if the IRS may use them as evidence of willfulness).
If you are required to file FBARs and you have not done so, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers with their FBAR compliance issues, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: On November 19, 2019, the IRS announced changes to the current FBAR filing verification submission process. The change is technical, but not without importance.

### November 21 2019 BSU Seminar in Minsk, Belarus | International Tax News
On November 21, 2019, Mr. Eugene Sherayzen, an international tax attorney and founder of Sherayzen Law Office, Ltd., conducted a seminar at the Belarusian State University Law School (the “2019 BSU Seminar”) in Minsk, Belarus. Let’s explore the 2019 BSU Seminar in more detail.
2019 BSU Seminar
2019 BSU Seminar: Topic and Attendance
The topic of the seminar was “Unique Aspects of the US International Tax System”.  The seminar was well-attended (more than 80 attendees) by the students of the Belarusian State University (“BSU”), BSU law school faculty and attorneys from the Minsk City Bar Association. 
The seminar with the follow-up Q&A session lasted close to two and a half hours.
2019 BSU Seminar Part I: Mr. Sherayzen Biography As Illustration of a Successful Career of an International Tax Attorney
The first part of the seminar was devoted to the discussion of Mr. Sherayzen’s legal career.  He commenced by describing his educational path: a bachelor’s degree in Political Science, History and Global Studies with Summa Cum Laude honors and a Juris Doctor degree in Law with Cum Laude honors from the University of Minnesota Law School.  Then, Mr. Sherayzen discussed how he acquired the passion for US international tax law, founded Sherayzen Law Office at the end of the year 2005 and developed his career as a successful international tax attorney.
At that point, Mr. Sherayzen described his main specialties in US international tax law: (1) offshore voluntary disclosure of foreign assets and foreign income; (2) IRS international tax audits; (3) US tax compliance concerning foreign gifts and foreign inheritance; (4) US tax compliance concerning US information returns, including FBAR and FATCA compliance; and (5) US international tax planning.
2019 BSU Seminar Part II: Discussion of Eight Unique Characteristics of the US International Tax Law
The second pat of the seminar was devoted to the long discussion of eight main unique characteristics of US international tax law.   Mr. Sherayzen commenced this part with the concept of “Voluntary Compliance” and its significance for a taxpayer’s personal liability for the accuracy of his IRS submissions.  Then, the attorney discussed the enormous complexity and extremely invasive nature of US international tax law. Mr. Sherayzen also separately emphasized the potentially huge penalty exposure as the fourth characteristic of the US international tax law, specifically referring to FBAR penalties.
The attorney continued the discussion with the description of the worldwide reach of the US tax jurisdiction. Here, he used the Foreign Account Tax Compliance Act (“FATCA”) as an example.
Then, Mr. Sherayzen described the obscurity that surrounds many US international tax provisions and explained how such obscurity presents problems and opportunities for US taxpayers.  The attorney concluded the second part of the 2019 BSU seminar with the discussion of the flexibility of US international tax system and how the US tax system should be considered a source of endless opportunities to knowledgeable US international tax attorneys and their clients.
2019 BSU Seminar Part III: Basic Unique Principles of US International Tax System
The next part of the seminar focused on the basic principles of the US international tax system.  Mr. Sherayzen organized this part from the perspective of how US taxpayers should declare their foreign assets and taxable income.  The structure of this part was based on answering three questions: “who”, “what” and “when”. 
The first question was: who should declare their foreign assets and pay taxes on their income?  In this context, Mr. Sherayzen defined the concept of “US tax residency”.  He further emphasized that non-resident aliens who are not US tax residents may still need to file non-resident US tax returns with the IRS.
The next question was: what income is subject to US taxation and what assets should be declared to the IRS?  Here, Mr. Sherayzen describes the most fundamental principle of US international tax law that applies to US tax residents – the worldwide income taxation requirement.  He also emphasized that US tax residents must declare on their US international information returns virtually all classes of their foreign assets with the exception of directly-owned real estate.  
Then, as part of his discussion of US tax responsibilities of non-residents (for tax purposes), the attorney introduced the “source of income” rules used to characterize income as US-source income or foreign-source income.  He provided the audience with the basic rules concerning sourcing of bank interest, dividends, earned income, rental income and royalties. 
The final question was: when should the tax be paid on income?  In this context, Mr. Sherayzen explained the concept of “realized income” and the general principle that income becomes taxable when it is realized for US tax purposes.  He also described the anti-deferral regimes and the Section 250 full participation exemption as exceptions to the general principle of income recognition. 
2019 BSU Seminar Part IV: International Information Returns and Conclusion
During the final part of the seminar, Mr. Sherayzen briefly discussed the most important US international information returns. He concluded his lecture by re-stating that US international tax provisions reflect the reality of US position in the world economy and other countries should understand this basic fact before they attempt to copy any US international tax provisions.

### Greek Flat Tax Residency: Draft Bill | International Tax Lawyer News
The new Greek government headed by Prime Minister Kyriakos Mitsotakis wishes to reach 2.8% economic growth next year. Part of the plan to achieve this goal includes a tax reform which introduces a curious new concept of Greek flat tax residency for wealthy foreign investors. Let’s discuss this interesting idea in more detail.
Greek Flat Tax Residency: Basic Description
The government envisions that the flat tax residency scheme will function in the following way: a foreign individual who makes qualified investments into the Greek economy will be allowed to shift his tax residency to Greece and pay a certain flat tax rate on his entire taxable income. In order to counter the other EU members’ potential objections, these new Greek tax residents will need to be physically present in Greece for at least 183 days per year.
Greek Flat Tax Residency: Required Investments
In order to become a qualified individual, the investor will need to invest at least 500,000 euros into the Greek economy during the first three years of his tax residency. 
Greek Flat Tax Residency: Flat Tax Rates
The exact flat tax rate depends on the amount of investments into the Greek economy.   If an investor invests only the minimum required 500,000 euros, then his flat tax will be 100,000 euros plus 20,000 euros for each family member.  
If, however, this investor invests 1.5 million euros into Greek assets, then the flat tax will be only 50,000 euros.  An investor who invests 3 million euros into the Greek economy will see this flat tax halved again to a mere 25,000 euros. 
Given the unstable nature of Greek politics, the government intends to insert a grandfather clause which will protect investors against any tax reforms by future governments. 
Greek Flat Tax Residency: Term of the Program
The flat tax residency program will be in place for at least fifteen years, unless renewed by future governments.
Greek Flat Tax Residency: Bill Voting
At this point, the flat tax residency scheme is merely a bill, not a reality.  The government expects that the Hellenic parliament will vote on the draft bill by the end of November of 2019.
Greek Flat Tax Residency: Impact on US Citizens
The proposed flat tax residency would be a great tax planning tool for the high-net worth citizens of the great majority of countries in the world, because the majority of the world follows either the territorial model of taxation or residency-based model of taxation.  This is not the case with respect to the United States.
The United States follows a citizenship-based worldwide income model of taxation. US citizens are considered to be US tax residents irrespective of where they reside and whether they acquire tax residency in another country.  This is almost unique in the world. 
This means that the proposed Greek flat tax residency would be of limited value to US citizens.  Despite the fact that they would acquire Greek tax residency, they would still be considered US tax residents and will have to pay US taxes on their worldwide income.  Most likely, they will be able to get a Foreign Earned Income Exclusion for any active income (i.e. salary, self-employment income and similar earnings) up to the annual exclusion amount and some tax treaty benefits, but no other direct benefits.
Greek flat tax residency may still, however, offer more indirect benefits in the context of more sophisticated tax planning.  For example, foreign corporations owned by US citizens who are also Greek tax residents may be able to obtain better tax treaty benefits.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance
If you are a US citizen who acquires Greek tax residency, you should be concerned about your US tax compliance.  US international tax law is extremely complex and it is very easy to run afoul of its provisions, Noncompliance penalties in these cases may be extremely high.   This is why it is important to have a trustworthy knowledgeable US international tax attorney by your side.
Sherayzen Law Office has successfully helped hundreds of US taxpayers with their US international tax compliance, including those who are tax residents of other countries. We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Income Reporting Without Forms W-2 or 1099 | Tax Lawyer
There is a surprisingly large number of US taxpayers who believe that reporting foreign income that was not disclosed on a Form W-2 or 1099 is unnecessary.  Even if they honestly believe it to be true, this erroneous belief exposes these taxpayers to an elevated risk of imposition of high IRS penalties. In this article, I will discuss the US tax rules concerning foreign income reporting which was never disclosed on a Form W-2 or 1099 and how the IRS targets tax noncompliance in this area.
Foreign Income Reporting: Worldwide Income Reporting Requirement
If you are a US tax resident, you are subject to the worldwide income reporting requirement.  In other words, you are required to disclose your US-source income and your foreign-source income on your US tax return.  
This requirement applies to you irrespective of whether this income was ever disclosed to the IRS on a Form W-2 or Form 1099.  It is important to understand that Forms W-2 and 1099 are only third-party reporting requirements. They do not impact your foreign income reporting on your US tax return in any way, because such a disclosure is your personal obligation as a US tax resident.
This means that, if your foreign employer pays you a salary for the work performed in a foreign country, you must disclose it on your US tax return.  Similarly, if you are a contractor who receives payments for services performed overseas, you are obligated to disclose these payments on your US tax return.  The fact that neither your foreign employer nor your clients ever filed any information returns, such as Forms W-2 or 1099, with the IRS is irrelevant to your foreign income reporting obligations in the United States.
Foreign Income Reporting: Many US Taxpayers Are Noncompliant
Unfortunately, many US taxpayers are not complying with their foreign income reporting obligations.  Some of them are doing it willfully, taking advantage of the absence of third-party IRS reporting (such as Forms W-2 and 1099).  Others have fallen victims to numerous online false claims of exceptions to the worldwide income reporting.
Foreign Income Reporting: Noncompliant Taxpayers at Elevated Risk of IRS Penalties 
The noncompliance in this area is so great that it drew the attention of the IRS.  In July of 2019, the IRS announced a specific compliance campaign that targets high-income US citizens and resident aliens who receive compensation from overseas that is not reported on a Form W-2 or Form 1099.  
The IRS has adopted a tough approach to noncompliance with the worldwide income reporting requirement – IRS audits only. The IRS did not mention any other, more lenient treatment streams for this campaign.
This means that we will see an increase in the number of IRS audits devoted mainly to discovering unreported foreign income and punishing noncompliant US taxpayers. Of course, these audits may further expand depending on other facts that the IRS discovers during these audits. For example, if foreign income comes from a foreign corporation owned by the taxpayer, the IRS may also impose Form 5471 penalties. If this corporation owns undisclosed foreign accounts, then the taxpayer may also face draconian FBAR civil as well as criminal penalties.
Contact Sherayzen Law Office for Professional Help With Your Foreign Income Reporting Obligations and Your Voluntary Disclosure of Unreported Foreign Income
If you are a US taxpayer who earns income overseas, contact Sherayzen Law Office for professional help with your US tax compliance. Furthermore, if you have not reported your overseas income for prior years, you should explore your voluntary disclosure options as soon as possible in order to reduce your IRS civil penalties and avoid potential IRS criminal prosecution. We have helped hundreds of US taxpayers like you to resolve their US tax noncompliance issues, including those concerning foreign income reporting, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### The Pursley Case: Offshore Tax Evasion Leads to Criminal Conviction
On September 6, 2019, the Tax Division of the US Department of Justice (“DOJ”) announced another victory against Offshore Tax Evasion. This time, a Houston lawyer, Mr. Jack Stephen Pursley, was convicted of one count of conspiracy to defraud the United States and three counts of tax evasion.  Let’s discuss this Pursley Case in more detail.
Facts of the Pursley Case
According to the evidence presented at trial, Mr. Pursley conspired with a former client to repatriate more than $18 million in untaxed income that the client had earned through his company, Southeastern Shipping. Southeastern Shipping had a business bank account located in the Isle of Man. 
Knowing that his client had never paid taxes on these funds, Mr. Pursley designed and implemented a scheme whereby the untaxed funds were transferred from Southeastern Shipping’s foreign bank account to the United States. Mr. Pursley helped to conceal the movement of funds from the Internal Revenue Service (“IRS”) by disguising the transfers as stock purchases in domestic corporations in the United States, which Mr. Pursley owned and his client owned and controlled.
At trial, the DOJ proved that Mr. Pursley received more than $4.8 million and a 25% ownership interest in the co-conspirator’s ongoing business for his role in the fraudulent scheme. For tax years 2009 and 2010, Mr. Pursley evaded the assessment of and failed to pay the income taxes he owed on these payments by, among other means, withdrawing the funds as purported non-taxable loans and returns of capital. Mr. Pursley then used these funds for personal investments as well as purchase of properties, including a vacation home in Vail, Colorado and a property in Houston, Texas.
Potential Penalties in the Pursley Case
Judge Lynn Hughes has set sentencing for December 9, 2019. Mr. Pursley faces a statutory maximum sentence of five years in prison for the conspiracy count and five years in prison for each count of tax evasion. He also faces a period of supervised release, monetary penalties, and restitution.
Main Lesson from the Pursley Case
The main lesson from the Pursley case is for business lawyers.  They should be very careful about involving themselves in schemes related to repatriation of overseas funds.  These business lawyers should verify whether US taxes were paid on these funds and consult an international tax attorney concerning the legality of the proposed repatriation scheme.  
Of course, if a business lawyer knows that his client never paid any US taxes on the funds, he should not participate in any stratagems which could be interpreted as conspiracy to defraud the United States.  Otherwise, this lawyer would be at risk of finding himself in a situation similar to the Pursley case. 
Contact Sherayzen Law Office for Professional Help With US International Tax Compliance
If a business lawyer finds out that he has a client with untaxed funds stored in an overseas account, he should urge the client to contact Sherayzen Law Office concerning the client’s offshore voluntary disclosure options.  The main goal of such a voluntary disclosure would be to reduce and even eliminate the risk of a criminal prosecution.  
Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!

### The Booker Case: ex-CPA Indicted for FBAR violations | FBAR Lawyer News
On August 27, 2019, the US Department of Justice (“DOJ”) announced that a federal grand jury returned a superseding indictment charging Mr. Brian Booker, a former resident of Fort Lauderdale, Florida, whose business specialized in international trade, with failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”) and filing false documents with the Internal Revenue Service (IRS). Let’s discuss the Booker case in more detail.
Facts of the Booker Case According to Indictment
Mr. Booker was a Certified Public Accountant who owned a Panamanian cocoa trading company.  He allegedly operated that company from Venezuela, Panama, and his former residence in Fort Lauderdale, Florida.  
The superseding indictment alleges that, for calendar years 2011 through 2013, Mr. Booker failed to disclose his interest in financial accounts located in Switzerland, Singapore, and Panama on annual Reports of Foreign Bank and Financial Accounts (FBARs) as required by law. Booker also allegedly filed false individual income tax returns for tax years 2010 through 2012 that failed to report to the IRS all of his foreign bank accounts.
Moreover, the indictment alleges that Mr. Booker filed a false offshore voluntary disclosure under the Streamlined Domestic Offshore Procedures. The superseding indictment claims that Mr. Booker’s Streamlined submission falsely claimed that his failure to report all income, pay all tax and submit all required information returns, such as FBARs, was due to non-willful conduct.
The Booker Case: Potential Criminal Penalties
If convicted, Mr. Booker faces a maximum sentence of five years in prison for each count related to his failure to file an FBAR. He also faces a maximum sentence of three years in prison for each of the counts related to filing false tax documents.
The Booker Case: Mr. Booker is Presumed Innocent Until Proven Guilty
The readers should remember than an indictment is an accusation. A defendant is presumed innocent unless and until proven guilty.
The Booker Case: Potential Lesson for Streamlined Filers
The Booker case contains two valuable lessons for other US taxpayers who utilize the Streamlined Compliance Options, such as Streamlined Domestic Offshore Procedures (“SDOP”) and Streamlined Foreign Offshore Procedures (“SFOP”).  
First, SDOP and SFOP are reserved for non-willful taxpayers only.  If you were willful in your noncompliance, utilizing these options can result in a criminal investigation. It is not known if the IRS commenced the investigation of Mr. Booker due to his SDOP filing, but it is very possible that this was the case.
Second, the IRS does not simply “rubber-stamp” all SDOP and SFOP submissions.  Taxpayers should expect a rigorous review of their cases.
Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure
If you are a taxpayer who has not filed his required FBARs, contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers to utilize various offshore voluntary disclosure options, including SDOP and SFOP, to bring themselves into full compliance with US tax laws, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### July 2019 IRS Compliance Campaigns | International Tax Lawyer & Attorney
On July 19, 2019, the IRS Large Business and International division (LB&I) announced the approval of another six compliance campaigns. Let’s discuss in more detail these July 2019 IRS compliance campaigns.
July 2019 IRS Compliance Campaigns: Background Information
In the mid-2010s, after extensive tax planning, the IRS decided to restructure LB&I in a way that would focus the division on issue-based examinations and compliance campaign processes. The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.
The first thirteen campaigns were announced by LB&I on January 13, 2017. Then, the IRS added eleven campaigns on November 3, 2017, five campaigns on March 13, 2018, six campaigns on May 21, 2018, five campaigns on July 2, 2018, five campaigns on September 10, 2018, five campaigns on October 30, 2018 and three campaigns on April 16, 2019. With the additional six July 2019 IRS compliance campaigns, the IRS has created a total of fifty-nine total IRS compliance campaigns.
Six New July 2019 IRS Compliance Campaigns
The six new campaigns are: S-Corporations Built-in Gains Tax, Post-OVDP Compliance, Expatriation, High Income Non-Filers, US Territories – Erroneous Refundable Credits and Section 457A Deferred Compensation Attributable to Services Performed before January 1, 2009.  As you can see, the new campaigns continue to maintain the IRS focus on US international tax compliance.  Let’s discuss each campaign in more detail.
July 2019 IRS Compliance Campaigns: S-Corporations Built-in Gains Tax
This campaign actually focuses on a C-corporation that converted to S-corporation. The main issue here is the Built-in Gains (“BIG”) tax.  If a C-corporation has a net unrealized built-in gain, converts to S-corporation and sells assets within five years after the conversion, then it will likely be subject to the BIG tax. The BIG tax is assessed to the S-corporation (this is why the campaign is named in this manner).
LB&I has found that S corporations are not always paying this tax when they sell the C-corporation’s assets after the conversion. LB&I has developed comprehensive technical content for this campaign that will aid revenue agents as they examine the issue. The goal of this campaign is to increase awareness and compliance with the law as supported by several court decisions. Treatment streams for this campaign will be issue-based examinations, soft letters, and outreach to practitioners.
July 2019 IRS Compliance Campaigns: Post-OVDP Compliance
This is an IRS campaign of an especially high interest for international tax lawyers, because it targets specifically taxpayers who went through the IRS Offshore Voluntary Disclosure Program (“OVDP”).  The IRS noticed that some taxpayers again became noncompliant after they went through the OVDP.
The campaign will specifically target post-OVDP taxpayers who failed to remain compliant with their foreign income and asset reporting requirements. The IRS will address tax noncompliance through soft letters and examinations.
July 2019 IRS Compliance Campaigns: Expatriation
This is another IRS campaign of high interest to international tax attorneys. US citizens and long-term residents (defined as lawful permanent residents in eight out of the last fifteen taxable years) who expatriated on or after June 17, 2008, may not have met their filing requirements or tax obligations. The Internal Revenue Service will address noncompliance through a variety of treatment streams, including outreach, soft letters, and examination.
July 2019 IRS Compliance Campaigns: High Income Non-Filers
This campaign again focuses on US international tax law.  In particular, the campaign targets high-income US citizens and resident aliens who receive compensation from overseas that is not reported on a Form W-2 or Form 1099.  IRS audits are going to be the main treatment stream for this campaign.
July 2019 IRS Compliance Campaigns: US Territories – Erroneous Refundable Credits
Some bona fide residents of US territories are erroneously claiming refundable tax credits on Form 1040. This campaign will address noncompliance through a variety of treatment streams including outreach and traditional examinations.
July 2019 IRS Compliance Campaigns: Section 457A Deferred Compensation Attributable to Services Performed before January 1, 2009
This campaign addresses compensation deferred from nonqualified entities attributable to services performed before January 1, 2009. In general, IRC Section 457A requires that any compensation deferred under a nonqualified deferred compensation plan shall be includible in gross income when there is no substantial risk of forfeiture of the rights to such compensation. The campaign objective is to verify taxpayer compliance with the requirements of IRC Section 457A through issue-based examinations.
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of any of its campaigns, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Child’s FBAR Requirements | FBAR Tax Lawyer & Attorney
I often receive questions concerning a child’s FBAR requirements. Many taxpayers automatically assume that, if their children are below the age of majority, these children do not have to file FBARs. Unfortunately, this is not the case – a child’s FBAR requirements are every bit as extensive of those of his parents.
Child’s FBAR Requirements: FBAR Background Information
A US Person must file FinCEN Form 114, the Report of Foreign Bank and Financial Account, commonly known as “FBAR”, if he has a financial interest in or a signatory authority or any other authority over a foreign financial account and the highest value of this account (in the aggregate with any other foreign accounts of this US person) is in excess of $10,000. FBAR is filed separately from the tax return.
Failure to file FBAR can lead to very high penalties. In fact, FBAR has the most severe penalty system in comparison to any other forms related to foreign accounts; it includes even criminal penalties. Even when a person was not willful in his non-filing of FBAR, he may still be subject to FBAR non-willful civil penalties of up to $10,000 (as adjusted for inflation) per account per year.
Child’s FBAR Requirements: Age Does Not Matter
The gruesome consequences of a failure to file FBAR make the determination of who is required to file FBARs one of the most important tasks of an international tax lawyer.  This is why understanding a child’s FBAR requirements is so important.  Let’s clarify this issue right now.
The rule is that a US Person is subject to the FBAR filing requirement regardless of his age. In other words, even an infant must file an FBAR.
Hence, it is important for an international tax lawyer (and his clients) to always check whether minor children have any foreign accounts. A typical fact pattern in this context involves situations where grandparents set up foreign savings accounts for their US grandchildren.
It is especially important to keep this in mind during an offshore voluntary disclosure. Oftentimes, a voluntary disclosure is focused on parents; children’s accounts are often neglected.
Child’s FBAR Requirements: FBAR Filing
Generally, a child is responsible for filing his own FBAR.  Again, this responsibility arises irrespective of the age of the child.  
The IRS understands, however, that a child would normally be unable to file his own FBARs. In such cases, the responsibility for filing FBARs is placed on the legally responsible person (such as parents, guardians, et cetera).  The legally responsible person will be allowed to sign and file FBARs on behalf of the child.
Contact Sherayzen Law Office With Respect to Your Child’s FBAR Requirements
If your child has foreign accounts, contact Sherayzen Law Office for professional FBAR help.  We have helped hundreds of US taxpayers around the world with their FBAR obligations, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 2019 Fourth Quarter IRS Interest Rates | PFIC Tax Lawyers
On August 28, 2019, the Internal Revenue Service (“IRS”) announced that the 2019 Fourth Quarter IRS underpayment and overpayment interest rates will not change from the 3rd Quarter of 2019.  This means that, the 2019 Fourth Quarter IRS underpayment and overpayment interest rates will be as follows:
five (5) percent for overpayments (four (4) percent in the case of a corporation);
 two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000;
 five (5) percent for underpayments; and
 seven (7) percent for large corporate underpayments. 
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. The IRS used the federal short-term rate for July of 2019 to determine the 2019 Fourth Quarter IRS interest rates The IRS interest is compounded on a daily basis.
2019 Fourth Quarter IRS interest rates are important for many reasons.  These are the rates that the IRS uses to determine how much interest a taxpayer needs to pay on an additional tax liability that arose as a result of an IRS audit or an amendment of his US tax return. The IRS also utilizes these rates with respect to the calculation of PFIC interest on Section 1291 tax. 
As an international tax law firm, Sherayzen Law Office keeps track of the IRS underpayment interest rates on a regular basis.  We often amend our client’s tax returns as part of an offshore voluntary disclosure process.  For example, both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures require that a taxpayer amends his prior US tax returns, determines the additional tax liability and calculates the interest on this liability.  
Moreover, we very often have to do PFIC calculations for our clients under the default IRC Section 1291 methodology.  This calculation requires the usage of the IRS underpayment interest rates in order to determine the amount of PFIC interest on the IRC Section 1291 tax.
Finally, it is important to point out that the IRS will use the 2019 Fourth Quarter IRS overpayment interest rates to determine the amount of interest that needs to be paid to a taxpayer who is due a tax refund as a result of an IRS audit or amendment of the taxpayer’s US tax return. Surprisingly, we often see this scenario arise in the context of offshore voluntary disclosures.

### Sherayzen Law Office Successfully Completes its 2019 Fall Tax Season
On October 15, 2019, Sherayzen Law Office, Ltd., successfully completed its 2019 Fall Tax Season.  It was a challenging and interesting tax season. Let’s discuss it in more detail.
2019 Fall Tax Season: Sherayzen Law Office’s Annual Compliance Clients
Annual tax compliance is one of the major services offered by Sherayzen Law Office to its clients.  The majority of our annual compliance clients are individuals and businesses who earlier retained our firm to help them with their offshore voluntary disclosures.  They liked the quality of our services so much that they preferred our firm above all others to assure that they stay in full compliance with US tax laws.
It is natural that this group of clients is the largest among all other groups, because the unique specialty of our firm is conducting offshore voluntary disclosures.
A smaller group of our annual compliance clients consists of tax planning clients who also asked Sherayzen Law Office to do their annual compliance for them. 
Finally, the last group of our annual compliance clients consists of businesses and individuals who were referred to our firm specifically for help with their annual compliance.  These are usually foreign businesses who just expanded to the United States and foreign executives and professionals who just arrived to the United States to start working here.
2019 Fall Tax Season: Sherayzen Law Office’s Annual Compliance Services
Virtually all of our clients have exposure to foreign assets and international transactions.  Hence, in addition to their domestic US tax compliance, Sherayzen Law Office prepares the full array of US international tax compliance forms related to foreign accounts (FBAR and Form 8938), PFIC calculations (Forms 8621), foreign business ownership and Section 367 notices (Forms 926, 5471, 8858, 8865, et cetera), foreign trusts (Form 3520 and Form 3520-A), and other relevant US international tax compliance issues.
2019 Fall Tax Season: Unique Challenges and Opportunities 
The 2019 Fall Tax Season was especially challenging because of the record number of deadlines that needed to be completed.  During the season, Sherayzen Law Office filed hundreds of FBARs, US income tax returns and US international tax returns such as Forms 3520, 5471, 8865, 8621 and 926. 
The great time pressure created opportunities for our firm to further streamline our tax preparation and scheduling processes, ultimately creating an even more efficient yet still comprehensive and detail-oriented organization. 
The 2019 Fall Tax Season was unique in one more aspect – the implementation of the 2017 tax reform changes.  The 2017 Tax Cuts and Jobs Act (“TCJA” or “2017 tax reform”) introduced the most radical changes to the Internal Revenue Code since 1986.  Form 1040 was greatly modified and numerous other US domestic tax laws and forms were affected.
The greatest change, however, befell the US international tax law, particularly US international corporate tax law.  The introduction of GILTI (Global Intangible Low-Taxed Income) tax, FDII (Foreign-Derived Intangible Income) deduction, full participation exemption and many other rules and regulations has profoundly modified this area of law.
No form felt these changes greater than Form 5471.  Due to the 2017 tax reform, it has almost tripled in size and has acquired a qualitatively new level of complexity.  Many new questions appeared and only some of them were definitely resolved by the IRS in the summer of 2019 when it issued new regulations. 
Since Sherayzen Law Office has a lot of clients who own partially or fully foreign corporations, Forms 5471 were a constantly-present challenge during the 2019 Fall Tax Season.  Nevertheless, we were able to timely complete all Forms 5471 for all of clients.  We were even able to develop and incorporate important strategic and tactical tax planning techniques, such as IRC Section 962 election, helping our clients lower their tax burden.
Looking Forward to Completing Offshore Voluntary Disclosures, End-of-Year Tax Planning and 2020 Spring Tax Season
Having completed such a difficult 2019 Fall Tax Season, Sherayzen Law Office now looks forward to working on the offshore voluntary disclosures and IRS audits through the end of the year.  We also have a sizeable portfolio of end-of-year tax planning cases.  Finally, we look forward to the 2020 Spring Tax Season for the tax year 2019.
If you have foreign assets or foreign income, contact Sherayzen Law Office for professional help. Our firm specializes in US international tax compliance.  We have helped hundreds of US taxpayers to bring themselves into full compliance with US tax laws, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Fundamental Form 5471 Concepts | Form 5471 Tax Lawyer & Attorney
Form 5471 is the most important information return that the IRS uses to collect information about foreign corporations with substantial US ownership. US taxpayers must file a Form 5471 with their US tax returns; failure to do so may result in the imposition of significant IRS penalties. In order to identify whether the IRS requires them to file Form 5471, US taxpayers must at the very least understand the following three fundamental Form 5471 concepts: “US Person”, “US Shareholder” and “Controlled Foreign Corporation” (“CFC”). This article introduces readers to these fundamental Form 5471 concepts.
Fundamental Form 5471 Concepts: US Person
The definition of “US Person” is crucial to understanding your Form 5471 filing requirements. Generally, the definition of a US person includes the following categories of taxpayers: US citizens, US tax residents, a domestic partnership, a domestic corporation, certain trusts and certain estates.  It should be pointed out that tax-exempt entities can also be US persons.
In order for a trust to be a US Person, it must not be a foreign trust; in other words, it must satisfy the legal tests set forth in the Internal Revenue Code (“IRC”)  §7701(a)(30).  The first test is that a court within the United States is able to exercise primary jurisdiction over the trust’s administrative issues.  The second test is that a US person has authority to make all important discretionary decisions which cannot be vetoed by a non-US person.
In order for an estate to be a US person, it must not be a foreign estate as defined in the IRC §7701(a)(31).
Fundamental Form 5471 Concepts: US Shareholder
The concept of US shareholder is also very important for understanding one’s Form 5471 obligations.  The definition of a US shareholder was recently modified by the 2017 Tax Cuts and Jobs Act (“TCJA”).  
A "US shareholder" is a US Person who owns either: (a) 10% or more of the total combined voting power of all classes of voting stock of a foreign corporation; or (b) 10% or more of the  value of all the outstanding shares of a foreign corporation.  The latter rule (10% ownership of the total value of shares) is applicable starting a tax year of a foreign corporation that begins after December 31, 2017. 
It is important to point that “ownership” can be direct, indirect or constructive within the meaning of IRC §958(a) and §958(b).
Fundamental Form 5471 Concepts: Controlled Foreign Corporation
Owners of shares in a CFC face a far greater Form 5471 compliance burden than owners of shares in foreign corporations which are not CFCs.  Hence, the concept of CFC is extremely important to identifying your Form 5471 obligations.
A CFC is a foreign corporation with US shareholders that own on any day of its tax year, more than 50% of either (1) the total combined voting power of all classes of its voting stock, or (2) the total value of its stock.  Again, the “ownership” can be direct, indirect or constructive within the meaning of IRC §958(a) and §958(b). 
The 2017 tax reform made profound changes to the definition of CFC.  Many foreign corporations which were not CFCs under the pre-TCJA rules have been re-classified as CFCs starting tax year 2018.
Contact Sherayzen Law Office for Professional Help With Your Form 5471 Compliance
If you are a US person with an ownership interest in a foreign corporation of 10% or more, you may have extensive Form 5471 reporting obligations.  Given the extreme complexity of the form and the high penalties associated with Form 5471 noncompliance, it is important secure the professional and experienced help of Sherayzen Law Office. 
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: Form 5471 tax attorney discusses fundamental Form 5471 concepts of US Person, US Shareholder & CFC (Controlled Foreign Corporation)

### FATCA Tax Lawyer Karlovy Vary
[av_video src='https://www.youtube.com/watch?v=AVhZcwSEkqw' mobile_image='https://sherayzenlaw.com/wp-content/uploads/2019/09/Eugene_KV-1030x579.jpg' attachment='25066' attachment_size='' format='16-9' width='16' height='9' conditional_play='' av_uid='av-k10x1fek']
 Hello and welcome to Sherayzen Law Office Video Blog. My name is Eugene Sherayzen; I'm an international tax attorney and owner of Sherayzen Law Office Ltd.
And today we are continuing our series of blogs from Czech Republic and we are in Karlovy Vary; a very famous resort where high-net worth individuals come to rest, to cure their diseases, to drink mineral water, but some of these individuals are also US Tax Residents. And unfortunately one of the problems US Tax Residents face is compliance with very extensive and intrusive US Tax Reporting Requirements.
One of these requirements is FATCA. Now FATCA is a huge piece of legislation that was passed in 2010, that revolutionized the entire legal landscape around the world with respect to information exchange and tax compliance.
There are three parts of FATCA which have relevance for ordinary individual and corporate tax, US Taxpayers. One of them is the requirement for foreign financial institutions to report foreign accounts owned by US Persons; the second one is a tax withholding requirement of 30% on the gross transactions if the foreign financial institution is not tax compliant, same by the way, applies by the way to US Taxpayers with foreign accounts which have not been disclosed to the IRS or for which the US Taxpayers refused to give the permission to the foreign institutions to disclose. And finally the third requirement is form 8938. Now form 8938 is part of the internal revenue code now and it should be filed with your US Tax Return. Failure to file form 8938 may have grave consequences, including the extension of the Statute of Limitations, the imposition of civil and even criminal penalties.
If you would like to learn more about your US Tax Reporting Requirements, you should contact me directly at eugene@sherayzenlaw.com or call me at (952) 500-8159. Thank you for watching; until the next time.

### The End of Swiss Bank Secrecy
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Hello, and welcome to Sherayzen Law Office video blog. My name is Eugene Sherayzen; I'm an international tax attorney and owner of Sherayzen Law Office, Ltd. And today, we are continuing our vlog in Zurich Switzerland and right now we're walking towards one of the most prestigious, one of the most expensive, and one of the most bank-filled if you will, streets in the world:  Bahnhofstrasse.
Bahnhofstrasse is known in the banking world for being the headquarters of some of the largest banks in the world. It is also known for being one of the top places for international assets management and international tax planning.
And now we have reached one of the most exciting and important places in US voluntary disclosure history, UBS Bank. UBS is important because it was precisely the IRS victory over the UBS that opened the door to the IRS intrusion into Switzerland and ultimately took down, completely destroyed, annihilated the concept of bank secrecy in Switzerland with respect to US Taxpayers.
It was also the beginning of a series of highly successful US voluntary disclosure programs. It was precisely the US victory in 2008 over UBS that lead to the creation of the (now discontinued) 2009 Offshore Voluntary Disclosure Program or OVDP.

### Ocultar Dinero En Cuentas Extranjeras es un Delito | Abogado FBAR FATCA
Ocultar dinero o activos en cuentas extranjeras no declaradas es un delito segun el Servicio de Impuestos Internos (“IRS”).  De hecho, el IRS incluye cuentas extranjeras no declaradas en la lista de estafas tributarias “Docena sucia” del año 2019. Recopilada anualmente, la "Docena sucia" enumera una variedad de estafas comunes que los contribuyentes pueden encontrar en cualquier momento, incluido los esquemas extranjeros.
Esquemas Para Ocultar Dinero en Cuentas Extranjeras No Declaradas
Ocultar dinero en cuentas extranjeras no declaradas es un esquema promocionado en el Internet por muchas companias.  Algunas de ellas proponen de ocultar los ingresos en bancos, cuentas de corretaje o entidades nominales extranjeras.  Esas personas dicen a los contribuyentes que ellos luego pueden acceder a los fondos mediante tarjetas de débito, tarjetas de crédito o transferencias bancarias. Otros esquemas son aun mas creativos - usan fideicomisos, planes de arrendamiento de empleados, anualidades privadas o planes de seguro extranjeros para el mismo propósito.
Se Puede Tener Cuentas Extranjeras Declaradas
Es importante de ratificar que tener una cuenta bancaria en el extranjero no es un delito; solamente ocultar dinero en una cuenta extranjera no declarada es ilegal.  Existen muchas razones legítimas para mantener cuentas financieras fuera de los Estados Unidos.
Sin embargo, los contribuyentes con cuentas extranjeras deben cumplir con los requisitos de presentación de informes. Los informes mas importantes son el Formulario 8938, Declaración de Activos Financieros Extranjeros Especificados, y Formulario 114, el Informe de Cuentas Bancarias y Financieras Extrajeras. Formulario 114 proviene de la Ley de Secreto Bancario (“BSA”) y es mas conocido como FBAR.  Formulario 8938 proviene de FATCA.
Ocultar Dinero en Cuentas Extranjeras No Es Un Esquema Seguro
Ocultar dinero en cuentas extranjeras parece ser seguro, pero no lo es. Hay muchas maneras para el IRS de descubrir las cuentas extranjeras no declaradas: seguir las transactions, informes de terceros, información obtenida durante auditorías y, últimamente, los bancos. 
A causa de la Ley de Cumplimiento Tributario de Cuentas en el Extranjero (“FATCA”), su banco extranjero tiene la obligación de declarar sus cuentas bancarias al IRS si el banco descubra que usted es un residente tributario de los Estados Unidos.  Además, el IRS  recibe más información sobre posibles incumplimientos a través de la red de acuerdos intergubernamentales entre las jurisdicciones de los EE. UU. y los socios.
Ocultar Dinero en Cuentas Extranjeras Puede Terminar en Multas Graves y Cargos Penales
“La evasión en el extranjero sigue siendo un punto focal de los esfuerzos de cumplimiento del IRS,” dijo Chuck Rettig, Comisionado del IRS. “Nuestros equipos de Investigación Criminal y de cumplimiento civil trabajan en estrecha colaboración con el Departamento de Justicia en el ámbito internacional para garantizar que se cumplan las leyes tributarias de nuestra nación. Los contribuyentes que consideran esconder fondos en el exterior deben pensarlo dos veces; las multas pueden ser severas.”
Si usted utiliza esos esquemas para ocultar dinero o activos, eso puede exponerlo a usted a varias multas importantes y aun posibles procesos penales. El IRS realizó miles de auditorías civiles relacionadas con el extranjero que resultaron en el pago de decenas de millones de dólares en impuestos. El IRS también ha presentado cargos penales que llevan a miles de millones de dólares en multas penales y restitución.
Llame Sherayzen Law Office Para Ayuda Professional Con Cuentas Extranjeras No Declaradas
Si usted tiene cuentas extranjeras no declaradas, usted debe communicarse con Sherayzen Law Office lo mas pronto posible.  Hay posibilidades de bajar y aun evitar multas de FBAR and FATCA, pero es necesario actuar lo mas pronto posible y antes de que el IRS descrubre su incumplimiento con la ley tributaria de los Estados Unidos.
Llamenos or mandenos un mensaje por el correo electronico hoy para programar una cita confidencial con el abogado Eugene Sherayzen!

### FATCA Criminal Penalties | International Tax Lawyer & Attorney
While there are a number of articles in professional publications and attorneys’ blogs covering the civil penalties associated with a failure to comply with the Foreign Account Tax Compliance Act (“FATCA”), there is almost a complete silence with respect to FATCA criminal penalties. This essay intends to fill this gap by introducing its readers to potential FATCA criminal penalties that the IRS may pursue in case of FATCA noncompliance.
FATCA Criminal Penalties: FATCA Background and FFI Reporting Requirements
Congress enacted the Foreign Account Tax Compliance Act (“FATCA”) as part of the Hiring Incentives to Restore Employment (“HIRE”) Act of 2010.  The law revolutionized international tax compliance, because, for the very first time, it forced all foreign financial institutions (“FFIs”) to report their US account holders to the IRS, including their names, account numbers and highest values of these accounts. 
In other words, FATCA has turned all compliant FFIs into IRS agents.  FFIs now carry the entire burden of automatically (and, it is important to emphasize the word “automatically”) disclosing all of the FATCA-required information directly to the IRS.  The IRS now only needs to properly process and analyze the data in order to identify noncompliant taxpayers and investigate them.
How did the Congress achieve this goal?  It imposed a very harsh penalty on FATCA-noncompliant FFIs without paying much attention to the potential legal and political implications such an over-reaching law has for the sovereignty of other nations. FATCA created a new tax withholding regime under which every noncompliant FFI faces a 30% withholding with respect to any incoming transaction.  The penalty is imposed on the gross amount of a transaction, which means that using a noncompliant FFI may result in a net loss for the parties engaged in the transaction.
The net impact of the FATCA FFI penalty is that no bank or person would wish to utilize a noncompliant FFI, effectively cutting off the latter from the any USD-nominated transactions and the world markets. 
FATCA Criminal Penalties: FATCA Requirements Imposed on US Taxpayers
FATCA created a new tax reporting obligation specifically for US taxpayers called Form 8938. I have discussed Form 8938 in detail elsewhere on my website and here I will provide just a very simplified description of this requirement. A Specified Person (who can be an individual or an entity) must file Form 8938 if the value of his Specified Foreign Financial Assets (SFFAs) exceeds a certain filing threshold which is determined by the tax return filing status of the Specified Person.
SFFAs are defined very broadly to include pretty much any type of a financial asset, an ownership interest in a foreign business, ownership of a beneficiary interest in a foreign trust, ownership interest in a foreign trust under the IRC Sections 671 through 679, et cetera. Additionally, Form 8938 requires the Specified Person to report foreign income attributable to holding or disposing of SFFAs. 
Failure to file Form 8938 may lead to an imposition of a $10,000 civil penalty, subject to reasonable cause exception. An additional $10,000 penalty applies if the taxpayer fails to file Form 8938 within 90 days after the IRS mails notice of the failure to file the form. If the taxpayer persists in his failure to file the form, the IRS will impose additional $10,000 for each thirty-day periods the failure continues up to the maximum of $50,000. It is important to note that the statute of limitations does not start to run if Form 8938 has not been filed.
FATCA Criminal Penalties in General
Interestingly, the US Congress did not create any separate FATCA criminal penalties. The IRS and the US Department of Justice (“DOJ”), however, have not had any problems in engaging into criminal prosecutions of FATCA violations.
There are three major provisions that the IRS and the DOJ can rely upon in their criminal prosecution of FATCA violations. First, 18 U.S.C. section 371 (see below for more details).  Second, 26 U.S.C. 7201 – a felony charge for intentional filing of a false Form 8938.  Finally, 26 U.S.C. 7203 – a misdemeanor charge for a willful failure to file Form 8938.
So far, the IRS and the DOJ have used Section 371 more than Sections 7201 and 7203.  However, as time goes on, I expect that Sections 7201 and 7203 will be used more extensively.  
Since Section 371 criminal charges are the most common at this point, let’s explore this type of a criminal prosecution charge in more detail. 
FATCA Criminal Penalties: 18 U.S.C. Section 371
As long as there is enough evidence, the IRS and the DOJ can use 18 U.S.C. section 371 to prosecute US taxpayers based on a charge of engaging in a FATCA-related conspiracy.  This is likely to become the most favorite tool to prosecute persons for aiding US clients to circumvent FATCA requirements, including tax withholding provisions. 
The DOJ already used this tool as early as within two months after FATCA tax withholding obligations became effective in July of 2014.  On September 9, 2014, Mr. Robert Bandfield, five other individuals and six corporations were charged under 18 U.S.C. section 371 for a conspiracy to aid US clients with evasion of FATCA reporting requirements. 
It is important to point out that criminal charges under 18 U.S.C. section 371 are especially dangerous for foreigners who help US taxpayers with tax evasion.
Contact Sherayzen Law Office for Professional Help With a Willful Failure to File Forms 8938
For persons who willfully failed to file their Forms 8938, the best strategy to avoid a criminal prosecution is to engage in a voluntary disclosure of their undisclosed foreign assets before the IRS finds out about your willful FATCA violations. Sherayzen Law Office can help you!
While the IRS flagship Offshore Voluntary Disclosure Program (“OVDP”) was closed on September 28, 2019, the IRS updated its traditional voluntary disclosure program in November of 2018 to help willful taxpayers voluntarily disclose their prior tax noncompliance.  I will refer to this option as Modified Traditional Voluntary Disclosure (“MTVD”).  
Sherayzen Law Office can help you with MTVD and any other type of a voluntary disclosure. Our highly-experienced team of tax professionals has helped hundreds of US taxpayers to successfully conduct an offshore voluntary disclosure of their undisclosed foreign assets and foreign income. We have prevented the initiation of numerous criminal prosecutions and saved tens of millions of dollars in penalties for our clients. We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 2019 Minsk Seminar: US International Corporate Tax Reform | GILTI & FDII
On August 28, 2019, Mr. Eugene Sherayzen, the owner and founder of Sherayzen Law Office, Ltd, gave a seminar at Minsk City Bar Association (“MCBA”) in Minsk, Belarus. The focus of the seminar was on the 2017 Tax Cuts and Jobs Act (“2017 TCJA” or “2017 tax reform”) changes in the US international corporate tax law.  Let’s discuss this 2019 Minsk seminar in more detail.
2019 Minsk Seminar: Organizational Aspects
The 2019 Minsk seminar was held at a location owned by MCBA in Minsk, Belarus. The seminar was well-attended by Minsk lawyers of various specializations, not just tax attorneys. Mr. Sherayzen conducted the seminar in the Russian language.
2019 Minsk Seminar: Structure of the Seminar
The seminar consisted of four parts: introduction to Sherayzen Law Office’s international tax practice, discussion of five important concepts of US international tax law, explanation of certain aspects of US international business tax law prior to the 2017 tax reform and the 2017 TCJA changes to US international corporate tax law.  Throughout the seminar, Mr. Sherayzen made certain digressions into individual international tax law as well as general business tax law in order to better explain certain aspects of the 2017 tax reform to the audience.
2019 Minsk Seminar: Sherayzen Law Office International Tax Practice
During the seminar, Mr. Sherayzen introduced his law firm, Sherayzen Law Office, Ltd., to the audience.  He explained that the focus of his practice is on US international tax law.  After explaining what “US international tax law” meant, the attorney described the four main sub-areas of his practice: offshore voluntary disclosures, IRS international tax audits, annual compliance and international tax planning.
2019 Minsk Seminar: Five Concepts
After describing his practice, Mr. Sherayzen discussed in detail five relevant concepts of US international tax law.  He first introduced the concept of “US tax residency” and generally described the categories of US tax residents.  In response to a question from an attendee, the attorney distinguished US tax residency from immigration residency.
Then, Mr. Sherayzen discussed the principle of worldwide income taxation of US tax residents.  The fact that US tax residents must report their worldwide income even if they reside overseas caused consternation among some attendees. 
The discussion of the concept of income recognition resulted in a lively exchange between the speaker and the audience.  At that point, Mr. Sherayzen alluded that this topic would be relevant to the his explanation of the anti-deferral regimes during the second part of his lecture.
The rest of this part of the seminar focused on the taxation powers of the US congress and the source of income rules.  The attorney introduced certain general source-of-income rules, but warned about the enormous amount of exceptions in this area of law.
2019 Minsk Seminar: Pre-Tax Reform US International Corporate Tax Law
Mr. Sherayzen adopted a general historical approach to the explanation of US international corporate tax law prior to the 2017 TCJA.  He commenced with a description of the progression of law since the 1920s, explaining the incentives that existed for the accumulation of cash overseas.  Then, the attorney discussed the modifications to the law enacted by Congress throughout the years in order to combat tax avoidance by US corporations.  
At that point, Mr. Sherayzen introduced the two main anti-deferral regimes: Subpart F rules and PFIC rules.  He explained these regimes in a general manner, warning the audience that there were many specific rules and exceptions to these general rules.  The attorney also discussed why these two anti-deferral regimes failed to stop tax avoidance and the continued accumulation of corporate cash in foreign subsidiaries.
2019 Minsk Seminar: 2017 Tax Reform
The discussion of the 2017 TCJA consisted of three parts: (1) reasons for the reform; (2) new rules to combat tax avoidance; and (3) tax incentives with respect to returning production to the United States and exporting from the United States.
After introducing the audience to the historical and political context in which 2017 TCJA was enacted, Mr. Sherayzen discussed the new tax avoidance prevention rules, focusing on the Section 965 tax and Global Intangible Low-Taxed Income (“GILTI”) tax.  Then, the attorney explained the new tax incentives introduced by the 2017 tax reform, including lower corporate tax rates, full participation exemption and Foreign-Derived Intangible Income (“FDII”). 
2019 Minsk Seminar: Conclusion
At the end of the seminar, there was an extensive Q&A session.  Questions ranged from re-classification of shareholder loans during an offshore voluntary disclosure to certain aspect of the 2017 tax reform and its impact on corporate restructuring.

### Partnership International Tax Issues | International Tax Lawyer & Attorney
This article introduces readers to potential US international tax issues that a business entity may face when it elects to operate as a partnership for US tax purposes (all together “partnership international tax issues”).  The focus of this article is on partnership international tax issues, particularly where US partnerships have a foreign partner and foreign partnerships have a US partner. The purpose of this article is to just identify the strategic groups of partnership international tax issues; future articles will analyze these issues in more depth. 
Partnership International Tax Issues: Two Main Fact Patterns
As stated above, the partnership international tax issues outlined below concern primarily one of the following situations.  First, a partnership is a US partnership and a foreign person invests in this partnership.  Second, a partnership is a foreign partnership and a US person invests in this partnership. 
The Internal Revenue Code (“IRC”) deals with both situations in a different manner. They are taxed differently, and a partnership and/or its partner may have to file different information returns.
Partnership International Tax Issues: Classification Issues
Three important US international tax issues exist with respect to classification of partnerships.  First, classification of an entity or arrangement as a partnership. The tax classification of a partnership that is officially formed by filing appropriate organizational documents with the proper government entity is usually fairly clear.  This is not the case, however, with respect to a situation where parties enter into a contractual arrangement which exhibit features similar to a partnership.  In these situations the IRS may determine such a contractual arrangement to be a partnership for US tax purposes; these are so-called “contractual partnerships”.
Second, classification of a partnership as “domestic” or “foreign”. Again, the easiest cases are those that involve a formally-organized partnership, but contractual partnerships raise a lot of difficult issues. 
Third, classification of a partnership as either “resident” or “non-resident”.  
Partnership International Tax Issues: Issues Concerning Inbound Investments
An important set of US international tax issues arises when a foreign person invests in a US partnership.  Most of these issues would arise in situations where the partnership trades or otherwise does business in the United States.  The most salient issues concern: partnership formation, taxation of partnership operations, taxation of partnership distributions and sale of a partnership interest by a foreign partner. We will discuss these issues in more detail in the future.
Partnership International Tax Issues: Issues Concerning Taxation of Outbound Investments
Another highly important set of issues arises when a US person does business through a foreign partnership.  The most important of these issues concern: acquisition of an interest in a foreign partnership, taxation of foreign partnership income allocated to US partners and disposition of an ownership interest in a foreign partnership.
These issues interconnect in an interesting and very complex way with such issues as income source rules, foreign tax credit, Subpart F rules and so on.  The interaction of these issues may directly affect taxation of foreign income of a US partner.  In future articles, we will cover this very diverse set of partnership international tax issues concerning taxation of outbound investments.
Partnership International Tax Issues: Tax Withholding Issues
US international tax law subjects domestic partnerships to a great variety of tax withholding rules whenever they have foreign partners with effectively connected income. Most common of these rules are the ones that concern partnership distributions to a foreign partner.  Another very common example is Foreign Investment in Real Property Tax Act of 1980, commonly known as “FIRPTA”, tax withholding requirements.  Again, we will cover these tax withholding issues as well as the problem of “effectively connected income” in future articles.
Partnership International Tax Issues: Tax Treaties
Bilateral tax treaties form an important part of US international tax law concerning taxation of partnerships. Partnership taxation is affected by a host of tax treaty issues. For example, the treatment of “hybrid” and “reverse hybrid” entities, tax treaty benefits and the issue of “imputed” permanent establishment are all highly important tax treaty issues that directly affect partnership taxation under US tax law.  In future article, we will discuss selected tax treaties as well as certain features common to most US tax treaties.
Partnership International Tax Issues: Information Returns and Income Tax Returns
Numerous tax filing requirements are imposed on partnerships, especially US partners of foreign partnerships.  The most salient information returns are those required by the Internal Revenue Code (“IRC”) Sections 6031, 6038 and 6046A. There is also an important interaction of these sections with information returns under the IRC Sections 6038A and 6038C. We will cover the partnership information and income tax returns in future articles.
Contact Sherayzen Law Office for Professional Help Concerning Partnership International Tax Issues 
If you are a US person who owns an interest in a foreign partnership or a foreign person who owns an interest in a US partnership, contact Sherayzen Law Office for professional help.   Our highly-experienced international tax team, headed by attorney Eugene Sherayzen, will help you identify your US international tax compliance issues and help you resolve them.  
If you are facing an IRS audit concerning partnership international tax issues, call us as soon as possible to obtain the maximum benefit from our advice. 
Contact Us Today to Schedule a Confidential Consultation!

### IRS Acquires Phone-Hacking Software | IRS Lawyer News
It seems that the IRS audit powers are increasing more and more at the expense of taxpayers’ privacy rights.  In June of 2019, the IRS posted a procurement notice on its website to award a contract to a company Cellebrite, an Israeli company that specializes in smartphone decryption software and equipment.  In other words, the IRS is about to acquire phone-hacking software from this company. 
IRS Phone-Hacking Software: Primary Targets
What exactly does the IRS want to be able to hack? It appears pretty much everything that is used by taxpayers on a daily basis. Cellebrite software is capable to hacking both Android and Apple phones. Moreover, it can extract data from programs such as WhatsApp, Instagram and Facebook.  This data-extraction ability covers encrypted messages.
According to Cellebrite’s website, its software would allow the IRS to “go beyond texts, call logs and photos with a comprehensive toolset that effectively accesses data from the widest variety of digital sources.”  Furthermore, “advanced capabilities help you bypass passwords, overcome locks and encryption challenges to extract and decode complete data from the most devices, operating systems and applications. You can also extract and preserve public and private data from social media and other cloud-based sources, providing an unparalleled amount of forensically sound digital evidence.”
IRS Phone-Hacking Software: IRS Is Not the Only Federal Agency to Use It
The IRS is not alone in its usage of phone-hacking software.  US Secret Service, US Immigration and Customs Enforcement, Federal Bureau of Investigation and other government agencies have acquired phone-hacking abilities, including from Cellebrite.  One of the most famous examples of a government agency using phone-hacking software occurred with respect to a mass shooter’s iPhone.  After Apple refused to cooperate with the FBI, the Bureau reportedly used an “outside party” to unlock the iPhone used by the San Bernardino shooter (the FBI has denied it, but it appears that the rumors are true). 
Also, this is not the first time that the IRS used Cellebrite software.  It appears the IRS has had contracts with the firm all the way back to 2009.  In those instances, the IRS simply paid Cellebrite for its services to unlock a specific phone.  This time, however, the IRS wants the software license, equipment and maintenance support. 
IRS Phone-Hacking Software: Privacy Invasion Concerns 
The fact that the IRS will acquire the capability to directly hack into taxpayers’ phones raises all kinds of privacy concerns.  When will the IRS use it – only in criminal investigations or also in civil ones?  Will there be a judicial review of the IRS usage of this software?  Who will authorize the hacking and under what circumstances?  How will the privacy rights of innocent taxpayers be protected?  Will the information obtained by the IRS be shared with other federal agencies? What about state agencies?  What kind of safeguards are in place to prevent the usage of the discovered data (especially when it is not relevant to tax compliance) for political vendetta purposes?
All of these questions are highly-important concerns in our world of rapidly-disappearing privacy rights.  This is a concern that should be shared by all members of our society.  
Sherayzen Law Office will continue to follow these recent developments with respect to expanding IRS capabilities to investigate US taxpayers.

### Minnesota Sales Tax Responsible Person Legal Standard | Audit Tax Lawyer
In this article, I would like to discuss the legal definition of Responsible Person under Minn. Stat. § 270C.56 – I will refer to this term as Minnesota sales tax responsible person legal standard.  
Minnesota Sales Tax Responsible Person: Background Information
Minnesota imposes a sales tax “on the gross receipts from retail sales.” Minn. Stat. § 297A.62, subd. 1 (2014).  “The sales … tax required to be collected by the retailer under chapter 297A constitutes a debt owed by the retailer to Minnesota, and the sums collected must be held as a special fund in trust for the state of Minnesota.” Minn. Stat. § 289A.31, subd. 7(a) (2014).
If the sales tax is not collected or remitted to the Minnesota Department of Revenue (“DOR”) by the company, then Minnesota law imposes personal liability upon a person who “has the control of, supervision of, or responsibility for filing returns or reports, paying taxes, or collecting or withholding and remitting taxes and who fails to do so.” Minn. Stat. § 270C.56, subd. 1 (2014).  In other words, the State of Minnesota will collect the sales tax liability incurred by a company from whoever is defined as a “responsible person” – this is what I mean by Minnesota Sales Tax Responsible Person.
Minnesota Sales Tax Responsible Person: Legal Test
In order for a person to be assessed with the personal liability for non-payment of a sales tax, Minnesota courts follow a two-prong analysis under the Legal Test that establishes whether a person is a Minnesota Sales Tax Responsible Person.  The first prong is definitional and the second one is substantive. Yik C. Lo v. Comm'r of Revenue, 2016 Minn. Tax LEXIS 17, *24 (Minn. T.C. April 7, 2016).  
Let’s deal with the definitional prong first.  “The threshold definitional question is whether the assessed person qualifies as a ‘person’ for purposes of the personal liability statute.” Id.; also see Igel v. Comm'r of Revenue, 566 N.W.2d 706, 709 (Minn. 1997).  For the purposes of this statute, the word “person” is defined broadly to include an officer of a company, a member of a partnership and even an employee.  Minn. Stat. § 270C.56, subd. 2 (2014).  Pretty much any stakeholder, officer or employee would be considered a “person”. 
If the first question is answered positively, then, the second issue is whether the “person” was also a “responsible person” – i.e. whether the “person” had the requisite control over financial matters to be found personally liable for the company’s tax liabilities. Stevens v. Comm'r of Revenue, 822 N.W.2d 646, 652 (Minn. 2012).  
The Minnesota Supreme Court adopted a five-factor test to determine who is a responsible person. Benoit v. Commissioner of Revenue, 453 N.W.2d 336, 344 (Minn. 1990).  This test is “informative” while the statutory language of 270C.56 controls. Larson v. Comm'r of Revenue, 581 N.W.2d 25, 28-29 (Minn. 1998).  In other words, the courts may and actually at other factors besides those listed in the test.
The five factors are:
“(1) The identity of the officers, directors and stockholders of the corporation and their duties;
(2) The ability to sign checks on behalf of the corporation;
(3) The identity of the individuals who hired and fired employees;
(4) The identity of the individuals who were in control of the financial affairs of the corporation; and
(5) The identity of those who had an entrepreneurial stake in the corporation.” Benoit, 453 N.W.2d at 344.  
The idea behind the test is to focus on “those persons who have the power and responsibility to see that the taxes are paid.” Id.   Writing for a unanimous court, Judge Wahl also stated: “Control and influence over the ‘disbursement of funds and priority of payments to creditors’ are the most important elements.” Id. at 342. 
Contact Sherayzen Law Office for Professional Help With Minnesota Statute  § 270C.56
If the DOR found you personally responsible for a company’s sales tax liability under Minn. Stat. § 270C.56, contact Sherayzen Law Office for professional tax help.

### 2019 Zurich Trip Completed | Zurich US International Tax Lawyer & Attorney
In July of 2019, Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., completed his business trip to Zurich, Switzerland.  Let’s discuss in more detail this 2019 Zurich Trip, its goals and accomplishments. 
2019 Zurich Trip: Goals
Mr. Sherayzen outlined the firm’s goals for the Zurich trip during the Sherayzen Law Office Board of Director’s meeting on March 19, 2019.  At the beginning of the meeting, he outlined two long-term goals for Sherayzen Law Office: (1) deepen the firm’s ties to the global banking and investment community, and (2) promote Sherayzen Law Office’s international tax services in Europe.
Mr. Sherayzen stated that the particular goals for the 2019 Zurich trip were as follows: (1) gather the necessary intelligence to achieve the long-term goals; (2) resolve certain issues for the firm’s current clients with Swiss bank accounts; and (3) make promotional videos of the firm’s services.
2019 Zurich Trip: Achievements
The 2019 Zurich trip achieved all of the goals that were outlined above.  During the trip, Mr. Sherayzen gathered a large amount of data that will need to be analyzed in the future for the purpose of improving the firm’s marketing strategies.  
Second, while in Zurich, Mr. Sherayzen successfully resolved all of the pending issues for the firm’s clients.
Finally, a number of videos were made for the purpose of promoting the vast experience and deep expertise that Sherayzen Law Office has accumulated in US international tax law.   Sherayzen Law Office is a leader in US international tax compliance, including offshore voluntary disclosures.  
2019 Zurich Trip and Future Plans
Sherayzen Law Office intends to capitalize in the near future on the achievements made by Mr. Sherayzen during this trip.  We encourage our clients and followers on social media to stay tuned for future updates, including video updates.  
The Board of Directors of Sherayzen Law Office, Ltd., will analyze the successes of the 2019 Zurich trip in order to modify the plans for the firm’s marketing strategies in Europe.  The Board already commenced planning for new targeted trips which will lead to the expansion of the firm’s clientele in Europe.  
Sherayzen Law Office already has a very large exposure in the European continent.  We have helped clients with undisclosed European assets in most countries on the European continent: Austria, Belarus, Belgium, Croatia, Cyprus, the Czech Republic, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Liechtenstein, Lithuania, Luxembourg, Monaco, Poland, Portugal, Romania, the Russian Federation, Spain, Sweden, Switzerland, United Kingdom and Ukraine.
Contact Sherayzen Law Office for Professional Help With Your US International Tax Compliance
Sherayzen Law Office is a US international tax law firm with deep expertise in all relevant areas of US international tax law, including offshore voluntary disclosures.  With clients from over 70 countries around the world, our firm is a leader in US international tax compliance.  
We have helped hundreds of US taxpayers around the world with their US international tax compliance issues, and We can help You!  Contact Us Today to Schedule Your Confidential Consultation!

### 2019 Karlovy Vary Trip Completed | US International Tax Lawyer & Attorney
Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., completed his trip to Karlovy Vary, Czech Republic, on July 10, 2019. Let’s discuss in more detail this brief 2019 Karlovy Vary trip, its motivations and results.
2019 Karlovy Vary Trip: Reasons for this Excursion
There were several reasons why Mr. Sherayzen decided to undertake this trip to Karlovy Vary.  He outlined them at the Sherayzen Law Office board of directors meeting on March 19, 2019.  
First, this is part of the firm’s overall expansion effort into the European market of high-net worth individuals. 
Second, this is a very attractive venue for new clients from all over the world, because Karlovy Vary is a world-famous resort. It is important for Sherayzen Law Office to establish a foothold in this city.  
Third, Karlovy Vary offers amazing scenery which is perfect for filming promotional videos for the firm.  
Finally, the 2019 Karlovy Vary trip was undertaken during Mr. Sherayzen’s Switzerland-Prague business trip.  In other words, it was very a convenient time for a journey into this prestigious European high-end legal market.
2019 Karlovy Vary Trip: Results
The 2019 Karlovy Vary trip was very successful in three aspects.  First of all, the firm now has acquired certain information about the city sufficient to commence building a comprehensive marketing strategy.  Second, the trip laid basis for several business relationships which the firm hopes to explore further in the future.  Finally, a large set of promotional material was created during the trip.
Despite its successes, the 2019 Karlovy Vary trip was merely an exploratory marketing trip. In order to build a more solid foothold in the city, Mr. Sherayzen and the employees of Sherayzen Law Office will need to continue to visit the city on a more sustained basis.
2019 Karlovy Vary Trip: What Sherayzen Law Office Can Offer to Its European Clients
Sherayzen Law Office specializes in US international tax compliance, including offshore voluntary disclosures, current tax compliance and international tax planning. Europeans who reside in Europe, but who are US citizens or US permanent residents, may be exposed to high IRS non-compliance penalties. This is why they should contact Sherayzen Law Office for professional help with US international tax compliance requirements.
Contact Us Today to Schedule Your Confidential Consultation!

### Legal Entity Identifiers: Introduction to LEI | International Tax Lawyer & Attorney
The Legal Entity Identifiers (“LEI”) is a method to identify legal entities that engage in financial transactions.  Let’s discuss LEI in more detail. 
LEI: Background Information
The establishment of LEI was driven by the recognition by regulators around the world that there is a complete lack of transparency with respect to identifying parties to international transactions. Each business entity is registered at the national level, but another country’s authorities would have great difficulty identifying this entity in an international transaction, including whether this entity has taken consistent tax positions in both countries. 
Establishment of LEI; Additional Initiatives
Hence, on the initiative of the largest twenty economies of the world (“G-20"), the Financial Stability Board (“FSB”) developed the framework of Global LEI System (“GLEIS”).  FSB was created in 2009 in the aftermath of the financial crisis (it replaced the Financial Stability Forum or “FSF”). 
Additionally, in January of 2013, a LEI Regulatory Oversight Committee (“ROC”) was created.  ROC is a group of over 70 public authorities from member-countries and additional observers from more than 50 countries. The job of the ROC is coordination and oversight of the worldwide LEI framework.
On May 9, 2017, the ROC announced that it has launched data collection on parent entities in the Global Legal Entity Identifiers System – this is the so-called “relationship data”.  The member countries (especially in the European Union (“EU”)) will use this data in a number of regulatory initiatives.  For example, as of 2018, the EU uses the relationship data for the purposes of commodity derivative reporting. 
How LEI Works
The LEI is a 20-character, alpha-numeric code, to uniquely identify legally distinct entities that engage in financial transactions.  The code incorporates the following information: 
1.the official name of the legal entity as recorded in the official registers; 2.the registered address of that legal entity; 3.the country of formation; 4.codes for the representation of names of countries and their subdivisions; 5.the date of the first Legal Entity Identifier assignment; the date of last update of the information; and the date of expiration, if applicable.
Here is how the numbering system works:
•Characters 1–4: A four-character prefix allocated uniquely to each LOU.
•Characters 5–6: Two reserved characters set to zero.
•Characters 7–18: Entity—specific part of the code generated and assigned by LOUs according to transparent, sound, and robust allocation policies.
•Characters 19–20: Two check digits as described in the ISO 17442 standard.
Jurisdictions With Rules Referring to LEI
Over 40 jurisdictions have rules that refer to Legal Entity Identifiers: Argentina, Australia, Canada, 31 members of the European Union and European Economic Area, Hong Kong, India, Israel, Mexico, Russia, Singapore, Switzerland, and the United States. IGOs such as Basel Committee on Banking Supervision and International Organization of Securities Commissions also use Legal Entity Identifiers.
Could LEI Be Used for CRS and FATCA Purposes?
Sherayzen Law Office, like many other commentators, believes that there is a possibility that the LEI would be a better alternative than Global Intermediary Identification Number (GIIN) for CRS and FATCA purposes. First of all, it would be more efficient to have one identification system across all compliance terrains.  Second, Legal Entity Identifiers are actually more popular than GIINs.  As of December 7, 2017, there were 830,477 LEIs issued versus a mere less than 300,000 GIINs.

### IRS Appeals Video Conference | IRS Tax Lawyer & Attorney
In May of 2019, Mr. Andrew Keyso, a deputy chief of the IRS Office of Appeals, stated that the Appeals Office is in the early stages of rolling out the technology to conduct video conferences as an option for Appeals conferences.  This is great news for tax practitioners – an IRS Appeals video conference is a very convenient option for doing business with the IRS.
IRS Appeals Video Conference: WebEx Platform and Early Testing
The IRS Appeals video conference option will be based on WebEx video conferencing software developed by Cisco.  It is secure and convenient, but some training is necessary to use it efficiently.
The IRS has already successfully tested WebEx software for appeals video conferences in early 2018.  In October of 2018, IRS made the software more broadly available to its employees so that they can offer video conferences. 
IRS Appeals Video Conference: IRS Wants Employees to Use It More
Unfortunately, not all IRS employees at the Appeals Office offer video conferences.  Neither do many taxpayers seek them (undoubtedly due to lack of knowledge about them).  Those who do so, however, find this option very attractive. 
The IRS definitely wants its employees to use the IRS Appeals video conference option more.  Speaking at the American Bar Association Section of Taxation conference in May of 2019, Diane Ogawa, an IRS appeals officer in Honolulu, stated: “We are trying to get more appeals officers training and on board with WebEx”.  Sherayzen Law Office believes that, as more Appeals employees, taxpayers and tax practitioners become familiar with WebEx, the usage of the IRS Appeals video conference option should greatly increase.
IRS Appeals Video Conference: Positive Reaction from Tax Lawyers
The tax lawyers are generally in favor of using the IRS Appeals video conference option.  They find it a convenient and effective way to conduct a hearing conference.  There is also an additional benefit of reduced costs: there is no need to waste time and money on traveling to the IRS office. 
IRS Appeals Video Conference: Potential Problems
This option, however, is not without potential problems.  Besides the potential technical issues, the biggest problem is privacy.  An unrepresented taxpayer may try to hold a video conference in a public place (like Starbucks) and the IRS will simply not agree to it.  A represented taxpayer will not likely run into this problem, because his representative should know about these privacy issues. 
The bigger privacy concern, though, comes from tax lawyers. They need to make sure that the prying eye of WebEx technology does not catch the other clients’ files, names and so on in the background of the WebEx video.  Lawyers should strive to protect the attorney-client privileged information to the maximum extent possible.
Sherayzen Law Office Supports the IRS Video Conference Option and Hopes the IRS Expands It to Audit Interviews
As an international tax law firm, Sherayzen Law Office has clients throughout the United States and, indeed, the world.  Flying to a meeting with an IRS agent is sometimes inconvenient for both, the taxpayer and the attorney; it is also expensive.  Video conferencing is a perfect solution to this issue, and Sherayzen Law Office fully supports the current IRS video conferencing efforts. 
Moreover, we encourage the IRS to apply video conferencing to other areas, such as IRS audit meetings.

### Finnish US Bank Accounts Face IRS John Doe Summonses | FATCA News
On May 1, 2019, the United States District Court for the Western District of North Carolina (the “Court”) authorized the IRS to serve John Doe Summonses seeking information about Finnish residents who own secret US bank accounts (collectively Finnish US Bank Accounts).  Let’s discuss this development concerning Finnish US bank accounts in more depth. 
Finnish US Bank Accounts Targeted by the Finnish Tax Administration.
This whole case is about the Finnish government’s efforts to identify noncompliant Finnish taxpayers who failed to disclose income related to their non-Finnish bank accounts.  Specifically, the Finnish Tax Administration (“FTA”) identified bank accounts in the United States owned by Finnish tax residents as one of the primary targets in its tax enforcement campaign.
The reason why Finland cannot identify the affected individuals itself is because, in circumstances where the payment cards are used only at ATMs or in other transactions where authorization is by PIN code, and the cardholder need not identify himself or herself to the merchant, the cardholders cannot be identified from sources in Finland.  Earlier FTA investigations of approximately 120 to 150 Finnish taxpayers who used foreign payment cards in a similar manner have yielded extremely high rates of tax non-compliance, as noted in the United States’ memo in support of the petition, which indicates that it is likely that the John Does sought by the summons are Finnish residents who are failing to report these foreign accounts and associated income.
Hence, the FTA asked the US Department of Justice (“DOJ”) and the IRS for help as prescribed by the tax treaty between Finland and the United States. The treaty provides for cooperation in exchanging information that is necessary for enforcement each of the signatory’s tax laws. 
The DOJ and the IRS readily agreed.  Then, the DOJ filed a petition in the Court asking for it to grant the IRS a permission to issue John Doe Summonses in response to the FTA’s request for help.
Finnish US Bank Accounts: Affected US Financial Institutions
The IRS Summonses specially target persons who reside in Finland and have Bank of America, Charles Schwab or TD Bank payment cards linked to bank accounts located outside of Finland.  It is important to note that the DOJ does not allege that Bank of America, Charles Schwab or TD Bank violated any US or Finnish laws with respect to these accounts.
Finnish US Bank Accounts: Information Targeted by the IRS John Doe Summonses
The IRS John Doe Summonses seek the identities of Finnish residents who have payment cards linked to bank accounts located outside of Finland so that the Finnish government can determine if those persons have complied with Finnish tax laws.
Finnish US Bank Accounts: Foreign Individuals With Secret US Bank Accounts Are Not Safe from Disclosure to Their Governments
The recent IRS John Doe summonses concerning Finnish US bank accounts is another indication that foreign individuals with secret US bank accounts are not immune from the disclosure of these accounts to their governments at home.  In fact, the US government will cooperate with requests for such information, at least from friendly governments.
“The Department of Justice and the IRS are committed to working with the United States’ international treaty partners to identify and stop individuals using hidden offshore accounts to evade tax laws,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. “The United States does not tolerate offshore tax evasion, nor does it sanction tax evasion committed through U.S. financial institutions.”
This cooperation also stems from the desire to somehow thank the foreign government for their prior cooperation with the IRS tax enforcement efforts that targeted (and continue to target) US taxpayers with undisclosed foreign bank accounts. “Our continued success in combating offshore tax noncompliance has been helped by the assistance we receive through the network of tax treaties around the globe,” said IRS Commissioner Charles Rettig. “Yesterday’s effort reflects that the U.S. will return this help by working under the law with tax administrators in other nations to help them in their fight against tax evasion and avoidance. A global economy should not be allowed to serve as a possible vehicle for tax evasion in any country.”
Sherayzen Law Office has predicted in the past that, after FATCA, the global tax enforcement will become tighter and more cooperative.  Our predictions turned out to be correct.

### PLR TAM Comparison | IRS International Tax Lawyer & Attorney
The IRS Private Letter Rulings (“PLR”) and the IRS Technical Advice Memoranda (“TAM”) often get confused by non-practitioners.  In this small essay, I will engage in a brief PLR TAM comparison in order to clarify the similarities and differences between both types of IRS administrative guidance.
PLR TAM Comparison: Similarities
Let’s begin our PLR TAM comparison with the similarities. The similarities are great between both types of the IRS administrative guidance; this is why so many taxpayers cannot tell the difference between PLR and TAM. Both, PLR and TAM are written determinations issued by the IRS National Office. Also, PLR and TAM both interpret and apply US tax law to a taxpayer’s specific set of facts.  Finally, both PLR and TAM are written IRS determinations which are binding on the IRS only in relation to the taxpayer who requested them. 
PLR TAM Comparison: Differences
The differences between PLR & TAM are more nuanced but highly important. The two main differences are: (a) the requesting party and (b) timing of the request.
PLR is requested by a taxpayer; i.e. the IRS issues its opinion to the taxpayer, based on the taxpayer’s pattern of facts and at his request.  The request for TAM, however, is made by a district IRS office.  Oftentimes, though, the district IRS office makes this request at the urging of a taxpayer to seek technical advice from the IRS National Office. 
With respect to the timing of the request, a taxpayer requests a PLR before he files his tax return. The taxpayer wishes to know the IRS position (or he is seeking IRS permission to do something, like a late election) in order to prevent the imposition of IRS penalties by filing an incorrect or late return.
TAM, however, deals with refund claims and examination issues after a tax return has been filed.  In fact, oftentimes, a TAM is issued in response to a question concerning a specific set of facts uncovered during an IRS audit.
Contact Sherayzen Law Office for Experienced US International Tax Help
If you have questions concerning US international tax law and procedure, contact Sherayzen Law Office for professional help.  We are a highly experienced US international tax law firm that has helped hundreds of US taxpayers around the globe with their US international tax compliance issues, including offshore voluntary disclosures, IRS audits and various annual tax compliance issues. 
Contact Us Today to Schedule Your Confidential Consultation!

### IRS Issues FBAR Fact Sheet | FBAR FATCA Tax Lawyer & Attorney
On April 4, 2019, the IRS issued the FBAR Fact Sheet in order to acquaint US taxpayers with this highly important reporting requirement for foreign accounts held by US persons. Let’s analyze the new fact sheet in more detail.
FBAR Fact Sheet: Organizational Structure of the Fact Sheet
The IRS FBAR Fact Sheet can be divided into seven parts: (1) introduction to FBAR and the need to report foreign accounts to the IRS; (2) identification of who needs to file FBARs; (3) explanation of how to file FBARs (including special cases such as joint accounts and the determination of highest balances); (4) discussion of Form 8938 and FBAR; (5) amended and late FBARs; (6) description of FBAR recordkeeping requirements; and (7) more IRS resources concerning FBAR. These parts are not clearly delineated in the Fact Sheet; rather, they are summaries of various information that this brochure contains.
FBAR Fact Sheet: Introduction to FBAR
The IRS FBAR Fact Sheet commences with the warning to US taxpayers that they are required to report their foreign bank and financial accounts even if they do not produce any interest income. April 15 is identified as the critical deadline for these taxpayers. Later, the IRS also states that there is an extension available for FBARs. Again, the IRS did not do a very good job in organizing the Fact Sheet.
FBAR Fact Sheet: Who Needs to File FBARs?
Then, the IRS Fact Sheet finally introduces FBAR and states that it was created by the 1970 Bank Secrecy Act; there is no discussion of the significance of this legal history. Then, the IRS focuses on the persons who may have to file FBARs and introduces the concept of “US Person”. It defines US person as a “citizen or resident of the United States or any domestic legal entity such as a partnership, corporation, limited liability company, estate or trust.”
There is a hidden trap in this IRS definition.  “Resident of the United States” does not only include US permanent residents (as most non-lawyers would read it), but also US tax residents. I encourage the readers to read this article with respect to the definition of “resident” for FBAR purposes.
The IRS also defines “United States” for FBAR purposes.  The readers can read this article published by Sherayzen Law Office for a more detailed analysis of this concept. 
FBAR Fact Sheet: How to File FBARs
This part of the FBAR Fact Sheet focuses on the details concerning how to file FBAR electronically.  The IRS cautions taxpayers that FBAR should not be filed with their federal tax returns.  
Then, the IRS discusses in more detail certain special cases such as joint accounts and US retirement accounts. The IRS finishes this part of the FBAR fact sheet with the discussion on the determination of the highest value of a foreign account.
FBAR Fact Sheet: Form 8938 & FBAR
In this part of the Fact Sheet, the IRS introduces taxpayers to an existence of another requirement concerning foreign accounts, FATCA Form 8938. The IRS urges the readers to search the IRS website with respect to this form and how it compares to FBAR.
FBAR Fact Sheet: Amended and Late FBARs
The next part of the Fact Sheet focuses on amended and late FBARs. First, the IRS discusses how to amend an FBAR. Then, the IRS states that, as soon as a taxpayer learns that he did not file the required FBARs, he needs to e-file them. At that point, the IRS casually discusses that there is space available on the form to explain the reason for late filing. Finally, the IRS describes the severe FBAR criminal penalties, stating the following: “the IRS will not penalize those who properly report a foreign financial account on a late filed FBAR, and the IRS finds they have reasonable cause for late filing.”
Sherayzen Law Office believes that the IRS has not done a good job in this part of the Fact Sheet. It has completely failed to emphasize the importance of seeking a legal advice prior to filing a late FBAR. A taxpayer may get the wrong impression that he should file a late FBAR as soon as possible before exploring the options on how to do it in a way that protects him from excessive FBAR penalties.
Moreover, the IRS also failed to emphasize the importance of offshore voluntary disclosure with respect to late FBARs. Besides a casual mention of an “IRS compliance program”, there is nothing about the various available voluntary disclosure options for US taxpayers who are filing late FBARs. The IRS does not refer at all to the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
FBAR Fact Sheet: Recordkeeping Requirements
In the next part of the Fact Sheet, the IRS discusses how many years the FBAR filers need to keep the supporting documentation and copies of FBARs. Curiously, the IRS states that the filers should keep the documents for five years from the due date of FBAR, but the FBAR Statute of Limitations is six years.  
Sherayzen Law Office does not believe that the IRS advice is correct here.  We urge FBAR filers to keep their FBAR records and copies of the filed FBARs for six to ten years.
FBAR Fact Sheet: IRS Resources
The IRS concludes its FBAR Fact Sheet with the discussion of additional available resources to US taxpayers, including FBAR hotline and Publication 4261.
Sherayzen Law Office’s View of the FBAR Fact Sheet
We believe that the FBAR Fact Sheet can serve only as a general introduction to FBAR, but it is not sufficient to provide US taxpayers with sufficient guidance on how to properly deal with late FBARs. On the contrary, a US taxpayer may actually put himself in a worse legal position if he only relies on the Fact Sheet to file his late FBARs.
If you should have filed FBARs but you have not done so, contact Sherayzen Law Office for professional help. As the IRS states in its FBAR Fact Sheet, the FBAR penalties are extremely severe. Hence, it is important to approach any FBAR violations with an extreme caution and retain Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world to deal with late FBARs, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### FY 2018 DOJ Criminal Case Statistics | Tax Lawyer & Attorney Minneapolis
An analysis of the fiscal year 2018 DOJ criminal case statistics reveals certain interesting patterns about federal criminal tax prosecution in that year.  Let’s explore in more detail these patterns.
2018 DOJ Criminal Case Statistics: Typical Tax Criminal
The analysis of the FY 2018 DOJ criminal case statistics reveals an interesting fact – a typical tax criminal is very different from any other type of a criminal. A typical tax criminal is about 50 years old and has at least one college degree; and, he is male.
This finding is not very surprising, because this category of males happens to also include the description of one of the most productive and affluent parts of our society. Rational risk-taking and even gambling are also characteristics that belong to this demographic. 
2018 DOJ Criminal Case Statistics: Fewer but Longer Sentences
In FY 2018, 577 tax crime offenders were sentenced compared to 660 in 2017. The tax crime sentence, however, was much longer than in 2017 – 17 months in FY 2018 versus 13 months in FY 2017.
It should be pointed out that the majority of tax crime offenders entered into plea agreements.  Only 7.5% of tax crime cases went to trial.
2018 DOJ Criminal Case Statistics: Judges Are Mostly More Lenient Than Federal Sentencing Guidelines
Another interesting fact is revealed by the FY 2018 DOJ criminal case statistics concerning sentencing.  In FY 2018, federal judges were more lenient than the federal sentencing guidelines, thus considering them too harsh for the crimes committed.  Almost 76% of sentences fell short of the minimum recommended by the federal sentencing guidelines. About 24% of tax crime sentences fell within the federal sentencing guidelines, but even 65.1% of them were at the minimum end of the recommended range. 
Tax practitioners, however, should not ignore the guidelines or assume that the judges will always be lenient: 10 sentences or 7.8% of the 129 cases within the guidelines came in at the maximum end of the range. There were also additional sentences that even exceeded the guidelines.
2018 DOJ Criminal Case Statistics: Probation
In addition to prison time, the courts imposed probation and other conditional confinement which affected the average 17-month sentence that was discussed above.  Without the probation, the average FY 2018 tax crime sentence was 23 months.  About 32.2% of the tax crime convictions received probation or probation plus some other conditions of confinement (other than prison).
2018 DOJ Criminal Case Statistics: Fines and Restitution
72.1% of tax crime cases resulted in sentences which included restitution but no fines; 16.3% included both; 6.1% of sentences contained neither fines nor restitution. In FY 2018, the judges imposed fines and restitution totaling close to $283.1 million; this averages at $27,517 in fines and $565,766 in restitution per case.
Sherayzen Law Office Strives to Help Its Clients to Avoid Criminal Prosecution 
US international tax law is replete with criminal penalties.  A US taxpayer who fails to comply with US international tax requirements must always contend with the possibility of facing criminal prosecution.  
One of the primary goals of Sherayzen Law Office is to help its clients reduce and even eliminate the possibility of a criminal prosecution with respect to prior noncompliance with US tax laws.  A number of strategies may be employed to achieve this goal depending on the situation, including offshore voluntary disclosure and proper handling of an IRS audit.
Contact Sherayzen Law Office for professional help with reducing the possibility of criminal prosecution with respect to your past US tax noncompliance.

### CRS Success: 47 Million Financial Accounts Reported | FATCA Lawyer News
On June 7, 2019, the Organization for Economic Cooperation and Development (“OECD”) announced that countries shared information concerning 47 million financial accounts under the OECD’s Common Reporting Standard (“CRS”).  Let’s explore this CRS success in more detail.
Measuring CRS Success: What is CRS?
CRS can be called the response of the rest of the world to the Foreign Account Tax Compliance Act (“FATCA”), a groundbreaking piece of US legislation that became a law in 2010.   The idea behind the CRS is the same as that of FATCA – to combat tax evasion that utilizes secret foreign accounts through automatic information exchange between the member-countries concerning these accounts.
CRS was developed in 2014 as the information exchange standard for the Automatic Exchange of Information (“AEOI”) Agreements.  Legally, CRS is based on the multilateral Convention on Mutual Administrative Assistance in Tax Matters, but it is the standard in the bilateral AEOI agreements as well.  The first reporting under the CRS occurred in 2017.
The United States has refused to information exchange under the CRS.  This is an egoistical position – CRS does not substantially help the IRS in its combat against tax evasion; the US government believes that FATCA already provides the IRS with all of the information that it needs.  Moreover, the CRS would require the United States to disclose information concerning domestic accounts owned by foreigners, thereby endangering the US “tax haven” appeal.  Finally, there is a practical aspect of paying for the implementation of the CRS.
Measuring CRS Success: Account Information Shared
On June 7, 2019, OECD shared some actual data concerning the impact of CRS on information exchange. This announcement was made in Fukuoka, Japan, right before the G20 meeting of finance ministers.  The results are extraordinary: the participating countries shared information concerning 47 million foreign accounts, which comprise $5.5 trillion or €4.9 trillion. The OECD already called CRS as the “largest exchange of tax information in history.”
Measuring CRS Success: Voluntary Disclosure Programs
Prior to the implementation of the CRS, many participating countries offered their taxpayers a chance to remedy their past noncompliance through a voluntary disclosure program.  These programs turned out to be a great success. 
Fearing disclosure under the CRS, about 500,000 account holders revealed more than €95 billion in offshore funds.   OECD believes that the responsibility for such a huge success of voluntary disclosure programs should be attributed to the CRS; i.e. these disclosures were “early evidence of taxpayer behavioral responses” to the potential future information exchanges. 
Measuring CRS Success: Drop in Tax Haven Investments
Another measure of the CRS success is its impact on the deposits in jurisdictions identified by the OECD as tax havens.  The International Monetary Fund reported a 34% decline since 2008 in the tax haven deposits by individuals and corporations.  The OECD believes that as much as two-thirds of this decline should be attributed to the CRS.

### Hungarian Bank Accounts | US International Tax Lawyer & Attorney
US taxpayers who own Hungarian bank accounts may have to comply with a large number of US tax reporting requirements. In particular, they need to be concerned about reporting income generated by their Hungarian bank accounts as well as disclosing the ownership of these accounts on FBAR and Form 8938. Other requirements may apply, but these are the three main ones. Let’s explore them in more detail in this essay.
Hungarian Bank Accounts: Definition of “Filer”
It is important to understand that each of the aforementioned three requirements has its own definition of “filer” – a person who is subject to these obligations to report his foreign assets and foreign income.  These differences in the definition of filer, however, are fairly small.  Rather, every definition is essentially based on the concept of “US tax residency”.   In fact, the worldwide income reporting requirement applies only to US tax residents.
Who are “US tax residents”?   This definition encompasses the following persons: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and persons who declare themselves as US tax residents. Keep in mind that this is a general definition of US tax residents which is subject to a number of important exceptions.
So, if US tax residency definition forms the basis for all three requirements, what are the differences? Generally, the differences arise with respect to situations which are less common and mostly limited to the persons who try to declare themselves as US tax residents or non-resident aliens.  The most common issues arise with respect to the application of the Substantial Presence Test, first-year definition of US tax resident and last-year definition of a US tax resident.  A common example can be found with respect to treaty “tie-breaker” provisions, which foreign persons use to escape the effects of the Substantial Presence Test for US tax residency purposes.
The determination of your US tax reporting requirements is the primary task of your international tax attorney.  It is simply too dangerous for a common taxpayer or even an accountant to attempt to dabble in this area of US international tax law.
Hungarian Bank Accounts: Worldwide Income Reporting Requirement
Now that we understand the concept of US tax residency, we are ready to explore the aforementioned three US reporting requirements with respect to Hungarian bank accounts.  Let’s begin with the obligation to report income generated by Hungarian bank accounts. 
All US tax residents, as defined above, must disclose their worldwide income on their US tax returns. This means that they must report to the IRS their US-source and foreign-source income.   The worldwide income reporting requirement applies to all types of foreign-source income: bank interest income, dividends, royalties, capital gains and any other income.  
The worldwide income reporting requirement applies even if the foreign income is subject to Hungarian tax withholding or reported on a Hungarian tax return.  It also does not matter whether the income was ever transferred to the United States or stayed in Hungary – the worldwide income reporting requirement will still apply in either case.
Hungarian Bank Accounts: FBAR (FinCEN Form 114)
In addition to reporting the income generated by Hungarian bank accounts, a taxpayer may also need to disclose the ownership of these accounts on his Report of Foreign Bank and Financial Accounts (abbreviated as “FBAR”). The official name of FBAR is FinCEN Form 114.
FBAR is arguably the most important reporting requirement with respect to foreign accounts.  The irony is that it is not a tax form – i.e. it is not part of the Internal Revenue Code which is Title 26 of the United States Code.  Rather, FBAR was created by the Bank Secrecy Act of 1970 under Title 31 of the United States Code.
Basically, the US Department of the Treasury requires all “US Persons” to disclose their ownership interest in or signatory authority or any other authority over Hungarian (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. If these requirements are met, the disclosure requirement is satisfied by filing an FBAR.
It is important to understand that all parts of this FBAR requirement are terms and conditions that require further exploration and understanding. I encourage you to search our firm’s website, sherayzenlaw.com, for the definition of “US Persons” and the explanation of other parts of the FBAR requirement.
There is one part of the FBAR requirement, however, that I wish to explore here in more detail – the definition of “account”.  The reason for this special treatment is the fact that this definition is a very important source of confusion among US taxpayers with respect to what needs to be disclosed on FBAR.
The FBAR definition of an account is substantially broader than what this word generally means in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
Despite the fact that FBAR compliance is neither easy nor straightforward, FBAR has a very severe penalty system. On the criminal side, FBAR noncompliance may lead to as many as ten years in jail (of course, these penalties come into effect in extreme situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.
Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. In 2015, the IRS added another layer of limitations on the FBAR penalty imposition. One must remember, however, that these are voluntary IRS actions which the IRS may disregard whenever circumstances warrant such an action.
Hungarian Bank Accounts: FATCA Form 8938
Finally, the third requirement that I wish to discuss today is a relative newcomer, FATCA Form 8938. This form requires “Specified Persons” to disclose all of their Specified Foreign Financial Assets (“SFFA”) as long as these Specified Persons meet the applicable filing threshold. The filing threshold depends on the Specified Person’s tax return filing status and his physical residency.
The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to report same foreign assets on FBAR and Form 8938.
Specified Persons consist of two categories of filers: Specified Individuals and Specified Domestic Entities.  You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching income tax consequences (including disallowance of foreign tax credit and imposition of 40% accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
One must also remember that, unlike FBAR, Form 8938 is filed with the filer’s federal tax return and forms part of the tax return.  This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Hungarian Bank Accounts
If you have Hungarian bank accounts, contact Sherayzen Law Office for professional help with your US international tax compliance. We have helped hundreds of US taxpayers with their US international tax issues (including disclosure of Hungarian bank accounts), and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 2019 Third Quarter IRS Interest Rates | MN International Tax Law Firm
On June 5, 2019, the Internal Revenue Service announced 2019 Third Quarter IRS Interest Rates.  This quarter, the IRS interest rates will be reduced for the first time in years. 
2019 Third Quarter IRS Interest Rates: 3rd Quarter and Interest Rates Defined
Third quarter of 2019 begins on July 1, 2019 and ends on September 30, 2019.  The term “IRS interest Rates” refers to both, IRS underpayment and overpayment rates.  In other words, these are the interest rates that the IRS will charge on any late tax liability; at the same time, these are also the interest rates that the IRS will pay on tax refunds (for example, if a refund results from amending a tax return).
For international tax purposes, the IRS Interest Rates also refer to the rates that the IRS will change on any PFIC tax under the default PFIC IRC Section 1291 calculations.  These are also the rates that taxpayers will need to pay on any tax due as part of their offshore voluntary disclosure submissions, including Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis; therefore, US taxpayers and tax professionals should refer to IRS announcements of IRS interest rates on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
2019 Third Quarter IRS Interest Rates: How These Rates Were Determined
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis; therefore, US taxpayers and tax professionals should refer to IRS announcements of IRS interest rates on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
2019 Third Quarter IRS Interest Rates: Rate Reduction
The 2019 Third Quarter IRS Interest Rates will be reduced from those of the second quarter as follows:
five (5) percent for overpayments (four (4) percent in the case of a corporation) instead of six (6) and (5) percent respectively;
five (5) percent for underpayments from (6) percent;
seven (7) percent for large corporate underpayments from eight (8) percent; and
two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000 (it used to one and one-half (1.5) percent).
Sherayzen Law Office will continue to closely monitor the moves of the Federal Reserve regarding its interest rates in the future.

### Minneapolis MN International Tax Lawyer & Attorney | PLR 201922010
On May 31, 2019, the IRS released a Private Letter Ruling (“PLR”) on the extension of time to make an election to be treated as a disregarded entity for US tax purposes under Treas. Reg. Section  301.7701 (26 CFR 301.7701-3).  Let’s explore this PLR 201922010 in more detail.
PLR 201922010: Fact Pattern
PLR 201922010 deals with a typical fact pattern for someone who is doing business overseas. A US citizen wholly owns a foreign corporation which wholly owns a foreign subsidiary.  The foreign subsidiary wants to make an election to be classified as a disregarded entity for US tax purposes, but misses the deadline to do so timely.  Hence, it files a request for the IRS to grant a discretionary extension of time to file Form 8832 pursuant to Treas. Reg. Sections 301.9100-1 and 301.9100-3.
PLR 201922010: Legal Analysis
The IRS began its legal analysis of the request by noting that, under Treas. Reg. Section 301.7701-3(a), a business entity that is not classified as a corporation under Treas. Reg. Section 301.7701-2(b)(1), (3), (4), (5), (6), (7) or (8) (hereinafter, an “eligible entity”) can elect its classification for federal tax purposes as provided in Treas. Reg. Section 301.7701-3. An eligible entity with at least two members can elect to be classified as either an association (and thus a corporation under the Treas. Reg. Section 301.7701-2(b)(2)) or a partnership. An eligible entity with a single owner, however, can elect to be classified as an association (i.e. a corporation) or to be disregarded as an entity separate from its owner.
The IRS then focused specifically on the classification of foreign entities relying on Treas. Reg. Section 301.7701-3(b)(2)(I).  This provision states that, unless it elects otherwise, a foreign eligible entity is (A) a partnership if it has two or more members and at least one member does not have limited liability; (B) an association if all members have limited liability; or © disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.
What does “limited liability” mean in this context? Treas. Reg. Section 301.7701-3(b)(2)(ii) answers this question by stating that a member of a foreign eligible entity has limited liability if the member has no personal liability for the debts of or claims against the entity by reason of being a member.
How does one make this classification election? Treas. Reg. Section 301.7701-3(c)(1)(I) provides, in part, that an eligible entity may elect to be classified other than as provided under Treas. Reg. Section 301.7701-3(b), or to change its classification, by filing Form 8832 with the service center designated on Form 8832.
Then, the IRS addressed the key issue for this PLR – when this classification election can be made.  Treas. Reg. Section 301.7701-3(c)(1)(iii) provides that the election will be effective on the date specified by the entity on Form 8832 or on the date filed if no such date is specified on the election form. The effective date specified on Form 8832 can not be more than 75 days prior to the date on which the election is filed and can not be more than 12 months after the date on which the election is filed.
Is it possible to make a late election?  The IRS answered this question by referring to Treas. Reg. Section 301.9100-1(c), which provides that the Commissioner may grant a reasonable extension of time to make a regulatory election, or a statutory election (but no more than six months except in the case of a taxpayer who is abroad), under all subtitles of the Internal Revenue Code (Code), except subtitles E, G, H, and I. Treas. Reg. Section 301.9100-1(b) defines “regulatory election” as an election whose due date is prescribed by a regulation published in the Federal Register, or a revenue ruling, revenue procedure, notice or announcement published in the Internal Revenue Bulletin.
Treas. Reg. Section 301.9100-3 addresses extensions of time for making late regulatory elections. Treas. Reg. Section 301.9100-3(a) states that such requests for relief will be granted when the taxpayer provides the evidence (including affidavits described in Treas. Reg. Section 301.9100-3(e)) to establish to the satisfaction of the Commissioner that the taxpayer acted reasonably and in good faith, and the grant of relief will not prejudice the interests of the Government.
PLR 201922010: IRS Granted Request for Extension to Time to Make the Election
Based on the information submitted and the representations made, the IRS concluded that the foreign entity satisfied the requirements of Treas. Reg. Sections 301.9100-1 and 301.9100-3. As a result, the IRS granted to the foreign entity an extension of time of 120 days from the date of PLR 201922010 to file a properly executed Form 8832 with the appropriate service center electing to be treated as a disregarded entity.
PLR 201922010: The Electing Foreign Entity Must Submit Form 8858 and All Other Returns
The IRS emphasized that its ruling was contingent on the electing foreign entity and its owner filing within 120 days from the date of the PLR all of the required federal income tax and information returns for all relevant years.  The IRS specifically mentioned Form 8858 (Return of U.S. Persons With Respect to Foreign Disregarded Entities).
Contact Sherayzen Law Office if You Need to File a PLR Request for Late Entity Classification Election Similar to PLR 201922010
If you need to ask the IRS to grant a late entity classification request, you can contact Sherayzen Law Office for professional help with drafting and submitting your request for a Private Letter Ruling.

### IRC 965 Tax: Introduction | US International Tax Lawyer & Attorney
The 2017 Tax Reform created the Internal Revenue Code Section 965, which requires US shareholders of foreign corporations to pay a new transition tax (hereinafter, “IRC 965 Tax”) in certain circumstances.  In this short article, I will introduce the readers to the IRC 965 Tax.
IRC 965 Tax: Taxpayers Who Are Targeted by the New Tax
The IRC 965 Tax targets US shareholders of specified foreign corporations. In very general terms,  a specified foreign corporation means either a controlled foreign corporation, as defined under the IRC Section 957 (“CFC”), or a foreign corporation (other than a passive foreign investment company (“PFIC”), as defined under the IRC Section 1297, that is not also a CFC) that has a US shareholder that is a domestic corporation. 
The term “US shareholders” includes all individuals who are considered to be US tax residents, domestic corporations (including S-corporations), domestic partnerships (including LLC, LP, LLP and LLLP), domestic estates, domestic trusts, domestic cooperatives, REITs, RICs and even US tax-exempt organizations. All US shareholders of a CFC who previously filed a Form 5471 are in a particular danger of being subject to the IRC 965 Tax. Note, however, that even if you are a US shareholder who has not filed Form 5471 before, you may still be subject to the new tax.
IRC 965 Tax: What It Taxes and How 
Generally, IRC 965 Tax imposes a special tax on untaxed foreign earnings of specified foreign corporations as if these earnings had been repatriated to the United States.  In other words, if a specified foreign corporation has a positive accumulated Earnings & Profits (“E&P”), its US shareholders will have to pay the new tax on it unless the E&P had been already taxed under a different provision of the Internal Revenue Code. 
The effective tax rates applicable to income inclusions are adjusted by way of a participation deduction set out in IRC Section 965©. A reduced foreign tax credit applies to the inclusion under the IRC Section 965(g). Interestingly, in certain situations, a US shareholder may reduce the amount of the income inclusion for the purposes of the new tax based on deficits in earnings and profits of other specified foreign corporations (of which he is a US shareholder as well).
The new tax applies to the last taxable year of a specified foreign corporations beginning before January 1, 2018; a US shareholder must include the new tax in the tax year in which the specified foreign corporation’s year ends (in other words, a US shareholder may need to pay the tax on his 2017 and/or 2018 US tax returns). If a US shareholder must pay the IRC 965 Tax, he may either pay it in full when he files the relevant US tax return or choose to do it in installments over an eight-year period.
IRC 965 Tax: IRS Closely Monitors Compliance with the New Tax
Any US taxpayers’ noncompliance with the IRC 965 Tax faces a high risk of IRS detection.  The reason for it is the IRS pledge to closely monitor potential noncompliance with the new tax.  In fact, the IRS even launched a special compliance campaign dedicated to the IRC Section 965 compliance. 
IRC 965 Tax: What to Do if You Did Not Timely Pay the Tax
If you failed to properly comply with your reporting and payment obligations under the IRC Section 965, you will most likely face additional IRS tax penalties as well as the interest on the tax. If you also did not file the required Form 5471 and/or Form 8938 to disclose your interest in a foreign corporation, you are also at a high risk of being subject to Form 5471 penalties as well as Form 8938 penalties. Additional penalties may also apply, including the draconian FBAR criminal and civil penalties (for example, if you are the majority shareholder of a controlled foreign corporation and you did not disclose the foreign bank and financial accounts of this corporation on your FBAR).
Given the gravity of your situation, it is important that you immediately contact an international tax lawyer who specializes in US international tax compliance and offshore voluntary disclosures.
Contact Sherayzen Law Office for Professional Help If You Are Not in Compliance with the IRC 965 Tax
If you have not complied with your payment requirement with respect to IRC 965 Tax and other related US international tax forms, contact Sherayzen Law Office as soon as possible. 
Sherayzen Law Office is an international tax law firm that specializes in US international tax compliance and offshore voluntary disclosures. We have helped hundreds of US taxpayers to resolve their past US tax noncompliance issues, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### International Tax Lawyer & Attorney | April 2019 IRS Compliance Campaigns
On April 16, 2019, the IRS Large Business and International division (LB&I)  announced the approval of three additional compliance campaigns. Let’s discuss in more detail these April 2019 IRS compliance campaigns.
April 2019 IRS Compliance Campaigns: Background Information
In the mid-2010s, after extensive planning, the IRS decided to move LB&I toward  issue-based examinations and a compliance campaign process.  The idea was to let LB&I itself decide which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this was the most efficient approach that assured the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.
The first thirteen campaigns were announced by LB&I on January 13, 2017.  Then, the IRS added eleven campaigns on November 3, 2017, five campaigns on March 13, 2018, six campaigns on May 21, 2018, five campaigns on July 2, 2018, five campaigns on September 10, 2018 and five campaigns on October 30, 2018.  With the additional three April 2019 IRS compliance campaigns, there are fifty-three total IRS compliance campaigns outstanding as of the time of this writing.
The IRS has created each campaign after careful strategic planning, re-deployment of resources, creation of new training and tools as well as careful taxpayer population selection through metrics and feedback. The IRS has also built a supporting infrastructure inside LB&I for each specific campaign.
Three New April 2019 IRS Compliance Campaigns
Here are the new three new campaigns: Captive Services Provider Campaign, Offshore Private Banking Campaign and Loose-Filed Forms 5471. Each of these five campaigns was identified through LB&I data analysis and suggestions from IRS employees. 
April 2019 IRS Compliance Campaigns: Captive Services Provider Campaign
The section 482 regulations and the OECD Transfer Pricing Guidelines provide rules for determining arm’s length pricing for transactions between controlled entities, including transactions in which a foreign captive subsidiary performs services exclusively for the parent or other members of the multinational group. The arm’s length price is determined by taking into consideration data available on companies performing functions, employing assets, and assuming risks that are comparable to those of the captive subsidiary. 
Excessive pricing for these services would inappropriately shift taxable income to these foreign entities and erode the U.S. tax base. The goal of this campaign is to ensure that U.S. multinational companies are paying their captive service providers no more than arm’s length prices. The treatment streams for this campaign are issue-based examinations and soft letters.
April 2019 IRS Compliance Campaigns: Offshore Private Banking Campaign
US tax residents are subject to tax on worldwide income from all sources, including income generated outside of the United States. It is not illegal or improper for US taxpayers to own offshore structures, accounts or assets, but they must comply with income tax and information reporting requirements associated with these foreign activities.
Through FATCA, bilateral information exchange treaties, the Swiss Bank Program, offshore voluntary disclosures and audits, the IRS has accumulated a great pile of records that identify taxpayers with transactions and/or accounts at offshore private banks. This campaign addresses tax noncompliance and the information reporting associated with these offshore accounts. The IRS will initially address tax noncompliance through the examination and soft letter treatment streams. Additional treatment streams may be developed based on feedback received throughout the campaign.
April 2019 IRS Compliance Campaigns: Loose-Filed Forms 5471
Form 5471, Information Return of US Persons With Respect to Certain Foreign Corporations, must be attached to an income tax return (or a partnership or exempt organization return, if applicable) and filed by the return’s due date including extensions. Some taxpayers are incorrectly filing Forms 5471 by sending the form to the IRS without attaching it to a tax return. 
If a Form 5471 is required to be filed and was not attached to an original return, an amended return with the Form 5471 attached should be filed. The goal of this campaign is to improve compliance with the requirement to attach a Form 5471 to an income tax, partnership or exempt organization return.
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of any of its campaigns, you should contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Taylor Lohmeyer Law Firm Clients Face Potential IRS Audit | FBAR News
On May 15, 2019, a Texas federal court ruled that the IRS can enforce a John Doe Summons for client information from Taylor Lohmeyer Law Firm because the firm failed to demonstrate that the attorney-client privilege protected this information.  This is bad news for Taylor Lohmeyer Law Firm clients who now may have to face a potential IRS audit. 
How and Why Taylor Lohmeyer Law Firm Clients Face IRS Pressure
This entire affair arose as a result of an IRS audit of an unnamed client of Taylor Lohmeyer law firm.  During the audit, the IRS determined that this client owed more than $2 million in taxes with respect to about $5 million of undisclosed foreign income. 
Moreover, the IRS agent who conducted the audit discovered that the taxpayer received an advice from Taylor Lohmeyer law firm with respect to evasion of US taxes on his foreign income.  It appears that the IRS agent also received additional information confirming the involvement of the firm in illegal tax-avoidance schemes from a former partner of the firm.  
As a result, the IRS agent was able to build the case that Taylor Lohmeyer law firm helped its clients build offshore trust structures and beneficial ownership schemes for the purpose of evading US taxes.  The IRS then made the logical conclusion that other Taylor Lohmeyer law firm clients may have used the firm to hide their taxable income in foreign jurisdictions through foreign bank accounts and foreign entities. 
Why the Court Approved the John Doe Summons for the Identities of Taylor Lohmeyer Law Firm Clients 
Based on this information, the court ruled that the government had sufficient evidence to establish that the summons was made with the legitimate purpose of combating tax evasion.  The court also said that the burden to show the government made a wrongful summons was on the Taylor Lohmeyer law firm, and the firm failed to satisfy its burden of proof. 
It was not just the IRS work that convinced the court to approve the IRS summons for the names of the Taylor Lohmeyer Law Firm clients.  Rather, it appears that the firm was overly confident and did not properly assert the attorney-client privilege to protect its clients.  The court specifically objected to what it believed to be a “blanket assertions of privilege” for the firm’s clients. It wanted the firm to establish that the attorney-client privilege applied to each specific client and each specific document.  
Will There Be an Appeal? 
It is not clear if the firm will appeal the court’s decision, but it appears that such an appeal would be the least that the firm can do to protect its clients.  From a broader perspective, it would be too dangerous to let the IRS further chip away at the attorney-client privilege.
What Should Taylor Lohmeyer Law Firm Clients Do?
The clients of the firm should not simply wait for what happens next in this case, whether the firm will appeal the decision or simply disclose their names. They are right now in a very dangerous situation and should immediately explore their voluntary disclosure options to limit their exposure to IRS criminal penalties, including FBAR criminal penalties. Moreover, a voluntary disclosure may allow them to reduce their exposure to civil penalties.
They must also prepare for the possibility that they may not be able to do a classic voluntary disclosure and prepare for an IRS audit. Even in a willful situation, it may be possible to significantly reduce the exposure to FBAR and other IRS penalties if the case is handled correctly.
In other words, whether their earlier noncompliance was willful or non-willful, the clients of this law firm should immediately contact an international tax attorney who specializes in offshore voluntary disclosures and IRS audits.
Taylor Lohmeyer Law Firm Clients Should Contact Sherayzen Law Office for Professional Help With Their Offshore Voluntary Disclosures and IRS Audits
If you are a client of Taylor Lohmeyer law firm, contact Sherayzen Law Office for professional advice with respect to your offshore voluntary disclosure options and IRS audit preparation. Sherayzen Law Office is a highly-experienced international tax law firm with respect to both of these subjects.
Our founder is an international tax attorney who possesses deep knowledge and understanding of US international tax law and its application in the context of an IRS audit and offshore voluntary disclosures. In fact, Mr. Eugene Sherayzen has helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US tax laws through an offshore voluntary disclosure. Moreover, he has handled a great variety of IRS audits, including audits of undisclosed offshore assets.
Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!

### Panamanian Bank Accounts | US International Tax Lawyer & Attorney
A large number of US taxpayers own Panamanian bank accounts.  These taxpayers have bank accounts in Panama for a variety of reasons: personal, business, tax planning and/or estate planning. Many of these account holders still do not realize that their Panamanian bank accounts may be subject to numerous reporting requirements in the United States.  In this essay, I will outline the three most common US tax reporting requirements that may apply to Panamanian bank accounts.   
Panamanian Bank Accounts: Definition of a “Filer”
Each of the requirements discussed below has its own eligibility requirements – i.e. each has its own definition of “filer” who is required to comply with these requirements. Despite these differences in the definition of a filer, we can identify a certain common definition that underlies all of the requirements we will discuss in this article, even if this definition is modified for the purposes of a particular form.  This common denominator is the concept of “US tax residency”. 
US tax residents include the following persons: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and persons who declare themselves as US tax residents.  It is important to remember that this general definition of US tax residents is subject to a number of important exceptions.
All of the US international tax reporting requirements adopt US tax residency as the basis for their definitions of a filer.  Where there are differences from the definition of US tax residency, they are mostly limited to the application of the Substantial Presence Test and/or the first-year and last-year definitions of a US tax resident.
For example, Form 8938 identifies its filers as “Specified Persons” while FBAR defines its filers as “US Persons”. Yet, the differences between these two terms mostly arise with respect to persons who voluntarily declared themselves as US tax residents or non-residents. A common example can be found with respect to treaty “tie-breaker” provisions, which foreign persons use to escape the effects of the Substantial Presence Test for US tax residency purposes.
The determination of your US tax reporting requirements is the primary task of your international tax attorney.  It is simply too dangerous for a common taxpayer or even an accountant to attempt to dabble in US international tax law.
Panamanian Bank Accounts: Worldwide Income Reporting
Now that we understand the concept of US tax residency, we are ready to explore the aforementioned three US reporting requirements with respect to Panamanian bank accounts. 
The first and most fundamental requirement is worldwide income reporting.  It is also the requirement that applies to US tax residents as they are defined above (i.e. we are dealing here with the classic definition of US tax residency in its purest form). 
All US tax residents must disclose their worldwide income on their US tax returns. This means that they must report to the IRS their US-source and foreign-source income.   The worldwide income reporting requirement applies to all types of foreign-source income: bank interest income, dividends, royalties, capital gains and any other income.  
The worldwide income reporting requirement applies even if the foreign income is subject to Panamanian tax withholding or reported on a Panamanian tax return.  It also does not matter whether the income was transferred to the United States or stayed in Panama. US tax residents must disclose their Panamanian-source income on their US tax returns.
Panamanian Bank Accounts: FBAR/FinCEN Form 114
The second requirement that I would like to discuss in this essay is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. Under the Bank Secrecy Act of 1970, the US government requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Panamanian (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. If these requirements are met, the disclosure requirement is satisfied by filing an FBAR.
It is important to understand all parts of the FBAR requirement are terms of arts that require further exploration and understanding. I encourage you to search our firm’s website, sherayzenlaw.com, for the definition of “US Persons” and the explanation of other parts of the FBAR requirement.
There is one part of the FBAR requirement, however, that I wish to explore here in more detail – the definition of “account”. The reason for this special treatment is the fact that the definition of an account for FBAR purposes is a primary source of confusion among US Persons with respect to what needs to be disclosed on FBAR.
The FBAR definition of an account is substantially broader than what this word generally means in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
Despite the fact that FBAR compliance is neither easy nor straightforward, FBAR has a very severe penalty system. On the criminal side, FBAR noncompliance may lead to as many as ten years in jail (of course, these penalties come into effect in extreme situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.
Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. In 2015, the IRS added another layer of limitations on the FBAR penalty imposition. One must remember, however, that these are voluntary IRS actions which the IRS may disregard whenever circumstances warrant such an action.
Panamanian Bank Accounts: FATCA Form 8938
The third requirement that I wish to discuss today is a relative newcomer, FATCA Form 8938. This form requires “Specified Persons” to disclose all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency.
The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to report the same foreign assets on FBAR and Form 8938.
Specified Persons consist of two categories of filers: Specified Individuals and Specified Domestic Entities.  You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching income tax consequences (including disallowance of foreign tax credit and imposition of 40% accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
One must also remember that, unlike FBAR, Form 8938 is filed with a federal tax return and forms part of the tax return. This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Panamanian Bank Accounts
If you have Panamanian bank accounts, contact Sherayzen Law Office for professional help with your US international tax compliance.  We have helped hundreds of US taxpayers with their US international tax issues (including disclosure of Panamanian bank accounts), and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### October 2018 IRS Compliance Campaigns | International Tax Lawyer & Attorney News
On October 30, 2018, the IRS Large Business and International division (LB&I) has announced five additional compliance campaigns. Let’s discuss in more detail these October 2018 IRS compliance campaigns.
October 2018 IRS Compliance Campaigns: Background Information
By the middle of the 2010s, the IRS realized that the then-existing structure of the LB&I was not the best format to address modern noncompliance issues; it could not even accurately identify potential noncompliant taxpayers.  Also, the IRS believed that LB&I was not applying the IRS funds in an efficient manner.
Hence, after extensive planning, the IRS decided to move LB&I toward  issue-based examinations and a compliance campaign process.  Under the new format, LB&I itself decided which compliance issues presented the most risk and required a response in the form of one or multiple treatment streams to achieve compliance objectives. The IRS came to the conclusion that this approach made the best use of IRS knowledge and appropriately deployed the right resources to address specific noncompliance issues.
Each campaign was preceded by strategic planning, re-deployment of resources, creation of new training and tools as well as careful taxpayer population selection through metrics and feedback. The IRS has also built a supporting infrastructure inside LB&I for each specific campaign.
The first thirteen campaigns were announced by LB&I on January 13, 2017.  Then, the IRS added eleven campaigns on November 3, 2017, five campaigns on March 13, 2018, six campaigns on May 21, 2018, five campaigns on July 2, 2018 and five campaigns on September 10, 2018.  In other words, as of September 11, 2018, there were a total of forty-five campaigns.  The additional five October 2018 IRS compliance campaigns bring the total number of campaigns to fifty.
Five New October 2018 IRS Compliance Campaigns
Here are the new October 2018 IRS Compliance campaigns that should be added to the already-existing forty-five campaigns: Individual Foreign Tax Credit Phase II, Offshore Service Providers, FATCA Filing Accuracy, 1120-F Delinquent Returns and Work Opportunity Tax Credit.  Each of these five campaigns was identified through LB&I data analysis and suggestions from IRS employees. 
October 2018 IRS Compliance Campaigns: Individual Foreign Tax Credit Phase II
IRC Section 901 alleviates double-taxation through foreign tax credit for income taxes paid by US taxpayers on their foreign-source income. In order to claim the credit, one must meet certain eligibility requirements. This campaign addresses taxpayers who have claimed the credit, but did not meet the requirements. The IRS will address noncompliance through a variety of treatment streams, including examination.
October 2018 IRS Compliance Campaigns: Offshore Service Providers
The goal of this campaign is purely punitive - to target US taxpayers who engaged Offshore Service Providers that facilitated the creation of foreign entities and tiered structures to conceal the beneficial ownership of foreign financial accounts and assets for the purpose of tax avoidance or evasion. The treatment stream for this campaign will be issue-based examinations. 
October 2018 IRS Compliance Campaigns: FATCA Filing Accuracy
The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 as part of the HIRE Act. The overall purpose is to detect, deter and discourage offshore tax abuses through increased transparency, enhanced reporting and strong sanctions. Under FATCA, Foreign Financial Institutions and certain Non-Financial Foreign Entities are generally required to report the foreign assets held by US account holders; the same applies to substantial (beneficial) US owners of these assets. This campaign addresses those entities that have FATCA reporting obligations but do not meet all their compliance responsibilities. The Service will address noncompliance through a variety of treatment streams, including termination of the FATCA status.
October 2018 IRS Compliance Campaigns: 1120-F Delinquent Returns
The campaign addresses delinquent (i.e. filed late) Forms 1120-F. Form 1120-F is a US income tax return of a foreign corporation. It must be accurate, true and filed timely in order for a foreign corporation to claim deductions and credits against effectively connected income. For these purposes, Form 1120-F is generally considered to be timely filed if it is filed no later than eighteen months after the due date of the current year's return. 
The IRS may waive the filing deadline where, based on its facts and circumstances, the foreign corporation establishes to the satisfaction of the IRS that the foreign corporation acted reasonably and in good faith in failing to file Form 1120-F. The reasonable cause standard is described in Treas. Reg. Section 1.882-4(a)(3)(ii). LB&I Industry Guidance 04-0118-007 (dated February 1, 2018) established procedures to ensure waiver requests are applied in a fair, consistent and timely manner under the regulations.
The objective of the 1120-F Delinquent Returns campaign is to encourage foreign entities to timely file Form 1120-F returns and address the compliance risks for delinquent 1120-F returns. The IRS hopes to accomplish it by field examinations of compliance-risk delinquent returns and external education outreach programs.
October 2018 IRS Compliance Campaigns: Work Opportunity Tax Credit
This campaign addresses the consequences of the Work Opportunity Tax Credit (WOTC) certification delays and the burden of amended return filings. Due to delays associated with the WOTC certification process, taxpayers are often faced with the burdensome requirement of amending multiple years of federal and state returns to claim the WOTC in the year qualified WOTC wages were paid. This requirement, coupled with any resulting examinations of this issue, is an inefficient use of both taxpayer and IRS resources. 
Pursuant to Rev. Proc. 2016-19, the IRS has agreed to accept the “WOTC year of credit eligibility” issue into the Industry Issue Resolution (IIR) program. The IIR is intended to provide remedies to reduce taxpayer burden, promote consistency, and decrease examination time to most effectively use IRS resources. The campaign's objective is to collaborate with industry stakeholders, Chief Counsel, and Treasury to develop an LB&I directive for taxpayers experiencing late certifications and to promote consistency in the examinations of WOTC claims.
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of any of its campaigns, you should contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Employee Stock Option Sourcing Rules | International Tax Lawyer & Attorney
Employee stock option sourcing rules govern the US tax classification of income generated by stock options as US-source income or foreign-source income.  In this article, I will provide a general overview of the employee stock option sourcing rules. 
Employee Stock Option Sourcing Rules: Importance of Income Sourcing Rules
Income sourcing rules are very important in US international tax law for two reasons.  First, for US taxpayers, these rules will determine the ability to utilize their foreign tax credit. Second, for foreign taxpayers, the issue is whether they will be taxed in the United States.  For example, if a non-resident alien received stock options the income from which is sourced to a foreign country, then he may completely escape US taxation of this income.
Employee Stock Option Sourcing Rules: Qualified vs. Non-Qualified Options
There are two types of stock options relevant to the employee stock option sourcing rules – qualified options (also called Incentive Stock Options) and non-qualified options.  Let’s discuss both types in more detail.
A stock option is a qualified option if it is issued pursuant to rules set forth in the Internal Revenue Code. In the vast majority of cases, if an employee exercises a qualified stock option, he will not receive income at that time.  Moreover, as long as he meets the statutory holding requirements, once the employee sells the stock, he will realize a capital gain.  So, when we are talking about income sourcing for qualified stock options, we really need to concentrate on the sourcing of long-term capital gain.
Non-qualified options are the options that do not qualify for the preferential tax treatment under the Internal Revenue Code.  Obviously, they are taxed in a different manner than qualified stock options.  Generally, the employee does not recognize any income when he receives a non-qualified stock option.  Rather, he will recognize ordinary income upon the exercise of the option; this ordinary income will equal to the difference between the value of the stock received and what he paid to exercise the option.  This is the income that is relevant to our discussion of the employee stock option sourcing rules.
Now that we understand both types of options and what type of income they usually generate, we are ready to apply the employee stock option sourcing rules to this income. 
Employee Stock Option Sourcing Rules Concerning Qualified Options
As we have already established, an employee usually generates a long-term capital gain as a result of a disposition of stock from a qualified option. The sourcing rules in this case require that the source of income is determined in the same manner as any other gain from a security disposition.  In other words, the income must be sourced to the employee’s residence. 
For example, let’s suppose that Pierre, a citizen of France, worked for a few years as a business analyst in New York for a multinational corporation.  On the third year of his employment, the employer rewarded Pierre with qualified stock options. Then, the employer moved Pierre back to France.  In France, he exercised his options; two years later (while still in France), Pierre sold the stocks.  In this scenario, Pierre’s long-term capital gain would be treated as French-source income since he resided in France when the gain was realized. 
Employee Stock Option Sourcing Rules & Non-Qualified Options: General Rule
The analysis with respect to non-qualified options is a lot more complex.  Our starting point is the fact which we already established – income generated from non-qualified option is treated as compensation.  
Second, the IRS does not list non-qualified options as a fringe benefit.  Hence, we can assume that the IRS does not wish to apply the fringe benefit sourcing rules to compensation.  Rather, most likely, the general salary-sourcing rules should apply.  
As I pointed out in another article, the main rule here is that the location where the employee renders his services determines whether this is US-source income or foreign-source income. If an employee works in the United States, then his salary would be considered US-source income; if he works in a foreign country, his salary would be sourced to that country. See §§861(a)(3) and 862(a)(3).  
Employee Stock Option Sourcing Rules & Non-Qualified Options: Allocation
In the context of non-qualified stock options, the general rule means that we have to determine where the employee was when he earned the options.  If the employee worked only in the United States or only in a foreign country, this is a very easy case.  
What happens, however, if we are dealing with a cross-border employee who is paid, in part, with non-qualified options?  In this case, we have to engage in the process of allocating time between the United States and a foreign country (or even various foreign countries).  As I pointed out in another article, time allocation is the default method in this case, but other options are available.
Let’s use an example to illustrate the time allocation rule with respect to non-qualified options:  a US corporation hired Charles to work for its UK subsidiary in 2016.  As part of his compensation, the employer granted non-qualified options exercisable in 2019.  The work involved working not just in London, but also in New York. In 2019, Charles exercised the options.  At the same time, he determined that out of the total 1,200 days he worked during the past three years, he was in the United States for 200 days and 1,000 days in the United Kingdom.  This means that one-sixth (200/1,200) of income from non-qualified options will be US-source income.
Employee Stock Option Sourcing Rules & Non-Qualified Options: Foreign Tax Credit
The real complexity comes in, however, when we include the foreign tax credit (“FTC”) considerations into our analysis. Other countries may treat non-qualified options differently from the United States and recognize the income earlier.  This means that, potentially, an employee can receive bills from multiple countries at different times. The FTC calculations here will become quite complex. 
Contact Sherayzen Law Office for Professional Help with Employee Stock Option Sourcing Rules
If you work in two or more countries and receive stock options from your employer, you will need to engage in complex tax calculations to correctly determine your US tax liability. This is why you need to contact Sherayzen Law Office for professional help.  We have helped hundreds of US taxpayers around the world with their international tax issues, and We Can Help You!
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### September 2018 IRS Compliance Campaigns | International Tax Lawyer & Attorney News
On September 10, 2018, the IRS Large Business and International division (“LB&I”) announced the creation of another five compliance campaigns. Let’s explore in more depth these September 2018 IRS Compliance Campaigns.
September 2018 IRS Compliance Campaigns: Background Information
Since January of 2017, the IRS has been regularly adding more and more compliance campaigns.  The compliance campaigns were created by the LB&I after extensive planning concerning the restructuring of its compliance enforcement activities.  The IRS solution to the then existing enforcement problems was to move towards issue-based examinations and a compliance campaign process in which the IRS itself decides which compliance issues that present risk require a response in the form of one or multiple treatment streams to achieve compliance objectives. The idea is to concentrate the IRS resources where they are most need – i.e. where there is a substantial risk of tax noncompliance.  
The new campaigns have been coming in batches.  The IRS announced the initial batch of thirteen campaigns on January 31, 2017.  Then, the IRS added another eleven campaigns in November of 2017, five in March of 2018, six in May of 2018 and five in July of 2018.  The new campaigns announced on September 10, 2018, brings the total number of campaigns to forty five as of that date.
It is important to point out that the tax reform that passed on December 22, 2017, may impact some of these existing campaigns.
Five New September 2018 IRS Compliance Campaigns
Here are the new September 2018 IRS Compliance campaigns that should be added to the forty campaigns that were announced prior to that date: IRC Section 199 – Claims Risk Review, Syndicated Conservation Easement Transactions, Foreign Base Company Sales Income – Manufacturing Branch Rules, Form 1120-F Interest Expense & Home Office Expense and Individuals Employed by Foreign Governments & International Organizations.  All of these campaigns were selected by the IRS through LB&I data analysis and suggestions from IRS employees.
September 2018 IRS Compliance Campaigns: IRC Section 199 – Claims Risk Review
Public Law 115-97 repealed the Domestic Production Activity Deduction (“DPAD”) for taxable years beginning after December 31, 2017. This campaign addresses all business entities that may file a claim for additional DPAD under IRC Section 199. The campaign objective is to ensure taxpayer compliance with the requirements of IRC Section 199 through a claim risk review assessment and issue-based examinations of claims with the greatest compliance risk. 
September 2018 IRS Compliance Campaigns: Syndicated Conservation Easement Transactions
The IRS issued Notice 2017-10, designating specific syndicated conservation easement transactions as listed transactions requiring disclosure statements by both investors and material advisors. This campaign is intended to encourage taxpayer compliance and ensure consistent treatment of similarly situated taxpayers by ensuring the easement contributions meet the legal requirements for a deduction, and the fair market values are accurate.  The initial treatment stream is issue-based examinations. Other treatment streams will be considered as the campaign progresses.
September 2018 IRS Compliance Campaigns: Manufacturing Branch Rules for Foreign Base Company Sales Income
In general, foreign base company sales income (“FBCSI”) does not include income of a controlled foreign corporation (“CFC”) derived in connection with the sale of personal property manufactured by such a corporation.  There is an exception to this general rule.  If a CFC manufactures property through a branch outside its country of incorporation, the manufacturing branch may be treated as a separate, wholly owned subsidiary of the CFC for the purposes of computing the CFC’s FBCSI, which may result in a subpart F inclusion to the US shareholder(s) of the CFC.
The goal of this campaign is to identify and select for examination returns of US shareholders of CFCs that may have underreported subpart F income based on certain interpretations of the manufacturing branch rules. The treatment stream for the campaign will be issue-based examinations.
September 2018 IRS Compliance Campaigns: 1120-F Interest Expense & Home Office Expense
Two of the largest deductions claimed on Form1120-F (US Income Tax Return of a Foreign Corporation) are interest expenses and home office expense. Treasury Regulation Section 1.882-5 provides a formula to determine the interest expense of a foreign corporation that is allocable to their effectively connected income. The amount of interest expense deductions determined under Treasury Regulation Section 1.882-5 can be substantial. 
Similarly, Treasury Regulation Section 1.861-8 governs the amount of Home Office expense deductions allocated to effectively connected income.  Through its data analyses, the IRS noted that Home Office Expense allocations have been material amounts compared to the total deductions taken by a foreign corporation.
This IRS campaign addresses both of these Form 1120–F deductions.  The campaign compliance strategy includes the identification of aggressive positions in these areas, such as the use of apportionment factors that may not attribute the proper amount of expenses to the calculation of effectively connected income. The goal of this campaign is to increase taxpayer compliance with the interest expense rules of Treasury Regulation Section 1.882-5 and the Home Office expense allocation rules of Treasury Regulation Section 1.861-8. The treatment stream for this campaign is harsh – issue-based examinations only.
September 2018 IRS Compliance Campaigns: Individuals Employed by Foreign Governments & International Organizations
Foreign embassies, foreign consular offices and international organizations operating in the United States are not required to withhold federal income and social security taxes from their employees’ compensation nor are they required to file information reports with the Internal Revenue Service. This lack of withholding and reporting often results in unreported income, erroneous deductions and credits, and failure to pay income and Social Security taxes, because some individuals working at foreign embassies, foreign consular offices, and various international organizations may not be reporting compensation or may be reporting it incorrectly. 
This campaign will focus on outreach and education by partnering with the Department of State’s Office of Foreign Missions to inform employees of foreign embassies, consular offices and international organizations. The IRS will also address noncompliance in this area by issuing soft letters and conducting examinations. 
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of any of its campaigns, you should contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
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### July 2018 IRS Compliance Campaigns | International Tax Lawyer & Attorney
On July 2, 2018, the IRS announced the creation of another five compliance campaigns. Let’s discuss these July 2018 IRS Compliance Campaigns in more detail.
July 2018 IRS Compliance Campaigns: Background Information
The IRS compliance campaigns is the end result of a long period of planning by the IRS Large Business and International division (“LB&I”). The idea behind the IRS compliance campaigns is to concentrate the LB&I resources in a way that deals with the potential noncompliance area in the most efficient way.  The first campaigns were announced by the IRS on January 31, 2017.  Then, the IRS rapidly added new campaigns in November of 2017, March of 2018 and May of 2018.  As of July 1, 2018, there were 35 campaigns outstanding.
Five New July 2018 IRS Compliance Campaigns
Here are the new July 2018 IRS Compliance campaigns that should be added to the already existing thirty-five campaigns: Restoration of Sequestered AMT Credit Carryforward, S Corporation Distributions, Virtual Currency, Repatriation via Foreign Triangular Reorganizations and Section 965 Transition Tax.
Each of these campaigns was identified by the IRS through LB&I data analysis and suggestions from IRS employees. 
July 2018 IRS Compliance Campaigns: Restoration of Sequestered AMT Credit Carryforward
This campaign deals with the complex issues concerning sequestered Alternative Minimum Tax (“AMT”) credit.  Refunds issued or applied to a subsequent year’s tax, pursuant to IRC Section 168(k)(4), are subject to sequestration and are a permanent loss of refundable credits. Taxpayers may not restore the sequestered amounts to their AMT credit carryforward, but some are doing so in any case. 
Given the complexity of the issues involved, the IRS decided to make soft letters as the primary treatment stream for this campaign.  Soft letters will be mailed to taxpayers who are identified as making improper restorations of sequestered amounts.  The IRS will then monitor these taxpayers to make sure that they correct the problem and stay in compliance. The idea is to educate taxpayers on the proper treatment of sequestered AMT credits so that they self-correct all problems.
July 2018 IRS Compliance Campaigns: S Corporation Distributions
This is a very important campaign that will affect a very large number of small business owners. It will focus on three major problem areas.  The first issue is failure to report gain upon the distribution of appreciated property to a shareholder.  The second issue is the proper classification of a corporate distribution (of cash and property) as a taxable dividend.  Finally, the third issue concerns non-dividend distributions to shareholders in excess of their stock basis; such distributions are taxable.  The IRS adopted a more severe approach to this campaign. The treatment streams for this campaign include issue-based examinations, tax form change suggestions and stakeholder outreach.
July 2018 IRS Compliance Campaigns: Virtual Currency
This campaign is the IRS attempt to catch up with modern technology and properly tax transactions that involve virtual currencies.  IRS Notice 2014-21 classifies virtual currency as “property” for federal tax purposes. Hence, any sales or exchanges that involve virtual currencies will be taxable in the United States.  
The fact that these transactions take place outside of the United States would not affect the taxability of foreign currencies as long as a US tax resident is involved in these transactions. As Sherayzen Law Office has pointed out numerous times in the past, US tax residents are subject to taxation on their worldwide income.  This rule includes virtual currencies.
This campaign involves highly complex issues and requires flexible approach to compliance enforcement. This is why the IRS will address noncompliance related to the use of virtual currency through multiple treatment streams including outreach and examinations.
The IRS has expressly stated that its compliance enforcement activities will follow the general tax principles applicable to all transactions in property as outlined in Notice 2014-21. The IRS will also continue to consider and solicit taxpayer and practitioner feedback in education efforts, future guidance and development of Practice Units. 
Interestingly enough, the IRS stated that it will not create a voluntary disclosure program specifically to address tax non-compliance involving virtual currency. Instead, the IRS urges taxpayers with unreported virtual currency transactions to self-correct their returns as soon as practical.
July 2018 IRS Compliance Campaigns: Repatriation via Foreign Triangular Reorganizations
This campaign focuses on enforcement of Notice 2016-73 (“the Notice”) which the IRS issued in December of 2016.  The Notice curtails the claimed “tax-free” repatriation of basis and untaxed CFC earnings following the use of certain foreign triangular reorganization transactions. The goal of the campaign is to identify and challenge these transactions by educating and assisting examination teams in audits of these repatriations.
July 2018 IRS Compliance Campaigns: Section 965 Transition Tax
This is a highly important campaign that focuses on the issue that will continue to plague US taxpayers for a long time – 965 transition tax.  IRC Section 965 requires US shareholders (a term of art) to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States. Taxpayers may elect to pay the transition tax as a lump-sum payment or in installments over an eight-year period. This means that some (and probably most) of these US shareholders should have paid some or all of the tax on their 2017 income tax return. 
The LB&I already engaged in an outreach campaign in 2018 to reach trade groups, advisors and other outside stakeholders to raise awareness of filing and payment obligations concerning the 965 transition tax. The IRS even circulated an external communication on this subject through stakeholder channels in April of 2018.                
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of any of its campaigns, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
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### IRS Large Corporate Compliance Program | IRS Lawyer & Attorney
On May 16, 2019, the IRS Large Business and International Division (“LB&I”) announced the creation of a new compliance program for the large corporations – Large Corporate Compliance program.  
The Large Corporate Compliance program will cover the oversight of the LB&I’s largest corporate taxpayers.  It replaces the existing Coordinated Industry Case program.
The replacement of the Coordinated Industry Case program is not unexpected. Ever since the IRS announced that it would switch to compliance campaigns for case selection purposes, the future of the old program was in doubt.  Moreover, the Coordinated Industry Case program used criteria that did not incorporate many of the advancements made by the IRS in the area of data analysis. Hence, it is not surprising that the May 16 announcement came right after the LB&I began on May 15, 2019 a new application of data analytics for determining the population of its largest and most complex corporate taxpayers. 
The IRS stated that the Large Corporate Compliance program will determine on a different, automatic basis who should be covered by the program.  In fact, the program employs automatic application of the large case pointing criteria to determine the LCC population. For example, pointing criteria include such items as gross assets and gross receipts.  In the past, this was done on a manual, localized basis. Automated pointing allows a more objective determination of the taxpayers that should be part of the population.
After the population is determined, data analytics is used to identify the returns that pose the highest compliance risk. The Large Corporate Compliance program further improves LB&I’s ability to efficiently focus its resources on noncompliance.
The Large Corporate Compliance program will coordinate its work with the LB&I agents and examiners who apply their experience and expertise in undertaking compliance actions and determining compliance treatment streams of the biggest and most-complex corporate taxpayers. The IRS happily stated that each enhances the other.
The IRS further shared that the program includes continuous improvement using an agile model principle to continually monitor and improve based on feedback from stakeholders including field teams, practice networks, and data scientists.
Sherayzen Law Office carefully watches the new IRS moves with respect to its compliance programs to determine their impact on the firm’s clients.

### May 2018 IRS Compliance Campaigns | International Tax Lawyer & Attorney
On May 21, 2018, the IRS announced the creation of another six compliance campaigns.  Let’s explore these May 2018 IRS Compliance Campaigns in more detail.
May 2018 IRS Compliance Campaigns: Background Information
After a long period of planning, the IRS Large Business and International division (“LB&I”) finalized its new restructuring plan in 2017.  Under the new plan, LB&I decided to switch to issue-based examinations and IRS campaigns.
The idea behind the IRS compliance campaigns is to concentrate the LB&I limited resources where they are most needed – i.e. where there is the highest risk of noncompliance. The first campaigns were announced by the IRS on January 31, 2017.  Then, the IRS introduced additional campaigns in November of 2017 and March of 2018.  As of March 13, 2018, there were a total of twenty-nine campaigns outstanding. 
Six New May 2018 IRS Compliance Campaigns
On May 21, 2018, the LB&I introduced the following new campaigns: Interest Capitalization for Self-Constructed Assets; Forms 3520/3520-A Non-Compliance and Campus Assessed Penalties; Forms 1042/1042-S Compliance; Nonresident Alien Tax Treaty Exemptions; Nonresident Alien Schedule A and Other Deductions; and NRA Tax Credits. Each of these campaigns was selected by the IRS through the analysis of the LB&I data as well as from suggestions made by IRS employees.  
It is also important to point out that each of these campaigns as well as the twenty-nine previous campaigns were reviewed by the IRS in light of the 2017 Tax Reform (which was enacted on December 22, 2017).  
May 2018 IRS Compliance Campaigns: Interest Capitalization for Self-Constructed Assets
The first campaign focused on the Internal Revenue Code (“IRC”) Section 263A. Under this provision if a taxpayer engaged in certain production activities with respect to “designated property”, he is required to capitalize the interest that he incurs or pays during the production period with respect to this property.
IRC Section 263A(f) defined “designated property” as: (a) any real property, or (b) tangible personal property that has: (i) a long useful life (depreciable class life of 20 years or more), or (ii) an estimated production period exceeding two years, or (iii) an estimated production period exceeding one year and an estimated cost exceeding $1,000,000.
The IRS created this campaign with the goal of ensuring taxpayer compliance by verifying that interest is properly capitalized for designated property and the computation to capitalize that interest is accurate. Construction companies are likely to be the most immediate target of this campaign. Given the fact that Section 263A is not well-known, the IRS adopted varous treatment streams for this campaign, including issue-based examinations, education soft letters, and educating taxpayers and practitioners to encourage voluntary compliance.
May 2018 IRS Compliance Campaigns: Form 3520/3520-A Non-Compliance and Campus Assessed Penalties
This campaign reflects the increasing attention of the IRS to foreign trusts.  This is a highly complex area of law.  In order to deal with this complexity, the IRS stated that it will adopt a multifaceted approach to improving Form 3520 and Form 3520-A compliance.  The treatment streams will include (but not limited to) examinations and penalties assessed by the campus when the forms are received late or are incomplete. The IRS will also use Letter 6076 to inform the trusts about their potential Form 3520-A obligations. 
May 2018 IRS Compliance Campaigns: Form 1042/1042-S Compliance
Taxpayers who make payments of certain US-source income to foreign persons must comply with the related withholding, deposit and reporting requirements. This campaign targets Withholding Agents who make such payments but do not meet all of their compliance duties. The IRS will address noncompliance and errors through a variety of treatment streams, including examination.
May 2018 IRS Compliance Campaigns: Nonresident Alien Tax Treaty Exemptions
This campaign is intended to increase compliance in nonresident alien (NRA) individual tax treaty exemption claims related to both effectively connected income and Fixed, Determinable, Annual Periodical (“FDAP”) income. Some NRA taxpayers may either misunderstand or misinterpret applicable treaty articles, provide incorrect or incomplete forms to the withholding agents or rely on incorrect information returns provided by US payors to improperly claim treaty benefits and exempt US-source income from taxation. This campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
May 2018 IRS Compliance Campaigns: Nonresident Alien Schedule A and Other Deductions
This is another campaign that targets NRAs.  In this case, the IRS focuses on the Form 1040NR Schedule A itemized deductions. NRA taxpayers may either misunderstand or misinterpret the rules for allowable deductions under the previous and new IRC provisions, do not meet all the qualifications for claiming the deduction and/or do not maintain proper records to substantiate the expenses claimed. The campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
May 2018 IRS Compliance Campaigns: NRA Tax Credits
This is yet another (third) campaign that targets NRAs; this time it concerns tax credits claimed by the NRAs. The IRS here targets NRAs who erroneously claim a dependent tax credit and who either have no qualifying earned income, do not provide substantiation/proper documentation, or do not have qualifying dependents. Furthermore, the IRS also wants to target NRAs who claim education credits (which are only available to U.S. persons) by improperly filing Form 1040 tax returns. This campaign will address noncompliance through a variety of treatment streams including outreach/education and traditional examinations.
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of any of its campaigns, please contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### FDII Export Incentive | Foreign Business Income Tax Lawyer & Attorney
The 2017 Tax Cuts and Jobs Act (the “2017 tax reform” or “TCJA”) enacted a highly-lucrative incentive for US corporations to export directly from the United States – the Foreign-Derived Intangible Income (“FDII”) regime.  In this article, I would like to introduce the readers in a general manner to the FDII export incentive contained in the TCJA.
FDII Export Incentive: TCJA
The creation of the participation exemption system posed a problem for the drafters of the TCJA – how does one stop US corporations from running all of their foreign business through a foreign corporation since foreign corporate profits may actually be transferred to the United States tax-free? Among other provisions of this complex law, the drafters utilized two powerful incentives for US corporations to export directly overseas.  
The first one was a “stick” – the Global Intangible Low-Taxed Income or GILTI. The GILTI regime established what can be best described as a global minimum tax on the earnings of foreign subsidiaries of a US business entity. 
The second approach was a “carrot” – the FDII export incentive.  The FDII regime creates a powerful incentive for US corporations to export goods and services from the United States by creating a deemed deduction of a large percentage of corporate export income.  In other words, the effective corporate tax rate is reduced through the FDII regime because a portion of a corporation’s export income is being deducted and never subject to US taxation. 
FDII Export Incentive: General Description of the Deemed Deduction
The deemed deduction applies only to a US corporation’s FDII.  FDII is basically a certain portion of corporate income from foreign sources determined by a formula established by Congress. 
The formula requires a multi-step process.  The first steps involve the determination of the Deduction-Eligible Income (DEI), Qualified Business Asset Investment (“QBAI”), Foreign-Derived Deduction-Eligible Income (“FDDEI”).  Once all of these items are calculated, then the Deemed Intangible Income (“DII”) is figured out.  
FDII is calculated last. The basic formula for FDII is: DII times the ratio of FDDEI over DEI.
The last step is to calculate the tax liability which involves the reduction of FDII by 37.5%.  Thus, the effective tax rate for a corporate taxpayer (assuming the current 21% corporate tax rate stays the same) with respect to its FDII is only 13.125%.
It should be mentioned that the current deemed deduction will stay at 37.5% only through December 31, 2025.  For the years after December 31, 2025, the deemed deduction will go down to 21.875%.  This means that the effective tax rate on FDII will be 16.406%.  Unless the law changes (which is possible), non-FDII corporate income will continue to be taxed at 21%.
FDII Export Incentive: Net Impact of the Deemed Deduction
Based on even just this general analysis of FDII, we can understand why the FDII export incentive is such an important part of the US corporate tax law.  First, in most cases, the FDII deduction is a disincentive to shift foreign-source income from a US corporation to a controlled foreign corporation (“CFC”).  A CFC may be subject to taxation under two different anti-deferral regimes, Subpart F or GILTI tax.  Subpart F income will just force the recognition of foreign income by the CFC right away without any deemed deduction (i.e. this would be the worst-case scenario).
If the Subpart F rules do not apply, then the corporation may be subject to the GILTI tax. It is true that the effective corporate tax rate for GILTI, after its current 50% deemed reduction is only 10.5%.  Nevertheless,  FDII”s effective tax rate of 13.125% significantly reduces the difference from that what it would have been otherwise (i.e. between 10.5% and 21%).  Moreover, when one factors in the additional administrative, US tax compliance and local tax compliance expenses, this difference may become nonexistent.  
Second, the FDII deemed deduction makes US corporations more competitive worldwide, because they may now realize a higher profit margin even if they lower the prices for their products and services sold overseas.  
Contact Sherayzen Law Office for Professional Help With FDII Calculations and International Business Tax Planning
If your business engages in selling products or services overseas, there are opportunities for international business tax planning from US perspective.  Contact Sherayzen Law Office to take advantage of these opportunities through professional, creative and ethical tax help.
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### 2019 IRS Hiring Spree Targets US International Tax Compliance
On May 11, 2019, the IRS Commissioner Chuck Rettig stated that the IRS is rapidly increasing the number of agents in certain divisions.  US international tax compliance is the primary target of this 2019 IRS hiring spree.
2019 IRS Hiring Spree: Affected IRS Divisions
The Commissioner announced this news while speaking at the American Bar Association’s Section of Taxation conference in Washington, D.C.  He stated that the Large Business and International (“LB&I), Small Business/Self-Employed (“SB/SE”) and Criminal Investigation (“CI”) divisions are the ones that form the core of the 2019 IRS hiring spree.  Additionally, the Office of Chief Counsel and the Modernization and Information Technology Division are also beefing up their staff.
2019 IRS Hiring Spree: Why the IRS is Hiring New Agents
The Commissioner expressly mentioned two reasons for the 2019 IRS hiring spree – reducing the tax gap and assuring international compliance.  Interestingly, he also mentioned that he will not allow the illegal tax shelter scandals, like the ones that happened in the 1980s, 1990s and 2000s, to happen on his watch.
The Commissioner went on to identify certain problematic areas where he wants the new hires to focus.  He specifically listed: digital economy, transfer pricing, syndicated conservation easements, employment tax and cash-intensive businesses.
Finally, the Commissioner stated that he wants to expand the IRS message to the taxpayers who speak English as a second language.  He said: “I'm from Los Angeles. In the grocery store in line there are more than six languages being spoken. This is 2019. We need to have our information available to every American trying to get it right.”  He also shared that he was surprised when he found out that the IRS printed tax returns in only six languages. 
The Commissioner emphasized that the IRS should not just print the returns in more languages, but also to provide IRS guidance in more languages.  Also, he stated that the quality of translation services can be further improved.  Undoubtedly, this will be the job of some of the new hires.
2019 IRS Hiring Spree: Consequences for Noncompliant Taxpayers with Foreign Assets and Foreign Income
The new IRS hiring spree means that there will be more audits and investigations of noncompliant taxpayers, including those who own foreign assets and receive foreign income.   The fact that the Commissioner specifically mentioned illegal tax shelters and international tax compliance is a direct confirmation that taxpayers with offshore assets will soon be at an even higher risk of the IRS discovery of their tax noncompliance.
Furthermore, with more agents available, the IRS can expand the scope of its international tax audits.  We can anticipate that there will be more audits with respect to Forms 3520/3520A (owners and beneficiaries of foreign trusts), 5471 (owners of a foreign corporation), 8621 (PFICs) and 8865 (owners of an ownership interest in a foreign partnership).
The IRS will also able to better utilize the piles of data it receives from foreign financial institutions under the Foreign Account Tax Compliance Act (“FATCA”) and bilateral automatic information exchange treaties.  In other words, the IRS will be able to identify more noncompliant taxpayers.
Contact Sherayzen Law Office for Professional Help With Your Undisclosed Foreign Assets and Foreign Income
If you have undisclosed foreign assets and foreign income, you need to contact Sherayzen Law Office for professional help as soon as possible. Within just a few months, the IRS ability to locate you will expand much further than ever. If the IRS audits you or even just commences an investigation of your foreign assets, you may not be able to utilize the offshore voluntary disclosure options to reduce your FBAR and other IRS penalties.
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### Offshore Bank Accounts Remain on the IRS 2019 Dirty Dozen List
On March 15, 2019, the IRS announced that it will keep undisclosed offshore bank accounts on its 2019 Dirty Dozen list.  
2019 Dirty Dozen List: Background Information
The “Dirty Dozen” list is complied annually by the IRS.  It consists of common tax scams and noncompliance schemes that the IRS prioritizes in its enforcement efforts.  Many of these scams and schemes peak during the tax filing season, but offshore evasion is present throughout the year.
2019 Dirty Dozen List: Offshore Evasion Remains a Priority for the IRS
Despite many years of an intense focus on this area, the IRS still priorities its enforcement efforts in the area of offshore evasion.  “Offshore evasion remains a primary focal point of overall IRS enforcement efforts,” said IRS Commissioner Chuck Rettig. “Our Criminal Investigation and civil enforcement teams work closely with the Justice Department in the international arena to ensure our nation’s tax laws are followed. Taxpayers considering hiding funds or assets offshore should think twice; the civil penalties and criminal sanctions can be severe.”
2019 Dirty Dozen List: Undisclosed Offshore Bank Accounts May Lead to Criminal Prosecution and Imposition of Huge Civil Penalties
This is very much true.  Over the years, the IRS has conducted thousands of offshore-related audits that resulted in the imposition of multimillion-dollar civil penalties as well as additional tax liability.  Moreover, the IRS has also been very active in pursuing criminal penalties, which resulted in the collection of billions of dollars in criminal fines and restitution. 
Many of these cases involved undisclosed offshore bank accounts.  In fact, the IRS has expressly warned noncompliant taxpayers that hiding income in undisclosed offshore bank accounts may result in significant penalties as well as criminal prosecution. 
2019 Dirty Dozen List: Common Schemes Involving Undisclosed Offshore Bank Accounts
The IRS has identified numerous schemes that involve undisclosed offshore bank accounts.  The most simple of them (and the one that is becoming increasingly rare) is the direct ownership of secret offshore bank accounts and brokerage accounts.  The more sophisticated schemes use nominee entities and prepaid debit cards.  The most complicated schemes often involve foreign trusts, employee-leasing schemes, private annuities and insurance plans. 
The IRS has emphasized that it is not illegal to have offshore bank accounts, foreign business entities and foreign trusts.  All of these foreign assets, however, must be disclosed and the appropriate US taxes must be paid. 
2019 Dirty Dozen List: How the IRS Finds Out About Schemes In order to Prosecute Noncompliant Taxpayers
There are many different ways for the IRS to find out about undisclosed offshore accounts and schemes that involve such accounts.  Let’s briefly review the top four of them.  First, the IRS has built up a significant pile of information from prior prosecutions of taxpayers with undisclosed foreign accounts as well as bankers and other financial experts suspected of helping clients hide their assets overseas. Each new audit and prosecution continues to bring in more information.
Second, the IRS also received a huge amount of information from US taxpayers who participated in the different versions of the IRS Offshore Voluntary Disclosure Program (“OVDP”) during 2004-2018 as well as Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.  OVDP has been particularly helpful, because it involved a large number of taxpayers who could be classified as willful in their prior noncompliance.
Third, the IRS has also obtained very sophisticated information concerning offshore schemes from the Swiss Bank Program.  As part of this program, Swiss banks disclosed their strategies for using undisclosed offshore bank accounts to hide income overseas.
Finally, as a result of the implementation of the Foreign Account Tax Compliance Act (“FATCA”) and the network of Intergovernmental Agreements (“IGAs”), there is a continuous and automatic flow of information concerning US-owned accounts from third parties to the IRS.
Contact Sherayzen Law Office for Professional Help With the Voluntary Disclosure of Your Undisclosed Foreign Assets
The fact that undisclosed offshore bank accounts remain on the 2019 Dirty Dozen list demonstrates the IRS commitment to fighting tax noncompliance in this area.  As a result of the information collection efforts by the IRS, US taxpayers with undisclosed foreign accounts are at a severe risk of discovery by the IRS.
This is why, if you have undisclosed foreign assets or foreign income, you should contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers around the world with their offshore voluntary disclosures, and We Can Help You!
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### March 2018 IRS Compliance Campaigns | International Tax Lawyer & Attorney
With this article, we begin a series of articles dedicated to the description of the IRS compliance campaigns initiated between March of 2018 and April of 2019. This article is dedicated to the March 2018 IRS Compliance Campaigns.
March 2018 IRS Compliance Campaigns: Background Information
On March 13, 2018, the IRS Large Business and International division (“LB&I”) has announced the creation of another five additional compliance campaigns. This news came after similar announcements on January 31, 2017 and November 3, 2017 about the selection of a total of twenty-four IRS compliance campaigns.
These campaigns came into existence as a result of a long and broad restructuring of the LB&I, which required a large investment of time and resources. Campaign development in particular required strategic planning and deployment of resources, training and tools, metrics and feedback. 
The basic idea behind the IRS campaigns is to focus the limited resources of the IRS on the high-risk compliance issues in the most efficient way.  These campaigns also go hand-in-hand with the recent IRS shift to issue-based audits.
Five March 2018 IRS Compliance Campaigns
On March 13, 2018, the IRS announced the creation of five additional campaigns: Costs that Facilitate an IRC Section 355 Transaction, SECA Tax, Partnership Stop Filer, Sale of Partnership Interest and Partial Disposition Election for Buildings.
Each of these campaigns was identified by the IRS through the LB&I data analysis as well as recommendations from IRS compliance employees. 
March 2018 IRS Compliance Campaigns: Costs that Facilitate an IRC Section 355 Transaction
In general, costs to facilitate a tax-free corporate distribution under IRC Section 355, such as a spin-off or split-up, must be capitalized (i.e. they cannot be deducted). Nevertheless, some taxpayers may execute a corporate distribution and improperly deduct the costs that facilitated the transaction in the year the distribution was completed. The goal of this campaign is to ensure that taxpayers only capitalize the facilitative costs.  The IRS intends to reach this goal through issue-based examinations.
March 2018 IRS Compliance Campaigns: SECA Tax
This campaign focuses on partners’ self-employment tax under the Self-Employment Contributions Act (“SECA”).  Unless a partner qualifies as a “limited partner” for self-employment tax purposes, he must report his pass-through income from the partnership and pay the required self-employment tax under SECA.
The IRS, however, has realized that, with respect to service-based partnerships (particularly, law firms), some partners have improperly claimed that they qualified as limited partners.  As part of this campaign, the IRS will focus on limited liability partnerships, limited partnerships and limited liability companies.  
March 2018 IRS Compliance Campaigns: Partnership Stop Filer
This campaign focuses on a very common problem – a partnership ceases to file tax returns even though it continues to do business, fails to supply Schedules K-1 to its partners and the partners never report any of the pass-through income from the partnership.  
Since there are various possible reasons that cause this problem to arise, the IRS decided to adopt a flexible approach to enforcement in this campaign.  The treatment streams will vary from stakeholder outreach, soft letters (to encourage voluntary self-correction) to issue-based examinations.
March 2018 IRS Compliance Campaigns: Sale of Partnership Interest
A sale of a partnership interest usually results in a capital gain or loss. The taxation of such a gain varies from long-term capital gains tax rate of 15% (if the partnership interest was held for more than a year) and higher capital gains rates for appreciated collectibles to short-term capital gains and, in some cases, even ordinary income (for example, in situations where the a partnership has inventory items or unrealized receivables at the time of the sale or exchange). 
This campaign intends to deal with two problems that arise with respect to a sale of a partnership interest. First, the IRS will target taxpayers who simply do not report the sale (there is a surprisingly large number of these individuals, especially in a small-business setting, like a restaurant).  
Second, the IRS wants to improve compliance with respect to correct taxation of the gain from a disposition of a partnership interest. The incorrect reporting usually occurs where the entire such gain is taxed at long-term capital gain tax rates, rather than 25% or 28% capital gain rates. 
The IRS realizes that there are a variety of reasons for errors concerning the proper reporting and taxation of a partnership disposition gain.  For this reason, it will apply a variety of treatment streams to noncompliance taxpayers, including soft letters and examinations. Additional treatment streams include practitioner and taxpayer outreach, tax software vendor outreach, and tax form and publication change suggestions.
March 2018 IRS Compliance Campaigns: Partial Disposition Election for Buildings
In August of 2014, the IRS issued regulations concerning IRC Section 168.  In particular, Treas. Reg. Section 1.168(i)-8 supply the rules concerning gain/loss recognition with respect to partial disposition of MACRS property. In order to comply with the Section168 disposition regulations and make a partial disposition election, a taxpayer must be able to substantiate that it:
disposed of a portion of a MACRS asset owned by the taxpayer;
identified the asset that was partially disposed;
determined the placed-in-service date of the partially disposed asset;
determined the adjusted basis of the disposed portion; and
reduced the adjusted basis of the asset by the disposed portion.
The goal of this campaign is to ensure taxpayers accurately recognize the gain or loss on the partial disposition of a building, including its structural components. The treatment stream for this campaign is issue-based examinations and potential changes to IRS forms and the supporting instructions and publications.
Contact Sherayzen Law Office for Professional Tax Help
If you have been contacted by the IRS as part of any of its campaigns, you should contact Sherayzen Law Office for professional help.  We have helped hundreds of US taxpayers around the world with their US tax compliance issues, and we can help you!
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### Noncompetition Agreement Income Sourcing | International Tax Lawyer
Oftentimes, as part of their noncompetition agreement, a taxpayer may receive income for restraining from competing with another party in certain areas.  An issue often arises with respect to international noncompetition agreement income sourcing rules – i.e. should the income paid as part of such a noncompetition agreement be considered US-source income or foreign-source income?  Let’s explore the answer to this question in this essay. 
Noncompetition Agreement Income Sourcing: General Rule
The general rule with respect to income sourcing for noncompetition agreements was settled in the distant year 1943.  In that year, the Tax Court held that the source of income from a noncompetition agreement is the location of the forbearance. Korfund Co., Inc. v. Commissioner, 1 T.C. 1180, 1187 (1943).  In other words, income received from an agreement not to compete is deemed to be income earned in a place where the agreement prohibits the taxpayer from competing. 
The reasoning of the Tax Court is clearly laid out in its opinion.  The Court stated that the rights that a party enjoys from the noncompetition agreement “were interests in property in [the] country [of forbearance]. … The situs of the right was in the United States, not elsewhere, and the income that flowed from the privileges was necessarily earned and produced here. … These rights were property of value and the income in question was derived from the use thereof in the [country of forbearance].” Id.
In 1996, in its Field Service Advice, the IRS restated its commitment to the position adopted by the Tax Court in Korfund: “income from covenants not to compete covering areas outside of the United States is foreign source income because the income from a covenant covering areas outside the United States is from the use of a property right outside the United States.” 1996 FSA LEXIS 191, *5 (I.R.S. August 30, 1996).
Noncompetition Agreement Income Sourcing: Apportionment
What if a noncompetition agreement covers both, part of the United States and a foreign country?  In this case, the IRS is likely to take a position that an apportionment of some sort is necessary.   In other words, only part of the income will be deemed as US-source income, while the rest will be considered foreign-source income.
Contact Sherayzen Law Office for Professional Help With Noncompetition Agreement Income Sourcing
If you are dealing with an international noncompetition agreement, you should contact Sherayzen Law Office for professional help with US international tax compliance.  Our firm has helped hundreds of US taxpayers around the world with their US international tax issues.  We Can Help You!
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### Amato Case: 5-Years in Prison for Secret Russian Bank Accounts | FBAR News
Failure to file FBARs for secret Russian bank accounts and income tax evasion led to the imposition of a five-year prison sentence on a New Jersey chiropractor. This is the essence of the new IRS victory in the Amato case. Let’s explore this case in more detail, because the case demonstrates the long reach of the FBAR requirement even in unusual jurisdictions, like Russia.
The Amato Case: Factual Background
Mr. Amato is a US citizen.  He was a chiropractor who resided and worked in New Jersey.  He practiced medicine through two corporate entities: Chiropractic Care Consultations, Inc. (“Chiropractic Care”) and Accident Recovery Physical Therapy, Inc. (“Accident Recovery”). 
It appears that, between January 1, 2013 and December 7, 2016, Mr. Amato over-billed at least six insurance companies. In many cases, he was simply billing for services that he never actually rendered.  For these crimes, he was separately charged by the US Department of Justice. On April 9, 2018, in his guilty plea, Mr. Amato admitted that his over-billings were over $1 million.
In order to hide these illegal proceeds, sometime between January 1, 2013 and December 7, 2016, Mr. Amato opened bank accounts in Russia and wired over $1.5 million to these accounts.
On September 14, 2015, Mr. Amato filed his 2014 tax return, stating that he had no taxable income and he owed no taxes.  In reality, his 2014 taxable income was about $561,258. 
At about the same time, Mr. Amato also deposited checks from his businesses into accounts owned by his minor children. He never disclosed these checks as part of his earnings on his US tax returns.   Additionally, there were more funds deposited in his corporate accounts which he also never disclosed on his personal and corporate tax returns.  
The Amato Case: IRS investigation and Criminal Prosecution
It appears that the 2014 return was the trigger and huge contributing factor to the commencement of the subsequent IRS investigation of Mr. Amato’s dealings.  In 2018, the US Department of Justice (the “DOJ”) filed criminal charges against Mr. Amato with respect to two different types of violations.  
The first charge was tax evasion pursuant to 26 USC 7201.  It was directly tied to his 2014 tax return, stating that Mr. Amato knowing and willfully attempted to evade his income taxes due.
The second charge was made under 31 USC 5314 & 5322(b) – these are FBAR criminal penalties. Again, the DOJ chose to focus only on 2014 FBAR. 
The Amato Case: Tax Evasion and FBAR Criminal Sentence 
As part of his deal with the DOJ, Mr. Amato pleaded guilty to both counts. On May 7, 2019, as a result of his failure to pay a large amount in taxes and failure to file FBARs, the New Jersey federal court sentenced him to five years in prison. 
Contact Sherayzen Law Office for Professional Help With the Reporting of Your Undisclosed Foreign Bank and Financial Accounts
The Amato case is one more reminder of the legal dangers that US taxpayers with undisclosed foreign accounts face.  You do not want to be in Mr. Amato's position.
This is why you need to contact Sherayzen Law Office for professional help with the reporting of your undisclosed foreign bank and financial accounts. We have helped hundreds of US taxpayers with the voluntary disclosure of their foreign assets and foreign income, and We Can Help You!
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### Czech Digital Tax Proposal | Digital Currency Tax Lawyer & Attorney
The Czech Republic just joined an ever increasing list of countries who are introducing their own versions of the digital tax. Let’s explore this development in more detail.
Czech Digital Tax Proposal: Overview
The Czech Republic’s ministry of finance just announced that it will introduce by the end of May of this year a 7% digital tax. The exact details are not yet know, but it appears that the tax will affect mostly the large multinational companies – those that make at least 750 million euros in global revenue.
Czech Digital Tax Proposal: When the New Tax Will Become Effective
If passed into law (and this appears to be the case), the new tax will take effect on January 1, 2020.
Czech Digital Tax Proposal: Reasons for the New Tax
There are four reasons for the introduction of the new digital tax.  The first and most obvious one is raising additional revenue.  The Czech finance minister is hoping to raise at least 5 billion Czech koruna (or $22 million) on an annual basis. 
The second reason for the Czech digital tax is the fact that the Czech government is reacting to developments (or lack thereof) in this area of international tax law.  Despite this being an issue for some time now, the European Union (“EU”) and the Organization for Economic Cooperation and Development (“OECD”) have both failed to work out an international framework for digital taxation.  
As Sherayzen Law Office has written previously, the EU discussion on the single digital tax is now completely stalled.   There is a stubborn opposition to the existing proposals from many member states, particularly Ireland and Sweden.  
Similarly, the OECD efforts to find a global consensus on the issue of taxation of the digital economy are progressing at a snail’s pace.  In fact, there is no certainty whether the OECD will finalize this discussion any time soon. 
The failure to reach an agreement at a supra-national level has already led some of the largest EU economies to adopt their own version of the digital tax.  The recent examples include France, Italy, Spain and the United Kingdom. The Czech Republic does not want to be the last country to adopt a national digital tax and there is no hope for an immediate resolution at the EU level.
This leads us to the third reason for the current Czech legal action. The Czech government is sending a message to the EU to come up with a long-sought digital tax that would apply uniformly across the EU countries. Otherwise, the EU will not be able to act as an economic union with respect to the digital economy.
Finally, the fourth and related reason for the new Czech digital tax is the fact that the Czech government wants to position itself better for the EU negotiations on the taxation of the digital economy.  Right now, the EU countries that are preparing to adopt a digital tax are in a better position to negotiate the final consensus that would be more beneficial to them vis-a-vis the EU countries which do not have anything in place.  
It is not just a matter of better experience and more insight into the impact of a digital tax.  The real issue is going to be the cost of tax harmonization. Since the EU countries without a national digital tax do not have any, the EU countries with a national digital tax will be able to argue that, in order to be fair, the final proposal needs to be closer to their national tax systems in order to reduce the tax harmonization costs. 
In fact, the more countries that announce their own versions of a digital tax, the more pressure the rest of the EU states will feel to do the same in order to preserve their negotiation position.

### Polish Bank Accounts | International Tax Lawyer & Attorney Chicago IL
A large number of Polish immigrants in the United States continue to maintain close ties to Poland, including the ownership of Polish bank accounts.  The same is true for Polish citizens with “green cards” who reside outside of the United States during most of the year.  Many of these new American tax residents do not realize that these accounts may be subject to numerous reporting requirements in the United States.  In this article, I will discuss, in a general manner, the top three US tax reporting requirements that may apply to these Polish bank accounts. 
Polish Bank Accounts: Definition of a “Filer”
There is one critical term that we need to understand in order to properly apply US tax reporting requirements to Polish bank accounts – the concept of “filer”.  In this context, “filer” means a person who fits into the category of taxpayers who are required to file a certain form. 
It is important to understand that the definition of a filer changes from one form to another. In other words, a person may be required to file one form but not the other even though it concerns the same foreign account.
Despite these differences in the definition of a filer, we can identify a certain common definition that underlies all of the requirements we will discuss in this article, even if this definition is modified for the purposes of a particular form.  This common definition can be found in the concept of a “US tax resident”. 
All of the following persons are considered to be US tax residents: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and persons who declare themselves as US tax residents.  This general definition of US tax residents is subject to a number of important exceptions.
All of the US international tax reporting requirements adopt the concept of US tax residency as the basis for their definitions of a filer.  Where there are differences from the definition of US tax residency, they are mostly limited to the application of the Substantial Presence Test and/or the first-year and last-year definitions of a US tax resident.
For example, Form 8938 identifies its filers as “Specified Persons” (a concept that is applied increasingly throughout US tax code after the 2017 tax reform) while FBAR defines its filers as “US Persons”. Yet, the differences between these two terms mostly arise with respect to persons who declared themselves as US tax residents or non-residents. A common example can be found with respect to treaty “tie-breaker” provisions, which foreign persons use to escape the effects of the Substantial Presence Test for US tax residency purposes.
The determination of your US tax reporting requirements is the primary task of your international tax attorney.  It is simply too dangerous for a common taxpayer or even an accountant to attempt to dabble in US international tax law.
Polish Bank Accounts: Worldwide Income Reporting
Now that we understand the concept of US tax residency and the fact that the definition of a filer may differ between different tax forms, we are ready to explore the aforementioned three US reporting requirements with respect to Polish bank accounts. 
The first and most fundamental requirement is worldwide income reporting.  It is also the requirement that applies to US tax residents as they are defined above (i.e. we are dealing here with the classic definition of US tax residency in its purest form). 
All US tax residents must disclose their worldwide income on their US tax returns. This means that they must report to the IRS their US-source and foreign-source income.   The worldwide income reporting requirement applies to all types of foreign-source income: bank interest income, dividends, royalties, capital gains and any other income.  
Worldwide income reporting requirement applies even if the foreign income is subject to Polish tax withholding or reported on a Polish tax return.  It also does not matter whether the income was transferred to the United States or stayed in Poland; the Polish-source income of a US tax resident must still be disclosed on his US tax returns.
Polish Bank Accounts: FinCEN Form 114 - FBAR
The second requirement that I would like to discuss today is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”). Under the Bank Secrecy Act of 1970, the US government requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Polish (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. If these requirements are met, the disclosure requirement is satisfied by filing an FBAR.
It is important to understand all parts of the FBAR requirement are terms of arts that require further exploration and understanding. I encourage you to search our firm’s website, sherayzenlaw.com, for the definition of “US Persons” and the explanation of other parts of the FBAR requirement.
There is one part of the FBAR requirement, however, that I wish to explore here in more detail – the definition of “account”. The reason for this special treatment is the fact that the definition of an account for FBAR purposes is a primary source of confusion among US Persons with respect to what needs to be disclosed on FBAR.
The FBAR definition of an account is substantially broader than what this word generally means in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
Despite the fact that FBAR compliance is neither easy nor straightforward, FBAR has a very severe penalty system. On the criminal side, FBAR noncompliance may lead to as many as ten years in jail (of course, these penalties come into effect in extreme situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.
Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. In 2015, the IRS added another layer of limitations on the FBAR penalty imposition. One must remember, however, that these are voluntary IRS actions and may be disregarded by the IRS whenever circumstances warrant such an action.
Polish Bank Accounts: FATCA Form 8938
The third requirement that I wish to discuss today is a relative newcomer, FATCA Form 8938. This form requires “Specified Persons” to disclose all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency.
The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to report same foreign assets on FBAR and Form 8938.
Specified Persons consist of two categories of filers: Specified Individuals and Specified Domestic Entities.  You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching income tax consequences (including disallowance of foreign tax credit and imposition of 40% accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
One must also remember that, unlike FBAR, Form 8938 is filed with a federal tax return and forms part of the tax return. This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Polish Bank Accounts
If you have Polish bank accounts, contact Sherayzen Law Office for professional help with your US international tax compliance.  We have helped hundreds of US taxpayers with their US international tax issues (including numerous taxpayers with Polish bank accounts), and We can help You!
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### Business Service Income Sourcing | Business Tax Lawyer & Attorney Delaware
Business service income sourcing is a highly important issue in US international tax law.  In this article, I will explain the concept of business service income sourcing and discuss the general rules that apply to it. Please, note that this is a discussion of general rules only; there are important complications with respect to the application of these rules. 
What is Business Service Income Sourcing?
Business service income sourcing refers to the classification of income derived from services rendered by a business entity as “domestic” or “foreign”.  In other words, if a corporation performs services for another business entity or individual, should it be considered US-source income or foreign-source income?
Importance of Business Service Income Sourcing 
The importance of business service income sourcing cannot be overstated. With respect to foreign businesses, these income sourcing rules determine whether the income derived from these services will be subject to US taxation or not.  For US business entities, the sourcing of income will be a key factor in their ability to utilize foreign tax credit.  
Moreover, in light of the 2017 tax reform, the sourcing rules are now important for qualification of various benefits that the new tax laws offer to US corporations. 
Business Service Income Sourcing: General Rule
Now that we understand the importance of the business services income sourcing rules, we are ready to explore the General Rule that applies in these situations.  Generally, the services are sourced to the country where the services are performed. 
In other words, if the services are performed in the United States, then, the income generated by these services is considered US-source income.  If the services are performed outside of the United States, then, the income is considered foreign-source income. 
Business Service Income Sourcing:  Services Performed Partially in the United States and Partially Outside of the United States
The general rule is clear, but what happens if services were only partially performed in the United States?  Here, we are now getting into practical complications and we have to look at the Treasury Regulations.
The Regulations begin with the general proposition that the sourcing of income from services rendered by a corporation, partnership, or trust, should be “on the basis that most correctly reflects the proper source of the income under the facts and circumstances of the particular case.”  Treas. Reg. §1.861-4(b)(1)(i). This is the so-called “facts and circumstances test”.
Then, the Regulations clarify that usually “the facts and circumstances will be such that an apportionment on the time basis, as defined in paragraph (b)(2)(ii)(E) of this section, will be acceptable.” Id.  In other words, the Time Basis Allocation will be the default method for business service income sourcing, but it is possible to use other tests where it is reasonable to do so.
Curiously, the Regulations provide only one example of business service income allocation that involves a corporation, and this example does not utilize the Time Basis Allocation method. 
Business Service Income Sourcing: Time Basis Allocation  
The Time Basis Allocation method offers two ways to source income: the “number of days” allocation and the “time periods” allocation.  Under the “number of days” variation, the business entity adds together the number of days worked by its employees who worked in the United States and the number of days they worked in a foreign country, figures out the percentages for each country and sources the income according to the percentage allocation. See Treas. Reg. §1.861-4(b)(2)(ii)(F).
Under the “time periods” variation, a tax year is split into distinct time periods: one where the employees of a business entity spent all of their time in the United States and one where they spent all of their time in a foreign country. The compensation paid in the first period is allocated entirely to the United States, whereas the proceeds paid in the second time period is considered to be foreign-source income. Id.
The Time Basis Allocation methodology works better for specific employees rather than a business entity as a whole, particularly the “time periods” variation.  Often, a business entity would have its employees working at the same time in the United States and outside of the United States making it very difficult to use the “time periods” allocation.  Even the “number of days” allocation becomes fairly complex if one has a large number of employees working back and forth between the countries. 
Contact Sherayzen Law Office for Help With Your Business Service Income Sourcing
Sherayzen Law Office is a premier US international tax law firm that helps businesses and individuals with their US international tax compliance, including business service income sourcing.  If you have employees who work in the United States and overseas, you need the professional help from our law firm.  
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### FFI FATCA Requirements: Introduction | FATCA Tax Lawyer & Attorney
Since July 1, 2014, the Foreign Account Tax Compliance Act (“FATCA”) has imposed a heavy compliance burden on Foreign Financial Institutions (“FFIs”).  Many of these FFIs have struggled with developing a good understanding of their new FATCA requirements even to this day. In this brief essay, I want to provide a general overview of these FFI FATCA requirements so that readers can begin to develop an understanding of FATCA.
FFI FATCA Requirements: Background Information
FATCA was enacted into law in 2010. The most important idea behind the new law was to combat US tax noncompliance of US taxpayers with foreign financial assets.  
There are several important parts of FATCA, but the most important one of them was forcing FFIs to identify US owners of foreign financial assets, collect certain information about them and share it with the IRS.  Failure to do so meant facing a FATCA penalty in the form of a 30% withholding tax on the gross amount of all transactions with a noncompliant FFI.  In essence, FATCA turned FFIs around the world into free IRS informants.
FFI FATCA Requirements: Three Categories
What precisely does FATCA require FFIs to do in order to be FATCA-compliant?  If we look broadly at the FFI FATCA requirements, we can group all of these requirements into three broad categories.   Each of these categories consists of a myriad of smaller but still fairly complex FATCA compliance requirements and requires a deep understanding of new FATCA terms. 
The first and most important category of FATCA requirements is to collect the required due diligence information concerning all account holders, investors and payees. “Collecting” here means obtaining the required due diligence information and documentation.  In other words, FATCA has to be part of an FFI’s “Know Your Client” (“KYC”) procedures.
Additionally, these new due diligence requirements apply not only to new customers, but also to pre-existing account holders.  Pre-existing account holders are the account holders who already had accounts with an FFI as of the time FATCA was implemented (i.e. July 1, 2014) or sometimes a different date. 
The second requirement is to report to the IRS three categories of persons: (a) all US account holders; (b) recalcitrant account holders; and © non-participating (i.e. FATCA-noncompliant) FFIs.  This means that, under FATCA, FFIs must turn over to the IRS the identifying information concerning accounts held by US persons as well as point out the “bad apples” who refuse to comply with FATCA.
Recalcitrant account holders is a fairly complex FATCA term.  In its most basic form, it refers to an account holder who does not supply the required FATCA information and who does not fall under any types of a waiver.  In a future article, I will provide a more detailed description of this term, but, at this point, I would like to refer the readers to Treas Reg § 1.1471-5(g)(2).
Finally, the FFIs are charged with the requirement to coordinate FATCA withholding as necessary.  In other words, the FFIs are required to impose FATCA noncompliance penalties on any FATCA non-compliant FFI, thereby turning FATCA in a worldwide self-enforcing system from which no FFI can escape.
FFI FATCA Requirements Are Interconnected
Needless to say that all three of these FFI FATCA requirements are deeply related to each other.  For example, the due diligence requirement is essential to an FFI’s ability to properly comply with its FATCA reporting and withholding obligations. It is important to keep this connection between different FFI FATCA Requirements in mind while building an effective FATCA compliance system.
Contact Sherayzen Law Office to Find Out More About Your FFI FATCA Requirements
Sherayzen Law Office is a US international tax law firm that specializes in US international tax compliance, including FATCA compliance.  We also help FFIs develop an effective FATCA compliance program as well as analyze existing FATCA compliance programs.
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Excerpt: Since July 1, 2014, the Foreign Account Tax Compliance Act (“FATCA”) has imposed heavy compliance burden on Foreign Financial Institutions (“FFIs”). In this brief essay, I want to provide a general overview of these FFI FATCA requirements so that the readers can begin to develop an understanding of FATCA.

### IRS Interest Rates for the Second Quarter of 2019 | PFIC Tax Lawyer & Attorney
On February 25, 2019, the IRS announced that the IRS underpayment and overpayment interest rates will remain the same for the second quarter of 2019 as they were in the first quarter of 2019.  The second quarter of 2019 begins on April 1, 2019 and ends on June 30, 2019. 
This is an important announcement because these rates will have impact on various calculations and affect many US taxpayers.  In particular, the second quarter of 2019 IRS interest rates will apply to the calculation of interest owed on any underpayment of tax as calculated on the amended tax returns.  This includes the payments that US taxpayers must make pursuant to the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
Moreover, the increase in the interest rates for the second quarter of 2019 directly affects the calculation of PFIC interest due on any PFIC tax.  It is important to remember that PFIC interest cannot be offset by foreign tax credit.
According to the aforementioned IRS announcement, the second quarter of 2019 IRS interest rates will be as follows:   
six (6) percent for overpayments (five (5) percent in the case of a corporation);
three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000;
six (6) percent for underpayments; and
eight (8) percent for large corporate underpayments.
Under the Internal Revenue Code, the rate of interest for the second quarter of 2019 is determined on a quarterly basis. The current year's overpayment and underpayment interest rates are computed from the federal short-term rate determined during January 2019 to take effect February 1, 2019, based on daily compounding. 
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

### Sherayzen Law Office Successfully Completes 2019 April 15 Tax Season
Hundreds of filed complex tax forms and FBARs is the supreme evidence of the successful completion of the 2019 April 15 tax season by Sherayzen Law Office.  Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures and US international tax compliance. 
Annual compliance occupies a special place in the firm’s practice.  This part of our practice consists of almost entirely clients who were so satisfied with our services that they wanted us to handle their annual tax compliance.  It is a proud testimony of the high quality, efficiency and professionalism of Sherayzen Law Office’s work. 
Since there are more and more clients every year who wish to retain our services for annual compliance, this has been a very dynamic area of growth.  It also means that, with each year, the deadline pressure is rising. 
The 2019 April 15 tax season was no exception.  A record number of clients placed their utmost confidence in our work and asked us to prepare their 2018 income tax returns, information returns and FBARs.  Moreover, the tremendous complexity of the 2017 tax reform has further added to the difficulty of the 2019 April 15 tax season.  
Mr. Eugene Sherayzen, the founder and owner of Sherayzen Law Office, recognized very early that this tax season is going to be the most difficult one yet in the firm’s existence.  This why he expanded and trained additional workforce at the beginning of 2019, engaged in proper tax season planning, addressed ahead of time the needs of the ongoing audit and offshore voluntary disclosure clients and established aggressive deadlines for the firm.  
Thanks to all of this work by Mr. Sherayzen and the firm’s employees, all of the annual compliance deadlines were successfully completed.  Moreover, Sherayzen Law Office was also able to finalize the filings for all of the offshore voluntary disclosure clients according to the already-created (by Mr. Sherayzen) customized plans of offshore voluntary disclosure. 
We are not planning, however, to simply enjoy the laurels of another success. We look forward to helping hundreds of new clients with their offshore voluntary disclosures, IRS audits and international tax planning.  We also already started our preparation for June 15, September 15 and October 15 tax seasons. 
If you are looking for an international tax firm to which you entrust your case, you should retain the services of Sherayzen Law Office!  We are a team of highly-experienced US international tax specialists who have helped hundreds of US taxpayers with their US international tax compliance and offshore voluntary disclosures.  We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: Sherayzen Law Office successfully completes 2019 April 15 tax season. Our international tax team filed hundreds of complex tax forms and FBARs during this tax season.

### German Bank Accounts | International Tax Lawyer & Attorney Minneapolis MN
Germans constitute one of the largest immigrant communities in the United States. Oftentimes, Germans continue to maintain close ties to their home country, including German bank accounts.  Having a German bank account, however, may result in a significant US tax compliance burden for their owners.  In this article, I will identify the three most common US tax reporting requirements that may apply to German bank accounts. 
German Bank Accounts: Who Must Disclose Them to the IRS?
Before we delve into discussion of how German bank accounts need to be disclosed to the IRS, we need to identify who must disclose them.  This task is complicated by the fact that US reporting requirements do not have a uniform definition of “filer”.  Rather, almost each one of them has its own term which contains slight (and sometime more profound) differences from each other.
Nevertheless, the concept of “US tax resident” provides the most common basis for all of the definitions of a filer.  A US tax resident is a broad term that covers: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and persons who declare themselves as US tax residents.  This general definition of US tax residents is subject to a number of important exceptions; almost all of these exceptions apply to either the Substantial Presence Test, first-year and last-year definitions of a US tax resident.
Other US reporting requirements adopted different definition of filers, but they mostly share the same categories of US taxpayers with the concept of US tax residency. For example, Form 8938 identifies its filers as “Specified Persons” (a concept that is applied increasingly throughout US tax code after the 2017 tax reform).  FBAR (which is not technically a tax form) defines its filers as “US Persons”.  Yet, both of these terms largely coincide with the definition of US tax residents.  
The differences between these three terms are mostly limited to persons who declare themselves as US tax residents.  A common example are the treaty “tie-breaker” provisions, which foreign persons use to escape the Substantial Presence Test for US tax residency purposes.
The determination of your US tax reporting requirements is the primary task of your international tax lawyer.  I strongly recommend that you do not even attempt to do this yourself or use an accountant for this purpose. It is simply too dangerous.
German Bank Accounts: Worldwide Income Reporting
Let’s begin with our discussion of US tax reporting requirements with the most basic concept of US international tax law – the worldwide income reporting requirement.  Like most other income tax concepts, worldwide income reporting requirements applies to US tax residents. 
Basically, all US tax residents must report their worldwide income on their US tax returns. This means that they must disclose to the IRS on their US tax returns both US-source and foreign-source income.   This requirement applies to all types of foreign-source income: bank interest income, dividends, royalties, capital gains and any other income.  
Of course, German bank accounts owned by US tax residents are not an exception. On the contrary, all income generated by these accounts must be disclosed on the US tax returns of their owners.
This income from German bank accounts must be disclosed in the United States even if it is subject to German tax withholding or reported on a German tax return.  It also does not matter whether the income was transferred to the United States or stayed in Germany; it must still be reported to the IRS.
German Bank Accounts: FBAR/FinCEN Form 114
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (“FBAR”), requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over German (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. I encourage you to search our firm’s website, sherayzenlaw.com, for the definition of “US Persons” and the explanation of other parts of the FBAR requirement.
The definition of “account”, however, deserves a special mention here, because it is a primary source of confusion among US taxpayers with respect to what needs to be reported on FBAR. This confusion stems from the fact that the FBAR definition of an account is substantially broader than what this word generally means in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
Finally, FBAR has a very complex and severe penalty system. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect in extreme situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.
Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. In 2015, the IRS added another layer of limitations on the FBAR penalty imposition. One must remember, however, that these are voluntary IRS actions and may be disregarded by the IRS whenever circumstances warrant such an action.
German Bank Accounts: FATCA Form 8938
FATCA Form 8938 is filed with a federal tax return and forms part of the tax return.  This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.
Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency.  
The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to report same foreign assets on FBAR and Form 8938.
Specified Persons consist of two categories of filers: Specified Individuals and Specified Domestic Entities.  You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching income tax consequences (including disallowance of foreign tax credit and imposition of 40% accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your German Bank Accounts
If you have German bank accounts, contact Sherayzen Law Office for professional help with your US international tax compliance.  We have helped hundreds of US taxpayers with their US international tax issues, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: Minneapolis MN international tax lawyer & attorney discusses US tax reporting of German bank accounts.

### South African Bank Accounts | International Tax Lawyer & Attorney Los Angeles California
Due to various waves of emigration from South Africa since early 1990s, there is a significant number of South Africans who live in the United States. Many of these new US taxpayers continue to maintain their South African bank accounts even to this very day. These taxpayers need to be aware of the potential US tax compliance requirements which may apply to these South African bank accounts. This is exactly the purpose of this article – I intend to discuss the three most common US tax reporting requirements which may apply to South African bank accounts held by US persons. These requirements are: worldwide income reporting, FBAR and Form 8938.
South African Bank Accounts: US Tax Residents, US Persons and Specified Persons
Prior to our discussion of these reporting requirements, we need to identify the persons who must comply with them.  It turns out that this task is not that easy, because different reporting requirements have a different definition of “filer”.
The most common and basic definition is the one that applies to the worldwide income reporting requirement – US tax residency. A US tax resident is a broad term that covers: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and individuals who declare themselves as US tax residents.  This general definition of US tax residents is subject to a number of important exceptions, such as visa exemptions (for example, an F-1 visa five-year exemption for foreign students) from the Substantial Presence Test. 
FBAR defines its filers as “US Persons” and Form 8938 filers are “Specified Persons”. These concepts are fairly similar to US tax residency, but there are important differences. Both terms apply to US citizens, US permanent residents and persons who satisfy the Substantial Presence Test. The differences arise mostly with respect to persons who declare themselves as US tax residents. A common example are the treaty “tie-breaker” provisions, which foreign persons use to escape the Substantial Presence Test for US tax residency purposes.
Determination of your US tax reporting requirements is the primary task of your international tax lawyer.  I strongly recommend that you do not even attempt to do this yourself or use an accountant for this purpose. It is simply too dangerous.
South African Bank Accounts: Worldwide Income Reporting
All US tax residents must report their worldwide income on their US tax returns. This means that US tax residents must disclose to the IRS on their US tax returns both US-source and foreign-source income.  In the context of the South African bank accounts, foreign-source income means all bank interest income, dividends, royalties, capital gains and any other income generated by these accounts.  
South African Bank Accounts: FBAR Reporting
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (“FBAR”), requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over South African (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. I encourage you to read this article (click on the link) concerning the definition of a “US Person”. You can also search our firm’s website, sherayzenlaw.com, for the explanation of other parts of the required FBAR disclosure.
The definition of “account”, however, deserves special attention here. The FBAR definition of an account is substantially broader than what this word generally means in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
Finally, FBAR has a very complex and severe penalty system. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect in extreme situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.
Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. One of the most important factors is the size of the South African bank accounts subject to FBAR penalties. Additionally, since 2015, the IRS has added another layer of limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and may be disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).
South African Bank Accounts: FATCA Form 8938
Form 8938 is filed with a federal tax return and forms part of the tax return.  This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.
Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency.  For example, if he is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year. 
The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.
Specified Persons consist of two categories of filers: Specified Individuals and Specified Domestic Entities.  You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching income tax consequences (including disallowance of foreign tax credit and imposition of 40% accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your South African Bank Accounts
If you have South African bank accounts, contact Sherayzen Law Office for professional help with your US international tax compliance.  We have helped hundreds of US taxpayers with their US international tax issues, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### FBAR Financial Interest Definition | FBAR International Tax Lawyer & Attorney | FinCEN Form 114
In this article, I discuss one of the most important aspects of FBAR compliance – the FBAR financial interest definition.  
FBAR Financial Interest: Legal Relevance and Context
FBAR is the acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. A US person who has a financial interest in foreign bank and financial accounts must file FBARs to report these accounts as long as their aggregate value exceeds the FBAR filing threshold. The key issue here is the definition of “financial interest” for FBAR purposes.
FBAR Financial Interest: Classification of Financial Interest
As I just stated, the FBAR financial interest definition describes a situation when a US person has a “financial interest” in a foreign account. It turns out that there are six possible situations when a US person may have a financial interest in a foreign account.
These situations can be divided into three categories: direct ownership, indirect ownership and constructive ownership. Let’s explore them in more detail.
FBAR Financial Interest: Direct Ownership
A US person has a financial interest in a foreign account if he is the owner of record or holder of legal title for this account. It does not matter whether he maintains the account for his own benefit or for the benefit of another person (US or foreign). As long as he is the owner of the account, he has a financial interest in the account and must file an FBAR to report it if the account’s highest value (together with all other foreign accounts of this person) exceeds $10,000.
FBAR Financial Interest: Indirect Ownership
There are four different scenarios which may result in having a reportable indirect FBAR financial interest in a foreign account:
1. Indirect Ownership Through a Corporation
A US person has a financial interest in a foreign account if the owner of record of holder of legal title is a corporation in which a US person owns directly or indirectly: (i) more than 50 percent of the total value of shares of stock; or (ii) more than 50 percent of the voting power of all shares of stock.
This means that, if a US corporation owns a foreign company which has a foreign account, then this US corporation has a financial interest in this account through its direct ownership of the foreign company.  In other words, the US corporation will need to file an FBAR for the foreign company’s foreign bank and financial accounts.
One of the most frequent sources of FBAR noncompliance, however, is with respect to indirect ownership of the foreign account by the owners of a US corporation.  For example, if a Nevada corporation owns 100% of a French corporation and a US owner owns 51% of the US corporation, then, the US owner must disclose on his FBAR his financial interest in the French corporation’s foreign accounts.  This financial interest is acquired through indirect 51% ownership of the French corporation. 
2. Indirect Ownership Through a Partnership
This scenario is very similar to that of corporations. A US person has a financial interest in a foreign account if the owner of record or holder of legal title is a partnership in which the US person owns directly or indirectly: (i) an interest in more than 50 percent of the partnership’s profits (distributive share of partnership income taking into account any special allocation agreement); or (ii) an interest in more than 50 percent of the partnership capital.
3. Indirect Ownership Through a Trust
This is a more complex category which includes two scenarios.  First, a US person has a financial interest in a foreign account if the owner of record or holder of legal title is a trust and this US person is the trust grantor who has an ownership interest in the trust under the 26 U.S.C. §§ 671-679.  
Second, a US person has a financial interest in a foreign account if the owner of record or holder of legal title is a trust in which the US person has a greater than fifty percent (50%) beneficial interest in the assets or income of the trust for the calendar year.  This second scenario is a true FBAR trap for US taxpayers, because while grantors may anticipate their FBAR requirements, beneficiaries are usually completely oblivious to this requirement. 
This category of FBAR financial interest definition is even more complicated by the fact that it requires a very nuanced understanding of US property law and FBAR regulations.  For example, how many taxpayers can answer this question: if a US person has a remainder interest in a trust that has a foreign financial account, should he disclose this account on his FBAR? 
4. Indirect Ownership Through Any Other Entity
This a “catch-all” category of indirect FBAR financial interest definition.  If a situation does not fall within any of the aforementioned categories, a US person still has a financial interest in a foreign account if the owner of record or holder of legal title is any other entity in which the US person owns directly or indirectly more than 50% of the voting power, more than 50% of the total value of equity interest or assets, or more than 50% of interest in profits. 
FBAR Financial Interest: Constructive Ownership
This is a very dangerous category of FBAR financial interest definition, because, in the event of an unfavorable determination by the IRS, it may have highly unfavorable consequences, including the imposition of FBAR willful penalties and even FBAR criminal penalties.  A US person has a financial interest in a foreign account if the owner of record or holder of legal title is a person who acts on behalf of the US person with respect to the account.  Various classes of persons fall under this description: agents, nominees and even attorneys.
This category of FBAR financial interest definition targets situations where a US person is trying to hold his money under the name of a third party.  It is not easy, however, to determine whether the foreign person is holding this money on behalf of the US person.  
The key consideration here is the degree of control that the US person exercises over the account.  If the agent can only access the account in accordance with the instructions from the US person, if there is an understanding that the agent holds the account on behalf of the US person and if the agent does not independently distribute funds for his own needs, then the IRS is likely to find that the US person has a financial interest in the account for FBAR purposes.
On the other hand, if the account owner uses the funds for his own purposes and makes gifts to third parties, the situation becomes increasingly unclear. In this case, one has to retain an international tax attorney to analyze all facts and circumstances, including the origin of funds. 
Contact Sherayzen Law Office for FBAR Help, Including the Determination of FBAR Financial Interest in a Foreign Account
FBAR is a very dangerous form. FBAR noncompliance penalties are truly draconian. They range from FBAR criminal penalties (of up to ten years in prison) to civil FBAR willful penalties (with 50% of the account or $100,000 (adjusted for inflation) whichever is higher) and even civil FBAR non-willful penalties of up to $10,000 (adjusted for inflation) per account per year. FBAR’s unusual Statute of Limitation of six years also means that the IRS has an unusually long period of time to assess these penalties.
This is why, if you have foreign bank and financial accounts, contact Sherayzen Law Office for professional help. We are a highly-experienced international tax law firm that specialized in US international tax compliance and offshore voluntary disclosures (including for prior FBAR noncompliance). We have helped hundreds of US taxpayers around the world, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: FBAR tax lawyer and attorney explains the FBAR financial interest definition.  FBAR tax lawyer discusses six different categories of FBAR financial interest.

### FBAR Maximum Account Value Determination | FBAR Tax Lawyer & Attorney
Determination of the FBAR maximum account value is a problem with which every FBAR filer has to deal. In this article, I would like to provide the main guidelines for the determination of the FBAR maximum account value.
FBAR Maximum Account Value Determination: Background Information
The Report of Foreign Bank and Financial Accounts or FBAR requires each filer to disclose his financial interest in or signatory authority or any other authority over foreign bank and financial accounts to the IRS. As part of this disclosure, the filer must calculate and report the maximum account value for each of his foreign accounts on his FBAR.
FBAR Maximum Account Value Determination: Definition of Highest Value
FinCEN defines the maximum value of an account for FBAR purposes as “a reasonable approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year.”  In other words, the IRS does not expect you to always get the highest possible value.  A reasonable approximation of this value will do if the exact highest value is not possible to determine. 
FBAR Maximum Account Value Determination: Usual Problems
There are two main problems that each FBAR filer faces whenever he tries to identify the maximum account value for FBAR purposes. The first and most obvious problem is the determination of the highest account value.  How does one determine the highest value for a bank account?  What about a securities account where stocks fluctuate all the time?  What about a precious metals account which has investments in different precious metals?
Second, FBAR requires that all amounts be stated in US dollars.  Hence, an issue arises with respect to proper currency conversion – i.e. what is the proper currency exchange rate?  Should the spot rates be used?  Or December 31 exchange rates?
Let’s discuss each of these problems in more depth.
FBAR Maximum Account Value Determination: Methodology
Determination of maximum account value depends to a certain degree on the type of an account for which the filer is trying to determine this value.  There is no question that, with respect to checking and savings bank accounts, the IRS wants you to use the full-year statements to determine the day on which the highest value was achieved for each of these accounts.  This is a simple and effective method.
Determining the maximum value of a securities account is much harder, because securities fluctuate on a daily basis.  For this reason, the IRS allows you to rely on periodic account statements to make this determination, especially end-of-year statements.  This method is allowed only as long as the statements fairly approximate the maximum value during the calendar year.
Even this method, however, is often insufficient when one deals with mixed-currency accounts, mixed-investment accounts, mixed-metal accounts, et cetera. These situations should be handled on a case-by-case basis by your international tax attorney.
Let’s illustrate the complexity of the issues involved here by a relatively simple example. Generally, an end-of-year statement for an investment account is a good approximation of the maximum value of the account. If, however, there was a withdrawal of funds from the account following a major sale of investments, then the end-of-year statement cannot be relied upon.  Instead, one should try a different method to approximate the highest value.  One possibility is to use a reliable and known financial website for valuing the remaining assets on the date of the sale plus the proceeds from the sale of investments.  The method, however, may fail if the highest value of investments was at the beginning of the year, not the date of sale.  
FBAR Maximum Account Value Determination: Currency Conversion
Unlike the identification of the highest account value with its various complications, the currency conversation part of the FBAR maximum account value determination is fairly straightforward.  All filers must use the end-of-year FBAR rates published by the Treasury Department.  These rates are officially called “Treasury Financial Management Service rates”, but they are commonly called “FBAR rates” by US international tax lawyers.  The FBAR rates are division rates, not the multiplication ones.  This is standard in US international tax law.
Hence, for the currency conversion purposes, you need to identify the currency in which your account is nominated, find the appropriate FBAR conversion rate for the relevant year and divide your highest balance by the relevant FBAR rate.  For your convenience, Sherayzen Law Office also publishes FBAR rates on its website. 
Contact Sherayzen Law Office for Professional Help With Your FBAR Preparation
If you are required to file FBARs, contact Sherayzen Law Office for professional help.  We have helped hundreds of US taxpayers to comply with their FBAR obligations, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: FBAR lawyer discusses FBAR maximum account value determination

### Joint Account FBAR Reporting | FBAR Tax Lawyer & Attorney
As an FBAR tax attorney, I constantly deal with the issues of joint account FBAR reporting. In most cases, the joint account FBAR reporting goes relatively smooth, but problems may surface from time to time. In this essay, I would like to address the general issues concerning joint account FBAR reporting.
Joint Account FBAR Reporting: FBAR Background
FBAR is the acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. A US person has to file an FBAR if he has a financial interest in or signatory authority or any other authority over foreign bank and financial accounts the aggregate value of which exceeds $10,000 at any point during the relevant calendar year.
It is important to emphasize that, with respect to joint accounts, each joint owner takes the entire value of the account in calculating whether he or she exceeded the $10,000 filing threshold.
A US person should file an FBAR separately from the tax return.  Since 2016 FBAR, the Congress aligned the FBAR filing deadline with that of an income tax return (i.e. April 15).  For example, the 2023 FBAR is due on April 15, 2024 (with an automatic extension until October 15, 2024 if needed).
Joint Account FBAR Reporting: Joint Owners
If two or more persons jointly maintain or own a partial interest in a foreign bank or financial account, then each of these persons has a financial interest in that account.  Hence, as long as they are US persons, each of these US persons has to report the account on his or her FBAR. 
Moreover, each of the filers must also indicate the principal joint owner of the joint account, even if this owner is not a US person.  I wish to repeat this important point: the joint owner must be disclosed on FBAR even if he is not a US person.  Besides the name of the joint owner, the filer must report the joint owner’s address and tax identification number (US or foreign). 
Joint Account FBAR Reporting: Report the Entire Value of the Account
Even though the same joint account may be reported at least twice, FinCEN requires the FBAR filer to disclose the entire value of each jointly-owned foreign account on his FBAR. 
Joint Account FBAR Reporting: Exception for Spouses
In certain circumstances, spouses may file a joint FBAR.  This means that the spouse of an FBAR filer may not be required to file a separate FBAR, but she can join her husband in filing one FBAR for both of them. 
In order to qualify for this exception, the spouses must meet the following three conditions.  First and most important, all of the financial accounts that the non-filing spouse has to report are jointly owned with the filing spouse. The filing spouse may have additional accounts, but the non-filing spouse should not have any other foreign bank and financial accounts.  Beware, however, that if one spouse is an owner of a foreign account, but the other spouse only has a signatory authority over the same account, then separate FBARs must be filed by each spouse.
Second, the filing spouse reports the jointly owned accounts on a timely filed FBAR and a PIN is used to sign item 44. 
Third, both spouses must complete and sign Form 114a, a Record of Authorization to Electronically File FBARs (maintained with the filers’ records).  
Contact Sherayzen Law Office for Professional Help With Joint Account FBAR Reporting
If you have foreign bank and financial accounts, contact Sherayzen Law Office for professional help with US international tax compliance and FBAR reporting.  We have helped hundreds of US taxpayers with their FBAR filings, including joint FBAR filings, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: FBAR tax lawyer & attorney constantly deals with the issues of joint account FBAR reporting.

### Disregarded Entity FBAR Obligations | FBAR Tax Lawyer & Attorney Houston
As an FBAR tax lawyer & attorney, I can see that one of the most common tax compliance mistakes made by US taxpayers is ignoring their disregarded entity FBAR obligations. These taxpayers believe that, since disregarded entities are ignored for tax purposes, these entities do not need to file any FBARs. In this article, I will explain why this view is completely false and how US taxpayers should comply with their disregarded entity FBAR obligations.
Disregarded Entity FBAR Obligations: What Are Disregarded Business Entities?
Under US tax law, certain juridical persons are disregarded for tax purposes. In other words, an entity is not recognized for tax purposes as something separate from its owner; the owner and the entity are merged into one tax person for tax purposes. 
A disregarded entity may have only one owner.  If there is more than one owner, then the entity is treated as a partnership for US tax purposes (unless it elects to be treated as a corporation).
A disregarded entity does not file its own tax return. Rather its owner reports all of the entity’s income and expense items on the owner’s tax return.
It is important, however, that one does not confuse the tax and legal treatment of a disregarded entity.  Despite being ignored for tax purposes, a disregarded entity continues to exist legally.  In other words, for all legal purposes, it is a separate juridical person with its own legal rights and obligations.
The most typical example of a disregarded entity is a single-member limited liability company (“SMLLC”).  Another prominent example is a grantor trust.
Disregarded Entity FBAR Obligations: Required FBAR Compliance
A US disregarded entity must file an FBAR if it has a financial interest in or signatory authority or any other authority over foreign bank and financial accounts the highest aggregate value of which exceeds $10,000 at any point during the relevant calendar year.
FBAR is not filed with a US tax return. Hence, disregarded entities must file FBARs even though they do not file US tax returns. Taxpayers need to make sure to obtain an EIN number for their disregarded entities.
It is important to emphasize that all FBARs of disregarded entities are filed under the names of these entities, not their owners or managers. In other words, if a grantor trust files an FBAR, the trustee will sign FBAR which is officially filed in the name of the grantor trust.
Also note that I stated that a “US disregarded entity” must file an FBAR. A foreign disregarded entity does not need to file an FBAR (though, its US owner will have to do it under the FBAR rules).
Disregarded Entity FBAR Obligations: FBAR is not a Tax Requirement
Why is it that a disregarded entity has to file FBARs if it is disregarded for tax purposes?  The answer to this question requires us to look into the legislative origin of FBAR.
The key to understanding why a disregarded entity has to file FBARs is the fact that FBAR is not part of the Internal Revenue Code (“IRC”). In other words, FBAR is not a tax form. FBAR is a creation of the Bank Secrecy Act and belongs to Title 31 (IRC is Title 26) of the United States Code.
As I stated above, a disregarded entity is ignored only for tax purposes, but it continues to exist for legal purposes. Hence, for FBAR purposes, the entity is not disregarded but continues to exist as a separate juridical person with its own legal compliance duties, including FBAR obligations.
Disregarded Entity FBAR Obligations: Why IRS Enforces FBAR Compliance
There is one more issue we need to clarify: if FBAR is not part of the IRC, why is the IRS agency in charge of enforcing it?  The answer to this question also lies in FBAR’s history (now, the readers can appreciate why I insist that an international tax attorney should know the legal history of different legal and tax requirements). 
Prior to the 9/11 terrorist attacks, the IRS was not in charge of enforcing FBAR compliance. Instead, for many years prior to 2001, FinCEN (the Financial Crimes Enforcement Network) was in charge of FBAR.
Why? The answer is simple: the original purpose of FBAR was not to fight tax noncompliance; it was not created as a tax form. Rather, FBAR was a tool to fight financial crimes, such as money laundering and terrorist financing. This fell straight within the competence of FinCEN.
In 2001, however, the US Congress turned over the function of enforcing FBAR compliance to the IRS (technically, FinCEN delegated the enforcement of FBAR to the IRS). The IRS almost immediately shifted the focus of FBAR from financial crimes to international tax enforcement.
Disregarded Entity FBAR Obligations: Frequent FBAR Violations
FBAR compliance is miserably low among disregarded entities. The main reason for so many FBAR violations is the fact that most taxpayers are completely unaware of the legal analysis of FBAR which I have set forth above. As I stated above, they incorrectly believe that FBAR is a tax form and, since disregarded entities are ignored for tax purposes, these entities do not or did not file FBARs. Unfortunately, even these non-willful situations may lead to the imposition of substantial FBAR penalties.
Contact Sherayzen Law Office for Professional Help with Your Disregarded Entity FBAR Obligations
In order to avoid these FBAR penalties and ensure proper tax compliance, you should contact Sherayzen Law Office for professional help with your disregarded entity FBAR obligations. Sherayzen Law Office has filed FBARs for every type of a disregarded entity. If your entity has not filed FBARs in the past, but it was required to do so, Sherayzen Law Office can also help you determine the best offshore voluntary disclosure option for your entity and do all of the work necessary to bring you and your entities into full compliance with US tax laws. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!
Excerpt: FBAR tax lawyer & attorney Houston discusses disregarded entity FBAR obligations.  FBAR is not a tax form; hence taxpayers must ensure their disregarded entity FBAR compliance.

### New Zealand Bank Accounts | International Tax Lawyer & Attorney Madison Wisconsin
There is a vibrant community of New Zealanders in Wisconsin (though New Zealanders can be found in many other places in the United States). Many members of this community continue to maintain their pre-immigration New Zealand bank accounts. Some of these owners of New Zealand bank accounts are aware of at least some US tax requirements with respect to these accounts, others are confused and still others are completely unaware of the existence of any such requirements. In this article, I will explain the three most common US reporting requirements – worldwide income reporting, FBAR and Form 8938 – concerning New Zealand accounts as well as describe, in general, those required to comply with them.
Note that, in this article, I will concentrate solely on individuals, not businesses, trusts or estates.
New Zealand Bank Accounts: US Tax Residents, US Persons and Specified Persons
Let’s commence our discussion with the issue of who is required to comply with US reporting requirements concerning New Zealand bank accounts.  The first issue to note here is that US tax reporting requirements do not always define the required filers in the same manner.  
In fact, each of aforementioned three requirements has its own definition of required filers. The worldwide income reporting requirement will follow the general definition of US tax residents. On the other hand, “US Persons” are required to file FBAR and “Specified Persons” are required to file Form 8938.
Despite these differences, however, the definitions of US Persons and Specified Persons are very similar to the concept of US tax residency; there are some specific differences, but, overall, these two concepts follow the definition of US tax residents very closely.
Hence, we should do the same and concentrate on the definition of a "US tax resident".  This is a broad term which covers a variety of US taxpayers, including: US citizens, US permanent residents, persons who satisfy the Substantial Presence Test and individuals who declare themselves as US tax residents.  This general definition of "US tax resident" is subject to a number of important exceptions, such as visa exemptions (for example, an F-1 visa five-year exemption for foreign students) from the Substantial Presence Test. 
Both, US Persons and Specified Persons include the same categories of taxpayers, but differences arise with respect to the treatment of individuals who declare themselves as US tax residents. The most common differences arise with respect to the treaty “tie-breaker” provisions to escape US tax residency and persons who declare themselves tax residents of the United States.
I strongly recommend that you contact an international tax attorney in order to determine whether you fall within the definition of any one or all of these filers.  An attempt to do it by a non-professional is fraught with legal dangers. 
New Zealand Bank Accounts: Worldwide Income Reporting
All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS.  In the context of New Zealand bank accounts, foreign-source income means all bank interest income, dividends, royalties, capital gains and any other income generated by these accounts.  
New Zealand Bank Accounts: FBAR Reporting
The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over New Zealand (and any other foreign country) bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. I encourage you to search our website sherayzenlaw.com for article concerning the definition of a US Person.
There is one aspect of the FBAR legal test that I wish to discuss here with more specificity – the definition of an “account”. The FBAR definition of an account is substantially broader than what this word is generally means in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
Finally, FBAR has a very complex and severe (to an astonishing degree) penalty system. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). On the civil side, the most dreaded penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Even FBAR non-willful penalties can wreak a havoc in a person’s financial life.
Civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. One of the most important factors is the size of the New Zealand bank accounts subject to FBAR penalties. Additionally, since 2015, the IRS has added another layer of limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and may be disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).
New Zealand Bank Accounts: FATCA Form 8938
Since 2011, FATCA Form 8938 has been another higher important requirement of US international tax law.  This form is filed with a federal tax return and considered to be an integral part of the return.  This means that a failure to file Form 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.
Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency. For example, if he is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.
The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.
Specified Persons consist of two categories of filers: Specified Individuals and Specified Domestic Entities.  You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your New Zealand Bank Accounts
If you have New Zealand bank accounts, contact Sherayzen Law Office for professional help with your US international tax compliance.  We have helped hundreds of US taxpayers with their US international tax issues, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 2018 FinCEN Form 114 Deadline | FBAR International Tax Lawyer & Attorney
The 2018 FinCEN Form 114 deadline is approaching fast. It is definitely one of the most important deadlines that US taxpayers face in 2019. It is also one of the most confusing ones, because this form is not filed with a federal income tax return. Moreover, some taxpayers mistakenly treat 2018 FinCEN Form 114 as something separate from the 2018 FBAR. In order to clarify these issues, Sherayzen Law Office is publishing this notice on the 2018 FinCEN Form 114 deadline to US taxpayers.
2018 FinCEN Form 114 Deadline: Relationship Between FBAR and FinCEN Form 114
FBAR is an acronym for FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. In other words, these are two names of the same form.  Also, it is useful to know that, prior to mandatory e-filing, the official name of FBAR was TD F 90-22.1 and it was filed on paper. The name of the form changed once the e-filing form was created. 
2018 FinCEN Form 114 Deadline: Pre-2016 Deadline
For the years preceding 2016, the US government chose a very strange deadline for FBARs – June 30 of each year. For example, the 2012 FBAR was due on June 30, 2013. No filing extensions were allowed.  
The last FinCEN Form 114 that followed the June 30 deadline was the 2015 FinCEN Form 114; its due date was June 30, 2016.  This fact is still relevant for offshore voluntary disclosures and  FinCEN Form 114 audits due to the six-year FBAR statute of limitations.  The June 30 deadline will continue to be relevant as late as June 30, 2022.
2018 FinCEN Form 114 Deadline: Changes Starting 2016 FinCEN Form 114
In order to resolve the problem of confusing deadlines, the US Congress changed the FinCEN Form 114 deadline as part of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”). Under Section 2006(b)(11) of the Act, starting 2016 FinCEN Form 114, US Persons must e-file FBARs by the due date of that year’s tax return (i.e. usually April 15), not June 30.
Furthermore, during the transition period (which continues to this date), the IRS granted to US taxpayers an automatic extension of the FinCEN Form 114 filing deadline to October 15. Taxpayers do not need to make any specific requests in order for an extension to be granted.
In other words, starting 2016 FinCEN Form 114, the Act adjusted the FinCEN Form 114 due date to coincide with the federal income tax filing deadlines.  This is the case even if federal law requires a different filing date.  For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day. 
2018 FinCEN Form 114 Deadline
Based on the current law, the 2018 FinCEN Form 114 deadline will be April 15, 2019.  In other words, your 2018 FinCEN Form 114 has to be e-filed by and including that date.  Automatic extension to October 15, 2019, is available.
2018 FinCEN Form 114 Deadline: Who Must File by April 15, 2019
A US Person must file his 2018 FinCEN Form 114 by April 15, 2019, as long as his foreign bank and financial accounts meet the FinCEN Form 114 filing requirements. 
“US Person” has special significance in the context of FinCEN Form 114.  This term is very similar to the concept of “US tax resident”, but there are some differences between these terms.  In general, a US Person includes a US citizen, a US permanent resident and any person who satisfies the Substantial Presence Test. The term also covers any business entity, trust and estate formed under the laws of the United States. 
Moreover, “US Person” also applies to certain non-resident aliens who make first-year election under IRC §7701(b)(4).  This term, however, does not apply to persons who make the first-year election pursuant to  IRC §6013(g) or (h) election.  See this article for a more detailed discussion of individual FinCEN Form 114 filers.
2018 FinCEN Form 114 Deadline: the Trigger for the FinCEN Form 114 Requirement
The FinCEN Form 114 requirement is triggered whenever a US person has a financial interest in or signatory authority or any other authority over foreign bank and financial accounts the highest aggregate value of which exceed $10,000. The term “accounts” is defined very broadly to include pretty much any custodial relationship. For example, this terms includes: foreign bank accounts, foreign fixed-deposit accounts, foreign investment accounts, foreign mutual funds, foreign precious metals accounts, foreign life insurance policies, foreign retirement accounts and so on and so forth.
A PPF account in India is a reportable foreign account for FinCEN Form 114. The French Assurance Vie accounts, Malaysian health insurance investment accounts, Australian Superannuation Fund accounts, Colombian building contract accounts, Argentinian “participation” accounts, German “building” accounts, Spanish mutual fund accounts, Swiss financial products are all reportable bank and financial accounts for FinCEN Form 114 purposes; so are Goldmoney and BullionVault accounts. 
Contact Sherayzen Law Office for Professional Help With Your 2018 FinCEN Form 114 Deadline
Sherayzen Law Office is an international tax law firm that specializes in FinCEN Form 114 compliance.  We have filed thousands of FBARs for our clients as part of their annual tax compliance as well as offshore voluntary disclosures. We can help You!
Contact Us Today to Schedule Your Confidential Initial Consultation!

### 2018 FBAR Deadline in 2019 | FinCEN Form 114 International Tax Lawyer & Attorney
The 2018 FBAR deadline is one of the most important deadlines for US taxpayers in the calendar year 2019.  Since FBAR is not filed with the federal income tax return, many taxpayers may miss this deadline.  This is why Sherayzen Law Office is publishing this notice to US taxpayers.
2018 FBAR Deadline: Background Information
FBAR is an acronym for FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. US Persons must file FBAR if they have a financial interest in or signatory or any other authority over foreign financial accounts if the highest aggregate value of these accounts is in excess of $10,000. FBARs are filed separately from federal tax returns.
2018 FBAR Deadline: Pre-2016 FBAR Deadline
For the years preceding 2016, the US government chose a very strange deadline for FBARs – June 30 of each year. For example, 2012 FBAR was due on June 30, 2013. No filing extensions were allowed.  
There was another surprising rule for FBAR deadlines.  Prior to the mandatory e-filing of FBARs, taxpayers had to mail their FBARs to the specialized center in Detroit, Michigan. Unlike the rest of the tax forms, FBARs did not follow the “mailbox rule”.  In other words, the filing of an FBAR was recognized by the IRS not upon the mailing of this form, but upon its receipt.  For example, if FBAR was mailed on June 30, but received on July 1, it was not timely filed. 
Federal tax returns, on the other hand, do follow the mailbox rule.  This means that the IRS will consider the mailing date, not the date of receipt, as the date of the filing of a tax return.  I should point out that, in practice, the IRS often confuses the rule and incorrectly issues failure-to-file penalties based on the date of receipt.  This is why it is important to have a proof of mailing for your federal tax return.
The last FBAR that followed the June 30 deadline was 2015 FBAR; its due date was June 30, 2016.  Nevertheless, due to the six-year FBAR statute of limitations, it is important to remember this history for the purpose of offshore voluntary disclosures and IRS FBAR audits. It will continue to be relevant as late as June 30, 2022.
2018 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR
Of course, the strange FBAR filing rules greatly confused US taxpayers.  First of all, it was difficult to learn about the existence of the form. Second,  taxpayers found it very difficult to timely comply with its requirements due to its very strange filing rules.  
The US Congress took action in 2015 to alleviate this problem. As it usually happens, it did so when it passed a law that, on its surface, had nothing to do with FBARs. The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR. Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.
Furthermore, during the transition period (which continues to this date), the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. Taxpayers do not need to make any specific requests in order for an extension to be granted.
Thus, starting with the 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines.  This is the case even if federal law requires a different filing date.  For example, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day; the FBAR deadline will follow suit and also shift to the next business day. 
2018 FBAR Deadline
Based on the current law, the 2018 FBAR deadline will be April 15, 2019.  In other words, your 2018 FBAR has to be e-filed by and including that date. Automatic extension to October 15, 2019, is available.

### Italian Bank Accounts | International Tax Lawyer & Attorney New York New Jersey
US tax requirements concerning Italian bank accounts can be quite burdensome and complex. The chief three US reporting requirements applicable to Italian bank accounts are: worldwide income reporting, FBAR and FATCA Form 8938. Let’s discuss each of these requirements in more depth.
Italian Bank Accounts: US Tax Residents and US Persons
Before we delve into the discussion of these requirements, we need to identify who is required to comply with these requirements.  This task is complicated by the fact that each of aforementioned three requirements has its own definition of a required filer. 
Nevertheless, we can readily identify the categories of required filers shared by all three requirements. These categories correspond most closely, but not exactly to the concept of US tax residents. "US tax residency" is a broad term which includes US citizens, US permanent residents, residents who satisfy the Substantial Presence Test and individuals who declare themselves as US tax residents.
This definition of a US tax resident is fully applicable to the worldwide income reporting requirement and very closely corresponds to the concept of the Specified Person of Form 8938. FBAR’s concept of “US Persons”, however, does differ more significantly from the definition of a “US tax resident”, but only in more unusual circumstances. The most common differences arise with respect to the treaty “tie-breaker” provisions to escape US tax residency and persons who declare themselves tax residents of the United States.
Additionally, I wish to caution the readers that even the definition of US tax residents which I just stated has a number of important exceptions, such as visa exemptions (for example, an F-1 visa five-year exemption for foreign students) from the Substantial Presence Test. 
In other words, the issue of who the required filer is, requires careful analysis of the facts and circumstances of an individual.  This is definitely the job of your international tax attorney; it is just too dangerous to attempt to do it yourself.
Italian Bank Accounts: Worldwide Income Reporting
All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS.  In the context of the Italian bank accounts, foreign-source income means all bank interest income, dividends, royalties, capital gains and any other income generated by these accounts.  
Italian Bank Accounts: FBAR Reporting
The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US Persons to disclose their ownership interest in or signatory authority or any other authority over Italian bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000.
I wish to emphasize again that, while the term “US persons” is very close to “US tax residents”, it is not the same.  The term “US tax residents” is slightly broader than “US persons”.  I encourage you to search our website – sherayzenlaw.com – for articles concerning the definition of a US Person.
One aspect of the FBAR requirement, however, deserves a special mention here – the definition of an “account”. The FBAR definition of an account is substantially broader than how this word is generally understood in our society. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
Finally, no discussion of FBAR can be considered complete without mentioned the much-dreaded FBAR penalty system. It is complex and severe to an astonishing degree. The most feared penalties are criminal FBAR penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). The next layer of penalties are FBAR willful civil penalties which can easily exceed a person’s net worth. Finally, FBAR imposes penalties even on non-willful taxpayers.
All of the civil FBAR penalties have their own complex web of penalty mitigation layers, which depend on the facts and circumstances of one’s case. One of the most important factors is the size of the Italian bank accounts subject to FBAR penalties. Additionally, since 2015, the IRS has added another layer of limitations on the FBAR penalty imposition. These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and may be disregarded under certain circumstances (in fact, there are already a few instances where this has occurred).
Italian Bank Accounts: FATCA Form 8938
FATCA Form 8938 has been in existence since 2011. Unlike FBAR, it is filed with a federal tax return and considered to be an integral part of the return. This means that a failure to file File 8938 may render the entire tax return incomplete and potentially subject to an IRS audit.
Form 8938 requires “Specified Persons” to disclose on their US tax returns all of their Specified Foreign Financial Assets (“SFFA”) as long as these Persons meet the applicable filing threshold. The filing threshold depends on a Specified Person’s tax return filing status and his physical residency. For example, if he is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.
The IRS defines SFFA very broadly to include an enormous variety of financial instruments, including foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera. In some ways, FBAR and Form 8938 require the reporting of the same assets, but these two forms are completely independent from each other. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.
Specified Persons consist of two categories: Specified Individuals and Specified Domestic Entities.  You can find a detailed explanation of both categories by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Italian Bank Accounts
Worldwide income reporting, FBAR and Form 8938 do not constitute a complete list of US reporting requirements that may apply to Italian bank accounts. There may be many more.
This is why, if you have Italian bank accounts, should contact Sherayzen Law Office.  We have a highly knowledgeable international tax compliance team headed by an experienced international tax attorney, Mr. Eugene Sherayzen.  We have helped hundreds of US taxpayers with their US international tax issues, including reporting Italian bank accounts, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 2019 IRS Standard Mileage Rates | IRS Tax Lawyer & Attorney
On December 14, 2018, the IRS issued the 2019 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Let's discuss in a bit more depth these new 2019 IRS Standard Mileage Rates.
Beginning on Jan. 1, 2019, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
58 cents per mile driven for business use, up 3.5 cents from the rate for 2018, 20 cents per mile driven for medical or moving purposes, up 2 cents from the rate for 2018, and 14 cents per mile driven in service of charitable organizations.
The business mileage rate increased 3.5 cents for business travel driven and 2 cents for medical and certain moving expense from the rates for 2018. The charitable rate is set by statute and remains unchanged.
According to the IRS Rev. Proc. https://www.irs.gov/pub/irs-drop/rp-10-51.pdf2010-51, a taxpayer may use the business standard mileage rate to substantiate a deduction equal to either the business standard mileage rate times the number of business miles traveled. If he does use the 2019 IRS standard mileage rates, then he cannot deduct the actual costs items. Even if the 2019 IRS standard mileage rates are used, however, the taxpayer can still deduct as separate items the parking fees and tolls attributable to the use of a vehicle for business purposes.
It is important to note that under the 2017 Tax Cuts and Jobs Act, taxpayers cannot claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. With the exception of active duty members of Armed Forces, taxpayers also cannot claim a deduction for moving expenses.  Notice-2019-02.  As in previous years, a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
Sherayzen Law Office advises taxpayers that they do not have to use the 2019 IRS standard mileage rates. They have the option of calculating the actual costs of using his vehicle rather than using the standard mileage rates. In such a case, all of the actual expenses associated with the business use of the vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.

### Premier Minneapolis Minnesota Voluntary Disclosure Lawyer | International Tax Attorney
Mr. Eugene Sherayzen, the founder and owner of Sherayzen Law Office, Ltd., is a premier Minneapolis Minnesota Voluntary Disclosure Lawyer.  Why is this the case?  Let’s explore the top five reasons for it.
Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Experience
Mr. Sherayzen started practicing law at the end of 2005.  In other words, he has been an international tax lawyer for over 13 years. During this time, he has successfully conducted hundreds of voluntary disclosures for US taxpayers all around the world.
He is a highly experienced lawyer in every type of a voluntary disclosure: OVDP/OVDI (while these programs existed), Streamlined Domestic Offshore Procedures (“SDOP”), Streamlined Foreign Offshore Procedures (“SFOP”), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause Disclosures.
During 2014-2016, Mr. Sherayzen also conducted the Transition to Streamlined Disclosure for some of his OVDP clients.  Moreover, starting 2017, he has also helped his clients with the IRS audits of voluntary disclosures done pursuant to SDOP and SFOP.  During all of these years, Mr. Sherayzen also helped clients with amendment of Forms 906 signed pursuant to OVDP or OVDI.
As a result of such an intense and diverse voluntary disclosure practice, Mr. Sherayzen has accumulated a tremendous, in many ways unique, amount of experience in offshore voluntary disclosures.
Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Knowledge 
Knowledge comes with experience.  Mr. Sherayzen may be considered a true expert on offshore voluntary disclosure.  Not only does he possess a deep understanding of substantive US international tax law, but his extensive experience with offshore voluntary disclosures endowed him with a profound knowledge of the procedural aspects of offshore voluntary disclosures. 
Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Ethical Creativity
This combination of knowledge and experience allows Mr. Sherayzen to devise creative ethical legal strategies for his clients’ offshore voluntary disclosures.  Each strategy is customized based on the facts of each case. All pros and cons are carefully considered to achieve the necessary balance of risks and rewards. Potential IRS challenges are considered and prepared for. Each alternative strategy is discussed with each client in order to choose the most agreeable one to the client. 
It should be emphasized that Mr. Sherayzen offers only those voluntary disclosure strategies which comply with the legal and ethical standards demanded by the IRS as well as the legal profession.
Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Customization
Mr. Sherayzen rejects “one size fits all” approach to offshore voluntary disclosure and strongly believes a case strategy must be considered only in light of the specific facts of each case.  Too often, with dismay, he sees how many accountants and even lawyers herd their clients into one approach, charging a flat fee for it, without the proper consideration of specific facts of each case.
Mr. Sherayzen believes that each case is unique and deserves a special consideration of its special facts and circumstances.  Each legal strategy must be adjusted to fit these facts and circumstances in order to produce the best result for the client.
Premier Minneapolis Minnesota Voluntary Disclosure Lawyer: Voluntary Disclosure Team
Mr. Sherayzen also counts on the support of a superb voluntary disclosure team of accountants and staff – a team which he has gradually built and trained over the past 13 years.  He carefully chose each member of the team and personally trained them to master certain aspects of a voluntary disclosure.  The team is not trained only in their specific duties, but also to help each other, creating a sense of comradeship among Sherayzen Law Office employees.  Everyone’s work goes through at least two levels of review to assure the highest quality.  As a result, Mr. Sherayzen and his team are able to conduct and produce successful highly-efficient high-quality offshore voluntary disclosures.
Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!

### Costa Rican Bank Accounts | International Tax Lawyer & Attorney Miami
Upon moving to Costa Rica, many US retirees open Costa Rican bank accounts in order to pay for their local expenses and purchase properties.  While to US retirees their Costa Rican bank accounts seem innocent and completely unrelated to US tax laws, the ownership of these accounts may put them at a significant risk for US tax noncompliance.  In this article, I would like to discuss the top three US reporting requirements with which US owners of the Costa Rican bank accounts need to comply.
Costa Rican Bank Accounts: Who Must Report Them?
Before we discuss these US tax requirements in more detail, we need to make it clear that, generally, only US tax residents must comply with these requirements.  The definition of a US tax resident is broad and includes US citizens, US permanent residents, an individual who declares himself a US tax resident. 
A couple of words of caution.  First, there are important exceptions to this general definition of a US tax resident.  For example, students on an F-1 visa are generally exempt from the Substantial Presence Test for five years. It is the job of your international tax attorney to determine whether you fall within any of these exceptions. 
Second, different information returns may modify the categories of persons which are included in the category of the required filers. In other words, while it is generally true that US tax residents are the ones who are required to comply with the US tax requirements concerning Costa Rican bank accounts, there are important, though limited exceptions.  The most prominent example is FBAR discussed below; the form requires “US persons”, not “US tax residents” to disclose the ownership of foreign accounts.  While these two concepts are similar, they are not exactly the same. 
Costa Rican Bank Accounts: Worldwide Income Reporting
All US tax residents must report their worldwide income on their US tax returns. In other words, US tax residents must disclose both US-source and foreign-source income to the IRS.  In the context of the Costa Rican bank accounts, foreign-source income would usually include bank interest income, but this concept also covers dividends, royalties, capital gains and any other income generated by the Costa Rican bank accounts.  
Costa Rican Bank Accounts: FBAR Reporting
The official name of the Report of Foreign Bank and Financial Accounts (“FBAR”) is FinCEN Form 114. FBAR requires all US persons to disclose their ownership interest in or signatory authority or any other authority over Costa Rican bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000.
Note that the term “US persons” is very close to “US tax residents”, but it is not the same.  The term “US tax residents” is slightly broader than “US persons”.  I have already discussed the definition of US persons in a series of articles (for example, see this article on individuals who are considered US persons); hence, I will not discuss it here, but I urge the readers to search sherayzenlaw.com for more materials on this subject.
There is one aspect of the FBAR requirement that I wish to explain in more detail here – the definition of an “account”. The FBAR definition of an account is substantially broader than how this word is generally understood by taxpayers. “Account” for FBAR purposes includes: checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset, there is a very high probability that the IRS will find that an account exists for FBAR purposes.
The final aspect of FBAR that I wish to discuss here is its penalty system. US taxpayers dread FBAR penalties which are supremely severe to an astonishing degree. At the apex are the criminal penalties with up to 10 years in jail (of course, these penalties come into effect only in the most egregious situations). While FBAR willful civil penalties do not threaten incarceration, they are so harsh that they can easily exceed a person’s net worth. Even taxpayers who non-willfully did not file an FBAR (either because they did not know about it or due to circumstances beyond their control) are not free from FBAR penalties. Since 2004, the Congress added non-willful FBAR penalties of up to $10,000 per account per year.
In order to mitigate the potential for the 8th Amendment challenges to FBAR penalties and make the penalty imposition more flexible, the IRS created a multi-layered system of penalty mitigation. Since 2015, the IRS has added additional limitations on the FBAR penalty imposition.  These self-imposed limitations of course help, but one must keep in mind that they are voluntary IRS actions and maybe disregarded under certain circumstances (in fact, there are already a few instances where this has occurred). 
Costa Rican Bank Accounts: FATCA Form 8938
Form 8938 is one of the most important and relatively recent additions to the numerous US international tax requirements. The IRS created Form 8938 under the Foreign Account Tax Compliance Act (“FATCA”) in 2011.
Form 8938 is filed with a federal tax return. This means that, without Form 8938, the tax return would not be complete and, potentially, open to an IRS audit.
The primary focus of Form 8938 is on the reporting by US taxpayers of Specified Foreign Financial Assets (“SFFA”). SFFA includes a very diverse range of foreign financial assets, including: foreign bank accounts, foreign business ownership, foreign trust beneficiary interests, bond certificates, various types of swaps, et cetera.
In some ways, Form 8938 requires the reporting of the same assets as FBARs (especially with respect to foreign bank and financial accounts), but the two requirements are independent. This means that a taxpayer may have to do duplicate reporting on FBAR and Form 8938.
Form 8938 has a filing threshold that depends on a taxpayer’s tax return filing status and his physical residency. For example, if a taxpayer is single and resides in the United States, he needs to file Form 8938 as long as the aggregate value of his SFFA is more than $50,000 at the end of the year or more than $75,000 at any point during the year.
Form 8938 needs to be filed by Specified Persons. Specified Persons consist of two categories: Specified Individuals and Specified Domestic Entities.  There are specific definitions for both categories; you can find them by searching our website sherayzenlaw.com.
Finally, Form 8938 has its own penalty system which has far-reaching consequences for income tax liability (including disallowance of foreign tax credit and imposition of higher accuracy-related income tax penalties). There is also a $10,000 failure-to-file penalty.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Costa Rican Bank Accounts
Foreign income reporting, FBAR and Form 8938 do not constitute a complete list of requirements that may apply to Costa Rican bank accounts.  There may be many more.
If you have Costa Rican bank accounts, contact the experienced international tax attorney and owner of Sherayzen Law Office, Mr. Eugene Sherayzen.  Mr. Sherayzen has helped hundreds of US taxpayers with their US international tax issues, and He can help You!
Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!
Excerpt: International tax lawyer & attorney Miami discusses US requirements concerning Costa Rican bank accounts.  International tax lawyers point out 3 most important: worldwide income reporting, FBAR and Form 8938

### FinCEN Form 114 Business Filers | FBAR Lawyer & Attorney Delaware
In a previous article, I described individuals who need to file FinCEN Form 114.  This essay is a continuation of the same series of articles concerning FinCEN Form 114 filers.  Today, I will devote my attention to FinCEN Form 114 Business Filers. 
FinCEN Form 114 Business Filers: FBAR Filing Requirement
We first need to understand what Form 114 is. The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 also known as “FBAR”, is one of the most important information returns administered by the IRS since 2001 (the form itself has existed since 1970). FBAR requires a US person to disclose his financial interest in or signatory authority (or any other authority) over foreign bank and financial accounts as long as the highest balance of these accounts, in the aggregate, exceeds $10,000 at any point during a calendar year.
FBAR is the creation of the Bank Secrecy Act, Title 31 of the United States Code (“USC”).  In other words, it is technically not a tax form.  In fact, its original purpose was to fight financial crimes.
Due to this legal history, FBAR has a ruthless yet highly elaborate penalty system. FBAR penalties range from criminal penalties that include incarceration to the astonishingly high willful and even non-willful civil penalties. This severe penalty system makes FBAR one of the most dangerous US international information returns.
FinCEN Form 114 Business Filers: General Definition
As described above, only US persons are required to file FBARs. There are various categories of US persons: individuals, businesses, trusts and estates. Our focus today is on business filers.
The general rule is that a business entity is considered a US person if it was created or organized in the United States or under the laws of the United States.  There are two terms that we need to understand within this general rule in order to the rule apply correctly: entity and the United States.
FinCEN Form 114 Business Filers: Entity
For FBAR purposes, the word “entity” is defined broadly to include without limitation a corporation, a partnership and a limited liability company. This term applies even if a business is a disregarded entity for US tax purposes.
In other words, a single member limited liability company is required to file an FBAR if it has foreign accounts that satisfy the FBAR filing threshold. Again, the reason for applying the legal, rather than a tax a definition of “entity”, is driven by the FBAR’s legal history; it is a Title 31 requirement, not a Title 26 (i.e. the Internal Revenue Code) requirement.
FinCEN Form 114 Business Filers: Definition of the United States
I have already explored the FBAR definition of the United States in another article.  Hence, I will only briefly state the rule here.  31 CFR 1010.100(hhh) defines the United States for FBAR purposes as: the States of the United States, the District of Columbia, the Indian Lands (as defined in the Indian Gaming Regulatory Act) and the territories and insular possessions of the United States. 
Thus, a business entity formed in Guam is considered a US person for FBAR purposes. Similarly, a partnership formed in Delaware by two non-resident aliens is also a US person. Even an entity created under the laws of the Commonwealth of Puerto Rico will still be a US person. If these entities have foreign financial and bank accounts which exceed the FBAR filing threshold, they will also be considered FinCEN Form 114 business filers.
Contact Sherayzen Law Office for Professional FBAR Help
If you are a US business entity which maintains foreign accounts outside of the United States, please consider contacting Sherayzen Law Office for professional legal help. We have extensive experience in helping US businesses to comply with their FBAR requirements as well as to remedy their past FBAR noncompliance through an offshore voluntary disclosure.
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This article focuses on FinCEN Form 114 business filers and is part of the series of articles on FinCEN Form 114 filers. The series began with the article that FBAR and Form 114a are the same form, then another article on the FBAR definition of the United States and still another article on the FinCEN Form 114 Filers (with the focus on the individual filers). Future articles are planned to continue this series.
Excerpt: FinCEN Form 114 Business Filers definition provided by international tax lawyer & attorney Delaware.  FBAR lawyer explains the general rule and exception.

### SFOP Non-Residency | Streamlined Foreign Offshore Procedures Lawyer
Streamlined Foreign Offshore Procedures (“SFOP”) is currently the preferred offshore voluntary disclosure option for US taxpayers who reside overseas, recently came to the United States or recently left the United States. Hence, the issue of SFOP eligibility (i.e. the ability of a taxpayer to participate in this program) is very important for these taxpayers. Today, I would like to concentrate on the SFOP non-residency requirement (I will alternatively refer to it simply as “SFOP non-residency”).
SFOP Non-Residency: Two Main SFOP Legal Requirements
In addition to meeting the general procedural requirements, a taxpayer who wishes to do a SFOP voluntary disclosure must meet two specific legal requirements. First, he must satisfy the applicable non-residence requirement. Second, he must meet the non-willfulness requirement. As I pointed out above, the focus of today’s article is on the non-residency requirement.
SFOP Non-Residency: All Participants Must Meet This Requirement
From the outset, it is important to point out that all SFOP participants must meet the SFOP non-residency requirement. This means that, in case of joint filers, both spouses must satisfy this requirement. This is the case even if only one spouse has unreported foreign assets.
SFOP Non-Residency: Two Categories
There are two distinct SFOP non-residency requirements depending on the immigration status of SFOP participants. The first type of non-residency requirements applies only to US citizens, US Lawful Permanent Residents (a/k/a “green card holders”) and their estates. The second type applies to everyone else.
SFOP Non-Residency: US Citizens and US Permanent Residents
In order to meet the SFOP non-residency requirement, a US citizen or US Permanent Resident (or his estate) must satisfy the following test:
1. In any one or more of the most recent three years for which the US tax return due date (including proper due date extensions) has passed;
2. He did not have a US abode; and
3. He was physically outside of the United States for at least 330 full days.
SFOP instructions specifically cite IRC §911 and its regulations for interpreting the term “abode”, which the IRS defines as one’s home, habitation, residence, domicile, or place of dwelling; it is not equivalent to one’s principal place of business. The IRS confirmed that temporary presence in the United States or maintenance of a dwelling in the United States does not necessarily mean that one has an abode in the United States.
SFOP Non-Residency: IRS Examples for US Citizens and US Permanent Residents
The SFOP instructions offer two examples where a US citizen or US Permanent Resident meets the SFOP non-residency requirement. I have provided both examples here verbatim:
“Example 1: Mr. W was born in the United States but moved to Germany with his parents when he was five years old, lived there ever since, and does not have a U.S. abode. Mr. W meets the non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents.
Example 2: Assume the same facts as Example 1, except that Mr. W moved to the United States and acquired a U.S. abode in 2012. The most recent 3 years for which Mr. W’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011. Mr. W meets the non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents.”
Please, note that example 2 emphasizes the fact that the non-residency requirement is satisfied even if an individual complies with it in only one of the past three years.
SFOP Non-Residency: Other Individuals
The second type of the SFOP non-residency requirement applies to all individuals who do not fit into the first category (i.e. they are not US citizens or US Permanent Residents). An individual from the second category meets the SFOP non-residency requirement if:
1. In any one or more of the most recent three years for which the US tax return due date (including proper due date extensions) has passed;
2. He did not meet the substantial presence test described in IRC §7701(b)(3).
SFOP Non-Residency: Substantial Presence Test
The Substantial Presence Test of IRC §7701(b)(3) is used to determine whether a person was a US tax resident in a given tax year. The Substantial Presence Test is satisfied if:
1. The individual was present in the United States for at least 31 days during the tax year in question; and
2. The sum of the number of days on which such individual was present in the United States during the current year and the two preceding calendar years equals or exceeds 183 days. The amount of days in the two preceding years should be multiplied by the applicable multiplier as follows: first preceding year – one-third; second preceding year – one-sixth.
I wish to emphasize that this is the general rule. There are numerous exceptions to the Substantial Present Test, including the “closer connection exception” and certain visa exemptions.
SFOP Non-Residency: IRS Example for Other Individuals
The IRS SFOP instructions again provide a useful example, which I copied here:
“Example 3: Ms. X is not a U.S. citizen or lawful permanent resident, was born in France, and resided in France until May 1, 2012, when her employer transferred her to the United States. Ms. X was physically present in the U.S. for more than 183 days in both 2012 and 2013. The most recent 3 years for which Ms. X’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011. While Ms. X met the substantial presence test for 2012 and 2013, she did not meet the substantial presence test for 2011. Ms. X meets the non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents.”
Contact Sherayzen Law Office for Professional Help With Streamlined Foreign Offshore Procedures, Including SFOP Non-Residency and Non-Willfulness Requirements
If you are not in compliance with US tax laws concerning foreign assets and foreign income, please contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers around the globe with their offshore voluntary disclosures, including Streamlined Foreign Offshore Procedures. We can help You!
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### FinCEN Form 114 Filers | FBAR Tax Lawyer & Attorney Minnesota Minneapolis
The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (a/k/a FBAR) is arguably the most important information return concerning foreign accounts. Its importance stems first and foremost from the extremely severe Form 114 penalties, which range from criminal penalties of up to 10 years in prison to willful and even non-willful penalties that may exceed the value of the penalized accounts. Given these penalties, it is important to understand who FinCEN Form 114 filers are – i.e. who is required to file Form 114?
For today’s purposes, I will concentrate only on the individual FinCEN Form 114 filers.
FinCEN Form 114 Filers: General Definition
At the center of the definition of FBAR filer is a United States person (“US person”). A US person must file FinCEN Form 114 if he has a financial interest in or signatory authority or any other authority over any foreign financial accounts and the aggregate maximum value of these accounts exceeds $10,000 at any time during the calendar year.
FinCEN Form 114 Filers: Main Categories of US Persons
Under the 31 CFR 1010.350(b), the definition of a US Person is very specific and consists of five main categories: (1) a citizen of the United States; (2) a resident of the United States; (3) an entity created or organized in the United States or under the laws of the United States; (4) a trust formed under the laws of the United States; and (5) an estate formed under the laws of the United States. As I stated above, today, I will focus only on categories 1 and 2; I will deal with business, trust and estate FinCEN Form 114 filers in other articles.
FinCEN Form 114 Filers: US Citizens
This is by far the easiest category of FinCEN Form 114 filers to analyze. If an individual is a US citizen and has foreign accounts that exceed the filing threshold, then, he must file Form 114.
FinCEN Form 114 Filers: Definition of “Residents of the United States”
In the context of FBAR compliance, a “resident of the United States” has a special meaning which corresponds for the most part, but not exactly, to the US income tax definition of a tax resident. There are three distinct categories of individuals who fall within the definition of a “resident of the United States” for FBAR purposes: US permanent residents, persons who satisfy the Substantial Presence Test, and certain non-resident aliens who make the first-year election to be treated as US tax residents. Additionally, Internal Revenue Code (“IRC”) §7701(b)(2) contains a number of provisions that regulate when individuals are considered to be US residents for FBAR (as well as income tax) purposes during the first-year and the last-year of residency.
FinCEN Form 114 Filers: US Permanent Residents
The first category of residents of the United States is not complex. All US Permanent are US persons and, if they have foreign accounts that exceed the FBAR filing threshold, also FinCEN Form 114 filers.
FinCEN Form 114 Filers: Substantial Presence Test
The second category of residents of the United States for FBAR purposes are the individuals who satisfied the Substantial Presence Test described in IRC §7701(b)(3). Under the Substantial Presence Test, an individual is a US person if: (1) he was present in the United States (as defined under 31 CFR 1010.100(hhh)) for at least 31 days during the calendar year in question; and (2) the sum of the number of days on which such individual was present in the United States during the current year and the two preceding calendar years equals or exceeds 183 days. The amount of days in the two preceding years should multiplied by the applicable multiplier as follows: first preceding year – one-third; second preceding year – one-sixth.
For example, if we are trying to determine the tax residency for the tax year 2019, we will take all the sum of the days an individual was physically present in the United States in 2019, one-third of the days in 2018 and one-sixth of the days in 2017. If the total amount equals or exceeds 183 days, then this individual is a US person for FBAR purposes.
It should be pointed out that this is the general rule. There are numerous exceptions to the Substantial Present Test, including the famous “closer connection exception” and certain visa exemptions. Hence, you should retain an international tax attorney to analyze your specific set of facts in order to determine whether you should be considered a US person for FBAR purposes.
FinCEN Form 114 Filers: First-Year Residency Election
The third category of residents of the United States for FBAR purposes includes all individuals who made a first-year election on their US tax returns to be treated as residents pursuant to IRC §7701(b)(4). Generally, we are talking about a situation where a person does not have a green card, does not meet the Substantial Presence Test and comes sometime during a year. In other words, this person is not a US person under any other category, but decides to make an election to be treated as a US tax resident.
In order to make this election, the person must satisfy certain requirements outlined in IRC §7701(b)(4). Failure to meet any of these requirements will result in a person becoming a non-resident alien for the entire year.
It is also important not to confuse the IRC §7701(b)(4) election with the IRC §6013(g) or (h) election. In the latter cases, the elections do not affect the residency status for FBAR purposes.
FinCEN Form 114 Filers: First- and Last-Year Residency Provisions of IRC §7701(b)(2)
IRC §7701(b)(2) is not technically a fourth category of a resident of the United States. Rather, this section regulates when US residency actually starts or ends once it is acquired or lost under other categories. Nevertheless, it is important to understand and be aware of these provisions.
FinCEN Form 114 Filers: Tax Treaties & FBAR Residency Status
Most tax treaties contain what are known as “tie-breaker provisions” for determining a person’s tax residency. Sometimes, a person can use these provisions to escape the income tax residency rules. The IRS has specifically stated that, as long as one of the residency test of IRC §7701(b) is met, the tax treaty non-residency determination does not affect the residency status of a person for FBAR purposes.
Contact Sherayzen Law Office for the Determination of Whether You and Your Family Should Be Considered FinCEN Form 114 Filers
If you have foreign bank accounts, contact Sherayzen Law Office for professional help concerning whether you need to file an FBAR. Sherayzen Law Office is a highly-experienced international tax law firm which has helped hundreds of US taxpayers with their FBAR issues. We can help You!
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### 2019 Offshore Voluntary Disclosure Options | International Tax Lawyers
The closure of the IRS flagship 2014 Offshore Voluntary Disclosure Program (“OVDP”) in September of 2018 posed a critical issue of the 2019 offshore voluntary disclosure options available to US taxpayers. This is precisely the issue that I would like to explore today – the 2019 offshore voluntary disclosure options available to US taxpayers who wish to voluntarily resolve their prior US tax noncompliance concerning foreign assets and foreign income.
2019 Offshore Voluntary Disclosure Options: Streamlined Domestic Offshore Procedures
With the closure of the OVDP, the Streamlined Domestic Offshore Procedures (“SDOP”) became the main voluntary disclosure option for US taxpayers who reside in the United States. SDOP offers huge benefits to its participants in terms of simplicity of the process, limitations on the years subject to voluntary disclosure and the mildness of its penalty structure. There are some “unfair” provisions, such as subjecting income-compliant accounts to SDOP’s Miscellaneous Offshore Penalty, but, overall, the benefits offered by this option outweigh its deficiencies for most taxpayers.
The main obstacle to using SDOP in 2019 remains its requirement that a taxpayer certifies under the penalty of perjury that he was non-willful with respect to his prior income tax noncompliance, FBAR noncompliance and noncompliance with any other US international information tax return (such as Form 8938, 3520, 5471, et cetera). This is an insurmountable problem for willful taxpayers. It will be up to your international tax lawyer to make the determination on whether you are able to make this certification.
2019 Offshore Voluntary Disclosure Options: Streamlined Foreign Offshore Procedures
Streamlined Foreign Offshore Procedures (“SFOP”) is SDOP’s brother; both options were announced at the same time in 2014 as two distinct parts of the Streamlined Filing Compliance Procedures. SFOP is available to US taxpayers who satisfy its eligibility requirements, particularly those related to non-willfulness certification and physical presence outside of the United States. Again, you should contact Sherayzen Law Office to help you determine whether you meet the eligibility requirements of SFOP.
The taxpayers who are able to satisfy SFOP’s eligibility requirements will find themselves in a tax paradise, because SFOP is the closest option to a true amnesty program that the IRS ever provided to US taxpayers. Not only does SFOP preserve the non-invasive and limited scope of voluntary disclosure that characterizes SDOP, but SFOP also does not require US taxpayers to pay any penalties. A taxpayer only needs to pay the extra tax due with interest for the past three years. The announcement by the IRS of this option in 2014 was a true gift to US taxpayers.
2019 Offshore Voluntary Disclosure Options: Delinquent FBAR Submission Procedures
Another highly beneficial voluntary disclosure option for 2019 is Delinquent FBAR Submission Procedures (“DFSP”). This is not a new option; in fact, in one form or another, it has always existed within the IRS procedures. Prior to 2014, it was even written into the OVDP as FAQ#17.
Since its “independence” in 2014, DFSP is a somewhat more difficult option than what it used to be as FAQ#17. Nevertheless, it is still a zero-penalty option for those taxpayers who are able to satisfy its eligibility requirements. Unfortunately, the eligibility requirements are very strict and even de minimis income tax noncompliance will deprive a taxpayer of the ability to use this option.
2019 Offshore Voluntary Disclosure Options: Delinquent International Information Return Submission Procedures
Delinquent International Information Return Submission Procedures (“DIIRSP”) has a very similar history to DFSP. In fact, it was “codified” into OVDP rules as FAQ#18. Since it became an independent option in 2014, however, its eligibility requirements became much harsher. Now, US taxpayers are required to provide a reasonable cause explanation in order to escape IRS penalties under this option.
2019 Offshore Voluntary Disclosure Options: Modified IRS Traditional Voluntary Disclosure Program
The traditional IRS Offshore Voluntary Disclosure Program (“TVDP”) has existed for a very long time. However, it faded into complete obscurity once the IRS opened its first major OVDP option. The recent closure of the OVDP has brought TVDP back to life.
In fact, the IRS is now presenting TVDP as the main, almost default, voluntary disclosure option for US taxpayers who willfully violated their US tax obligations. On November 20, 2018, the IRS has completely revamped the TVDP’s procedural structure and clarified the penalty imposition rules. I am almost tempted to call this new version of TVDP as “2018 TVDP”!
2019 Offshore Voluntary Disclosure Options: Reasonable Cause Disclosure
This was the most popular voluntary disclosure option prior OVDP; then, after 2009 (and between various OVDP options), Reasonable Cause disclosure continued to play the role of the most important alternative to the OVDP. Since 2014, however, the appearance of SDOP and SFOP has substantially deflated the appeal of Reasonable Cause disclosures. The fact that the IRS closed the physical address for such disclosures and tried to make this option as unpopular as possible further contributed to the decline of Reasonable Cause disclosures. Starting the end of 2018, however, Reasonable Cause disclosure experienced some resurgence due to the closure of the OVDP, sometimes for all the wrong reasons.
Reasonable Cause disclosure (a/k/a “Noisy Disclosure”) is based on the actual statutory language; it is not part of any IRS program. Special care must be taken in using this option, because this is a high-risk, high-reward option. If a taxpayer is able to satisfy his high burden of proof, then, he will be able to avoid IRS penalties. If the IRS audits the Reasonable Cause disclosure and disagrees, this taxpayer may face significant IRS penalties and, potentially, years of IRS litigation.
Contact Sherayzen Law Office for Professional Analysis of Your 2019 Offshore Voluntary Disclosure Options
If you have not been able to comply with your US international tax obligations concerning foreign assets and foreign income, contact Sherayzen Law Office for professional help.
Sherayzen Law Office is a leading international tax law firm in the area of offshore voluntary disclosures. Our highly specialized legal team, led by a known international tax attorney Mr. Eugene Sherayzen, has successfully helped hundreds of US taxpayers with assets in more than 70 countries to bring their tax affairs into full compliance with US tax laws.
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### FBAR United States Definition | FBAR Lawyer & Attorney Minneapolis MN
The United States is defined differently with respect to different parts (and, sometimes even within the same part) of the United States Code. There is a specific definition of the United States for FBAR Purposes. In this brief essay, I would like to discuss the FBAR United States Definition and explain its importance to FBAR compliance.
Importance of FBAR United States Definition to FinCEN Form 114
Before we discuss the FBAR United States Definition, we need to the context in which it is used and why it is important for US international tax purposes. FBAR is a common acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. It used to be known under a different name – TD F 90-22.1.
FBAR is part of Title 31, Bank Secrecy Act, but the IRS has administered FBAR since 2001. The IRS primarily uses FBAR not to fight financial crimes (which was its original purpose), but for tax enforcement. In particular, the IRS found that FBAR is an extremely useful tool for combating tax evasion associated with a strategy of hiding money in secret foreign bank accounts.
FBAR’s draconian penalties is what makes this form the favorite with the IRS, but much hated by US taxpayers. The penalties range from a jail sentence to civil willful penalties and even civil non-willful penalties which may exceed a taxpayer’s net worth.
It is precisely these penalties which make it absolutely necessary for US taxpayers to understand when they need to file FBARs. One of the aspects of this understanding is the FBAR United States Definition, which allows one to determine two things. First, the FBAR United States Definition is used to define the United States for the purposes of the Substantial Presence Test. Second, the FBAR United States Definition allows one to classify bank accounts as foreign or domestic for FBAR compliance purposes.
FBAR United States Definition
31 CFR 1010.100(hhh) contains the FBAR United States Definition. Under this provision, the United States is defined as: the States of the United States, the District of Columbia, the Indian Lands (as defined in the Indian Gaming Regulatory Act) and the territories and insular possessions of the United States. As of February 3, 2019, the US territories and insular possessions refer to: Puerto Rico, Guam, American Samoa, US Virgin Islands and Northern Mariana Islands.
Contact Sherayzen Law Office for Professional FBAR Help
If you have undisclosed foreign accounts, contact Sherayzen Law Office for professional help. We have successfully helped hundreds of US taxpayers around the world with their FBAR issues, and We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Colombian Bank Accounts | International Tax Lawyer & Attorney Miami
Even today many US owners of Colombian bank accounts remain completely unaware of the numerous US tax requirements that may apply to them. The purpose of this essay is to educate these owners about the requirement to report income generated by these accounts in the United States as well as the FBAR and FATCA obligations concerning the disclosure of ownership of Colombian bank accounts to the IRS.
Colombian Bank Accounts: Individuals Who Must Report Them
Before we discuss the aforementioned requirements in more detail, we need to determine who is required to comply with them. In other words, is every Colombian required to file FBAR in the United States? Or, does this obligation apply only to certain individuals?
The answer is very clear: only Colombians who fall within one of the categories of US tax residents must comply with these requirements. US tax residents include US citizens, US Permanent Residents, an individual who satisfies the Substantial Presence Test and an individual who properly declares himself a US tax resident. There are important exceptions to this general rule, but, if you fall within any of these categories, you need to contact an international tax attorney as soon as possible to determine your US tax obligations concerning your ownership of Colombian bank accounts.
Colombian Bank Accounts: Income Reporting
All US tax residents are subject to the worldwide income reporting requirement. In other words, they must disclose on their US tax returns not only their US-source income, but also their foreign income. The latter includes all bank interest income, dividends, royalties, capital gains and any other income generated by Colombian bank accounts.
The worldwide income reporting requirement also requires the disclosure of PFIC distributions, PFIC sales, Subpart F income and GILTI income. These are complex requirements which are outside the scope of this article, but US owners of Colombian bank accounts need to be aware of the existence of these requirements.
Colombian Bank Accounts: FinCEN Form 114 (FBAR)
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”) mandates US tax residents to disclose their ownership interest in or signatory authority or any other authority over Colombian bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. Every part of this sentence has a special significance and contains a trap for the unwary.
The most dangerous of these traps is the definition of an “account”. The FBAR definition of account is much broader than how this word is generally understood by taxpayers. For the purposes of FBAR compliance, this term includes checking accounts, savings accounts, fixed-deposit accounts, investments accounts, mutual funds, options/commodity futures accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, it is very likely that the IRS will find that an account exists whenever there is a custodial relationship between a foreign financial institution and a US person’s foreign asset.
FBAR has its own intricate penalty system which is widely known for its severity. The FBAR penalties range from incarceration to willful and even non-willful penalties which may easily exceed the value of the penalized accounts. In order to circumvent the potential 8th Amendment challenges and make the penalty imposition more flexible, the IRS has implemented a system of self-imposed limitations, but it is a completely voluntary system (i.e. the IRS can, and in fact already did several times, disregard these limitations).
Colombian Bank Accounts: FATCA Form 8938
While Form 8938 is a relative newcomer (since tax year 2011), it has occupied a special place among the US international tax requirements. In fact, one could argue that it is currently as important as FBAR for US taxpayers with Colombian bank accounts.
The Foreign Account Tax Compliance Act (“FATCA”) gave birth to Form 8938, making it part of a taxpayer’s federal tax return. This means that a failure to file Form 8938 may render the entire federal tax return incomplete, and the IRS may be able to audit the return. Immediately, we can see the profound impact Form 8938 has on the Statute of Limitations for the entire tax return.
Given the fact that it is a direct descendant of FATCA, it is not surprising Form 8938's primary focus is on foreign financial assets. Form 8938 requires a US taxpayer to disclose all Specified Foreign Financial Assets (“SFFA”) as long as he satisfies the relevant filing threshold. The filing thresholds differ depending on the filing status and the place of residence (i.e. inside or outside of the United States) of the taxpayer.
SFFA includes an enormous variety of foreign financial assets, including foreign bank and financial accounts. In fact, with respect to bank and financial accounts, Form 8938 is very similar to FBAR, which often results in double-reporting of the same assets. It is important to emphasize that Form 8938 does not replace FBAR, both forms must still be filed. In other words, US taxpayers should report their Colombian bank accounts on FBAR and disclose them again on Form 8938.
Form 8938 has its own penalty system which contains some unique elements. In addition to its own $10,000 failure-to-file penalty, Form 8938 directly affects the accuracy-related income tax penalties and the ability of a taxpayer to use foreign tax credit.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Colombian Bank Accounts
US international tax compliance is extremely complex. It is very easy to get yourself into trouble, and much more difficult and expensive to get yourself out of this trouble. If you have Colombian bank accounts, contact the experienced international tax attorney and owner of Sherayzen Law Office, Mr. Eugene Sherayzen. Mr. Sherayzen has helped hundreds of US taxpayers with their US international tax issues, and He can help You!
Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!

### Main Worldwide Income Reporting Myths | International Tax Attorney St Paul
In a previous article, I discussed the worldwide income reporting requirement and I mentioned that I would discuss the traps or false myths associated with this requirement in a future article. In this essay, I will keep my promise and discuss the main worldwide income reporting myths.
Worldwide Income Reporting Myths: the Source of Myths
I would like to begin by reminding the readers about what the worldwide income reporting rule requires. The worldwide income reporting requirement states that all US tax residents are obligated to disclose all of their US-source income and foreign-source income on their US tax returns.
This rule seems clear and straightforward. Unfortunately, it does not coincide with the income reporting requirements of many foreign tax systems. It is precisely this tension between the US tax system and tax systems of other countries that gives rise to numerous false myths which eventually lead to the US income tax noncompliance. Let’s go over the four most common myths.
Worldwide Income Reporting Myths: Local Taxation
Many US taxpayers incorrectly believe that their foreign-source income does not need to be disclosed in the United States because it is taxed in the local jurisdiction. The logic behind this myth is simple – otherwise, the income would be subject to double taxation. There is a variation on this myth which relies on various tax treaties between the United States and foreign countries on the prevention of double-taxation.
The “local taxation” myth is completely false. US tax law requires US tax residents to disclose their foreign-source income even if it is subject to foreign taxation or foreign tax withholding. These taxpayers forget that they may be able to use the foreign tax credit to remedy the effect of the double-taxation.
Where the foreign tax credit is unavailable or subject to certain limitations, the danger of double taxation indeed exists. This is why you need to consult an international tax attorney to properly structure your transactions in order to avoid the effect of double-taxation. In any case, the danger of double taxation does not alter the worldwide income reporting requirement – you still need to disclose your foreign-source income even if it is taxed locally.
The tax-treaty variation on the local taxation myth is generally false, but not always. There are indeed tax treaties that exempt certain types of income from US taxation; the US-France tax treaty is especially unusual in this aspect. These exceptions are highly limited and usually apply only to certain foreign pensions.
Generally, however, tax treaties would not prevent foreign income from being reportable in the United States. In other words, one should not turn an exception into a general rule; the existence of a tax treaty would not generally modify the worldwide income reporting requirement.
Worldwide Income Reporting Myths: Territorial Taxation
Millions of US taxpayers were born overseas and their understanding of taxation was often formed through their exposure to much more territorial systems of taxation that exist in many foreign countries. These taxpayers often believe that they should report their income only in the jurisdictions where the income was earned or generated. In other words, the followers of this myth assert that US-source income should be disclosed on US tax returns and foreign-source income on foreign tax returns.
This myth is false. US tax system is unique in many aspects; its invasive worldwide reach stands in sharp contrast to the territorial or mixed-territorial models of taxation that exist in other countries. Hence, you cannot apply your prior experiences with a foreign system of taxation to the US tax system. With respect to individuals, US tax laws continue to mandate worldwide income reporting irrespective of how other countries organize their tax systems.
Worldwide Income Reporting Myths: De Minimis Exception
The third myth has an unclear origin; most likely, it comes from human nature that tends to disregard insignificant amounts. The followers of this myth believe that small amounts of foreign source income do not need to be disclosed in the United States, because there is a de minimis exception to the worldwide income reporting requirement.
This is incorrect: there is no such de minimis exception. You must disclose your foreign income on your US tax return no matter how small it is.
This myth has a special significance in the context of offshore voluntary disclosures. The Delinquent FBAR Submission Procedures can only be used if there is no income noncompliance. Oftentimes, taxpayers cannot benefit from this voluntary disclosure option, because they failed to disclose an interest income of merely ten or twenty dollars.
Worldwide Income Reporting Myths: Foreign Earned Income Exclusion
Finally, the fourth myth comes from the misunderstanding of the Foreign Earned Income Exclusion (the “FEIE”). The FEIE allows certain taxpayers who reside overseas to exclude a certain amount of earned income on their US tax returns from taxation as long as these taxpayers meet either the physical presence test or the bona fide residency test.
Some US taxpayers misunderstand the rules of the FEIE and believe that they are allowed to exclude all of their foreign income as long as they reside overseas. A variation on this myth ignores even the residency aspect; the taxpayers who fall into this trap believe that the FEIE excludes all foreign income from reporting.
This myth and its variation are wrong in three aspects. First of all, even in the case of FEIE, all of the foreign earned income must first be disclosed on a tax return and then, and only then, would the taxpayer be able to take the exclusion on the tax return. Second, the FEIE applies only to earned income (i.e. salaries or self-employment income), not passive income (such as bank interest, dividends, royalties and capital gains). Finally, as I already stated, in order to be eligible for the FEIE, a taxpayer must satisfy one of the two tests: the physical presence test or the bona fide residency test.
Contact Sherayzen Law Office for Professional Help With Your Worldwide Income Reporting
Worldwide income reporting can be an incredibly complex requirement despite its appearance of simplicity. In this essay, I pointed out just four most common traps for US taxpayers; there are many more.
Hence, if you have foreign income, contact Sherayzen Law Office for professional help. Our highly-experienced tax team, headed by a known international tax lawyer, Mr. Eugene Sherayzen, has helped hundreds of US taxpayers to bring themselves into full compliance with US tax laws. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Worldwide Income Reporting Requirement | IRS International Tax Lawyer
Worldwide income reporting is at the core of US international tax system. Yet, every year, a huge number of US taxpayers fail to comply with this requirement. While some of these failures are willful, most of this noncompliance comes from misunderstanding of the worldwide income reporting requirement. In this essay, I will introduce the readers to the worldwide income reporting requirement and explain who must comply with it.
Worldwide Income Reporting Requirement: Who is Affected
It is important to understand that the worldwide income reporting requirement applies to all US tax residents. US tax residents include US citizens, US Permanent Residents (the so-called “green card” holders), taxpayers who satisfied the Substantial Presence Test and non-resident aliens who declared themselves US tax residents on their US tax returns. This is the general definition and there are certain exceptions, including treaty-based exceptions.
Worldwide Income Reporting Requirement: What Must Be Disclosed
The worldwide income reporting requirement mandates US tax residents to disclose all of their US-source income and all of their foreign-source income on their US tax returns. This seems like a very straightforward rule, but its practical application creates many tax traps for the unwary, which I will discuss in a future article.
Worldwide Income Reporting Requirement: Constructive Income and Anti-Deferral Regimes
It is important to emphasize that the worldwide income reporting requirement requires the disclosure not only of the income that you actually received, but also the income that you are deemed to have received by the operation of law. In other words, US tax residents must also disclose their constructive income.
One of the most common sources of constructive income in US international tax law are Anti-Deferral regimes that arise from the ownership of a foreign corporation. The two most common regimes are Subpart F rules (which apply only to a Controlled Foreign Corporation) and the brand-new GILTI  regime. You can find out more about these two highly-complex US tax laws by searching the articles on our website.
Contact Sherayzen Law Office for Professional Help With the Worldwide Income Reporting Requirement
The worldwide income reporting requirement can be extremely complex; you can easily get yourself into trouble with the IRS over this issue. In order to avoid making costly mistakes and correct prior US tax noncompliance in the most efficient manner, you should contact Sherayzen Law Office help. We have helped hundreds of US taxpayers to comply with their US international tax obligations with respect to foreign income and foreign assets, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Mexican Bank Accounts & US Tax Obligations | International Tax Lawyers
In this essay, I would like to discuss three main US tax obligations concerning Mexican bank accounts: the worldwide income reporting requirement, FBAR and Form 8938. I will only concentrate on the obligations concerning individuals, not business entities.
Mexican Bank Accounts and US Tax Residents
Before we delve into the discussion concerning US tax obligations, we should establish who is required to comply with these obligations. In other words, who needs to report their Mexican bank accounts to the IRS?
The answer to this question is clear: US tax residents. Only US tax residents must disclose their worldwide income and report their Mexican bank accounts on FBAR and Form 8938. Non-resident aliens who have never declared themselves as US tax residents do not need to comply with these requirements.
US tax residents include US citizens, US Permanent Residents, an individual who satisfied the Substantial Presence Test and an individual who properly declares himself a US tax resident. This is, of course, the general rule; important exceptions exist to this rule.
Mexican Bank Accounts: Worldwide Income Reporting Requirement
US tax residents must disclose their worldwide income on their US tax returns, including any income generated by Mexican bank accounts. In other words, all interest, dividend and royalty income produced by these accounts must be reported on Form 1040. Similarly, any capital gains from sales of investments held in Mexican bank accounts should also be disclosed on Form 1040. US taxpayers should pay special attention to the reporting of PFIC distributions and PFIC sales.
It is also possible that you may have to disclose passive income generated by your Mexican business entities through the operation of Subpart F rules and the GILTI regime, but this is a topic for a separate discussion.
Mexican Bank Accounts: FBAR
US tax residents must disclose on FBAR their ownership interest in or signatory authority or any other authority over Mexican bank and financial accounts if the aggregate highest balance of these accounts exceeds $10,000. FBAR is a common acronym for the Report of Foreign Bank and Financial Accounts, FinCEN Form 114. Even though this is a FinCEN Form, the IRS is charged with the enforcement of this form since 2001.
While seemingly simple, FBAR contains a number of traps for the unwary. One of the most common trap is the definition of “account”. For the FBAR purposes, “account” has a much broader definition than what people generally think of as an account. ‘Account” includes not just regular checking and savings accounts, but also investment accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In fact, it is very likely that the IRS will find that an account exists whenever there is a custodial relationship between a financial institution and a US person’s foreign asset.
FBAR is a very dangerous form. Not only is the filing threshold very low, but there are huge penalties for FBAR noncompliance. For a willful violation, the penalties can go up to $100,000 (adjusted for inflation) per account per year or 50% of the highest value of the account per year, whichever is higher. In special circumstances, the IRS may refer FBAR noncompliance to the US Department of Justice for criminal prosecution. Even non-willful FBAR penalties may go up to $10,000 (again, adjusted for inflation) per account per year.
Mexican Bank Accounts: FATCA Form 8938
The final requirement that I wish to discuss today is the FATCA Form 8938. Born out of the Foreign Account Tax Compliance Act, Form 8938 occupies a unique role in US international tax compliance. On the one hand, it may result in the duplication of a taxpayer’s US tax disclosures (especially with respect to the accounts already disclosed on FBAR). On the other hand, however, Form 8938 is a “catch-all” form that fills the compliance gaps with respect to other US international tax forms.
For example, if a taxpayer holds a paper bond certificate, this asset would not be reported on FBAR, because it is not an account. For the Form 8938 purposes, however, the IRS would consider this certificate as part of assets that fall within the definition of the Specified Foreign Financial Assets ("SFFA”).
Hence, the scope of Form 8938 is very broad. It requires a specified person (this term is almost equivalent to a US tax resident) to disclose all SFFA as long as these SFFA, in the aggregate, exceed the applicable filing threshold.
SFFA includes a huge variety of foreign financial assets which are divided into two sub-categories: (a) foreign bank and financial accounts; and (b) “other” foreign financial assets. The definition of the “other” assets is impressive in its breadth: bonds, stocks, ownership interest in a closely-held business, beneficiary interest in a foreign trust, an interest rate swap, currency swap; basis swap; interest rate cap, interest rate floor, commodity swap; equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty; an option or other derivative instrument with respect to any currency or commodity that is entered into with a foreign counterparty or issuer; and so on.
Form 8938 requires not only the reporting of SFFA, but also the income generated by the SFFA. In essence, the worldwide income reporting requirement is incorporated directly into the form.
The filing threshold for Form 8938 is more reasonable than that of FBAR for specified persons who reside in the United States, but it is still fairly low (especially for individuals). For example, if a taxpayer lives in the United States, he will need to file Form 8938 if he has SFFA of $50,000 ($100,000 for a married couple) or higher at the end of the year or $75,000 ($150,000 for a married couple) or higher during any time during the year. Specified persons who reside outside of the United States enjoy much higher thresholds.
Form 8938 has its own penalty system which contains some unique elements. First of all, a failure to comply with the Form 8938 requirements may allow the IRS to impose a $10,000 failure-to-file penalty which may go up to as high as $50,000 in certain circumstances. Second, Form 8938 noncompliance will lead to an imposition of much higher accuracy-related penalties on the income tax side – 40% of the additional tax liability. Third, Form 8938 noncompliance will limit the taxpayer’s ability to utilize the Foreign Tax Credit.
Finally, a failure to file Form 8938 will directly affect the Statute of Limitations of the entire tax return by extending the Statute to the period that ends only three years after the form is filed. In other words, Form 8938 penalties may allow the IRS to audit tax years which otherwise would normally be outside of the general three-year statute of limitations.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Mexican Bank Accounts
Sherayzen Law Office’s core area of practice is international tax compliance, including offshore voluntary disclosures – i.e. helping US taxpayers with foreign assets and foreign income to stay in US tax compliance and, if a taxpayer fails failed to comply with US tax laws in the past, bring him into compliance through an offshore voluntary disclosure. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Inheritance Definition | International Tax Lawyer & Attorney
Foreign inheritance definition is a topic of crucial importance for both US income and US estate tax compliance, because domestic inheritance and foreign inheritance have vastly different income tax results and reporting requirements. Hence, the topic of foreign inheritance definition directly concerns millions of Americans who reside overseas and tens of millions of Americans who have relatives outside of the United States. In this article, I will explore the foreign inheritance definition and warn against the common tax traps associated with it.
Foreign Inheritance Definition: Confusion Among Taxpayers
There is an enormous confusion right now among many US taxpayers with respect to US tax compliance requirements concerning a foreign inheritance. Some taxpayers firmly believe that a foreign inheritance is never subject to US taxation, some adopt an exactly opposite position while the rest simply do not know what to think.
It appears that the notion that foreign inheritance is non-taxable was acquired by reading various articles on the internet that state exactly this point. The people who believe that foreign inheritance is taxable also draw their conclusion from the internet - the difference arises from the fact that they read different articles. Finally, the third category of taxpayers read both kinds of articles and they simply do not know who to believe.
What is going on? Why is it that the articles on the internet seem to draw mutually-exclusive conclusions? Is one category of articles correct while the other one is one hundred percent wrong?
The answer to these questions lies in identifying the purpose for which an internet article was written, because the source of confusion lies in the foreign inheritance definition. It turns out that there are two definitions with separate applicable US tax compliance requirements!
Foreign Inheritance Definition for Income Tax Purposes
The first foreign inheritance definition exists for income tax purposes only. Under this rule, foreign inheritance is an inheritance received from a decedent who is a non-resident alien.
In this context, “non-resident alien” is defined by the IRS income tax rules. In other words, a non-resident alien is a person who does not fall into any of the tax residency categories. He cannot be a US citizen or US permanent resident; he did not stay long enough to satisfy the Substantial Presence Test; and he never declared himself a US tax resident (for example, by filing a joint US tax return with his US spouse).
Foreign Inheritance Definition for Estate Tax Purposes
A different definition of foreign inheritance applies under the US estate tax rules. Here, a foreign inheritance is defined as an inheritance received from a decedent who is a nonresident noncitizen. A noncitizen is a nonresident if he is domiciled outside of the United States. The term “domicile” here means acquiring a place to live without a present intention of later leaving. There are various factors used to determine a person’s domicile.
It is important to understand that, due to these two different definitions of a foreign inheritance, it is possible that a person could be a tax resident for income tax purposes and a nonresident noncitizen for estate tax purposes. Vice-versa may also be true.
Foreign Inheritance Definition and Tax Consequences
Now that we understand that there is a separate foreign inheritance definition for each tax regime (income and estate), we can clarify the confusion that prevails on the internet and among US taxpayers.
Generally, if the decedent was a non-resident alien, then neither his estate nor his US heirs would be subject to income taxes at the time of inheritance. I wish to emphasize here that this rule applies only “at the time of inheritance”, not before or after the foreign inheritance takes place. Exceptions may be possible with respect to foreign trusts.
On the other hand, if an inheritance was received from a taxpayer who is domiciled in the United States, then it will be subject to US estate tax rules irrespective of the country where the inherited assets are located. Of course, estate tax treaties may provide a certain amount of relief against double-taxation in this case.
If an inheritance was received from a nonresident noncitizen, then all foreign assets, except those considered as “US situs assets”, will avoid US estate taxation. The US situs assets above the exclusion of $60,000, however, may still be taxed in the United States.
Contact Sherayzen Law Office for Professional Tax Help With Your Foreign Inheritance
All of the rules that I have stated here are general, and your international tax attorney needs to apply them to your specific fact pattern in order to determine whether an inheritance fits a foreign inheritance definition for either estate or income tax purposes or both.
Furthermore, one should remember that “non-taxable” does not mean “non-reportable”. There are various income tax information reporting requirements that may apply to you even if your foreign inheritance was not taxable. Additionally, income tax recognition may be required in certain situations with respect to your foreign inheritance, especially before and after the you are deemed to have inherited your foreign assets.
Under these circumstances, the help of Sherayzen Law Office is of critical importance if you wish to stay in US tax compliance and avoid high IRS tax penalties. We are an international tax law firm highly experienced in US tax compliance concerning a foreign inheritance. We have successfully helped US taxpayers all over the globe with their foreign inheritance issues, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation About Your Foreign Inheritance!

### IRS Waives 2018 Estimated Tax Penalty for Certain Taxpayers | Tax News
On January 16, 2019, the IRS announced that it would waive the 2018 estimated tax penalty for taxpayers who paid at least 85% of their total tax liability during 2018, either through federal income tax withholding, quarterly estimated tax payments or the combination of both of these payment methods. These changes will be integrated in the forthcoming revision of Form 2210 and instructions.
The 85% threshold is a reduction from the usual 90% threshold required to avoid a penalty. It appears that this new limitation will apply only to the 2018 estimated tax penalty.
Why did the IRS single out the 2018 estimated tax penalty for this additional relief? Very simple – the IRS is trying to help the taxpayers who were unable to properly calculate the needed tax withholding and estimated tax payments due to the numerous changes to tax laws introduced by the 2017 Tax Cuts and Jobs Act.
The IRS probably also feels that its own federal tax withholding tables could have contributed to underpayment of tax by many taxpayers. When they were released in early 2018, the updated federal tax withholding tables reflected only the lower tax rates and the increased standard deduction. The tables, however, did not fully reflect other changes, such as the elimination of personal exemptions (including exemptions for dependents) and the severe limitations placed on  itemized deductions. Hence, if a taxpayer relied on the federal tax withholding tables, he would have been unfairly exposed to the 2018 estimated tax penalty had the IRS refused to grant this relief.
In all fairness, it should be mentioned that the IRS attempted to correct its mistake by initiating a very extensive education campaign (which also involved all IRS partner groups) for taxpayers with respect to the need to check on their tax withholding.
It is important to point out that the taxpayers should pay a lot more attention to their tax withholding for 2019 so that a 2018 estimated tax penalty does not turn into a 2019 estimated tax penalty. This is especially true for taxpayers who will now owe (maybe, somewhat unexpectedly for them) taxes on their tax returns. The highest-risk taxpayers are, of course, those who have itemized their deductions and complex income. Sherayzen Law Office also warns that taxpayers with foreign income are within this high-risk category.

### 2018 FBAR Currency Conversion Rates | FBAR Tax Lawyer & Attorney
2018 FBAR and 2018 Form 8938 instructions both require that 2018 FBAR Currency Conversion Rates be used to report the required highest balances of foreign financial assets on these forms. In the case of 2018 Form 8938, the 2018 FBAR Currency Conversion Rates is the default choice, not an exclusive one.
The U.S. Department of Treasury  already published the 2018 FBAR Currency Conversion Rates online (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”).
Since the 2018 FBAR Currency Conversion Rates are very important to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below listing the official 2018 FBAR Currency Conversion Rates (note that the readers still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI
74.576
ALBANIA - LEK
107.05
ALGERIA - DINAR
117.898
ANGOLA - KWANZA
310.0000
ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR
2.7000
ARGENTINA - PESO
37.642
ARMENIA - DRAM
485.0000
AUSTRALIA - DOLLAR
1.4160
AUSTRIA - EURO
0.8720
AZERBAIJAN - NEW MANAT
1.7000
BAHAMAS - DOLLAR
1.0000
BAHRAIN - DINAR
0.3770
BANGLADESH - TAKA
84.0000
BARBADOS - DOLLAR
2.0200
BELARUS - NEW RUBLE
2.1600
BELGIUM - EURO
0.8720
BELIZE - DOLLAR
2.0000
BENIN - CFA FRANC
568.6500
BERMUDA - DOLLAR
1.0000
BOLIVIA - BOLIVIANO
6.8500
BOSNIA - MARKA
1.7060
BOTSWANA - PULA
10.6610
BRAZIL - REAL
3.8800
BRUNEI - DOLLAR
1.3610
BULGARIA - LEV
1.7070
BURKINA FASO - CFA FRANC
568.6500
BURUNDI - FRANC
1790.0000
CAMBODIA (KHMER) - RIEL
4103.0000
CAMEROON - CFA FRANC
603.8700
CANADA - DOLLAR
1.3620
CAPE VERDE - ESCUDO
94.8800
CAYMAN ISLANDS - DOLLAR
0.8200
CENTRAL AFRICAN REPUBLIC - CFA FRANC
603.8700
CHAD - CFA FRANC
603.8700
CHILE - PESO
693.0800
CHINA - RENMINBI
6.8760
COLOMBIA - PESO
3245.8000
COMOROS - FRANC
428.1400
CONGO, DEM. REP - CONGOLESE FRANC
1630.0000
COSTA RICA - COLON
603.5000
COTE D'IVOIRE - CFA FRANC
568.6500
CROATIA - KUNA
6.3100
CUBA - PESO
1.0000
CYPRUS - EURO
0.8720
CZECH REPUBLIC - KORUNA
21.9410
DENMARK - KRONE
6.5170
DJIBOUTI - FRANC
177.0000
DOMINICAN REPUBLIC - PESO
49.9400
ECUADOR - DOLARES
1.0000
EGYPT - POUND
17.8900
EL SALVADOR - DOLARES
1.0000
EQUATORIAL GUINEA - CFA FRANC
603.8700
ERITREA - NAKFA
15.0000
ESTONIA - EURO
0.8720
ETHIOPIA - BIRR
28.0400
EURO ZONE - EURO
0.8720
FIJI - DOLLAR
2.1080
FINLAND - EURO
0.8720
FRANCE - EURO
0.8720
GABON - CFA FRANC
603.8700
GAMBIA - DALASI
50.0000
GEORGIA - LARI
2.6700
GERMANY - EURO
0.8720
GHANA - CEDI
4.8250
GREECE - EURO
0.8720
GRENADA - EAST CARIBBEAN DOLLAR
2.7000
GUATEMALA - QUENTZAL
7.7150
GUINEA - FRANC
9076.0000
GUINEA BISSAU - CFA FRANC
568.6500
GUYANA - DOLLAR
215.0000
HAITI - GOURDE
77.1180
HONDURAS - LEMPIRA
25.0000
HONG KONG - DOLLAR
7.8320
HUNGARY - FORINT
280.1700
ICELAND - KRONA
116.1100
INDIA - RUPEE
69.8000
INDONESIA - RUPIAH
14440.0000
IRAN - RIAL
42000.0000
IRAQ - DINAR
1138.0000
IRELAND - EURO
0.8720
ISRAEL - SHEKEL
3.7490
ITALY - EURO
0.8720
JAMAICA - DOLLAR
126.0000
JAPAN - YEN
109.8500
JERUSALEM - SHEKEL
3.7490
JORDAN - DINAR
0.7080
KAZAKHSTAN - TENGE
375.1500
KENYA - SHILLING
101.8000
KOREA - WON
1114.4900
KOSOVO - EURO
0.8720
KUWAIT - DINAR
0.3030
KYRGYZSTAN - SOM
69.8000
LAOS - KIP
8535.0000
LATVIA - EURO
0.8720
LEBANON - POUND
1500.0000
LESOTHO - SOUTH AFRICAN RAND
14.3500
LIBERIA - DOLLAR
156.7100
LIBYA - DINAR
1.3860
LITHUANIA - EURO
0.8720
LUXEMBOURG - EURO
0.8720
MACAO - MOP
no listing
MACEDONIA FYROM - DENAR
53.5000
MADAGASCAR - ARIARY
3470.2000
MALAWI - KWACHA
733.0000
MALAYSIA - RINGGIT
4.1300
MALI - CFA FRANC
568.6500
MALTA - EURO
0.8720
MARSHALL ISLANDS - DOLLAR
1.0000
MARTINIQUE - EURO
0.8720
MAURITANIA - OUGUIYA
36.0000
MAURITIUS - RUPEE
34.1500
MEXICO - PESO
19.6540
MICRONESIA - DOLLAR
1.0000
MOLDOVA - LEU
16.9930
MONGOLIA - TUGRIK
2642.9200
MONTENEGRO - EURO
0.8720
MOROCCO - DIRHAM
9.5300
MOZAMBIQUE - METICAL
61.5300
MYANMAR - KYAT
1535.0000
NAMIBIA - DOLLAR
14.3500
NEPAL - RUPEE
111.6000
NETHERLANDS - EURO
0.8720
NETHERLANDS ANTILLES - GUILDER
1.7800
NEW ZEALAND - DOLLAR
1.4900
NICARAGUA - CORDOBA
32.3000
NIGER - CFA FRANC
568.6500
NIGERIA - NAIRA
361.0000
NORWAY - KRONE
8.6800
OMAN - RIAL
0.3850
PAKISTAN - RUPEE
138.6000
PALAU - DOLLAR
1.0000
PANAMA - BALBOA
1.0000
PAPUA NEW GUINEA - KINA
3.2840
PARAGUAY - GUARANI
5956.0000
PERU - NUEVO SOL
3.3750
PHILIPPINES - PESO
52.4900
POLAND - ZLOTY
3.7530
PORTUGAL - EURO
0.8720
QATAR - RIYAL
3.6400
ROMANIA - NEW LEU
4.0690
RUSSIA - RUBLE
69.6800
RWANDA - FRANC
890.0000
SAO TOME & PRINCIPE - NEW DOBRAS
21.5350
SAO TOME & PRINCIPE - DOBRAS
20941.0080
SAUDI ARABIA - RIYAL
3.7500
SENEGAL - CFA FRANC
568.6500
SERBIA - DINAR
103.3900
SEYCHELLES - RUPEE
13.5500
SIERRA LEONE - LEONE
8620.0000
SINGAPORE - DOLLAR
1.3610
SLOVAK REPUBLIC - EURO
0.8720
SLOVENIA - EURO
0.8720
SOLOMON ISLANDS - DOLLAR
7.7520
SOMALI - SHILLING
575.0000
SOUTH AFRICA - RAND
14.3500
SOUTH SUDANESE - POUND
153.7000
SPAIN - EURO
0.8720
SRI LANKA - RUPEE
182.6000
ST LUCIA - EC DOLLAR
2.7000
SUDAN - SUDANESE POUND
47.0000
SURINAME - GUILDER
7.5200
SWAZILAND - LILANGENI
14.3500
SWEDEN - KRONA
8.9380
SWITZERLAND - FRANC
0.9840
SYRIA - POUND
515.0000
TAIWAN - DOLLAR
30.5880
TAJIKISTAN - SOMONI
9.3500
TANZANIA - SHILLING
2295.0000
THAILAND - BAHT
32.3500
TIMOR - LESTE DILI
1.0000
TOGO - CFA FRANC
568.6500
TONGA - PA'ANGA
2.1730
TRINIDAD & TOBAGO - DOLLAR
6.7700
TUNISIA - DINAR
3.0090
TURKEY - LIRA
5.2830
TURKMENISTAN - NEW MANAT
3.4910
UGANDA - SHILLING
3705.0000
UKRAINE - HRYVNIA
27.7000
UNITED ARAB EMIRATES - DIRHAM
3.6730
UNITED KINGDOM - POUND STERLING
0.7810
URUGUAY - PESO
32.3200
UZBEKISTAN - SOM
8310.0000
VANUATU - VATU
111.6900
VENEZUELA - BOLIVAR - SOBERANO
563.9800
VENEZUELA - BOLIVAR - FUERTE
248832.0000
VIETNAM - DONG
23190.0000
WESTERN SAMOA - TALA
2.5350
YEMEN - RIAL
480.0000
ZAMBIA - NEW KWACHA
11.9000
ZIMBABWE - DOLLAR
1.0000

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

### Sherayzen Law Office, Ltd. Conducts Foreign Inheritance Seminar | News
On January 17, 2019, Mr. Eugene Sherayzen, an international tax attorney and owner of Sherayzen Law Office, Ltd., conducted a foreign inheritance seminar for the International Business Law and Probate and Trust Law Sections of the Minnesota State Bar Association. The title of the seminar was “Foreign Inheritance – the Pandora’s Box of U.S. International Tax Reporting Requirements.”
Foreign Inheritance Seminar, MSBA, 01/17/2019
This foreign inheritance seminar was well-attended; there were close to 50 attendees. The majority of the attendees were business and estate planning lawyers; there were also a few immigration lawyers.
Mr. Sherayzen defined the main goal of the seminar as broadening the awareness of the U.S. international tax implications of receiving a foreign inheritance. He first focused on the definition of the concept of “foreign inheritance”, exposing the complexity behind this term. Mr. Sherayzen further explained how this term is defined for income tax versus estate tax purposes. He concluded this first part of the seminar by going over a set of hypothetical situations and explaining the U.S. tax consequences the foreign inheritance definition would have in each of them.
During the second part of the seminar, Mr. Sherayzen explained the reporting requirements associated with foreign inheritance. He also explained the difference between the taxability of a foreign inheritance and the reporting of a foreign inheritance. A foreign inheritance may still be required to be reported to the IRS even if it is not taxable.
Mr. Sherayzen devoted the third part of the foreign inheritance seminar to pre-inheritance transfers of assets by a foreign decedent. He explained how an international tax attorney has to analyze each of these transfers in the context of three main strategic issues: classification, income recognition and information reporting. The attorney then focused on the example that embodied all three of these issues – the usufruct.
During the final part of the seminar, Mr. Sherayzen focused on the post-inheritance U.S. tax compliance issues. The attorney described, in a broad manner, the income tax and information tax reporting requirements associated with various classes of assets.  Additionally, Mr. Sherayzen separately discussed the concept of a foreign trust, stated its main reporting requirements and introduced the complications concerning the foreign trust income tax recognition.
Contact Sherayzen Law Office for Professional Tax Help With Your Foreign Inheritance Reporting to the IRS
If you are about to receive or already received a foreign inheritance, contact Sherayzen Law Office for professional help. We are a team of tax professionals highly experienced in U.S. international tax reporting of a foreign inheritance as well as offshore voluntary disclosures which involve inherited foreign assets. We have helped hundreds of U.S. taxpayers with their IRS foreign inheritance issues; and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

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

### Specified Domestic Entity Seminar | International Tax Lawyer & Attorney
On August 17, 2017, the owner of Sherayzen Law Office, Mr. Eugene Sherayzen, conducted a seminar on the new FATCA reporting requirement concerning Form 8938, specifically the new filing category of Specified Domestic Entities (the “Specified Domestic Entity Seminar”). Mr. Sherayzen is a highly experienced attorney who specializes in U.S. international tax compliance, including FATCA Form 8938. The Specified Domestic Entity Seminar was organized by the International Business Law Section of the Minnesota State Bar Association.
The Specified Domestic Entity Seminar commenced with the historical overview of FATCA. Then, it continued to analyze the three principal parts of FATCA (as relevant to the seminar), including Form 8938.
The next part of the Specified Domestic Entity Seminar focused on the filing requirements of FATCA, including the definition of the Specified Foreign Financial Assets. Mr. Sherayzen devoted considerable time to the exploration of various categories of Form 8938 filers and their respective filing thresholds. He explained to the audience that Form 8938 was previously required to be filed only by Specified Individuals. The tax attorney then stated that, starting tax years after December 31, 2015, a domestic corporation, partnership or trust classified as a Specified Domestic Entity was required to file Form 8938.
Having finished the review of the background information, Mr. Sherayzen proceeded to analyze the definition of Specified Domestic Entity. At this point, the Specified Domestic Entity Seminar turned very technical and analytical.
After stating the general definition of Specified Domestic Entity, the tax attorney divided the definition into various parts and analyzed each part in detail. In particular, the Specified Domestic Entity seminar covered the following topics: definition of “domestic” (as defined specifically for the purposes of domestic trusts and domestic business entities), Specified Foreign Financial Assets and the phrase “formed or availed of”.
As part of the analysis of the latter, Mr. Sherayzen discussed the Closely-Held Test and the Passive Tests with their varying applications to domestic trusts and domestic business entities. The tax attorney also discussed the highly unusual attribution rules within the context of the Closely-Held Test.
After the explanation of the Form 8938 filing threshold for Specified Domestic Entities, Mr. Sherayzen concluded the Specified Domestic Entity Seminar and opened the Q&A session.

### Minsk Seminar Conducted by US International Tax Lawyer & Attorney
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.

### SLO’s 2017 Seminar on Business Lawyers’ International Tax Mistakes
On February 23, 2017, Mr. Eugene Sherayzen, an international tax lawyer and owner of Sherayzen Law Office (“SLO”), conducted a seminar titled “Top 5 International Tax Mistakes Made by Business Lawyers”. The seminar was sponsored by the Corporate Counsel Section and International Business Law Section of the Minnesota State Bar Association.
Mr. Sherayzen commenced the seminar by asking a question about why business lawyers should be concerned with making international tax mistakes. After identifying the main answers, the tax attorney stated that he would focus on the strategic mistakes, rather than any specific U.S. international tax requirements.
Mr. Sherayzen first discussed the Business Purity Trap, a situation where business lawyers view a business transaction as something exclusively within the business law domain and with no relation whatsoever to U.S. tax law. The tax attorney stated that all business transactions have tax consequences, even if the effect is not immediate and there is no actual income tax impact.
Then, Mr. Sherayzen discussed the Tax Dabble Trap. This trap describes a situation where a business lawyer attempts to provide an advice on an international tax issue. The tax attorney explained why business lawyers often fall into this trap and the potentially disastrous consequences this trap may have for the business lawyers’ clients.
The Tax Law Uniformity Trap was the third trap discussed by the tax attorney. One of the most common international tax mistakes that business lawyers (and also many accountants) make is to believe that U.S. domestic tax law and U.S. international tax law are similar. Mr. Sherayzen also pointed out that there is a variation on this trap with respect to foreign owners of U.S. entities.
The discussion of the fourth trap, the Tax Professional Equality Trap, turned out be very fruitful. Mr. Sherayzen drew a sharp distinction between the role played by a general accountant versus the role of an international tax attorney. He also specifically focused on the potentially disastrous consequences the reliance on a domestic accountant may have in the context of offshore voluntary disclosures.
Finally, Mr. Sherayzen discussed the Foreign Exceptionalism Trap. This trap deals with a false belief that certain foreign transactions that occur completely outside of the United States have no tax consequences for the U.S. clients involved in these transactions. Mr. Sherayzen also pointed out that danger of relying solely on foreign accountants and lawyers in this context.
He concluded the seminar with a short examination of another “bonus” tax trap called the Linguistic Uniformity Trap. The description of all tax traps was accompanied by real-life examples from Mr. Sherayzen’s international tax law practice.
Contact Sherayzen Law Office for Professional U.S. International Tax Advice to Avoid Costly International Tax Mistakes
If you are a business lawyer who deals with international business transactions or transactions involving tax residents of a foreign country, please contact Sherayzen Law Office to avoid costly international tax mistakes. Our law firm has worked with many business lawyers, helping them to properly structure international business transactions in a way that avoids making international tax mistakes. Remember, it is much easier and cheaper to avoid making international tax mistakes than fixing them later.
Contact Us Today to Schedule Your Confidential Consultation!

### Overseas Green Card Holder & US Tax Residency | Tax Lawyer & Attorney
While most US taxpayers understand that a US permanent resident who resides in the United States is a US tax resident, there seems to be a great deal of confusion over whether the same is true with respect to a US permanent resident who resides overseas (hereinafter, “Overseas Green Card Holder”). In other words, the question is whether an Overseas Green Card Holder should be considered a US tax resident?
It is important to clear up this confusion, because an individual non-resident only needs to report to the IRS his US-source income and income effectively connected to the United States. On the other hand, a US tax resident must disclose to the IRS his worldwide income and his foreign assets. A failure to report foreign income and foreign assets will expose the noncompliant taxpayer to IRS penalties. In the context of US international information returns, these IRS penalties can be particularly cruel; FBAR penalties and FATCA penalties are the most important examples of the severity with which the IRS may punish noncompliant green card holders.
Now that we understand the importance of determining whether an individual is a US tax resident, we can proceed with answering the question of whether an Overseas Green Card Holder is a US tax resident. The answer is an emphatic “yes”.
A US Permanent Resident is always a US tax resident (unless his permanent residency is stripped away for noncompliance with US immigration laws). The location of his physical residency does not matter. This means that an Overseas Green Card Holder should properly report his worldwide income and his foreign assets to the IRS, including the filing of any required FBARs and/or Forms 8938.
For example, if a US Permanent Resident resides in the United Kingdom, earns a salary and owns UK bank accounts, he should disclose his UK income in the United States and report his UK bank accounts on his Schedule B to Form 1040. He should also verify if he needs to disclose his UK bank accounts on FBAR and Form 8938, among other potential US tax requirements.
Contact Sherayzen Law Office for Professional Hep With Your US Tax Compliance if You Are an Overseas Green Card Holder
If you are a US permanent resident who resides in foreign country, contact Sherayzen Law Office for professional tax help as soon as possible. Our highly-experienced international tax attorney, Mr. Sherayzen, will personally analyze your legal situation, determine the US tax requirements that may apply in your situation and create your tax compliance plan, including one that includes an offshore voluntary disclosure to remedy any past US international tax noncompliance. Then, our professional tax team, under the supervision of Mr. Sherayzen, will prepare all of the required tax documents while Mr. Sherayzen implements the overall legal plan.
Contact Us Today to Schedule Your Confidential Consultation!

### Employment Income Sourcing | International Tax Lawyer & Attorney
Employment income sourcing is a very important tax issue for employees of US corporations sent overseas, employees of foreign corporations stationed in the United States and employees who work in different countries during a tax year. For employees who are tax residents of a foreign country, this issue will determine whether their income will be taxed in the United States; whereas for US tax residents, the source of income rules will determine the amount of the allowable foreign tax credit. In this article, I will focus on the employment income sourcing rules concerning monetary compensation of employees.
Employment Income Sourcing: General Rules
The source of income rules concerning employees are very similar to the rules that apply to self-employment income, but there are some differences. The main rule is that the location where the services are rendered determines whether this is US-source income or foreign-source income. If an employee works in the United States, then his salary would be considered US-source income; if he works in a foreign country, his salary would be sourced to that country. See §§861(a)(3) and 862(a)(3).
If the employer pays for work partly performed in the United States and partly outside of the United States, then the salary needs to be allocated between the countries. Treas. Reg. §1.861-4(b)(2)(ii)(A). The key issue arises here – how does an employee allocate this income between the countries?
Employment Income Sourcing: Time Basis Allocation
The first methodology for allocation of income between the countries is stated directly within the regulations – time basis. Id. Here, the IRS offers two choices to the employees: allocation based on specific number of days working in the United States versus separate time periods.
Under the “number of days” variation, the employee adds together the number of days worked in the United States and the number of days worked in a foreign country, figures out the percentages for each country and sources the income according to the percentage allocation. Treas. Reg. §1.861-4(b)(2)(ii)(F).
Under the “time periods” variation, a tax year is split into distinct time periods: one where employee spends all of his time in the United States and one where employee spends all of his time in a foreign country. The compensation paid in the first period is allocated entirely to the United States, whereas the salary paid in the second time period is considered to be foreign-source income. Id.
Employment Income Sourcing: Multi-Year Compensation
An interesting situation occurs with respect to employees with multi-year compensation contracts. A multi-year contract in this context means a situation where the “compensation that is included in the income of an individual in one taxable year but that is attributable to a period that includes two or more taxable years.” Reg. §1.861-4(b)(2)(ii)(F).
Generally, the employment income sourcing in this case occurs in the following manner: (1) employee first aggregates his total contract compensation for the entire year; (2) then, the employee sums up all of the days worked in the United States and all of the days worked in a foreign country for the period covered by the multi-year contract; and (3) the employee sources the income to the United States based on the number of days worked in the United States vis-a-vis the total number of days worked under the contract; the rest of the income is considered foreign-source income. Id. While this approach is specifically described in the regulations, the regulations also generally refer to the “time basis” allocation. Hence, it appears that an employee may have a choice between the “number of days” approach that was just described and the “time periods” variation.
Employment Income Sourcing: Alternative Basis Sourcing
Employees have the right to disregard completely the time basis approach to employment income sourcing and adopt an alternative basis approach. Treas. Reg. §1.861-4(b)(2)(ii)(C)(1)(i).  An employee can do so as long as he is able to establish that “under the facts and circumstances of the particular case, the alternative basis more properly determines the source of the compensation than a basis described in paragraph (b)(2)(ii)(A) or (B), whichever is applicable, of this section.” Id.
An employee is not the only person who has this right; the IRS also has the right to utilize an alternative basis for employment income sourcing “if such compensation either is not for a specific time period or constitutes in substance a fringe benefit.” Treas. Reg. §1.861-4(b)(2)(ii)(C)(1)(ii). The IRS can do so as long as the “alternative basis determines the source of compensation in a more reasonable manner than the basis used by the individual pursuant to paragraph (b)(2)(ii)(A) or (B) of this section.” Id.
A taxpayer does not need to obtain the IRS consent in order to use the alternative basis for employment income sourcing. He should, however, keep the records in order to be able to show how his method is better than the time basis approach. TD 9212, 70 FR 40663, 40665 (07/14/2005).
Special requirements apply to employees who received $250,000 or more in compensation and use the alternative basis for employment income sourcing. Not only must such employees answer the relevant questions on Form 1040, but they should also attach a detailed statement to their tax returns. Id. The statement must contain the following information: “(1) The specific compensation income, or the specific fringe benefit, for which an alternative method is used; (2) for each such item, the alternative method of allocation of source used; (3) for each such item, a computation showing how the alternative allocation was computed; and (4) a comparison of the dollar amount of the compensation sourced within and without the United States under both the individual's alternative basis and the basis for determining source of compensation described in § 1.861-4(b)(2)(ii)(A) or (B).” Id.
Contact Sherayzen Law Office for Professional Help With US International Tax Law
If you are a US taxpayer who receives foreign-source income and/or has foreign assets, contact Sherayzen Law Office for professional help. Our professional tax team, headed by international tax attorney, Mr. Eugene Sherayzen, has helped hundreds of US taxpayers around the world with their US international tax issues. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### FinCEN Form 114 and FBAR Are the Same Form | FBAR Tax Lawyers
In my practice, I often receive phone calls from prospective clients who treat FinCEN Form 114 and FBAR as two different forms. Of course, these are the same forms, but I have asked myself: why do so many taxpayers believe that FinCEN Form 114 and FBAR are two different forms?
The simplest answer, of course, would be that taxpayers are simply so unfamiliar with US international tax law that they do not know the form with which both titles, FinCEN Form 114 and FBAR, should be associated. There is definitely a lot of truth to this conclusion, but it does not tell the whole story.
Upon more profound exploration, I found that a significant amount of potential clients believed that either FBAR or FinCEN Form 114 was a tax form while the other form was something else. In other words, some of the taxpayers think that FinCEN Form 114 is a tax form while FBAR is not a tax form while other taxpayers believe that FBAR is a tax form while FinCEN Form 114 is something else.
After making this discovery, I realized that the very nature of FBAR is at the heart of the problem, because FBAR is not a tax form and has nothing to do with Title 26 (i.e. the Internal Revenue Code) of the United States Code. Rather, the Report of Foreign Bank and Financial Accounts, FinCEN Form 114, commonly known as FBAR, was created by the Bank Secrecy Act of 1970. The Bank Secrecy Act forms part of Title 31 of the United States Code. In fact, prior to September 11, 2001, the IRS had almost nothing to do with FBAR.
It was only after the 9/11 terrorist attacks in the United States when the Congress decided to turn over the enforcement of FBAR to the IRS. Initially, the official purpose was to facilitate the Treasury Department’s fight against terrorism. Within a year, though, it became clear that the IRS would use FBAR in its fight against offshore tax evasion and other noncompliance with US international tax laws.
Using the draconian FBAR penalty structure (at that time, the form was still called TD F 90-22.1) against noncompliant US taxpayers turned out to be a highly effective intimidation tool for the IRS – a tool which works very well even today. Once the Treasury Department mandated the e-filing of FBARs, the name of FBAR was changed from TD F 90-22.1 to FinCEN Form 114.
Thus, the confusion over the relationship between FinCEN Form 114 and FBAR stems from FBAR’s peculiar legal history. Most of US taxpayers do not know any of it; they are simply confused by the fact that the IRS is enforcing a form that has two names and which has nothing to do with the Internal Revenue Code.

### Japanese Bank Accounts : Main US Tax Obligations | FATCA Tax Lawyer
Despite the fact that FATCA has been implemented already in July of 2014, a lot of US taxpayers are still unaware of their obligation to disclose their Japanese bank accounts in the United States. In this essay, I will discuss the three most important US international tax requirements concerning Japanese bank accounts: worldwide income reporting, FBAR and FATCA Form 8938.
Japanese Bank Accounts: Japanese Income Must Be Disclosed on US Tax Returns
All US tax residents must disclose their worldwide income on their US tax returns. This requirement includes all income generated by the Japanese bank accounts. This obligation applies to all types of income: bank interest income, dividends, capital gains, et cetera.
In this context, it is important to reject two incorrect, but commonly-held beliefs concerning the reporting of Japanese-source income. First, a significant number of US taxpayers believe that Japanese income does not need to be reported if it never left Japan. This is completely false; it does not matter where the income is earned or held – as long as you are a US tax resident, you must disclose your Japanese income on your US tax returns whether or not it was ever transferred to the United States.
The second and most common myth is the belief that, if the income is subject to Japanese tax withholding, it does not need to be reported in the United States. Some taxpayers hold this belief because of their familiarity with the territorial system of taxation, while others assume that this is true due to the prohibition of double-taxation under the US-Japan tax treaty.
In either case, this myth is also completely false. All US tax residents must disclose their Japanese income on their US tax returns even if it is subject to Japanese tax withholding or reported on Japanese tax returns. However, you may be able to take advantage of the Foreign Tax Credit to reduce your US tax liability by the amount of taxes paid in Japan.
Japanese Bank Accounts: FBAR
The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (popularly known as “FBAR”) is one of the most important reporting requirements that applies to Japanese bank accounts. Generally, a US person is required to file FBAR if he has a financial interest in or signatory authority or any other authority over foreign bank and financial accounts which, in the aggregate, exceed $10,000 at any point during a calendar year.
FBAR has a severe penalty system for failure to file the form, failure to provide accurate information on the form and failure to maintain supporting documentation for the amounts reported on FBAR. The penalties range from criminal penalties (i.e. actual time in jail) to willful and non-willful civil penalties. The civil penalties are adjusted for inflation each year.
Given the fact that FBAR penalties may completely destroy one’s financial life, US taxpayers should strive to do everything in their power to make sure that they comply with this requirement.
Japanese Bank Accounts: FATCA Form 8938
In addition to FBAR, US tax residents with Japanese bank accounts may be required to file Form 8938. Form 8938 is the creation of the Foreign Account Tax Compliance Act (“FATCA”). US tax residents must disclose their Specified Foreign Financial Assets (“SFFA”) on Form 8938 in each year their SFFA exceed the form’s filing threshold.
Form 8938 has a higher filing threshold than FBAR, but it is still relatively low, especially if the owner of Japanese bank accounts resides in the United States. For example, if a taxpayer resides in the United States and his tax return filing status is “single”, then he would only need to have $50,000 or higher at the end of the year or $75,000 or higher at any point during the year in order to trigger the Form 8938 filing requirement.
Moreover, SFFA is defined very broadly to include a lot of more financial assets than what is required to be reported on FBAR; hence, it is easier for US taxpayers to meet the Form 8938 filing Threshold. SFFA includes foreign bank and financials accounts, bonds, swaps, ownership interest in a foreign business, beneficiary interest in a foreign trust and many other types of financial assets. A word of caution: even when FBAR and Form 8938 cover the same assets, both forms must be filed despite the duplication of the disclosure.
The readers should also remember that Form 8938 has it own distinct penalty structure for failure to file the form or failure to comply with all of its requirements.
Contact Sherayzen Law Office for Professional Help With Reporting of Your Japanese Bank Accounts in the United States
This essay broadly covered three most important and most common reporting requirements concerning Japanese bank accounts. There may be a lot more of these requirements depending on your particular fact pattern.
Sherayzen Law Office has extensive experience working with Japanese clients and their bank accounts. We can help you identify your US international tax requirements and prepare all of the tax documents necessary to comply with them. Moreover, if you did not comply with any of these US tax obligations in the past, we will help you with your offshore voluntary disclosure to minimize your IRS penalties and avoid IRS criminal prosecution.
We have successfully helped hundreds of US taxpayers to deal with their US international tax compliance, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### International Personal Services Sourcing Rules | International Tax Lawyer
In a previous article, I explained that US tax law sources personal services to the place where these services are performed. What about a situation where such services are performed partially in the United States and partially outside of the United States (hereinafter, I will call such services “international personal services”)? In this article, I will address this situation and discuss the US international personal services sourcing rules.
I will specifically limit my discussion in this essay to international personal services sourcing rules concerning non-corporate independent contractors. In the future, I will discuss the income source rules for corporations and employees, including the source of income rules concerning fringe benefits and stock options.
International Personal Services Sourcing: Two Main Situations
The rules concerning the sourcing of international person services income depend on how a contracting agreement structures the payment for such services. In this context, there are two most common categories of contracts.
The first category of contracts specifically designates part of the payment to cover the services performed in the United States and part of the payment to compensate for services performed in a foreign country. In this situation, we can easily apply the general rule and source each part of the payment to the place where services are performed. In other words, the payment for US services will be US-source income and the payment for foreign services will be foreign-source income.
Unfortunately, contractors rarely structure their agreements in this way, because they often fail to retain an international tax lawyer to review their contracts for US international tax issues. Business lawyers also often make the same mistake, because they fail to see the need to involve a tax attorney.
Hence, most contracts fall within the second category of contracts, where a contract does not allocate the payment between services performed in the United States and those performed in a foreign country. The general rule is of little help for these contracts; hence, the IRS developed a supplementary legal process for income sourcing in this type of a situation.
International Personal Services Sourcing: the Two-Step Allocation Process
If the contract does not divide the payment between the countries where the services are performed, then the taxpayer will need to engage in a two-step process.
First, the taxpayer should determine if the terms of the contract allow to make an accurate allocation of payment between the United States and a foreign country. Sometimes, a contractor may perform services so specific to a country that the allocation of payment is obvious, even though the contract does not expressly allocate the payment to this country.
Second, if no such accurate allocation is possible, then the taxpayer should allocate the payment “on the basis that most correctly reflects the proper source of income on the facts and circumstances of the particular case.” Treas. Reg. §1.861-4(b)(1). This appears to be a very general rule that opens up possibilities for creative tax planning, but, once we look at the history of this rule, we will quickly realize that one method – the Time Rule (described below) – limits its flexibility.
The current flexible rule is in force only since 1976. Prior to that year, the IRS required the allocation of payment strictly based on the Time Rule. The impetus to changing to a more flexible rule was a 1973 case from the Tenth Circuit, Tipton & Kalmbach, Inc v US, 480 F2d 1118, 32 AFTR2d 73-5334 (10th Cir 1973). In that case, the IRS determined that a re-enlistment bonus was a compensation for services which the taxpayer performed on the day he re-enlisted. The paradoxical result was the fact that the location of the soldier on the day of his re-enlistment determined the sourcing of the entire re-enlistment bonus.
Hence, the IRS infused more flexibility into the Time Rule by adopting the language currently found in Treas. Reg. §1.861-4(b)(1). Nevertheless, given this history, there is no question that the Time Rule remains the most persuasive method of income allocation for non-corporate individual contractors.
It should be emphasized, however, that dominance of the Time Rule should not deter a taxpayer utilizing alternative methodology (for example, the value produced by specific services) if it is more accurate. In other words, the Time Rule is the default methodology which the IRS will use to allocate the payment between the countries, but a taxpayer may use other alternatives as long as he can persuade the IRS that his methodology represents a more accurate allocation of income.
International Personal Services Sourcing: the Time Rule
The time has come to define the Time Rule. According to Treas. Reg. §1.861-4(b)(2)(ii)(E), under the Time Rule, the amount of payment allocated to the United States “is the amount that bears the same relation to the individual's total compensation as the number of days of performance of the labor or personal services by the individual within the United States bears to his or her total number of days of performance of labor or personal services.” Taxpayers should use fractions in determining the allocations.
Let’s use an example to demonstrate the application of the Time Rule. A US Corporation signs a contract with Mr. Hause, a tax resident of Germany, to provide professional advice concerning incorporation of German heavy machinery into a Chinese factory owned by the corporation. The total price paid is $900,000; the work is performed within 180 days. Out of these 180 days, Mr. Hause spends 60 days in the United States working on the implementation plans and 120 days in China overseeing the implementation process. Based on the Time Rule, Mr. Hause spent 1/3 of his time in the United States and 2/3 in China; hence, $300,000 will be considered US-source income and $600,000 will be sourced to China. Of course, if Mr. Hause can show that the value of his work in China was far more important to the contract than his work in the United states, he can use an alternative methodology (which may still have to survive the IRS scrutiny during an audit).
Based on this example, you can see why the IRS likes the Time Rule – it is a relatively straightforward, objective calculation that can be easily implemented in almost any case.
Contact Sherayzen Law Office for Professional Help With International Personal Services Sourcing Rules and Other US International Tax Issues
Sherayzen Law Office can help you with all of your US international tax needs, including the international personal services sourcing rules. Our highly experienced international tax team has successfully helped US taxpayers around the globe to deal with their US international tax issues. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Happy New Year 2019 from Sherayzen Law Office!
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!
Contact Us Today to Schedule Your Confidential Consultation!

### Indian Bank Accounts : Key US Tax Obligations | International Tax Lawyer
Due to ongoing implementation of FATCA as well as the tax reform in India, more and more Indian Americans and US tax residents of Indian nationality are learning that they are required to disclose to the IRS their Indian bank accounts. Yet, there are still many more US taxpayers left who are either completely unaware of this requirement or they are confused with respect to what is required to be disclosed and how. This essay intends to clarify who is required to report their Indian bank accounts to the IRS and explain the most common US international tax requirements applicable to Indian bank accounts.
Indian Bank Accounts: Who Needs to Report Them to the US Government?
All US tax residents with Indian bank accounts need to disclose them to IRS. Warning: “US tax resident” is not equivalent to the immigration concept of “US Permanent Resident”. The confusion over these two concepts is a frequent cause of US tax noncompliance, because many Indian immigrants who come to the United States on a work visa assume that they are not US tax residents since they do not have the status of a US Permanent Resident. This assumption is completely false.
The definition of US tax residency includes US permanent residents, but it is much broader. In general, this term includes: US citizens, US Permanent Residents, any person who satisfied the Substantial Presence Test and any person who declared himself as a tax resident. There are exceptions to this rule, but you will need to consult with an international tax lawyer before making use of any of these exceptions.
Indian Bank Accounts: Indian Income Must Be Disclosed on US Tax Returns
All US tax residents must comply with the numerous US tax reporting requirements, including the worldwide income reporting requirement. All Indian-source income generated by the Indian bank accounts of US tax residents must be disclosed on their US tax returns.
The worldwide income reporting requirement applies to any kind of income: bank interest income, dividends, capital gains, et cetera. This income should be reported on US tax returns even if it was already disclosed on Indian tax returns or subject to Indian tax withholding. This income should be disclosed in the United States even if it never left India.
Indian Bank Accounts: FBAR
The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (popularly known as “FBAR”) is one of the most important and dangerous reporting requirements that applies to Indian bank accounts. Generally, a US person is required to file FBAR if he has a financial interest in or signatory authority or an authority over foreign bank and financial accounts which, in the aggregate, exceed $10,000 at any point during a calendar year.
FBAR has an extremely severe penalty system, and US taxpayers should strive to do everything in their power to make sure that they comply with this requirement.
Indian Bank Accounts: FATCA Form 8938
US tax residents are also required to disclose their Indian bank accounts on Form 8938. The Foreign Account Tax Compliance Act (“FATCA”) led to the creation of Form 8938; US taxpayers should have filed their first Forms 8938 with their 2011 US tax returns.
Form 8938 requires US tax residents to report all of their Specified Foreign Financial Assets (“SFFA”) as long as the Form’s filing threshold is met. SFFA includes a very diverse set of financial instruments, including foreign bank and financials accounts, bonds, swaps, ownership interest in a foreign business, beneficiary interest in a foreign trust and many other types of financial assets. In other words, with the exception of signatory authority accounts, Form 8938 not only duplicates FBAR, but covers a much broader range of financial instruments that would not be required to be reported on FBAR.
It should be pointed out that, even when FBAR and Form 8938 cover the same assets, both forms must be filed despite the duplication of the disclosure.
While Form 8938 has a much higher filing threshold than FBAR, it may still be easily exceeded, especially by taxpayers who reside in the United States. For example, if a taxpayer resides in the United States and his tax return filing status is “single”, then he would only need to have $50,000 or higher at the end of the year or $75,000 or higher at any point during the year in order to trigger the Form 8938 filing requirement. A lot of US taxpayers with Indian bank accounts easily exceed this threshold, especially if they are helping their parents or buying properties in India.
Finally, it should be remembered that Form 8938 has its own penalty structure for failure to file the form. Furthermore, Form 8938 forms an integral part of a federal tax return; this means that a failure to file the form may extend the IRS Statute of Limitations for an IRS audit indefinitely for the entire return.
Contact Sherayzen Law Office for Professional Help With Reporting of Your Indian Bank Accounts in the United States
In this essay, I just listed the most common US tax reporting requirements that may apply to US owners of Indian bank accounts. There is a plethora of other requirements that may apply to these taxpayers.
Contact Sherayzen Law Office for professional help with your US tax compliance. We have worked extensively with our Indian clients with respect to reporting of their Indian bank accounts, including offshore voluntary disclosure for late filings.
The stakes in international tax compliance are high, and you need to be able to rely on the knowledge, experience and professionalism of Sherayzen Law Office in order to make sure that you protect yourself from draconian IRS tax penalties. We have successfully helped hundreds of US taxpayers to deal with their US international tax compliance, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Personal Services Income Sourcing | International Tax Lawyer & Attorney
This article continues our series of articles on the source of income rules. Today, I will explain the general rule for individual personal services income sourcing. I want to emphasize that, in this essay, I will focus only on individuals and provide only the general rule with two exceptions. Future articles will cover more specific situations and exceptions.
Personal Services Income Sourcing: General Rule
The main governing law concerning individual personal services income sourcing rules is found in the Internal Revenue Code (“IRC”) §861 and §862. §861 defines what income is considered to be US-source income while §862 explains when income is considered to be foreign-source income.
The general rule for the individual personal services income is that the location where the services are rendered determines whether this is US-source income or foreign-source income. If an individual performs his services in the United States, then this is US-source income. §861(a)(3). On the other hand, if this individual renders his services outside of the United States, then, this will be a foreign-source income. §862(a)(3).
In other words, the key consideration in income sourcing with respect to personal services is the location where the services are performed. Generally, the rest of the factors are irrelevant, including the residency of the employee, the place of incorporation of the employer and the place of payment.
As always in US tax law, there are exceptions to this general rule. In this article, I will cover only two statutory exceptions; in the future, I will also discuss other exceptions as well as the rule with respect to situations where the work is partially done in the United States and partially in a foreign country.
Personal Services Income Sourcing: De Minimis Exception
IRC §861(a)(3) provides a statutory exception to the general rule above specifically for nonresident aliens whose income meet the de minimis rule. The de minimis rule states that the US government will not consider the services of a nonresident alien rendered in the United States as US-source income as long as the following four requirements are met:
1. The nonresident alien is an individual;
2. He was only temporarily in the United States for a period or periods of time not exceeding a total of 90 days during the tax year;
3. He received $3,000 or less in compensation for his services in the United States; AND
4. The services were performed for either of two persons:
4a. “A nonresident alien, foreign partnership, or foreign corporation, not engaged in trade or business within the United States”. §861(a)(3)(C)(i); OR
4b. “an individual who is a citizen or resident of the United States, a domestic partnership, or a domestic corporation, if such labor or services are performed for an office or place of business maintained in a foreign country or in a possession of the United States by such individual, partnership, or corporation.” §861(a)(3)(C)(ii).
Personal Services Income Sourcing: Foreign Vessel Crew Exception
The personal services income performed by a nonresident alien individual in the United States will not be deemed as US-source income if the following requirements are satisfied:
1. The individual is temporarily present in the United States as a regular member of a crew of a foreign vessel; and
2. The foreign vessel is engaged in transported between the United States and a foreign country or a possession of the United States. See §861(a)(3).
Contact Sherayzen Law Office for Professional Help Concerning US International Tax Law, Including Personal Services Income Sourcing Rules
Sherayzen Law Office is a leading international tax law firm in the United States that has successfully helped hundreds of US taxpayers with their US international tax compliance issues. Contact Us Today to Schedule Your Confidential Consultation!

### Bitcoin Payments Are Subject to UK Income Tax | International Tax News
On December 19, 2018, the UK officials confirmed that Bitcoin payments received by UK tax residents will be subject to UK taxation. The HMRC is now clear: digital currency is not a currency or money.
The exact purpose of a Bitcoin transaction seems to determine the exact tax treatment of it. For example, if you just own cryptocurrency like Bitcoin that you later sell, then the Bitcoin is treated as an investment asset; any subject such Bitcoin payments will be subject to the UK capital gain taxes. Similarly, if you mine Bitcoins on an occasional basis, then it is also taxed as a capital gain.
However, if the mining of Bitcoins rises to the level of doing business, then it would be treated as income gains as part of a financial trade and subject to ordinary income taxation.
Moreover, if a UK employee receives Bitcoin payments from his employer, these payments will be subject to UK payroll taxes. The amount to be taxed will be based on the “best reasonable estimate” of the value received. It also appears that the employer may need to recognize a capital gain in certain situations.
The most interesting guidance appears to be with respect to Bitcoins received and given away for free as well as stolen Bitcoins. If a Bitcoin received for free (rather than received a payment for a service), then it may actually be tax free. It is not clear what the cost-basis would be in such a Bitcoin.
Stolen Bitcoins do not appear to produce any tax consequences, because, paradoxically, HMRC appears to consider such Bitcoins as still owned by the same taxpayers. If a taxpayer forgets his password needed to access his Bitcoins, however, he may be able to claim a loss if he persuades HMRC that he will never remember the password. It is not clear at all how the taxpayer would be able to do so.
The recent HMRC guidance concerning Bitcoin payments is highly important and seems to be mostly aligned with that of the IRS in the United States. Sherayzen Law Office advises its clients on the US tax consequences of Bitcoin transactions. Contact Us Today to Schedule a Confidential Consultation!

### Italian & French Digital Services Tax | Cryptocurrency Tax Lawyer
As the EU talks on the single digital services tax have stalled, some major individual-member countries have moved to impose one independently in their own jurisdictions. On December 17 and 20, 2018, France and Italy announced their plans to impose their national digital services taxes. Spain and the United Kingdom already stated that they will do the same, but they have yet to announce the final proposals.
France took the lead with the imposition of a 3% digital services tax on all revenue derived from digital activities starting January 1, 2019. The tax will target only large multinational companies with large global annual revenues, commonly known as “GAFA” in France (Google, Apple, Facebook, Amazon). France believes that, through sophisticated tax planning, these companies have been able to escape much of the local taxation; the new tax will assure that they will start paying more to French tax authorities. The tax is expected to generate €500 million of additional revenue in 2019.
Italy also desires to impose in 2019 a 3% digital services tax that will target specifically online advertising, big data and peer-to-peer marketplaces. The Italians believe that their digital services tax will generate €600 million per year. The proposed law will be payable by all Internet companies with over €750 million in revenue and €5.5 million of “eligible” Italian earnings. Nonresident companies who have no physical presence in Italy will need to register with the Italian tax authorities in order to pay the required tax.
The Italian legislative process is slower than that of France and it is unlikely that the tax will be imposed on January 1, 2019. Usually, once the new law passes, the Italian finance ministry will need to publish it with all details within four months after the passage of the law; then, it will be another two months before the new law will become effective. Still, there is little double that this law may be imposed sometime in the second half of 2019.
While the need for revenue that drives these new national laws is understandable, there is a danger for such piecemeal approach to taxation of digital services in the European Union. As Mr. Pierre Moscovici (the EU Commissioner for Economic and Financial Affairs) already noted, the differences between these national tax laws may produce serious impediments to the free movement of online goods and services in the European Union.
On the other hand, the prospects for a unified European digital services tax are quite dim due to the adamant opposition to such law from many member-countries, especially Ireland and Sweden. Given this impasse, the national governments that desire to benefit from taxation of online services do not have any other effective remedy but to do it independently within their own jurisdictions.

### 2018 Individual Tax Rates | International Tax Lawyer & Attorney
The Tax Cuts and Jobs Act of 2017 modified the tax brackets that existed in tax year 2017. In this short essay, I will discuss the new 2018 individual tax rates.
2018 Individual Tax Rates: Historical Background
Tax rates seem to change every time there is a new President. For example, when President Bush got elected in 2000, the Congress passed the Economic Growth and Tax Relief Reconciliation Act of 2001 creating a new tax bracket and bringing the rest of the tax rates down; the top rate was gradually reduced to 35% from 39.6%.
Then, under the new administration of President Obama, the American Taxpayer Relief Act of 2012 increased the tax rates again with the top rate going back up to 39.6%.
2018 Individual Tax Rates: 2017 Tax Reform
Under President Trump, the Congress passed a major reform of the US tax system through the Tax Cuts and Jobs Act of 2017. The tax rates were among the most important changes with respect to domestic US tax law.
While the tax reform preserves the same seven tax brackets for individual tax payers, it introduces new 2018 individual tax rates for almost each of them. Under the previous law, the tax brackets were 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. Now, the new rates starting tax year 2018 are much lower: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
It is important to emphasize that these are not permanent changes. The new tax brackets will operate only through tax year 2025; starting January 1, 2026, the tax rates will return to those that existed in 2017.
2018 Individual Tax Rates: Income Thresholds for Tax Brackets Increase
In addition to lower tax rates, the 2017 tax reform also restructured the income thresholds that apply to most tax brackets. Generally, the income thresholds went up.
For example, in order to be subject to 39.6% tax in 2017, taxpayers filing a joint tax return must have had income in excess of $470,700. In 2018, in order to be subject to the top bracket’s tax rate of 37%, the same couple will have to have income in excess $600,000. The income of $470,700 would only trigger the 35% tax rate in 2018.
Sherayzen Law Office has long held the view that the increase in the income thresholds for tax brackets is especially important (perhaps, more so than the decrease in tax rates) to alleviate the tax burden of the middle class. However, we do note with alarm that the benefits might have been spread too widely to include the top 1% of the earners while the 10% bracket was kept essentially the same. We believe that this was one of the reasons why the Congress made the increase in income thresholds for tax brackets a temporary one despite the anticipated inflation pressures in the future.

### Interest Income Sourcing | International Tax Lawyer & Attorney
This article is a continuation of a recent series of articles on the US source of income rules. In this article, I would like to introduce the readers to the interest income sourcing rules.
Interest Income Sourcing: Definition of “Interest”
Let’s first understand what is meant by the word “interest”. It is very curious that there is no definition of this term in the Internal Revenue Code nor in the Treasury regulations. Indeed, when applied to real life situations, the tax definition of interest spreads to items which do not at first appear as interest income (the most famous example is the original issue discount); the contrary is also true – sometimes an income that appears to be interest income is not considered to be such by the IRS (for example, commitment fees).
Generally, “interest” is a payment for the use of money. In most cases, there is a relationship of indebtedness that accompanies the requirement to pay interest; however, this is not always the case. In fact, there are numerous rules and rulings that one must know in order to properly determine how the IRS will treat a certain payment.
Interest Income Sourcing: General Rule
Generally, the interest is sourced at the residence of the obligor. IRC § 861(a)(1). Thus, if the obligor resides in the United States, then the interest paid on the obligation will be considered as US-source income. This is the case even if the obligor is a foreign national who resides in the United States. On the other hand, if a US citizen resides in a foreign country, then the interest that he pays to his lender is a foreign-source income.
This rule may lead to a paradoxical situation. For example, if a US citizen resides in Spain and pays interest to a Spaniard, this interest would be considered as Spanish-source income. At the same time, if a Spaniard resides in the United States and pays interest to a US citizen who resides in Spain, then the interest would be considered as US-source income.
Generally, interest paid by domestic corporations and domestic partnerships follows the same interest income sourcing rules. There are, however, some exceptions to this rule. For example, with respect to banks, interest on deposits with a foreign branch of a domestic corporation is not considered to be US-source income. IRC § 861(a)(1)(A)(i).
I wish to emphasize that I am stating here a general rule only. There are various exceptions, especially with respect to the portfolio interest. Most of these exceptions are especially relevant to nonresident aliens who receive interest from the United States.
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### H.R. 7358 & Modified Residency-Based Taxation | International Tax News
On December 20, 2018, Congressman George Holding, a Republican from North Carolina and a member of the House Ways and Means Committee, introduced The Tax Fairness for Americans Abroad Act of 2018 (H.R. 7358). According to the analysis below, Sherayzen Law Office believes that H.R. 7358 seeks to modify it in a manner that moves it closer to something that can be described as a modified residency-based model of taxation. Yet, in no way should H.R. 7358 be viewed as an attempt to completely repeal the current citizenship-based model of taxation.
Current US Tax Law: Citizenship-Based Model of Taxation
Currently, all US citizens are obligated to report their worldwide income and pay US taxes on this income irrespective of their actual place of residence. In other words, even if a US citizen resides abroad, he is a US tax resident and must file a US tax return to report his worldwide income.
The current US tax law does allow such citizens to exclude a certain amount ($104,100 in 2018) through the operation of IRC Section 911, commonly known as the Foreign Earned Income Exclusion.
The United States and Eritrea are the only two countries in the world that tax their citizens in this manner. Everyone else taxes their citizens based only on their actual place of residence or under even more restrictive territorial model of taxation.
Lack of Residency-Based Taxation Results in Higher Tax Burden for Americans Who Live Abroad
The current law imposes an enormous burden on over nine million Americans who live abroad. Not only do they have to comply with all local tax laws, but they are also forced to comply with all US international tax laws, including the numerous US international tax reporting requirements.
Undoubtedly, the Foreign Earned Income Exclusion (“FEIE”) helps on the income side, but it only applies to earned income; US taxes must still be paid on all passive income. Moreover, the FEIE is limited to a certain threshold amount of earnings, which can easily be exceeded by the salaries normally paid to mid-level and upper echelon of corporate executives as well as small business owners.
Furthermore, the unincorporated American owners of small businesses may still be subject to US self-employment taxes (despite the income exclusion under the FEIE). Their income may also be disqualified from FEIE under the infamous 30% rule.
The Tax Fairness for Americans Abroad Act of 2018: Moving Current U.S. Tax System In the Direction of Modified Residency-Based Model of Taxation
H.R. 7358 seeks to alleviate the suffering of millions of Americans by modifying the current citizenship-based model of taxation. It proposes to move the US tax system to something that is reminiscent of a residency-based model of taxation.
If it passes, H.R. 7358 would create a new IRC Section 911A which would apply to the new category of taxpayers – qualified nonresident citizens. Such qualified nonresident citizens could exclude from their gross income the entire foreign earned income and foreign unearned income. In other words, nonresident citizens would only have to pay taxes on US-source income (with one exception concerning gains from sale of personal property).
Who would be a “qualified nonresident citizens”? Basically, in order to qualify for this designation, a citizen would have to be a nonresident citizen, not make an election under the IRC Section 911 and make an election under the IRC Section 911A.
A nonresident citizen would be a US citizen who: (a) has a “tax home” in a foreign country; (b) is in full compliance with US income tax laws for the three previous tax years; and (c) either physically resides in foreign country for at least 330 full days during the relevant tax year OR is a bona fide resident of a foreign country for the entire tax year.
Modified Residency-Based Taxation is Proposed by H.R. 7358
It is important to understand that, as it is written at this moment, H.R. 7358 proposes to modify the current tax system, not establish a true residency-based system of taxation. Even if today’s version of the bill passes, all nonresident US citizens will continue to be US tax residents while they reside in a foreign country. In other words, what is really proposed here is a major expansion of the FEIE, not a complete repudiation of the citizenship-based model of taxation.
This is a highly important legal conclusion, because it allows us to clearly see the limits of the relief offered by H.R. 7358. For example, since nonresident citizens will continue to be tax residents, they will still need to file their Forms 8938 and FBARs. Moreover, it does not appear that the bill would affect the obligation to file other international information returns, such as Forms 3520, 5471, 8865, et cetera.
Additionally, it is unclear what would happen to income recognized under the tax deferral regimes, such as Subpart F rules and the GILTI tax. If this income is excluded, H.R. 7358 will become a powerful incentive to residing outside of the United States for a certain period of time in order to implement certain tax planning strategies.
Thus, instead of eliminating citizenship-based taxation, the bill simply attempts to continue the modification of the US international tax system in a way similar to the 2017 tax reform introduced on the corporate side.
Obviously, this is just the initial version of the bill. It is possible that a more overt repudiation of the citizenship-based model of taxation will be enacted, including the elimination of FBAR and Form 8938 requirements for nonresident citizens. It is also possible, however, that this bill will not be enacted in any format at all.

### Source of Income: Sale of Real Property | International Tax Law Firm
One of the most common questions that often arises is whether a sale of real property is considered to be a foreign-source or US-source income. In this short essay, I will briefly describe the source of income rule for the sale of real property and discuss its importance.
Sale of Real Property: What is “Source of Income”
The sourcing rules within the United States Internal Revenue Code (“IRC”) determine to which part of the world a particular income item needs to be assigned. In other words, the source of income rules allow a taxpayer to determine whether his income is considered to be “domestic” or “foreign” for US tax purposes.
Sale of Real Property: the Importance of the Source of Income Rules
The importance of the source of income rules is difficult to overstate. For US tax residents, the source of income rules determine the amount of foreign tax credit that can be claimed on their US tax returns. Moreover, the source of income rules may have other important effects, especially for corporate taxpayers.
However, the significance of the source of income rules is felt the most by nonresident aliens. For these foreign persons, the determination of whether income is foreign or domestic may result in a complete escape from US taxation or, on the opposite end, the obligation to submit a US tax return (even if the nonresident alien has no other connection to the United States). Moreover, the sourcing of income has direct implications for the numerous US tax withholding obligations.
Sourcing of a Sale of Real Property
The US source of income rule with respect to sales of real property is clear: the gain from a sale of real property is sourced to the place where the property is located. In other words, if a house is located in the United States, then the gains from the sale of the house will be considered US-source income. On the other hand, if a house is located in a foreign country, then it will be considered foreign-source income (actually, sourced to the specific country where the sold property is located).
Contact Sherayzen Law Office for Professional Help With US International Tax Laws
Sherayzen Law Office is a tax law firm that specializes in US international tax law. We have developed deep expertise in US international tax law that allows us to effectively resolve our clients’ problems in this area. Procedurally, we are experienced in every stage of an international tax case: tax planning, tax preparation, offshore voluntary disclosures, IRS representation and federal litigation. We have successfully helped hundreds of taxpayers around the globe with their US international tax issues, and We can help You!
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### Dividend Income Sourcing | International Tax Lawyer & Attorney
One of the most important issues in US international tax law is the sourcing of income – i.e. the determination of whether the income is foreign or domestic for US tax purposes. In this article, I will introduce readers to US tax rules concerning dividend income sourcing (note, I will not be discussing substitute dividends and so-called “fast-pay” stocks as part of this article).
Dividend Income Sourcing: General Rule
Aside from limited exceptions, the source of dividend income is determined by whether the corporation that pays the dividends is foreign or domestic.
Dividend Income Sourcing: Domestic Corporations
Generally, if a US domestic corporation pays a dividend to its shareholders, the income is sourced in the United States. IRC §861(a)(2)(A).
There are three limited exceptions to this general rule, but only the first exception is really relevant at this point. The first exception is found in the complex rules concerning a Domestic International Sales Corporation (“DISC”). Basically, under IRC §861(a)(2)(D), dividends from a DISC are US-source income unless the dividends are attributable to “qualified export receipts”. In other words, if all of the gross income of a DISC satisfies the definition of qualified export receipts, then the entire gross income will be considered as derived from a foreign source. This is the basic rule and there are important exceptions and considerations that must be considered if one engages in a detailed analysis.
The second exception was a dividend paid by a Section 936 corporation. A Section 936 corporation was a special type of a domestic corporation that did business in the US possessions. At this point, the repeal of IRC §936 makes this section largely irrelevant.
Finally, the third exception existed mostly prior to 1987. At that time, if a taxpayer was able to show that 80% of the gross income of the payor corporation for the relevant period of time consisted of foreign-source income, then the dividend was also foreign-source even if it was paid by a domestic corporation. The relevant period of time for making this determination included the three fiscal years of the corporation preceding the year in which the dividend was declared (obviously, if the corporation existed for less than three years, then the period of time was reduced to the number of years the corporation had been in existence). Interestingly, with the exception of mergers and consolidations, the dividends were foreign-source even if the payor corporation filed a consolidated return with an affiliated group which did not meet what was known as the 80/20 rule.
This third exception became largely irrelevant as of January 1, 1987. However, the 80/20 corporations were exempted from tax withholding even as late as prior to 2010. At that time, the Congress finally repealed the 80/20 company rule, though it still left a grandfather clause for it.
Dividend Income Sourcing: Foreign Corporations
Dividend income sourcing with respect to foreign corporations is more complex. Generally, dividends from foreign corporations are considered to be foreign-source income unless 25% or more of the corporation’s gross income for the three years preceding the taxable year (in which the distribution occurred) was from income that was effectively connected with a trade or business in the United States. This is the so-called “25% exception”.
If the 25% threshold is satisfied, then the dividend is apportioned according to the percentage of the corporation’s income effectively connected to the United States versus foreign-source income. This rule obviously affects the ability of a US person to take full foreign tax credit.
Now, let’s look at the 25% exception from the perspective of a foreign person receiving a dividend from a foreign corporation. Again, if a foreign dividend was paid to a foreign person from a company that did not satisfy the 25% exception, then no part of the dividend was sourced to the United States. If, however, the 25% exception was satisfied, then a foreign person had US-source income according to the apportionment rule described above. In other words, a foreign dividend paid from a foreign company to a foreign individual may result in US-source income even though none of these persons are US tax residents!
Moreover, prior to 2005, such a foreign individual would have to declare this US-source income in the United States and, theoretically, pay tax on it. Obviously, this was unlikely to happen because either the foreign corporation was subject to the branch profits tax which offset the tax on dividends paid by the corporation or a tax treaty prevented the taxation of such dividend. Nevertheless, if neither exception applied, a foreign person could find himself in noncompliance with US tax laws (and there was even some litigation on this subject).
When it passed the American Jobs Creation Act of 2004, the US Congress finally relented and exempted from US taxation all dividends that fell within the 25% exception and were paid to foreign persons on or after January 1, 2005. IRC §871(i)(2)(D).
Contact Sherayzen Law Office for Professional Help with Dividend Income Sourcing
Sherayzen Law Office is a highly experienced international tax law firm that specializes in US international tax compliance, offshore voluntary disclosures and international tax planning. Our clients have greatly benefitted from our reliability, profound knowledge of international tax law (including dividend income sourcing), detailed and comprehensive approach to tax compliance and creative ethical tax planning (even during offshore voluntary disclosures). We can help You!
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### 2019 First Quarter IRS Interest Rates Increase | Tax Lawyers MN
On December 6, 2018, the IRS announced that the 2019 First Quarter IRS interest rates for the underpayment and overpayment purposes will increase again. The increase in the 2019 First Quarter IRS interest rates follows the recent increases in interest rates by the Federal Reserve.
After the new increase, the 2019 First Quarter IRS interest rates will be as follows:
six (6) percent for overpayments (five (5) percent in the case of a corporation);
six (6) percent for underpayments;
eight (8) percent for large corporate underpayments; and
three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000.
The Internal Revenue Code requires that the rate of interest be determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The 2019 First Quarter IRS interest rates were computed based on the federal short-term rate determined during October of 2018 to take effect on November 1, 2018, based on daily compounding.
The 2019 First Quarter IRS interest rates have widespread impact beyond just the calculation of the interest rates that the IRS will calculate on the underpayments and overpayments of federal tax liability, as determined on an amended tax return or as a result of an audit. These rates will be used to determine the total amount due for any additional tax return liability that arose as result of filing under Streamlined Domestic Offshore Procedures.
Moreover, the 2019 First Quarter IRS interest rates are directly relevant the calculation of PFIC (Passive Foreign Investment Company) tax liability. In particular, these rates are used to determine the PFIC interest on PFIC tax imposed on “excess distribution” under the default IRC Section 1291 PFIC calculation method.
Sherayzen Law Office continues to watch the increase in IRS interest rates to properly adjust its interest calculation spreadsheets.

### Singapore Central Provident Fund & US Tax Compliance | FATCA Lawyer
The Singapore Central Provident Fund is an important compliance issue for US owners of foreign accounts in Singapore. In fact, it could be the most common problem for these taxpayers. In this article, I would like to provide an overview of the main US tax compliance requirements for US taxpayers who have a Singapore Central Provident Fund account.
What is the Singapore Central Provident Fund?
The Singapore Central Provident Fund is basically a compulsory savings plan to which all working Singapore citizens and permanent residents and their employers are required (by the Singapore government) to contribute certain amount of their earnings. This savings scheme is meant to fund the workers’ future retirement, healthcare and housing needs.
The Fund is administered by the Central Provident Fund Board which reports to the Ministry of Manpower and is charged with the task of investing the contributed funds.
Structure of the Singapore Central Provident Fund
The Singapore Central Provident Fund consists of various sub-accounts: Ordinary Account, Special Account, Medisave Account and Retirement Account. The Fund also includes various Retirement Schemes, Medical Schemes (most common Medisave and Medishield), and Protection Schemes.
Sometimes, an account holder uses the Ordinary Account to fund investment schemes. One of the most important and obscure of them is the Special Discounted Shares (“SDS”) Scheme which allowed the owners of a Singapore Central Provident Fund account to obtain Discounted Singapore Telecom (“Singtel”) shares. This opportunity was provided only in 1993 and 1996. Additional loyalty shares were granted to owners who held on to Singtel shares.
US Tax Obligations: Reporting of Singapore Central Provident Fund Account
A Singapore Central Provident Fund account is a reportable foreign financial account for US tax purposes. Hence, such an account should be disclosed on both FinCEN Form 114 (FBAR) and FATCA Form 8938 as long as the applicable filing threshold is met.
Both, FBAR and Form 8938 require that the highest value of such an account is disclosed. Usually, this is not very challenging as long as there were no withdrawals from the account. The reason for it is because the value of the account is indicated on the first page of each CPF statement. The FBAR currency exchange rates should be used to translate this value for the purpose of FBAR and FATCA reporting.
If there were withdrawals, then the taxpayer is required to calculate the highest value of his account prior to the withdrawal.
In addition to FBAR and Form 8938 reporting, taxpayers should remember to disclose the existence of a Singapore Central Provident Fund account on Schedule B of Form 1040.
US Tax Obligations: Reporting Income from Singapore Central Provident Fund
In addition to reporting the highest value of a Singapore Central Provident Fund account, a US taxpayer is required to disclose all income from the account on his US tax return. Usually, this means the reporting of interest income – all of the CPF sub-accounts generate interest income typically paid at the end of the year.
This income reporting requirement, however, also covers any other income produced by the account, including any dividends paid by Singtel shares and proceeds from any sales of Singtel shares. These are items that are often missed even by US tax accountants and attorneys due to their unfamiliarity with the SDS scheme.
The interest and dividend income should be converted to US dollars based on spot rates. Then, the converted values should be reported on Schedule B of Form 1040.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Singapore Central Provident Fund
The reporting of a Singapore Central Provident Fund account is one of the biggest sources of US tax noncompliance among individual US taxpayers who own financial accounts in Singapore. Besides what I listed above, there may be other applicable US tax requirements to such an account.
This is why, if you own a Singapore Central Provident Fund account, contact Sherayzen Law Office for professional help. Our firm can help you not only properly disclose the account for US tax purposes, but also correct any prior noncompliance related to the reporting of this type of an account or any income it generated.
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### French Bank Accounts FBAR / FATCA Obligations | FATCA Law Firm
The FBAR and FATCA obligations with respect to French bank accounts are extensive and can often be quite burdensome for US owners of these accounts. This is one of the main reasons why France has been consistently one of the top sources of clients for my firm with respect to offshore voluntary disclosures. In this essay, I would like to discuss the FBAR and FATCA obligations of individual US taxpayers who own French bank accounts.
Who Needs to Report French Bank Accounts to the US Government?
It is important to understand that, with respect to individuals, all US tax residents must comply with their FBAR and FATCA obligations concerning their French bank accounts. US tax residency is defined broadly to include US citizens, US “green card” holders, any individual who satisfied the Substantial Presence test and individual who declared himself a US tax resident on his US tax return. This is the general rule; important exceptions exist and it is the job of your international tax attorney to determine whether you are eligible for any of these exceptions.
FBAR Obligations With Respect to French Bank Accounts
US tax residents must file FBARs with respect to their French bank accounts as long as they meet the filing requirements of this form.
FBAR’s current official name is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts. It is one of the important and dangerous information returns that exists in the United States. Let’s understand a little bit better why this is the case.
FBAR must be filed by a US person as long as the aggregate highest balance on this person’s foreign bank and financial accounts (including signatory authority accounts, not just accounts owned individually or jointly) is in excess of $10,000. As used here, “US person” is almost identical to the definition of a US tax resident.
The term “account” is defined much broader for FBAR purposes than how this term is commonly used in our society. It includes not only the regular checking and savings accounts, but also investment accounts, life insurance policies with a cash surrender value, precious metals accounts, earth mineral accounts, et cetera. In other words, if there is a custodial relationship between the financial institution and the US person’s foreign asset, it is very likely that the IRS will determine that an account exists for FBAR purposes.
Now, we can appreciate why FBAR is such a dangerous form – it has very low eligibility requirements. The combination of a low filing threshold of just $10,000 and a very broad definition of “account” makes it very likely that a US owner of French bank accounts will need to file this form.
Moreover, not only is it easy to trigger the FBAR requirement, but the FBAR penalties are outrageously high. Not only are there potential criminal penalties, but there are also significant civil willful penalties (up to $100,000 adjusted for inflation per account per year or 50% of the value of the account per year, whichever is higher) and civil non-willful penalties (up to $10,000 adjusted for inflation per account per year). In other words, the FBAR penalties can have a devastating impact on the economic well-being of an owner of French bank accounts.
The low filing threshold, broad definition of account and draconian penalties make FBAR the most dangerous form with respect to French bank accounts; an utmost effort must be made to file FBARs timely and correctly.
FATCA Form 8938 Obligations With Respect to French Bank Accounts
FATCA Form 8938 is the broadest (in terms of the assets covered) information return in the US tax code with respect to reporting of foreign assets. This form is filed with a taxpayer’s US tax return (unlike FBAR) and requires US persons to report all of their Specified Foreign Financial Assets (“SFFA”).
SFFA includes a huge array of foreign financials assets, including foreign bank and financial accounts (however, signatory authority accounts are not reportable on Form 8938) and “other” foreign financial assets. Among these “other” assets are bonds, stocks, ownership interest in a closely-held business, beneficiary interest in a foreign trust, an interest rate swap, currency swap; basis swap; interest rate cap, interest rate floor, commodity swap; equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty; an option or other derivative instrument with respect to any currency or commodity that is entered into with a foreign counterparty or issuer; and so on.
Moreover, in addition to SFFA, Form 8938 requires US persons to report their foreign income related to SFFA directly on the form. In other words, FATCA Form 8938 directly incorporates the worldwide income reporting requirement.
The filing threshold for Form 8938, while lower than that of FBAR, is still not high. For example, if a taxpayer lives in the United States, he will need to file Form 8938 if he has SFFA of $50,000 ($100,000 for a married couple) or higher at the end of the year or $75,000 ($150,000 for a married couple) or higher during any time during the year. A very large portion of the French immigrants to the United States meet these thresholds.
Failure to file Form 8938 may lead to assessment of heavy penalties. While not as high as those of FBAR, Form 8938 penalties are much more diverse and may ultimately bite as hard as FBAR penalties.
Let’s go over the main penalties. First, Form 8938 has its own $10,000 failure-to-file penalty which may go up to as high as $50,000 in certain circumstances. Second, Form 8938 noncompliance will lead to an imposition of much higher accuracy-related penalties on the income tax side – 40% of the additional tax liability. Third, Form 8938 noncompliance will limit the taxpayer’s ability to utilize Foreign Tax Credit.
Finally, since Form 8938 is integrated within a taxpayer’s US tax return, the failure to file Form 8938 will keep the Statute of Limitations open potentially on the entire tax return for three years after the form is ultimately filed (and, potentially forever if the form is never filed). This means that the IRS may be able to go back much further than the general three-year statute of limitations in order to audit past tax returns.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your French Bank Accounts
If you have French bank accounts, contact Sherayzen Law Office for professional help. As you can see, both FBAR and FATCA requirements concerning French bank accounts may be quite complex and difficult to meet. Moreover, the failure to comply with either of these requirements may result in the imposition of heavy IRS penalties.
Sherayzen Law Office has extensive experience with respect to reporting French bank accounts in the United States. Furthermore, we have successfully conducted numerous offshore voluntary disclosures in order to remedy past tax noncompliance with respect to these accounts. We can help You!
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### Spanish Bank Accounts & US Tax Compliance | International Tax Lawyer
Despite the surge in FATCA letters from Spanish banks in the past two years, there is a significant number of US taxpayers with Spanish bank accounts who still have not complied with their US tax obligations. In this essay, I would like to discuss the most common US tax reporting requirements of individual US owners of Spanish bank accounts.
Spanish Bank Accounts: the Key Importance of US Tax Residency
Virtually all US tax requirements with respect to Spanish bank accounts apply only to US tax residents. Therefore, it is important to understand who is considered to be a “US tax resident”.
Generally, this term includes: US citizens, US Permanent Residents, a person who satisfied the Substantial Presence Test and a person who declared himself as a tax resident. There are certain exceptions to this general rule, and your international tax lawyer will need to determine whether you are eligible for any of these exceptions or whether you can take a position under the relevant tax treaty to escape US tax residency.
It is important to point out the tax concept of US tax residency should not be confused with the immigration term “US permanent resident”. "US tax resident" has a much broader definition that encompasses US permanent residents, but also includes many other types of individuals. In my practice, I have noticed that this confusion is a frequent cause for mis-interpretation of US tax rules by immigrants who come to the United States on a visa, but who are not yet US Permanent Residents.
Now that we understand who is responsible for the disclosure of Spanish bank accounts to the IRS, we are ready to discuss the most common US tax reporting requirements that apply to these accounts.
Spanish Bank Accounts: Worldwide Income Reporting Requirement
All income earned by Spanish bank accounts must be reported on the US owner’s US tax return. The income must be reported in the United States irrespective of whether it was disclosed on Spanish tax returns, subject to Spanish tax withholding or never transferred to the United States.
The reason for such an invasive rule is the worldwide income reporting requirement that applies to all US tax residents irrespective of where they reside and where the income is earned. The worldwide income reporting requirement applies to all types of income, including bank interest income, dividends, capital gains, et cetera.
It should be pointed out that not all of the income earned in Spain would necessarily be treated similarly in the United States for income tax purposes. For example, income generated by mutual funds will be treated as PFIC income in the United States. You need to consult an international tax lawyer to determine the proper treatment of your Spanish income.
Spanish Bank Accounts: FBAR
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, popularly known as “FBAR” is one of the most important and dangerous reporting requirements that applies to Spanish bank accounts. It is difficult to overstate the importance of this form, because of the enormous threat that FBAR poses to US owners of Spanish bank accounts.
The danger of FBAR stems from two factors. First, with the low filing aggregate threshold of just $10,000, FBAR is a very common information return that must be filed by the vast majority of Spaniards who move to the United States and US citizens who live in Spain.
Second, the main danger of the form stems from FBAR’s draconian system of penalties, which may be assessed by the IRS even in a non-willful situation. In other words, the penalties may be assessed even if the taxpayer simply did not know about the existence of FBAR.
If you have violated any of these FBAR requirements or just never filed the form, you should contact an experienced international tax lawyer for professional help.
Spanish Bank Accounts: FATCA Form 8938
While a newcomer (by tax standards), FATCA Form 8938 quickly became the FBAR contender for the first place of most important tax requirements. Created by the Foreign Account Tax Compliance Act in 2011, Form 8938 requires US tax residents to report all of their Specified Foreign Financial Assets (“SFFA”) as long as the filing threshold is met.
The threshold is much higher than that of FBAR. Still, Form 8938 is triggered if a taxpayer resides in the United States and has only $50,000 ($100,000 for a married couple) or higher on his Spanish bank accounts at the end of the year or $75,000 ($150,000 for a married couple) or higher during any time during the year. For most middle-class Spaniards who come to the United States, it is not a problem to meet this threshold.
While Form 8938 penalties are not as high as those of FBAR, Form 8938 is still a very dangerous form and, in some aspects, a lot more dangerous than FBAR. First of all, Form 8938 has a much broader scope than FBAR. The definition of SFFA includes not only foreign bank and financial accounts, but all sorts of other financial instruments including bonds, ownership interests in foreign businesses and even a beneficiary interest in a foreign trust. In a sense, Form 8938 is a “catch-all” form that is likely to require the reporting of foreign financial assets that were not disclosed on any other tax forms.
Second, Form 8938 is filed with and forms part of a taxpayer’s US tax return. For this reason, Form 8938 penalties affect the income tax penalty calculations, the taxpayer’s Foreign Tax Credit claims as well as the IRS ability to open up tax returns that would otherwise be closed under the general three-year Statute of Limitations.
Finally, it should be mentioned that Form 8938 has its own penalty structure for failure to file the form and other violations of its requirements.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Spanish Bank Accounts
In this short essay, I just listed the main and the most common three US tax reporting requirements that may apply to Spanish bank accounts owned by US tax residents. There may be other requirements that may apply to these US taxpayers.
Contact Sherayzen Law Office for professional help with your US tax compliance. We will determine what types of US tax requirements apply to your particular facts, prepare the necessary annual compliance forms to make sure you meet these requirements and conduct an offshore voluntary disclosure with respect to any requirements that you may have violated in the past.
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### Lebanese Bank Accounts & US Taxes | Lebanon FATCA Lawyer & Attorney
Despite the domination of international tax compliance by FATCA since at least July of 2014, many US owners of Lebanese bank accounts are still not compliant with their US tax obligations. In fact, for many of them, the receipt of a FATCA letter is a huge surprise. In this essay, I would like to discuss the US tax compliance requirements of individual owners of Lebanese bank accounts. I will focus only on the main and most common requirements; other requirements may apply to your foreign bank accounts.
Lebanese Bank Accounts: Who Needs to Report Them
In general, it is important to understand that your Lebanese bank accounts are most likely subject to one or more US tax reporting requirements if you are a US tax resident.
“US tax resident” should not be confused with the immigration term of “US permanent resident”. Rather, the term “US tax resident” includes: US citizens, US permanent residents, any person who satisfied the Substantial Presence Test and any person who declared himself as a tax resident (there are several types of situations that fall within this category; the most common one is when a non-resident alien files a joint tax return with his or her US spouse). For example, if you are here on an B-1/B-2 visa, L-1 visa, H-1B visa or E-1/E-2 visa and you satisfied the Substantial Presence Test, you are likely a US tax resident.
This is obviously a very general description of US tax residency. There are important exemptions for certain types of visas, especially students and scholars. Moreover, in certain situations, a person who satisfied the Substantial Presence Test may adopt a treaty position that he was still not a tax resident of the United States. Then, we enter a world of complications with respect to which of the US tax reporting requirements would still apply to such a person.
It must be remembered that the final determination of whether a taxpayer should adopt a position that he is a US tax resident should be made by an international tax attorney based on the facts of a particular case.
Lebanese Bank Accounts & Worldwide Income Reporting Requirement
The first and very important requirement that applies to Lebanese bank accounts owned by a US tax resident is worldwide income reporting. A US tax resident must disclose on his US tax return and pay US taxes on his worldwide income.
This means that any income generated by his Lebanese bank accounts should disclosed on his Form 1040, including any bank interest income paid, dividends, royalties and capital gains. This income must be disclosed even if it is subject to tax withholding by the Lebanese government.
Lebanese Bank Accounts & PFICs
In this context of the worldwide income reporting requirement, it is important emphasize that it is possible that some of the income generated by investment accounts in Lebanon may not be treated as ordinary income or capital gains. Rather, such income may be classified as PFIC income leading to the requirement to file Form 8621 and pay PFIC taxes and PFIC interest in the United States.
Lebanese Bank Accounts & FBAR
One of the most important requirements that may apply to your Lebanese bank accounts is FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as “FBAR”. Due to its very low filing threshold, the FBAR is a common and very dangerous US international information return. What makes FBAR so dangerous are the draconian penalties that may be imposed for failure to comply with FBAR requirements – penalties that may be assessed by the IRS even in a non-willful situation. This form should definitely be number one on your US tax compliance list.
Lebanese Bank Accounts & FATCA
FATCA Form 8938 is another highly important requirement. Born in tax year 2011 out of the Foreign Account Tax Compliance Act, Form 8938 requires US tax residents to report their Specified Foreign Financial Assets (“SFFA”).
While SFFA mostly duplicates the FBAR filing requirement with respect to foreign bank and financial accounts, there are important differences. Generally, SFFA requires you to report a much broader range of foreign assets than just foreign bank and financial accounts, including ownership interests in foreign business assets and a beneficiary interest in a foreign trust. In fact, Form 8938 plays a highly important role of being a “catch-all” form – i.e. it is likely to be applicable whenever a foreign asset is not reported elsewhere.
Unlike FBAR, Form 8938 is attached to the tax return. This has tremendous implications for the Statute of Limitations of the tax returns that are filed (or should have been filed) with Form 8938. In other words, failure to file Form 8938 may allow the IRS to open up tax returns even when the general three-year Statue of Limitations has passed.
Form 8938 has its own well-developed system of penalties, including a $10,000 failure-to-file penalty. Form 8938 penalties also have important implications for the ability of a taxpayer to claim Foreign Tax Credit on Form 1116.
Contact Sherayzen Law Office for Professional Help With the US Tax Reporting of Your Lebanese Bank Accounts
There may be other reporting requirements that may apply to your Lebanese bank accounts; I just listed in this essay the main and the most common ones. Given this tremendous complexity of US tax reporting requirements, it is imperative that you consult an international tax lawyer with respect to your ownership of Lebanese bank accounts.
The international tax law firm of Sherayzen Law Office can help You! Our firm is a leader in US tax compliance and has successfully helped hundreds of US taxpayers to bring their tax affairs into full compliance with US tax laws, including numerous clients with Lebanese bank accounts.
Contact Us Today to Schedule Your Confidential Consultation!

### OVDP Closure Sets the Stage for a Dramatic Increase in IRS FBAR Audits
There has been virtually no discussion of the impact of the OVDP closure beyond how it affects the ability of willful taxpayers to settle their past noncompliance. This is very unfortunate, because there is a direct correlation between OVDP and IRS tax enforcement activities. In this article, I will discuss how the OVPD closure sets the stage for a dramatic increase in the IRS FBAR Audits as well as IRS audits of other US taxpayers with international tax exposure.
The Utility of the OVDP Program Prior to the OVDP Closure
The IRS flagship 2014 Offshore Voluntary Disclosure Program served various purposes prior to its closure on September 28, 2018. Let’s concentrate on its two most important roles.
First and foremost, it was an important information-gathering tool for the IRS. The taxpayers who participated in the OVDP disclosed not only their noncompliance with US tax laws, but also the identity of the persons and institutions who facilitated this noncompliance. In other words, the OVDP supplied to the IRS valuable, up-to-date information about foreign financial institutions and foreign financial advisors who participated and even set-up the various tax evasion schemes. This ever-growing mountain of evidence was later used by the IRS to target these schemes effectively and efficiently.
Second, the OVDP greatly enhanced the IRS tax enforcement activities in two different ways. On the one hand, the OVDP promoted the general awareness of FBAR requirements as well as voluntary disclosures of FBAR noncompliance by US taxpayers, thereby saving the IRS the time and resources that otherwise would have been unnecessarily spent on finding and auditing these taxpayers. On the other hand, by “weeding-out” these repentant taxpayers, the OVDP allowed the IRS to concentrate its enforcement efforts on the taxpayers who the IRS believed to be true and inveterate tax evaders.
Diminished Utility of the OVDP and the OVDP Closure in 2018
Over time, however, the IRS came to conclusion that, in precisely these two most important aspects, the OVDP had lost a substantial part of its prior utility. The full implementation of FATCA and the ever-spreading web of bilateral and multilateral information exchange treaties made the OVDP a relatively unimportant information collection tool by the end of 2017.
At the same time, due to the introduction of the Streamlined Filing Compliance Procedures and the fact that most willful taxpayers who wanted to take advantage of the OVDP had already done so, fewer and fewer taxpayers were entering the OVDP. In other words, by early 2018, the IRS was in the position to make the decision that the “weeding-out” process was substantially complete.
For these two reasons as well a number of other smaller reasons, the IRS decided to finally close the 2014 OVDP (which itself was a modification of the 2012 OVDP) on September 28, 2018. The OVDP closure did not happen suddenly; rather, the IRS gave a more than nine-month notice to the public that the OVDP was going to be closed. This was done very much according to the “weeding-out” concept – the IRS gave one last opportunity to certain groups of taxpayers to settle their prior US international tax noncompliance under the established terms of the OVDP program.
The Link Between the OVDP Closure and IRS FBAR Audits
At this point, after giving noncompliant US taxpayers their last chance to “peacefully” resolve their FBAR and other US tax problems, the IRS believes that it has completed its weeding-out process. The time has come for harsh IRS tax enforcement.
Based on my conversations with various IRS agents, I have identified the trend where the IRS currently encourages IRS agents to quickly close their voluntary disclosure cases and shift to doing field audits involving international tax compliance, including FBAR audits.
In other words, the OVDP closure frees up the critical resources that the IRS needs to conduct audits based on the mountains of information it has accumulated over the past decade. Some of this information came from the OVDP, the Swiss Bank Program, from FATCA and other  information exchange mechanisms.
What is worse (from the perspective of noncompliant taxpayers) is that the IRS now can justify the imposition of higher FBAR penalties since it can claim that the taxpayers had prior chances to resolve their prior FBAR noncompliance and intentionally failed to do so.
Sherayzen Law Office Predicted the Shift Toward Tax Enforcement a Long Time Ago
All of these developments – the OVDP closure and the shift toward stricter tax enforcement – were predicted years by Sherayzen Law Office ago. As early as 2013, Mr. Sherayzen made a prediction that the Swiss Bank Program and FATCA were likely to lead to higher levels of FBAR audits and FBAR litigation as well as the general shift of the IRS policy from voluntary disclosures to tax enforcement.
Contact Sherayzen Law Office for Professional Help With FBAR Audits and Other International Tax Audits
If you are being audited by the IRS and your tax return involves any international tax issues (including FBARs), contact Sherayzen Law Office for professional help. Our experienced international tax law firm has successfully helped hundreds of US taxpayers to settle their US tax affairs.
We possess profound knowledge and understanding of US international tax law as well as the IRS procedures. We have experience in every stage of IRS enforcement: from offshore voluntary disclosures and IRS administrative appeals to IRS audits (including FBAR audits and audits of Streamlined disclosures) and federal court litigation.
We are a leader in US international tax compliance and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### SDOP Real Estate Penalty | Offshore Voluntary Disclosure Law Firm
One of the most important considerations in an offshore voluntary disclosure is the type of assets that form the Penalty Base for the imposition of the Miscellaneous Offshore Penalty. In this article, I would like to explore the issue of whether there is such a thing as SDOP Real Estate Penalty.
SDOP Real Estate Penalty: Streamlined Domestic Offshore Procedures Background
Streamlined Domestic Offshore Procedures or SDOP is an offshore voluntary disclosure option that was announced by the IRS in June of 2014. With the recent termination of the OVDP (Offshore Voluntary Disclosure Program), SDOP has become the main voluntary disclosure vehicle for eligible taxpayers.
Under the terms of the SDOP, a taxpayer voluntarily discloses his prior noncompliance with US international tax laws, files FBARs for the past six years, amends tax returns for the past three years and certifies under the penalty of perjury that his prior noncompliance with US tax laws was non-willful. Moreover, the taxpayer must pay a 5% Miscellaneous Offshore Penalty that supplants all other penalty structures associated with FBAR and other US international information returns (such Form 5471, 8865, et cetera).
SDOP Real Estate Penalty: SDOP Penalty Base
The 5% Miscellaneous Offshore Penalty is imposed on the entire SDOP Penalty Base. The SDOP Penalty Base is formed by the inclusion all foreign financial assets undisclosed on US international information returns as well as income-noncompliant foreign financial assets. This includes without limitation all assets listed on FBARs and Forms 8938, 5471, 8858, 8865, 3520 (the foreign trust portion), 3520-A, et cetera.
Is there A SDOP Real Estate Penalty?
Now, armed with this understanding of the structure of the SDOP Penalty Base, we can answer the question of whether there is such a thing as SDOP Real Estate Penalty. Since the SDOP Penalty Base is formed by the inclusion of all foreign financial assets and real estate is not a foreign financial asset, we can conclude that there is no SDOP Real Estate Penalty on the real estate owned directly by a US taxpayer.
What about real property owned through a foreign business entity or a foreign trust? Unfortunately, it is here where we encounter the hidden SDOP Real Estate Penalty. If the foreign entity (or income from this foreign entity) was not properly disclosed on Form 8938 or any other relevant information return which is used to avoid the duplication of reporting of foreign business ownership (i.e. Form 5471, 8865, 8858, 3520 and 3520-A), then the SDOP Penalty Base will include the fair market value of the undisclosed foreign entity. In other words, the SDOP Real Estate Penalty may be imposed on the value of the entity that is holding the real estate, not real estate per se.
This is very worrying news to taxpayers who hold real estate through foreign entities. In virtually all Latin American countries, US taxpayers usually own real estate through a corporation. This means that they are exposed to the imposition of SDOP Miscellaneous Offshore Penalty on their personal real estate that is held through a foreign entity simply because it is a local custom to do so.
Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure
If you have undisclosed foreign assets and/or foreign income, contact Sherayzen Law Office for professional help. Our legal team, led by an international tax attorney Eugene Sherayzen, is highly experienced in offshore voluntary disclosures of unreported offshore assets and income. Whether it is Indian mutual funds, Swiss Structured Products, a French Assurance Vie account, Polish lokatas, Australian Superannuation accounts, Canadian RRSPs, a Malaysian health insurance investment policy, a Singapore Central Provident Fund (CPF), an Italian Corporation, a British Limited Company, a Spanish rental property, a Panamanian Sociedad Anonima, a Kazakh foreign branch, a Jersey trust and many, many other varieties of foreign assets – we have done it all and successfully brought our clients in full compliance with the US international tax laws. We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### 4th Quarter 2018 Underpayment and Overpayment Interest Rates
On September 7, 2018, the IRS announced that the 4th Quarter 2018 underpayment and overpayment interest rates will not change from the 3rd Quarter of 2018.
This means that, the 4th quarter 2018 IRS underpayment and overpayment interest rates will be as follows:
 	five (5) percent for overpayments (four (4) percent in the case of a corporation)
 	five (5) percent for underpayments
 	seven (7) percent for large corporate underpayments; and
 	two and one-half (2.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the interest rates are determined on a quarterly basis. This means that the next change in the IRS underpayment and overpayment interest rates may occur only for the 1st Quarter of 2019. In fact, if the analysts are correct, it may very well happen in early 2019.
The 4th Quarter 2018 underpayment and overpayment interest rates are important for many reasons. Not only are these rates used to determine what the IRS will charge in case of an amended tax return (including an amended return made as part of an offshore voluntary disclosure), but they will also determine the interest rate for any adjustments made by the IRS during an audit.
Moreover, the IRS underpayment rates are used to calculate the interest charged on the PFIC (default IRC Section 1291) tax due on an excess distribution. It should be remembered that PFIC calculations de facto remain outside of the Statute of Limitations and PFIC interest can be charged on any PFIC gains made in 2018 but allocated to any prior year (all the way to 1988).
It is important to prevent some US tax accountants from falling into a common trap concerning distributions of accumulated income from a foreign trust. There is a myth that the interest rates on UNI tax is calculated based on the IRS underpayment and overpayment interest rates. This is incorrect – the Throwback Rule follows a separate method for calculating the interest on the UNI tax.
Sherayzen Law Office continues to track any changes IRS makes to its overpayment and underpayment interest rates.

### Sherayzen Law Office Successfully Completes October 2018 Tax Season
Sherayzen Law Office, Ltd., successfully ended yet another tax season. The October 2018 tax season presented formidable challenges not only due to the diversity of the issues involved, but also the sheer volume of deadlines that needed to be completed between September 16 and October 15, 2018.
Let’s analyze the October 2018 tax season in more detail.
October 2018 Tax Season: Diversity of Tax Forms
During this October 2018 tax season, the tax team of Sherayzen Law Office had to deal with highly diverse tax issues – as usual. Our team is very well-versed in foreign income reporting and US international information returns such as: FBAR and FATCA Form 8938, business tax forms (926, 5471, 8858 and 8865), foreign trust forms (3520 and 3520-A), foreign gifts & inheritance reporting (Form 3520 and other relevant forms), PFICs and others. All of these forms needed to be completed for the October 2018 tax season.
However, there was something very new this time – Section 965 Transition Tax. As a result of the 2017 tax reform, US owners of certain foreign corporations were forced to recognize as income the accumulated E&P of their foreign corporations at their ownership percentage. The Section 965 tax compliance added a significant burden to the October 2018 tax season.
October 2018 Tax Season: High Volume of Deadlines & High Diversity of Assets
Between September 16 and October 15, 2018, Sherayzen Law Office completed over 70 deadlines for its clients. As part of these deadlines, we filed about 50 FBARs and a similar number of Forms 8938, about two dozens of Forms 5471/5472 and a smaller number of Forms 8865, about a dozen of Forms 3520 and over 200 Forms 8621.
Numerous forms were filed to report foreign rental income as well as foreign dividend and interest income. The vast majority of the filed tax returns included Foreign Tax Credit calculations.
October 2018 Tax Season: Diversity of Countries
The reported assets belonged to a wide variety of countries. During the October 2018 Tax Season, Sherayzen Law Office reported assets from virtually all main areas of the world. The majority of assets were reported from the European (particularly: France, Germany, Italy and the United Kingdom) and Asian countries (especially, China, India and Thailand); a smaller number of assets reported for Canada and Latin America. The deadlines for most of our New Zealand and all of our Australian clients were completed prior to September 15.
Lebanon and Egypt stood out among the Middle Eastern clients.
Sherayzen Law Office is a Leader in US International Tax Compliance
Sherayzen Law Office is committed to helping our clients to properly comply with their US international tax requirements. Our highly knowledge and higher experienced tax team has successfully helped hundreds of clients around the world with their US tax compliance issues, including offshore voluntary disclosures of foreign assets and foreign income. Our successful October 2018 tax season is just another proof of our commitment to our clients!
Contact Us Today to Schedule Your Confidential Consultation!

### October 15 2018 Deadline for FBARs and Tax Returns | US Tax Law Firm
With just a week left before October 15 2018 deadline, it is important for US taxpayers to remember what they need to file with respect to their income tax obligations and information returns. I will concentrate today on four main requirements for US tax residents.
1. October 15 2018 Deadline for Federal Tax Returns and Most State Tax Returns
US taxpayers need to file their extended 2017 federal tax returns and most state tax returns by October 15, 2018. Some states (like Virginia) have a later filing deadline. In other words, US taxpayers need to disclose their worldwide income to the IRS by October 15 2018 deadline. The worldwide income includes all US-source income, foreign interest income, foreign dividend income, foreign trust distributions, PFIC income, et cetera.
2. October 15 2018 Deadline for Forms 5471, 8858, 8865, 8938 and Other International Information Returns Filed with US Tax Returns
In addition to their worldwide income, US taxpayers also may need to file numerous international information returns with their US tax returns. The primary three categories of these returns are: (a) returns concerning foreign business ownership (Forms 5471, 8858 and 8865); (b) PFIC Forms 8621 – this is really a hybrid form (i.e. it requires a mix of income tax and information reporting); and (c) Form 8938 concerning Specified Foreign Financial Assets. Other information returns may need to be filed by this deadline; I am only listing the most common ones.
3. October 15 2018 Deadline for FBARs
As a result of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, the due date of FinCEN Form 114, The Report of Foreign Bank and Financial Accounts (also known as “FBAR”) was adjusted (starting tax year 2016) to the tax return deadline. Similarly to tax returns, the deadline for FBAR filing can also be extended to October 15; in fact, under the current law, the FBAR extension is automatic. Hence, October 15 2018 deadline applies to all 2017 FBARs which have not been filed by April 15, 2018.
The importance of filing this form cannot be overstated. The FBAR penalties are truly draconian even if they are mitigated by the IRS rules. Moreover, an intentional failure to file the form by October 15 2018 may have severe repercussions to your offshore voluntary disclosure options.
4. October 15 2018 Deadline for Foreign Trust Beneficiaries and Grantors
October 15 2018 deadline is also very important to US beneficiaries and US grantors (including deemed owners) of a foreign trust – the extended Form 3520 is due on this date. Similarly to FBAR, while Form 3520 is not filed with your US tax return, it follows the same deadlines as your income tax return.
Unlike FBARs, however, Form 3520 does not receive an automatic extension independent of whether you extended your tax return. Rather, its April 15 deadline can only be extended if your US income tax return was also extended.
Sherayzen Law Office warns US taxpayers that a failure to file 2017 Form 3520 by October 15 2018 deadline may result in the imposition of high IRS penalties.

### 2018 Egyptian Tax Amnesty | International Tax Lawyer & Attorney
Egyptian Law 174 of 2018 announced the 2018 Egyptian Tax Amnesty program that commenced on August 15, 2018. Egypt is no stranger to tax amnesties; in fact, the very first documented tax amnesty program in the world is believed to be the one announced by Ptolemy V Epiphanes in 197 B.C.
The 2018 Egyptian Tax Amnesty program is a continuation of the worldwide trend to fight tax noncompliance with amnesty programs. If they are structured well (such as the US OVDP) and combined with effective tax administration, these amnesty programs can be highly effective, generating large revenue streams for national governments. There are, however, numerous examples of failed amnesty programs (like the ones in Pakistan) due to either poor structuring or other factors. Let’s acquaint ourselves with the 2018 Egyptian Tax Amnesty program.
2018 Egyptian Tax Amnesty: Term
The 2018 Egyptian Tax Amnesty program will last a total 180 days starting August 15, 2018.
2018 Egyptian Tax Amnesty: Taxes and Penalties Covered
The 2018 Egyptian Tax Amnesty program will cover stamp duty, personal income tax, corporate income tax, general sales tax, and VAT liabilities that matured before August 15, 2018.
The interest and penalties on the outstanding tax liabilities related to the listed taxes will be reduced according to a fairly rigid schedule which benefits most taxpayers who go through the program within 90 days after the Program opens on August 15, 2018. These taxpayers can expect a whopping 90% reduction in penalties and interest!
If a taxpayer misses the 90-day deadline, but settles his outstanding tax debts within 45 days after the deadline, he will be entitled to a waiver of 70% of the tax debt and interest.
If a taxpayer misses both, the 90-day deadline and the 45-day deadline, but settles his outstanding tax debts within 45 days after the 70%-waiver deadline (i.e. 135 days after August 15, 2018), he can still benefit from a 50% reduction in tax penalties and interest.
US Tax Amnesty & 2018 Egyptian Tax Amnesty
US taxpayers who participate in the Egyptian Tax Amnesty should also consider pursuing a voluntary disclosure option in the United States with respect to their unreported Egyptian income and Egyptian assets. There is a risk that the information disclosed in the Egyptian Tax Amnesty may be turned over to the IRS, which may lead to an IRS investigation of undisclosed Egyptian assets and income for US tax purposes.
While the IRS Offshore Voluntary Disclosure Program closes on September 28, 2018, there is still a little time left to utilize this option. Additionally, US taxpayers should consider other relevant voluntary disclosure options, such as Streamlined Offshore Compliance Procedures.
Contact Sherayzen Law Office for Professional Help With Offshore Voluntary Disclosure of Egyptian Assets in the United States
If you have undisclosed Egyptian assets and/or Egyptian income, you should contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world to successfully settle their US tax noncompliance, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### August 24 OVDP Deadline | OVDP Tax Lawyer & Attorney
The fact that the IRS Offshore Voluntary Disclosure Program (“OVDP”) closes on September 28, 2018, obscured another important deadline that is much closer – the August 24 OVDP Deadline to submit the Preclearance Request.
August 24 OVDP Deadline: What is a Preclearance Request?
The Preclearance Request is basically a pre-application process to make sure that a taxpayer is eligible to apply for the OVDP. It is filed with the IRS Criminal Investigation Unit (“IRS-CI”), which will check for any outstanding investigations or examinations concerning the taxpayer.
August 24 OVDP Deadline: Is the Preclearance Request Required?
The short answer is “no”. I have seen a fair number of Internet blogs that mislead the taxpayers into believing that to the contrary, but this is simply false. A person can skip the Preclearance Request and apply directly to be accepted into the OVDP.
Nevertheless, even though the Preclearance Request is not an absolute requirement, it may be prudent to go through this process in some cases. It will be up to your international tax attorney to determine whether this is necessary.
What is the August 24 OVDP Deadline?
According to FAQ #11 published for the Closure of the OVDP, August 24, 2018 is the last day that a taxpayer will be able to submit his Preclearance (OVDP FAQ 23) Request to the IRS.
It should be remembered that the response to a Preclearance request may take 30 days or more (especially with the current rush to enter OVDP prior to its closure). In fact, the response to a Preclearance request may even come into conflict with the OVDP closure deadline. In such cases, it would be prudent to timely submit by September 28, 2018, the OVDP application letter required by OVDP FAQ #24.
Contact Sherayzen Law Office for Help With Your OVDP Application
If you have undisclosed offshore accounts and you wish to enter the OVDP, contact Sherayzen Law Office for professional help.
Sherayzen Law Office has successfully helped its clients around the globe with every type of an offshore voluntary disclosure, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP. We can help You!
Time is of the essence, because the current 2014 OVDP will close on September 28, 2018. Contact Us Today to Schedule Your Confidential Consultation!

### Mizrahi-Tefahot Bank Rejects DOJ Settlement Offer | FATCA Tax Lawyer
On August 8, 2018, Mizrahi-Tefahot Bank (“Mizrahi-Tefahot”) informed the Tel Aviv Stock Exchange that its Board of Directors rejected a settlement offer from the US Department of Justice (“DOJ”).
It appears that the DOJ offer was received by the bank on August 7, 2018. The DOJ proposed that Mizrahi-Tefahot pay $342 million to settle the DOJ investigation into whether the bank helped US taxpayers evade US federal taxes.
Mizrahi-Tefahot felt that this was an unreasonably high amount to pay. In its financial statements for the quarter that ended on March 31, 2018, the bank reserved just $46.1 million to settle the DOJ investigation.
The official and primary reason for the rejection of the DOJ offer, however, was the fact that the DOJ’s letter was not accompanied by any details of how DOJ arrived at such a high sum of money. The letter did not contain even any references to any calculation principles. Mizrahi-Tefahot’s lawyer felt that any reasonable calculation of potential settlement amount would lead to a much lower settlement offer.
The most likely reason why Mizrahi-Tefahot felt so confident in rejecting the DOJ offer was its knowledge of the settlements paid by the Swiss banks. NPB Neue Privat AG, for example, only paid $5 million. Basler Kantonalbank believes it can settle for $100 million. In other words, it appears that the negotiation process with the DOJ has matured to the point where Mizrahi-Tefahot can reasonably predict the amount for which the DOJ would agree to settle the case.
Mizrahi-Tefahot is not the only bank in Israel under the IRS investigation. Bank Leumi settled its DOJ investigation for a fine of $270 million and entered into a deferred prosecution agreement. Bank Hapoalim is still in settlement negotiation with the DOJ; in fact, last May, it further increased the funds set aside for a possible DOJ settlement to a total of $365 million.
Contact Sherayzen Law Office for Help With the Voluntary Disclosure of your Mizrahi-Tefahot and Other Israeli Bank Accounts
As part of their settlement agreements, foreign banks agree to supply to the DOJ full information concerning bank accounts owned by US persons. Mizrahi-Tefahot settlement will very likely follow the same path; so will Bank Hapoalim and any other Israeli bank investigated by the DOJ.
This means that if you have undisclosed foreign bank accounts in Israel, you are at a high risk of IRS detection and potentially disastrous FBAR penalties. This is why you need to contact Sherayzen Law Office for professional help with the voluntary disclosure of your Israeli bank accounts. Our law firm specializes in offshore voluntary disclosures of foreign accounts and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### NPB Neue Privat Bank Signs Non-Prosecution Agreement | OVDP Lawyer
On July 18, 2018, the US Department of Justice (the “DOJ”) announced that it signed a Non-Prosecution Agreement with NPB Neue Privat Bank AG (“NPB”). Let’s explore in more detail the history of this case and its resolution.
Background Information: 2001 QI Agreement between NPB and the IRS
NPB is a Swiss private bank based in Zurich. In 2001, NPB entered into a Qualified Intermediary Agreement (“QI Agreement”) with the IRS, which had extensive requirements for US tax withholding and US information reporting. Among these requirements was the obligation for NPB to ask its new and existing US clients to complete IRS Forms W-9 if they engaged in US securities transactions. In such cases, NPB was required to report the relevant transactions on IRS Form 1099.
Based on the QI Agreement, NPB arrived at a paradoxical conclusion that became prevalent among Swiss banks in the early 2000s. It believed that, as long as the bank complied with its QI Agreement, it could continue to accept and service US taxpayers even if NPB knew or had reason to believe that these taxpayers engaged in tax evasion. In other words, the bank could service such clients as long as they were not trading US-based securities or the investment accounts were nominally structured in the name of a foreign-based entity. It does not appear that an opinion of a legal counsel was secured in support for this belief.
Background Information 2009: NPB Accepts Noncompliant US Taxpayers
Prior to 2009, NPB had relatively few US clients; in fact, at the close of 2008, all of the NPB accounts owned by its US clients held approximately 8 million Swiss francs in assets.
The situation changed dramatically in 2009. As a result of the UBS case and other signs of increased IRS activity with respect to undisclosed foreign accounts, major Swiss banks started closing accounts owned by US taxpayers, creating a flood of potential clients for NPB. In early 2009, certain external-asset managers asked the bank to give refuge to these taxpayers and their money. The managers told the bank that they asked their US clients to become tax compliant, but some of them still had not done so.
On March 9, 2009, the NPB’s board of directors unanimously voted to allow US taxpayers to open accounts with the bank, even for those clients who fled other Swiss banks. As a result, by the end of 2009, NPB accumulated close to 450 million Swiss francs in accounts owned or beneficially owned by US taxpayers. The DOJ estimated that only 69% of these assets were reported to the US government at that time.
It appears that the bank’s executives had hoped that their US clients would eventually come into full compliance with US tax laws, but no written or formal policy to encourage or mandate such compliance was ever created.
Years 2010-2012: NPB Stops Accepting US Clients and Implements Some Procedures to Encourage US Tax Compliance
In August of 2010, as a result of the fact that US tax enforcement made the environment for Swiss banks which accepted noncompliant US taxpayers more and more dangerous, NPB decided not to open any new accounts for US clients who were noncompliant with US tax laws.
This decision (which was not reduced to writing) did not stop the bank from continuing to service its already existing noncompliant US taxpayers. Moreover there were at least 89 US-related accounts, both declared and undeclared, held in the name of offshore structures, such as trusts or corporations. These offshore structures were domiciled in countries such as Panama, Liechtenstein, the British Virgin Islands, Hong Kong, and Belize. All of these structures, however, were set up before the clients were accepted by the bank.
Starting August of 2010, NPB finally started to require new US clients to provide Forms W-9. The existing clients were required to submit Form W-9 only starting in the summer of 2011. The bank started to require evidence of tax compliance from its external asset managers only in August of 2011.
Swiss Bank Program: NPB is a Category 1 Bank
On August 29, 2013, the DOJ announced the Swiss Bank Program, but it declared NPB as a Category 1 bank ineligible to participate in the Program. By that time, the DOJ already started its investigation of the bank and its activities with respect to noncompliant US taxpayers.
Non-Prosecution Agreement with the DOJ
NPB cooperated throughout the DOJ investigation. In fact, the bank turned over the identities of US account holders and beneficial owners of more than 88% of the US-held assets.
The parties finally reached the agreement on July 18, 2018, when they signed the Non-Prosecution Agreement. Under the Agreement, the DOJ promised not to prosecute NPB. In return, the bank agreed to pay a penalty of $5 million. The bank further agreed to cooperate in any related criminal or civil proceedings as well as demonstrate that it implemented the necessary procedure to stop misconduct involving undeclared US-related accounts.
Contact Sherayzen Law Office for Help With the Voluntary Disclosure of Your Foreign Accounts
The NPB-DOJ Non-Prosecution Agreement demonstrates the continued IRS focus on US international tax enforcement. The IRS has devoted considerable resources to this area and all noncompliant US taxpayers around the world are at a significant risk of discovery, not just taxpayers with undisclosed Swiss bank accounts.
If you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Time is of the essence: the IRS flagship Offshore Voluntary Disclosure Program (“OVDP”) will close on September 28, 2018.
Contact Us Today to Schedule Your Confidential Consultation!

### US Taxpayers with Lombard Odier Bank Accounts At Risk | OVDP News
On July 31, 2018, the US Department of Justice (“DOJ”) announced that it signed an Addendum to a non-prosecution agreement with Bank Lombard Odier & Co., Ltd. (“Lombard Odier). The Addendum requires Lombard Odier to disclose additional 88 accounts; in other words, US taxpayers who own these additional Lombard Odier bank accounts are now at a high risk of a criminal prosecution by the IRS.
Lombard Odier Bank Accounts: Background Information on the Swiss Bank Program and Original Non-Prosecution Agreement
The new Addendum to the non-prosecution agreement was signed by Lombard Odier as part of the Swiss Bank Program that was created by the DOJ on August 29, 2013. The Swiss Bank Program is basically a voluntary disclosure program for Swiss banks, which allows the banks to avoid potential criminal prosecution for helping US taxpayers evade US tax laws (the so-called Category 2 banks). As part of their voluntary disclosure, the participating banks were required, among other things, to provide all of the required information concerning bank accounts owned (directly or indirectly) by US taxpayers. The information was provided on an account-by-account basis, rather than per taxpayer.
Overall, the DOJ executed non-prosecution agreements with 80 banks between March of 2015 and January of 2016, collecting $1.36 billion in penalties. Lombard Odier signed the original non-prosecution agreement on December 31, 2015, and paid $99 million in penalties.
Addendum to the Original Agreement Concerning Additional 88 Lombard Odier Bank Accounts
It appears that, when the original non-prosecution agreement was signed, Lombard Odier failed to account for certain additional accounts owned by US persons. The bank later realized its mistake and disclosed it to the DOJ.
As a result of this disclosure, the July 31, 2018 Addendum to the original non-prosecution agreement was signed. Under the Addendum, Lombard Odier will pay the additional sum of $5,300,000 and disclose 88 additional Lombard Odier bank accounts owned by US persons.
Impact of the Addendum on US Taxpayers With Undisclosed Lombard Odier Bank Accounts
The Addendum means that the IRS now has knowledge of additional 88 Lombard Odier bank accounts that were not previously disclosed. US owners of these accounts are now at a risk of willful FBAR penalties and potential criminal prosecution if they have not yet entered into an IRS voluntary disclosure program. A quiet disclosure of these accounts will not suffice to protect these taxpayers against the IRS criminal prosecution.
Contact Sherayzen Law Office for Help With the Disclosure of Your Lombard Odier Bank Accounts and Any Other Foreign Bank Accounts
If you are the owner of any of the 88 Lombard Odier bank account or if you have other undisclosed foreign bank accounts, contact the experienced legal team of Sherayzen Law Office. We have helped hundreds of US taxpayers around the world to bring their undisclosed foreign assets, including foreign bank and financial accounts, into full compliance with the US tax laws. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### FBAR Noncompliance & Taxpayer’s Options | FBAR Lawyer & Attorney
FBAR noncompliance is the worst nightmare for US taxpayers due to enormous FBAR penalties even for non-willful taxpayers. US Taxpayers who are not facing an IRS examination or a DOJ (US Department of Justice) lawsuit have three options with respect to their FBAR noncompliance: (1) do nothing with respect to correcting their prior FBAR noncompliance, close the accounts and hope that the IRS will never discover them; (2) do a quiet disclosure; and (3) come forward and voluntarily disclose their unfiled FBARs.
I already explored the highly-risky strategy of a quiet disclosure in another article. In this article, I will focus on option #1 – doing nothing about prior FBAR noncompliance. In the next article, I will discuss the option of Offshore Voluntary Disclosure as a way to deal with prior FBAR noncompliance.
This article does not constitute legal advice, but merely provides information for educational purposes.
Advantages of Doing Nothing With Respect to Prior FBAR Noncompliance
Doing nothing with respect to FBAR noncompliance is a position that some taxpayers prefer, because it requires no action, no immediate legal expenses and no immediate payment of IRS penalties.
In other words, if a taxpayer chooses to do nothing with respect to his late unfiled FBARs and his strategy is successful, he stands to gain in two aspects: (1) he spends no effort, time or money on correcting his past FBAR noncompliance; and (2) if (and this is big “if”) the IRS never finds out about his past FBAR noncompliance, he will not pay any penalties. This whole strategy is based on the hope that the IRS will not find out about their FBAR noncompliance.
Disadvantages of Doing Nothing With Respect to Prior FBAR Noncompliance Even If the Strategy Is Successful
From legal perspective, this strategy of doing nothing can be classified as very risky. If unsuccessful, a noncompliant taxpayer who chooses to do nothing stands to lose a lot more than he could ever gain if his strategy works.
Let’s analyze the disadvantages of doing nothing based on two scenarios: the strategy is successful and the strategy is unsuccessful.
Even if the strategy is ultimately successful and the IRS does not find out about FBAR noncompliance, there is still a heavy psychological price to pay for this success, because the taxpayer will not find out about the success of his strategy until the FBAR statute of limitations expires. In other words, for six long years, the taxpayer will not have any peace of mind and will constantly worry about his potential FBAR penalty exposure. If the taxpayer does not close his foreign accounts, the waiting period could be extended even further.
Moreover, if FBAR noncompliance is combined with income noncompliance and failure to file other US international information returns, the statute of limitations on the tax returns might be open for an indefinite period of time (especially if the IRS can assert a fraud claim against the noncompliant taxpayer).
I have personally seen the psychological effects of such pressure on some of my clients. It was simply destroying their lives. Eventually, they could not live like this and came to me to do an offshore voluntary disclosure to resolve their prior FBAR noncompliance.
Disadvantages of Doing Nothing With Respect to Prior FBAR Noncompliance Where the Strategy Fails
If the success of this strategy exhorts such a heavy price, its failure may potentially result in disastrous consequences. Let’s explore the main two reasons why the strategy of doing nothing is so disfavored among international tax lawyers.
First, as described above, the current international tax enforcement structure severely undermines the entire basis for the strategy – i.e. hope that the IRS will not find out about FBAR noncompliance is simply too risky in the contemporary world dominated by FATCA, CRS and a widely-spread web of bilateral and multilateral automatic information exchange treaties. It is still possible that the IRS will not find out about a US person’s foreign accounts, but it is becoming less and less likely.
Second, since the strategy of doing nothing implies a taxpayer’s conscious choice not to comply with the FBAR requirements, it may turn a relatively simple and non-willful situation into a complex and willful one. In other words, under these circumstances, if the IRS is able to find out about prior FBAR noncompliance, the IRS may pursue willful and, in extreme circumstances, even criminal FBAR penalties.
Contact Sherayzen Law Office for Professional Help With Resolving FBAR Noncompliance Issues
If you never filed your required FBARs and other US tax forms, contact Sherayzen Law Office for professional help. Our legal team is headed by one of the most experienced international tax lawyers in this area – Mr. Eugene Sherayzen. He has helped hundreds of US taxpayers around the world to successfully resolve their prior FBAR noncompliance, and He can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Understand How IRS Amnesty Works Before Entering 2014 OVDP
Less than two months are left before the 2014 IRS Offshore Voluntary Disclosure Program (“2014 OVDP”) closed on September 28, 2018. 2014 OVDP may offer great benefits to taxpayers with undisclosed foreign accounts, such as the possibility of avoiding criminal penalties and greatly reducing FBAR civil penalties. Yet, entering 2014 OVDP also implies a great variety of obligations and complications that many taxpayers will find overly invasive and burdensome. Moreover, non-willful taxpayers may resent not only the amount of paperwork, but also the 27.5% to 50% OVDP Miscellaneous Offshore Penalty.
Furthermore, 2014 OVDP has its own eligibility requirements which may simply prevent a taxpayer from being able to participate in the program. Unfortunately, the taxpayer may only find out about it after he submits his OVDP application, thereby exposing himself to potential IRS investigation and penalties.
In sum, entering 2014 OVDP is an important and highly complex decision that requires a detailed evaluation of the taxpayers’ facts. 2014 OVDP is not the best solution for everyone, but it may be a critical opportunity to settle past tax noncompliance for some taxpayers (especially taxpayers whose noncompliance is likely to be considered “willful” by the IRS) – an opportunity that should not be wasted.
Such legal analysis should only be done by a skilled international tax attorney who specializes in the area of offshore voluntary disclosures. The stakes are simply too high to entrust a matter of such importance to anyone else.
Experienced International Tax Attorney Sherayzen Can Help You With Your Offshore Voluntary Disclosure
Mr. Eugene Sherayzen is an international tax attorney who specializes in offshore voluntary disclosures. In fact, this specialty occupies more than 80% of his entire practice. Mr. Sherayzen has helped his clients with respect to every major IRS voluntary disclosure program, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures and Delinquent International Information Return Submission Procedures.
Additionally, Mr. Sherayzen has conducted a great number of statutory voluntary disclosures based on Reasonable Cause exception or so called “Noisy Disclosures” (they were very popular prior to 2009 as well as between 2009 OVDP and the creation of the Streamlined Filing Compliance Procedures).
Furthermore, Mr. Sherayzen represented his clients during the IRS audits of offshore voluntary disclosures, has extensive experience with IRS appeals and federal court litigation.
Contact Attorney Sherayzen Before Entering 2014 OVDP
Such an extensive work with offshore voluntary disclosures makes Mr. Sherayzen one of the most experienced offshore voluntary disclosure lawyers whose opinion should be obtained before entering 2014 OVDP (now closed).
Contact Mr. Sherayzen Today to Schedule Your Confidential Consultation!

### Schedule C IRS Audit | Business Tax Lawyer & Attorney
One of the most common types of IRS audits is the Schedule C IRS audit. In this article, I would like to introduce the readers to the Schedule C IRS audit. In particular, I would like to discuss the type of taxpayers who are affected by an IRS audit of Schedule C and the key legal issues associated with such an audit.
Schedule C IRS Audit: Who is Affected?
A Schedule C IRS audit primarily concerns two groups of taxpayers: owners of sole proprietorships and owners of single-member LLCs. These are the taxpayers who conduct business in either unincorporated form (i.e. sole proprietorship) or the incorporation is disregarded by the IRS (i.e. single-member LLC).
Schedule C IRS Audit: the Focus of the Audit
A typical Schedule C IRS audit focuses on two critical areas: full reporting of revenue and substantiation of expenses.
Generally, the reporting of business revenue should not be too difficult as long as there are sufficient records, but there are exceptions. One of such exceptions is the reporting of foreign income earned by the taxpayer because of the issues of income recognition and currency translation.
Unfortunately, a typical Schedule C IRS audit rarely involves a business with well-kept records. In a purely cash-based business, this is most problematic for obvious reasons – absent records of receipt of cash, it is extremely difficult to recreate an accurate picture of the revenue intake by the business. Similarly, a lot of work will be needed to reconstruct the revenue of a business with multiple revenue conduits, constant transfers between accounts, inexplicable cash withdrawals and deposits, disorganized prepayments and other similar complications.
Schedule C IRS Audit: Substantiation of Expenses
The problems associated with the second part of a Schedule C IRS audit (i.e expenses), however, dwarf the difficulties of revenue identification. The substantiation of expenses is by far the most difficult task in a Schedule C IRS audit. Let’s explore the reasons for this problem in more detail.
During a Schedule IRS C audit, the revenue agent in charge of the audit will only allow a business expenses if it satisfies all of the following three requirements:
1. Expense is Incurred by Business Identified on Schedule C
In this context, the primary problem that plagues taxpayers is the commingling of personal and business expenses. Oftentimes, the taxpayers will pay for business expenses using a personal bank account or a personal credit card. Actually, I have had clients who used credit cards of third parties to pay for business expenses. Proving that these expenses were actually incurred by the business, as opposed to the taxpayer or the third party, can be very challenging.
2. Expense is Supported by Records
The IRS will generally require that a business expense is supported by records. If a taxpayer uses only his own memory as the basis for an expense, an IRS agent is likely to disallow such an expense.
Ideally, the taxpayer should have actual receipts for all business expenses, but IRS agents generally accept bank and credit card statements that would allow them to identify the nature of an expense. The generosity of an IRS agent in this aspect often depends on the general “flow” of a Schedule C IRS audit – i.e. cooperation of the taxpayer, his credibility and the non-willfulness of his prior noncompliance.
3. Expense is Allowable Business Deduction from Income
Even if the audited taxpayer has good records in support of a business expense, the expense must still be an allowable business deduction. The critical issue here is whether the law actually allows the taxpayer to reduce his business income by the expense in question.
In order to qualify for being a deductible business expense, the expense must be both ordinary (i.e. common and accepted in the relevant area of trade or business) and necessary (i.e. helpful and appropriate for your trade or business). It is also should be kept in mind that some of the business expenses are either capitalized or added to cost of goods sold. There are also limitations on certain types of business deductions (such as business meals).
One of the most frequent problems that arise during a Schedule C IRS audit is the issue of personal expenses paid by the business. Personal expenses are never deductible as a business expense. I already described this problem above in the context of business expenses paid through personal accounts or by a third party; here, I am discussing the opposite situation – personal expenses paid using a business bank account or credit card.
It is important to understand that the fact that an expense is paid by a business, does not automatically mean that this is a deductible business expense. An expense still needs to comply with the “ordinary and necessary” requirement and be separated from personal expenses.
Sometimes, it is fairly easy to identify personal expenses, but this is not always the case; on the contrary, a vast number of expenses can be interpreted either as a business expense or a personal expense. For example, if a business owner buys tickets to a baseball game for himself, his family, potential clients and their families, how much of it is deductible? How about a personal membership at a gold club to which the business owner often invites his prospective clients and pays for their games?
The answers to these questions should not be left to the judgment of the IRS agent in charge of the question; instead, the attorney who represents the audited taxpayer should look at the precise facts, IRS revenue rulings and similar cases to promote the argument that will benefit his client.
Contact Sherayzen Law Office for Professional Help with a Schedule C IRS Audit
If the IRS is auditing the Schedule C of your tax return, contact Sherayzen Law Office. Our professional audit team, headed by attorney Eugene Sherayzen, is highly experienced in the IRS audits of Schedule C, especially with respect to upper middle-class and high net-worth clients. We can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Streamlined Domestic Offshore Procedures Audits | SDOP Tax Lawyer
The great majority of offshore voluntary disclosures are currently done through Streamlined Filing Compliance Procedures. Hence, the majority of IRS audits concerning offshore voluntary disclosures are focused on Streamlined Filing Compliance Procedures – the most common type is the Streamlined Domestic Offshore Procedures Audit. This article discusses the main stages of the Streamlined Domestic Offshore Procedures Audit and provides some suggestions to attorneys who handle this type of an IRS audit.
Streamlined Domestic Offshore Procedures Audits: SDOP Background Information
Streamlined Domestic Offshore Procedures (“SDOP”) is an offshore voluntary disclosure option that has existed since June of 2014. It is extremely popular due the fact that it is the most convenient and the least expensive voluntary disclosure option (except the Reasonable Cause/Noisy Disclosure option) for taxpayers whose prior tax noncompliance was non-willful and who otherwise meet the SDOP eligibility requirements.
Under the SDOP, a taxpayer or tax professional prepares a voluntary disclosure package and mails it to the IRS. The voluntary disclosure package usually consists of amended tax returns for the past three years, copies of e-filed FBARs for the past six years, any required international information returns which do not form part of a tax return (such as Forms 3520), the payments of additional tax with interest, the payment of the Miscellaneous Offshore Penalty and Non-Willfulness Certification form (Form 14654) with a detailed explanation. Certain additional items may need to be included in the package.
Once the package arrives to its destination, it is processed by the IRS. Assuming that all of the SDOP submission requirements are met, the IRS reserves the right to audit the taxpayer(s) at any point within three years after the submission of the original SDOP voluntary disclosure package.
The exact process of a Streamlined Domestic Offshore Procedures Audit varies from case to case, but it usually contains all of the stages listed below.
Streamlined Domestic Offshore Procedures Audits: the Initiation Stage
All Streamlined Domestic Offshore Procedures Audits start in the same way. Once an IRS revenue agent is assigned to the case, the agent will send an initial letter to the taxpayer informing the taxpayer about the fact that his SDOP is being audited. Generally, the initial audit letter will explain that the IRS decided to examine certain tax returns and ask for all worksheets and supporting documents that were used to prepare the amended returns. The letter is likely to also contain a request for the taxpayer to contact the agent to schedule the initial meeting, which would usually include an interview of the taxpayer.
At this point, you should contact an international tax lawyer who specializes in Streamlined Domestic Offshore Procedures Audits. I strongly discourage you from even trying to represent yourself or to have your accountant represent you. It is very easy to get into trouble during an IRS audit and it is very hard and expensive to get out of such a situation afterwards.
Streamlined Domestic Offshore Procedures Audits: Initial Meeting and Interview Stage
Prior to the initial meeting, the taxpayer’s attorney should review all documents to make sure that they support the information on the tax returns. All supporting documents and worksheets should be neatly organized by subject and year. If the audited tax returns are incorrect, the attorney should make the decision on whether amended tax returns should be prepared prior to the initial meeting.
Additionally, the attorney should conduct an extensive preparation of his client for the interview. Read this article for more information on the IRS audit interview preparation specifically for Streamlined Domestic Offshore Procedures Audits.
The initial meeting usually commences with the interview of the taxpayer in the presence of his attorney. It is the attorney’s job to protect his client during the interview, including by making sure that the IRS questions are clear, explaining any confusing answers of the taxpayer, correcting the record based on available evidence and so on.
After the interview, the IRS agent will want to review with the attorney (and, sometimes, the client as well) the documents supplied on a very general level – i.e. he will want to know what is being submitted to him. The attorney should discuss with the agent any confusing parts of the case and familiarize the agent with the client’s story. If a case is very small, it is possible for an agent to cover everything in the first meeting, but it is very rare.
Streamlined Domestic Offshore Procedures Audits: Follow-Up IRS Requests
After the initial meeting, the IRS agent will take some time to review submitted documents, interview third parties where relevant (for example, the accountant who prepared the original tax returns), analyze the tax returns and the Non-Willfulness Certification.
Most likely, the agent will have additional follow-up questions. It is the job of the attorney to address them. Where necessary, the attorney should secure his client’s participation in order to answer the questions. In certain cases, additional meetings with the IRS agent may be required to increase the efficiency of the audit. Continuous cooperation with the IRS while promoting the client’s position is the key to long-term success.
One of the most problematic areas for the IRS agents in Streamlined Domestic Offshore Procedures Audits are PFIC calculations. A lot of agents simply do not know how to properly do PFIC calculations. In my practice, very often I have to go through the entire PFIC calculations with the agent in order to make sure that their calculations match mine.
Streamlined Domestic Offshore Procedures Audits: Conclusion of the IRS Audit
Once the IRS agent completes his review process, he will submit the preliminary results to the taxpayer and his attorney. The attorney needs to review carefully the final results and contact the agent in case he finds mistakes in the agent’s conclusions. The taxpayers’ attorney will also need to build a strategy with respect to the taxpayer’s response to the audit results depending on whether the taxpayer agrees or disagrees with the results of the audit.
The biggest issue in the Streamlined Domestic Offshore Procedures Audits is making sure that the Non-Willfulness Certification is not challenged by the IRS, because such a challenge may result in highly unfavorable consequences to the taxpayer, including a potential referral to the Tax Division of the US Department of Justice for a criminal investigation.
It should be mentioned that, even if the taxpayer agrees with the audit results, the Audit is not immediately over. The IRS agent will need to submit his conclusions to his technical advisor, his manager and the IRS National Office in Washington D.C. for the their approval of these conclusions before the audit can be officially completed.
Contact Sherayzen Law Office for Professional Help With Streamlined Domestic Offshore Procedures Audits
An IRS audit of an offshore voluntary disclosure completed through Streamlined Domestic Offshore Procedures is one of the most important events in a taxpayer’s life. A lot is at stake during such an audit – financial stability, immigration status and, in exceptional circumstances, even personal freedom.
This is why it is so important for a taxpayer subject to an IRS audit of his Streamlined Domestic Offshore Procedures voluntary disclosure to retain the services of an experienced international tax lawyer to handle the audit professionally.
Sherayzen Law Office is a leader in the area of offshore voluntary disclosures and IRS audits of offshore voluntary disclosures. The firm’s owner, Mr. Eugene Sherayzen, is one of the most experienced international tax lawyers in this area, including IRS audits of a Streamlined Domestic Offshore Procedures submission. He can help You!
Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!

### Amending Tax Returns during An IRS Audit | IRS Audit Lawyer & Attorney
One of the most interesting questions that arise during an IRS audit is whether a taxpayer (or his tax attorney) should amend his tax returns during an IRS audit. Amending tax returns during an IRS audit may offer great benefits as long as it is done properly, but this is not a strategy available in every case. In this article, I would like to discuss the benefits and dangers of amending tax returns during an IRS audit.
Potential Benefits of Amending Tax Returns During an IRS Audit
The main job of a tax attorney during an IRS audit is to protect his client as well as make it easy and convenient for the IRS agent to make a decision that will favor his client. One of the ways to accomplish this is to do the necessary audit groundwork for the IRS agent by amending all tax returns subject to audit before your initial meeting with the IRS agent.
In such cases, amending tax returns is likely to bring the taxpayer various benefits. I will concentrate here on the three main benefits. First, amending tax returns shows that the taxpayer is willing to cooperate with the IRS far and beyond his prescribed obligations.
Second, by amending tax returns and providing supporting documentation, the tax attorney is likely to “buy” a lot of goodwill from the agent, who will appreciate that the attorney is trying to reduce his workload and make all information easily accessible. In some situations, such extensive cooperation may convince the agent not to expand the audit beyond the already audited years.
Finally, depending on the situation, it may show a rift between past noncompliance and present compliance for reasonable cause purposes. This is especially relevant in situations where the original tax preparer can be held accountable for the taxpayer’s past noncompliance.
Potential Drawbacks of Amending Tax Returns During an IRS Audit
There are, however, various risks associated with this strategy. Again, I will concentrate on the three main drawbacks of the strategy. First, the amended tax returns have to be prepared correctly. If the amended returns are incorrect, then the taxpayer would be getting himself into even bigger troubles.
Second, in some situations, a taxpayer may not benefit from prolonging the case, especially where there are Statute of Limitations issues concerning unaudited years. By prematurely exposing the taxpayer’s mistakes on the original return, the taxpayer may give the IRS additional time to open up another year for audit. It is questionable whether this concern outweighs the benefits of amending tax returns; one really should look at the totality of circumstances of the specific case in question and make the decision based on this analysis.
Third, by shifting the workload from the IRS agent to the taxpayer’s tax attorney, the taxpayer is likely to incur substantially higher legal fees. Therefore, a cost-benefit analysis must be done by the attorney to make sure that the proposed strategy of amending tax returns is cost-effective and does not result in unduly high legal fees.
Procedural Concerns: Do NOT File Amended Tax Returns; Send Them to the IRS Agent
One of the biggest procedural mistakes with respect to the strategy of amending tax returns that I see in my practice is incorrect filing of amended tax returns. By “incorrect filing”, I mean here the filing of amended tax returns directly with the IRS bypassing the IRS agent in charge of the audit.
This is a big mistake, because it goes against the proper procedure of having all adjustments to the audited original returns done by the IRS agent in charge of the case. Moreover, the IRS agent will feel ignored and to some degree betrayed by the taxpayer, and the taxpayer will likely lose all goodwill that he has accumulated with the agent up to that point.
The proper procedure for amending tax returns during an IRS audit is to prepare the amended tax returns and send them to the IRS agent in charge of the audit with supporting documentation.
Contact Sherayzen Law Office for Amending Tax Returns During an IRS Audit
Amending tax returns may not a be a strategy that is available in all cases. If done properly, in many cases, it will offer great benefits to a taxpayer, while it may result in augmenting the already existing problems in other cases. This type of a decision should not be made by the taxpayer, but by an experienced IRS audit lawyer.
Contact the professional IRS audit team of Sherayzen Law Office. Headed by our highly-experienced tax attorney, Mr. Eugene Sherayzen, Sherayzen Law Office has helped US taxpayers around the world to deal with various types of IRS audits, including audits of offshore voluntary disclosures and high net-worth audits.
Contact Us Today to Schedule Your Confidential Consultation!

### 2018 FBAR Civil Penalties | FBAR Tax Lawyer & Attorney
Following the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, the FBAR civil penalties are adjusted every year by the IRS for inflation. In this brief article, I would like to describe the new 2018 FBAR Civil Penalties that may be assessed by the IRS with respect to FBAR noncompliance.
2018 FBAR Civil Penalties: Pre-2016 FBAR Penalty System
The FBAR penalty system was already complex prior to the FBAR penalty inflation adjustment. It consisted of three different levels of penalties with various levels of mitigation. The highest level of penalties consisted of criminal penalties. The most dreadful penalty was imposed for the willful failure to file FBAR or retain records of a foreign account while also violating certain other laws – up to $500,000 or 10 years in prison or both.
The next level consisted of civil penalties imposed for a willful failure to file an FBAR – up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation per year.
The third level of penalties were imposed for the non-willful failure to file an FBAR. The penalties were up to $10,000 per violation per year. It is also important to point out that the subsequent laws and IRS guidance imposed certain limitations on the application of the non-willful FBAR penalties.
Finally, there were also penalties imposed solely on businesses for negligent failure to file an FBAR. These penalties were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.
2018 FBAR Civil Penalties: Penalty Adjustment System
The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 further complicated the already complex FBAR penalty system, including for 2018 FBAR civil penalties.
As a result of the Act, with respect to post-November 2, 2015 violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred.
For example, in 2017, the IRS announced that if the IRS penalty assessment was made after August 1, 2016 but prior to January 16, 2017, then the maximum non-willful FBAR penalty per violation would be $12,459 and the maximum willful FBAR penalty per violation would be the greater of $124,588 or 50% of the highest balance of the account.
Similarly, if the penalty was assessed after January 15, 2017, the maximum non-willful FBAR penalty would increase to $12,663 per violation and the maximum civil willful FBAR penalty would be the greater of $126,626 or 50% of the highest balance of the account.
Now, in 2018, post-January 15, 2017 FBAR penalties are adjusted higher.
2018 FBAR Civil Penalties: 2018 Inflation Adjustment
The new 2018 FBAR civil penalties for FBAR violations have increased as a result of inflation. If a penalty was assessed after January 15, 2017, the maximum 2018 FBAR civil penalties for a non-willful violation increased from $12,663 to $12,921. Similarly, the maximum 2018 FBAR civil penalties for a willful violation assessed after January 15, 2017 increased from $126,626 to $129,210.
It should be emphasized that the IRS currently interprets the term “violation” as a failure to report an account on an FBAR. In other words, these higher 2018 FBAR civil penalties can be assessed on a per-account basis.
Contact Sherayzen Law Office for Professional Help with 2018 FBAR Civil Penalties
If you have not filed your FBAR and you want to do a voluntary disclosure; if you are being audited by the IRS with the possibility of the imposition of FBAR penalties; or FBAR penalties have already been assessed and you believe that they are too high, you should contact Sherayzen Law Office for professional help.
Sherayzen Law Office has helped hundreds of US taxpayers to deal with their FBAR penalties on all levels: offshore voluntary disclosure, FBAR Audit pre-assessment, post-audit FBAR penalty assessment and FBAR litigation in a federal court. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Passport Revocation and Denial for Tax Debt | IRS Tax Lawyer & Attorney
Starting January 1, 2018, the State Department commenced to deny the requests for US passport issuance and renewal made by individuals with “seriously delinquent tax debt”. Moreover, the State Department has been granted the authority for US passport revocation with respect to these individuals. Let’s explore this new law on passport revocation and denial for tax debt.
Passport Revocation and Denial: IRC Section 7345
Section 32101 of the 2015 Fixing America’s Surface Transportation Act (“FAST Act”) added IRC Section 7345, which requires the IRS to notify the State Department of taxpayers that the IRS has certified individuals as having “seriously delinquent tax debt.” This is called “Section 7345 Certification.” Once the State Department receives such a Certification, it is generally required to deny a passport application for the certified individuals and may even revoke or limit passports that were previously issued to these individuals.
Passport Revocation and Denial: Who Can Make Section 7345 Certifications
Only designated IRS officials may certify an individual or reverse Certification. IRC Section 7345(g) specifically reserves this right to the Commissioner of Internal Revenue, the Deputy Commissioner for Services and Enforcement of the Internal Revenue Service (IRS), or the Commissioner of an operating division of the IRS (collectively, “Commissioner or specified delegate”).
Passport Revocation and Denial: Seriously Delinquent Tax Debt
The term “seriously delinquent tax debt” is defined in IRC Section 7345(b)(1), which sets up four requirements. First, the debt must be “unpaid, legally enforceable Federal tax liability of an individual.” Id. Note that the seriously delinquent tax debt is limited to liabilities incurred under Title 26 of the United States Code (i.e. the Internal Revenue Code). The term does not include items such as FBAR penalties and child support.
Second, this federal tax liability must have been “assessed.” IRC Section 7345(b)(1)(A).
Third, the assessed liability must be greater than $50,000. IRC Section 7345(b)(1)(B). Pursuant to the IRC Section 7345(f), the $50,000 amount is adjusted for inflation each calendar year beginning after 2016. In fact, for 2018, the threshold amount is $51,000.
Finally, either a levy pursuant to IRC Section 6331 or a lien pursuant to the IRC Section 6323 has been issued with respect to the assessed tax liability. IRC Section 7345(b)(1)(C). Moreover, the administrative appeal rights under IRC Section 6320 with respect to the lien must have been either exhausted or lapsed. Id.
Passport Revocation and Denial: More Than $50,000 Threshold
In calculating whether the $50,000 federal tax liability threshold is met, the IRS will aggregate all of the current tax liabilities for all taxable years and periods assessed against an individual. It will also include penalties and interest.
Passport Revocation and Denial: Exclusions
Under the newly-issued IRS guidance, the term “seriously delinquent tax debt” for the purposes of passport revocation and denial does not include the following:
1. A debt that is being timely paid under an IRS-approved installment agreement under section 6159.
2. A debt that is being timely paid under an offer in compromise accepted by the IRS under section 7122.
3. A debt that is being timely paid under the terms of a settlement agreement with the Department of Justice under section 7122.
4. A debt in connection with a levy for which collection is suspended because of a request for a due process hearing (or because such a request is pending) under section 6330.
5. A debt for which collection is suspended because the individual made an innocent spouse election (section 6015(b) or (c)) or the individual requested innocent spouse relief (section 6015(f)).
Passport Revocation and Denial: Exceptions
Additionally, the State Department will not revoke or deny the US passport of a taxpayer if one of the following exceptions apply:
1. The taxpayer is in bankruptcy;
2. The IRS identified the taxpayer as a victim of tax-related identity theft;
3. The IRS determined that the taxpayer’s account is currently uncollectible due to hardship;
4. The taxpayer is located within a federally declared disaster area;
5. The taxpayer has a request pending with the IRS for an installment agreement;
6. The taxpayer has a pending offer in compromise with the IRS;
7. The taxpayer has an IRS-accepted adjustment that will satisfy the debt in full; or
8. If the taxpayer is serving in a designated combat zone or participating in a contingency operation, the IRS will postpone the Certification.
Passport Revocation and Denial: 90-Day Delay
Before denying a passport, the State Department will grant a taxpayer 90 days to allow him to either resolve any erroneous certification issues, make a full payment of the tax debt or enter into a payment arrangement with the IRS.
Passport Revocation and Denial: Main Remedy in Case of Erroneous Certification
In cases where the IRS makes an erroneous Certification or fails to revers a certification, a taxpayer does not have many choices. It appears that the taxpayer will not be able to appeal to the IRS Office of Appeals. The main course of action in these situations appears to be a civil action in court under IRC Section 7345(e).
Contact Sherayzen Law Office for Professional Help with US Tax Issues
Sherayzen Law Office is a highly experienced tax law firm based in Minneapolis. We have helped hundreds of US taxpayers to resolve their tax issues, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2018 FSI Ranks United States as Second Largest Secrecy Haven | FATCA
Paradoxically, while demanding that other countries comply with FATCA, the United States itself has become the second largest secrecy haven in the world according to the Financial Secrecy Index (“FSI”) released by the Tax Justice Network (“TJN”) at the end of January of 2018. Let’s explore why the 2018 FSI considers the United States a Tax Haven.
What is 2018 FSI?
The TJN’s FSI is considered to be one of the most comprehensive assessments of secrecy of financial centers. It is published every two years using independently verifiable data. Its methodology is based on the European Commission’s Joint Research Center. The 2018 FSI, however, is not considered to be influenced by any political considerations.
The FSI is based on various criteria which is updated with each publication. The assessment of a country’s financial secrecy includes such consideration as: requirement to identify beneficial owners of companies, trusts and foundations; whether annual registries are made available to the public in an online format; the extent to which the countries’ financial secrecy rules are forced to comply with the anti-money laundering standards, and so on.
In order to create the index, a secrecy score is combined with a figure representing the size of the offshore financial services industry in each country. This is expressed as a percentage of global exports of financial services. The responsibility for bigger transparency increases with the size of the financial services industry of a country.
In 2018, new indicators where added to what are now considered 20 Key Financial Secrecy Indicators “KFSI”. The 2018 FSI new factors ask whether a jurisdiction in question provides for public register of ownership and annual accounts of limited partnerships; public register of ownership of real estate; public register of users of freeports for the storage of high value assets; protection against prison for banking whistleblowers; harmful tax residency and citizenship rules; and other factors.
2018 FSI Placed United States as Second Largest Secrecy Haven Among the Top 10 Countries
Based on the consideration of all of these factors, including KFSI, the 2018 FSI placed United States as the second largest secrecy haven among the top ten countries. Here is the full list of top ten countries:
1. Switzerland
2. United States
3. Cayman
4. Hong Kong
5. Singapore
6. Luxembourg
7. Germany
8. Taiwan
9. UAE
10. Guernsey
What this means is that the United States is now the country that, with the exception of Switzerland, most contributes to financial secrecy in the world.
Reasons Behind the US Rise in the 2018 FSI Ranking
The second rank of the United States was assigned due to its growing share of the offshore financial services industry. According to 2018 FSI, the US market share of the offshore financial services industry is 22.3%. It was 19.6% in 2015. In fact, in order to occupy the second place in the 2018 FSI, the United States displaced such a notorious offshore haven as the Cayman Islands.
There are other objective reasons and comparative reasons for the US rise to the second place of the 2018 FSI. The main comparative reason is the European Union’s lead in the transparency initiatives. The EU is now the definite leader in combating financial secrecy.
The objective reasons are various. The United States does not have any beneficial ownership registries. It also lacks the country-by-country reporting of corporate profits (although, this may change). Finally, the United States continues to refuse to join the OECD’s Common Reporting Standard (“CRS”).
The Second Place in the 2018 FSI Points to Dubious Cost-Benefit Analysis
The second place in the 2018 FSI is not accidental. Rather, there is a cold, though morally dubious, cost-benefit calculation behind it. On the one hand, the United States was the country that really propelled the global fight against bank secrecy in the years 2008-2014. It trampled all over the vaulted Swiss Bank Secrecy laws when it came to its pursuit of US tax evaders, enacted the revolutionary FATCA legislation, forced the vast majority of foreign financial institutions to share information (including beneficial ownership information) with the IRS concerning US owners of foreign accounts, and engaged in a number of other activities to increase the worldwide financial transparency with respect to US taxpayers.
On the other hand, all of the US efforts to combat bank secrecy were not a fight for transparency ipso facto. Rather, the US government was only interested in fighting bank secrecy in so far as it concerned US taxpayers. With respect to its own bank secrecy laws concerning foreigners who wish to invest in the United States, the US government is on par and even exceeds some of the most secretive tax havens.
In other words, when it comes to fighting US tax evasion, the US government is an innovative champion. With respect to attracting investment in the United States, the same US government seems to do everything possible to turn the United States into a tax haven. This is precisely why it never joined the CRS.
While the US government seems to be acting in the name of the national self-interest, there is one huge problem that this policy creates. Currently, the elites of the most corrupt regimes, mafias and cartels of all stripes, narcotics dealers and other criminals can see the advantage of using the United States as a haven for illicit financial flows, including money laundering and funding of terrorism. There is also an increased danger that the corruption created by one part of the US financial policy may spread to other aspects of our society.
In other words, the current US bank secrecy policy seems to be in contradiction with other stated policies which attempt to specifically target the aforementioned criminal activities. This contradiction is an easy target for critics of the US financial policy and may contribute in the future to potential reversals of the current gains in international financial transparency.
Sherayzen Law Office will continue the monitor the developments in the US bank secrecy laws.

### IRS Prioritizes Combating Offshore Tax Cheating | Offshore Tax Lawyer
On March 20, 2018, the IRS announced that offshore tax cheating – i.e. hiding money and other assets in unreported foreign accounts – remains on the IRS “Dirty Dozen” tax scams for the year 2018.
Offshore Tax Cheating: What is the “Dirty Dozen” List?
The IRS uses the “Dirty Dozen” list to describe various scams that a taxpayer may encounter and which form the focus of the IRS enforcement efforts. Some of these schemes peak during the tax filing season.
Illegal scams can lead to significant penalties and even possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.
What is Offshore Tax Cheating?
In its most basic form, offshore tax cheating is a long-running scheme that uses foreign accounts to hide money in order to avoid paying US taxes. The taxpayers then use debit cards, credit cards or wire transfers to access the hidden accounts. More complex schemes include the usage of foreign corporations, foreign trusts, employee-leasing schemes, private annuities, insurance plans and other third-parties to conceal the real US owner of foreign accounts.
The most modern offshore tax cheating scheme has involved cryptocurrencies traded overseas and exchanged into a foreign currency by using an offshore account. The IRS has already begun addressing tax evasion based on virtual currencies, but we have not yet seen a fully-developed IRS enforcement in this area.
Offshore Tax Cheating is the Long-Standing Focus of the IRS
The IRS warns that taxpayers should be wary of these schemes, especially given the continuing focus on this issue by the IRS and the Justice Department.
In fact, since mid-2000s, offshore tax cheating has been one of the primary targets of the IRS. The IRS already conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.
Every investigation yields important information that is used to learn about noncompliance patterns and commence other investigations. Some of these investigations may focus on bankers and financial advisors who helped set up a scheme that led to offshore tax cheating.
Offshore Voluntary Disclosure as a Way to Settle Prior Tax Noncompliance
If a taxpayer participated in scheme that the IRS may characterize as offshore tax cheating, he should consider doing a voluntary disclosure as soon as possible. It is very likely that the IRS will consider tax noncompliance associated with such a scheme as willful. Hence, the Offshore Voluntary Disclosure Program (“OVDP”) may be the primary choice for such taxpayers.
In fact, according to the IRS, more than 56,400 disclosures were made through various versions of OVDP since 2009. The IRS collected more than $11.1 billion from the OVDP during that time period.
Additionally, more than 65,000 taxpayers who claimed that they were non-willful in their prior tax noncompliance participated in the Streamlined Compliance Procedures. As I stated above, however, a taxpayer should be very careful about participating in the Streamlined Compliance Procedures if he participated in a scheme that the IRS may classify as offshore tax cheating.
OVDP Will Close on September 28, 2018
Taxpayers who wish to participate in the OVDP should consult Sherayzen Law Office as soon possible. The IRS recently announced that the OVDP will close on September 28, 2018.
Contact Sherayzen Law Office if You Wish to do an Offshore Voluntary Disclosure That Involves a Scheme Classified as Offshore Tax Cheating
If you participated in a scheme that the IRS may classify as offshore tax cheating, you should contact Sherayzen Law Office to explore your voluntary disclosure options as soon as possible.
Sherayzen Law Office is a leading international tax law firm that specializes in offshore voluntary disclosures, including OVDP (closed) and Streamlined Compliance Procedures. We have helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance with US tax laws, and We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Uruguay-US Social Security Agreement Sent to Congress | Tax Lawyer
On March 19, 2018, President Trump sent the Uruguay-US Social Security Agreement to the US Senate. This is an important step toward the final ratification of the treaty that promises to benefit the citizens of both countries.
Uruguay-US Social Security Agreement: What is a Social Security Agreement?
A Social Security Agreement (also called a Totalization Agreement) is essentially a treaty between two countries that eliminates the burden of dual social security taxation for individuals and businesses who operate in both countries.
Typically, the potential for this type of double-taxation arises when a worker from country A works in Country B, but he is covered under the social security systems in both countries. In such situations, without a Social Security Agreement, the worker will have to pay social security taxes to both countries on the same earnings. A Social Security Agreement, on the other hand, allows the worker (and employers) to pay social security taxes only in one country identified in the treaty.
Social Security Agreements are authorized by Section 233 of the Social Security Act. Right now, only 26 Totalization Agreements are in force between the United States and another country: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, South Korea, Spain, Sweden, Switzerland and the United Kingdom. Uruguay may become the 27th country to have a Social Security Agreement with the United States.
Uruguay-US Social Security Agreement: Recent History
The Uruguay-US Social Security Agreement has had a very favorable history so far. In fact, it may set the record for the fastest treaty ever negotiated by Uruguay. The countries first agreed to pursue a Social Security Agreement between them in May 2014, when the then Uruguayan president Jose Mujica was in Washington.
Amazingly, already in May of 2015, after just two rounds of talks held over a six-month period, the countries finished the negotiations of the Uruguay-US Social Security Agreement. Typically, it takes anywhere between two to three years to negotiate a Totalization Agreement.
On January 10, 2017, the Uruguay-US Social Security Agreement was signed in Montevideo. The United States was represented by its ambassador Mr. Kelly Kinderling. Uruguay was represented by its Foreign Minister Jose Luis Cancela and Labor and its Social Security Minister Ernesto Murro.
On October 3, 2017, the Uruguayan Senate approved the pending Uruguay-US Social Security Agreement, thereby completing the first part of the necessary ratification process. By sending the treaty to Congress for the required 60-day review period, President Trump started the US ratification process.
Uruguay-US Social Security Agreement: Benefits
According to Uruguay, the Uruguay-US Social Security Agreement will benefit some 60,000 Uruguayans working in the United States and up to 6,000 Americans living in Uruguay. The primary benefit is that the workers of both countries will be able to count the working years spent in both countries to be obtain eligibility for their home-country retirement, disability and survivor benefits.
Additionally, the Agreement will exempt US citizens sent by US-owned companies to work in Uruguay for five years or less from paying the Uruguayan social security taxes. Similarly, Uruguayan citizens sent to work temporarily in the United States by Uruguayan-owned companies will not need to pay social security taxes to the US government. Thus, employers in both countries will pay social security taxes only to their employees’ home countries.
Additionally, both countries hope that the Uruguay-US Social Security Agreement will boost trade between the countries. Currently, more than 200 American firms operate in Uruguay (mostly in the service sector).
Sherayzen Law Office will continue to monitor future developments with respect to this highly-beneficial treaty.

### FATCA Criminal Case Filed Against Foreigners | FATCA Lawyer & Attorney
On March 22, 2018, the US Department of Justice (“DOJ”) announced that it charged four foreign residents – Panayiotis Kyriacou (resides in London, UK), Arvinsingh Canaye (resides in Mauritius), Adrian Baron (resides in Budapest, Hungary), and Linda Bullock (resides in St. Vincent/Grenadines) – with conspiracy to defraud the United States by failing to comply with FATCA. Let’s explore this new FATCA criminal case in more detail.
Legal Basis for FATCA Criminal Case
The legal basis for this FATCA criminal case is the allegation that the defendants conspired to defraud the United States by obstructing the IRS administration of the Foreign Account Tax Compliance Act (“FATCA”).
FATCA was passed into law in 2010. One part of this highly complex law requires foreign financial institutions (“FFIs”) to identify their US customers, collect the information about foreign accounts held by these US customers as required by FATCA (“FATCA Information”) and send FATCA Information to the United States. The DOJ alleges that the defendants in this case intentionally conspired to obstruct the collection and reporting of FATCA Information to the IRS.
Facts of the FATCA Criminal Case As Alleged by the DOJ
The indictment alleges that the defendants agreed to defraud the United States by opening foreign bank and brokerage accounts without collecting FATCA information that should have been reported to the IRS. The indictment describes two specific schemes, both of which were uncovered by the DOJ through an undercover agent.
The first scheme is called the Beaufort Scheme, because Canaye and Kyriacou both worked at Beaufort Management as a general manager and an investment manager respectively. The indictment alleges that, between August 2016 and February 2018, these two defendants conspired to defraud the United States by failing to comply with FATCA. The DOJ states that it obtained the proof of the existence of this conspiracy through an undercover agent (the “Agent”).
The Agent first approached Kyriacou in 2016, who opened bank accounts for the agent without doing any FATCA compliance. In July 2017, Kyriacou introduced the Agent to Canaye and advised that Canaye could assist with the Agent’s stock manipulation scheme schemes. In January 2018, Canaye and Beaufort Management opened six global business corporations for the Agent. The Agent's name did not appear on any of the account opening documents.
The second scheme is called the Loyal Scheme because it involved Baron, the Loyal Bank’s Chief Business Officer. During their meetings, the Agent explained to Baron that he was a US citizen and described his stock manipulation schemes, including the need to bypass FATCA. In July and August of 2017, the Undercover Agent met with Baron and Bullock, Loyal Bank's Chief Executive Officer. During the meeting, the Undercover Agent described how his stock manipulation deals operated, including the necessity to bypass FATCA. In July and August 2017, Loyal Bank opened multiple bank accounts for the Agent. At no time did Loyal Bank request or collect FATCA Information from the Undercover Agent.
It should be remembered that the charges in the superseding indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
This FATCA Criminal Case Reflects IRS Commitment to FATCA Enforcement
While not the first FATCA criminal case, the present case is definitely at the beginning of the future series of FATCA cases against US taxpayers and foreigners. The IRS stressed that this FATCA criminal case reflects the commitment of the IRS and the DOJ to combat offshore tax evasion and enforce FATCA worldwide.
Sherayzen Law Office will continue to monitor IRS enforcement of FATCA, including this FATCA criminal case.

### OECD Harmful Tax Practices & FDII | International Tax Law Firm
The Organization for Economic Co-operation and Development (“OECD”) has detailed base erosion and profit-shifting (“BEPS”) rules. Among these rules are the OECD rules for countering harmful tax practices (“OECD Harmful Tax Practices Rules”). The 2017 Tax Cuts and Jobs Act introduced a new tax concept in the US Internal Revenue Code – foreign-derived intangible income (“FDII”). FDII has become a hot topic in international tax law, especially with respect to whether FDII constitutes a violation of the OECD Harmful Tax Practices Rules.
OECD Harmful Tax Practices Rules and Preferential Tax Regimes
The OECD Harmful Tax Practices Rules require that a preferential tax regime of any OECD nation satisfies the “substantial activities requirement”. In particular, the Intellectual Property income regimes must incorporate the “nexus approach” that limits the entitlement to the preferential tax regime based on the amount of the qualifying research and development costs incurred.
European Position: FDII May Violate OECD Harmful Tax Practices Rules
The Europeans started questioning the FDII’s compliance with the OECD Harmful Tax Practices Rules almost immediately. The main reason for their concern is that the FDII regime does not adopt the nexus approach while allowing US corporations to deduct 37.5% of their deemed intangible income generated abroad by the usage of the US Intellectual Property. The end-result of the FDII rules is the reduction of the effective tax rate on the FDII to a bit over 13%.
The Europeans question whether this result and the FDII rules in general are in conformity with BEPS’ minimum standards and the EU blacklist criteria.
US Position: FDII Does Not Violate OECD Harmful Tax Practices
The Department of the Treasury officials adopted a position exactly opposite to the Europeans (which is not surprising at all). The United States believes that the FDII rules only superficially resemble harmful tax practices, but, in reality, they are very different from traditional preferential tax regimes.
The United States urges the Europeans to consider the FDII tax regime in the context of the overall tax reform that is intended to equalize minimum tax rate that applies to foreign activities of a US corporation regardless of whether the income is earned directly by the US corporation or through it subsidiary (which would be classified as a CFC).
In other words, the FDII rules have a different purpose and effect when one looks at the broader context. They are designed to take away a tax incentive to transfer IP out of the United States into a low-tax foreign subsidiary . Therefore, according to the Department of the Treasury, the FDII tax regime will not create any harm that the OECD Harmful Tax Practices Rules were designed to prevent.
FDII Compliance With the OECD Harmful Tax Practices Rules Will Continue to Be in Dispute
The FDII rules’ compliance with the OECD Harmful Tax Practices Rules will continue to be a matter of debate and conflict between the United States and the EU countries. Additionally, there are very strong objections from the Europeans to the FDII rules from the WTO perspective. This conflict will likely grow into a formal legal dispute between the two economic giants.
Sherayzen Law Office will continue to follow this new dispute between the EU and the United States.

### 3 Main Streamlined Domestic Compliance Disadvantages | SDOP Lawyer
In a previous article, I described the three main advantages of doing an offshore voluntary disclosure through Streamlined Domestic Offshore Procedures (“Streamlined Domestic Compliance”). Today, I would like to discuss three main Streamlined Domestic Compliance disadvantages.
Streamlined Domestic Compliance Disadvantages: Audit Risks
The first main disadvantage of Streamlined Domestic Compliance is the potential IRS audit within three years after the voluntary disclosure is completed. The audit is likely to include everything: FBARs, amended tax returns, Miscellaneous Offshore Penalty calculation and, most importantly, the determination of non-willfulness.
The potential IRS audit stands in a shark contrast to the IRS flagship Offshore Voluntary Disclosure Program (“OVDP”) which closed in September of 2018. At the end of a voluntary disclosure through OVDP, the taxpayer and the IRS sign the Closing Agreement, which (absent fraud or material misstatements) effectively closes prior tax noncompliance issues forever.
The audit risks may be particularly important to taxpayers who are in the process of obtaining their US citizenship or US permanent residence.
Streamlined Domestic Compliance Disadvantages: Penalty Base Not Limited to Income Noncompliance
One of the main Streamlined Domestic Compliance disadvantages is the fact that the calculation of the penalty base (i.e. what assets are subject to the 5% penalty) includes assets that never produced any foreign income. Moreover, the penalty base includes a foreign asset even if the foreign income from this asset was timely disclosed on the taxpayer’s original tax return, but the asset itself was not reported on FBAR or any other international information return.
In other words, a taxpayer who participates in the Streamlined Domestic Compliance should be prepared to pay a 5% penalty even on assets that are compliant with the US income tax laws.
Again, this is contrary to the rules of the OVDP. In the OVDP, only assets that are tied to income tax noncompliance are included in the penalty base.
Streamlined Domestic Compliance Disadvantages: Danger of Superficial Analysis
Finally, the danger of superficial analysis concerning non-willfulness constitutes the third main disadvantage of the Streamlined Domestic Compliance. In reality, there are two dangers which should be placed at the opposite ends of the voluntary disclosure continuum.
The first danger is the natural bias in the self-assessment of non-willfulness. Oftentimes, a taxpayer may exaggerate the facts in his favor while selectively ignoring the facts that may establish willful noncompliance. This is very natural. It is difficult to find a person who will state outright that he was willful in his prior tax noncompliance.
Usually, this problem can be (and should be) fixed by retaining an international tax attorney to do an independent assessment of the taxpayer’s non-willfulness.
At the opposite end is the danger of concentrating on non-willfulness and ignoring the possibility of doing a Reasonable Cause disclosure. In most cases, this is not a problem because Streamlined Domestic Compliance would be a superior choice despite the 5% penalty. This, however, is not true in all cases and real opportunities are often lost by failure to explore this route.
I should state that the biggest problem that I found in my practice is the fact that some taxpayers do not consult an international tax attorney on this issue. Instead, they try to do everything themselves even though they have no specialized knowledge in this field. I strongly discourage this practice.
I believe that the involvement of an international tax attorney is essential to doing a proper offshore voluntary disclosure.
Contact Sherayzen Law Office for Professional Help with Your Offshore Voluntary Disclosure
Choosing the correct offshore voluntary disclosure path is the most important decision for a taxpayer who wishes to remedy his past noncompliance with US tax laws. Every voluntary disclosure option has its advantages and disadvantages. All essential factors must be considered.
The failure to do proper legal analysis may have highly negative legal and tax consequences. It may even put a taxpayer in a position worse than what he was prior to his attempt to do a voluntary disclosure.
This is why you need the professional help of Sherayzen Law Office. Our experienced legal team has helped hundreds of US taxpayers to do their offshore voluntary disclosures properly. We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

### 2017 FBAR Currency Conversion Rates  | FBAR Lawyer and Attorney
Using proper currency conversion rates is a very important part of preparing 2017 FBAR and 2017 Form 8938. The instructions to both forms require (in case of FATCA Form 8938, this is the default choice) US taxpayers to use the 2017 FBAR Currency Conversion Rates published by the Treasury Department. The 2017 FBAR Currency Conversion Rates may also be used for other purposes, not just the preparation of the 2017 FBAR and Form 8938.
The 2017 FBAR Currency Conversion Rates are the December 31, 2017 rates officially published by the U.S. Department of Treasury (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”) and they are the proper conversion rates that must be used while preparing FBAR and Form 8938.
Due to this importance of the 2017 FBAR Currency Conversion Rates to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below the official 2017 FBAR Currency Conversion Rates (keep in mind, you still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI
69.3200
ALBANIA - LEK
110.6000
ALGERIA - DINAR
114.6590
ANGOLA - KWANZA
170.0000
ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR
2.7000
ARGENTINA - PESO
19.1600
ARMENIA - DRAM
485.0000
AUSTRALIA - DOLLAR
1.2790
AUSTRIA - EURO
0.8330
AZERBAIJAN - NEW MANAT
1.7100
BAHAMAS - DOLLAR
1.0000
BAHRAIN - DINAR
0.3770
BANGLADESH - TAKA
82.0000
BARBADOS - DOLLAR
2.0200
BELARUS - NEW RUBLE
1.9730
BELGIUM - EURO
0.8330
BELIZE - DOLLAR
2.0000
BENIN - CFA FRANC
562.3300
BERMUDA - DOLLAR
1.0000
BOLIVIA - BOLIVIANO
6.8600
BOSNIA - HERCEGOVINA - MARKA
1.6300
BOTSWANA - PULA
9.8040
BRAZIL - REAL
3.3120
BRUNEI - DOLLAR
1.3420
BULGARIA - LEV
1.6310
BURKINA FASO - CFA FRANC
562.3300
BURMA - KYAT
1354.0000
BURUNDI - FRANC
1720.0000
CAMBODIA (KHMER) - RIEL
4103.0000
CAMEROON - CFA FRANC
567.7900
CANADA - DOLLAR
1.2550
CAPE VERDE - ESCUDO
92.0260
CAYMAN ISLANDS - DOLLAR
0.8200
CENTRAL AFRICAN REPUBLIC - CFA FRANC
567.7900
CHAD - CFA FRANC
567.7900
CHILE - PESO
614.2300
CHINA - RENMINBI
6.5040
COLOMBIA - PESO
2981.7900
COMOROS - FRANC
411.0000
CONGO - CFA FRANC
567.7900
CONGO, DEM. REP - CONGOLESE FRANC
1580.0000
COSTA RICA - COLON
564.0000
COTE D'IVOIRE - CFA FRANC
562.3300
CROATIA - KUNA
6.2300
CUBA - PESO
1.0000
CYPRUS - EURO
0.8330
CZECH REPUBLIC - KORUNA
20.8840
DENMARK - KRONE
6.2070
DJIBOUTI - FRANC
177.0000
DOMINICAN REPUBLIC - PESO
48.1100
ECAUDOR - DOLARES
1.0000
EGYPT - POUND
17.7300
EL SALVADOR - DOLARES
1.0000
EQUATORIAL GUINEA - CFA FRANC
567.7900
ERITREA - NAKFA
15.0000
ESTONIA - EURO
0.8330
ETHIOPIA - BIRR
27.2000
EURO ZONE - EURO
0.8330
FIJI - DOLLAR
2.0170
FINLAND - EURO
0.8330
FRANCE - EURO
0.8330
GABON - CFA FRANC
567.7900
GAMBIA - DALASI
47.0000
GEORGIA - LARI
2.6100
GERMANY FRG - EURO
0.8330
GHANA - CEDI
4.5200
GREECE - EURO
0.8330
GRENADA - EAST CARIBBEAN DOLLAR
2.7000
GUATEMALA - QUENTZAL
7.3300
GUINEA - FRANC
9004.0000
GUINEA BISSAU - CFA FRANC
562.3300
GUYANA - DOLLAR
215.0000
HAITI - GOURDE
62.9500
HONDURAS - LEMPIRA
23.5000
HONG KONG - DOLLAR
7.8150
HUNGARY - FORINT
258.4500
ICELAND - KRONA
104.0900
INDIA - RUPEE
63.7500
INDONESIA - RUPIAH
13490.0000
IRAN - RIAL
36057.0000
IRAQ - DINAR
1166.0000
IRELAND - EURO
0.8330
ISRAEL - SHEKEL
3.4710
ITALY - EURO
0.8330
JAMAICA - DOLLAR
128.0000
JAPAN - YEN
112.5500
JERUSALEM - SHEKEL
3.4710
JORDAN - DINAR
0.7080
KAZAKHSTAN - TENGE
331.3100
KENYA - SHILLING
103.2000
KOREA - WON
1065.9301
KUWAIT - DINAR
0.3010
KYRGYZSTAN - SOM
69.0000
LAOS - KIP
8274.0000
LATVIA - EURO
0.8330
LEBANON - POUND
1500.0000
LESOTHO - SOUTH AFRICAN RAND
12.3160
LIBERIA - U.S. DOLLAR
125.1700
LIBYA - DINAR
1.3570
LITHUANIA - LITAS
0.8330
LUXEMBOURG - EURO
0.8330
MACAO - MOP
8.0000
MACEDONIA FYROM - DENAR
51.0700
MADAGASCAR - ARIA
3235.6201
MALAWI - KWACHA
731.0000
MALAYSIA - RINGGIT
4.0440
MALI - CFA FRANC
562.3300
MALTA - EURO
0.8330
MARSHALL ISLANDS - DOLLAR
1.0000
MARTINIQUE - EURO
0.8330
MAURITANIA - OUGUIYA
355.0000
MAURITIUS - RUPEE
33.4000
MEXICO - NEW PESO
19.7040
MICRONESIA - DOLLAR
1.0000
MOLDOVA - LEU
17.0580
MONGOLIA - TUGRIK
2427.3999
MONTENEGRO - EURO
0.8330
MOROCCO - DIRHAM
9.3520
MOZAMBIQUE - METICAL
58.8500
NAMIBIA - DOLLAR
12.3160
NEPAL - RUPEE
102.4000
NETHERLANDS - EURO
0.8330
NETHERLANDS ANTILLES - GUILDER
1.7800
NEW ZEALAND - DOLLAR
1.4050
NICARAGUA - CORDOBA
30.6000
NIGER - CFA FRANC
562.3300
NIGERIA - NAIRA
359.0000
NORWAY - KRONE
8.1960
OMAN - RIAL
0.3850
PAKISTAN - RUPEE
110.4000
PALAU - DOLLAR
1.0000
PANAMA - BALBOA
1.0000
PAPUA NEW GUINEA - KINA
3.1350
PARAGUAY - GUARANI
5574.0000
PERU - NUEVO SOL
3.2360
PHILIPPINES - PESO
49.8490
POLAND - ZLOTY
3.4830
PORTUGAL - EURO
0.8330
QATAR - RIYAL
3.6400
ROMANIA - LEU
3.8800
RUSSIA - RUBLE
57.8450
RWANDA - FRANC
855.0000
SAO TOME & PRINCIPE - DOBRAS
20597.2227
SAUDI ARABIA - RIYAL
3.7500
SENEGAL - CFA FRANC
562.3300
SERBIA - DINAR
101.3300
SEYCHELLES - RUPEE
13.3800
SIERRA LEONE - LEONE
7645.0000
SINGAPORE - DOLLAR
1.3360
SLOVAK REPUBLIC - EURO
0.8330
SLOVENIA - EURO
0.8330
SOLOMON ISLANDS - DOLLAR
7.4910
SOMALI - SHILLING
575.0000
SOUTH AFRICA - RAND
12.3160
SOUTH SUDANESE - POUND
126.0000
SPAIN - EURO
0.8330
SRI LANKA - RUPEE
153.4000
ST LUCIA - EC DOLLAR
2.7000
SUDAN - SUDANESE POUND
9.0000
SURINAME - GUILDER
7.5200
SWAZILAND - LILANGENI
12.3160
SWEDEN - KRONA
8.1930
SWITZERLAND - FRANC
0.9750
SYRIA - POUND
515.0000
TAIWAN - DOLLAR
29.6460
TAJIKISTAN - SOMONI
8.7500
TANZANIA - SHILLING
2235.0000
THAILAND - BAHT
32.6000
TIMOR - LESTE - DILI
1.0000
TOGO - CFA FRANC
562.3300
TONGA - PA'ANGA
2.1140
TRINIDAD & TOBAGO - DOLLAR
6.6300
TUNISIA - DINAR
2.4580
TURKEY - LIRA
3.7880
TURKMENISTAN - MANAT
3.4910
UGANDA - SHILLING
3635.0000
UKRAINE - HRYVNIA
28.1450
UNITED ARAB EMIRATES - DIRHAM
3.6730
UNITED KINGDOM - POUND STERLING
0.7400
URUGUAY - PESO
28.7600
UZBEKISTAN - SOM
8030.0000
VANUATU - VATU
105.0000
VENEZUELA - BOLIVAR
3345.0000
VIETNAM - DONG
22708.0000
WESTERN SAMOA - TALA
2.4400
YEMEN - RIAL
250.5000
ZAMBIA - NEW KWACHA
9.9750
ZAMBIA - KWACHA
5455.0000
ZIMBABWE - DOLLAR
1.0000

### Streamlined Domestic Disclosure: Main Advantages | SDOP Attorney
At this point, Streamlined Domestic Offshore Procedures (“Streamlined Domestic Disclosure”) is undoubtedly the most popular offshore voluntary disclosure option. Let’s explore three main reasons for this preference of Streamlined Domestic Disclosure among US taxpayers.
Streamlined Domestic Disclosure: Background Information and General Requirements
The IRS created the Streamlined Domestic Disclosure as an offshore voluntary disclosure option on June 18, 2014. The IRS specifically the designed Streamlined Domestic Disclosure to address the critique of many practitioners and taxpayers that the 2012 OVDP did not adequately deal with US taxpayers who non-willfully violated their US tax obligations (for example, in cases where the taxpayers simply did not know about the existence of FBAR or Form 8938).
Any taxpayer can participate in the Streamlined Domestic Disclosure as long as he satisfies all three parts of the eligibility criteria: US tax residency, absence of IRS examination or investigation and non-willfulness.
If a taxpayer satisfies the eligibility criteria, he then must comply with all of the required submissions. The key requirement here is the certification under the penalty of perjury that the taxpayer’s prior tax noncompliance was non-willful. This requirement is the heart of the Streamlined Domestic Disclosure and must be approached with special care.
The other requirements include filing of amended tax returns for the past three years (with all of the necessary information returns), filing FBARs for the past six years, payment of tax due with interest and payment of Miscellaneous Offshore Penalty. Other requirements may also apply depending on the specific situation of a taxpayer.
Streamlined Domestic Disclosure Offers a Number of Advantages to Noncompliant US Taxpayers
While the list of the requirements above may seem like a lot of work, in reality, Streamlined Domestic Disclosure definitely offers a number of advantages compared to other offshore voluntary disclosure options. I will discuss in this article only the main three advantages.
Keep in mind that the Streamlined Domestic Disclosure may not always be advantages to taxpayers. There are plenty of situations where other offshore voluntary disclosure options may be superior to Streamlined Domestic Disclosure.
I also wish to emphasize that the analysis of advantages or disadvantages of a particular voluntary disclosure option is highly fact-specific. I strongly recommend that you contact Sherayzen Law Office for a detailed analysis of your voluntary disclosure options before you even attempt to proceed with your offshore voluntary disclosure.
Advantages of Streamlined Domestic Disclosure: Flexible Risk Management
One of the greatest advantages (though, the one rarely discussed on the Internet) of the Streamlined Domestic Disclosure is the opportunity this option offers to manage the voluntary disclosure risks. We can be even more precise – to manage the risk-reward ratio.
There is no doubt that the now closed OVDP (the 2014 IRS Offshore Voluntary Disclosure Program) may have been the safest option available in the great majority of cases, but its “rewards” in terms of penalty rate, calculation of Penalty Base and other factors are generally (though, not always) inferior to those of the Streamlined Domestic Disclosure. Noisy Disclosures stand at the opposite end of the spectrum compared to the OVDP.
Streamlined Domestic Disclosure, however, occupies the middle ground. You only have to establish non-willfulness, not reasonable cause. This is a much lower standard. Moreover, this standard is applied to all international information returns, not just FBARs. At the same time, the penalty rate (see below) is generally far more advantageous than that of the OVDP.
Advantages of Streamlined Domestic Disclosure: Relatively Low Penalty Rate
One of the most cited advantages of the Streamlined Domestic Disclosure is the low penalty rate of 5%. Compared to the OVDP penalty rate of 27.5% or FBAR non-willful penalties outside of a voluntary disclosure program, this can be a very advantageous option. This is not always the case, but it is true in most non-willful cases.
Advantages of Streamlined Domestic Disclosure: Shortened Voluntary Disclosure Period
Another great advantage of Streamlined Domestic Disclosure is the smaller number of years covered by the voluntary disclosure period. Unlike the OVDP voluntary disclosure period (which covers eight years of FBARs and tax returns), this voluntary disclosure option only encompasses the years which are covered by a regular statute of limitations.
In other words, it only includes the past six years of FBARs (occasionally seven) and past three years of tax returns. Obviously, this is a lot more convenient than OVDP.
A voluntary disclosure that involves an expatriation will require an increased number of amended tax returns.
Contact Sherayzen Law Office for Professional Help with Streamlined Domestic Disclosure
Despite having a much simpler procedure, Streamlined Domestic Disclosure may still be quite complex and require professional attention. There are a number of pitfalls that may seriously undermine the advantages of a Streamlined Domestic Disclosure. Sometimes, unrepresented taxpayers may also make mistakes that will result in a disastrous result during a subsequent IRS audit.
This is why you need the professional help from Sherayzen Law Office. Our experienced legal team has helped hundreds of US taxpayers with their Streamlined Domestic Disclosures, and We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

### 2018 Post-OVDP Options | Foreign Accounts IRS Lawyer & Attorney
In a previous article, I discussed the recent IRS announcement with respect to the closure of the IRS Offshore Voluntary Disclosure Program (“OVDP”) on September 28, 2018. Today, I would like to predict the range of the 2018 post-OVDP options for offshore voluntary disclosures starting October of 2018.
2018 Post-OVDP Options: Streamlined Compliance Procedures
As of October 1, 2018, taxpayers will still be able to utilize the Streamlined Compliance Procedures to complete their voluntary disclosures with respect to their foreign income and foreign assets. This option will be available only to taxpayers who will be able to certify that their prior noncompliance with US international tax laws was non-willful.
There are two variations within the Streamlined Compliance Procedures that are available to taxpayers depending on their residency: Streamlined Domestic Offshore Procedures (“SDOP”) and Streamlined Foreign Offshore Procedures (“SFOP”). I expect both options to be available on October 1, 2018 and even into 2019.
I should emphasize, however, that the existence of Streamlined Compliance Procedures is by no means assured in the future. As I have stated in the article that predicted the demise of the OVDP, there may be a point in the future (and it can be a near future – 2020 or 2021) when even these procedures will be affected. It is more likely that SFOP will survive for a longer period of time than SDOP.
The other issue with Streamlined Compliance Procedures is that some of the terms of these type of voluntary disclosures may change over time even if SDOP and SFOP will remain in place.
Nevertheless, the Streamlined Compliance Procedures is a very popular option.  In fact, according to the IRS, about 65,000 taxpayers have used it since its creation in 2014). This is a very high dis-incentive for the IRS to end this option.
2018 Post-OVDP Options: Delinquent FBAR Submission Procedures
I fully expect the Delinquent FBAR Submission Procedures to be available as of October 1, 2018. In one form or another, this option has always existed within the IRS. First, it was an informal understanding of the IRS that, in the absence of income tax noncompliance and other aggravating factors, there would be no FBAR penalties. Then, this option was “codified” as FAQ #17 within the OVDP programs.
In 2014, the Delinquent FBAR Submission Procedures became an independent option. Of course, now, this is a somewhat harsher option.
2018 Post-OVDP Options: Delinquent International Information Return Submission Procedures
I expect that this option will continue to exist as of October 1, 2018. Similarly to FBAR, it used to be a part of various OVDPs as FAQ #18. Now, Delinquent International Information Return Submission Procedures is a separate option which requires a reasonable cause explanation.
2018 Post-OVDP Options: IRS-Criminal Investigation Voluntary Disclosure Program (CI-VDP)
This option has existed for a very long time; it just faded into obscurity during the existence of OVDP. Now, it will surge back to life as it becomes almost the default option for a voluntary disclosure for US taxpayers who willfully violated their US tax obligations. In fact, I now expect CI-VDP to become a very valuable voluntary disclosure option (similar to what it used to be prior to 2009 OVDP).
2018 Post-OVDP Options: Reasonable Cause “Noisy” Disclosures
Since Reasonable Cause Disclosures (a/k/a “Noisy Disclosures”) are based on statutory law and not on any IRS programs, I fully expect this voluntary disclosure option to be available on October 1, 2018.
Contact Sherayzen Law Office for Professional Help With the Voluntary Disclosure of Your Foreign Assets and Foreign Income
If you have been unable to comply with US international tax laws concerning the reporting of foreign assets (including foreign accounts) and foreign income, contact Sherayzen Law Office for professional help.
Sherayzen Law Office is a leading international tax law firm in the area of offshore voluntary disclosures. Our highly specialized legal team, led by an international tax attorney Mr. Eugene Sherayzen, has helped hundreds of US taxpayers with assets in close to 70 countries to bring their tax affairs into full compliance with US tax laws.
We can Help You! Contact Us Today to Schedule Your Confidential Consultation!

### IRS OVDP to End on September 28, 2018 | US OVDP Tax Law Firm
On March 13, 2018, the IRS announced that it will be closing its flagship 2014 Offshore Voluntary Disclosure (“OVDP”) program on September 28, 2018. The closure of the IRS OVDP was already predicted by Sherayzen Law Office last year. Let’s analyze further this important development.
Historical Overview of the IRS OVDP
I already provided a profound historical overview of the IRS OVDP in a previous article. Here, I would like to state a brief summary of this history.
The 2009 Offshore Voluntary Disclosure Program (“2009 OVDP”) was considered to be the first modern offshore voluntary disclosure program created by the IRS. There were voluntary disclosure initiatives in the earlier years (most notably 2004), but they lacked the sophistication, publicity and enforcement that characterized the post-UBS case IRS OVDPs.
The 2009 OVDP ended in October of that year, but its favorable results laid the foundation for the enormously successful 2011 Offshore Voluntary Disclosure Initiative (“2011 OVDI”). In fact, the 2011 OVDI turned out be such a hit that, after it ended, the IRS almost immediately instituted the “permanent” 2012 OVDP with many terms fairly similar to 2011 OVDI.
In 2014, the 2012 OVDP underwent a profound change with the creation of the Streamlined Domestic Offshore Procedures (“SDOP”) and the Streamlined Foreign Offshore Procedures (“SFOP”) as well as the split off of the old FAQ 17 and FAQ 18 into new Delinquent FBAR Submission Procedures and Delinquent International Information Returns Submission Procedures respectively. The changes to 2012 OVDP were so dramatic that the IRS and the practitioners treated the remaining part of the IRS OVDP as the 2014 OVDP.
Popularity of the IRS OVDP Changed Over Time
Since the introduction of the 2009 OVDP, more than 56,000 taxpayers participated in some version of the IRS OVDPs. Altogether, the IRS stated that “those taxpayers paid a total of $11.1 billion in back taxes, interest and penalties”.
The popularity of the IRS OVDP, however, changed over time. It really peaked with the 2011 OVDI – about 18,000 taxpayers participated in this program. The numbers have declined ever since; the decline greatly accelerated with the 2014 introduction of SDOP and SFOP. In fact, the IRS stated that only 600 disclosures were made through the IRS OVDP in the entire year 2017.
IRS OVDP: Its Importance Today and Who Will Be Affected Most by Its Closure
Today, the IRS OVDP remains the main voluntary disclosure option for US taxpayers who willfully failed to comply with their US international tax obligations. In fact, this is the best option available to these willful taxpayers. The IRS-Criminal Investigation Voluntary Disclosure Program (CI-VDP) does not offer any of the assurances on the penalty limitations that the IRS OVDP offers today.
It is important to point out, however, that the IRS OVDP can be a desirable voluntary disclosure option not only to willful taxpayers, but also to taxpayers who were non-willful in their inability to comply with the complex US international tax laws.
There are at least two categories of these non-willful taxpayers who will be affected by the impending closure of the IRS OVDP. First, the taxpayers who were non-willful, but lack sufficient proof to establish their non-willfulness in the SDOP or SFOP. In such cases, IRS OVDP offered a prudent, even if more expensive way to deal with prior tax noncompliance.
Second, due to the fact that the IRS OVDP does not impose penalties on unreported foreign assets that were not related to income tax noncompliance, some non-willful taxpayers may find it more economically beneficial to go through the IRS OVDP rather than SDOP.
Finally, it should be remembered that the IRS OVDP is the only offshore voluntary disclosure option (besides CI-VDP) that offers a Closing Agreement – i.e. a nearly guaranteed assurance that there will not be an IRS audit of prior years after the voluntary disclosure is completed, absent fraud and/or material mis-statements of fact.
Why Did the IRS Decide to End IRS OVDP?
The reasons that IRS listed today for the closure of the IRS OVDP are practically the same as what I stated in my article last year, when I predicted the likely closure of the IRS OVDP.
First, the IRS stated that the “end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.” In other words, as I have previously wrote, the existing voluntary disclosure options are rapidly losing value as a source of new information regarding offshore noncompliance with US taxes. Third-party reporting has overtaken the OVDP in this respect due to the huge and continuously expanding network (especially the FATCA network) of automatic information exchange between the IRS and foreign financial institutions.
Second, as I warned in November of 2017, there has been a systemic change to a different model of tax administration. The IRS noted that “it will continue to use tools besides voluntary disclosure to combat offshore tax avoidance, including taxpayer education, Whistleblower leads, civil examination and criminal prosecution.”
This means that the IRS is shifting away from processing broad voluntary disclosure programs while it is embracing the model of focused enforcement. This is precisely why the IRS created the issued-based LB&I Compliance Campaigns. Hence, we now entered into a phase where various enforcement channels will dominate the IRS efforts to implement US international tax laws.
Do US Taxpayers Still Have Time to do a Voluntary Disclosure Through IRS OVDP?
Yes, the taxpayers who wish to utilize the IRS OVDP option will still be able to do it through September 28, 2018.
Contact Sherayzen Law Office if You Wish to Explore Your Voluntary Disclosure Options, Including IRS OVDP
If you a US taxpayer who has undisclosed foreign assets and foreign income, you should contact Sherayzen Law Office for professional help. Our highly experienced international tax law firm has helped hundreds of US taxpayers to successfully bring their US tax affairs into full compliance with US tax laws.
You will be working directly with an international tax lawyer and owner of Sherayzen Law Office, Mr. Eugene Sherayzen. He will thoroughly analyze the facts of your case, determine your US tax compliance requirements with respect to unreported foreign assets and foreign income, estimate your penalty exposure, and determine the available voluntary disclosure options.
Once a voluntary disclosure option is chosen, the highly professional team of Sherayzen Law Office will work with you and prepare all of the necessary tax forms and legal documents. We will guide you throughout the entire process, including IRS representation in case of an IRS challenge of your voluntary disclosure or an IRS audit.
We have helped taxpayers with assets from close to 70 countries around the world and We Can Help You! Contact Us Today to Schedule Your Confidential Consultation!

### IRS Increases Interest Rates for the Second Quarter of 2018
On March 7, 2018, the Internal Revenue Service announced that the IRS underpayment and overpayment interest rates have increased for the second quarter of 2018. The second quarter of 2018 begins on April 1, 2018 and ends on June 30, 2018.
The second quarter of 2018 IRS interest rates will increase by one percent and will be as follows:five percent for overpayments (four percent in the case of a corporation);two and one-half percent for the portion of a corporate overpayment exceeding $10,000;five percent percent for underpayments; andseven percent for large corporate underpayments.
The IRS increased its underpayment and overpayment interest rates for the last time in the second quarter of 2016.
Under the Internal Revenue Code, the rate of interest for the second quarter of 2018 is determined on a quarterly basis. The second quarter of 2018 overpayment and underpayment interest rates are computed based on the federal short-term rate determined during January 2018 to take effect February 1, 2018, including daily compounding.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
This increase in the IRS underpayment and overpayment interest rates for the second quarter of 2018 is highly important and will have an impact on many US taxpayers. In particular, I would like to point out two principal areas impacted by this increase in the second quarter of 2018 IRS interest rates.
First, this increase means that the taxpayers will have to pay a higher interest on any underpayment of tax as calculated on the amended tax returns. This includes the payments that US taxpayers must make pursuant to the IRS Offshore Voluntary Disclosure Program and the Streamlined Domestic Offshore Procedures.
Second, the increase in the interest rates for the second quarter of 2018 directly affects the calculation of PFIC interest due on any “excess distributions”. It is important to remember that PFIC interest cannot be offset by foreign tax credit.

### Bitcoin is Property Under Israeli Tax Law | Cryptocurrency Tax Lawyer
On February 19, 2018, the Israel Tax Authority (“ITA”) stated in a circular to tax professionals that cryptocurrencies, such as Bitcoin, are property under Israeli tax law. This view brings the Israeli tax law very much in line with the IRS position in the United States.
Cryptocurrency is Property under Israeli Tax Law and Subject to Israeli Taxation
After years of vacillation, the ITA took the hard stance and stated that virtual currencies should be treated as intangible assets. This is a position very similar to the IRS in the United States, which declared in March of 2014 that it will consider and tax cryptocurrencies as property.
The ITA position leads to the logical conclusion that any income generated by these assets (including from the sale of cryptocurrencies) will be subject to Israeli taxation. The exact level of taxation will depend on whether a taxpayer is engaged in a business activity.
Cryptocurrency as a Non-Business Property under Israeli Tax Law
If a taxpayer’s activities do not rise to the level where a taxpayer would be considered as carrying on a business, he will not be subject to the Value Added Tax (“VAT”). This individual, however, will still have to pay the Capital Gains Tax (“CGT”) on any gains from the sale of bitcoins and other cryptocurrencies. The current CGT rate in Israel for individuals is 25%.
On the other hand, it appears that capital losses incurred by investors in crytocurrencies (a topic of special relevance today in light of the recent huge drop in the value of Bitcoins) can be used to offset any capital gains. Furthermore, these losses can be carried forward to future tax years.
Cryptocurrency as a Business Property under Israeli Tax Law
It gets a lot worse for businesses. First of all, the “mining” of virtual currencies (this is process of solving algorithms to create a new unit of a virtual currency) will be generally subject to 17% VAT. The VAT is imposed only on the mining itself; it appears that the trades thereafter will not be subject to VAT.
Second, any taxpayer engaged in the business of trading virtual currencies will be classified as a financial institution for the VAT purposes.
Finally, businesses that conduct transactions with virtual currencies should report them on their business tax returns. Any capital gains generated by cryptocurrencies will generally require businesses to pay the CGT up to the maximum rate of 47%.
ITA Circular on Cryptocurrencies as Property Under Israeli Tax Law Can Be Challenged in Court
It should be kept in mind that the circular issued by the ITA represents only the ITA’s position on cryptocurrencies as property under Israeli tax law. This circular is not the final law and it can be challenged in courts.
Contact Sherayzen Law Office for Help with US Tax Planning and Tax Compliance Concerning Ownership of Cryptocurrencies
If you are a US taxpayer who owns or deals with cryptocurrencies, you may have a significant exposure to US taxation.   If you would like to find out more about US taxation of cryptocurrencies, contact Sherayzen Law Office to schedule a confidential consultation.

### IRS Requests Comments on OVDP Information Collection | OVDP Lawyer
On February 28, 2018, the IRS issued a request for comments from the general public with respect to the its OVDP Information Collection practices. Let’s explore this new development in more detail.
OVDP Information Collection: Background Information on the OVDP
The IRS Offshore Voluntary Disclosure Program (“OVDP” now closed) remains today the primary voluntary disclosure route for taxpayers who violated their US international tax requirements willfully. It is also a valid option for taxpayers who wish to avoid the uncertainty associated with the Streamlined Compliance Procedures. This uncertainty often arises with respect to being able to establish non-willfulness and the potential follow-up audit. Finally, given the differences between the OVDP penalty calculation rules and those of the Streamlined Domestic Offshore Procedures (“SDOP”), some taxpayers may find it beneficial to go through the OVDP rather than SDOP.
The idea behind the OVDP is to allow US taxpayers to voluntarily disclose their prior noncompliance with US international tax requirements, including FBAR, in return for a fixed, lower penalty. One of the great benefits of the OVDP is that it generally eliminates the risk of a criminal prosecution.
OVDP Information Collection: Forms For Which Comments are Requested
The IRS requests comments for all Forms 14452, 14453, 14454, 14457, 14467, 14653, 14654, 14708 and 15023. In other words, while this request is formally made under the OVDP, it also covers the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Moreover, by including the brand-new Form 15023 (which was just created a few months ago), this request for comments (which supposed should cover only the OVDP Information Collection) also extends to the new IRS Decline and Withdrawal Campaign.
OVDP Information Collection: Requested Comments
The IRS requests comments on five matters related to the OVDP Information Collection, SDOP, SFOP and Form 15023:
“(a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.”
OVDP Information Collection: Deadline for Comments
The IRS requests that all written comments be received on or before April 30, 2018.
Contact Sherayzen Law Office for Professional Help With OVDP and Other Offshore Voluntary Disclosure Options
If you have undisclosed foreign accounts and foreign income, contact Sherayzen Law Office for professional help as soon as possible. We have helped hundreds of US taxpayers to resolve their prior US international tax noncompliance, and we can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### South Korean Cryptocurrency Taxation of Exchanges | IRS Tax Lawyer
In January of 2018, South Korea announced that it will start taxing cryptocurrency exchanges. This is a highly important development in international tax law concerning cryptocurrencies, because South Korea is a major hub for cryptocurrency trading. Let’s delve a bit deeper into South Korean cryptocurrency taxation.
South Korean Cryptocurrency Taxation of Exchanges
The first important point to make is that the new law affects only South Korean cryptocurrency exchanges, such as Bithumb and Coinone.
South Korean Cryptocurrency Taxation Starts With Tax Year 2017
The new South Korean cryptocurrency taxation will apply retroactively to any income derived from digital currency in the calendar year 2017. In other words, any profits the exchanges realized in 2017 on the trading of cryptocurrencies will be subject to the South Korean corporate taxation.
South Korean Cryptocurrency Taxation Rates
There is no new special tax rate created for cryptocurrency exchanges. Rather, the current corporate income tax rates will apply. In other words, the cryptocurrency exchanges are likely to pay a 22 percent tax rate for corporate profits exceeding an annual threshold of KRW 20 billion and an additional 2.2 percent local income tax (which constitutes 10 percent of the corporate income tax rate).
South Korean Cryptocurrency Taxation Deadlines
The deadline to pay the corporate income tax for the tax year 2017 will be March 31, 2018. The deadline to pay the 2017 local income tax will be April 30, 2018.
South Korean Cryptocurrency Taxation is Part of the South Korean Overhaul of the Cryptocurrency Market
The extension of corporate taxation to cryptocurrency exchanges is part of a major overhaul of the entire South Korean cryptocurrency market.  In fact, the South Korean government has instituted a number of non-tax measures to address concerns about money laundering and tax evasion.  For example, South Korea recently prohibited the opening of new virtual accounts for cryptocurrency investors while the cryptocurrency traders are required to change the names of their accounts to make them identifiable.
Cryptocurrency Trading is Taxable in the United States
Sherayzen Law Office reminds US taxpayers cryptocurrency exchanges are taxable in the United States as capital gains. Contact Sherayzen Law Office to schedule a consultation to learn more about US taxation of cryptocurrencies.

### IRS Fails to Recover a Large Erroneous Refund | Litigation Tax Attorney
In a recent case, the IRS failed to recover a large erroneous refund of $21 million that it gave to a company called Starr International Co. Inc. (“Starr”). The opinion was released on January 31, 2018 by the District Judge Christopher R. Cooper (U.S. District Court for the District of Columbia) who granted Starr’s summary judgment motion. Let’s delve deeper into why the IRS was not able to recover this erroneous refund.
The Starr Case: Initial 2007 Request for Erroneous Refund
The story that led to a such a large erroneous refund is very interesting and related to the US-Swiss tax treaty. In 2007, as a shareholder of AIG stocks, Starr received dividends from AIG. In December of 2007, Starr filed a request with the US Competent Authority (“CA”) to claim a reduced withholding tax rate on the AIG dividends.
Then, without waiting for the CA response, Starr filed a refund claim with the IRS for the tax year 2007, seeking a refund in the amount it would have been entitled to had the CA granted the request for treaty benefits. It should be pointed out that Starr indicated on its Form 1120-F that this was a protective refund claim (to avoid the later Statute of Limitations problems) and informed the CA of the claim.
Once it was informed about the Starr’s protective refund claim, the CA instructed the Ogden Service Center not to issue a refund for 2007. Moreover, in October of 2010, the CA denied Starr’s request for treaty benefits for 2007.
The Starr Case: Request for 2008 Large Erroneous Refund Granted
This denial did not have the intended effect. On the contrary, Starr filed another refund request with the IRS for $21 million for 2008 and amended its refund claim for 2007. Starr also did it in a very clean and honest manner – on its 2008 Form 1120-F (next to the line indicating the refund amount), Starr wrote “see statement 1”. Statement 1 disclosed that CA did not grant treaty benefits to Starr and presented its counter-arguments arguing that CA’s decision was erroneous.
In 2011 the IRS erroneously granted Starr’s refund request for 2008 and issued a refund for $21,151,745.75. At the same time, the IRS did not issue any refund for the amended 2007 claim.
The Starr Case: Erroneous Refund for 2008 Leads to Lawsuit to Recovery Refund for 2007 and IRS Lawsuit to recover the 2008 Erroneous Refund
Emboldened by its 2008 erroneous refund, Starr decided to file a lawsuit in the D.C. District court to claim a refund for 2007. The lawsuit was filed in 2014 after Starr must have believed that the Statute of Limitations for the IRS to recover the 2008 erroneous refund had expired. It appears that this part of the case still continues as Starr has appealed the recent ruling in the government’s favor.
In the meantime, in response to Starr’s ever expanding appetite for refunds, the IRS decided to attempt to curb the Starr’s ambitions by recovering the 2008 erroneous refund. In 2015, the government amended its answer to Starr’s 2014 lawsuit and added a counterclaim seeking to recover the 2008 refund. Here, the most interesting part of the case begins.
The Starr Case: the IRS Arguments for the IRS Statute of Limitations to Recover 2008 Erroneous Refund
Generally, the IRS has only two years to initiate a lawsuit to recover a refund. There is, however, an exception. If a taxpayer obtains any part of the refund through fraud or misrepresentation, the Statute of Limitations may be extended to five years. The government bears the burden of proof to show that an extension of the statute of limitations is justified.
The IRS based its claim for the extension of the Statute of Limitations on three different arguments. First, the IRS stated that Starr made a misrepresentation when it indicated on line 9 of Form 1120-F that Starr was entitled to a $21 million refund; the IRS argued that it should have put “0" on it.
Additionally, the IRS also made a second variation on the same argument, relying on Rev. Proc. 2006-54, which sets forth the procedures for requesting treaty benefits from the CA. Section 12.04 expressly states that denials of requests for discretionary treaty benefits are final and not subject to administrative review. Based on this section, the government asserted that Starr, in contradiction to the established procedure, sought an administrative review of the CA’s denial of its refund claim by not making it clear that it was not entitled to a refund claim.
Second, the IRS argued that the Starr’s failure to inform the CA about it 2008 refund claim was another misrepresentation. Here, the IRS again relied on Rev.Proc. 2006-54, which states that a taxpayer must update the CA on all material changes regarding issues under consideration.
Finally, the government argued that Starr made the third misrepresentation when it failed to notify the Ogden Service Center (where the Starr’s claim for 2008 erroneous refund was filed), that it lacked the jurisdiction to issue the 2008 refund.
The Starr Case: the Court Refuted All IRS Arguments and Denied the IRS Request to Recover 2008 Erroneous Refund
The district court judge disagreed with all of the three IRS arguments. With respect to the first argument, the court disagreed with the government’s position, because had Starr requested $0 on its refund claim and then litigated the merits of the claim in court, it would have been entitled only to $0 even if it won. The court noted that this has been the government’s position in the past. Moreover, Treas. Reg. §301.6402-3(a)(5) requires that refund claims contain a statement of the amount overpaid.
In this context, the court addressed the government’s argument that, by filing a refund claim, Starr was looking for a back-door administrative review of the CA’s denial of its claim. The court noted that a refund claim is not a request for administrative review, but a normal way for a taxpayer to obtain a refund that the IRS already withheld.
Moreover, the refund claim was an absolute jurisdictional requirement for seeking a judicial review of CA’s denial of Starr’s claim for refund. Had Starr failed to file a refund claim before going to court, the court would have lacked the subject matter jurisdiction to hear the case.
With respect to the government’s second argument, the court stated that it is irrelevant because Starr filed its 2008 refund claim when CA already made the final decision to deny the refund claim. In other words, there were no issues under CA’s consideration at the time when Starr filed its refund claim.
Finally, the court completely disagreed with the government’s argument that Starr should have informed the Ogden Service Center that it lacked jurisdiction to issue the refund. The court stated that there is simply no regulation, statute or an IRS instruction that would require the taxpayers to inform the IRS of what falls and what does not fall within its jurisdiction.
Since the government failed its burden of proof that Starr obtained its refund through misrepresentations, the court granted Starr’s motion for summary judgment and found that the IRS was not entitled to extend the Statute of Limitations to five years.
Contact Sherayzen Law Office for Help With Tax Litigation
If you or your business are being sued by the IRS, contact Sherayzen Law Office for professional help with tax litigation.

### Sherayzen Law Office Ltd | Международная налоговая юридическая фирма США
Sherayzen Law Office PLLC уведомляет о том, что с 1 января 2018 года его официальным владельцем является Sherayzen Law Office Ltd. Sherayzen Law Office Ltd будет продолжать использовать “Sherayzen Law Office” в качестве своего фирменного названия.
Изменение в корпоративной структуре адвокатского бюро Sherayzen Law Office произошло в маркетинговых целях. «PLLC» - это очень необычная форма ведения бизнеса, которая не признается за пределами Соединенных Штатов, тогда как «Ltd» - очень распространенная форма ведения бизнеса во всем мире.
Sherayzen Law Office Ltd - международная налоговая юридическая фирма, принадлежащая адвокату Евгению Шерайзен, эсквайру, который специализируется в международном налоговом законодательстве США.  В частности, г-н Шерайзен является ведущим экспертом в области добровольного декларирования имущества, находящегося за границей и в оффшорных зонах (Программа IRS добровольного предоставления сведений об оффшорных активах (OVDP), «Упрощенной процедуры добровольного раскрытия информации для налогоплательщиков США, проживающих в США» (Streamlined Domestic Offshore Procedures), «Упрощенная процедура добровольного раскрытия информации для налогоплательщиков США, проживающих за границей» (Streamlined Foreign Offshore Procedures), «Амнистия поздних международныхналоговых информационных деклараций» (Delinquent International Information Return Submission Procedures), «Амнистия невыполненных обязательств FBAR» (Delinquent FBAR Submission Procedures), Добровольное раскрытие информации на основе Уважительной причины (Reasonable Cause Disclosures), Выполнении FATCA обязательств (включая Form 8938, W8-BEN-E и т. д.)), FBAR, международных налоговых деклараций США (включая информационные декларации для владельцев иностранного бизнеса. - Forms 5471, 8865, 8858, 926 и т. д.), налогообложении иностранных трастов (Forms 3520 и 3520-A), декларировании унаследованного имущества за границей, декларировании подарков из-за границы, PFIC декларации (Form 8621), международном налоговом планировании и других.
Кроме того, Sherayzen Law Office Ltd помогает своим клиентам с соблюдением внутренних налогов США, аудитами IRS, апелляциями в Апелляционный офис IRS и федеральными налоговыми судебными разбирательствами.
Sherayzen Law Office Ltd работает с клиентами по всему миру. С 2005 года Sherayzen Law Office помогло сотням клиентов из почти 70 стран со всех континентов.

### 2017 FBAR Deadline | FinCEN Form 114 FBAR Lawyer & Attorney
FinCEN recently confirmed the 2017 FBAR deadline and the automatic extension option.
2017 FBAR Deadline: FBAR Background
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, is commonly known as FBAR.  US taxpayers should use this form to report their financial interest in or signatory authority over foreign financial accounts. Failure to timely file the FBAR may result in the imposition of draconian FBAR penalties.
2017 FBAR Deadline: Traditional FBAR Deadline
Prior to 2016 FBAR, the taxpayers had to file their FBARs for each relevant calendar year by June 30 of the following year. No filings extensions were allowed. The last FBAR that followed this deadline was 2015 FBAR (its due date was June 30, 2016).
2017 FBAR Deadline: Changes to FBAR Deadline Starting 2016 FBAR
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the “Act”) changed the FBAR deadline starting with 2016 FBAR.  Section 2006(b)(11) of the Act requires the FBARs to be filed by the due date of that year’s tax return (i.e. usually April 15), not June 30.
Furthermore, during the transition period, the IRS granted to US taxpayers an automatic extension of the FBAR filing deadline to October 15. The taxpayers do not need to make any specific requests in order for extension to be granted.
In other words, starting 2016 FBAR, the Act adjusted the FBAR due date to coincide with the federal income tax filing deadlines. Moreover, the new FBAR filing deadline will follow to the letter the federal income tax due date guidance. The federal income tax due date guidance states that, in situations where the tax return due date falls on a Saturday, Sunday, or legal holiday, the IRS must delay the due date until the next business day.
2017 FBAR Deadline
Based on the new law, the 2017 FBAR deadline will be April 17, 2018 (same as 2017 income tax return due date). If a taxpayer does not file his 2017 FBAR by April 17, 2018, then the IRS will automatically grant an extension until October 15, 2018. Failure to file 2017 FBAR by October 15, 2018, may result in the imposition of FBAR civil and criminal penalties.

### Section 1041 Definition of Divorce | Divorce Tax Attorney & Lawyer
26 U.S.C. §1041(a)(2) states that transfers of property between former spouses are not taxable as long as they are “incident to divorce”. The question is what is the definition of divorce for Section 1041 purposes?
Section 1041 Definition of Divorce: 26 U.S.C. §71(b)(2)
The Treasury regulations specifically refer to 26 U.S.C. §71(b)(2) for the definition of divorce or separation instrument (see Treas Reg §1.1041-1T(b), Q&A-7). 26 U.S.C. §71(b)(2) lays out three definitions of divorce or separation instrument:
“(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree,
(B) a written separation agreement, or
(C) a decree (not described in subparagraph (A)) requiring a spouse to make payments for the support or maintenance of the other spouse.”
The regulations specifically states that the definition of divorce or separation instrument under 26 U.S.C. §71(b)(2)(A) also includes a modification or amendment to such decree or instrument. Treas Reg §1.1041-1T(b), Q&A-7.
Section 1041 Definition of Divorce: Void Ab Initio Annulments
Additionally, for the purposes of 26 U.S.C. §1041, the definition “divorce” is expanded to include divorce annulments and the cessations of marriage that are deemed void ab initio due to violations of state law. Treas Reg §1.1041-1T(b), Q&A-8.
Void ab initio annulments dissolve a marriage retroactively from its very beginning. In other words, the legal outcome of such an annulment is to treat the annulled marriage as if it never happened. While the state law differs from state to state, there are generally four grounds under which a marriage is voided ab initio: bigamy, related parties (i.e. spouses are related within a certain degree of consanguinity or affinity), incompetence and situations where one of the spouses is less than sixteen years old.
Contact Sherayzen Law Office for Help with Tax Issues Concerning a Section 1041 Transfer of Property
If you need help with tax issues concerning a divorce or a transfer of property pursuant to a divorce, contact Sherayzen Law Office for professional legal help.

### Sherayzen Law Office Ltd | US International Tax Law Firm
Sherayzen Law Office PLLC hereby gives notice that, as of January 1, 2018, its official owner is Sherayzen Law Office, Ltd (“Sherayzen Law Office Ltd”). Sherayzen Law Office Ltd will continue to utilize “Sherayzen Law Office” as its trade name. Furthermore, Sherayzen Law Office Ltd will continue to maintain the disregarded entity (for tax purposes) Sherayzen Law Office PLLC for an indefinite period of time.
This means that Sherayzen Law Office Ltd is the official name of our international tax law firm as of January 1, 2018. Sherayzen Law Office Ltd has assumed all assets, liabilities, rights and duties of Sherayzen Law Office PLLC as of January 1, 2018.
The change in the corporate structure of Sherayzen Law Office occurred for marketing purposes. “PLLC” is a highly specified form of doing business which is not recognized outside of the United States, whereas “Ltd” is a very common form of doing business worldwide.
Sherayzen Law Office Ltd is an international tax law firm owned by attorney Eugene Sherayzen, Esq., who specializes in US international tax law. In particular, Mr. Sherayzen is a leading expert in the area of offshore voluntary disclosures (IRS Offshore Voluntary Disclosure Program (“OVDP”), Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures, Delinquent FBAR Submission Procedures, Reasonable Cause Disclosures, et cetera), FATCA compliance (including Form 8938, W8-BEN-E, et cetera), FBAR compliance, international tax compliance (including information returns for the ownership of a foreign business - Forms 5471, 8865, 8858, 926, et cetera), foreign trust US tax compliance (Forms 3520 and 3520-A), foreign inheritance reporting, foreign gift reporting, PFIC compliance (Form 8621), international tax planning and others.
Additionally, Sherayzen Law Office Ltd is helping its clients with domestic tax compliance, IRS audits, appeals to the IRS Office of Appeals and tax litigation.
Sherayzen Law Office Ltd operates worldwide. In fact, since 2005, Sherayzen Law Office has helped hundreds clients from close to 70 countries from every continent: Australia, North America (Canada, Mexico and the United States), South America (Argentina, Brazil, Chile and Colombia), including Central American countries like Barbados, Belize, Costa Rica, Nicaragua and Panama, Africa (Ethiopia, Ivory Coast, Nigeria), the Middle East region of Asia (Egypt, Iraq, Iran, Israel, Kuwait, Lebanon, United Emirates and so on), Southeast Asian countries (China, India, Thailand, et cetera), Far Eastern region of Asia (Japan) and the great majority of European countries (Western, Eastern, Northern and Southern Europe) including Great Britain and Ireland as well as Russia.
Contact Us Today to Schedule Your Confidential Consultation!

### Overcoming Late IRC Section 1041 Transfer Presumption | IRS Lawyer & Attorney
In a previous article, I discussed that a late IRC Section 1041 transfer between former spouses is presumed to be unrelated to the cessation of the marriage. This means that such a transfer may not be considered tax-free for US tax purposes. In this article, I would like to explain what a late IRC Section 1041 transfer is and how to overcome the presumption that it is not related to the cessation of the marriage.
What is a Late IRC Section 1041 Transfer?
A transfer of property between ex-spouses is not taxable as long as it is “incident to divorce”. 26 U.S.C. §1041(a)(2). Temporary regulations state that such a transfer of property will be considered as incident to divorce as long as it occurs within one year of the date of the cessation of marriage or if this transfer is related to the cessation of marriage. Treas Reg §1.1041-1T(b), Q&A-6.
As I indicated in a previous article, a transfer of property is related to the cessation of marriage if it is done pursuant to a divorce or separation instrument and “occurs not more than 6 years after the date on which the marriage ceases”. Treas Reg §1.1041-1T(b), Q&A-7. If the transfer of property between ex-spouses occurs after six years of the cessation of marriage, then it is considered a late IRC Section 1041 transfer. Id.
Late IRC Section 1041 Transfer: Presumption that the Transfer if Not Related to Marriage
A late IRC Section 1041 transfer gives rise to a presumption that the transfer is not related to the cessation of marriage. Id. In other words, if an ex-spouse transfers a property to another ex-spouse more than six years after the cessation of their marriage, then the IRS will assume that the transfer is not related to the marriage.
Late IRC Section 1041 Transfer: Rebuttal of the Presumption
Luckily for US taxpayers, this presumption is not absolute and can be rebutted. “This presumption may be rebutted only by showing that the transfer was made to effect the division of property owned by the former spouses at the time of the cessation of the marriage.” Id.
The temporary Treasury regulations emphasize that the presumption can be rebutted by establishing two facts. First, the transfer was made late “because of factors which hampered an earlier transfer of the property, such as legal or business impediments to transfer or disputes concerning the value of the property owned at the time of the cessation of the marriage”. Id. Second, “the transfer is effected promptly after the impediment to transfer is removed.” Id.
Late IRC Section 1041 Transfer: PLRs Indicate Anticipation of Transfer in a Divorce Decree as the Crucial Factor
The IRS has issued a number of Private Letter Rulings (“PLRs”) on the issue of a late IRC Section 1041 transfer. Overall, the PLRs seem to follow an important trend in determining whether a taxpayer is successful in his rebuttal of the aforementioned presumption.
The key factor that appears in these PLRs seems to be whether a transfer of property (or an option to transfer a property) was part of the divorce decree. In other words, the most important question is whether this transfer of property was anticipated by the terms of the divorce decree. If it was and there is a good justification for the delay of the transfer of property, then the IRS is likely to rule that Section 1041 applies and the transfer would be deemed tax-free for federal income tax purposes.
Of course, it is highly important that a tax attorney review the situation to determine the likelihood that the IRS will agree on both points: anticipation of transfer in the divorce decree and the good reason for the delay of the transfer.
Contact Sherayzen Law Office for Professional Help Concerning Late IRC Section 1041 Transfers
If you are engaged in a divorce or you are an attorney representing a person who is engaged in a divorce, contact Sherayzen Law Office for experienced help with respect to taxation of transfers of property to an ex-spouse as well as other tax consequences of a divorce proceeding.

### Ex-Spouse Property Transfers Incident to Divorce | Tax Lawyer & Attorney
This article introduces a series of articles on 26 U.S.C. §1041 and specifically the issue of tax treatment of ex-spouse property transfers incident to divorce. As a result of a divorce, it is very common for ex-spouses to transfer properties to each other as part of their settlement agreement. A question arises: are these ex-spouse property transfers taxable?
Note that this article covers a situation only when both spouses are US citizens and only direct transfers between ex-spouses (i.e. the transfers on behalf of an ex-spouse are not covered here).
General Rule for Ex-Spouse Property Transfers under 26 U.S.C. §1041
A property transfer between spouses is generally not subject to federal income tax. 26 U.S.C. §1041(a)(1). Transfers of property between former spouses are also not taxable as long as they are “incident to divorce”. 26 U.S.C. §1041(a)(2). For income tax purposes, the law treats the transferee spouse as having acquired the transferred property by gift. 26 U.S.C. §1041(b)(1). This means that “the basis of the transferee in the property shall be the adjusted basis of the transferor”. 26 U.S.C. §1041(b)(2).
It is important to emphasize that only transfers of property (real, personal, tangible and/or intangible) are governed by 26 U.S.C. §1041; transfers of services are not subject to the rules of this section. Treas Reg §1.1041-1T(a), Q&A-4.
Ex-Spouse Property Transfers Incident to Divorce
The key issue for the ex-spouse property transfers is whether they are “incident to divorce”. The statute and the temporary Treasury regulations describe two situations when a transfer between ex-spouses will be considered “incident to divorce”: “(1) The transfer occurs not more than one year after the date on which the marriage ceases, or (2) the transfer is related to the cessation of the marriage.” Treas Reg §1.1041-1T(b), Q&A-6; 26 U.S.C. §1041(c).
Ex-Spouse Property Transfers Not More Than One Year After the Cessation of a Marriage
Any transfers of property between former spouses that occur not more than one year after the date on which the marriage ceases are subject to the nonrecognition rules of 26 U.S.C. §1041(a). This is case even if a transfer of property is not really related to the cessation of the marriage. Treas Reg § 1.1041-1T(b), Q&A-6.
Ex-Spouse Property Transfers Related to the Cessation of the Marriage
26 U.S.C. §1041 does not actually define the meaning of “transfers related to the cessation of the marriage”. Rather, the temporary Treasury regulations explain this term.
The temporary regulations establish a two-prong test that states that a transfer of property is treated as related to the cessation of the marriage if: (1) “the transfer is pursuant to a divorce or separation instrument, as defined in section 71(b)(2)”, and (2) “the transfer occurs not more than 6 years after the date on which the marriage ceases”. Treas Reg §1.1041-1T(b), Q&A-7. The definition of divorce or separation instrument in the first prong also includes a modification or amendment to such decree or instrument.
If either or both of the prongs of this test are not satisfied (for example, the transfer occurred more than six years after the cessation of the marriage), then a transfer “is presumed to be not related to the cessation of the marriage.” Id. This is a rebuttable presumption and, in a future article, I will discuss how a taxpayer may rebut this presumption.
Contact Sherayzen Law Office for Professional Help Concerning Tax Consequences of a Property Transfer to an Ex-Spouse
If you are engaged in a divorce or you are an attorney representing a person who is engaged in a divorce, contact Sherayzen Law Office for experienced help with respect to taxation of transfers of property to an ex-spouse as well as other tax consequences of a divorce proceeding.

### South Korean Inheritance Leads to Criminal Sentence for FBAR Violations
On January 25, 2018, a South Korean citizen and a US Permanent Resident, Mr. Hyong Kwon Kim, was sentenced to prison for filing false tax returns and willful FBAR violations; additionally, he had to pay over $14 million in FBAR willful civil penalties. I already discussed Mr. Kim’s guilty plea and the main facts of his case in an earlier article last year, but I would like to come back to another aspect of this case: South Korean inheritance. In particular, I would like to trace how a South Korean inheritance led to Mr. Kim’s guilty plea and a criminal sentence for FBAR violations.
From South Korean Inheritance to Swiss Account FBAR Violations
According to the US Department of Justice (“DOJ”), Mr. Kim became a US permanent resident in 1998. The DOJ describes him as a sophisticated business executive who ran family businesses with operations in the United States and internationally.
At some point after he became a US tax resident, Mr. Kim inherited tens of millions of dollars from his family in South Korea. Instead of properly reporting his South Korean inheritance (which would not have been subject to US taxation at that time), he decided to hide it in foreign accounts. You can find the details of his efforts to hide his accounts in this article (unavailable).
In the end, despite his ingenuous efforts, the IRS was able to identify Mr. Kim as a willfully noncompliant taxpayer who deliberately failed to file FBARs and filed false income tax returns for the years 1999 through 2010. As a result of his willful FBAR and income tax noncompliance and as part of Mr. Kim’s guilty plea, U.S. District Court Judge Brinkema sentenced Mr. Kim to six months to prison, imposed a fine of $100,000 and ordered him to pay $243,542 in restitution to the IRS. Moreover, Mr. Kim already paid $14 million in willful FBAR penalties.
In other words, as a result of his actions, Mr. Kim lost the majority of his South Korean inheritance and all earnings on that inheritance in addition to going to be jail.
Failure to Report South Korean Inheritance Was the First Step that Led to Criminal FBAR Violations
While, undoubtedly, the entire history of willful failures to file FBARs and report foreign income on tax returns is the primary cause of Mr. Kim’s imprisonment in 2018, it is important to understand that his noncompliance was only possible because Mr. Kim did not properly report his South Korean inheritance.
In other words, had Mr. Kim disclosed on Form 3520 that he had received an inheritance from South Korea in the last 1990s, he would not have been tempted to hide his inheritance from the IRS. In fact, the disclosure of his South Korean inheritance, would have made it impossible for him to hide his foreign assets in Swiss banks afterwards.
Primary Lesson from Mr. Kim’s South Korean Inheritance Case
This is an important lesson from this case that many observers and tax attorneys have missed – Mr. Kim’s noncompliance began with failure to report South Korean inheritance, not from the failure to file FBARs and foreign income (even though, he was sentenced and penalized for the latter two activities).
In fact, a very high number of my offshore voluntary disclosure clients came from a similar background - they received an inheritance from a foreign country (and it could be any foreign country: Australia, Canada, China Colombia, France, Germany, Italy, Russia, South Korea, Thailand, et cetera) and they failed to report the foreign inheritance first (usually, due to lack of knowledge about proper reporting of foreign inheritance). This failure to report foreign inheritance later led to significant US tax noncompliance that could have only been corrected through a voluntary disclosure.
Starting in 2013-2014, I have also seen the steady rise in the “reverse discovery” inheritance cases – i.e. clients would receive a foreign inheritance and would come to me to discuss on how to best disclose it. Then, as a result of my due diligence checklist, we would uncover prior FBAR or other tax noncompliance with respect to other foreign assets my clients had prior to their foreign inheritance.
Contact Sherayzen Law Office for Proper Reporting of Your Foreign Inheritance
If you received a foreign inheritance, you should contact Sherayzen Law Office for professional help. Sherayzen Law Office is an international tax law firm that specializes in US tax reporting of a foreign inheritance. We can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Broadcom Re-domiciliation Approved | International Tax Lawyer & Attorney
On January 29, 2018, Broadcom Board of Directors approved the plan for Broadcom re-domiciliation in the United States. This move was expected after Broadcom’s November of 2017 pledge to president Trump that the company would return to the United States.
Broadcom Re-domiciliation: A Story of Tax Inversion and Tax Remorse
The story of the Broadcom re-domiciliation began fairly recently in February of 2016. At that time, Broadcom did what was very popular during the Obama administration – tax inversion. California-based Broadcom allowed itself to be acquired by Singapore’s Avago Technologies Limited with the result of creation of a single Singapore entity.
The real motivation for the inversion was lowering the corporate taxes. At that time, during the political climate that existed in the United States, Broadcom thought that it was a good move.
Now, Broadcom believes that the tax inversion might not have been such a great thing to do in light of the new developments and certain consequences that it did not seem to have anticipated prior to tax inversion. First of all, Broadcom’s business in the US has continued to expand as it stepped-up its acquisition strategy. Already in 2017, barely a year and a half after tax inversion, Broadcom has stated that the benefits of this business strategy outweigh the potential additional taxes it might have to pay when it returns to the United States (especially after the tax reform - see below).
Second and closely related to the first reason, as a foreign company based in Singapore, Broadcom is under constant scrutiny of the Committee on Foreign Investment in the United States (“CFI”). CFI focuses on the review of transactions that may result in control of a US business by a foreign person and the impact of such control on US national security. This is an irritating and expensive factor that continuously hinders Broadcom’s acquisition strategy in the United States.
Third, Broadcom apparently did not anticipate that the tax reform be so radical and so beneficial to corporations. There is one issue in particular that makes Broadcom re-domiciliation in the United States so important. At the time of its tax inversion, Broadcom established a deferred tax liability on its balance sheet with respect to integration of the company’s intellectual property (“IP”). Under the old law, this deferred tax liability would have become payable at 35% tax rate in the United States.
Now, under the Tax Cuts and Jobs Act of 2017 (“TCJA”), this deferred liability will be recognized in fiscal year 2018 as deemed repatriated foreign earnings at a much lower tax rate. This means that Broadcom re-domiciliation in 2018 will save the company a huge amount in taxes; or, as the company itself put it: “a material reduction in the amount of other long-term liabilities on our balance sheet”.
Broadcom Re-domiciliation Approved Within One Month of TCJA
The tax motivation behind Broadcom re-domiciliation became especially evident in light of the fact that the Broadcom Board approved it within just one month of the passage of TCJA. Moreover, in its filings with SEC, Broadcom directly stated that, as a result of TCJA, the tax cost of being a US-based multinational company has decreased substantially.
Sherayzen Law Office will continue to observe the impact of the recent tax reform on the behavior of US companies that went through tax inversion.

### 2018 FBAR Criminal Penalties | FBAR Lawyer & Attorney
2018 FBAR criminal penalties should be on the mind of any US taxpayer who willfully failed to file his FBARs or knowingly filed a false FBAR. In this essay, I would like to do an overview of the 2018 FBAR criminal penalties that these noncompliant US taxpayers may have to face.
2018 FBAR Criminal Penalties: Background Information
A lot of US taxpayers do not understand why the 2018 FBAR criminal penalties are so shockingly high. These taxpayers question why failing to file a form that has nothing do with income tax calculation should potentially result in a jail sentence.
The answer to this questions lies in the legislative history of FBAR. First of all, it is important to understand that FBAR is not a tax form. The Report of Foreign Bank and Financial Accounts (“FBAR”) was born in 1970 out of the Bank Secrecy Act (“BSA”), in particular 31 U.S.C. §5314. This means that the initial primary purpose of the form was to fight financial crimes, money laundering and terrorism. In other words, FBAR was not created as a tool against tax evasion.
Hence, the FBAR penalties were structured from the very beginning for the purpose of punishing criminals engaged in financial crimes and/or terrorism. This is why the FBAR penalties are so severe and easily surpass the penalties of any tax form.
It was only 30 years later, after the enaction of The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), that the enforcement of FBAR was turned over to the IRS. The IRS almost immediately commenced using FBAR to fight the tax evasion schemes that utilized offshore accounts.
The Congress liked the IRS initiative and responded with the American Jobs Creation Act of 2004 (“2004 Jobs Act”). The 2004 Jobs Act further increased the FBAR penalties, including the creation of the non-willful penalty of up to $10,000 per violation.
2018 FBAR Criminal Penalties: Description
Now that we understand why the 2018 FBAR criminal penalties are so severe, let’s describe what they penalties actually look like. There are three different 2018 FBAR criminal penalties associated with different FBAR violations.
The first criminal penalty may be imposed under 26 U.S.C. 5322(a) and 31 C.F.R. § 103.59(b) for willful failure to file FBAR or retain records of a foreign account. The penalty is up to $250,000 or 5 years in prison or both.
When the willful failure to file FBAR is combined with a violation of other US laws or the failure to file FBAR is “part of a pattern of any illegal activity involving more than $100,000 in a 12-month period”, then the IRS has the option of imposing a criminal penalty under 26 U.S.C. 5322(b) and 31 C.F.R. § 103.59(c). In this case, the penalty jumps to incredible $500,000 or 10 years in prison or both.
Finally, if a person willingly and knowingly files a false, fictitious or fraudulent FBAR, he is subject to the penalty under 31 C.F.R. § 103.59(d). The penalty in this case may be $10,000 or 5 years or both.
Contact Sherayzen Law Office for Help With Past FBAR Violations
If you were required to file an FBAR but you have not done it, contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Our international tax law firm specializes in FBAR compliance and we have helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance with US tax laws while reducing and, in some cases, eliminating their FBAR penalties.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### US Taxpayers’ Nightmare Continues: FBAR Penalty Inflation Adjustment
As if the FBAR penalties were not frightening enough, Congress has mandated the IRS to adjust the FBAR penalties to account for inflation. As a result, the already complicated and severe system of FBAR penalties became even more complex and ruthless. In this article, I would like provide a general overview of the FBAR penalty inflation adjustment and what it means for noncompliant US taxpayers.
FBAR Penalty Inflation Adjustment: The “Old” FBAR Penalty System
The FBAR penalty system was already complex prior to the 2015 FBAR penalty inflation adjustment. It consisted of three different levels of penalties with various levels of mitigation. The highest level of penalties consisted of criminal penalties. The most dreadful penalty was imposed for the willful failure to file FBAR or retain records of a foreign account while also violating certain other laws – up to $500,000 or 10 years in prison or both.
The next level consisted of civil penalties imposed for the willful failure to file an FBAR – up to $100,000 or 50% of the highest balance of an account, whichever is greater, per violation. It is important to emphasize that the IRS has unilaterally interpreted the word “violation” to mean that a penalty should be imposed on each account per year, potentially going back six years (the FBAR statute of limitations is six years).
The third level of penalties were imposed for the non-willful failure to file an FBAR. The penalties were up to $10,000 per violation per year. It is also important to point out that the subsequent laws and IRS guidance imposed certain limitations on the application of the non-willful FBAR penalties.
Finally, there were also penalties imposed solely on businesses for negligent failure to file an FBAR. These penalties were up to $500 per violation; if, however, there was a pattern of negligence, the negligence penalties could increase ten times up to $50,000 per violation.
FBAR Penalty Inflation Adjustment: Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015
Apparently, the Congress did not believe that these FBAR penalties were sufficiently horrific. Hence, it enacted a law awkwardly named Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (“2015 Inflation Adjustment Act”) to “improve the effectiveness of civil monetary penalties and to maintain their deterrent effect.”
The 2015 Inflation Adjustment Act required federal agencies to do two things: (1) adjust the amounts of civil monetary penalties with an initial “catch-up” adjustment; and (2) make subsequent annual adjustments for inflation. It is important to note that only civil penalties, not criminal, were subject to the inflation adjustment.
While the annual adjustment requirement is fairly clear, the “catch-up” adjustment requires a bit more explanation. In essence, the catch-up adjustment requires a federal agency to adjust the penalty (as it was last originally established by an act of Congress) for inflation from the time of establishment through roughly the November of 2015. In other words, a penalty would be adjusted in one year for all of the inflation that accumulated between the time the statutory penalty was created and the time the 2015 Inflation Adjustment Act was enacted. The adjustment was limited to 2.5 times of the original penalty.
The end result of the penalty adjustment was a massive increase in federal penalties in 2016. For example, one OSHA penalty went up from $70,000 to $124,709.
New System under the FBAR Penalty Inflation Adjustment
Luckily, the FBAR penalties were last revisited by Congress in 2004 and the increase in FBAR penalties, while very large (about 25%), was not as dramatic as some of the other federal penalties. Nevertheless, the FBAR penalty inflation adjustment further complicated the multi-layered system of FBAR penalties.
The key complication came from the fact that the FBAR penalty became dependent on the timing of the IRS penalty assessment, bifurcating the already existing FBAR penalty system (that was broadly described above) into two distinct parts: pre-November 2, 2015 and post-November 2, 2015.
If an FBAR violation occurred on or before November 2, 2015, the old FBAR penalty system applies. This is also true even if the actual IRS assessment of the FBAR penalties for the violation occurred after this date. In other words, the last FBAR violation definitely eligible for the old statutory penalties is the one concerning 2014 FBAR which was due on June 30, 2015. Obviously, FBARs for prior years are also eligible for the same treatment.
If an FBAR violation occurred after November 2, 2015 and the FBAR penalty would be assessed after August 1, 2016, the new system of penalties (i.e. the one after the FBAR penalty inflation adjustment) applies. In other words, all FBAR violations starting 2015 FBAR (which was due on June 30, 2016) are subject to the ever-increasing FBAR civil penalties.
With respect to these post-November 2, 2015 violations, the exact amount of penalties will depend on the timing of the IRS penalty assessment, not when the FBAR violation actually occurred. For example, if the IRS penalty assessment was made after August 1, 2016 but prior to January 15, 2017, then maximum non-willful FBAR penalty per violation will be $12,459 and the maximum willful FBAR penalty per violation will be the greater of $124,588 or 50% of the highest balance of the account.
If, however, the penalty was assessed after January 15, 2017 but prior to January 15, 2018, the maximum non-willful FBAR penalty will increase to $12,663 per violation and the maximum civil willful FBAR penalty will be the greater of $126,626 or 50% of the highest balance of the account.
Contact Sherayzen Law Office for Help with Avoiding or Reducing Your FBAR Penalties
Whether you have undisclosed foreign accounts on which the FBAR penalties have not yet been imposed or the IRS has already imposed FBAR penalties for your prior FBAR noncompliance, you should contact Sherayzen Law Office as soon as possible to secure professional help. We have helped hundreds of US taxpayers to reduce and, under certain circumstances, completely eliminate FBAR penalties through properly made voluntary disclosures. We have also helped US taxpayers to fight the already imposed FBAR penalties through appeals to the IRS Office of Appeals as well as in a federal court.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Cyprus Tax Amnesty Extended | FATCA Lawyer & Attorney
For the second time now, the Cyprus Tax Amnesty has been extended. Let’s discuss in more detail the new deadline and the terms of the Cyprus Tax Amnesty.
Cyprus Tax Amnesty: Deadline Extensions
The original deadline for the Scheme for the Settlement of Overdue Taxes (the official name of the Cyprus Tax Amnesty) was October 3, 2017. The deadline, however, was extended for the first time to January 3, 2018. In early January of 2018, the deadline was further extended to the current deadline of July 3, 2018. Thus, the more recent extension gives Cyprus taxpayers another six months to bring their tax affairs in full compliance with Cyprus tax law.
Main Terms of the Cyprus Tax Amnesty
The Cyprus Tax Amnesty allows “qualifying applicants” to pay off their tax liabilities for prior years with up to 95% reduction in the interest and penalties that otherwise would have been or have already been imposed by the Cyprus tax authorities. The precise percentage of the reduction of interest and penalties depends on the number of monthly installment payments chosen by the taxpayer (i.e. if you pay off everything in full immediately, you get the full benefit of the 95% reduction in interest and penalties).
The Cyprus Tax Amnesty encompasses all outstanding tax liabilities that were incurred in the tax years up to and including 2015. The Amnesty also covers a great variety of taxes: income tax, capital gains tax, VAT, property tax, stamp duties, inheritance tax and certain special fees.
Cyprus Tax Amnesty: Qualifying Taxpayers
Since the main purpose of the Amnesty is to bring Cyprus taxpayers into full and ongoing compliance with Cyprus tax law, the emphasis is placed on assuring current compliance. This is done through the definition of “qualifying taxpayers” who are the only taxpayers eligible to participate in the Cyprus Tax Amnesty.
Qualifying taxpayers are defined as taxpayers who have been in full tax compliance from the tax year 2016 onwards – i.e. these taxpayers must have filed all of their Cyprus tax returns and paid all of their Cyprus tax liabilities for the tax year 2016 and all of the following tax years.
Cyprus Tax Amnesty is Part of a Trend Amplified by the IRS Offshore Voluntary Disclosure Program
The Cyprus Tax Amnesty is just one more example of the tax amnesty programs which have proliferated around the world in the recent years. This trend was greatly strengthened and really amplified to its current status by the establishment of the 2009 IRS Offshore Voluntary Disclosure Program (“2009 OVDP”). The 2009 OVDP, 2011 OVDI and 2012/2014 OVDPs together with enactment of FATCA have drawn the attention around the world and many countries began to imitate the successes of these US initiatives.
Sherayzen Law Office has helped clients deal with each of these major IRS voluntary disclosure programs as well as other voluntary disclosure options (like the Streamlined Domestic Offshore Procedures and the Reasonable Cause Disclosures). A voluntary disclosure program presents wonderful opportunities to taxpayers to settle their past tax noncompliance. This is why we sympathize with the Cyprus Tax Amnesty and see it as a positive development in the international tax law.

### Specified Domestic Entity: Passive Test | FATCA Form 8938 Lawyer & Attorney
This article is published as part of a long series of articles on the Specified Domestic Entity (“SDE”) Definition. In a previous article, I stated that the term “formed or availed of” consists of two legal tests: the Closely-Held Test and the Passive Test. Since I already explained the general requirements of the Closely-Held Test in another article, I would like to focus today on the Passive Test.
The Passive Test: Background Information
Starting tax year 2016, business entities classified as SDEs may be required to attach Form 8938 to their US tax returns. What entity is considered to be SDE? The answer is found in Treas. Reg. §1.6038D-6(a): “a specified domestic entity is a domestic corporation, a domestic partnership, or a trust described in IRC Section 7701(a)(30)(E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets.”
I already explained in a previous article that “formed or availed of” is a term of art and a requirement that an entity meets two legal tests: the Closely-Held Test and the Passive Test.
The Passive Test: General Requirements
The Passive Test consists of two threshold requirements: the Passive Income Threshold and the Passive Assets Threshold. If one of these Thresholds is satisfied, the Passive Test is met and a business entity would be considered as formed or availed of for the purposes of holding specified foreign financial assets. Let’s explore these two requirements in more detail.
The Passive Test: the Passive Income Threshold
The Passive Income Threshold is satisfied if “at least 50 percent of a corporation's or a partnership's gross income for the taxable year is passive income.” Treas. Reg. §1.6038D-6(b)(1)(ii). The definition of passive income includes:
“(A) Dividends,
(B) Interest;
(C) Income equivalent to interest, including substitute interest;
(D) Rents and royalties, other than rents and royalties derived in the active conduct of a trade or business conducted, at least in part, by employees of the corporation or partnership;
(E) Annuities;
(F) The excess of gains over losses from the sale or exchange of property that gives rise to passive income described in paragraphs (b)(3)(i)(A) through (b)(3)(i)(E) of this section;
(G) The excess of gains over losses from transactions (including futures, forwards, and similar transactions) in any commodity, but not including -
(1) Any commodity hedging transaction described in section 954(c)(5)(A), determined by treating the corporation or partnership as a controlled foreign corporation; or
(2) Active business gains or losses from the sale of commodities, but only if substantially all the corporation or partnership's commodities are property described in paragraph (1), (2), or (8) of section 1221(a);
(H) The excess of foreign currency gains over foreign currency losses (as defined in section 988(b)) attributable to any section 988 transaction; and
(I) Net income from notional principal contracts as defined in § 1.446-3(c)(1).” Treas. Reg. §1.6038D-6(b)(3).
The Treasury Regulations also contain certain exceptions to the definition of passive income (for example, for dealers).
The Passive Test: the Passive Assets Threshold
The Passive Assets Threshold is satisfied if at least 50 percent of the assets held by a corporation or a partnership for the taxable year “are assets that produce or are held for the production of passive income.” Treas. Reg. §1.6038D-6(b)(1)(ii). Such assets are called “passive assets”. Id.
The percentage of passive assets held by a corporation or a partnership during a taxable year is determined based on “the weighted average percentage of passive assets (weighted by total assets and measured quarterly).” Id. This is very similar to the PFIC test.
The regulations allow for two different methods of valuation of the assets for the purpose of the Passive Asset Threshold. The first method is Fair Market Value of the assets. The second method is valuation of assets based on the “book value of the assets that is reflected on the corporation's or partnership's balance sheet.” Id. Surprisingly, both US and an international financial accounting standard are permitted for the purpose of the valuation of assets (usually, only US GAAP is allowed).
Contact Sherayzen Law Office for Professional Help with FATCA Form 8938 Compliance
If you are concerned about whether your entity is required to file Form 8938 or you have any other FATCA-related questions, please contact Sherayzen Law Office for professional help. Sherayzen Law Office is an international tax law firm that specializes in the US international tax compliance, including FATCA Form 8938 compliance. We have helped hundreds of US taxpayers with their FATCA requirements and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Shakira Tax Evasion is Reportedly Investigated by Spain | Tax Law News
On January 23, 2018, the Spanish Newspaper based in Madrid “El País” broke the news that the Colombian Singer Shakira (full name Shakira Isabel Mebarak) is being reportedly investigated by the Spanish tax authorities for tax evasion. Let’s explore the alleged Shakira tax evasion investigation in more detail.
Alleged Shakira Tax Evasion Investigation is Centered Around Spanish Tax Residency
At the core of the alleged investigation of potential Shakira tax evasion lies the concept of tax residency. Under the tax laws of Spain, a person who resides in Spain for at least 183 days during a calendar tax year may generally be considered a Spanish tax resident. As such, he would be required to disclose his worldwide income on a Spanish tax return.
It should be noted (as Sherayzen Law Office has pointed out in the past) that Spain is a very strict tax jurisdiction in many aspects, especially when it comes to tax evasion. In fact, it is the only country in the European Union which has a form similar to the IRS Form 8938 – Spanish Modelo 720.
Alleged Shakira Tax Evasion Investigation: 2011-2014 Tax Residency of Shakira in Question
El País reported that the Spanish tax authorities focused their investigation of Shakira on tax years 2011 through 2014. The singer has claimed that she was resident of the Bahamas at that time. Shakira’s lawyer stated that Shakira lived in several places over the years due to her lifestyle as an international singer and has been in full compliance with tax laws of all relevant jurisdictions.
The tax authorities reportedly reached a different conclusion – that Shakira was a Spanish tax resident during the years 2011, 2012, 2013 and 2014. It is not clear whether the alleged conclusion was arrived at using direct evidence or indirect evidence. El País, for example, stated that the Spanish Tax Agency investigators went to her hairdresser in Spain to establish that Shakira lived in Spain.
It should be pointed out that Shakira officially declared herself as a Spanish tax resident in 2015 due to her marriage with the Spanish soccer player Gerard Pique.
Paradise Papers Could Have Prompted the Investigation of Potential Shakira Tax Evasion
The alleged Shakira Tax Evasion investigation also has an interesting twist. It appears that it could have been prompted by the famous Paradise Papers in November of 2017.
The Paradise Papers is a collection of 13.4 million of files that were stolen from the client files of Appleby Law Firm, a Singapore-based trust company, as well as company registries of nineteen different jurisdictions.
According to the Paradise Papers, Shakira transferred some or all of her intellectual property and trademarks to Tournesol, Ltd., (“Tournesol”) a company registered in Malta in 2009. Shakira is the sole shareholder of this company. Tournesol increased its capital by 31 million euros through an interest-free loan agreement with ACER Entertainment, a related company owned by Shakira and registered in Luxembourg.
Alleged Shakira Tax Evasion Investigation: Potential Penalties
Shakira’s estimated net worth is $200 million. This means that her tax fraud case will involve large numbers, possibly in the millions of dollars.
It appears that if Shakira is found guilty of tax fraud that is in excess of 600,000 euros, she could be facing from two to six years in prison for each count of tax fraud. Moreover, she could be facing a fine of six times the amount of underpaid tax. It should be pointed out that the charges will most likely focus on the years 2012-2014, because 2011 appears to be barred by the Spanish statute of limitations.
Shakira’s celebrity status will not have any impact on the Spanish tax authorities. In fact, she now joined a list of many celebrities who have been investigated by the Spanish Tax Agency, including Lionel Messi and Cristiano Ronaldo.

### Swiss Voluntary Disclosures Rise as Swiss AEOI Compliance Nears
The voluntary disclosures by Swiss taxpayers jumped dramatically in 2017. The most likely reason for the increase is the fact that the Swiss government started to collect information under its numerous Automatic Exchange of Information (“AEOI”) agreements. Let’s analyze in more detail this connection between the Swiss voluntary disclosures and the Swiss AEOI Compliance.
Swiss AEOI Compliance: Increase in Swiss Voluntary Disclosures
The increase in Swiss voluntary disclosures between 2015 and 2017 is undeniable. The Swiss said approximately 350,000 voluntary declarations were made in 2016, compared to 328,000 in 2015. While the numbers for 2017 for the entire country are not available, we can extrapolate the 2017 numbers based on the canton of Zurich.
On January 4, 2018, the canton of Zurich reported that there were almost three times as many of voluntary disclosures of unreported assets by Swiss taxpayers in 2017 than in 2016. A total of 6,150 voluntary disclosures were submitted in 2017 whereas only 2,100 voluntary disclosures were made in 2016. The disclosures brought in about 104 million Swiss francs of additional tax income in 2017; the 2016 number was only 85 million Swiss francs.
The Swiss government also stated that the 2017 voluntary disclosures concerning ownership of real estate in Italy, Portugal and Spain were especially high.
Swiss AEOI Compliance Has a Direct Impact on Swiss Voluntary Disclosures
The connection between Swiss AEOI compliance and the increase in the voluntary disclosures is obvious. In fact, the cantonal government of Zurich directly stated that it attributed the jump in voluntary disclosures to the Swiss AEOI agreements, especially those related to the EU countries.
Already in 2017, the Swiss government started collecting financial information about Swiss taxpayers in order to turn it over to its partner jurisdictions under the Swiss AEOI agreements. The exchange of information under the Swiss AEOI compliance obligations is scheduled to begin in the fall of 2018 for the calendar year 2017 and 2019 for the calendar year 2018.
The Swiss AEOI compliance obligations are very broad due to the fact that Switzerland signed AEOI agreements with 53 jurisdictions already, including the European Union. The European Union is considered to be a single jurisdiction even though it consists of twenty-eight countries. The EU-Switzerland AEOI agreement was approved by the Swiss Parliament in 2016.
The Connection Between Swiss AEOI Compliance and FATCA
As Sherayzen Law Office has repeatedly pointed out in the past, the passage of FATCA in the United States has completely changed the international tax landscape concerning international information exchange with respect to foreign accounts and other foreign assets. In fact, FATCA and the DOJ Program for Swiss Banks have completely destroyed the vaulted Swiss bank privacy laws (though, the 2008 UBS case made the first hole in this bastion of offshore privacy).
After seeing the success of FATCA with respect to US tax compliance, the rest of the world joined the party. The new Common Reporting Standard or CRS was the OECD’s response to FATCA with an ambition to force even more transparency than required by FATCA and making this transparency apply to the United States. The US government refused to join CRS, but it did not prevent the CRS into growing in as important of an international tax compliance standard as FATCA.
Additionally, the enforcement of FATCA had another side-effect: a rapid proliferation of the AEOI agreements, both bilateral and multilateral. The new web of AEOI agreements is growing larger with the passage of time forcing an ever greater international tax transparency. The recent Swiss AEOI compliance is just the latest example of this trend.
Will we ever see a reversal of this trend? It is a real possibility, but it is unlikely that it will be able to destroy the legal groundwork for greater tax transparency that has been laid out by FATCA, CRS and the AEOI agreements.

### IMF Wants “Modern” Croatian Real Estate Tax | Tax Lawyer News
On January 16, 2018, the International Monetary Fund (“IMF”) released its 2017 Article IV consultation notes with respect to Croatia. Among its recommendations is the introduction of a modern Croatian Real Estate Tax.
Croatian Real Estate Tax: IMF assessment of Croatian Economy
The IMF began on the positive note stating that, in 2017, Croatia continued its third year of positive economic growth, mostly supported by tourism, private consumption, trade partner growth and improved confidence. The IMF also noted that the fiscal consolidation was progressing at a much faster pace than originally anticipated with Croatia leaving the European Union’s Excessive Deficit Procedure in June of 2017. The international organization made other positive comments, particularly stressing that Croatia was overcoming its Agrokor crisis.
Then, the IMF turned increasingly negative. It first noted that, while the balance risks has improved, it was not satisfied with the high level of Croatian public and external debt levels. Then, it stated that the full impact of the Agrokor restructuring is not yet known. The IMF was also unhappy about the pace of structural reforms since 2013 (when Croatia became a member of the EU), further stating that Croatia’s GDP per capita stood at about 60% of the EU average and Croatian business environment remained less favorable than that of its peers.
Finally, the IMF expressed its concerns over the fact that the output did not recover from its pre-recessing level and stated that, in the medium-term, the Croatia’s economic growth is expected to decelerate. Hence, the IMF emphasized that Croatia needed to do more to improve its economic prospects.
Croatian Real Estate Tax: IMF Recommendations
What precisely does Croatia need to do in the IMF opinion? Mainly reduction of public debt.
How does the IMF recommend that Croatia accomplish this task? The IMF made a number of proposals that can be consolidated into five courses of action. First, enhance the efficiency of public services by streamlining public services. Second, keep the wages low and reform the welfare state policies (here, it probably means either slashing the state benefits or privatizing them). Third, relaxing the labor regulations, particularly in the areas of hiring and temporary employment. Fourth, enhancement of legal and property rights. Finally, improvement of the structure of revenue and expenditure.
This last enigmatic phrase is the keyword for reducing the expenses and the introduction of new taxes. In particular, the IMF wants to see an introduction of a modern Croatian real estate tax.
What is a “Modern” Croatian Real Estate Tax According to IMF
The IMF defined a “modern” Croatian real estate tax as a “real estate tax that is based on objective criteria” and the one that “would be more equitable and would yield more revenue than the existing communal fees.” The idea is that “a modern more equitable property tax could allow for a reduction of less growth-friendly taxes.” In fact, the additional revenue derived from this tax “could compensate for a further reduction in the income tax burden, the parafiscal fees, or even VAT.”
It should be noted that the Croatian government already listened to the IMF and tried to impose a Croatian real property tax starting January of 2018, but the implementation of the law was suspended in light of strong public opposition.
Sherayzen Law Office will continue to monitor the situation.

### Form 8938 Filing Thresholds | FATCA Tax Lawyer and Attorney Update
Form 8938 is one of the most important US international tax forms with its own sophisticated penalty structure. Hence, taxpayers should strive to understand when they are required to file the form. In this context, I would like to focus in this essay on the Form 8938 Filing Thresholds.
General Relevant Criteria in the Determination of the Form 8938 Filing Thresholds
There are three most relevant criteria for determining the Form 8938 filing threshold that may apply to a taxpayer: (1) whether the taxpayer is a Specified Individual or a Specified Domestic Entity; (2) the taxpayer’s tax return filing status; and (3) whether the taxpayer resides in the United States or outside of the United States.
I have already described in other articles the criteria for determining whether a taxpayer is a Specified Individual or a Specified Domestic Entity. Hence, for the purposes of this essay, I will assume that the taxpayer satisfies the requirements of one of these categories. Therefore, I will focus solely on the Form 8938 filing thresholds based the filing status and the place of residence.
Form 8938 Filing Thresholds for Unmarried Taxpayers
If a taxpayer files his US tax returns with an unmarried filing status (i.e. “single” or “head of household”) and resides in the United States, he will satisfy the Form 8938 reporting threshold if the total value of the taxpayer’s Specified Foreign Financial Assets (“SFFA”) is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
If the unmarried taxpayer resides outside of the United States, then the values would go up to more than $200,000 on the last day of the tax year or more than $300,000 at any time during the tax year.
Form 8938 Filing Thresholds for Taxpayers Whose Filing Status is “Married Filing Jointly”
If a taxpayer files his US tax returns as “married filing jointly” and resides in the United States, he will satisfy the Form 8938 reporting threshold if the total value of his SFFA exceeds $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year. If this taxpayer resides outside of the United States, then the Form 8938 reporting thresholds will increase to more than $400,000 on the last day of the tax year or more than $600,000 at any time during the tax year.
Form 8938 Filing Thresholds for Taxpayers Whose Filing Status is “Married Filing Separately”
If a taxpayer files his US tax returns as “married filing separately”, then his Form 8938 reporting thresholds are going to be the same as those of an unmarried taxpayer.
Form 8938 Filing Thresholds for Specified Domestic Entities
Finally, a Specified Domestic Entity has the same Form 8938 Filing Thresholds as those of an unmarried taxpayer who resides in the United States – i.e. SFFA value must be more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.
Contact Sherayzen Law Office for Professional Help With Form 8938
If you were required to file Forms 8938 in the previous years and you have not done so, you may be subject to Form 8938 penalties. In order to avoid or mitigate your Form 8938 penalties, you need to explore your offshore voluntary disclosure options as soon as possible.
Sherayzen Law Office can help You! We are an international tax law firm that specializes in offshore voluntary disclosures of unreported foreign assets and foreign income. We have successfully helped clients from close to 70 countries. You can be next!
Contact Us Today to Schedule Your Confidential Consultation!

### 2018 Government Shutdown is the IRS Nightmare | IRS Lawyer & Attorney
A government shutdown is always bad for the normal functioning of federal agencies, but the 2018 government shutdown spells disaster for the IRS, especially if it lasts for a significant amount of time.
2018 Government Shutdown Comes at the Worst Time for the IRS
What makes the current 2018 government shutdown so bad is the timing. The shutdown comes just nine days before the tax season begins. For the IRS, the tax season is always the busiest time of the year.
Moreover, this year, the shutdown also comes right after a huge tax reform passed. Many of the provisions of the Tax Cuts and Jobs Act of 2017 still need to be implemented, the IRS software needs to be adjusted and the employees at the Call Centers need to be prepared to answer the questions of millions of Americans about the new tax laws.
2018 Government Shutdown Comes After Years of Budget Cuts
The 2018 government shutdown also comes after many years of the IRS budget cuts. Since 2010, the IRS lost more than $900 million in funding, eliminated 18,000 full-time positions and had to implement hiring freezes. Moreover, many IRS veterans are now retiring without being able to train proper replacement. This means that the IRS is gradually losing its best, highly-knowledgeable and experienced cadres – professionals who know how to enforce tax laws in an equitable manner. This unfortunate circumstance will inevitably have a profound impact on IRS ability to properly implement US tax laws in the future.
It is not only the professionals that the IRS is losing. The long years of budget cuts dramatically reduced the IRS ability to staff its call centers. Even before the shutdown, the IRS projected that, with its current budget, it will only be able to answer at best four calls out of every ten – i.e. the IRS said that it could answer only 40% of the calls, leaving 60% of Americans without any assistance.
Furthermore, the budget cuts came at a time when there was an unprecedented explosion of new tax laws, domestic and international, which have created an enormous demand for more IRS employees. The Tax Cuts and Jobs Act of 2017 is just the latest example of these new laws.
So far, the IRS has been able to more or less survive by cutting everything it could in the non-essential areas and relying on new technology to save costs. However, it does not appear that this is a sustainable situation in the future.
2018 Government Shutdown: Immediate Impact
The most immediate impact of the 2018 government shutdown will be the fact that only 43.5% of IRS employees will be coming to work on next week. 56.5% of the IRS workforce will be forced to stay at home.
While the IRS will continue to do “excepted activities” such as processing 2017 tax returns (this is a matter of life and death for the federal government), a number of its functions will be suspended.
Here is the list of the most common examples of the suspended activities: issuing refunds, processing of amended tax returns (Forms 1040X), conducting any audits or examinations, processing of non-electronic tax returns that do not include remittances, non-automated collections, legal counsel, planning, research, training, all development activities, most information systems functions, headquarters and administrative functions not related to the safety of life and protection of property, service center processing after the point of batching (i.e. Code & Edit, data transcription, error resolution, un-postables) and other activities. With respect to offshore voluntary disclosures, they are not likely to be processed while the government shutdown continues.
At this point, we can only wish that the government shutdown be over as soon as possible to minimize the negative impact it may have on the IRS, our nation and our fellow citizens.
Sherayzen Law Office will continue to monitor the situation.

### Specified Domestic Entity Form 8938 Filing Threshold | FATCA Lawyer
The Specified Domestic Entity Form 8938 filing threshold is likely to be very easily satisfied by the majority of Specified Domestic Entities. With the major tax return filing deadlines just two or three months away (depending on whether an entity is a corporation, a partnership or a trust), every Specified Domestic Entity must assess whether it is required to file FATCA Form 8938. Failure to do so may result in imposition of Form 8938 penalties by the IRS.
Specified Domestic Entity Form 8938 Filing Threshold
For tax years beginning after December 31, 2015, a Specified Domestic Entity must file Form 8938 if the total value of its Specified Foreign Financial Assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year. This is an incredibly low Specified Domestic Entity Form 8938 filing threshold that pretty much means that virtually all Specified Domestic Entities will have to file a Form 8938.
Transition Years Are Most Dangerous
Transition tax years 2016, 2017 and 2018 are likely to be the most dangerous for Specified Domestic Entities. Since the Specified Domestic Entity Form 8938 filing threshold is very low and the awareness of the Specified Domestic Entity Form 8938 filing obligation is limited to a small number of specialized tax professionals, there can be no doubt that many Specified Domestic Entities will fail to comply with their Form 8938 filing obligations and may face steep Form 8938 penalties.
Contact Sherayzen Law Office for Help with the Specified Domestic Entity Form 8938 Filing Obligations
If your business or a trust is classified as a Specified Domestic Entity and your entity failed to file FATCA Form 8938,  contact Sherayzen Law Office for professional help. Our international tax law firm specializes in helping business and individuals with their US international tax compliance requirements, including Form 8938, and with their offshore voluntary disclosures involving a Form 8938.
Contact Us today to Schedule Your Confidential Consultation!

### Home Equity Tax Deduction Eliminated in 2018 | Tax Lawyers News
The Home Equity Tax Deduction used to be one of the most common deductions used by US taxpayers. The Tax Cuts and Jobs Act of 2017 eliminated this deduction. Let’s take a brief look at the Home Equity Tax Deduction and what its elimination may mean for your US tax return.
Home Equity Tax Deduction: What are Home Equity Loans and Home Equity Lines of Credit?
A Home Equity Loan is a loan which uses the borrower’s equity in his home as a collateral for the loan.
A Home Equity Line of Credit or HELOC is a loan in which a lender agrees to lend a certain amount of funds to the borrower who uses his equity in his home as a collateral. HELOC is different from a conventional home equity loan because the borrower does not receive the entire amount of the credit up front, but uses a line of credit to borrow funds as needed (but not to exceed the credit limit). HELOC is very similar to a credit card, but it is backed-up by the borrower’s real estate.
Home Equity Tax Deduction as of 2017
Prior to the Tax Cuts and Jobs Act of 2017, homeowners who took out home equity loans could deduct from their adjusted gross income (on Schedule A) the interest on a Home Equity Loan or HELOC up to $100,000. This was called the Home Equity Tax Deduction.
Home Equity Tax Deduction Eliminated Starting Tax Year 2018
As a result of the 2017 tax reform (the Tax Cuts and Jobs Act of 2017), the Home Equity Tax Deduction was completely eliminated. In fact, the deduction was eliminated for both, new and existing borrowers (unlike the home mortgage deduction).
Home Equity Tax Deduction Elimination May Impact 2018 Individual Tax Returns
While the precise tax impact of the elimination of the Home Equity Tax Deduction may vary based on your precise tax situation, it can be reasonably supposed that the end of this deduction may result in a larger amount of taxpayers taking standard deduction rather than trying to itemize their deductions. This will be especially true since, in 2018, the standard deduction will double in size.

### Specified Domestic Entity: Closely-Held Test | 8938 Lawyer & Attorney
In a previous article, I introduced the key term of the Specified Domestic Entity (“SDE”) Definition for corporations and partnerships that may be required to file FATCA Form 8938: “formed or availed of”. At that point, I stated that this term required that a business entity satisfies two legal tests. One of these tests is a Closely-Held Test.
Closely-Held Test: Background Information
Starting tax year 2016, certain business entities and trusts that are classified as SDEs may be required to file Form 8938 with their US tax returns. Treas. Reg. §1.6038D-6(a) states that “a specified domestic entity is a domestic corporation, a domestic partnership, or a trust described in IRC Section 7701(a)(30)(E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets.”
In a previous article, I discussed the fact that “formed or availed of” is a term of art which has no relationship to the actual finding of intent. Rather, in the context of corporations and partnerships, the “formed or availed of” requirement is satisfied if two legal tests are met. One of these tests is a Closely-Held Test, which is the subject of this article.
Closely-Held Test: General Requirements
In order to meet the closely-held test, a corporation or partnership must be closely held by a specified individual. There are two separate parts of this test that need to be analyzed: (a) who is considered to be a specified individual, and (b) what percentage of ownership meets the “closely held” requirement.
Closely-Held Test: Specified Individual
In another article, I already defined the concept of a Specified Individual. It is, however, worth re-stating the definition here again for convenience purposes. Treas. Reg. §1.6038D-1(a)(2) defines Specified individual as anyone who is: (I) US citizen; (ii) resident alien of the United States for any portion of the taxable year; (iii) nonresident alien for whom an election under 26 U.S.C. §6013(g) or (h) is in effect; or (iv) nonresident alien who is a bona fide resident of Puerto Rico or a section 931 possession.
Closely-Held Test: Ownership Percentage for Corporations and Partnerships
The ownership requirement of the Closely-Held Test is explained in Treas. Reg. §1.6038D-6(b)(2) with respect to both, corporations and partnerships. A domestic corporation is considered to be “closely held” if “at least 80 percent of the total combined voting power of all classes of stock of the corporation entitled to vote, or at least 80 percent of the total value of the stock of the corporation, is owned, directly, indirectly, or constructively, by a specified individual on the last day of the corporation's taxable year.” Treas. Reg. §1.6038D-6(b)(2)(I).
A domestic partnership is “closely held” if “at least 80 percent of the capital or profits interest in the partnership is held, directly, indirectly, or constructively, by a specified individual on the last day of the partnership's taxable year.” Treas. Reg. §1.6038D-6(b)(2)(ii).
It is important to emphasize that the 80% threshold is met not only through direct ownership, but also through indirect and constructive ownership. So, one must closely look at the attribution rules of 26 U.S.C. §267 to determine whether the Closely-Held Test is met. Moreover, the constructive ownership rules for the purposes of the Closely-Held Test also contain an additional provision for the addition of spouses of individual family members.
Contact Sherayzen Law Office for Experienced Help with US International Tax Compliance Requirements for Corporations and Partnerships
If you are a minority or a majority owner of a corporation or partnership that either operates outside of the United States or has foreign assets, contact Sherayzen Law Office for professional help with US international tax compliance requirements. Our firm specializes in the are of US international tax law. We can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Specified Domestic Entity: Formed or Availed Of | FATCA Lawyer & Attorney
We are continuing our series of articles on the Specified Domestic Entity definition. In previous articles, I already explained what entities are considered to be domestic and what kind of foreign assets are included in the Specified Foreign Financial Assets. In this article, I would like to introduce the key part of the definition of a Specified Domestic Entity: formed or availed of.
Due to the fact that there is a significant difference in treatment of trusts versus business entities (partnerships and corporations), I will analyze these two types of entities separately. In this article, I will focus solely on introducing the concept of Formed or Availed Of as it applies to partnerships and corporations.
Formed or Availed Of: Context
It is first useful the remember the context in which the clause “Formed or Availed Of” arises.  Treas. Reg. §1.6038D-6(a) defines a Specified Domestic Entity as “a domestic corporation, a domestic partnership, or a trust described in 26 U.S.C. §7701(a)(30)(E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets” (italics added).
Thus, the concept of “formed or availed of” is the key part to the definition of a Specified Domestic Entity.
Formed or Availed Of: Main Legal Test
It may seem to a person unfamiliar with Form 8938 that Formed or Availed Of concept implies some sort of a factual finding of intent. This first impression is not correct.
On the contrary, Formed or Availed Of concept has nothing in common with the actual intent of the parties who formed the business entity. Rather, the IRS established a very specific legal test to determine if a business entity is formed or availed of for purposes holding specified foreign financial assets.
The Formed or Availed Of Test is in reality a combination of two legal tests found in Treas. Reg. §1.6038D-6(b). An entity is considered to be formed or availed of for purposes of holding specified foreign financial assets if: (1) the corporation or the partnership is closely held (the “Closely-Held Test”), AND (2) the corporation or the partnership meets the Passive Income or Passive Assets threshold requirement (the “Passive Test”). See Treas. Reg. §1.6038D-6(b). Please, note that both tests need to be satisfied in order for a business entity to be considered as formed or availed of for purposes of holding specified foreign financial assets.
In future articles, I will explore the Closely-Held Test and the Passive Test in more detail.
Contact Sherayzen Law Office for Professional Help Concerning US International Tax Compliance Requirements for Owners of US and Foreign Businesses
If you are an owner of a foreign business or a US domestic business which owns assets overseas, contact Sherayzen Law Office for professional help concerning relevant US tax compliance requirements. We have helped US business owners around the world, and We can Help You!
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### Specified Individual | FATCA International Tax Lawyers and Attorneys
Specified Individual is a key tax term that must be correctly understood in order to properly identify the persons who are required to file FATCA Form 8938. In this brief article, I will describe the general definition of a Specified Individual for Form 8938 purposes.
Specified Individual: FATCA Form 8938 Background
In 2010, one of the most important events in modern history of US taxation happened – the passage and signing of the Foreign Account Tax Compliance Act or FATCA. FATCA completely revolutionized the entire landscape of international tax law, elevating the international exchange of tax-related and account-related information to an unprecedented level. FATCA also created a brand-new requirement called Form 8938.
Form 8938 requires US taxpayers to report to the IRS their Specified Foreign Financial Assets (“SFFA”) together with the taxpayers’ US tax returns. Prior to tax year 2016, only a Specified Individual was required to report his SFFA to the IRS. Starting tax year 2016, a Specified Domestic Entity is also required to disclose its SFFA on Form 8938.
Specified Individual Definition
Treas. Reg. §1.6038D-1(a)(2) defines a “specified individual” as anyone who is: (I) US citizen; (ii) resident alien of the United States for any portion of the taxable year; (iii) nonresident alien for whom an election under 26 U.S.C. §6013(g) or (h) is in effect (i.e. nonresident alien who makes an election to be treated as a resident alien in order to file a joint US tax return); or (iv) nonresident alien who is a bona fide resident of Puerto Rico or a section 931 possession (as defined in Treas. Reg. §1.931-1(c)(1) – i.e. Guam, American Samoa and Northern Mariana Islands).
Resident alien includes anyone who is a US permanent resident or meets the substantial presence test.
Contact Sherayzen Law Office for Help With Form 8938 If You Are a Specified Individual
If you are a specified individual who has undisclosed foreign accounts or any other SFFA, contact Sherayzen Law Office as soon as possible to explore your offshore voluntary disclosure options. Sherayzen Law Office is a highly experienced international tax law firm that specializes in offshore voluntary disclosures, including Streamlined Compliance Procedures (both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures), Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause (so-called Noisy) Disclosures.
We have helped hundreds of US taxpayers all around the globe to bring their US tax affairs into full compliance with US tax laws, and We can Help You! Contact Us Today to Schedule Your Confidential Consultation!

### Specified Domestic Entity: Domestic Entity | FATCA Lawyer & Attorney
This is the second article from the series of articles concerning the definition of a Specified Domestic Entity. Today, I will explore what business entities are considered to be “Domestic”.
Specified Domestic Entity Background Information
Specified Domestic Entity is a new category of FATCA Form 8938 filers. Under FATCA, Form 8938 has to be filed with a US taxpayer’s tax return in order to report his Specified Foreign Financial Assets (“SFFA”). Prior to tax year 2016, Form 8938 was applicable only to individual US taxpayers. Starting tax year 2016, however, Specified Domestic Entities are required to file Form 8938 as long as the total value of their SFFA meets the filing threshold.
Definition of a Domestic Entity for the Purposes of FATCA Form 8938
For the purposes of FATCA Form 8938, whether a corporation or a partnership is considered “domestic” is determined under the general definition found in 26 U.S.C. §7701(a)(4): “the term ‘domestic’ when applied to a corporation or partnership means created or organized in the United States or under the law of the United States or of any State unless, in the case of a partnership, the Secretary provides otherwise by regulations.” Thus, while the definition of a domestic corporation is fairly straightforward, it is not always the case with respect to domestic partnerships.
It should also be remembered that an LLC is never taxed as an LLC under the US tax law. Rather, LLC can be taxed either as a partnership or a corporation; it can also be treated as a disregarded entity if there is only one owner of the LLC and the LLC never elected to be taxed as a corporation.
A trust is considered to be a “domestic trust” if it meets the 26 U.S.C. §7701(a)(30)(E). The tests under this section of the Internal Revenue Code (IRC) can be fairly complex and may require additional analysis (see this article for further analysis).
Contact Sherayzen Law Office for Professional Help With FATCA Form 8938
If you need help with the FATCA Form 8938 compliance (including the definition of a Specified Domestic Entity), contact Sherayzen Law Office for professional help. Our experienced international tax team, headed by international tax attorney Eugene Sherayzen, Esq., will thoroughly analyze your case, determine whether you need to file Form 8938 and any other US international information returns, and prepare these forms for you. We can also help you with the voluntary disclosure of any of your offshore assets if you did not timely comply with your US tax obligations with respect to these assets.
Contact Us Today to Schedule Your Confidential Consultation!

### Treasury List of Boycott Countries Published | Tax Lawyer & Attorney
On January 8, 2018, the US Treasury Department published a list of boycott countries. Let’s analyze what is meant here by Boycott Countries.
Boycott Countries: The Meaning of Boycott Under IRC Section 999(b)(3)
IRC Section 999(a)(3) requires the Department of the Treasury to publish (at least on a quarterly basis) a current list of countries which require or may require participation in or cooperation with an international boycott. IRC Section 999(b)(3) defines “boycott participation and cooperation”.
Basically, the cooperation with an international boycott requires a person to agree:
“(i) to refrain from doing business with or in a country which is the object of the boycott or with the government, companies, or nationals of that country;
(ii) to refrain from doing business with any United States person engaged in trade in a country which is the object of the boycott or with the government, companies, or nationals of that country;
(iii) to refrain from doing business with any company whose ownership or management is made up, all or in part, of individuals of a particular nationality, race, or religion, or to remove (or refrain from selecting) corporate directors who are individuals of a particular nationality, race, or religion; or
(iv) to refrain from employing individuals of a particular nationality, race, or religion; or
(B) as a condition of the sale of a product to the government, a company, or a national of a country, to refrain from shipping or insuring that product on a carrier owned, leased, or operated by a person who does not participate in or cooperate with an international boycott (within the meaning of subparagraph (A)).” IRC Section 999(b)(3)
List of Boycott Countries
The following countries were placed on the boycott list by the Department of the Treasury as of January 2, 2018: Iraq, Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, United Arab Emirates, Yemen

### Disclosure of Swiss Bank Staff Details to the IRS Blocked by Swiss Court
On January 3, 2018, a decision of the Swiss Federal Court (the nation’s highest court) dated December 18, 2017, was published, prohibiting automatic disclosure of the Swiss bank staff details to the IRS and the US DOJ. Let’s analyze this decision in more detail.
Disclosure of Swiss Bank Staff Details: History of the Case
The lawsuit decided in 2017 is not the first time that the Swiss Federal Court is placing limits on the IRS ability to obtain information from Switzerland with respect to Swiss citizens. Already in 2016, the Court ruled that a Swiss bank could not disclose to the US authorities the names of financial advisers who helped US taxpayers set up secret Swiss bank accounts (“facilitators”). The reasoning was based on the inadequate level of data protection in the United States which is far below the Swiss Data Protection Act.
It should be emphasized, however, that in the same opinion, the Court also said that the names of facilitators could be disclosed to the US government despite the data protection concerns if the failure to do so would deepen the legal dispute between Switzerland and a the United States and harm the Swiss reputation as a financial center.
The lawsuit with respect to disclosure of Swiss bank staff details was initiated by an unnamed US taxpayer who lived in Switzerland. He filed a lawsuit to prevent the Swiss equivalent of the IRS, the Federal Tax Administration (“FTA”) from disclosing to the US government the name of third parties who were involved or might have been involved with his financial affairs. The lower Swiss court agreed with the taxpayer.
Automatic Disclosure of Swiss Bank Staff Details to the IRS Prohibited
The Swiss Federal Court also partially agreed with the unnamed US taxpayer, stating that FTA could not automatically turn over to the US government the names of Swiss bankers and others who might have helped US tax residents in evading their US tax reporting obligations. The reasoning behind the decision was based on relevance.
Basically, the Court stated that the Swiss bank staff details in this particular case were not necessary to the US government to prove its tax evasion case against the unnamed US account holder. “What is needed . . . is information about the existence and intervention of these third parties, not their identities,” the Court said.
The Court basically stated that administrative assistance requests should not be used for indirect purposes. In other words, the IRS cannot use such requests “in order to obtain information about the identities of alleged accomplices of the taxpayer . . . that could be subject to criminal prosecution if this information is not relevant to elucidate the tax situation of the same taxpayer.”
Obviously, this reasoning does not offer any decisive protection for Swiss bank staff details. It appears that, if the information would have been necessary for the US tax authorities to prove its tax evasion case, the transfer of Swiss Bank Staff details would have been permitted. Additionally, the decision might have come in a bit late as hundreds of documents with the Swiss bankers’ names have already been turned over to the IRS.
Swiss Bank Staff Case Offers No Protection to US Taxpayer’s Data Transfer
Moreover, the Court’s decision offered no hope for blocking the transfer of US taxpayers’ information. While the Court blocked the transfer of the Swiss bank staff details, it still allowed the FTA to provide to the US government the US account holder’s information. This means that the transfer of data concerning US tax residents from Switzerland to the United States will continue unimpeded.
Swiss Bank Staff Case Offers Insight Into IRS’ Next Target in Switzerland
This case also offers a good insight into the current IRS strategy concerning Switzerland. It appears that the IRS is compiling statistics concerning Swiss bank staff who might have helped US taxpayers evade their US tax reporting obligations. Most likely, the focus is on the bankers who provided this help regularly to a large amount of US taxpayers.
Sherayzen Law Office will continue to observe the IRS latest moves in Switzerland.

### Toledo Tax Lawyer and Attorney | Ohio Tax Lawyers
A Toledo Tax Lawyer who specializes in international tax law does not necessarily have to be a tax lawyer who actually resides in Toledo. An international tax lawyer who offers US international tax law services to residents of Toledo, Ohio, may also be considered a Toledo Tax Lawyer. Let’s analyze a bit deeper why this is the case.
Toledo Tax Lawyer Definition: Offering International Tax Services to Residents of Toledo
Of course, the definition of a Toledo Tax Lawyer includes all tax lawyers who are physically located in Toledo, Florida, and offer their tax services there.
With respect to US international tax law, however, the definition of a Toledo Tax Lawyer expands to encompass all international tax lawyers who offer services to residents of Toledo, Ohio.
The reason for such an expansion in the definition of Toledo Tax Lawyer lies in the nature of US international tax law. Unlike many other areas of law which are predominantly local in nature (such as local contracts, torts, criminal law, et cetera), US international tax law is federal law which is applied equally to the residents of all states of the United States. In other words, there is nothing local about it; the city of Toledo cannot in any way modify US international tax law.
Hence, an international tax lawyer residing in Minneapolis, such as attorney Eugene Sherayzen of Sherayzen Law Office, Ltd., has the same right to offer international tax law services to residents of Toledo as a lawyer who lives in Toledo.
Toledo Tax Lawyer Definition: Local Tax Law
It is important to distinguish, however, a tax lawyer who offers US international tax services from a tax lawyer who offers his services with respect to local tax law. In the first case, as I had mentioned before, the lawyer may call himself a Toledo Tax Lawyer as long as he offers international tax services to residents of Toledo (even though he is not residing in Toledo or anywhere else in the State of Ohio).
In the second case, however, an out-of-state lawyer cannot be classified as a Toledo Tax Lawyer, because he is working on local Toledo or Ohio state tax issues. In fact, in this case, it would best for local taxpayers to retain a local Toledo Tax Lawyer who resides in Toledo, Ohio.
Sherayzen Law Office is Your Preferred Choice for Toledo Tax Lawyer With Respect To US International Tax Issues
Sherayzen Law Office is a highly experienced international tax law firm which specializes in the area of foreign account tax compliance. We have been helping our clients worldwide with their international tax issues, including FBAR, FATCA and Offshore Voluntary Disclosure issues since the end of 2005. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Tampa Foreign Accounts Lawyer and Attorney | Florida Tax Lawyers
Tampa Foreign Accounts Lawyer is an interesting specialty among international tax lawyers who offer their foreign account tax compliance services to residents of Tampa, Florida. The term Tampa Foreign Accounts Lawyer does not simply refer to a lawyer who is physically located in Tampa, but also covers lawyers who reside outside of Tampa. Let’s explore why international tax lawyer Eugene Sherayzen of Sherayzen Law Office, Ltd., can be considered a Tampa Foreign Accounts Lawyer.
Tampa Foreign Accounts Lawyer Definition: Foreign Account Tax Compliance Services Offered to Residents of Tampa Florida
Obviously, the definition of a Tampa Foreign Accounts Lawyer includes all FBAR lawyers who are physically located in Tampa, Florida, and offer their tax services there. However, this definition also includes every international tax lawyer who offers out-of-state foreign account tax services to residents of Tampa.
Why is this the case? The answer is simple - it is the federal tax law, not local law, that requires foreign account tax compliance (with the exception of a few states like New York and California; the main requirements, however, come from federal tax law). This means that an international tax lawyer licensed to practice anywhere in the United States is qualified to help residents of Tampa with their US tax compliance requirements concerning foreign accounts (such as FBAR and FATCA Form 8938).
Tampa Foreign Accounts Lawyer Definition: Knowledge of US International Tax Law is Required
Having stated the definition of a Tampa Foreign Accounts Lawyer so broadly, I do not mean to imply that any lawyer can offer foreign account tax compliance services to Tampa residents. On the contrary, in order to help his clients, a Tampa Foreign Accounts Lawyer must be an international tax attorney who specializes in the area of foreign accounts tax compliance. Otherwise, the lawyer simply would not have the required expertise to practice in this area of law.
Tampa Foreign Accounts Lawyer: Modern Technologies Eliminated the Advantages of Hiring a Local Lawyer
There is still some hesitance on part of many taxpayers to retain the services of an out-of-state tax lawyer. This hesitance comes from a false myth that working with a local attorney is more convenient.
This myth is false for two reasons. First, the development of modern means of communication has completely resolved the communication problems of the past. Email, Video Skype Conferences, telephone and text messages make your out-of-state Tampa Foreign Accounts Lawyer as equally accessible as your local Tampa Foreign Accounts Lawyer.
Second, in reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail.
Sherayzen Law Office is Your Preferred Choice for Your Tampa Foreign Accounts Lawyer
Sherayzen Law Office is a highly experienced international tax law firm which specializes in the area of foreign account tax compliance. We have been helping our clients worldwide with their FBAR and FATCA issues for a very long time; in fact, we are one of the few firms which advised clients with respect to all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP closed and Streamlined Submission Procedures (Domestic and Foreign). We can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Ireland-Kazakhstan Tax Treaty Ratified | International Tax Lawyer News
On December 29, 2017, the President of Kazakhstan Nazarbayev signed the law for the ratification of the Ireland-Kazakhstan Tax Treaty for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.
History of the Ireland-Kazakhstan Tax Treaty
The Ireland-Kazakhstan Tax Treaty was originally signed in Astana on April 26, 2017. Ireland already ratified the treaty through Statutory Instrument 479 on November 10, 2017. By ratifying the treaty on December 29, 2017, Kazakhstan completed the process for the treaty ratification on the part of Kazakhstan.
The Ireland-Kazakhstan Tax Treaty will enter into force once the ratification instruments are exchanged. The provisions of the Treaty will apply from January 1 of the year following its entry into force. The Treaty is the first tax treaty between Ireland and Kazakhstan.
Taxes Covered by the Ireland-Kazakhstan Tax Treaty
The Ireland-Kazakhstan Tax Treaty will apply to the following taxes. With respect to Ireland, the Treaty will apply to the income tax, the universal social charge, the corporation tax and the capital gains tax. For Kazakhstan, it will apply to the corporate income tax and the individual income tax. Identical or substantially similar taxes imposed by either state after the Treaty was signed are also covered by the Treaty.
Main Provisions of the Ireland-Kazakhstan Tax Treaty
Here is an overview of the most important provisions. Obviously, this is a very general description for educational purposes only, and it cannot be relied upon as a legal advice; you should contact a licensed attorney in Ireland or Kazakhstan for legal advice.
Article 4 of the Ireland-Kazakhstan Tax Treaty defines the meaning of the term “resident”. It should be noted that the Treaty applies only to Irish and Kazakh residents (see Article 2 of the Treaty).
Article 5 defines the term Permanent Establishment.
Article 6 states that income from the “immovable” property (i.e. real estate) is subject to taxation in a country where it is located. This includes business real estate. This provision, of course, does not exempt the owner of the real estate from the obligation to also pay taxes in his home country.
Article 7 deals with business profits. It states that “the profits of an enterprise of a Contracting State shall be taxable only in that Contracting State unless that enterprise carries on business in the other Contracting State through a permanent establishment situated therein.” In the latter case, “the profits of the enterprise may be taxed in the other Contracting State but only so much of them as is attributable to that permanent establishment.”
Article 8 states that “profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that Contracting State.”
Article 9 deals with Associated Enterprises.
Article 10 establishes the maximum tax rates for dividends. In general, dividends should be taxed at a maximum rate of 5% if the beneficial owner is a company (other than a partnership) that directly holds at least 25 percent of the capital of the payer company; in all other cases, the tax rate should be no more than 15%.
Articles 11 and 12 establish the maximum tax withholding rate of 10% for interest and royalties respectively.
Articles 13 - 22, 24 and 25 deal with capital gains, employment income, director fees and certain special cases.
Article 23 establishes the usage of foreign tax credit to eliminate double-taxation under the Treaty.
Information Exchange and Tax Enforcement under the Ireland-Kazakhstan Tax Treaty
The Ireland-Kazakhstan Tax Treaty contains fairly strong provisions on the information exchange and tax enforcement. Article 26 provides for exchange of relevant tax information described in the Treaty. Article 27 obligates the signatory states to lend assistance for the purposes of collection of taxes.
Information Exchange under the Ireland-Kazakhstan Tax Treaty and FATCA Compliance
Article 26 of the Ireland-Kazakhstan Tax Treaty could be dangerous to US citizens who are also either Kazakh residents or citizens. The reason for it is FATCA which would obligate Ireland to turn over the information it receives under the Treaty directly to the IRS in cases where this information concerns noncompliant US tax residents. This may lead to an IRS investigation and the imposition of FBAR and other penalties on these US taxpayers.
Contact Sherayzen Law Office if You Have Unreported Foreign Accounts in Ireland or Kazakhstan
If you have undisclosed foreign accounts and/or foreign income in Ireland and Kazakhstan, contact Sherayzen Law Office as soon as possible. Our firm specializes in offshore voluntary disclosures and has helped hundreds of US taxpayers to deal with this issue. We can help You!
Contact Us Today for Your Confidential Consultation!

### Guam & American Samoa Are Non-Cooperative Tax Jurisdictions | News
On December 5, 2017, the European Union (the EU) Council published its list of the non-EU non-cooperative tax jurisdictions. The list included American Samoa and Guam unleashing strenuous objections from the United States.
Full List of Non-Cooperative Tax Jurisdictions
A total of seventeen countries made it to the list of non-cooperative tax jurisdictions: American Samoa, Bahrain, Barbados, Grenada, Guam, Korea (Republic of), Macao SAR, Marshall Islands, Mongolia, Namibia, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and United Arab Emirates.
Criteria for Inclusion in the List of Non-Cooperative Tax Jurisdictions
The list of non-cooperative tax jurisdictions was formed out of tax jurisdictions that failed to meet three criteria at the same time: transparency, fair taxation and the implementation of anti-base-erosion and profit-shifting measures.
The EU Reasoning for Including American Samoa and Guam on the List of Non-Cooperative Tax Jurisdictions
The EU reasoning for including American Samoa and Guam on the list of non-cooperative tax jurisdictions is a peculiar one because it does not seem to care about the fact that both jurisdictions are only US territories with no authority to separately sign international tax commitments (i.e. everything is done through the United States).
In particular, the EU Council specifically criticized American Samoa and Guam for three failures. First, American Samoa and Guam did not implement the automatic information exchange of financial information. Second, both jurisdictions did not sign the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Finally, neither American Samoa nor Guam followed the EU’s BEPS minimum standards.
US Objections to the Inclusion of Its Territories on the List of Non-Cooperative Tax Jurisdictions
In his letter to the Council of the European Union, the Treasury Secretary Steven Mnuchin strenuously objected to the inclusion of American Samoa and Guam on the list of non-cooperative tax jurisdictions. The Treasury Secretary set forth the following reasons.
First, he objected to the publication of the list per se as being “duplicative” of the efforts at the G-20 and OECD level.
Second and most important, Mr. Mnuchin stated that the EU reasoning does not make sense, because American Samoa and Guam “participate in the international community through the United States”. The fact that the United States agreed to implement BEPS minimum standards and the tax transparency standards should be considered as the agreement of American Samoa and Guam to do the same. In other words, he argued that American Samoa, Guam and the Untied States should be considered as one whole legal framework.
Based on this reasoning, Mr. Mnuchin urged the EU to immediately remove American Samoa and Guam from its list of non-cooperative tax jurisdictions. It should be noted that several other jurisdictions also rejected their inclusion on the list.
Sherayzen Law Office will continue to watch for any new developments with respect to this issue.

### Cyprus-Saudi Arabia Tax Treaty Signed | International Tax Lawyers
On January 3, 2018, the “Convention for the Avoidance of Double Taxation with respect to Taxes on Income and for the Prevention of Tax Evasion between the Republic of Cyprus and the Kingdom of Saudi Arabia” or the Cyprus-Saudi Arabia Tax Treaty was signed in Riyadh, Saudi Arabia.
The Cyprus-Saudi Arabia Tax Treaty was signed during the official visit of the President of Cyprus to Saudi Arabia. On behalf of Cyprus, the treaty was signed by Mr. Ioannis Kasoulides, Minister of Foreign Affairs of the Republic of Cyprus. On behalf of the Kingdom of Saudi Arabia, the treaty was signed by Mr. Mohammad Abdullah Al-Jadaan, Minister of Finance of Saudi Arabia.
Cyprus authorities have stated that the Cyprus-Saudi Arabia Tax Treaty is based on the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital, and it includes the exchange of financial and other information in accordance with the relevant Article of the Model Convention.
The signing of the Cyprus-Saudi Arabia Tax Treaty comes at a very special time for Saudi Arabia as another eleven princes were arrested. It should be remembered that there were numerous arrests for corruption in November of 2017.
The signing of the Cyprus-Saudi Arabia Tax Treaty will strengthen the treaty networks of both countries. The exchange of information will also help Saudi Arabia to exercise better control the flow of funds from Saudi Arabia to Cyprus.
Moreover, the exchange of information between Saudi Arabia and Cyprus may also inadvertently lead to this information being turned over to the IRS through FATCA (i.e. this information may be disclosed to the IRS by Cyprus or any other FATCA-compliant country that obtains it from Cyprus through another exchange of information arrangement). Hence, there is an increased potential of the IRS discovery of noncompliance with US international tax provisions by Saudi Arabian citizens who are also US tax residents.
It should be noted that the Cyprus-Saudi Arabia Tax Treaty was only signed and it has not yet been ratified by either country.
Sherayzen Law Office will continue to monitor new developments with respect to the Treaty.

### EU Tax Harmonization Initiative Stalled by Ireland and Hungary | Tax News
The EU Tax Harmonization initiative faced a joint opposition of Ireland and Hungary in early January of 2018. Both countries are vehemently opposed to any effort that would “tie their hands” in terms of their corporate tax policies.
The EU Tax Harmonization Initiative
Tax Harmonization is basically a policy that aims to adjust the tax systems of various jurisdictions in order to achieve one tax goal. The adjustment usually implies equalization of tax treatment.
In the past, the EU tax harmonization efforts were mostly limited to Value-Added Tax (“VAT”) and certain parent-subsidiary taxation issues. Since at least 2016, however, the EU Tax Harmonization policy seeks to regulate corporate income taxes among its members in order to limit intra-EU tax competition.
In 2016, the European Commission released two proposed directives addressing the issues of a common corporate tax base and a common consolidated corporate tax base. Neither directive establishes a minimum corporate tax rate. Neither directive passed the internal EU opposition.
Irish and Hungarian Opposition to the EU Tax Harmonization of Corporate Taxation
Today, the EU internal opposition to the EU tax harmonization initiatives consists of Ireland and Hungary. Both Hungary and Ireland have very low (by EU standards) corporate tax rates. The Irish corporate tax rate is 12.5% and the Hungarian corporate tax rate is only 9% (the EU average corporate tax rate is about 22%).
In early January of 2018, the Hungarian Prime Minister Viktor Orbán and Irish Prime Minister Leo Varadkar both stated that their countries have the right to set their corporate tax policies and that this area should not be subject to the EU tax harmonization efforts. "Taxation is an important component of competition. We would not like to see any regulation in the EU, which would bind Hungary's hands in terms of tax policy, be it corporate tax, or any other tax," Mr. Orbán said. He further added that "we do not consider tax harmonization a desired direction."
Both countries view the aforementioned proposed 2016 European Commission directives as a threat, because harmonizing of the tax base could lead to corporate income tax rate harmonization.
Impact of Brexit on the EU Tax Harmonization Initiatives
The United Kingdom used to be in the same opposition camp as Ireland and Hungary. Given the size of its economy and its political influence, the United Kingdom was an almost insurmountable barrier to the proponents of greater EU unity (mainly France and Germany). In essence, the UK was enough of a counterweight to keep the balance of power within the European Union from tilting in favor of the EU unity proponents.
Everything has changed with Brexit. The exit of the United Kingdom from the EU automatically led to the shift of the balance of power in favor of Germany. Brexit also means that Ireland and Hungary are now alone in their resistance against the Franco-German efforts to achieve greater EU unity. The political pressure of these outliers is now enormous.
In fact, it appears that, rather than suspending the unanimity requirement by invoking the so-called “passerelle clauses” (which would be a highly controversial step), the proponents of the EU Tax Harmonization initiative will simply wait until this political pressure forces Ireland and Hungary to modify their positions on this issue.

### 2018 Tax Filing Season | International Tax Lawyer News
On January 4, 2018, the IRS announced that the 2018 tax filing season for the tax year 2017 will commence on January 29, 2018. This date was chosen by the IRS to make sure its software incorporates the full impact of the Tax Cuts and Jobs Act of 2017 on the 2017 tax returns.
2018 Tax Filing Season: EITC and ACTC Refunds
Despite the fact that the 2018 tax filing season will begin on January 29, the IRS warned that taxpayers who will claim Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) will not receive their refunds until at least February 27, 2018.
2018 Tax Filing Season: Processing of Paper Tax Returns
Also, it is important to note that the processing of paper returns will begin only in mid-February, because the system updates will continue until that time. The IRS, however, will begin accepting both, electronic and paper tax returns, on January 29, 2018.
This is very important for taxpayers who file US international information returns, such as Forms 926, 5471, 8621, 8865, 8938, et cetera. A lot of these returns are voluminous and cannot be e-filed due to tax software limitations; hence, they must be filed on paper.
2018 Tax Filing Season: Deadline on April 17, 2018
The filing deadline to submit 2017 tax returns will be on Tuesday, April 17, 2018. Usually, the deadline would be on April 15, but, in 2018, April 15 falls on a Sunday and April 16 is a legal holiday in the District of Columbia (Emancipation Day). Under the tax law, legal holidays in the District of Columbia affect the filing deadline for federal tax returns; hence, the filing deadline moved by one more day to April 17, 2018.
US taxpayers who have to file international information returns should keep in mind that there are two categories of such returns: information reports which are filed with their 2017 tax returns and the information reports which are filed (or e-filed) separately from the 2017 tax returns. Forms 926, 5471, 8621, 8865, 8938 and other similar information returns must be filed with the original US tax returns.
On he other hand, FBARs (FinCEN Form 114) and Form 3520 should be filed separately from the taxpayers’ tax returns. The deadline for this category of returns, however, is the same as the deadline for the 2017 tax returns – April 17, 2018 (unless an extension is filed).
Contact Sherayzen Law Office for Help with Your US International Tax Compliance During this 2018 Tax Filing Season
If you have foreign income and/or foreign assets, or if you received a foreign gift or inheritance, you should contact Sherayzen Law Office for professional help in determining your US tax compliance obligations and the preparation of the required US international information returns.
Contact Us Today to Schedule Your Confidential Consultation!

### Streamlined Audit Interview | Streamlined Audit Tax Lawyers
In an earlier article, I described the main features of an IRS audit of a voluntary disclosure made pursuant to the Streamlined Domestic Submission Procedures (“Streamlined Submission Audit”). Today, I would like to discuss a very specific feature of this process – Streamlined Audit Interview.
Streamlined Audit Interview: Background Information on Streamlined Domestic Offshore Procedures
Streamlined Domestic Offshore Procedures (“SDOP”) is a special offshore voluntary disclosure program initiated by the IRS in 2014. SDOP allows US taxpayers to remedy their past tax noncompliance concerning the reporting of foreign assets and foreign income while paying a highly reduced 5% Miscellaneous Offshore Penalty. The reason for such a lenient treatment is that the taxpayers must certify that their prior noncompliance with US international tax laws was non-willful.
Streamlined Audit Interview: General Description
Virtually every IRS field audit will involve an attempt to interview the audited taxpayer(s). The concept of a Streamlined Audit Interview describes a situation where an audited taxpayer is interviewed specifically in the context of a Streamlined Submission Audit.
Streamlined Audit Interview: Main Differences from Regular IRS Audit Interview
In many ways, a regular IRS audit interview is similar to a Streamlined Audit Interview. In fact, procedurally, there are very few differences: both audits involve the same type of scheduling procedures, same interview format and, with respect to audited tax returns, very similar questions.
The main difference between a regular IRS audit interview and the Streamlined Audit Interview lies in the fact that the latter will involve the examination of the audited taxpayer’s non-willfulness with respect to prior tax noncompliance – i.e. whether the taxpayer carried his burden of proof to participate in SDOP in the first place. In other words, the difference between the two types of audits is in the substantive legal issues to be discussed.
There are also differences in the potential stakes. A failure for the taxpayer to substantiate his original non-willfulness arguments may lead the IRS to impose heavy penalties and even refer the case to the US Department of Justice’s Tax Division for criminal prosecution.
Finally, a Streamlined Audit Interview is likely to involve a much broader spectrum of issues than just amended tax returns. For example, there could be questions concerning FBARs, sources of foreign account balances, US assets purchased with undisclosed foreign funds, et cetera.
Streamlined Audit Interview: Extensive Preparation Is Necessary
A taxpayer should prepare for a Streamlined Audit Interview. It should be remembered that this interview may happen two or even almost three years from the time when the SDOP voluntary disclosure package was originally submitted. Hence, it is important to refresh the memory of the taxpayer so that he would be able to respond to the IRS questions (instead of constantly saying “I have no recollection”, thereby creating an impression as if he had to hide something).
The taxpayer should also be prepared on how to properly answer a question. Again, the idea is to avoid unnecessary suspicions and an impression that he has something to hide. This why the taxpayer’s answers should be firm and clear in order to eliminate any doubt of their meaning.
In every case, there are going to be weak or negative facts. The temptation to avoid a discussion of negative facts is huge, but it should be resisted. The taxpayer should be prepared to speak of them boldly, explain these facts and show how they fit into his overall non-willfulness arguments.
A taxpayer should never be trained into lying to the IRS or obfuscating the facts. Never, under any circumstances, should an attorney allow his client to commit a perjury, especially in the context of a voluntary disclosure based on the taxpayer’s non-willfulness. The outcome of this unethical strategy is likely to be disastrous (the IRS is likely to find out the truth in any case) and may result in criminal charges filed against the client, even if his original tax noncompliance was non-willful.
Being honest is of utmost importance in a Streamlined Audit Interview. This, however, does not preclude an attorney from employing certain strategies as described above to prevent unnecessary complications by the failure of a taxpayer to express himself clearly or creating a temptation on the part of the IRS to go on a “fishing expedition”.
Contact Sherayzen Law Office for Professional Help With an Audit of Your Streamlined Submission and a Streamlined Audit Interview
If your Streamlined Submission is being audited by the IRS, contact Sherayzen Law Office as soon as possible for professional help. Sherayzen Law Office is a highly experienced international tax law firm that specializes in all stages of offshore voluntary disclosures, including IRS audits of a Streamlined Submission and federal court representation.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### Belarus-Spain Tax Treaty Approved | FATCA Lawyer News
On December 19, 2017, the Belarusian Council of the Republic, which is the upper chamber of the Belarusian parliament, approved a law on the ratification of the pending Belarus-Spain Tax Treaty. The Belarus-Spain Tax Treaty will cover both income and capital gain taxes and is meant to prevent the double taxation of the same income in both countries. This development comes after both countries signed the Belarus-Spain Tax Treaty in Madrid, Spain, on June 14, 2017.
The exact text of the treaty is not yet known. There are reasons to believe, however, that it includes an article on the automatic exchange of tax-related information in compliance with the OECD standard. The exchange of information under the Belarus-Spain Tax Treaty is reported to be quite extensive.
The Belarus-Spain Tax Treaty will enter into force within three months after all of the ratification procedures are completed. Once in force and effective, the Belarus-Spain Tax Treaty will replace the agreement signed between the former Soviet Union and Spain on March 1, 1985.
The Belarus-Spain Tax Treaty is just the latest example of the recent rise in the number of tax treaties signed between various countries. It appears that the web of treaties between various countries is growing increasingly wider and diverse as a result of the global preference for bilateral negotiations over the multilateral ones.
Similarly, as a result of FATCA and CRS, there has been an explosion of the agreements concerning automatic exchange of certain tax-related information, including those related to foreign accounts and beneficial ownership of foreign corporations. Again, the general trend toward bilateral negotiations, led by FATCA implementation treaties (which are bilateral treaties between the United States and other countries), can be clearly observed from these developments.
This trend toward bilateral negotiations reflects the underlying complex historical processes of moving to an increasingly multipolar world. This, of course, offers little consolation to US taxpayers as well as taxpayers of other countries who are increasingly caught between the ever demanding tax compliance requirements of various countries. The recent Belarus-Spain Tax Treaty will make but a modest contribution to this burden; yet, it is definitely part of this trend.
Sherayzen Law Office will continue to observe and analyze these trends and developments, including the progress of the new Belarus-Spain Tax Treaty.

### Streamlined Submission Audit | SDOP Audit Tax Lawyer
An increasing number of submissions under the Streamlined Domestic Offshore Procedures are subject to an IRS audit (hereinafter “Streamlined Submission Audit”). In this article, I will explain what a Streamlined Submission Audit is and what a taxpayer should expect during the Audit.
Streamlined Submission Audit: Background Information on Streamlined Domestic Offshore Procedures
Streamlined Domestic Offshore Procedures (“SDOP”) is a voluntary disclosure option offered by the IRS since June of 2014 to noncompliant US taxpayers to settle their past tax noncompliance concerning foreign assets and foreign income at a reduced penalty rate. In order to participate in SDOP, a taxpayer must meet three main eligibility requirements – US tax residency, non-willfulness of prior noncompliance and absence of IRS examination.
SDOP is likely to be the most convenient and the least expensive voluntary disclosure option for taxpayers whose prior tax noncompliance was non-willful. SDOP is very popular; in fact, it has quickly surpassed the traditional IRS Offshore Voluntary Disclosure Program (“OVDP”) in the number of participants with over 18,000 submissions just in 2016.
The Origin of the Streamlined Submission Audit
Streamlined Submission Audit originates within the very nature of SDOP. Unlike OVDP, SDOP voluntary disclosures are not immediately subject to a comprehensive IRS review of tax return items (although, there is a review process which may lead to a Streamlined Submission Audit, but it is not as comprehensive as that of the OVDP prior to the Audit). Hence, the IRS reserved the right to audit any SDOP submission at any point within three years after the submission of the original SDOP voluntary disclosure package.
Streamlined Submission Audit: Process
The exact process of a Streamlined Submission Audit varies from case to case, but all of such audits have a similar format: initial letter with request for a meeting, meeting with an interview, review of submitted documents and (very likely) additional requests for information, interview of other involved individuals (such as a tax preparer) and, finally, the results of an audit are provided by the IRS to taxpayer(s) and/or the representative indicated on Form 2848.
A Streamlined Submission Audit commences in a way very similar to a regular IRS audit: a letter is sent to taxpayers and (if there is a Form 2848 on file) to their representative. The letter explains that the IRS decided to examine certain tax returns (usually all three years of amended tax returns) and asks for submission of all documentation and work papers that were used to prepare the amended returns. Additionally, the letter requests that the taxpayers’ representative (or taxpayers if not represented) contact the IRS agent in charge of the audit to schedule the initial meeting.
During the initial meeting, the IRS agent will review (at least to make sure he or she has what is needed) the documents supplied. In larger cases, the IRS will need a lot more time to later examine all of the submitted documents and see if additional documents are needed. If a case is very small, it is possible for an agent to cover everything in the first meeting, but it is very rare.
Also, during an initial meeting, there is going to be an interview of the taxpayer(s). I will discuss the interview separately in a different article.
Once the review of the initial package of documents is concluded, it is very likely that the IRS agent will have questions and additional document requests. The questions may be answered by the taxpayers’ attorney during a separate meeting with the agent; smaller questions may be settled over the phone.
If additional documentation is needed, an IRS agent will send out an additional request to taxpayers and/or their attorney. The answer will most likely need to be provided in writing.
Once the IRS completes its interview of other involved parties and reviews all evidence, it will make its decision and submit the results of the audit to the taxpayers and their tax attorney in writing. The taxpayers’ attorney will need to build a strategy with respect to the taxpayers’ response to the audit results depending on whether the taxpayers agree or disagree with the results of the audit.
Differences Between Streamlined Submission Audit and Regular IRS Audit
At first, it may seem that there are no big differences between a regular IRS audit and a Streamlined Submission Audit. While procedurally this may be correct, substantively it is not.
The greatest difference between the two types of IRS audits is the subject-matter involved. While a regular IRS audit will concentrate on the tax returns only, a Streamlined Submission Audit will involve everything: amended tax returns, FBARs, other information returns and, most importantly, Non-Willfulness Certification. In other words, a Streamlined Submission Audit will focus not only on whether the tax forms are correct, but also on whether the taxpayer was actually non-willful with respect to his prior tax noncompliance.
This difference in the subject-matter examination will carry over to other aspects of a Streamlined Submission Audit: the taxpayers’ interview will focus on their non-willfulness arguments, third-party interviews of original tax preparers become a regular feature (this is very different from a regular IRS audit when tax preparers may never be interviewed), and the final IRS results must necessarily make a decision on whether to challenge the taxpayers’ non-willfulness arguments.
Failure by a taxpayer to sustain his non-willfulness arguments may result in a disaster during a Streamlined Submission Audit with a potential referral to the Tax Division of the US Department of Justice for a criminal investigation.
This is why it is so important for a taxpayer subject to a Streamlined Submission Audit to retain the services of an experienced international tax lawyer to handle the audit professionally.
Contact Sherayzen Law Office for Professional Help With A Streamlined Submission Audit
If your submission under the Streamlined Domestic Offshore Procedures is being audited by the IRS, contact Sherayzen Law Office as soon as possible. Our international tax law firm is highly experienced in offshore voluntary disclosures (including OVDP (now closed), SDOP, SFOP, “noisy disclosures”, “quiet disclosures”, et cetera) and the IRS audits of a voluntary disclosure.
In fact, we have handled voluntary disclosure cases at every stage of the process of a Streamlined Submission Audit described above. We can Help You!
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### IRS International No Rule List Updated | International Tax Lawyer News
On January 2, 2018, the IRS issued Rev. Proc. 2018-7 (2018-1 IRB 271) to update its existing international No Rule list. I will quickly overview what the No Rule List is and provide a copy of Sections 3 and 4 of the No Rule List.
What is an International No Rule List?
It may be surprising to many taxpayers to learn, but the IRS does not rule on all matters within its jurisdiction. The IRS may provide a Private Letter Ruling, Determination Letters and Opinion Letters with respect to most, but not all areas of the Internal Revenue Code.
The areas for which the IRS will not issue a letter ruling or a determination letter are grouped under a single term “No Rule List”.
Rev. Proc. 2018-7 and the International No Rule List
Rev. Proc. 2018-7 supersedes Rev. Proc. 2017-7 and updates all international tax matters under the IRS jurisdiction for which the IRS will not answer a taxpayer’s inquiry. Rev. Proc. 2018-7 is directly relevant to 26 CFR 601.201 (which deals with rulings and determination letters).
The chief change introduced by Rev. Proc. 2018-7 to the No Rule List is a new section 4.01(26), which deals with IRC Section 1059A. Additionally, Rev. Proc. 2018-7 renumbered the rest of the relevant sections and cross references due to the addition of a new section.
No Rule List: Section 3 List Versus Section 4 List
The No Rule List differentiates between two types of situations which are organized under Section 3 and Section 4 of Rev. Proc. 2018-7. Section 3 lists the areas of the IRC in which letter rulings and determination letters will not be issued under any circumstances.
Section 4, however, lists the areas of the IRC in which a ruling will not ordinarily be issued unless there are unique and compelling reasons that justify issuing a letter ruling or a determination letter.
Despite the existence of the No Rule List, the IRS may still provide a general information letter in response to inquiries in areas on either list. On the other hand, just because an IRC section or an item is not listed on the No Rule List does not automatically mean that the IRS will answer a taxpayer’s inquiry. Rev. Proc. 2018-7 specifically states that the IRS may “decline to rule on an individual case for reasons peculiar to that case, and such decision will not be announced in the Internal Revenue Bulletin”.
International No Rule List and Section 4 International Tax Interpretation Requests
As it was mentioned above, a taxpayer may still request a letter ruling or a determination letter for any of the Section 4 items of the No Rule List. If he decides to do so, he should contact (by telephone or in writing) the Office of Associate Chief Counsel (International) (“the Office”) prior to making such a request and discuss with the Office the unique and compelling reasons that the taxpayer believes justify issuing such letter ruling or determination letter. While not required, a written submission is encouraged since it will enable the Office personnel to arrive more quickly at an understanding of the unique facts of each case. A taxpayer who contacts the Office by telephone may be requested to provide a written submission.
International No Rule List Section 3
I am copying here Section 3 of the Rev. Proc. 2018-7 which describes the areas in which ruling or determination Letters will no be issued under any circumstances:
“.01 Specific Questions and Problems
(1) Section 861. - Income from Sources Within the United States. - A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 2004–37, 2004–1 C.B. 1099.
(2) Section 862. - Income from Sources Without the United States. - A method for determining the source of a pension payment to a nonresident alien individual from a trust under a defined benefit plan that is qualified under § 401(a) if the proposed method is inconsistent with §§ 4.01, 4.02, and 4.03 of Rev. Proc. 2004–37, 2004–1 C.B. 1099.
(3) Section 871(g). - Special Rules for Original Issue Discount. - Whether a debt instrument having original issue discount within the meaning of § 1273 is not an original issue discount obligation within the meaning of § 871(g)(1)(B)(i) when the instrument is payable 183 days or less from the date of original issue (without regard to the period held by the taxpayer).
(4) Section 894. - Income Affected by Treaty. - Whether a person that is a resident of a foreign country and derives income from the United States is entitled to benefits under the United States income tax treaty with that foreign country pursuant to the limitation on benefits article. However, the Service may rule regarding the legal interpretation of a particular provision within the relevant limitation on benefits article.
(5) Section 954. - Foreign Base Company Income. - The effective rate of tax that a foreign country will impose on income.
(6) Section 954. - Foreign Base Company Income. - Whether the facts and circumstances evince that a controlled foreign corporation makes a substantial contribution through the activities of its employees to the manufacture, production, or construction of the personal property sold within the meaning of § 1.954–3(a)(4)(iv).
(7) Section 7701(b). - Definition of Resident Alien and Nonresident Alien. - Whether an alien individual is a nonresident of the United States, including whether the individual has met the requirements of the substantial presence test or exceptions to the substantial presence test. However, the Service may rule regarding the legal interpretation of a particular provision of § 7701(b) or the regulations thereunder.
.02 General Areas.
(1) The prospective application of the estate tax to the property or the estate of a living person, except that rulings may be issued on any international issues in a ruling request accepted pursuant to § 5.06 of Rev. Proc. 2018–1, in this Bulletin.
(2) Whether reasonable cause exists under Subtitle F (Procedure and Administration) of the Code.
(3) Whether a proposed transaction would subject a taxpayer to criminal penalties.
(4) Any area where the ruling request does not comply with the requirements of Rev. Proc. 2018–1.
(5) Any area where the same issue is the subject of the taxpayer's pending request for competent authority assistance under a United States tax treaty.
(6) A ‘comfort’ ruling will not be issued with respect to an issue that is clearly and adequately addressed by statute, regulations, decisions of a court, tax treaties, revenue rulings, or revenue procedures absent extraordinary circumstances (e.g., a request for a ruling required by a governmental regulatory authority in order to effectuate the transaction).
(7) Any frivolous issue, as that term is defined in § 6.10 of Rev. Proc. 2018–1.”
International No Rule List Section 4
I am copying here Section 4 of the International No Rule List which describes the areas in which ruling or determination Letters will not ordinarily be issued:
“.01 Specific Questions and Problems
(1) Section 367(a). - Transfers of Property from the United States. - Whether an oil or gas working interest is transferred from the United States for use in the active conduct of a trade or business for purposes of § 367(a)(3); and whether any other property is so transferred, where the determination requires extensive factual inquiry.
(2) Section 367(a). - Transfers of Property from the United States. - Whether a transferred corporation subject to a gain recognition agreement under § 1.367(a)–8 has disposed of substantially all of its assets.
(3) Section 367(b). - Other Transfers. - Whether and the extent to which regulations under § 367(b) apply to an exchange involving foreign corporations, unless the ruling request presents a significant legal issue or subchapter C rulings are requested in the context of the exchange.
(4) Section 864. - Definitions and Special Rules. - Whether a taxpayer is engaged in a trade or business within the United States, and whether income is effectively connected with the conduct of a trade or business within the United States; whether an instrument is a security as defined in § 1.864–2(c)(2); whether a taxpayer effects transactions in the United States in stocks or securities under § 1.864 –2(c)(2); whether an instrument or item is a commodity as defined in § 1.864 –2(d)(3); and for purposes of § 1.864–2(d)(1) and (2), whether a commodity is of a kind customarily dealt in on an organized commodity exchange, and whether a transaction is of a kind customarily consummated at such place.
(5) Section 871. - Tax on Nonresident Alien Individuals. - Whether a payment constitutes portfolio interest under § 871(h); whether an obligation qualifies for any of the components of portfolio interest such as being in registered form; and whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by § 72(s) and § 7702(a) is portfolio interest as defined in § 871(h).
(6) Section 881. - Tax on Income of Foreign Corporations Not Connected with United States Business. - Whether the income earned on contracts that do not qualify as annuities or life insurance contracts because of the limitations imposed by § 72(s) and § 7702(a) is portfolio interest as defined in § 881(c).
(7) Section 892. - Income of Foreign Governments and of International Organizations. - Whether income derived by foreign governments and international organizations from sources within the United States is excluded from gross income and exempt from taxation and any underlying issue related to that determination.
(8) Section 893. - Compensation of Employees of Foreign Governments and International Organizations. - Whether wages, fees, or salary of an employee of a foreign government or of an international organization received as compensation for official services to such government or international organization is excluded from gross income and exempt from taxation and any underlying issue related to that determination.
(9) Section 894. - Income Affected by Treaty. - Whether the income received by an individual in respect of services rendered to a foreign government or a political subdivision or a local authority thereof is exempt from federal income tax or withholding under any of the United States income tax treaties which contain provisions applicable to such individuals.
(10) Section 894. - Income Affected by Treaty. - Whether a taxpayer has a permanent establishment in the United States for purposes of any United States income tax treaty and whether income is attributable to a permanent establishment in the United States.
(11) Section 894. - Income Affected by Treaty. - Whether certain persons will be considered liable to tax under the laws of a foreign country for purposes of determining if such persons are residents within the meaning of any United States income tax treaty. But see Rev. Rul. 2000–59, 2000–2 C.B. 593.
(12) Section 894. - Income Affected by Treaty. - Whether the income received by a nonresident alien student or trainee for services performed for a university or other educational institution is exempt from federal income tax or withholding under any of the United States income tax treaties which contain provisions applicable to such nonresident alien students or trainees.
(13) Section 894. - Income Affected by Treaty. - Whether the income received by a nonresident alien performing research or teaching as personal services for a university, hospital or other research institution is exempt from federal income tax or withholding under any of the United States income tax treaties which contain provisions applicable to such nonresident alien teachers or researchers.
(14) Section 894. - Income Affected by Treaty. - Whether a foreign recipient of payments made by a United States person is ineligible to receive the benefits of a United States tax treaty under the principles of Rev. Rul. 89–110, 1989–2 C.B. 275.
(15) Section 894. - Income Affected by Treaty. - Whether a recipient of payments is or has been a resident of a country for purposes of any United States tax treaty. Pursuant to § 1.884 –5(f), however, the Service may rule whether a corporation representing that it is a resident of a country is a qualified resident thereof for purposes of § 884.
(16) Section 894. - Income Affected by Treaty. - Whether an entity is treated as fiscally transparent by a foreign jurisdiction for purposes of § 894(c) and the regulations thereunder.
(17) Section 901. - Taxes of Foreign Countries and of Possessions of United States. - Whether a foreign levy meets the requirements of a creditable tax under § 901.
(18) Section 901. - Taxes of Foreign Countries and of Possessions of United States. - Whether a person claiming a credit has established, based on all of the relevant facts and circumstances, the amount (if any) paid by a dual capacity taxpayer under a qualifying levy that is not paid in exchange for a specific economic benefit. See § 1.901–2A(c)(2).
(19) Section 903. - Credit for Taxes in Lieu of Income, Etc., Taxes. - Whether a foreign levy meets the requirements of a creditable tax under § 903.
(20) Sections 954(d), 993(c). - Manufactured Product. - Whether a product is manufactured or produced for purposes of § 954(d) and § 993(c).
(21) Section 937. - Definition of Bona Fide Resident. - Whether an individual is a bona fide resident of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands. However, the Service may rule regarding the legal interpretation of a particular provision of § 937(a) or the regulations thereunder.
(22) Section 956. - Investment of Earnings in United States Property. - Whether a pledge of the stock of a controlled foreign corporation is an indirect pledge of the assets of that corporation. See § 1.956–2(c)(2).
(23) Section 985. - Functional Currency. - Whether a currency is the functional currency of a qualified business unit.
(24) Section 989(a). - Qualified Business Unit. - Whether a unit of the taxpayer's trade or business is a qualified business unit.
(25) Section 1058. - Transfers of Securities Under Certain Agreements. - Whether the amount of any payment described in § 1058(b)(2) or the amount of any other payment made in connection with a transfer of securities described in § 1058 is from sources within or without the United States; the character of such amounts; and whether the amounts constitute a particular kind of income for purposes of any United States income tax treaty.
(26) Section 1059A. - Limitation on taxpayer's basis or inventory cost in property imported from related persons. - Whether a taxpayer's cost or inventory basis in property imported from a foreign affiliate will not be limited by § 1059A due to differences between customs valuation and tax valuation.
(27) Sections 1471, 1472, 1473, and 1474. - Taxes to Enforce Reporting on Certain Foreign Accounts. - Whether a taxpayer, withholding agent, or intermediary has properly applied the requirements of chapter 4 of the Internal Revenue Code (sections 1471 through 1474, also known as "FATCA") or of an applicable intergovernmental agreement to implement FATCA.
(28) Section 1503(d). - Dual Consolidated Loss. - Whether the income tax laws of a foreign country would deny any opportunity for the foreign use of a dual consolidated loss in the year in which the dual consolidated loss is incurred under § 1.1503(d)–3(e)(1); whether no possibility of foreign use exists under § 1.1503(d)–6(c)(1); whether an event presumptively constitutes a triggering event under § 1.1503(d)–6(e)(1)(i)–(ix); whether the presumption of a triggering event is rebutted under § 1.1503(d)–6(e)(2); and whether a domestic use agreement terminates under § 1.1503(d)–6(j)(1). The Service will also not ordinarily rule on the corresponding provisions of prior regulations under § 1503(d).
(29) Section 2501. - Imposition of Tax. - Whether a partnership interest is intangible property for purposes of § 2501(a)(2) (dealing with transfers of intangible property by a nonresident not a citizen of the United States).
(30) Section 7701. - Definitions. - Whether an estate or trust is a foreign estate or trust for federal income tax purposes.
(31) Section 7701. - Definitions. - Whether an intermediate entity is a conduit entity under § 1.881–3(a)(4); whether a transaction is a financing transaction under § 1.881–3(a)(4)(ii); whether the participation of an intermediate entity in a financing arrangement is pursuant to a tax avoidance plan under § 1.881–3(b); whether an intermediate entity performs significant financing activities under § 1.881–3(b)(3)(ii); whether an unrelated intermediate entity would not have participated in a financing arrangement on substantially the same terms under § 1.881–3(c).
(32) Section 7874. - Expatriated Entities and Their Foreign Parents. - Whether, after the acquisition, the expanded affiliated group has substantial business activities in the foreign country in which, or under the law of which, the foreign entity is created or organized, when compared to the total business activities of the expanded affiliated group.
(33) Section 7874. - Expatriated Entities and Their Foreign Parents. - Whether a foreign corporation completes the direct or indirect acquisition of substantially all of the properties held directly or indirectly by a domestic corporation or substantially all of the properties constituting a trade or business of a domestic partnership.
.02 General Areas
(1) Whether a taxpayer has a business purpose for a transaction or arrangement.
(2) Whether a taxpayer uses a correct North American Industry Classification System (NAICS) code or Standard Industrial Classification (SIC) code.
(3) Any transaction or series of transactions that is designed to achieve a different tax consequence or classification under U.S. tax law (including tax treaties) and the tax law of a foreign country, where the results of that different tax consequence or classification are inconsistent with the purposes of U.S. tax law (including tax treaties).
(4)(a) Situations where a taxpayer or a related party is domiciled or organized in a foreign jurisdiction with which the United States does not have an effective mechanism for obtaining tax information with respect to civil tax examinations and criminal tax investigations, which would preclude the Service from obtaining information located in such jurisdiction that is relevant to the analysis or examination of the tax issues involved in the ruling request.
(b) The provisions of subsection 4.02(4)(a) above shall not apply if the taxpayer or affected related party (i) consents to the disclosure of all relevant information requested by the Service in processing the ruling request or in the course of an examination to verify the accuracy of the representations made and to otherwise analyze or examine the tax issues involved in the ruling request, and (ii) waives all claims to protection of bank or commercial secrecy laws in the foreign jurisdiction with respect to the information requested by the Service. In the event the taxpayer's or related party's consent to disclose relevant information or to waive protection of bank or commercial secrecy is determined by the Service to be ineffective or of no force and effect, then the Service may retroactively rescind any ruling rendered in reliance on such consent.
(5) The federal tax consequences of proposed federal, state, local, municipal, or foreign legislation.
(6)(a) Situations involving the interpretation of foreign law or foreign documents. The interpretation of a foreign law or foreign document means making a judgment about the import or effect of the foreign law or document that goes beyond its plain meaning.
(b) The Service, at its discretion, may consider rulings that involve the interpretation of foreign laws or foreign documents. In these cases, the Service may request information in addition to that listed in § 7.01(2) and (6) of Rev. Proc. 2018–1, including a discussion of the implications of any authority believed to interpret the foreign law or foreign document, such as pending legislation, treaties, court decisions, notices or administrative decisions.”

### Happy New Year 2018 From Sherayzen Law Office
Our team at Sherayzen Law Office wishes a very Happy New Year 2018 to our clients; colleagues at other law firms; judges of state and federal courts; our website blog readers; and our followers on Facebook, Twitter, YouTube and other social media.
Year 2017 was another highly successful year at Sherayzen Law Office. Our tremendous expertise and experience in US international tax law draws an ever-increasing number of clients from all over the world. We have expanded our client base at existing countries and added clients from new countries, bringing the total number of countries with our client assets to close to seventy. Additionally, we were asked to defend a case in federal court concerning FBAR penalties, successfully advised on expatriation cases and finalized a number of existing and new tax planning cases.
Our biggest success area, however, remains Offshore Voluntary Disclosures with the new highs for Form 3520, 5471 and 926 voluntary disclosures as well as FBAR/FATCA voluntary disclosures. FATCA-based cases were especially prolific with a significant variation in fact patterns and countries.
Furthermore, we have made an unprecedented effort to educate our clients as well as the general public about US international tax law. A combined record number of video posts and website blog posts were made available online. Additionally, Mr. Eugene Sherayzen, the owner and the principal attorney of Sherayzen Law Office, spoke at a large number of seminars in 2017, including outside of the United States.
In many ways, year 2017 was also a preparatory year for the new year 2018. We are closely following the rapid changes in US international tax law. The main changes are coming, of course, from the Tax Cuts and Jobs Act of 2017. The changes are enormous and will affect virtually every US taxpayer – both, individuals and businesses. We already started a series of articles on this topic. Please, continue to follow our blog in the new year 2018 to learn more about how the Act’s provisions may affect your tax situation.
It is also important to emphasize that, while the Tax Cuts and Jobs Act of 2017 will introduce the main changes in the new year 2018, some of its provisions are very relevant for the tax year 2017. In particular, the new income recognition rules for US Shareholders of foreign corporations (PFIC corporations are exempted from this provision) may impose a significant and unexpected tax burden on US taxpayers. Please, continue to follow our blog in the new year 2018 to learn more about these changes.
Equally important are the new IRS regulations that will be coming in the new year 2018. The IRS has announced that it intends to issue regulations that will target certain obscure areas of tax law which remain unregulated by the IRS or where the regulations are contradictory. In this context, it is particularly important to mention the interaction of PFIC rules with the Throwback Rule concerning distributions of a foreign trust’s UNI.
Finally, the IRS has also stated that it would announce sometime in the new year 2018 dramatic changes to Offshore Voluntary Disclosure options that exist right now. We have written a number articles on this topic and we have warned our readers that the current favorable environment may change dramatically with a potentially complete closure of the IRS OVDP program.
Sherayzen Law Office is a highly experienced law firm with a unique expertise in US international tax law. We have helped hundreds of US taxpayers around the world to bring and maintain their US tax affairs in full compliance with US tax laws while ethically and effectively reducing their penalties and tax burden. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Tax Cuts & Jobs Act: 2018 Standard Deduction and Exemptions
The Tax Cuts and Jobs Act of 2017 made dramatic changes that affected pretty much every US taxpayer. This is the first article of the series of articles on the Act. I will start this series with the discussion of simple US domestic issues (such as 2018 standard deduction and personal exemptions), then gradually turn to more and more complex US domestic and international tax issues, and finish with the examination of the highly complex issues concerning E&P income recognition for US owners of foreign corporations and the new type of Subpart F income.
Today, I will focus on the 2018 standard deduction and exemptions.
Standard Deduction for the Tax Year 2017
Standard deduction is the amount of dollars by which you can reduce your adjusted gross income (“AGI”) in order to lower your taxable income and, hence, your federal income tax. The standard deduction is prescribed by Congress. If you use standard deduction, you cannot itemize your deductions (i.e. try to reduce your AGI by the amount of actual allowed itemized deductions) – you have to choose between these two options.
Standard deduction varies based on your filing status (there is an additional standard deductions of individuals over the age of 65 or who are blind).
For the tax year 2017, the standard deduction are as follows: $6,350 for single taxpayers and married couples filing separately, $12,700 for married couples filing a joint tax return and $9,350 for heads of household.
2018 Standard Deduction and Exemptions
Under the Tax Cuts and Jobs Act of 2017, the 2018 standard deduction will virtually double in size: $12,000 for single taxpayers and married couples filing separately, $24,000 for married couples filing a joint tax return and $18,000 for heads of household. All of these amounts will be indexed for inflation.
It is important to point out, however, that these increased standard deduction amounts will only last until 2025. Then, the standard deduction should revert to the old pre-2018 law.
Personal Exemptions & Impact of 2018 Standard Deduction
Personal exemption is an additional amount of dollars by which the Congress will allow you to reduce your AGI (already reduced by either standard deduction or itemized deductions). When IRC Section 151 was enacted in 1954, the idea behind a personal exemption was to exempt from taxation a certain minimal amount a person needs to survive at a subsistence level.
Personal exemption can be claimed for you and your qualified dependents; in case of joint tax returns, each spouse is granted a personal exemption. However, a personal exemption for a spouse can be claimed even if the spouses are filing separate tax returns, but certain requirements have to be met.
For the tax year 2017, the personal exemption amount is $4,050. The exemption is subject to a phase-out at a certain level of income.
The Tax Cuts and Jobs Act of 2017 repeals personal exemptions for the tax years 2018-2025. After 2025, the law reverts to the one that existed as of the tax year 2017. In other words, the increase in 2018 standard deduction will be at least partially offset by the elimination of 2018 personal exemption.
In some cases, where taxpayers claim many personal exemptions for their dependants, the elimination of personal exemptions may actually result in the increase in taxation (compared to the 2017 law) despite the increase of 2018 standard deduction. Of course, such an increase in taxation needs to take into account potential increase in child tax credit under the new law. Hence, in order to assess the full tax impact of the tax reform for large families, one needs to consider other factors in addition to just 2018 standard deduction.

### Prepaid 2018 Real Property Taxes as a Tax Strategy | Tax Lawyers News
The Tax Cuts and Jobs Act of 2017 radically changed the US tax system with respect to deductible state and local income taxes, including real property taxes. Starting tax year 2018, real estate, person property, income taxes and sales taxes are deductible only up to $10,000. This means that people with high property taxes have a big problem – they have an expense that is no longer deductible. A question arises for tax attorneys – can these taxpayers use prepaid 2018 real property taxes to lower their 2017 tax liability?
This issue of prepaid 2018 real property taxes is the subject of the latest IRS advisory issued on December 27, 2017. Let’s explore this advisory in more detail.
Prepaid 2018 Real Property Taxes That Were Assessed and Paid in 2017
The IRS advised that prepaid 2018 real property taxes may be deductible in 2017 under specific circumstances. In particular, the IRS stated that, in situations where 2018 real property taxes were assessed and paid in 2017, such prepaid 2018 real property taxes may be deductible.
Prepaid 2018 Real Property Taxes That Are Not Yet Assessed But Paid in 2017
On the other hand, if your real property taxes for 2018 were assessed only in 2018, the prepayment in 2017 will not be deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.
Examples of Deductible and Non-Deductible Prepaid 2018 Real Property Taxes
The IRS provides the following examples of deductible and non-deductible prepaid 2018 real property taxes:
Example 1: Assume County A assesses property tax on July 1, 2017 for the period July 1, 2017 – June 30, 2018. On July 31, 2017, County A sends notices to residents notifying them of the assessment and billing the property tax in two installments with the first installment due Sept. 30, 2017 and the second installment due Jan. 31, 2018. Assuming taxpayer has paid the first installment in 2017, the taxpayer may choose to pay the second installment on Dec. 31, 2017, and may claim a deduction for this prepayment on the taxpayer’s 2017 return.
Example 2: County B also assesses and bills its residents for property taxes on July 1, 2017, for the period July 1, 2017 – June 30, 2018. County B intends to make the usual assessment in July 2018 for the period July 1, 2018 – June 30, 2019. However, because county residents wish to prepay their 2018-2019 property taxes in 2017, County B has revised its computer systems to accept prepayment of property taxes for the 2018-2019 property tax year. Taxpayers who prepay their 2018-2019 property taxes in 2017 will not be allowed to deduct the prepayment on their federal tax returns because the county will not assess the property tax for the 2018-2019 tax year until July 1, 2018.

### IRS 2018 Standard Mileage Rates | Tax Lawyers Twin Cities
Earlier this month, the IRS issued the option IRS 2018 standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.Earlier this month, the IRS issued the option IRS 2018 standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
The new IRS 2018 standard mileage rates are generally higher than the 2017 rates:
54.5 cents per mile for business miles driven (up from 53.50 cents for 2017)
18 cents per mile driven for medical or moving purposes (up from 17 cents for 2017)
14 cents per mile driven in service of charitable organizations (same as for 2017)
The higher IRS 2018 standard mileage rates are caused by higher price for gasoline. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
According to the IRS Rev. Proc. 2010-51, a taxpayer may use the business standard mileage rate to substantiate a deduction equal to either the business standard mileage rate times the number of business miles traveled. If he does use the IRS 2018 standard mileage rates, then he cannot deduct the actual costs items. Even if the IRS 2018 standard mileage rates are used, however, the taxpayer can still deduct as separate items the parking fees and tolls attributable to the use of a vehicle for business purposes.
It is important to note that a taxpayer does not have to use the IRS 2018 standard mileage rates. He always has the option of calculating the actual costs of using his vehicle rather than using the standard mileage rates. In such a case, all of the actual expenses associated with the business use of the vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.
On the other hand, in some circumstances, a taxpayer cannot use the IRS 2018 standard mileage rates. For example, a taxpayer cannot use the IRS business standard mileage rate for a vehicle after using any MACRS depreciation method or after claiming a Section 179 deduction for that vehicle. Additionally, the business standard mileage rate cannot be used for more than four vehicles used during the same period of time. More information about the limitations on the usage of the IRS 2018 standard mileage rates can be found in the IRS Rev. Proc. 2010-51.

### First Quarter 2018 IRS Underpayment Interest Rates | Tax Lawyer MN
On December 5, 2017, the IRS announced that the First Quarter 2018 IRS underpayment interest rates and overpayment interest rates will remain the same as they were in the last quarter of 2017. This means that, the First Quarter 2018 IRS underpayment interest rates and overpayment interest rates will be as follows: On December 5, 2017, the IRS announced that the First Quarter 2018 IRS underpayment interest rates and overpayment interest rates will remain the same as they were in the last quarter of 2017. This means that, the First Quarter 2018 IRS underpayment interest rates and overpayment interest rates will be as follows:
four (4) percent for overpayments (three (3) percent in the case of a corporation);
four (4) percent for overpayments (three (3) percent in the case of a corporation);
four (4) percent for underpayments; six (6) percent for large corporate underpayments; and one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
The Internal Revenue Code requires that the rate of interest be determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The First Quarter 2018 IRS underpayment interest rates and overpayment interest rates were computed based on the federal short-term rate determined during October of 2017 to take effect on November 1, 2017, based on daily compounding.
There are two principal applications for the First Quarter 2018 IRS underpayment interest rates in the context of US international tax law. First, the First Quarter 2018 IRS underpayment interest rates are used to calculate interest on the additional tax liability that has arisen as a result of filing amended federal tax returns.  This is also true with respect to tax returns that are amended as part of the OVDP or the Streamlined Domestic Offshore Procedures voluntary disclosure package.
Second, the First Quarter 2018 IRS underpayment interest rates are relevant to calculation of a PFIC (Passive Foreign Investment Company) interest on PFIC tax imposed on “excess distribution” under the default IRC Section 1291 PFIC calculation method.

### Abandoned OVDP Preclearance Requests Are Targeted by IRS
Since January 31, 2017, all of the denied and abandoned OVDP Preclearance requests have become the target of a special IRS compliance campaign. Let’s analyze in more detail this important development and attempt to predict what may be its main consequences for noncompliant or formerly noncompliant US taxpayers.
Denied and Abandoned OVDP Preclearance Requests: OVDP Background
IRS Offshore Voluntary Disclosure Program (“OVDP” now closed, is a special program developed by the IRS to allow US taxpayers to resolve their past tax noncompliance concerning unreported foreign assets and foreign income. Under the OVDP, US taxpayers have to file delinquent FBARs and other information returns as well as amended tax returns; additionally, the taxpayers are required to pay additional tax due with interest and penalties.
In return, the IRS promises that participation in the OVDP would result in no criminal prosecution for past noncompliance. Furthermore, OVDP offers a clear and limited civil penalty exposure in the form of the Miscellaneous Offshore Penalty, which replaces all other civil penalty systems, including the draconian FBAR penalties.
What Are These Denied and Abandoned OVDP Preclearance Requests?
In order to participate in the OVDP, US taxpayers have to file a Preclearance Request with the IRS-CI (Criminal Investigation). The IRS-CI determines whether applicants are eligible to participate in the OVDP; the taxpayers who fail to meet the eligibility criteria are rejected without the possibility of further participation in the OVDP.
Additionally, especially after the Streamlined Compliance Procedures were instituted, there were a lot of taxpayers who submitted their Preclearance Requests and even certain additional information, but ultimately decided not to participate in the OVDP and/or withdrew from the OVDP. These are abandoned OVDP Preclearance Requests.
Denied and Abandoned OVDP Preclearance Requests: June of 2016 TIGTA Report
Despite the fact that the IRS was already aware of prior noncompliance of the taxpayers who submitted these denied or abandoned OVDP Preclearance Requests, it failed to do any follow-up in many of these cases. In June of 2016, TIGTA issued a report on the IRS management of OVDP. Among other matters, TIGTA recommended that the IRS review all Denied or Abandoned OVDP Preclearance Requests.
LB&I Campaign on Denied and Abandoned OVDP Preclearance Requests
Partially in response to the 2016 TIGTA report, the IRS LB&I announced an unprecedented compliance campaign on Denied and Abandoned Preclearance Requests in January of 2017. The campaign specifically targets taxpayers who were denied the participation in the OVDP or who voluntarily abandoned their Preclearance requests.
On October 26, 2017, an IRS official stated that the Denied and Abandoned OVDP Preclearance Requests Campaign is focusing on approximately 6,000 US taxpayers. It appears that the exact treatment stream will be decided on a case-by-case basis, but the IRS is hoping to review (at least at some level) this entire category of taxpayers. In other words, virtually every one of these taxpayers should expect some sort of communication from the IRS, including, potentially (and maybe even likely) full IRS audit of their tax returns and FBARs.
What Does the LB&I Campaign on Denied and Abandoned OVDP Preclearance Requests Mean for US Taxpayers
US taxpayers who abandoned their OVDP Preclearance Requests or whose requests were denied by the IRS-CI should prepare as soon as possible a viable strategy on how to deal with respect to the potential IRS audit. Right now, they are at an extremely high risk of detection and possible imposition of the IRS civil and criminal penalties.
The options are various and highly depend on the individual fact pattern of a taxpayer. In particular, a taxpayer’s legal position will depend on whether the taxpayer’s prior noncompliance was willful or non-willful and whether he abandoned his OVDP Preclearance Request or such a request was denied.
This entire analysis of a taxpayer’s legal position and available strategies for dealing with a possible IRS audit should be done by an experienced international tax lawyer who specializes in the area of offshore voluntary disclosures.
Contact Sherayzen Law Office for Professional Help With the LB&I Campaign on Denied and Abandoned OVDP Preclearance Requests
If your OVDP Preclearance Request was denied by the IRS or abandoned by you, you should contact Sherayzen Law Office for professional help as soon as possible. Our legal team is highly experienced in the area of international tax law and, specifically, offshore voluntary disclosures. In fact, we have helped hundred of US taxpayers around the globe to bring their US tax affairs into full compliance with US tax laws. We Can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### New Irish Software to Combat Offshore Tax Evasion | Tax Lawyer News
The Irish Revenue is expanding its tax enforcement capabilities through new Irish software. This new Irish software will provide the Irish Revenue with a unique type of a multilateral analysis of a taxpayer in order to combat offshore tax evasion. This is definitely a new development in international tax enforcement and it is the one likely to be followed by other nations, including the United States.
New Irish Software Allows a Brand-New Versatile Analysis of a Taxpayer’s Life
The unique feature of the new Irish software is its multilateral analysis of a taxpayer. First of all, the software will match the data provided by taxpayer (or by other national institutions) with the data collected from other jurisdictions under the automatic information exchange agreements. So far, this is similar to the IRS FATCA software.
However, the new Irish software goes further: it will analyze the taxpayer’s social media accounts, statements, pictures and so on to see if the taxpayer’s posts about his lifestyle match the information provided by the taxpayer to the Irish Revenue. It appears that there are other features of the software which are not even disclosed to the public that also go beyond the traditional analysis of tax and financial documents.
In other words, the new software will do the data analysis that will allow the Irish Revenue to build a complete profile of Irish taxpayers and their activities. This is a very bold and creative approach to tax enforcement, but, as discussed below, it is completely within the logic of the recent trends in international tax enforcement.
The New Irish Software Comes After the Closure of the Irish Voluntary Disclosure Program
The new Irish software is being introduced by the Irish Revenue just about six months after the closure of the Irish voluntary disclosure program. The Irish Revenue received 2,734 disclosures with a declared value of almost 84 million before the program’s deadline for offshore disclosures on May 4, 2017.
Since the voluntary disclosure program is closed, the noncompliant taxpayers who will be identified by the new Irish software are likely to face substantially higher penalties.
Lessons to be Drawn from the New Irish Software With Respect to Future US Tax Enforcement
This latest development in Irish tax enforcement is indicative of the trend of using comprehensive data analytics through smarter, more aggressive software with elements of Artificial Intelligence to identify noncompliant taxpayers. This is the trend that will undoubtedly influence US tax enforcement. In fact, the IRS already has an advanced tax software to analyze FATCA data (which, right now, is filled with errors and not very effective). Moreover, the IRS has also stated that it will develop its own AI software to identify US international tax noncompliance.
Furthermore, it seems that there is a worldwide trend toward harsher international tax enforcement in lieu of continuation of the existing voluntary disclosure programs. The fact that the Irish Revenue unveiled new software after the closure of the voluntary disclosure program is also not an accident, but a planned course of events.
We can already observe the same trend here in the United States. The IRS is stepping up FBAR audits while the DOJ (US Department of Justice) is dramatically increasing its FBAR-related litigation. Additionally, the IRS has recently announced its intentions to seriously modify and even close its own voluntary disclosure programs.
The combination of all of these trends means that noncompliant US taxpayers are at an extremely high risk of detection at the time when most of their voluntary disclosure options are being closed or significantly modified. This is why this is the critically-important time for these taxpayers to explore their voluntary disclosure options while they are still available. Failure to do so now may lead to extremely unfavorable tax consequences, including the imposition of substantially higher IRS penalties.
Contact Sherayzen Law Office for Professional Help with Your Offshore Voluntary Disclosure
If you have undisclosed foreign assets (including foreign bank and financial accounts) or foreign income, please contact Sherayzen Law Office as soon as possible. Our international tax law firm has successfully helped hundred of US taxpayers with their offshore voluntary disclosures. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Reducing Form 5471 Penalties | Form 5471 Tax Lawyer & Attorney
Reducing Form 5471 penalties has become a big headache for US shareholders of foreign corporations due to a very aggressive enforcement stance by the IRS. In this essay, I would like to explore the main option for reducing Form 5471 penalties – the Reasonable Cause Exception.
Reducing Form 5471 Penalties: What is Form 5471?
26 USC §6038 requires a US shareholder to report certain information with respect to a foreign corporation which is owned at least ten percent by the shareholder. Additionally, 26 USC §6046 imposes additional reporting requirements on US shareholders and US directors of a foreign corporation with respect to acquisition of its stock, its organization and its reorganization.
All of these reporting requirements can be satisfied by a timely filing of accurate Form 5471 with the taxpayer’s tax return. There are four different categories of Form 5471 filers depending on the taxpayer’s ownership percentage, the event that triggered the filing of Form 5471, whether the taxpayer is a director of the corporation and whether the corporation in question is a Controlled Foreign Corporation (“CFC”). Each of the filer categories needs to complete his own parts of Form 5471 and its Schedules.
Reducing Form 5471 Penalties: Form 5471 Penalties
There are five sets of Form 5471 penalties that may be imposed on US shareholders.
First, with respect to failure to comply with Form 5471 and Schedule M requirements (i.e. failure to comply with 26 USC §6038), there is a $10,000 penalty per form. Additionally, an extra $10,000 penalty per each 30-day period (or a fraction thereof) during which the failure continues after the initial 90-day notice from the IRS. This additional penalty is capped at $50,000 per form.
Second, with respect to failure to comply with Form 5471 and Schedule O requirements (i.e. failure to comply with 26 USC §6046), there is another $10,000 penalty. Similar to §6038, an additional $10,000 penalty may be imposed by the IRS for continuous failure to comply with 26 USC §6046; this penalty also cannot exceed $50,000 per form.
Third, in certain situation, the IRS may recommend criminal penalties under 26 USC §§7203, 7206 and 7207 if a taxpayer fails to comply with 26 USC §§6038 and §6046.
Fourth, failure to timely supply the required Form 5471 information may result in a 10% reduction in the foreign tax credit available under 26 USC §§901, 902 and 960. If the failure persists for 90 days or more after the date when the IRS informs the taxpayer of this failure, an additional 5% reduction is applied for each three-month period (or fraction thereof) of the continuation of the failure to comply with Form 5471 requirements. 26 USC §6038(c)(2) imposes certain limitations on this reduction of foreign tax credit.
Finally, foreign financial asset understatement penalties may be imposed pursuant to 26 USC §6662(j). In other words, any underpayment of tax as a result of a taxpayer’s failure to file an accurate Form 5471 will lead to the imposition of a 40% penalty on the underpaid tax (as opposed to the usual 20% accuracy-related penalty on underpayments).
Reducing Form 5471 Penalties: the Reasonable Cause Exception
All of the penalties listed above may be reduced to zero if the taxpayer is able to establish that he could not comply with Form 5471 requirements due to reasonable cause. For example, see Treas. Reg. §1.6038-2(k)(3).
Reasonable Cause is not defined anywhere in the Internal Revenue Code, but, in general, the courts have followed the Supreme Court’s definition in United States v. Boyle, 469 U.S. 241, 246, 105 S. Ct. 687, 83 L. Ed. 2d 622 (1985). The Boyle case stated that, if a taxpayer exercises ordinary business care and prudence and is nevertheless unable to obtain and provide the required information, the failure to file will be considered to have occurred due to reasonable cause.
This is a standard that, of course, requires a very detailed analysis of the facts that led to Form 5471 noncompliance. Drafting a Reasonable Cause Statement is a very creative and detail-oriented process at the same time. Everything should be analyzed carefully by the international tax attorney who is drafting a Reasonable Cause Statement: taxpayer’s education and work history, his cultural backgrounds, reliance on tax and financial professionals, mistaken understanding of law or facts, circumstances beyond the taxpayer’s control and innumerable other factors.
Reducing Form 5471 Penalties: Administrative Process
In order to establish that the Reasonable Cause exception applies to Form 5471 noncompliance, the taxpayer needs to make an affirmative showing of all facts alleged as reasonable cause in a written statement containing a declaration that it is made under the penalties of perjury. See Treas. Reg. §1.6038-2(k)(3). “The statement must be filed with the district director for the district or the director of the service center where the return is required to be filed.” Id.
Contact Sherayzen Law Office for Professional Help In Reducing Your Form 5471 Penalties
Sherayzen Law Office has a unique expertise in drafting Form 5471 Reasonable Cause Statements with respect to foreign corporations established in a very wide range of countries in Africa, Asia (including Japan), Europe and Latin America; of course, we a also have had a large number of clients who own Canadian corporations. We have helped all of these taxpayers to successfully reduce and even eliminate their Form 5471 penalties.
Contact Us Today to Schedule Your Confidential Consultation!

### IRS Written Advice Abatement Procedures | IRS Tax Lawyer
This is the concluding article in our series of articles on the topic of the IRS Written Advice Defense. In prior articles, we have outlined the general legal test of the IRS Written Advice Defense and described each of the three prongs of this test. In this article, I would like to discuss the IRS Written Advice Abatement Procedures – i.e. the actual administrative process for requesting abatement of penalties based on this defense.
This article is for educational purposes only and I strongly encourage you to retain the services of an experienced tax attorney before engaging in the IRS Written Advice Abatement Procedures.
IRS Written Advice Abatement Procedures: Form 843
The centerpiece of the IRS Written Advice Abatement Procedures is Form 843. Taxpayers who are entitled to an abatement of penalties pursuant to 26 U.S.C. §6404(f) should complete and file Form 843. At the top of Form 843, taxpayers should write: “Abatement of penalty or addition to tax pursuant to section 6404(f).” Furthermore, taxpayers should state on Form 843 whether the penalty or addition to tax has been paid.
IRS Written Advice Abatement Procedures: Documents to Be Submitted with Form 843
The taxpayers must submit copies of the following documents together with their Form 843 (note that these documents are directly related to the three-prong legal test for the IRS Written Advice Defense):
1. A copy of the taxpayer’s written request for the IRS advice (with a statement of adequate and accurate facts);
2. A copy of the erroneous written advice provided by the IRS to the taxpayer and relied upon by the taxpayer; and
3. A copy of a report (if any) of tax adjustments (the report should identify the penalty or addition to tax and the item for which the erroneous IRS written advice was requested).
In addition to these required documents, I recommend that most of Form 843 abatement requests be accompanied by a detailed description of facts, the erroneous IRS written advice, the taxpayer’s reliance on this advice and how this reliance led to the imposition of a penalty.
IRS Written Advice Abatement Procedures: Time Limitations for Filing Form 843
The IRS regulations also address the issue when Form 843 should be submitted in order to be considered a timely request for abatement. The regulations specified that any abatement of a penalty or addition to tax pursuant to 26 U.S.C. §6404(f) will be permitted only if the request for such an abatement “is submitted within the period allowed for collection of such penalty or addition to tax, or, if the penalty or addition to tax has been paid, the period allowed for claiming a credit or refund of such penalty or addition to tax.” Treas. Reg. §301.6404-3(e).
IRS Written Advice Abatement Procedures: Where to File Form 843
The mailing address of Form 843 depends on whether the incorrect IRS advice is related to an item on a federal tax return. If the advice is related to an item on the taxpayer’s tax return, then Form 843 should be submitted to the IRS center where the tax return was originally filed. On the other hand, if the erroneous IRS advice is not concerning any item of the taxpayer’s federal tax return, then the taxpayer should submit Form 843 to the IRS Center where the taxpayer's return was filed for the taxable year in which the taxpayer relied on the erroneous advice.
Contact Sherayzen Law Office for Professional Help With Respect to Abatement or Reduction of IRS Penalties
If the IRS imposed a penalty with respect to your prior noncompliance with US international tax returns, such as FBAR, Forms 926, 3520, 5471, 5472, 8621, 8865, 8938, et cetera, contact Sherayzen Law Office to explore your IRS penalty reduction options. Sherayzen Law Office is an international tax law firm that has helped US taxpayers around the world to deal with these penalties. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### IRS Written Advice Defense: Adequate & Accurate Information | Tax Lawyer
This is the fourth article on the topic of the IRS Written Advice Defense under 26 U.S.C. §6404(f). The first three articles outlined the legal test for the Defense and described the first and the second prongs of the test. In this say, I will briefly discuss the final third prong of the IRS Written Advice Defense – the requirement to provide adequate and accurate description of facts.
IRS Written Advice Defense: Taxpayer Must Provide Adequate and Accurate Description of Facts
When a taxpayer asks the IRS for advice, he must provide adequate and accurate description of his facts based on which the IRS has to make its decision. If the taxpayer fails to supply the IRS with adequate and accurate information, then the IRS Written Advice Defense will fail. See Treas. Reg. § 301.6404-3(b)(4). It should be noted that the IRS “has no obligation to verify or correct the taxpayer's submitted information.” Id.
This is a much more difficult task that it may appear, because “adequate” really means here a complete set of all material facts that may influence the IRS analysis. If the taxpayer provides only the facts that are favorable and omits the facts which are unfavorable, the IRS advice will not give the taxpayer the protection against imposition of future penalties that the he seeks.
This is why I strongly encourage taxpayers to retain tax attorneys to submit their written request for the IRS written advice. This is especially true in the area of US international tax law.
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Sherayzen Law Office has an extraordinary experience in drafting Reasonable Cause Statements on various grounds, including IRS advice. We have drafted such statements in defense against imposed and potential FBAR, Form 926, 3520, 5471, 8621, 8865 and other IRS penalties.
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### IRS Written Advice Defense & The Written Request | Tax Lawyers MN
This article is a continuation of the series of articles on the IRS Written Advice Defense. In the first article of this series, I outlined the legal test for the Defense. The second article of the series focused on the first prong of that test. In this essay, I would like to briefly highlight the second prong of this legal test: the IRS written Advice must be issued in response to a taxpayer’s written request.
IRS Written Advice Issued in Response to Written Request by the Taxpayer
This second prong of the IRS Written Advice Defense is not as simple as it seems at first. The main issue here is when a specific written request is considered to be made by a taxpayer. Obviously, if the taxpayer writes a written request himself, it was made “by a taxpayer”. What about a request made by a taxpayer’s representative?
The IRS regulations state that a written request from a taxpayer’s representative shall be considered a “written request by the taxpayer” only if two conditions are met. First, a taxpayer’s representative must be “an attorney, a certified public accountant, an enrolled agent, an enrolled actuary, or any other person permitted to represent the taxpayer before the Service and who is not disbarred or suspended from practice before the Service.” Treas. Reg. §301.6404-3(b)(3).
Second, “the written request for advice either is accompanied by a power of attorney that is signed by the taxpayer and that authorizes the representative to represent the taxpayer for purposes of the request, or such a power of attorney is currently on file with the Service.” Id.
The Written Request for the IRS Written Advice Must Be Properly Made
In a future article, I will describe the property abatement procedure with which the taxpayer’s written request must comply. For the purposes of this essay, I just wish to point out that this is the second major issue concerning written requests for the IRS Written Advice.
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### IRS Written Advice Defense: Reasonable Reliance | International Tax Lawyer
In a previous article, I outlined the three-prong legal test of the IRS Written Advice Defense. This article aims to explore the first prong of that test: the IRS written advice was reasonably relied upon by the taxpayer. In particular, I would like to explain two important concepts of this part of the test: “advice”and “reasonable reliance”.
IRS Written Advice Defense: Advice
In the context of the IRS Written Advice Defense, “advice” is not just any written response provided by the IRS. Rather, for purposes of the IRC section 6404(f), a written response issued to a taxpayer by the IRS “shall constitute ‘advice’ if, and only if, the response applies the tax laws to the specific facts submitted in writing by the taxpayer and provides a conclusion regarding the tax treatment to be accorded the taxpayer upon the application of the tax law to those facts.” Treas. Reg. § 301.6404-3(c)(1).
IRS Written Advice Defense: Reasonably Relied Upon
The IRS Written Advice Defense can only work if the taxpayer actually reasonably relied upon the advice furnished by the IRS – i.e. the taxpayer took an action or failed to act in response to the advice. One of the main issues here is the timing of the taxpayer’s reliance.
In situations related to an item on a taxpayer’s federal tax return, if an IRS advice was received after the taxpayer already filed his original return, the IRS Written Advice Defense is likely to fail because the IRS will not consider the taxpayer’s post factum reliance on its advice as reasonable.
There is an exception, however, with respect to situations where the taxpayer took action in response to the IRS advice and filed an amended tax return. As long as the amended return conforms with the IRS written advice, “the taxpayer will be considered to have reasonably relied upon the advice for purposes of the position set forth in the amended return.” Treas. Reg. §301.6404-3(b)(2)(iii).
Similarly, in cases where an IRS written advice is furnished with respect to an item unrelated to a federal tax return (e.g. estimated tax payments) and it is furnished before the taxpayer acted or failed to act on the item that caused the imposition of IRS penalties, the IRS will again not consider the taxpayer’s reliance as reasonable or timely.
IRS Written Advice Defense: Duration of the Period of Reliance
It is also important to remember that a period of reliance on the IRS written advice only lasts until the taxpayer is put on notice that the advice no longer corresponds to the IRS position. The question is: what does being “put on notice” mean?
There are five situations which will end the taxpayer’s period of reasonable reliance on the IRS advice as long as they occur subsequent to the issuance of the advice by the IRS:
(a) the taxpayer receives a letter from the IRS stating that the advice no longer reflects the IRS position;
(b) a tax treaty is enacted or a new tax law was passed and both of these events concern the item with respect to which the IRS advice was issued;
(c) A decision of the United States Supreme Court;
(d) The issuance of temporary or final regulations by the IRS ; or
(e) The issuance of a revenue ruling, a revenue procedure, or other statement by the IRS that was published in the Internal Revenue Bulletin.
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### IRS Written Advice - Legal Test | International Tax Lawyer & Attorney
IRS written advice can constitute a reasonable cause defense against an imposition of pretty much any tax penalty related to noncompliance that stemmed from that advice. This essay begins a series of articles with respect to various aspects of the IRS Written Advice Defense. Today, I will outline the statutory authority and the main legal test for the IRS Written Advice Defense as well as describe the penalties against which this Defense can be used.
IRS Written Advice Defense: Statutory Authority and Treasury Regulations
Pursuant to the Internal Revenue Code (“IRC”) Section 6404(f) and Treasury Regulations §301.6404-3, the IRS is required to abate any portion of any penalty attributable to erroneous IRS written advice furnished to the taxpayer by an officer or employee of the IRS acting in such officer’s or employee’s official capacity.
IRS Written Advice Defense: Penalties That Can Be Abated
I already mentioned above that the IRS Written Advice Defense may be applicable to pretty much any penalty that was imposed from that advice – this is obviously a simplification, but it is very close to reality. The regulations specify that the IRS Written Advice Defense applies to any penalty or addition to tax “imposed under subtitle F, chapter 68, subchapter A and subchapter B of the Internal Revenue Code, and the liabilities imposed by sections 6038(b), 6038(c), 6038A(d), 6038B(b), 6039E(c), and 6332(d)(2).” Treas. Reg. § 301.6404-3(c)(2).
Moreover, the IRS Written Advice Defense also applies to any liability “resulting from the application of other provisions of the Code where the Commissioner of Internal Revenue has designated by regulation, revenue ruling, or other guidance published in the Internal Revenue Bulletin that such provision shall be considered a penalty or addition to tax for purposes of section 6404(f).” Id.
Finally, the Defense will further apply to any “interest imposed with respect to any penalty or addition to tax.” Id.
It is important to point out that the IRS written advice may be a very important reasonable cause defense against FBAR, Form 5471 and Form 5472 penalties.
IRS Written Advice Defense: Legal Test
The Treasury Regulations describe all three prongs of the legal test that must be satisfied before relief from tax penalties is granted based on the IRS Written Advice Defense:
(i) The written advice was reasonably relied upon by the taxpayer;
(ii) The advice was issued in response to a specific written request for advice by the taxpayer; and
(iii) The taxpayer requesting advice provided adequate and accurate information.
In subsequent articles I will explore each prong of this legal test in more detail.
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### El Salvador Tax Amnesty Program | International Tax Lawyer & Attorney
On October 10, 2017, the Salvadorian Congress enacted the Legislative Decree No. 804, “La Ley Transitoria para el Cumplimiento Voluntario de Obligaciones Tributarias y Aduaneras”. After noting the experience of the past El Salvador voluntary disclosure options, the Decree announced a three-month long El Salvador Tax Amnesty Program. Let’s briefly explore the main contours of this new El Salvador Tax Amnesty Program.
The Duration of El Salvador Tax Amnesty Program
The Decree specifies that the program will become effective on October 27, 2017 and it will end on January 27, 2018.
The Terms of El Salvador Tax Amnesty Program
El Salvador Tax Amnesty Program basically allows El Salvadorian taxpayers to voluntarily come forward, correctly declare their income and pay any undeclared or understated taxes. In return for doing so, all penalties, charges and interest will be waived by the tax authorities of El Salvador, la Dirección General de Impuestos Internos. This Salvadorian voluntary disclosure program compares very favorably with the IRS OVDP now closed (which is not really an amnesty program and imposes a significant penalty for prior noncompliance).
The El Salvador Tax Amnesty Program is also very broad. The voluntary disclosure program is applicable to all taxpayers with outstanding tax liabilities that were due prior to October 27, 2017. The program covers understated taxes, undeclared taxes, withholding taxes, VAT, real estate transfer taxes and basically all other situations. The program is applicable to taxpayers irrespective of whether they ever filed their tax returns. El Salvador Tax Amnesty Program will even allow the taxpayers to simply pay their tax liability without any penalties, even if the income was already declared and taxes assessed.
Only a narrow category of taxpayers is not eligible to participate in El Salvador Tax Amnesty Program: the taxpayers already under a criminal investigation initiated by la Dirección General de Impuestos Internos and la Dirección General de Aduanas.
US Taxpayers May Participate in El Salvador Tax Amnesty Program and US Voluntary Disclosure at the Same Time
If you are a US taxpayer who has not declared his Salvadorian income in the United States and El Salvador, you may be eligible to participate in the voluntary disclosure programs of both countries at the same time.
It is important to remember, however, that these voluntary disclosures should be coordinated by your US and Salvadorian lawyers. The main reason for this coordination is a concern that an information disclosed under El Salvador Tax Amnesty Program may be automatically disclosed to the IRS by la Dirección General de Impuestos Internos, leading to an investigation that may prevent you from going through a voluntary disclosure in the United States.

### OVDP & Streamlined Disclosure May Terminate Soon | Foreign Accounts Lawyer
On November 15, 2017, the IRS sent yet another signal that certain offshore voluntary disclosure options, particularly the OVDP & Streamlined Disclosure options, will be significantly modified or even terminated as the IRS proceeds with the LB&I Compliance Campaigns. This means that US taxpayers with undisclosed foreign accounts need to hurry up if they wish to proceed with their offshore voluntary disclosure utilizing the OVDP or the Streamlined Compliance Procedures.
OVDP & Streamlined Disclosure Termination: What Did the IRS Say?
The latest signal on the termination of the OVDP & Streamlined Disclosure options came from Mr. John Cardon (director of the withholding and international compliance area within IRS LB&I) and Mr. Daniel Price, an attorney with the IRS Office of Chief Counsel, Small Business/Self-Employed Division in Austin, Texas.
Both IRS officials emphasized that the current Offshore Voluntary Disclosure Program and the Streamlined Filing Procedures are likely to terminate soon. Mr. Price emphasized the fact that these voluntary disclosure options were always intended as special offers that were bound to end at some point.
The possibility that the IRS wishes to terminate the Streamlined Disclosure options in addition to OVDP is somewhat sudden and premature. The IRS already stated in the past that it is no longer satisfied with the OVDP, but it never complained about the Streamlined Compliance Procedures (which have been highly successful with over 18,000 disclosures just in the last year). It is also not clear whether the IRS wishes to completely terminate all OVDP and Streamlined Disclosure options or whether the Streamlined Filing Procedures will survive in one form or another.
Why the IRS Wishes to End OVDP & Streamlined Disclosure Options
There is more than one reason behind the current IRS drive to end or significantly modify the existing voluntary disclosure options. Let’s focus on the two most important of them.
First, the existing voluntary disclosure options are rapidly losing value as a source of new information regarding offshore noncompliance with US taxes. FATCA has created an enormous and continuously expanding network of automatic information exchange between the IRS and foreign financial institutions. Moreover, other automatic information exchanges mechanisms have successfully filled most of the gaps left by FATCA.
In other words, now that offshore tax compliance and automatic international information exchanges have become a worldwide norm, the IRS does not need voluntary disclosures to obtain new information about offshore tax noncompliance.
Second, there has been a systemic change to a different model of tax administration. As the IRS officials emphasized on November 15, 2017, the IRS is shifting away from processing broad voluntary disclosure programs while it is embracing the model of focused enforcement. This is precisely why the IRS created the LB&I Compliance Campaigns – to concentrate its limited resources on tax enforcement where it is most needed rather than engage in broad efforts with respect to voluntary correction of past errors. Hence, in an environment where enforcement dominates over voluntary disclosures, the utility of the IRS voluntary disclosure options becomes more and more limited.
OVDP & Streamlined Disclosure Termination: When Will the IRS Announce the Termination of the Current OVDP & Streamlined Disclosure Programs?
It appears that the IRS will make the appropriate announcement for the termination of the voluntary disclosures prior to the end of January of 2018.
Will the Termination of Current OVDP & Streamlined Disclosure Programs Happen Immediately or Sometime After the Announcement?
It appears that, even after its announcement of the termination of the OVDP & Streamlined Disclosure options, the IRS will provide some time for the taxpayers to finalize their on-going disclosures. Mr. Cordone even stated that the voluntary disclosure programs’ termination date could be as far away as one year from the date of the IRS announcement of such a termination.
Will the End of OVDP & Streamlined Disclosure Programs Also Mark the End of IRS Voluntary Disclosures Per Se?
While the recent IRS moves are of great concern, they should not be taken as the end of the IRS voluntary disclosures per se with no options available to remedy one’s past tax noncompliance with respect to offshore accounts. Rather, I expect that the IRS voluntary disclosures will simply shift to different options. It is beyond the scope of this article to discuss these potential voluntary disclosure options, but it is reasonable to assume we will find ourselves in situation somewhat reminiscent of the period of time between the end of 2011 OVDI and the beginning of 2012 OVDP.
If, however, a taxpayer wishes to take advantage of the existing voluntary disclosure options, the taxpayer should contact Sherayzen Law Office as soon as possible to make sure that the voluntary disclosure can be completed before the IRS closes OVDP & Streamlined Disclosure Program.
Contact Sherayzen Law Office for Professional Help with Your Offshore Voluntary Disclosure, including the OVDP & Streamlined Disclosure Options
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### New PFIC Foreign Trust Rules by June of 2018 | PFIC Lawyer & Attorney
On November 9, 2017, the IRS gave a clear signal that it is working on new PFIC Foreign Trust rules and hopes to have these new regulations published by June of 2018. The IRS also indicated that other areas of PFIC rules will be affected and it expects the Subpart F regulations to come out before the new PFIC regulations.
The area of intersection of PFIC rules and Foreign Trust rules is an area of law that has remained murky since the late 1980s. Let’s explore in more detail what exactly the problem is and why the new PFIC Foreign Trust regulations are so important.
PFIC Foreign Trust Rules
PFIC Foreign Trust Rules: What is a PFIC?
In general, a foreign corporation that is not a “controlled foreign corporation” (CFC) as defined in IRC section 957, nor a “foreign personal holding company” (FPHC) as defined in IRC section 552, will be determined to be a Passive Foreign Investment Company or (PFIC) if it has at least one US shareholder and meets either one of the two tests found in IRC section 1297: (a) income test: at least 75% or more of the corporation’s gross income is passive income; or (b) asset test: at least 50% of the average percentage of its assets are investments that produce or are held for the production of passive income.
PFIC is a unique US classification that has no equivalents anywhere in the world. The PFIC designation was created by Congress in 1986 (as part of the Tax Reform Act of 1986). In essence, this is an anti-deferral regime meant to deter US taxpayers from deferring or avoiding payment of US taxes by transferring money or investing in passive offshore entities. This is why the PFIC rules are so severe, imposing the highest marginal tax on the income considered as “excess distribution” and converting the rest of the income from capital gains into ordinary income.
PFIC Foreign Trust Rules: Foreign Trust Rules on Distribution of Accumulated Income
The IRS also has a special set of rules concerning foreign trust’s distribution of accumulated income from prior years. In order to analyze these rules, we need to understand two concepts: distributable net income (“DNI”) and undistributed net income (“UNI”). With respect to foreign trusts, in general (and there are exceptions), DNI includes all of the ordinary income and capital gains earned by a foreign trust in current taxable year. If a foreign trust does not distribute its entire DNI in the taxable year when DNI is earned, then, the undistributed portion of DNI (after taxes) becomes UNI.
Hence, whenever we discuss a distribution of a foreign trust’s accumulated income, this means a distribution of UNI in excess of DNI (on FIFO basis). So, what happens if a foreign trust distributes UNI to a US beneficiary?
In general, such distributions of UNI are taxed according to the infamous “throwback rule”. The throwback rule is complex and I can only state here a very simplified description of it. In general, under the throwback rule, distributed UNI will be taxed at the beneficiary’s highest marginal tax rate for the year in which UNI was earned. In other words, the throwback rule divides up UNI back into DNI portions for each relevant taxable year (but not exactly; this is an assumed DNI, not an actual one), adds these portions to the already-reported income on the beneficiary’s US tax returns and, then, imposes the tax on this income.
The throwback rule, however, does more than just add the income to the tax returns - it adds the income always as ordinary income, even if the original undistributed DNI consisted of long-term capital gains. Moreover, the throwback rule imposes an interest charge on the additional “throwback” taxes; the interest accumulates in a way somewhat similar to PFIC rules.
There is a way to mitigate the highly unfavorable consequences of the throwback rule called the “default method” (the name does not make much sense because you can use it only in specific circumstances). In general, you can use the default method in situations where the foreign trust does not provide its US beneficiaries with the information sufficient to identify the character of the distributed income. It is beyond the scope of this article to describe this method in detail, but, there are potentially highly unfavorable consequences to using the default method as well.
PFIC Foreign Trust Rules: the Inconsistency Between PFIC Rules and Foreign Trust Rules With Respect to Accumulated Income
Now that we have a general familiarity with PFIC rules and the foreign trust UNI distribution rules, we can now understand the area of confusion between PFIC rules and Foreign Trust rules that the IRS wishes to finally clear up by June of 2018. The confusion arises when both anti-deferral regimes are combined into PFIC Foreign Trust rules.
Let’s clarify this issue further. The basic problem occurs whenever a foreign trust distributes UNI that originates from accumulated PFIC income. For example, in a situation where a foreign trust received PFIC dividends and did not distribute them as part of its DNI distribution, such dividends would be added to the trust’s UNI. In this situation, if the trust distributes its PFIC UNI and we just follow the standard UNI rules, the PFIC rules would never be taken into account. The IRS, however, never said that the throwback rule or the default method should trump PFIC rules; it is also unclear about what should be reported on Form 8621 (for indirect ownership of PFICs).
On the other hand, if a taxpayer calculates his tax liability under the PFIC rules, then, he cannot comply with his Form 3520 requirements. The IRS also never stated that PFIC rules should triumph over either the throwback rule or the default method for UNI distributions. In other words, there is no clear guidance on what to do in this situation.
There is simply no compatibility between the foreign trust’s UNI distribution rules and the PFIC rules: one of them has to triumph or a completely new set of regulations has to be issued by the IRS to address the PFIC Foreign Trust rules. As an international tax attorney, I hope that the IRS keeps its word and resolves this highly important dilemma of the US international tax law.
Contact Sherayzen Law Office for Help With PFIC Foreign Trust Rules and Other International Tax Issues
If you are struggling with the PFIC Foreign Trust rules or you have any other issues concerning your compliance with your US international tax obligations, contact Sherayzen Law Office for professional help.
Sherayzen Law Office has helped hundreds of US taxpayers around the globe with their US tax compliance issues, including those concerning the PFIC rules and foreign trust rules. We can help You!
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### Egyptian Bank Accounts & FATCA Letter | FATCA Lawyer & Attorney
Year 2017 marked an important increase in FATCA compliance throughout the Middle East, despite the fact that most countries of this region did not sign a FATCA implementation treaty. US owners of Egyptian bank accounts were among the most affected in the area. In this brief essay, I will explain what receiving a FATCA Letter means for a US owner of undeclared Egyptian bank accounts and what a US owner of undeclared Egyptian bank accounts should do.
Egyptian Bank Accounts: What is FATCA Letter?
An important part of the Foreign Account Tax Compliance Act (“FATCA”) is the requirement that foreign financial institutions (“FFIs”) gather certain information concerning their clients, including the verification of their US tax residency status. In order to comply with this requirement, FFIs send out special letters to their clients to collect the necessary FATCA information. These letters are commonly known as FATCA letters.
FATCA letters can be mailed or emailed, depending on the contact policy of a particular FFI in a particular country as well as contact information that FFI has with respect to its clients. So far, it appears that the majority of FATCA letters sent out by Egyptian banks concerning Egyptian bank accounts are mailed to their clients.
Egyptian Bank Accounts: What does Receiving a FATCA Letter Mean for a US Owner?
Whenever a US owner receives a FATCA letter concerning his undisclosed Egyptian bank accounts, this is an important event for US tax compliance purposes. Let’s concentrate on the three most important consequences.
First, the most immediate impact of receiving a FATCA letter is that it definitely means that this particular owner of Egyptian bank accounts was identified as a potential US tax resident. In other words, from that point on, the owner will have to face the consequences of not disclosing his Egyptian bank accounts to the IRS and he has to make at least one of the following three choices:
1. The owner can disregard the letter and never respond to it. The consequence of this action closure of the owner’s Egyptian bank accounts by his Egyptian bank and reporting of the owner as a “recalcitrant” taxpayer to the IRS;
2. The owner can dishonestly respond to the FFI that he is not a US tax resident. If he does it, he is basically creating circumstantial evidence for the IRS that his prior US tax compliance concerning his Egyptian bank accounts was willful. Moreover, it may actually cause an IRS investigation if the information that the owner supplies to the Egyptian bank does not otherwise match the information that the IRS has already collected from other sources; or
3. The owner can disclose to the bank that he is a US tax resident. Such an outright, honest disclosure is likely to be interpreted in favor of the owner’s non-willfulness with respect to his prior US tax noncompliance. This action, however, implies that the owner should immediately seek help from Sherayzen Law Office with respect to his IRS voluntary disclosure options (see the third consequence of receiving a FATCA letter below).
The second consequence of receiving a FATCA letter is that it may act as a notice to the owner of undisclosed Egyptian bank accounts that he is required to report them and the foreign income they produce to the IRS. It will be an important factor with respect to whether the owner would be later able to certify his non-willfulness if he chooses to do his voluntary disclosure through Streamlined Filing Compliance Procedures.
Finally, receiving a FATCA letter means that the clock has already started for the taxpayer to beat the Egyptian bank’s disclosure of his Egyptian foreign accounts to the IRS. In other words, the owner needs to explore his voluntary disclosure options as soon as he receives the FATCA letter. If the IRS starts an investigation of the owner’s prior tax noncompliance before his voluntary disclosure or (in case of the IRS Offshore Voluntary Disclosure Program) before he files his Pre-Clearance Request, the owner of Egyptian bank accounts is very likely to be prevented from doing any type of a voluntary disclosure except the one based on the Reasonable Cause Exception (assuming he is able to satisfy the requirements of this statutory defense).
What Should a US Owner Do If He Receives a FATCA Letter Concerning His Egyptian Bank Accounts?
If an owner of Egyptian bank accounts receives a FATCA letter, the most recommended course of action for him is to contact an international tax law firm as soon as possible. He definitely needs to meet the deadline for answering to his Egyptian bank (or ask for extension, which may often be granted), but it is imperative that he contacts a tax professional who specializes in this area first.
Contact Sherayzen Law Office for Professional FATCA Help With Respect To Your Egyptian Bank Accounts
If you received a FATCA letter concerning your Egyptian bank accounts, contact Sherayzen Law Office for professional tax help as soon as possible. Offshore voluntary disclosure is our specialty. We have helped hundreds of US taxpayers around the globe to bring their US tax affairs concerning undisclosed foreign accounts in order, and we can help You!
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### Manafort FBAR Violations Indictment | International Tax Lawyer & Attorney
On October 30, 2017, Mr. Paul Manafort was charged with FBAR violations among other charges. Manafort FBAR violations charges were filed as a result of an ongoing investigation led by special counsel Robert Mueller.
While the investigation should have been searching for possible ties between Mr. Manafort and the Russian government, it found something completely different. Instead of finding any ties to the Russians, it found that Mr. Manafort was lobbying on behalf of the Ukrainian government (currently the archenemy of Russia and involved in a civil war with its eastern provinces) without registering as a foreign agent.
Moreover, it has led to the IRS Criminal Investigation with respect to Mr. Manafort’s FBAR noncompliance. Let’s explore this part of the investigation in more detail.
Manafort FBAR Violations Indictment: Alleged Facts
According to the indictment, Manafort failed to report his interest in over a dozen foreign entities, primarily in Cyprus, and used those entities to hide millions of dollars in foreign bank accounts from the U.S. government. Over $75 million allegedly flowed through the accounts, but only a portion of it was accessed. Manafort was accused of using over $18 million of proceeds on personal expenses.
The government further alleges that, during 2008-2014, Mr. Manafort falsely stated on his tax returns that he did not have an authority over any foreign bank accounts (I believe the reference here is to Part III of Schedule B, Form 1040).
Furthermore, the government claims that Mr. Manafort lied, in writing, to Mr. Manafort's tax return preparer in order to conceal his authority over the undisclosed foreign accounts. It is obvious that this accusation is meant to preempt the reasonable cause reliance defense against FBAR penalties.
The indictment includes seven counts of willful FBAR violations under 31 U.S.C. section 5322. It is possible that Mr. Manafort may try to throw out some of the counts on the basis of the FBAR Statute of Limitations, but not all facts of the case are known at this point to estimate the success of this defense.
Manafort FBAR Violations Indictment: No Tax Evasion Charges
It is very strange, but the indictment does not contain a separate tax evasion charge, which requires the approval of the DOJ’s Tax Division. This omission is even more puzzling in light of the fact that the government alleges in its indictment that Mr. Manafort did not pay taxes on any income related to undisclosed foreign accounts. The government even specifically states that he purchased properties in Virginia and took out loans for the purpose of having access to untaxed income.
Manafort FBAR Violations Indictment: How Was $18 Million Calculated
The Manafort case is very good in one aspect: it allows us to see the government methodology for identifying potential willful FBAR violations. The main tool in this case was the government’s analysis of Mr. Manafort’s lifestyle.
The government alleged that, between 2008 and 2014, Mr. Manafort made domestic expenses of close to $18 million dollars which the government believes came from undisclosed foreign bank accounts and should be directly tied to Mr. Manafort FBAR violations. Most of this money was spent on improving real estate as well as purchases at antique shops, car dealerships and so on.
Manafort FBAR Violations Indictment: A Political Case With Important Lessons
It is important to remember that, at this point, these are merely government allegations and Mr. Manafort is presumed to be innocent until found otherwise by a court of law or a jury. While it is too early to state whether the government can prove its allegations and the case does have a very strong political background, it is still important to study the lessons of this case with respect to the government’s ability to pursue FBAR violations. The government’s methodology in this case is somewhat unusual, and all international tax lawyers should follow this case closely to see how the courts react to the government’s strategy.

### New 11 IRS Compliance Campaigns | International Tax Lawyer & Attorney
On November 3, 2017, the IRS Large Business and International Division (“LB&I”) announced the rollout of additional 11 IRS Compliance Campaigns in addition to the 13 already existing campaigns. Most of these campaigns directly address the IRS concerns with respect to US international tax law compliance. Let’s explore these new 11 IRS Compliance Campaigns.
New 11 IRS Compliance Campaigns: What Does This Mean for Taxpayers?
The issue-based IRS Campaigns is the brand-new strategy of the IRS to maximize the utility of its strained resources. Unlike previous efforts, a Campaign basically focuses on a specific issue that may carry a significant non-compliance risk and, then, applies a variety of solutions (called “treatment streams”) to increase the compliance with respect to this issue. The treatment streams range from development of an externally published practice unit, potential published guidance to issue-based examinations.
From a taxpayer point of view, the new strategy means that, if the IRS announces a new campaign, US taxpayers associated with the risk issue at the heart of a new campaign are at increased audit risk.
New 11 IRS Compliance Campaigns: General Emphasis on International Tax Compliance
Seven out of total eleven campaigns are focused on international tax compliance. This means that the IRS continues to give priority to international tax enforcement. Hence, US taxpayers who own foreign assets or are involved in international business transactions are likely to be affected by the IRS campaigns and should make sure they are in full US tax compliance.
Let’s briefly describe each of the new 11 IRS Compliance Campaigns.
New 11 IRS Compliance Campaigns: 1120-F Chapter 3 and Chapter 4 Withholding
This campaign focuses upon verification of the withholding credits before the claim for refund or credit is allowed. To make a claim for refund or credit to estimated tax with respect to any U.S. source income withheld under chapters 3 or 4, a foreign entity must file a Form 1120-F. Before a claim for credit (refund or credit elect) is paid, the IRS must verify that withholding agents have filed the required returns (Forms 1042, 1042-S, 8804, 8805, 8288 and 8288-A).
In other words, this campaign is designed to verify withholding at source for 1120-Fs claiming refunds.
New 11 IRS Compliance Campaigns: Swiss Bank Program
A non-surprising new addition to campaigns that will focus on tax and FBAR noncompliance of US beneficial owners of Swiss bank and financial accounts. The IRS will draw on the materials supplied to the DOJ by Swiss Banks as part of the Swiss Bank Program.
New 11 IRS Compliance Campaigns: Foreign Earned Income Exclusion
This campaign is likely to affect US taxpayers who reside overseas. The campaign will focus on taxpayers who claimed Foreign Earned Income Exclusion, but did not meet the requirements for claiming them. The IRS will address noncompliance through a variety of treatment streams, including examination.
New 11 IRS Compliance Campaigns: Verification of Form 1042-S Credit Claimed on Form 1040NR
The campaign’s goal is to ensure the amount of withholding credits or refund/credit elect claimed on Forms 1040NR is verified and whether the taxpayer has properly reported the income reflected on Form 1042-S.
New 11 IRS Compliance Campaigns: Agricultural Chemicals Security Credit
The first of the new four domestic campaigns. The Agricultural chemicals security credit is claimed under Internal Revenue Code Section 45O and allows a 30 percent credit to any eligible agricultural business that paid or incurred security costs to safeguard agricultural chemicals. The credit is nonrefundable and is limited to $2 million annually on a controlled group basis with a 20-year carryforward provision. In addition, there is a facility limitation as outlined in Section 45O(b). The goal of this campaign is to ensure taxpayer compliance by verifying that only qualified expenses by eligible taxpayers are considered and that taxpayers are properly defining facilities when computing the credit. The treatment stream for this campaign is issue-based examinations.
New 11 IRS Compliance Campaigns: Deferral of Cancellation of Indebtedness Income
This is an interesting addition and a correct one to the campaigns; I also believe that this area suffers from high rate of noncompliance. This issue stems from the Great Recession of 2008; in 2009 and 2010, a lot of US taxpayers elected to defer their cancellation of indebtedness (“COD”) income incurred as a result of reacquisition of debt instruments at an issue price less than the adjusted issue price of the original instrument. Such taxpayers should have reported their COD income ratably over a period of five years beginning in 2014 through 2018.
Furthermore, whenever a taxpayer defers his COD income, any related original issue discount (OID) deductions on the new debt instrument, resulting from debt-for-debt exchanges that triggered the original COD must also be deferred ratably and in the same manner as the deferred COD income.
The goal of this campaign is to ensure taxpayer compliance by verifying that taxpayers (who properly deferred COD income in 2009 and 2010) actually properly reported it in subsequent years beginning in 2014. The campaign will also look at situations where an accelerating event occurred and required earlier recognition of income under IRC § 108(i). The treatment stream for this campaign is issue-based examinations. The use of soft letters is under consideration.
New 11 IRS Compliance Campaigns: Energy Efficient Commercial Building Property
The goal of this campaign is to ensure taxpayer compliance with the section 179D (Energy Efficient Commercial Building Deduction). Section 179D allows taxpayers who own or lease a commercial building to deduct the cost or portion of the cost of installing energy efficient commercial building property (EECBP). If the equipment is installed in a government-owned building, the deduction is allocated to the person(s) primarily responsible for designing the EECBP. The treatment stream for this campaign is issue-based examinations.
New 11 IRS Compliance Campaigns: Economic Development Incentives Campaign
The goal of this campaign is to ensure taxpayer compliance with respect to a variety of government economic incentives. These incentives include refundable credits (refunds in excess of tax liability), tax credits against other business taxes (for example, payroll tax), nonrefundable credits (refunds limited to tax liability), transfer of property and grants. The common problems targeted by this campaign are situation where taxpayers improperly treat government incentives as non-shareholder capital contributions, exclude them from gross income and claim a tax deduction without offsetting it by the tax credit received. The treatment stream for this campaign is issue-based examinations.
New 11 IRS Compliance Campaigns: Section 956 Avoidance
This campaign focuses on situations where a CFC loans funds to a US Parent (USP), but nevertheless does not include a Section 956 amount in income. The goal of this campaign is to determine to what extent taxpayers are utilizing cash pooling arrangements and other strategies to improperly avoid the tax consequences of Section 956. The treatment stream for this campaign is issue-based examinations.
New 11 IRS Compliance Campaigns: Corporate Direct (Section 901) Foreign Tax Credit
Domestic corporate taxpayers may elect to take a credit for foreign taxes paid or accrued in lieu of a deduction. The goal of the Corporate Direct Foreign Tax Credit (“FTC”) campaign is to improve return/issue selection (through filters) and resource utilization for corporate returns that claim a direct FTC under IRC section 901. This campaign will focus on taxpayers who are in an excess limitation position. The treatment stream for the campaign will be issue-based examinations. The IRS emphasized that this is just the first of several FTC campaigns. The IRS further specified that future FTC campaigns may address indirect credits and IRC 904(a) FTC limitation issues.
New 11 IRS Compliance Campaigns: Individual Foreign Tax Credit (Form 1116)
This campaign addresses taxpayer compliance with the computation of the foreign tax credit (“FTC”) limitation on Form 1116. Due to the complexity of computing the FTC and challenges associated with third-party reporting information, some taxpayers face the risk of claiming an incorrect FTC amount. The IRS will address noncompliance through a variety of treatment streams including examinations.

### Sale of Russian Real Estate by US Residents | International Tax Lawyer
Sale of Russian Real Estate by US permanent residents was the subject of a recent guidance letter from the Russian Ministry of Finance (“MOF”). Guidance Letter 03-04-05/66382 (dated October 11, 2011, but released only earlier this week) provides a thorough analysis of questions concerning the sale of real estate in Russia by a US resident and, eventually, comes to conclusion such a sale should be subject to a 30% tax rate. Let’s explore this recent MOF analysis in more detail.
Sale of Russian Real Estate: What is MOF Guidance Letter?
The closest US equivalent to the Russian MOF Guidance Letter is the IRS Private Letter Ruling (“PLR”). Similarly to PLR, the MOF Guidance Letters usually address a fairly specific situation and, generally, have a suggestive rather than normative value. A Guidance Letter does not have a precedential value (again similar to PLR). Nevertheless, the MOF Guidance Letters are good indicators of how the MOF would view similar situations and have a very strong persuasive value.
Sale of Russian Real Estate: Fact Pattern Addressed by Guidance Letter 03-04-05/66382
Guidance Letter 03-04-05/66382 specifically addresses a situation where an individual is a Russian citizen who has resided in the United States since 1996. It is not clear whether the individual actually received his green card in 1996 or he simply commenced to reside in the United States on a permanent basis in 1996. This individual wishes to dispose of (or already sold) a real property in Russia.
Sale of Russian Real Estate: Is the Sale Done by a Russian Taxpayer Who Is Subject to Russian Taxation?
The MOF begins its analysis by establishing that, in accordance with Section 1 of Article 207 of the Russian Tax Code (“Tax Code”), individuals who receive Russian-source income are Russian taxpayers for the purposes of the Russian income tax irrespective of whether they are Russian tax residents or not. Since Article 208, Section 1(5) states that income earned from the sale of Russian real estate is considered to be Russian-source income, an individual selling Russian real estate is considered to be a Russian taxpayer who is subject to Russian taxation.
Sale of Russian Real Estate: Is the Sale Done by a Russian tax resident?
The MOF then continued its analysis to determine whether, in the situation described in the Guidance Letter 03-04-05/66382, the individual is a Russian tax resident. I believe that this was the key reason why the individual in question requested the MOF Guidance letter: he was hoping that he would be found a Russian tax resident under the Russia-US tax treaty due to the fact that he had real estate in Russia (and, hence, subject to lower tax on the proceeds from sale).
The MOF analysis involved two steps: the determination of tax residency under the tax treaty between the United States and the Russian Federation (because the individual in question has resided permanently in the United States since 1996) and, then, the determination of tax residency under the domestic Russian tax laws.
First, the MOF stated that, pursuant to paragraph 1 of Article 4 of the Russia-US Tax Treaty, a person should be recognized as a permanent resident of a contracting state in accordance with the provisions of the national law of that state. In other words, the determination of who is a tax resident of the Russian Federation should be done under the Russian domestic tax law.
Here, the MOF also addressed the critical part of this Guidance Letter - does the ownership of Russian real estate matter for the purposes of establishing the Russian tax residency under the Treaty. The MOF determined that the factor of ownership of real estate matters only in cases where the owner of real estate is recognized as a resident of both contracting states in accordance with the national legislation of both, the United States and Russia. This is the most important part of the MOR Guidance Letter 03-04-05/66382.
Having made this determination, the MOF went into the second half of its analysis – those considered to be Russian tax residents under the Russian laws. According to Section 2 of Article 207 of the Tax Code, individuals are considered Russian tax residents if they are physically present in Russia for at least 183 calendar days within a period of 12 consecutive months. Since the individual in question did not satisfy the residency requirement of Article 207, the MOF determined that he was not a tax resident of the Russian Federation.
Sale of Russian Real Estate: Can Russia Tax the Proceeds from the Sale under the Russia-US Tax Treaty?
Having determined that the owner of the Russian Real Estate was not a Russian tax resident, the next issue was whether Russia can still tax the proceeds from the sale. The MOF stated that, under paragraph 3 of Article 19 of the Treaty, the gains from the sales of real estate located in one contracting state received by a permanent resident of the other contracting state can be taxed in accordance with the domestic tax legislation of the state where the property is located. Hence, Russia can tax the sale of Russian Real Estate made by a US permanent resident.
As a side note, Russia can also tax a disposition of shares or other rights of participation in the profits of a company in which Russian real estate makes up at least 50 percent of the assets.
Sale of Russian Real Estate: What is the Applicable Tax Rate?
The final point addressed by the MOF was the applicable tax rate for the sale of Russian real estate by a US permanent resident and a nonresident of Russia. Pursuant to Section 3 of Article 224 of the Tax Code, the MOF decided that tax rate in this situation should be 30 percent.
Contact Sherayzen Law Office for Professional International Tax Help
If you are looking for a professional advice concerning US international tax law, contact Sherayzen Law Office. Our legal team, headed by attorney Eugene Sherayzen, is highly experienced in US international tax law, including international tax compliance filing requirements, international tax planning and offshore voluntary disclosures.
Contact Us Today To Schedule Your Confidential Consultation!

### 2018 OVDP Changes Imminent | International Tax Lawyer & Attorney Update
On October 26, 2017, the IRS sent a clear signal that OVDP changes are coming soon. The signal that the 2018 OVDP changes are imminent came from Mr. Daniel Price, an attorney with the IRS Office of Chief Counsel, Small Business/Self-Employed Division, who participated in a panel discussion of offshore accounts and compliance at the University of San Diego School of Law (at a Procopio International Tax Institute Annual Conference).
What Are the Main Reasons for the 2018 OVDP Changes?
There are four main reasons for the upcoming 2018 OVDP changes. First, the OVDP program has been heavily criticized for lack of transparency by tax lawyers and the National Taxpayer Advocate's Nina Olson. Ms. Olson’s report in June of 2017 and the Freedom of Information Act requested from Tax Analysts forced the IRS to recently release its OVDP hotline guide.
Second, there is a very specific but painful and largely unaddressed issue of the relationship between bankruptcy and the ability to participate in the OVDP. As a reminder to readers, the OVDP FAQs currently require the payment of all liabilities, including the miscellaneous offshore penalty, with the submission of the OVDP voluntary disclosure package. Mr. Price stated that a new FAQ will be added to OVDP to specifically address whether taxpayers in bankruptcy or contemplating bankruptcy will be able to use the OVDP process.
Third, the value of the OVDP as an information collection tool has greatly diminished as a result of FATCA and other automatic information exchange mechanisms.
Finally, fewer and fewer taxpayers are participating in the OVDP. Between 2015 and 2016, only about 1,800 OVDP disclosures were made. At the same time, there were almost 18,000 Streamlined submissions made by US taxpayers in the United States and overseas.
Potential 2018 OVDP Changes: Could the OVDP Program End in 2018?
There is a possibility of the OVDP program ending in 2018. Such a dramatic development, however, may cut off any voluntary disclosure possibilities for willful taxpayers who wish to bring their US tax affairs into full compliance, but are too afraid to do so without a guarantee that they will not be criminally charged. For this reason, I believe that it is more likely that the OVDP program will be modified, but not cancelled.
Sherayzen Law Office Will Continue to Follow Any Potential 2018 OVDP Changes
Sherayzen Law Office will continue to monitor any new developments with respect to changes to the current OVDP. OVDP currently constitutes an integral part of our practice of international tax law and it remains one of the main voluntary disclosure options that every US taxpayer with past noncompliance should consider.

### 2018 FBAR Audits Set to Increase | IRS FBAR Audit Lawyer & Attorney
2018 FBAR audits are set to increase at a dramatic pace. In this article, I would like to discuss what the FBAR audits are and why 2017-2018 will be the period of time when we believe that the FBAR audits will gain as a percentage of the overall IRS audits compared to earlier years.
2018 FBAR Audits and Sherayzen Law Office Predictions
As early as 2011, Sherayzen Law Office predicted that the FBAR audits would become more commonplace than ever a few years after FATCA was implemented. Once FATCA was implemented in July of 2014, we confirmed our prediction and refined it to specifically identify 2017 and 2018 FBAR audits as the years of larger than average increases. Obviously, the increase in FBAR audits will go hand in hand with the jump in FBAR litigation by the US Department of Justice.
2018 FBAR Audits: How Do FBAR Audits Differ from Regular IRS Audits?
The public is generally familiar to a certain degree with regular IRS Audits of US tax returns. In general, in a regular audit, the IRS contacts the taxpayer or his representative and conducts a thorough review of the taxpayer’s tax returns selected for examination.
So, are FBAR Audits different from the regular US tax return audits? The answer is: “yes” and “no”. In terms of the actual procedure (i.e. the IRS contacting the taxpayer and the taxpayer’s representative and doing a thorough examination), there are no large differences, though, the fact that FBARs come under Title 31 does affect certain procedures.
However, in terms of issues involved, the FBAR audits can be vastly different, because they would involve not only the issues that are a concern during a regular IRS audit of a tax return, but also FBAR-specific issues. In other words, the FBAR audit will likely involve all of the features of the audit concerning US tax returns (especially, with respect to verification that all foreign income was properly disclosed) and FBAR -specific issues concerning the accuracy of the reported foreign account and foreign income information.
Moreover, it should be remembered that FBAR has a draconian penalty system. Hence, the stakes in the FBAR audit are much higher than those of a regular IRS audit.
Finally, FBAR audits may often lead to FATCA compliance issues, particularly Form 8938 compliance. FBAR audits may also trigger the audit of other information returns, including Form 3520 with respect to foreign gifts and inheritance.
Thus, while FBAR audits may seem procedurally similar to regular IRS audits (though, as I had pointed out above, this similarity is superficial to a large degree), the scope of the FBAR audit, the issues involved, the “expansion” effect and the stakes involved (in terms of potential penalties) make FBAR audits far more dangerous to US taxpayers than regular IRS audits of US tax returns.
Why Should We Expect to See An Increase in 2017 and 2018 FBAR Audits?
The increase in 2017 and 2018 FBAR audits is driven primarily by FATCA and other automatic information exchange mechanisms (including those provided for in bilateral treaties). Since the UBS case in 2008, the IRS has seen a steady increase of data inflow from overseas concerning foreign accounts owned and/or controlled by US taxpayers.
This stream of data became a torrential river after the implementation of FATCA in 2014 and the increase in the bilateral and multilateral automatic information exchange mechanisms since 2011. In fact, the IRS has received so much data that it has not even been able to properly process and organize it yet.
However, even with the small percentage of the data that was actually properly processed, the IRS received a treasure trove of information concerning unreported foreign accounts and noncompliant US taxpayers. This new data has already led to a steady increase of IRS investigations during the years 2015-2016. Given the fact that a much larger amount of data will be processed in 2017 and 2018, the number of IRS investigations and FBAR audits should increase dramatically in 2017-2019.
An indirect confirmation of this conclusion is the recent surge in the US Department of Justice FBAR litigation. We fully expect the FBAR audits to follow the same path of intensification in 2017-2019.
What Should You Do If the IRS Selects You for FBAR Audit?
If the IRS contacts you concerning examination of your FBARs or your US tax returns with Forms 8938 and/or foreign income, you should contact Sherayzen Law Office for professional help as soon as possible. Our firm specializes in helping taxpayers like you with the IRS audits of any US international information returns, including FBARs and Forms 8938.
The owner of Sherayzen Law Office, Mr. Eugene Sherayzen, is an international tax attorney with an almost unique experience of helping US taxpayers at all stages of US international tax compliance: annual compliance, offshore voluntary disclosures, FBAR Audits and FBAR litigation in federal courts. This experience has allowed Mr. Sherayzen to have a unique perspective on FBAR Audits which allows him to be a highly effective advocate of his clients’ positions before the IRS.
Contact Us Today to Schedule Your Confidential Consultation!

### FBAR Safe Deposit Box Reporting | FBAR Tax Lawyer & Attorney
One of the most common questions that US taxpayers have is regarding FBAR Safe Deposit Box reporting requirements. While the general answer is clear, there may be complications in certain cases.
General FBAR Safe Deposit Box Reporting Requirements
In general, a safe deposit box is not considered to be a financial account and, therefore, not reportable on FBAR.
This is a general rule and it is important to understand that it applies only to a safe deposit box – i.e. an individually secured container, usually held within a larger safe or bank vault. It is important to understand that the bank vault itself is NOT a safe deposit box. In fact, if you were to store gold in a bank vault with bank employees able to directly and legally access the contents of your storage, you would create a reportable account.
The most common example of accounts created by storing items in a bank vault are precious metals, particularly gold and silver (but also any other similar accounts, such as rare minerals accounts).
Exception: FBAR Safe Deposit Box Reporting May Arise If Custodial Relationship Is Established With Respect to the Safe Deposit Box
The great majority of cases are easily resolved under the general rule. However, as I hinted at above, an FBAR safe deposit box reporting requirement may arise if the owner of a safe deposit box enters into a custodial relationship with respect to this safe deposit box.
In such situations, a foreign financial institution is usually given direct legal access to the safe deposit box, is responsible for the safety of its contents and may change the contents according to the instructions from the box’s owner. Of course, in such a case, a safe deposit box can hardly be called in such a way and becomes very similar to a regular bank vault account.
This exception is very rare. I have personally encountered such exceptions only in the context of precious metals accounts.
Contact Sherayzen Law Office for Professional Help With Your FBAR Reporting Requirements
If you need professional help with your FBAR filings, or if you have not timely filed your FBARs for past years and need to resolve your past tax noncompliance, please contact Sherayzen Law Office. Our experienced legal team of tax professionals, headed by our international tax attorney Eugene Sherayzen, will thoroughly analyze your case, determine the US tax reporting requirements that may apply to your case, develop your voluntary disclosure plan and implement it.
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### Lebanese Taxes Set to Increase in 2017 & 2018 | FATCA Lawyer Lebanon
On October 9, 2017, the Lebanese Parliament passed for the second time a controversial tax bill which may increase several Lebanese taxes. The passage of this increase in Lebanese taxes comes after a turbulent legislative history and it is not yet certain that it will actually become the law and survive a Constitutional challenge.
History of the 2017/2018 Increase in Lebanese Taxes
The simultaneous increase in Lebanese taxes and Lebanese public sector wages was on the table for the consideration of the Lebanese Parliament already in the Spring of 2017. After a prolonged deliberation in Lebanon, Bill No. 45/2017 finally mustered sufficient support in the Parliament and passed for the first time in July of 2017. President Aoun ratified it on August 21, 2017 and the workers began to receive increased salary immediately.
The Lebanese business groups, however, strongly objected to some aspects of the new law. The Lebanese Constitutional Council agreed with these objections and annulled the new law in September of 2017, referring it back to the Parliament for amendments.
Yet, the raising of the wages proved to be such a powerful move that the Lebanese parliament again passed virtually the same bill again on October 9, 2017. Of course, this means that the law could be challenged at the Constitutional Council again. In fact, a leader of one of the parties that opposed the tax increases already stated that he would do exactly this as soon as his lawyers explore this possibility.
Description of Increase of the Lebanese Taxes
The current law as amended would increase the corporate income tax rate to 17 percent from the current 15 percent. The VAT (Value Added Tax) will increase by 1 percent to the total of 11 percent effective October 1, 2017. Starting August 22, 2017, the transfers of real estate will be subject to a duty of 2 percent of the sales value of the property.
There will also be a brand-new 20-percent tax on lottery prizes.
The biggest losers under the new increase in Lebanese taxes, however, will be all banks that operate in Lebanon. First of all, the withholding tax rate on interest and other similar income derived from bank deposits will increase to 7 percent from the current 5 percent. Second, the new law raises the effective tax rate of the banks themselves. Right now, the effective tax rate stands at 15 percent, but the banking lobbying groups say that it may be as high as 50% after the increase in Lebanese taxes is fully implemented (though, there are strong reasons to doubt this claim).
Conclusion: Increase of the Lebanese Taxes Is Not Certain Yet, But It May Still Impact US Taxpayers with Lebanese Bank Accounts
It is not clear yet whether the recently-passed increase in Lebanese taxes will actually be realized, but all US taxpayers with bank accounts in Lebanon should carefully follow these new developments and re-assess their investment strategies accordingly.

### FBAR Litigation to Skyrocket in 2017 & 2018 | FBAR Lawyer & Attorney
After the implementation of FATCA in 2014, Sherayzen Law Office made a prediction that there would be a major increase in FBAR litigation a few years later once the IRS is able to process data obtained through FATCA and the Swiss Bank Program. This prediction is now becoming a reality as the US Department of Justice (“DOJ”) is filing lawsuits related to FBAR penalties in unprecedented numbers.
When Should the Taxpayers Expect to See Increase in FBAR Litigation?
The process has already started. The DOJ is already filing new FBAR litigation cases and it is working closely with the IRS to prepare a large number of additional FBAR cases.
In fact, the second half of 2017 and the first half of 2018 will be the period when the number of FBAR litigation cases will skyrocket, achieving a new historical high. Most of these lawsuits will likely be criminal while others will be civil, including attempts to collect FBAR penalties.
Will Non-Willful FBAR Penalty Cases Be Affected by the Increase in FBAR Litigation?
Yes, taxpayers who were assessed non-willful FBAR penalties will also be affected. We expect, however, that the majority of the new cases will be those concerning willful and even criminal FBAR penalties.
Can a Non-Willful FBAR Penalty Case Turn Into Willful FBAR Penalty Case as a Result of FBAR Litigation?
Such a possibility exists, especially in cases where the IRS imposed non-willful penalties without having sufficient information to assess willful penalties. Since the DOJ will try to argue that the cases should be tried de novo, it is possible that new information obtained during the discovery stage of a case may result in sufficient evidence for the DOJ to argue that willful FBAR penalties should be imposed.
Therefore, it is important to bring in an international tax attorney as early as possible into your case to assess the possibility of the DOJ turning a non-willful case into a willful one.
Can the Recent Increase in FBAR Penalties Influence a Taxpayer’s Exposure as a Result of FBAR Litigation?
Recently, the FBAR penalties experienced a significant increase as a result of the Congress-mandated adjustment to inflation. The increase should not affect any penalties assessed prior to November 2, 2015. The FBAR Penalties imposed after that date are likely to be affected by FBAR Litigation, because the DOJ may sue for the adjusted amount of penalties.
What Should I do If the DOJ Files Compliant Against Me in a US District Court?
If you receive a compliant from the DOJ (acting on behalf of the United States of America), contact Sherayzen Law Office as soon as possible for professional help. Mr. Sherayzen is an experienced international tax lawyer who can help you determine on how to best deal with the DOJ lawsuit, assess your chances of success and help you with the litigation of the case.
Contact Us Today to Schedule Your Confidential Consultation.

### IRS Announces 2018 Pension Plan Limitations | Tax Lawyer Update
On October 27, 2017, the IRS announced the cost of living adjustments affecting 2018 Pension Plan limitations.
2018 Pension Plan Limitations: Summary of Main Changes
1. The first main change in 2018 Pension Plan Limitations affects all employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. In 2018, employees can contribute up to $18,500 into these plans. This amount represents a $500 increase from the 2017 contribution limitation of $18,000.
2. The second major change in 2018 Pension Plan Limitations is the modification of income ranges concerning eligibility to make deductible contributions to traditional IRAs. Here are the new 2018 phase-out ranges:
Single Taxpayers (covered by a workplace retirement plan): $63,000 to $73,000 (up from the 2017 range of $62,000 to $72,000);
Married Filing Jointly (covered by a workplace retirement plan): $101,000 to $121,000 (up from the 2017 range of $99,000 to $119,000).
Taxpayer not covered by a workplace retirement plan, but who is married to someone who is covered: $189,000 and $199,000 (up from the 2017 range of $186,000 and $196,000).
No changes for a married individual filing a separate return, but who is covered by a workplace retirement plan. The phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
3. The third change in 2018 Pension Plan Limitations affects the modification of income ranges concerning eligibility to make contributions to Roth IRA. Here are the new 2018 phase-out ranges:
Single and Head of Household Taxpayers: $120,000 to $135,000 (up from the 2017 range of $118,000 to $133,000);
Married Couples Filing Jointly: $189,000 to $199,000 (up from the 2017 range of $186,000 to $196,000).
No change in the phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA. Such contributions are not subject to an annual cost-of-living adjustment and remain at the range of $0 to $10,000.
4. The fourth change in 2018 Pension Plan Limitations affects the modification of income range concerning eligibility for the Retirement Savings Contributions Credit. In 2018, the income limits will be:
Married Couple Filing Jointly: $63,000 (up from $62,000 in 2017);
Heads of Household: $47,250 (up from $46,500 in 2017);
Singles and Married Individuals Filing Separately: $31,500 (up from $31,000 in 2017).
2018 Pension Plan Limitations: Summary of Main Unchanged Limitations from 2017
1. IRA Annual Contribution Limit: remains unchanged at $5,500.
2. IRA additional catch-up contribution for individuals aged 50 and over: remains at $1,004.40 (not subject to annual cost-of-living adjustment).
3. 401(k), 403(b) and most 457 plans and the federal government’s Thrift Savings Plan catch up contribution limit for employees aged 50 and over: remains unchanged at $6,000.

### Czech Bank Accounts: Lawyer Finds Compliance Problems With FBAR and FATCA
For years, the Czech Republic has held a position within the top fifteen countries among our firm’s voluntary disclosure clients. At the end of May and early June of 2017, our firm’s owner, international tax attorney Eugene Sherayzen, made a trip to the Czech Republic to find out why there are so many clients with unreported Czech Bank accounts.
Ceska Narodni Banka
General Lack of Awareness of FBAR and FATCA With Respect to Czech Bank Accounts
While Mr. Sherayzen found Prague an astonishingly beautiful city, his investigation of FBAR and FATCA awareness confirmed what he already supposed for years – there are important gaps in awareness of these US tax compliance requirements. The results of his investigation also showed that while there were some signs of improvement in FATCA awareness, FBAR was still generally an unknown form.
While Mr. Sherayzen’s investigation was not done using any scientific method and his targeted sample cannot be considered as a properly representative survey, its results are nonetheless alarming.
They are particularly important for Czech citizens who are also US citizens or US permanent residents residing in the United States, especially if they opened their Czech bank accounts with Czech passports prior to moving to the United States. Mr. Sherayzen’s investigation identified this group of individuals as particularly vulnerable to failing to comply with US tax requirements, including FBAR.
Czech Bankers Often Do Not Inform Their Clients of FBAR and FATCA Obligations With Respect to Czech Bank Accounts
Additionally, Mr. Sherayzen found a general lack of awareness of the obligation of foreign bankers to inform their clients about FATCA and, especially, FBARs. Of the five banks chosen, Mr. Sherayzen was unsatisfied with level of FATCA preparedness of the Czech bankers. These results further supported Mr. Sherayzen’s original supposition that the Czech bankers’ lack of proper education about US tax requirements exacerbated and, in many instances, were directly responsible for his clients’ unawareness of their FBAR and FATCA obligations.
These results are too recent at this point and need further analysis and confirmation in the future. Yet, it is clear that all US persons with Czech bank accounts need to urgently re-evaluate their current US tax compliance, especially if it is based on advice from Czech bankers.
Contact Sherayzen Law Office for Help With US Tax Compliance Concerning Czech Bank Accounts
If you have undisclosed Czech bank accounts or any other foreign assets, contact Sherayzen Law Office as soon as possible. Failure to do it before the IRS initiates an investigation may result in imposition of draconian FBAR penalties.
We have helped hundreds of US taxpayers around the world to bring their tax affairs into fully compliance with US laws. We can help You!
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### 4th Quarter 2017 Underpayment, Overpayment & PFIC Interest Rates
On September 8, 2017, the IRS announced that the 4th Quarter 2017 underpayment and overpayment interest rates will remain the same as they were in the third quarter of 2017. The IRS underpayment interests also govern the PFIC interest rates under the default Section 1291 method of calculation. PFIC interest rates are very important not only to taxpayers who currently hold PFICs, but also to the US taxpayers who are participating in the Streamlined Domestic Offshore Procedures and, to a lesser extent, the IRS Offshore Voluntary Disclosure Program (“OVDP”) now closed.
Recent History of the IRS Underpayment, Overpayment and PFIC Interest Rates
Following the global financial meltdown, the Federal Reserve quickly dropped its interest rates to almost zero. The IRS underpayment, overpayment and PFIC interest rates are set to follow the Federal Reserve short-term rates on a quarterly basis.
For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Hence, from the 4th quarter of 2011 through the first quarter of 2016, the IRS underpayment, overpayment and PFIC interest rates remained at 3%. Once the Federal Reserve started to raise its short-term rates, however, the IRS raised the interest rates in the second quarter of 2016, from 3% to 4%. Since then, the rates remained the same.
4th Quarter 2017 IRS Underpayment, Overpayment and PFIC Interest Rates
4th quarter 2017 IRS underpayment, overpayment and PFIC interest rates will be as follows:
four (4) percent for overpayments (two (3) percent in the case of a corporation);
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
These interest rates were computed based on the federal short-term rate determined during July of 2017 to take effect on August 1, 2017, plus daily compounding. The 4th Quarter IRS underpayment, overpayment and PFIC interest rates will apply during the period of October 1, 2017, through December 31, 2017.

### Specified Foreign Financial Assets | Form 8938 International Tax Lawyers
Specified Foreign Financial Assets is one of the most important terms in contemporary US international tax law. In this article, I will explore what these Specified Foreign Financial Assets are and why they play such an important role in modern US international tax compliance.
Specified Foreign Financial Assets and FATCA
In order to understand the significance of the Specified Foreign Financial Assets, we must turn to one of the most important US tax laws called Foreign Account Tax Compliance Act or FATCA.
FATCA was signed into law in 2010 and it immediately became the most important development in international taxation since at least 1970s, if not all the way to the end of the Second World War. There are three parts of FATCA that made it such a revolutionary development in international tax law. The first part of FATCA requires all foreign financial institutions (FFIs) to report to the IRS, directly or indirectly, Specified Foreign Financial Assets (be careful, this concept can be modified by a FATCA implementation treaty to include and exclude various foreign assets) owned by US persons. In essence, it meant that the world financial community would now serve as an IRS informer, providing the third-party reporting of financial assets owned by US persons.
In order to enforce this “obligation”, the second part of FATCA imposed a 30% penalty on the gross amount of a transaction whenever the transaction is related to an institution that is not compliant with FATCA. Such a huge penalty was meant to force all FFIs to become FATCA-compliant and, to a large extent, this goal has been attained.
With the third-party reporting secured by the first two parts of FATCA, the third part of FATCA imposed a new reporting requirement, Form 8938, on certain categories of US taxpayers who would fall within the categories of Specified Individuals and (starting 2016) Specified Domestic Entities. FATCA Form 8938 forced these Specified Persons to directly report their Specified Foreign Financial Assets with their US tax returns.
Specified Foreign Financial Assets: General Definition
In general, Specified Foreign Financial Assets include: foreign financial accounts and assets that are held for investment and not held in an account maintained by a financial institution. The concept of “assets held for investment and not held in an account” covers stocks or securities issued by anyone who is not a US person, any interest in a foreign entity, any financial instrument or contract that has an issuer or counterparty that is other than a US person, stock issued by a foreign corporation, an interest in a foreign trust or foreign estate and a capital or profits interest in a foreign partnership.
In other words, definition of the Specified Foreign Financial Assets is so broad that it applies to virtually any financial instrument or security one can imagine as long as one of the counterparties and/or issuers is a foreign person. It also includes pretty much any ownership interest in a foreign business entity as well as a beneficiary interest in a foreign trust. Therefore, it is always prudent to contact an international tax attorney to confirm whether your particular investment is covered by the definition of the Specified Foreign Financial Assets.
Specified Foreign Financial Assets: Additional Non-Exclusive Lists of Assets
Additionally, the instructions to Form 8938 specifically state that Specified Foreign Financial Assets encompass an interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty. Specified Foreign Financial Assets also include a note, bond, debenture, or other form of indebtedness issued by a foreign person. Finally, options and other derivative instructions with a foreign counterparty or issuer are also included in the definition of Specified Foreign Financial Assets.
Specified Foreign Financial Assets: Influence of FATCA Implementation Treaties
Despite the broad general definition of Specified Foreign Financial Assets and despite the “laundry” list of assets specifically identified above, one should always look at a specific FATCA implementation treaty in order to verify whether an asset is considered to fall within the definition of Specified Foreign Financial Assets. In particular, one must have extra care with foreign retirement accounts. During the negotiation of FATCA Implementation Treaties, countries often insisted that particular types of retirement accounts should be excluded from FATCA reporting (the United Kingdom was particularly successful in this respect).
A word of caution: even if an asset is excluded from FATCA reporting, it does not automatically mean that it would also be excluded from FBAR reporting. It is possible to have a financial asset reportable exclusively on FBAR, but not Form 8938.
Contact Sherayzen Law Office for Professional Help with Reporting of Specified Foreign Financial Assets on Form 8938
If you have any of the Specified Foreign Financial Assets listed above, contact Sherayzen Law Office for professional help. In addition to annual tax compliance, our firm can help you with the offshore voluntary disclosure with respect to any delinquent Forms 8938 which you have not timely filed in any of the prior years.
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### Specified Domestic Entity Definition | FATCA Form 8938 Tax Lawyers Update
The recent introduction of the new concept of Specified Domestic Entity by the IRS represents a major expansion of the application of FATCA to US businesses and US trusts. For tax years beginning after December 31, 2015, a domestic corporation, partnership or trust classified as a Specified Domestic Entity must file FATCA Form 8938 with respect to its Specified Foreign Financial Assets (SFFA) as long as the total value of those assets meets the filing threshold. With this article, I begin a series of articles with respect to the definition of the Specified Domestic Entity and the affect of this new FATCA concept on US businesses and trusts. Today, I will introduce the general definition of a Specified Domestic Entity.
Specified Domestic Entity Definition: FATCA Background
Before we approach the Specified Domestic Entity Definition, we first need to make sure that we understand what FATCA is. The Foreign Account Tax Compliance Act or FATCA was signed into law in 2010 and codified in Sections 1471 through 1474 of the Internal Revenue Code. The law was enacted in order to reduce offshore tax evasion by US persons with undisclosed foreign accounts.
There are three main parts of FATCA (one can identify even more, but this type of analysis is most useful for the purposes of introducing the Specified Domestic Entity Definition). The first part is the obligation of foreign financial institutions (FFIs) to report to the IRS all foreign financial accounts held, directly or indirectly, by US persons. The second part of FATCA is a 30% withholding tax imposed on the gross amount of each transaction if the transaction involves a non-compliant FFI (these are the “teeth” of FATCA that force FFIs around the world to accept the first part of FATCA).
Finally, the third part of FATCA is the part most relevant to the Specified Domestic Entity Definition – the imposition of a new reporting requirement on US taxpayers with respect to Specified Foreign Financial Assets. This new requirement is called Form 8938.
Specified Domestic Entity Definition: Form 8938 Applied to Specified Individuals Only Prior to 2016
Prior to January 1, 2016, only certain categories of individuals were required to file Form 8938. These individuals were grouped under the term of a “specified individual”. In general, the term “specified individual” included US citizens, all resident aliens and certain categories of nonresident aliens. No business entities or trusts were required to file Form 8938 prior to 2016.
Specified Domestic Entity Definition: New Filing Category Starting 2016
This situation changed dramatically on January 1, 2016 with the introduction of a new category of Form 8938 filers. Starting tax years that began after December 31, 2015, business entities and trusts that are classified as Specified Domestic Entities must file Form 8938 as long as they meet the Form 8938 filing threshold.
Specified Domestic Entity Definition: General Definition
Now that we understand the context in which the Specified Domestic Entity Definition appeared, let’s state this definition.
Treas. Reg. §1.6038D-6(a) defines a Specified Domestic Entity as “a domestic corporation, a domestic partnership, or a trust described in 26 U.S.C. §7701(a)(30)(E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets.” As it is often the case with US international tax law, this general definition is pregnant with terms of art that require specific understanding and further analysis. In particular, we will need to explore the terms “domestic”, “formed or availed of for purposes of holding”, “holding directly or indirectly”, and “specified foreign financial assets.”
In the future articles concerning the analysis of the Specified Domestic Entity Definition, I will explore all of these terms. Without a doubt, the focus of our analysis will be on “formed or availed of for purposes of holding” clause, because this is the heart of the Specified Domestic Entity Definition.
Contact Sherayzen Law Office for Professional Help With the Specified Domestic Entity Definition, FATCA Form 8938 Filing and Other International Tax Compliance Issues
If you need to determine whether your business entity or your trust falls under the definition of a Specified Domestic Entity, contact Sherayzen Law Office for help. Our professional team, headed by international tax attorney Eugene Sherayzen, Esq., will thoroughly analyze your case, determine whether you need to file Form 8938 and/or any other US international information returns, and prepare these forms for you. We can also help you with the voluntary disclosure of any of your offshore assets if you did not timely comply with your US tax obligation with respect to these assets.
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### HSBC Bangladesh FATCA Letter | FATCA Lawyers Paterson NJ
US taxpayers who own accounts outside of the United States should remember that, in order to open a new account (even if you already have an existing account), foreign banks throughout the world require the submission of various documents pursuant to FATCA. In this legal note, I am providing a list of the documents required by a standard HSBC Bangladesh FATCA Letter for opening a new joint account in a context where an old joint account was already opened with HSBC Bangladesh.
HSBC Bangladesh FATCA Letter for Opening a New Account: Introduction
After standard greetings, HSBC Bangladesh FATCA Letter would state that they checked their records and found a certain number of forms that need to be replaced in order to open a new joint Non Resident Bangladeshi (BDT) savings/current account. Additionally, there will be documents that need to be updated. In other words, HSBC Bangladesh FATCA Letter will ask for update of: (a) documents and (b) forms.
HSBC Bangladesh FATCA Letter: Update of Documents
A standard HSBC Bangladesh FATCA letter will list the following documents to be updated in order to open a new account (this is almost the precise copy of the letter, except those parts where I tried to eliminate mistakes and inaccuracies):
“1) Copy of valid US passports of both Account Holders (with the copy of 'No Visa Required For Bangladesh’);
2) Copy of a valid Driving License for both Account Holders;
3) Copy of a valid passport of the Nominee- attested by both Account Holders;
4) Four copies of a passport-size color photograph of Nominee (attested by both Account Holders on the back side of the photo);
5) Four copies of a passport-size color photograph of the guardian of the Nominee (attested by both account holders on the back side of the photo);
6) Four copies of passport-size color photographs of both account holders;
7) Copy of a document confirming the Source of Funds in Bangladesh [i.e. Rental Deed copy, Land Sale Documents];
8) Copy of Proof of US Income [i.e Employment certificate with Pay slip, Employment Contract mentioning monthly income & validation of contract, etc.];
9) Copy of Bangladesh E-TIN (Tax Identification Number) Certificate- if applicable (attested by both account holders);
10) Copy of a Personal Bangladesh Income Tax Return (including IT-10B and Acknowledgment Receipt) of both account holders (make photocopies of those forms & documents which contain the signature & seal of Income Tax authority);
11) Copy of a valid US Tax Return;
12) W-9 Form of both Account Holders - duly filled & signed;
13) Address Proof of Correspondence Address, Present Residential Address and Permanent Address of both account holders, Nominees and guardian of nominees [if those are not mentioned in valid passport / Driving License); up-to-date (i.e. not more than two month old) Govt. Utility Bill copy where address is clearly mentioned with holding number. The copies of such documents should be accompanied by a declaration and signature of the customer (with holding number) stating “No Reservation from the Account Holders’ in case HSBC Bangladesh contacts the address for any reason). In case of the Present Residential Address Proof, declaration and signature of customer (with holding number) should contain a statement that the customer presently resides in the mentioned address.”
HSBC Bangladesh FATCA Letter: Update of Documents
A standard HSBC Bangladesh FATCA letter will list the following forms to be updated in order to open a new account:
“1) Signature Card (Joint Account);
2) Personal Account Opening Form;
3) Personal Information Form (PIF)- 02 Sets (separate forms are required for both account holders);
4) Personal Information Form (PIF) Addenda- 02 Sets (separate forms are required for both account holders);
5) Form for Updating Documents;
6) Account Terms and Conditions;
7) Probable Transaction Profile Form;
8) E-TIN Confirmation/ Update Form;
9) Self-Declaration from Dependent House Wife Home Maker regarding Income;
10) Change of TMD (003-216231-102) Maturity Instruction (to link with current/ savings BDT account);
11) Secrecy Waiver Form - 02 Sets (signed by both the account holders).”
HSBC Bangladesh FATCA letter would normally require that a black ball point pen is used to sign and fill the forms.

### False FBARs for German and Israeli Bank Accounts Lead to Criminal Indictment
On July 20, 2017, the US Department of Justice announced that Mr. Teymour Khoubian was indicted by a federal grand jury in the Central District of California for corruptly endeavoring to impede the internal revenue laws, filing false tax returns and filing false FBARs regarding his German and Israeli bank accounts and making false statements to a federal agent.
It is important to remember that the charges contained in the indictment are only allegations. A defendant is entitled to a fair trial in which it will be the government’s burden to prove guilt beyond a reasonable doubt.
Facts of the Case According to the Indictment
According to the indictment, Mr. Khoubian filed false individual tax returns for tax years 2005 through 2010, which failed to disclose his financial interest in multiple Israeli and German bank accounts as well as the interest income from those accounts. To make matters worse, the indictment alleges that he also falsely claimed refundable tax credits to which he was not entitled, including the Earned Income Tax Credit (a tax credit mostly for low-income working individuals). In 2008, Mr. Khoubian is alleged to have held approximately $20 million in assets in his undisclosed German and Israeli bank accounts.
In 2011, Mr. Khoubian allegedly made another step on the road that eventually lead to the criminal indictment – he allegedly filed a false 2011 tax return that underreported the interest income he earned from his Israeli accounts. He continued to fail to disclose that he held an account in Germany.
The indictment further changes that Mr. Khoubian also filed false 2012 and 2013 Reports of Foreign Bank and Financial Accounts (FBARs) that concealed his German bank account. In addition to filing false tax returns and FBARs, Mr. Khoubian allegedly provided his German bank with a copy of his Iranian passport and a residential address located in Israel to prevent the bank from disclosing the account to the IRS. Furthermore, he allegedly sent a letter to Bank Leumi falsely claiming he was living in Iran when, in fact, he resided in Beverly Hills, California.
Finally, Mr. Khoubian is also charged with making false statements to an IRS Criminal Investigation (CI) special agent denying that he owned an account in Germany between 2005 and 2010, stating that the German account was closed, when it was in fact still open, and stating that the funds had been transferred to the United States, when Mr. Khoubian had allegedly transferred over $600,000 from his German account to his accounts in Israel.
Potential Penalties for Filing False Tax Returns, Impeding the Enforcement of Internal Laws, and Filing False FBARs for German and Israeli Bank Accounts
If convicted, Mr. Khoubian faces a statutory maximum sentence of three years in prison for corruptly endeavoring to impede the internal revenue laws and each count of filing a false return and five years in prison for each count of filing a false FBAR and making a false statement. He also faces a period of supervised release, restitution and monetary penalties.
Contact Sherayzen Law Office for Professional Help if You Have Undisclosed Foreign Accounts, Including German and Israeli Bank Accounts
If you have undisclosed foreign financial accounts, including German and Israeli Bank accounts, you should contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Sherayzen Law Office has helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US tax laws, while reducing and, in some cases, even eliminating their penalties. We Can Help You!
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### Former Credit Suisse Banker Pleads Guilty | FATCA Lawyer Duluth
On July 19, 2017, Ms. Susanne D. Rüegg Meier, a citizen of Switzerland, pleaded guilty to conspiring to defraud the United States in connection with her work as the head of a team of bankers for Credit Suisse AG. The announcement of this plea by a former Credit Suisse Banker came from the U.S. Department of Justice’s Tax Division.
Facts that Led to Guilty Plea by the Former Credit Suisse Banker
According to the statement of facts and the plea agreement, Ms. Rüegg Meier admitted that, between 2002 and 2011, she worked as the team head of the Zurich Team of Credit Suisse’s North American desk in Switzerland. Ms. Rüegg Meier was responsible for supervising the servicing of accounts involving over 1,000 to 1,500 client relationships, out of which she personally handled about 140 to 150 clients (the great majority of these clients were U.S. persons). These “personally handled” clients had assets of about $400 million.
Ms. Rüegg Meier assisted many U.S. clients in utilizing their Credit Suisse accounts to evade their U.S. income taxes and to facilitate concealment of their undeclared financial accounts from the U.S. Department of the Treasury and the IRS. In particular, she engaged in the following activities to help her clients conceal their accounts: retaining in Switzerland all mail related to the account; structuring withdrawals in the forms of multiple checks each payable in amounts less than $10,000 that were sent by courier to clients in the United States and arranging for U.S. customers to withdraw cash from their Credit Suisse accounts at Credit Suisse locations outside Switzerland, such as the Bahamas. Moreover, Ms. Rüegg Meier admitted that approximately 20 to 30 of her U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities or other structures that were frequently created in the form of foreign partnerships, trusts, corporations or foundations.
Additionally, between 2002 and 2008, the former Credit Suisse banker traveled approximately twice per year to the United States to meet with her clients. Among other places, Ms. Rüegg Meier met clients in the Credit Suisse New York representative office. To prepare for the trips, the former Credit Suisse banker would obtain “travel” account statements that contained no Credit Suisse logos or customer information, as well as business cards that bore no Credit Suisse logos and had an alternative street address for her office, in order to assist her in concealing the nature and purpose of her business.
After the UBS case, Credit Suisse began closing U.S. customers’ accounts in 2008. During that time, Ms. Rüegg Meier assisted the clients in keeping their assets concealed. In one instance, when one U.S. customer was informed that the bank planned to close his account, the former Credit Suisse banker assisted the customer in closing the account by withdrawing approximately $1 million in cash. Furthermore, she advised the client to find another bank simply by walking along the street in Zurich and locating a bank that would be willing to open an account for the client. The customer placed the cash into a paper bag and exited the bank.
Admitted Tax Loss from the Activities of the Former Credit Suisse Banker and Potential Sentence
The former Credit Suisse Banker admitted that the tax loss associated with her criminal conduct was between $3.5 and $9.5 million. The sentencing of Ms. Rüegg Meier is scheduled for September 8, 2017. She faces a statutory maximum sentence of five years in prison, a period of supervised release, restitution and monetary penalties.

### IRS Office of Appeals to Pilot Internet Virtual Conference Option
On July 24, 2017, the IRS Office of Appeals announced that it will soon pilot a new Internet virtual conference option for taxpayers and their representatives. This new option will offer an additional choice for holding taxpayer conferences and will come as close as possible to a “face-to-face” meeting.
Internet Virtual Conference Option: Existing Options
Each year, the IRS Office of Appeals hears appeals of more than 100,000 taxpayers. The main purpose of such an appeal is to resolve tax issues without going to court. By avoiding the court, the taxpayers are able to dispute the original IRS finding in a convenient and fast way; they can even introduce additional evidence without the formal procedures required in court. The IRS Office of Appeals is also a very cheap forum for disputing IRS decisions compared to federal court. Finally, it is one of the ten rights guaranteed to taxpayers under the Taxpayer Bill of Rights
Currently, the taxpayers who utilize the appeals process can participate in a meeting with an Appeals Officer in three ways: in person, by phone or through a special video conference technology. Each of these options has its own problems. A face-to-face meeting with an Appeals Officer may require substantial traveling for the taxpayer. A telephone conference resolves this problem, but it loses the personal interaction that so many taxpayers prefer.
While the current video conference option partially resolves both problems, its biggest drawback is limited availability – only a few IRS Offices have the necessary technology.
Internet Virtual Conference Option Aims to Offer Another Option to Supplement the Existing Ones
The new Internet Virtual Conference Option aims to resolve the current problems with the existing options. The idea is to provide a secure, web-based screen-sharing platform to connect with taxpayers face-to-face from anywhere they have internet access – this is very similar to Video Skype Conferences offered by Sherayzen Law Office.
In essence the pilot Internet Virtual Conference Option will allow for greater access of the IRS by the taxpayers. In the future, it is likely that this option will become the preferred one by the IRS and the taxpayers.
Internet Virtual Conference Option Pilot Will Start on August 1, 2017
The IRS Office of Appeals plans to commence the pilot Internet Virtual Conference Option on August 1, 2017. After the pilot program is completed, the IRS will analyze the results and determine the taxpayers’ satisfaction with the technology. Sherayzen Law Office predicts that, once the technology is finalized, the IRS Internet Virtual Conference Option will become a permanent feature in the near future.

### Precious Metals Broker Indicted for Using Shell Corporations to Conceal Income
On April 12, 2017, a federal grand jury sitting in the Eastern District of New York returned an indictment, which was unsealed on May 24, 2017, charging Mr. Christopher Wolf, who operated Rothchild & Associates LLC (in New York), with tax evasion and aiding and assisting in the preparation of false tax returns achieved by using shell corporations to conceal income.
Using Shell Corporations to Conceal Income: Facts According to the Indictment
Mr. Wolf operated Rothchild & Associates LLC and was in the business of selling precious metals to investors over the telephone. While the company was technically owned by a third-party, the indictment alleges that Mr. Wolf controlled all aspects of Rothchild’s operations
According to the indictment, Mr. Wolf allegedly concealed the income he earned from Rothchild by using shell corporations. The scheme operated in a very simple way: Mr. Wolf’s commissions from Rothchild were paid by the company to shell corporations and, then, Mr. Wolf used the funds for his own personal purposes.
The indictment further alleges that Mr. Wolf filed a false 2010 individual income tax return which did not disclose the income he earned from selling precious metals. Then, Mr. Wolf simply failed to file his 2011 income tax return. On the “corporate side”, the indictment states that Mr. Wolf caused the shell corporations to file false 2010 and 2011 corporate tax returns that claimed deductions for phony expenses.
Using Shell Corporations to Conceal Income: Potential Consequences
If the IRS is successful in proving its case, Mr. Wolf may face a statutory maximum sentence of five years in prison for tax evasion and three years in prison for aiding and assisting the preparation or presentation of a false tax return.
Important Reminder: Indictment is NOT a Finding of Guilt
Sherayzen Law Office reminds its readers that an indictment is not a finding of guilt. Guilt can only be established in a court of law. Individuals charged in indictments are presumed innocent until proven guilty beyond a reasonable doubt.
Contact Sherayzen Law Office for a Voluntary Disclosure to Avoid Criminal Penalties if You are Using Shell Corporations to Conceal Income
If you are using shell corporations to conceal your income, then you should contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options to avoid criminal penalties. It is important to act fast – if the IRS initiates an investigation first, you may not be able to participate in any formal IRS voluntary disclosure programs.
Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!

### A Senior Citizen With Offshore Accounts in Panama Pleads Guilty | IRS News
On May 26, 2017, the IRS scored another victory against Offshore Accounts in Panama and again against a senior citizen. This time, Ms. Joyce Meads, a 73-year old Texas resident, pleaded guilty to conspiring to defraud the United States by using offshore accounts in Panama to conceal more than $1.3 million in royalty income that she earned from oil wells.
Offshore Accounts in Panama: Facts of the Meads Case
According to documents and information provided to the court, from approximately April of 1997 through April of 2010, Ms. Meads conspired with offshore promoters to disguise more than $1.3 million in royalty income (from oil wells) as scholarships and loans from a foreign corporation that she set up.
In particular, Ms. Meads set up nominee companies in Delaware and Panama in the name of W.G. Holdings Corporation. Then, she transferred her interest in the oil wells to the nominee entity in Delaware, which resulted in all of the royalty checks to be issued to W.G. Holdings and sent to a Miami post office box. The checks were picked up there and sent by a courier to Panama to be deposited into Ms. Meads’ nominee accounts. Later, as it was mentioned above, the funds were repatriated as scholarships or loans from W.G. Holdings to herself. Ultimately, the funds ended up on her bank accounts and the accounts that were opened in her mother’s name.
During all of the relevant years, Ms. Meads never reported her income on her tax returns. Nor did she ever file an FBAR with respect to her offshore account in Panama. As part of the guilty plea, Ms. Meads admitted that she caused a tax laws of more than $250,000.
The IRS identified the promoters who helped Ms. Meads in her conspiracy to evade taxes. They are Marc Harris of The Harris Organization, Republic of Panama, and Boyce Griffin of Offshore Management Alliance Ltd., Republic of Panama. Both of them have already been convicted of conspiracy and other charges and were previously sentenced to prison.
Offshore Accounts in Panama: Potential Jail Time and FBAR Penalties
The sentencing of Ms. Meads is scheduled for August 4, 2017. Ms. Meads faces a statutory maximum sentence of five years in prison, a period of supervised release, restitution and monetary penalties. The penalties will likely include not only income tax fraud penalties, but also FBAR penalties.
Offshore Accounts in Panama: Lessons from the Meads Case
The Meads case is a classic example of a situation that leads to an IRS criminal investigation. Let’s focus on three main factors here.
First, Ms. Meads was diverting pre-tax US-source income from the United States to an offshore tax shelter. Based just on this fact, the IRS has sufficient incentive to make an example of her. In fact, diverting US-source income to a tax shelter might be the most important factor that led to criminal penalties in this case.
Second, Ms. Meads utilized a shell corporations to hide her income. Involving foreign companies in a tax evasion scheme is a very common factor that leads to an IRS criminal investigation.
Finally, Ms. Meads utilized secret offshore accounts in Panama in her tax evasion scheme – accounts that she never disclosed on her FBARs. By doing so, she granted to the IRS a very powerful weapon in the form of draconian FBAR penalties, not just criminal but also civil. This means that the IRS had a trump card in court to force Ms. Meads to agree to a guilty plea. In other words, with FBAR penalties as a major negotiation weapon, the IRS feels confident to press with the criminal charges for the entire case. While in the Meads case proving the rest of the charges might not have been very difficult, this is not the situation in a lot of other cases.
Contact Sherayzen Law Office for Professional Help With Disclosing Your Offshore Accounts in Panama and Any Other Foreign Country
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office as soon as possible. Time may be of the essence, because an IRS investigation may prevent you from participating in any of the main Offshore Voluntary Disclosure initiatives (now closed).
With Sherayzen Law Office, you can feel confident that expertise, experience and convenience is on your side! We have helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US tax laws, and We Can Help You!
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### IRS Wins Against Wells Fargo’s Tax Shelter Scheme | Int’l Tax Lawyers MN
On May 25, 2017, the IRS sealed another victory against the infamous abusive tax shelter known as STARS (Structured Trust Advantaged Repackaged Securities).
The actual victory occurred on November 17, 2016, when a jury in Minnesota found Wells Fargo guilty of engaging in abusive tax shelter and determined that Wells Fargo was not entitled to a about $350 million of foreign tax credits. On May 25, 2017, however, the IRS expanded that victory when the Minnesota federal district court found Wells Fargo liable for a 20 percent negligence penalty.
Wells Fargo’s Tax Shelter Scheme can be traced to Barclays Bank PLC (“Barclays”). Barclays marketed the STARS transaction to American banks, including Wells Fargo. STARS was designed to exploit differences between the tax laws in the United States and in the United Kingdom.
Wells Fargo’s Tax Shelter Scheme is not the first one to be rejected by courts. In fact, at this point, three other cases have rejected the STARS tax shelters similar to Wells Fargo’s Tax Shelter Scheme. These case are: Bank of New York, BB&T Bank and Santander Bank purchased. Santander Holdings USA, Inc. v. United States, 844 F.3d 15 (1st Cir. 2016), pet. for cert. filed, March 20, 2017 (No. 16 1130); Bank of N.Y. Mellon Corp. v. Comm’r, 801 F.3d 104 (2d Cir. 2015), cert. denied, 136 S. Ct. 1377 (2016); Salem Fin., Inc. v. United States, 786 F.3d 932 (Fed. Cir. 2015), cert. denied, 136 S. Ct. 1366 (2016).
The recent victory by the IRS against Wells Fargo’s Tax Shelter Scheme is an important reminder of the salience of the business purpose doctrine in US international tax law. Sherayzen Law Office has previously written on the doctrine and emphasized how crucial it is to distinguish legitimate tax planning from engaging in abusive tax shelters.
Sherayzen Law Office advocates an approach that emphasizes legitimate tax planning that allows US taxpayers to utilize the advantages offered by US tax laws without engaging in abusive tax schemes, like STARS.

### IRS Wins Against a Lawyer’s Motion to Dismiss FBAR Penalties | FBAR Tax Lawyer
On May 3, 2017, the IRS scored an important victory in United States v. Little, 2017 U.S. Dist. LEXIS 67580 (SD NY 2017) by defeating a Motion to Dismiss FBAR charges made by the defendant, Mr. Michael Little. The motion was based on an argument that is often used by opponents of FBAR penalties – the unconstitutionality of the FBAR penalties based on a tax treaty and the vagueness of the FBAR requirement as applied to the defendant. While I do not intend to provide a comprehensive analysis of the Motion to Dismiss FBAR Charges and the reasons for its rejection, I do wish to outline certain important aspects of the judge’s opinion.
Brief Overview of Important Facts
The Motion to Dismiss FBAR Charges was made by Mr. Little, a UK citizen and a US permanent resident. Mr. Little was a UK lawyer who also became a US lawyer and practiced in New York. During this time, he helped Mr. Harry G.A. Seggerman’s heirs hide millions in offshore accounts. For his services, he was paid hundreds of thousands of dollars which were never disclosed to the IRS.
In 2012 and 2013, Mr. Little was charged with willful failure to file FBARs and his US tax returns. He was further charged with various crimes arising out of his alleged assistance to Mr. Seggerman's heirs in a scheme to avoid the taxes due on their inheritance held in undeclared offshore accounts.
Motion to Dismiss FBAR Penalties Based on “Void for Vagueness” Standard
The key argument of the Motion to Dismiss FBAR Penalties was based on the so-called “Void for Vagueness” Standard. The court cited United States v. Rybicki, 354 F.3d 124, 129 (2d Cir. 2003) to define the standard as follows: “the void-for-vagueness doctrine requires that a penal statute define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary and discriminatory enforcement.”
In the first part of the Motion to Dismiss FBAR Penalties, Mr. Little essentially argued that, in his circumstances, the application of the FBAR requirement was too vague due to the 2008 changes in the definition of the required FBAR filers, particularly with respect to exclusion of persons “in or doing business in the United States”.
The Court dismissed the argument stating that whatever was an issue with respect to “in or doing business” provision, a lawful alien resident of ordinary intelligence (whether or not he was “doing business in the United States”) would have understood that the FBAR requirement applied to him because the definition of the “United States resident” includes green card holders. Hence, the vagueness of the original FBAR definition was inapplicable to a lawful alien resident such as Mr. Little.
Motion to Dismiss FBAR Penalties and Other Criminal Counts: No Vagueness in Criminal Statutes Because Willfulness Must be Proven Beyond Reasonable Doubt
The Motion to Dismiss FBAR Penalties also contained several more “void for vagueness” arguments (related not just to FBARs, but also to Mr. Little’s failure to file US tax returns and his role as an “offshore account enabler”). Among these arguments, Mr. Little especially relied on several US-UK tax treaty provisions which led him to believe that he was not a US tax resident (in particular, he believed that he was in the United States temporarily and he interpreted the treaty as stating that he was not a US tax resident even though he had a green card).
The Court dismissed Mr. Little’s treaty-based arguments based on its interpretation of how a person of ordinary intelligence would have understood these provisions. Here, I wish to emphasize one of the most important parts of the decision – the affirmation that the worldwide income reporting requirement was not vague. The Court found that “the U.S. statutes and regulations that require alien lawful permanent residents (green card holders) to either (a) file a tax return and pay taxes on worldwide income, or (b) file a tax return reporting worldwide income and indicate that he or she is taking a particular protection under the Treaty, are not unconstitutionally vague as applied”.
The most interesting aspect of the Court’s decision, however, was in its last part. Here is where judge Castel dealt a death blow to all of Mr. Little’s void-for-vagueness arguments. The Court stated that, since a conviction can only be achieved if the government proves willfulness beyond reasonable doubt, none of the relevant criminal tax provisions (including criminal FBAR penalties) can be deemed as vague.
The reason for this conclusion is very logical – in order to prove willfulness, the government must establish that: “the defendant knew he was legally required to file tax returns or file an FBAR, and so knowing, intentionally did not do so with the knowledge that he was violating the law.” Obviously, if such knowledge and intention of the defendant are proven beyond the reasonable doubt, the defendant “cannot complain that he could be convicted for actions that he did not realize were unlawful”.
Motion to Dismiss FBAR Penalties Based on Vagueness Versus Non-Willfulness Arguments
It is important to emphasize that the vagueness arguments contained in Mr. Little’s Motion to Dismiss FBAR Penalties can still be utilized to establish the defendant’s non-willfulness even though the Motion to Dismiss was denied. In other words, while the void-for-vagueness arguments were insufficient to challenge the criminal tax provisions, they may be important in establishing the defendant’s subjective perception of these provisions and his non-willful inability to comply with them.
I believe that the defendant’s motion in this case was destined to be denied. In reality, the defendant might have made this motion not to win, but in order to establish the base for asserting the same arguments in a different context of undermining the government’s case for willfulness. The Court itself stated that one of the Defendant’s arguments (reliance on advice received from her Majesty’s Revenue and Customs”) was in reality a potential affirmative defense to failure to file US tax returns, not an argument against the constitutionality of the laws in question.

### IRS Wins Another Case Against Secret Belize Bank Accounts | FATCA Lawyers
On March 23, 2017, the IRS scored another major victory against using Belize bank accounts to hide income. On that day, Mr. Casey Padula pleaded guilty to conspiracy to commit tax and bank fraud, including using Belize bank accounts to conceal almost $2.5 million.
Facts Concerning Using Belize Bank Accounts to Commit Tax Fraud
According to documents filed with the court, Mr. Padula was the sole shareholder of Demandblox Inc. (Demandblox), a marketing and information technology business. Mr. Padula conspired with others to move funds from Demandblox to his Belize bank accounts, disguising the transfer of funds as business expenses in Demandblox’s corporate records. At the same time, Mr. Padula created two offshore companies in Belize: Intellectual Property Partners Inc. (IPPI) and Latin American Labor Outsourcing Inc. (LALO). He opened and controlled bank accounts in the names of these entities at Heritage International Bank & Trust Limited (Heritage Bank), a financial institution located in Belize.
From 2012 through 2013, Demandblox “paid” to the bank accounts at Heritage Bank approximately $2,490,688. The transfers were recorded as intellectual property rights or royalty fees on Demandblox’s corporate books and deducted as business expenses on the company’s 2012 and 2013 corporate tax returns, causing a tax loss of more than $728,000. In reality, Mr. Padula used the funds to pay for personal expenses and purchase significant personal assets.
Furthermore, Mr. Padula also conspired with investment advisors Mr. Joshua VanDyk and Mr. Eric St-Cyr at Clover Asset Management (CAM), a Cayman Islands investment firm, to open and fund an investment account that he would control, but that would not be in his name. Heritage Bank had an account at CAM in its name and its clients could get a subaccount through Heritage Bank at CAM, which would not be in the client’s name but rather would be a numbered account. Mr. Padula transferred $1,000,080 from the IPPI bank account at Heritage Bank in Belize to CAM to fund his numbered account.
Facts Concerning Bank Fraud
In addition to committing tax fraud, Mr. Padula also conspired with others to commit bank fraud.
Mr. Padula had a mortgage on his Port Charlotte, Florida home of approximately $1.5 million with Bank of America (BoA). In 2012, he sent a letter to the bank stating that he could no longer repay his loan. At the same time, Mr. Padula provided Mr. Robert Robinson, III, who acted as a nominee buyer, with more than $625,000 from his IPPI bank account in Belize to fund a short sale of Mr. Padula’s home. Mr. Padula and Mr. Robinson signed a contract, which falsely represented that the property was sold through an “arms-length transaction,” and agreed that Padula would not be permitted to remain in the property after the sale.
In fact, Mr. Padula never moved from his home. Moreover, less than two months after the closing, Mr. Robinson conveyed it back to Mr. Padula by transferring ownership to one of Mr. Padula’s Belizean entities for $1. Mr. Robinson also pleaded guilty on March 23, 2017, to signing a false Form HUD-1 in connection with his role in the scheme.
Potential Penalties Concerning Using Belize Bank Accounts to Commit Tax Fraud
Mr. Padula faces a statutory maximum sentence of five years in prison, a term of supervised release and monetary penalties. As part of his plea agreement, Mr. Padula agreed to pay restitution to the IRS and to BoA in the amount of $728,609. Mr. Robinson faces a statutory maximum sentence of one year in prison, a term of supervised release, restitution and monetary penalties.
Lessons of the Padula Case
The Padula Case is a classic illustration of facts that often lead to a criminal prosecution by the IRS. First, he was shifting US-source income to Belize bank accounts by creating an artificial loss between the entities that he controlled.
Second, Mr. Padula employed a sophisticated offshore corporate structure to actively attempt to conceal his ownership of his Belize bank accounts. While the guilty plea does not specifically state how the IRS first found out about Mr. Padula’s structure, it appears to me that it occurred in connection with the IRS criminal cases against Mr. VanDyk and Mr. St-Cyr.
Finally, Mr. Padula utilized Belize, a tax haven, to commit tax fraud. This is always a factor for the IRS with respect to deciding whether to commence a criminal investigation.
Additionally, the Padula Case is another confirmation there are no safe havens anymore. Especially since the implementation of FATCA, the IRS has now the capacity to trace the transfer of funds, identify the tax violations and present sufficient evidence to prosecute a criminal case.
Contact Sherayzen Law Office for Professional Help With the Voluntary Disclosure of Your Belize Bank Accounts
If you have undisclosed Belize bank accounts or undisclosed offshore assets in any other foreign country, you should contact Sherayzen Law Office to explore your voluntary disclosure options as soon as possible. If the IRS commences an investigation against you, this very fact may result in the closure of all voluntary disclosure paths currently available to you.
Sherayzen Law Office has accumulated tremendous experience in helping its clients with their Offshore Voluntary Disclosures, including Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### IRS International Tax Campaigns | International Tax Attorney Houston
Five of the thirteen new IRS Campaigns directly target US international tax noncompliance. In this essay, I would like to provide a brief overview of these five IRS International Tax Campaigns. In the future articles, I will explain each of these campaigns in more detail.
IRS International Tax Campaigns: Background Information
After multiple years of preparation and reorganization, the IRS Large Business and International Division announced a new way to enforce US corporate and international tax laws – issue-focused IRS campaigns. An IRS campaign is basically an approach to tax enforcement which allows the IRS to allocate its scarce resources to a specific issue that the IRS believes to be a major noncompliance concern. This is very different from the previous IRS approaches which focused more on specific types of taxpayers.
On January 31, 2017, the IRS outlined the first thirteen campaigns and claimed that many more campaigns are in the process of being developed and finalized. Five of the first thirteen campaigns focus on international tax compliance issues.
IRS International Tax Campaigns: General Description
These five IRS International Tax Campaigns are: Offshore Voluntary Disclosure Program (“OVDP”) (closed 2018). Declines-Withdrawals Campaign, Repatriation Campaign, Form 1120-F Non-Filer Campaign, Inbound Distributor Campaign and Related Party Transactions Campaign.
The international focus of the OVDP, Repatriation, Form 1120-F and Inbound Distribution Campaigns is fairly obvious. The Related-Party Transactions is listed among the IRS International Tax Campaigns because of the IRS focus on the transfer of funds from a controlled foreign corporation to its related pass-through entities (US or foreign) or shareholders.
IRS International Tax Campaigns: What Taxpayers are at Risk
Among the IRS International Tax Campaigns, the OVDP Declines-Withdrawal Campaign and Form 1120-F Non-Filer Campaign can apply to small, mid-market and high net-worth taxpayers. It appears that the Inbound Distributor Campaign is likely to apply to any mid-market to large taxpayers. The rest of the IRS International Tax Campaigns, the Repatriation Campaign and the Related Party Transactions Campaign, specifically identify “mid-market taxpayers” as a targeted group. It should be stated, however, that the Repatriation Campaign will also indiscriminately target failures to state taxable transactions on US tax returns.
From the description above, it is obvious that the IRS is increasing its focus on mid-market taxpayers. Who is considered to be a “mid-market” taxpayer? The IRS defined this category during its first webinar on March 7, 2017 as taxpayers with assets between $10 million and $250 million. If you or your company fall within this category, you are at a high risk of IRS examination.
What Should Taxpayers Exposed to the IRS International Tax Campaigns Do?
If you are taxpayer with tax issues identified in the IRS International Tax Campaigns, you should contact Sherayzen Law Office as soon as possible. Our team of tax professionals, headed by an international tax attorney, Mr. Eugene Sherayzen, will: thoroughly analyze your case to determine if you are currently in compliance with US tax laws, determine the options for proceeding forward with bringing your tax affairs into full compliance and preparing for an issue-based examination, and implement the preferred option (including the preparation of all legal documents and tax forms).
Contact Us Today to Schedule Your Confidential Consultation!

### IRS Compliance Campaigns | US International Tax Attorney and Lawyer
On January 31, 2017, the IRS announced a complete new approach to tax enforcement – Issue-Focused IRS Compliance Campaigns. A total of thirteen IRS compliance campaigns were announced; all of them will be administered by the LB&I (Large Business and International) division of the IRS. Let’s explore in more detail this highly important IRS announcement.
Background Information: IRS Compliance Campaigns is the Second Phase of the LB&I Restructuring
The announcement of the IRS Compliance Campaigns does not come as a surprise. The IRS has been talking about the LB&I division restructuring for a long while and the first details of the new campaigns already appeared as early as September of 2015.
In fact, the IRS Compliance Campaigns represent the second phase of this restructuring. Already in the fall of 2015, the LB&I completed the first phase – the administrative re-organization of the LB&I into nine units, including four geographic practice areas and five issue-based practice areas.
The first phase of the LB&I reorganization focused on the administrative structure of the Division. The IRS Compliance Campaigns are meant to reorganize the Division’s tax enforcement process in a way that fits best the new administrative structure.
IRS Compliance Campaigns are Focused on Specific Tax Issues
On January 31, 2017, during a conference call announcing the new IRS Compliance Campaigns, the IRS stated that each campaign is meant to provide “a holistic response to an item of either known or potential compliance risks.” In other words, each Campaign is focused on a specific tax issue which carries a heightened noncompliance risk.
This focus on specific issues fits perfectly with the new organizational structure of the LB&I which we already discussed above. Again, this is all part of a large IRS plan to devote its scarce resources towards the areas which have significant noncompliance risk and, hence, require a more intense level of IRS scrutiny.
Issue-Focused IRS Compliance Campaigns: What Areas Will the Campaigns Affect?
As of March 21, 2017, the IRS identified thirteen such high-risk areas. A separate campaign was assigned to each of these areas. The campaigns can be grouped according to the IRS LB&I Practice Areas.
1. Cross Border Activities Practice Area
The following campaigns are included within the Cross Border Activities Practice Area of the LB&I Division: Form 1120-F Non-Filer Campaign and Repatriation Campaign.
2. Enterprise Activity Practice Area
The Enterprise Activity Practice Area of the LB&I Division contains more campaigns than any other area by a large margin. Seven different campaigns are launched within this Practice Area: IRC 48C Energy Credit; Domestic Production Activities Deduction, Multi-Channel Video Program Distributors (MVPD’s) and TV Broadcasters; Micro-Captive Insurance Campaign; Related Party Transactions; Deferred Variable Annuity Reserves & Life Insurance Reserves IIR Campaign; Basket Transactions Campaign; and Land Developers - Completed Contract Method (CCM) Campaign.
3. Pass-Through Entities Area
Two huge campaigns are launched in the Pass-Through Entities Area of the LB&I Division: TEFRA Linkage Plan Strategy Campaign and S Corporation Losses Claimed in Excess of Basis Campaign.
4. Treaty and Transfer Pricing Operations Practice Area
One campaign is launched within the Treaty and Transfer Pricing Operations Practice Area: the Inbound Distributor Campaign.
5. Withholding and International Individual Compliance Practice Area
Only one, but highly important campaign was launched within the Withholding and International Individual Compliance Practice Area – OVDP Declines-Withdrawals Campaign.
The taxpayers should remember that they may be subject to multiple IRS Compliance Campaigns at the same time.
IRS Compliance Campaigns: Treatment Streams
The goal of the campaigns is to promote tax compliance – even more fundamentally, to change the taxpayer behavior in general, replacing noncompliance with compliance.
In order to achieve this goal, the IRS may utilize a variety of “treatment streams” as part of a campaign. The first and most fundamental treatment stream is the traditional audit, which will remain the ultimate weapon in all IRS Compliance Campaigns.
Second, the IRS stated that it will also include “soft letters” to taxpayers. The idea behind the soft letters is to draw a taxpayer’s attention to a particular item or issue on the taxpayer’s return, explain the IRS position and give the taxpayer an opportunity to amend his return himself (i.e. without resorting to an audit). If the taxpayer does not do so after he receives the IRS letter, an audit will most likely follow.
Additionally, the IRS stated that it will pursue four additional strategies: guidance, new forms and instructions, published practice units, and practitioner and stakeholder outreach.
More IRS Compliance Campaigns Will Be Launched in the Future
The IRS has affirmatively stated that the number of the IRS Compliance Campaigns will increase in the future. At this point, it is not yet known what particular areas the new Campaigns will affect.
Contact Sherayzen Law Office for Professional Help If You Are Affected by One or More of the IRS Compliance Campaigns
If you are affected by any of the IRS campaigns or you have received a soft letter from the IRS, contact Sherayzen Law Office for professional help. Our team of tax professionals, headed by Attorney Eugene Sherayzen, will thoroughly analyze your case, create a plan to move forward to resolve the situation, implement the plan and defend your position against the IRS.

### The IRS Large Business and International Division Organizational Structure
Almost two years ago, the IRS Large Business and International Division announced long-term changes in its structure as well as its approach to tax enforcement. In the fall of 2015, the IRS completed the first phase of the structural changes in the Division – re-organization of its administrative structure. This structure exists intact today and we fully expect for it to last for a long while. Let’s discuss this current administrative structure of the IRS Large Business and International Division.
IRS Large Business and International Division: Areas of Responsibility
The IRS Large Business and International Division forms a huge part of the IRS. First, it is responsible for the tax compliance enforcement (US domestic and US international) with respect to all corporations, subchapter S corporations, and partnerships with assets greater than $10 million. Most of these businesses employ a large number of employees and their business affairs involve complex accounting principals and tax laws. Second, the Division deals with individual international tax compliance, including offshore voluntary disclosures.
Current Organization of the IRS Large Business and International Division
The IRS Large Business and International Division is currently organized into Support Areas (a smaller part of the Division) and Practice Areas.
The Support areas concentrate on supporting the Practice Areas through data analysis and integrated feedback loop (which is a highly important feature that was incorporated into the Division’s reorganization plan in 2015). The Support areas include Headquarters, Program and Business Solutions (including Technology and Program Solutions and Resource Solutions), Compliance Integration (including Data solutions and the highly-important Compliance Planning and Analytics) and Assistant Deputy Commissioner - International.
The second part of the IRS Large Business and International Division is divided into five Practice Areas and four Compliance Practice Areas. The Practice Areas include: (1) Cross Border Activities, (2) Enterprise Activity, (3) Pass-Through Entities, (4) Treaty and Transfer Pricing Operations and (5) Withholding and International Individual Compliance. US international tax compliance concerns are especially important in areas 1, 4 and 5.
The Compliance Practice Areas basically represent a geographical division of the United States into four tax enforcement areas: Central (which consists of North Central and South Central Fields), Eastern (which consists of Great Lakes and Southeast Fields), Northeastern (which includes North-Atlantic and Mid-Atlantic Fields) and, finally, Western (which includes West and Southwest Fields).
The IRS Large Business and International Division Reorganization Now Entered Into the Second Phase
Since January 31, 2017, the IRS Large Business and International Division reorganization commenced the second phase with the enaction of the first thirteen issue-based IRS Compliance Campaigns. These campaigns represent a new approach to tax enforcement that is believed to fit best the new administrative structure of the division. In the near future, Sherayzen Law Office will update its website with articles dedicated to this important new development.

### US Bank Accounts Disclosed to Israel | FATCA Tax Lawyers Florida
Many persons have assumed that FATCA is a one-way street where only the United States is able to obtain tax information with respect to foreign accounts controlled by its citizens while the information about US bank accounts is never exchanged with other FATCA signatories. While, to some (or even to a large) degree this may be true due to the fact that US financial institutions do not generally collect certain information about nonresident aliens with financial accounts in the United States, there are exceptions.
Disclosure of US Bank Accounts held by US Tax Residents Under FATCA
One of such exceptions are US taxpayers who are also citizens or tax residents of another country. Generally, the information about US bank accounts owned by US tax residents is collected by US financial institutions and shared with the IRS. Then, the IRS may share this information with other countries, including Israel.
This is a fairly important exception, because it affects millions of US citizens who reside overseas, including those who reside in Israel.
2017 Disclosures of Owners of US Bank Accounts to Israel
The most recent example of such a disclosure occurred on February 28, 2017, when the Israeli Tax Authority (“ITA”) announced that it received a second batch of information from the IRS with respect to about 30,000 US bank accounts held by Israeli citizens in the year 2014. All of this information was provided pursuant to US-Israel FATCA Agreement.
Earlier this year, in January, the US transferred the first batch of financial information under FATCA to Israel. At that time, the IRS provided information about 35,000 Israelis who had bank accounts in the United States in 2015.
Disclosure of US Bank Accounts and Other Information Will Lead to Audits of Israeli Tax Returns
The ITA also stated that the IRS will continue to supply the ITA with FATCA information regarding US Bank Accounts in the future. Israel also expects to commence the exchange of information under CRS (OECD’s Common Reporting Standard) by September of 2018.
All of the information that the ITA collects under FATCA and CRS will be used to compare with the information reported by Israelis on their Israeli tax returns. In fact, the ITA created a special tax force dedicated to screening and comparing the data. Hence, one should expect an increase in tax audits and imposition of tax penalties in Israel.
Swiss Bank Program Data Will Be Shared with Israel, Not Just US Bank Accounts
There is one important point that should be emphasized with respect to the future IRS disclosures to Israel. Not only will the IRS share with the ITA the information regarding US bank accounts held by Israelis, but it will also supply the data about Israeli-held Swiss bank accounts that the IRS obtained through the Swiss Bank Program. The ITA already declared that it expects to receive data regarding thousands of the Swiss bank accounts held by Israelis.
This development is something that Sherayzen Law Office has frequently warned about in the past. We have repeatedly stated our concerns that the information that a foreign country obtains regarding US-held accounts through FATCA or CRS will eventually be shared with the IRS through one of the tax information exchange agreements.
The recent ITA declaration is just another confirmation of the correctness of our prediction – only it works here to benefit the ITA, not the IRS. We should expect more confirmations in the future that benefit the IRS directly with respect to detection of noncompliant US taxpayers who might have escaped the direct detection through FATCA.

### Greece Publishes the List of Noncooperative States | FATCA Lawyer Atlanta
On February 28, 2017, the Ministry of Finance of Greece published a list of noncooperative states.
What are Noncooperative States
In order for a state to be designated as “noncooperative”, it has to satisfy the following four conditions:
1. The state is not a member of the European Union;
2. The state’s legal structure with respect to transparency and exchange of information in tax matters has not been reviewed by the OECD (Organisation for Economic Co-Operation and Development);
3. The state has not signed any treaty with Greece on administrative assistance in tax matters (basically tax information exchange) nor do they offer such assistance; and
4. The state has not signed tax administrative assistance treaties with at least twelve other states.
The last requirement appears to be somewhat random in the number of states.
Why the List of Noncooperative States Matters
The list of noncooperative states is important because transactions with any states on this list are subject to heightened scrutiny by the Greek tax authorities. Moreover, certain limitations may be imposed on the companies involved in transactions with noncooperative states, especially with respect to tax deductibility of certain expenses. Additionally, the Greek tax authorities may look particularly close at such companies with respect to transfer pricing issues and the controlled foreign corporation tax compliance issues.
This Year’s List of Noncooperative States
In February of 2017, a total of twenty-nine states were on the list of noncooperative states. Here is the list: Andorra, Antigua and Barbuda, Bahamas, Bahrain, Barbados, Brunei, Cook Islands, Dominica, Grenada, Guatemala, Hong Kong, Lebanon, Liberia, Liechtenstein, Macedonia, Malaysia, Marshall Islands, Monaco, Nauru, Niue, Panama, Philippines, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Samoa, Uruguay, the U.S. Virgin Islands, and Vanuatu. As the readers can see, some of the “states” are really just tax jurisdictions within a state (such as U.S. Virgin Islands).
It should be noted that some of these tax jurisdictions are favorite designations for forming foreign corporations (e.g. Bahamas and Barbados), other foreign entities (such as Nevis LLC) and foreign trusts (e.g. Cook Islands). Furthermore, a lot of these tax jurisdictions are also designated as “tax shelters” by other countries.

### International Tax Lawyer Lectures on US Tax Reporting of Italian Assets and Income
On February 2, 2017, Mr. Eugene Sherayzen, the founder and owner of Sherayzen Law Office (an international tax law firm headquartered in Minneapolis, Minnesota) gave a lecture at the Italian Cultural Center in downtown Minneapolis. The topic of the lecture was an introduction to US tax reporting of Italian assets and income for individual taxpayers. The lecture was well-attended by mostly native Italians (the room was filled to capacity) and caused a great amount of interest in the audience.
US Tax Reporting of Italian Assets Introduction
US Tax Reporting of Italian Assets and Income: Worldwide Income Reporting Requirement
The lecture commenced with the discussion of the worldwide income reporting requirement. After explaining the US tax residency requirement, Mr. Sherayzen focused on the importance of reporting Italian-source income in the United States for those Italians who are considered to be US tax residents (i.e. US citizens, US permanent residents, persons who satisfied the Substantial Presence Test and the US tax residents by choice). The lawyer explained that the Italian-source income must be disclosed by these Italians even if the income is already taxed in Italy and even if it is never brought into the United States.
US Tax Reporting of Italian Assets and Income: Foreign Rental Income Must Be Reported but Real Estate itself Is Reportable Only In Certain Cases
Then, Mr. Sherayzen discussed the subject of reporting by Italians of their foreign real estate and income derived from foreign real estate. The international tax lawyer emphasized that foreign rental income and foreign capital gains must be disclosed on the taxpayers’ US tax returns.
Then, Mr. Sherayzen clarified that, in situations where real estate is owned outright by individuals (i.e. not through any entity or any other complex arrangement), the ownership of the real estate itself is not generally reportable. However, if the Italian real estate is owned through an entity, then it will need to be disclosed as part of the entity’s financial statements prepared as part of Form 5471, 8865 or 8858. The lawyer again emphasized that, even in these circumstances, the income derived from Italian real estate is still reportable on the taxpayers’ US tax returns.
US Tax Reporting of Italian Assets and Income: FBAR and FATCA Form 8938
After discussing real estate as an exception from the general rule that foreign assets are likely to be reportable on the information returns in the United States, Mr. Sherayzen turned to the subject of reporting of foreign accounts with particular focus on FBAR and FATCA Form 8938. The discussion focused on the types of accounts that needed to disclosed, the reporting thresholds, and the penalties associated with the failure to file these forms. The international tax lawyer also discussed in more depth the history of FBAR.
This discussion caused a great number of questions related to FBAR, its thresholds and its relationship to income reporting. Fewer questions were asked with respect to Form 8938.
US Tax Reporting of Italian Assets and Income: PFICs
Despite the time limitations, Mr. Sherayzen briefly discussed Form 8621 as a hybrid form. The lawyer explained that a “hybrid form” meant that Form 8621 was used for both, income tax reporting and asset reporting, with respect to PFICs. Mr. Sherayzen explicated, in a very general manner, what assets qualified for PFIC status and what were the income tax consequences of PFICs. The Minneapolis international tax lawyer warned the audience that their Italian private pension plans and life insurance policies could contain PFICs.
US Tax Reporting of Italian Assets and Income: Foreign Inheritance and Foreign Gifts
The lecture ended with a brief discussion of US tax reporting requirements concerning inheritance and gifts from Italian nationals and non-resident aliens (for US tax purposes). At that point, Mr. Sherayzen introduced Form 3520 and its threshold reporting requirements for foreign gifts and foreign inheritance. The lawyer also explained how Form 8938 could be applicable to a foreign inheritance.
After the lecture ended, Mr. Sherayzen continued to take questions in private for the next thirty minutes.

### IRS Cracks Down on Sovereign Debit Cards linked to Offshore Accounts
On January 25, 2017, the federal court in Montana authorized the IRS to serve John Doe Summons on Michael Berg of Bozeman, Montana, seeking information about US taxpayers with offshore accounts established by Sovereign Management & Legal LTD (“Sovereign”), a Panamanian company. In particular, the IRS is interested in US taxpayers who use debit cards linked to these offshore accounts (“Sovereign Debit Cards”). Let’s explore in more detail why the IRS is pursuing John Doe summons with respect to Sovereign Debit Cards.
Sovereign Debit Cards Used to Access Secret Offshore Accounts Without Identifying the Owner of the Accounts
First of all, it is important to point out that Sovereign is already on the OVDP (now closed) list of “facilitators”, which means that any US taxpayer who owns Sovereign offshore accounts and enters the OVDP will be subject to a 50% Offshore Penalty. Additionally, it means that the IRS has long been focusing on this company and what it is doing to promote US tax evasion.
It seems that there is a particular scheme linked to Sovereign debit cards that bothers the IRS. In its press release, the IRS and the DOJ stated that Sovereign advertised various products that allow US taxpayers to hide their offshore assets. In particular, the IRS emphasized one “package” where a corporation owned by another entity (including a fake charitable foundation) is officially governed by nominee officers provided by Sovereign. Then, Sovereign would open bank accounts for these entities and provide Sovereign debit cards (issued in the name of a nominee) to the taxpayer. By using Sovereign debit cards, taxpayers were able to access their offshore funds without revealing their identities.
In essence, the main issue here is the use of pre-paid debit cards for tax evasion purposes.
The Information that the IRS Seeks Regarding Sovereign Debit Cards
The John Doe summons issued by the IRS seek the records of US taxpayers who received Sovereign debit cards, specifically “Sovereign Gold Cards”. The IRS wishes to obtain the records for eleven years – 2005 through 2016.
This is the Second Time the IRS Seeks Regarding Sovereign Debit Cards
The current summons represent just a part of the case against the Sovereign . The IRS and the DOJ already previously obtained a similar order from the U.S. District Court for the Southern District of New York, which authorized the issuance of eight separate John Doe summonses on bank and other entities for information related to Sovereign and its US customers. The evidence submitted in the request to issue the current Montana John Doe summons was built in part on the information provided in response to the earlier summons.
Impact of Sovereign Debit Cards John Doe Summons on US Taxpayers
The new Sovereign Debit Cards John Doe Summons should be of grave concern to US taxpayers who own Sovereign Debit Cards as well as other noncompliant US taxpayers. Let’s discuss two most important aspects of these John Doe Summons with respect to noncompliant US taxpayers.
First of all, all noncompliant US taxpayers related to Sovereign in one way or another are in grave risk of the IRS detection. As long as their names appear in Sovereign’s internal records, these taxpayers are likely to be discovered and prosecuted by the IRS.
Second, what is especially disconcerting is the time frame for the new John Doe summons – years 2005 through 2016. The IRS is seeking records of even pre-UBS case tax noncompliance. This trend to going back that far should worry not only the US taxpayers with Sovereign debit cards, but also any US taxpayers who did quiet disclosure or just closed their accounts a long time ago and believe that they are safe from the IRS prosecution because of the passage of time. The willingness of the IRS to go back that far shows that all of these taxpayers are at risk.
Contact Sherayzen Law Office for Help with Your Voluntary Disclosure Concerning Sovereign Debit Cards and/or Any Other Undisclosed Foreign Accounts
As the IRS correctly pointed out, “the time to come forward and come into compliance is running short, and those who continue to violate U.S. tax and reporting laws will pay a heavy price.” The “heavy price” might be the criminal tax evasion penalties and willful and criminal FBAR penalties – a situation where a taxpayer might owe in penalties more than he ever had on his offshore accounts and he will also be put in prison for potentially as many as ten years.
This is why it is very important for noncompliant US taxpayers to contact Sherayzen Law Office to discuss their offshore voluntary disclosure options as soon as possible. The situation is particularly critical for US taxpayers with Sovereign debit cards.
We have successfully helped hundreds of US taxpayers avoid criminal penalties and achieve civil case resolutions with the IRS. We can Help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Israeli IT Tax Breaks | Minnesota International Tax Lawyer and Attorney
Israel continues to solidify its leading positions in the IT market by using tax policy. On January 1, 2017, Amendment 73 to the Law for the Encouragement of Capital Investments of 1959 entered into force. The main goal of the Amendment is to clarify, extend and improve the Israeli tax breaks for IT companies operating in Israel. Let’s review some of the most important of these Israeli IT tax breaks.
Israeli IT Tax Breaks: Preferred Technological Taxable Income Tax Rates
Starting year 2017, Israel will have three levels of taxation of what is termed as “preferred technological taxable income” (PTTI) of certain companies, referred to as “preferred enterprises” (PE). The tax rates will be as follows: 12% default rate, $7.5% development area A (special Israeli designation for certain areas) and just 6% in the case of a special preferred technological enterprise (SPTE). All of these rates compare favorably to the standard business tax rate in Israel of 24% (which was also lowered as of January 1, 2017 from 25%).
There is an important exception – R&D centers will not be entitled to a reduced corporate tax rate if the controlling shareholders or the beneficiaries are Israeli residents. Control here can be direct or indirect and it is defined as an entitlement to 25% or more of the income or profits of the R&D center.
Israeli IT Tax Breaks: IT Company Owners Dividend Tax Rates
The owners of IT companies get another tax break in the form of dividend withholding rates. Generally, the tax withholding rate for dividends paid to an owner of an IT company will be 20% (subject to any applicable tax treaty). However, the rate goes down to a mere 4% if the dividend is distributed to at least a 90% foreign resident corporate shareholder.
Again, these rate are below the general tax withholding rate of 30-33% for dividends paid out to shareholders who own at least 10% of the company.
Israeli IT Tax Breaks: Certain Capital Gains
The Israeli IT tax breaks also expand to capital gains in certain limited situations. Israeli IT companies that sell IP to a related foreign company will qualify for a reduced 6% capital gains tax rate, but only if the Israeli company developed or acquired the IP from a foreign company after January 1, 2017. Such sales are subject to the approval of the National Authority for Technological Innovation.
A Combined Effort of US and Israeli Lawyers Needed to Properly Plan A US Company’s Expansion to Israel
All of the tax law changes that I mentioned above are described here in a very general manner. There are very specific qualifications that need to be satisfied by a company in order to qualify for the Israeli IT Tax Breaks. This is why a US company will need to contact a specialized Israeli tax attorney to properly plan the expansion of its IT business to Israel.
At the same time, however, the work of the Israeli tax attorney should be coordinated with proper US tax planning, because US companies are taxed on their worldwide income and may potentially even be taxed on the income of their foreign subsidiaries. Therefore, the tax planning efforts of an Israeli tax attorney should be combined with those of a US tax attorney in order to produce a tax plan that will function properly in both jurisdictions at the same time.
Contact Sherayzen Law Office for Professional Help With Your Business Tax Planning
If you wish to expand your business overseas, you need to contact Sherayzen Law Office for professional US business tax planning. Additionally, we can also help you with your US annual compliance with respect to your foreign assets and foreign income.
Contact Us Today to Schedule Your Consultation!

### University Professor Sentenced to Prison with $100 Million FBAR Penalty
On February 10, 2017, the IRS scored yet another victory in its fight against secret offshore accounts with the imposition of a $100 Million FBAR Penalty. Mr. Dan Horsky, a 71-year old retired university professor (he used to teach at a business school), was a spectacularly successful investor and a very unsuccessful tax evader. After making a fortune, he decided to conceal his earnings through secret offshore accounts in Switzerland. Now, not only will this university professor pay an enormous $100 Million FBAR penalty, but he will also go to prison.
Facts of the Case: From University Professor to a $100 Million FBAR Penalty
Let’s first explore how did a simple professor ended up paying a $100 Million FBAR penalty.
According to court documents and statements made during the sentencing hearing, Mr. Horsky is a citizen of the United States, the United Kingdom and Israel. For over 30 years, he worked as a professor of business administration at a university located in New York. Around 1995, this university professor invested in numerous start-up companies. All of them but one failed; however, the one that succeeded (“Company A”) was spectacularly profitable.
In 2000, Mr. Horsky consolidated all of his investments into a nominee account in the name of a shell entity, Horsky Holdings. The account was opened at a Swiss bank in Zurich in order to conceal his financial transactions and accounts from the IRS and the US Treasury Department (the “DOJ”).
In 2008, Mr. Horsky received approximately $80 million in proceeds from selling Company A’s stock. However, he filed a fraudulent 2008 tax return, under-reporting his income by more than $40 million and disclosing only approximately $7 million of his gain from the sale. Then, the Swiss Bank opened multiple accounts for the university professor to assist him in concealing his assets. The university professor decided to trick the IRS and opened one small account for which Horsky admitted that he was a US citizen and another much larger account for which he claimed he was an Israeli citizen and resident.
As a university professor who loved business, Mr. Horsky could not stay away from temptation of further investments. He re-invested some of his gains from selling Company A’s stock into Company B’s stocks. Again, the university professor was enormously successful – by 2015, his secret offshore holdings exceeded $220 million.
In 2012, after learning about the IRS efforts to fight offshore tax evasion, Mr. Horsky engaged in a new scheme. He arranged for an individual (“Person A”) to take nominal control over his accounts at the Swiss Bank because the bank was closing accounts controlled by US persons. Interestingly, the Swiss Bank went so far as to help Person A relinquish his US citizenship. In 2014, Person A filed a false Form 8854 (Initial Annual Expatriation Statement) with the IRS that failed to disclose his net worth on the date of expatriation, failed to disclose his ownership of foreign assets, and falsely certified under penalties of perjury that he was in compliance with his tax obligations for the five preceding tax years.
By 2015, however, the IRS already conducted an investigation (probably triggered by information received as a result of the Swiss Bank Program) and identified Mr. Horsky’s tax evasion scheme. The IRS special agents actually raided Mr. Horsky’s home and confronted him about his concealment of his foreign financial accounts.
The IRS estimated that, during this entire 15-year old tax evasion scheme, Mr. Horsky evaded more than $18 million in income and gift taxes.
Punishment: $100 Million FBAR Penalty, Imprisonment and Other Penalties
Mr. Horsky faced a large array of penalties for filing fraudulent federal income tax returns, failure to disclosure his beneficial interest in and control over his foreign financial accounts on FBARs through the year 2011, and filing of fraudulent 2012 and 2013 FBARs.
The court sentenced Mr. Horsky to seven months in prison, one year of supervised release and a $250,000 fine. As part of his plea agreement, Mr. Horsky also paid over $13,000,000 in taxes owed to the IRS and a $100,000,000 FBAR penalty.
Lessons to be Learned from this $100 Million FBAR Penalty Case
So, how did this become a $100 Million FBAR Penalty Case? What qualified this case for criminal prosecution?
First, the very sophisticated nature of the tax evasion scheme made it very easy for the IRS to pursue criminal penalties in this case. Mr. Horsky went from one tax evasion trick to another, believing that he could avoid IRS detection. Using a shell corporation to hide his identity was definitely a big factor here. However, other strategies (like the use of a nominee who gave up his US citizenship) employed by him also made it an easy target for criminal prosecution.
Second, the amounts involved. With over $200 million in assets, Mr. Horsky should have known that he would be a valuable target for the IRS criminal prosecution.
Third, income evasion was done here on a grand scale. Not only did Mr. Horsky conceal the income from his accounts, but he also tried to evade the taxation of his very large capital gains. Every time that there is a combination of FBAR violation with a large-scale income tax violation, the chances of a criminal prosecution increase exponentially.
Finally, the willfulness of Mr. Horsky’s entire behavior was particularly made evident with the filing of fraudulent tax returns. A partial disclosure is one of the most dangerous patterns of tax behavior, because it discloses the knowledge of a tax obligation on the part of the taxpayer and points to the willfulness of the violation with respect to the noncompliant part of the obligation.
In fact, looking at this case, one can say that Mr. Horsky’s $100 Million FBAR penalty was definitely not the worse outcome. It is probably thanks to the skillful work of his criminal tax attorneys that the worst was avoided.
There is one more lesson that needs to be learned from this case. It appears that Mr. Horsky had plenty of opportunities to enter into any of the IRS offshore voluntary disclosure programs to avoid his $100 Million FBAR penalty and a prison sentence. He could have entered the 2009 OVDP, 2011 OVDI, 2012 OVDP and probably even 2014 OVDP.
If he would have entered into any of these programs, Mr. Horsky could have avoided the $100 Million FBAR penalty, saved tens of millions of dollars in potential penalties and eliminated any serious chance of a criminal prosecution.
Contact Sherayzen Law Office for Professional Help With the Voluntary Disclosure of Your Foreign Accounts
If you have undisclosed foreign accounts outside of the United States, you are in grave danger of IRS detection and the imposition of draconian FBAR penalties, including incarceration. This is why you need to contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options.
Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures. We have successfully helped hundreds of US taxpayers to avoid or reduce draconian FBAR penalties and bring their tax affairs into full compliance with US tax laws. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Importance of Outbound Business Tax Planning | International Tax Attorney
Outbound business tax planning should form part of every outbound business transaction, whether it is in technology transfers, export of goods or an investment overseas. In this article, I would like to discuss the main goal of the outbound business tax planning and identify the overall “global” (i.e. looking at the entire genre of outbound transactions) strategies which are utilized to achieve this goal.
The Main Purpose of the Outbound Business Tax Planning
The main goal of the outbound business tax planning is not difficult to discern – legal reduction of tax burden and, thereby, maximization of profits. What is important to understand is that the outbound business tax planning seeks to optimize the after-tax financial return from a transaction by reducing the taxes paid. It is not concerned so much with the pre-tax business details of the outbound transaction (although, these details may play a very important role in tax planning, but as a strategy and not a goal).
In other words, instead of treating taxes as just another cost of doing business, a business can significantly increase its real return from an outbound transaction through careful business tax planning.
Three Global Strategies to Achieve the Main Goal of the Outbound Business Tax Planning
How can the goal of after-tax financial return be achieved? There are three main strategies that can be utilized by an international tax attorney. The first strategy is to avoid the existence of any taxing jurisdiction in the destination country (i.e. the foreign country that is the object of the outbound business transaction). In other words, the transaction is structured in such a way as to avoid (or, at least, significantly reduce) the taxation of profits overseas.
The second strategy is to postpone for a significant period of time the US taxation of foreign profits until these profits are repatriated into the United States. Since US businesses are taxed on their worldwide income, the focus of this strategy is on deferral of US income tax, rather than its complete avoidance. The economic benefits of such deferral can be very significant, because the profits can be either reinvested tax-free, accumulate interest (also tax-free) or serve as a collateral for borrowing in the United States.
What happens if the income taxation in the destination country cannot be avoided? Does the outbound business tax planning have anything to offer in this case?
The answer is yes – the prevention of significant double-taxation of foreign income in the United States. This is the third main strategy of the outbound business tax planning. A prominent example of such strategy is the utilization of foreign tax credit to offset US tax liability.
Contact Sherayzen Law Office for Help with Your Outbound Business Tax Planning
If you are planning to expand your business overseas, contact Sherayzen Law Office for professional help. We will thoroughly analyze your planned business transaction, create a tax plan for you and implement it. Moreover, our firm will also provide you with the annual US tax compliance support with respect to US tax compliance requirements that may arise as a result of the tax plan (such as Form 5471 or 8865 compliance).
Contact Us Today to Schedule Your Confidential Consultation!

### 2016 FBAR Currency Conversion Rates | FBAR Lawyer and Attorney
Using proper currency conversion rates is a critical part of preparing 2016 FBAR and 2016 Form 8938. The instructions to both forms require (in case of Form 8938, this is the default choice) US taxpayers to use the 2016 FBAR Currency Conversion Rates published by the Treasury Department. The 2016 FBAR Currency Conversion Rates also serve other purposes beyond the preparation of the 2016 FBAR and Form 8938.
The 2016 FBAR Currency Conversion Rates are the December 31, 2016 rates officially published by the U.S. Department of Treasury (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”) and they are the proper conversion rates that must be used while preparing FBAR and Form 8938.
Due to this importance of 2016 FBAR Currency Conversion Rates to US taxpayers, international tax lawyers and international tax accountants, Sherayzen Law Office provides the table below with the official 2016 FBAR Currency Conversion Rates (keep in mind, you still need to refer to the official website for any updates).
Country
Currency
Foreign Currency to $1.00
Afghanistan
Afghani
66.5000
Albania
Lek
128.2500
Algeria
Dinar
110.0180
Angola
Kwanza
170.0000
Antigua-Barbuda
East Caribbean Dollar
2.7000
Argentina
Peso
15.9030
Armenia
Dram
480.0000
Australia
Dollar
1.3850
Austria
Euro
0.9490
Azerbaijan
New Manat
1.8400
Bahamas
Dollar
1.0000
Bahrain
Dinar
0.3770
Bangladesh
Taka
79.0000
Barbados
Dollar
2.0200
Belarus
New Ruble
 1.9590
Belarus
Ruble
 19585.0000
Belgium
Euro
 0.9490
Belize
Dollar
2.0000
Benin
CFA Franc
 625.1400
Bermuda
Dollar
1.0000
Bolivia
Boliviano
 6.8700
Bosnia-Hercegovina
Marka
 1.8560
Botswana
Pula
 10.6720
Brazil
Real
 3.2530
Brunei
Dollar
 1.4450
Bulgaria
Lev
 1.8560
Burkina Faso
CFA Franc
 625.1400
Burma-Myanmar
Kyat
 1365.0000
Burundi
Franc
 1650.0000
Cambodia (Khmer)
Riel
4103.0000
Cameroon
CFA Franc
 621.7300
Canada
Dollar
 1.3460
Cape Verde
Escudo
 104.7280
Cayman Islands
Dollar
0.8200
Central African Republic
CFA Franc
 621.7300
Chad
CFA Franc
 621.7300
Chile
Peso
 668.8000
China
Renminbi
 6.9420
Colombia
Peso
3001.5000
Comoros
Franc
 462.6500
Congo
CFA Franc
 621.7300
Congo, Dem. Rep
Congolese Franc
 1210.0000
Costa Rica
Colon
 546.0000
Cote D'Ivoire
CFA Franc
 625.1400
Croatia
Kuna
 7.0500
Cuba
Peso
1.0000
Cyprus
Euro
 0.9490
Czech Republic
Koruna
 25.0450
Denmark
Krone
 7.0540
Djibouti
Franc
 177.0000
Dominican Republic
Peso
 46.5900
Ecuador
Dolares
1.0000
Egypt
Pound
 18.0000
El Salvador
Dolares
1.0000
Equatorial Guinea
CFA Franc
 621.7300
Eritrea
Nakfa
 15.0000
Estonia
Euro
 0.9490
Ethiopia
Birr
 22.4000
Euro Zone
Euro
 0.9490
Fiji
Dollar
 2.0730
Finland
Euro
 0.9490
France
Euro
 0.9490
Gabon
CFA Franc
 621.7300
Gambia
Dalasi
 44.0000
Georgia
Lari
 2.6600
Germany FRG
Euro
 0.9490
Ghana
Cedi
 4.2200
Greece
Euro
 0.9490
Grenada
East Carribean Dollar
2.7000
Guatemala
Quetzal
 7.5220
Guinea
Franc
 9225.0000
Guinea Bissau
CFA Franc
 625.1400
Guyana
Dollar
 205.0000
Haiti
Gourde
 66.4600
Honduras
Lempira
 23.4000
Hong Kong
Dollar
 7.7560
Hungary
Forint
 293.7500
Iceland
Krona
 112.8700
India
Rupee
 67.8000
Indonesia
Rupiah
 13380.0000
Iran
Rial
 32376.0000
Iraq
Dinar
 1166.0000
Ireland
Euro
 0.9490
Israel
Shekel
 3.8410
Italy
Euro
 0.9490
Jamaica
Dollar
 128.0000
Japan
Yen
 117.0300
Jerusalem
Shekel
 3.8410
Jordan
Dinar
0.7080
Kazakhstan
Tenge
 333.3000
Kenya
Shilling
 102.4500
Korea
Won
 1203.2100
Kuwait
Dinar
 0.3050
Kyrgyzstan
Som
 69.3000
Laos
Kip
 8170.0000
Latvia
Euro
 0.9490
Lebanon
Pound
1500.0000
Lesotho
South African Rand
 13.7070
Liberia
Dollar
 91.0000
Libya
Dinar
 1.4380
Lithuania
Euro
 0.9490
Luxembourg
Euro
 0.9490
Macao
Mop
8.0000
Macedonia FYROM
Denar
 58.1200
Madagascar
Aria
 3350.5400
Malawi
Kwacha
 747.0000
Malaysia
Ringgit
 4.4850
Mali
CFA Franc
 625.1400
Malta
Euro
 0.9490
Marshall Islands
Dollar
1.0000
Martinique
Euro
 0.9490
Mauritania
Ouguiya
 355.0000
Mauritius
Rupee
 35.8700
Mexico
New Peso
 20.6520
Micronesia
Dollar
1.0000
Moldova
Leu
 19.9000
Mongolia
Tugrik
 2489.5300
Montenegro
Euro
 0.9490
Morocco
Dirham
 10.1540
Mozambique
Metical
 70.8000
Namibia
Dollar
 13.7070
Nepal
Rupee
 108.7000
Netherlands
Euro
 0.9490
Netherlands Antilles
Guilder
1.7800
New Zealand
Dollar
 1.4370
Nicaragua
Cordoba
 29.0500
Niger
CFA Franc
 625.1400
Nigeria
Naira
304.2000
Norway
Krone
8.6210
Oman
Rial
0.3850
Pakistan
Rupee
 104.3500
Palau
Dollar
1.0000
Panama
Balboa
1.0000
Papua New Guinea
Kina
 3.1010
Paraguay
Guarani
 5755.0000
Peru
Nuevo Sol
 3.3570
Philippines
Peso
 49.5910
Poland
Zloty
 4.1850
Portugal
Euro
 0.9490
Qatar
Riyal
3.6410
Romania
Leu
 4.3050
Russia
Ruble
 61.0220
Rwanda
Franc
 815.0000
Sao Tome & Principe
Dobras
23556.0240
Saudi Arabia
Riyal
3.7500
Senegal
CFA Franc
625.1400
Serbia
Dinar
 117.1400
Seychelles
Rupee
 13.2190
Sierra Leone
Leone
 7451.0000
Singapore
Dollar
 1.4450
Slovak Republic
Euro
 0.9490
Slovenia
Euro
 0.9490
Solomon Islands
Dollar
 7.9370
South Africa
Rand
 13.7070
South Sudan
Pound
 80.0000
Spain
Euro
 0.9490
Sri Lanka
Rupee
 149.6000
St Lucia
East Caribbean Dollar
2.7000
Sudan
Pound
 7.1000
Suriname
Guilder
 7.4850
Swaziland
Lilangeni
 13.7070
Sweden
Krona
 9.0630
Switzerland
Franc
 1.0190
Syria
Pound
 515.0000
Taiwan
Dollar
 32.4010
Tajikistan
Somoni
7.8000
Tanzania
Shilling
 2178.0000
Thailand
Baht
 35.7700
Timor-Leste
Dili
1.0000
Togo
CFA Franc
625.1400
Tonga
Pa'anga
 2.1530
Trinidad & Tobago
Dollar
 6.6900
Tunisia
Dinar
 2.3010
Turkey
Lira
 3.5220
Turkmenistan
Manat
3.4910
Uganda
Shilling
 3607.0000
Ukraine
Hryvnia
 27.0000
United Arab Emirates
Dirham
3.6720
United Kingdom
Pound Sterling
 0.8120
Uruguay
New Peso
 29.0700
Uzbekistan
Som
 3286.0000
Vanuatu
Vatu
 111.8000
Venezuela
New Bolivar
 673.8300
Vietnam
Dong
 22770.0000
Western Samoa
Tala
 2.4960
Yemen
Rial
 250.5000
Zambia
Kwacha (New)
 9.9150
Zambia
Kwacha
 5455.0000
Zimbabwe
Dollar
1.0000
1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM - Former Yugoslav Republic of Macedonia.

### Nine Swiss AEOI Agreements in Force Since January 1 2017 | FATCA Lawyer
Switzerland has recently become one of the most active countries with respect to expanding its network of automatic exchange of information agreements (Swiss AEOI Agreements). In fact, since January 1, 2017, nine Swiss AEOI Agreements entered into force.
Nine Swiss AEOI Agreements
All of the Swiss AEOI Agreements were signed via exchange of notes in late 2016 and entered into force from January 1, 2017. All of the Swiss AEOI Agreements were signed based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (Protocol 10) in accordance with OECD CRS (common reporting standard). OECD CRS is the OECD version of FATCA.
Let’s list out the countries with which Swiss AEOI Agreements were signed in late 2016. They can be divided into two groups: the October Group and the December group.
The October Group includes Guernsey, Iceland, Isle of Man, Jersey, Norway and South Korea. All of the agreements were signed via an exchange of notes dated October 26, 2016 and October 28 (Iceland), November 1 (Jersey), November 10 (Guernsey), November 16 (South Korea), December 5 (Isle of Man) and December 13 (Norway).
The December Group includes Japan-Switzerland agreement signed via exchange of notes on December 8, 2016; Australia-Switzerland agreement that was signed via an exchange of notes dated December 8, 2016, and December 14, 2016; and Canada-Switzerland AEOI that was signed via an exchange of notes dated December 9, 2016, and December 22, 2016.
Indirect Impact of Swiss AEOI Agreements on US Taxpayers
This expansion of the information exchange network through Swiss AEOI Agreements poses an additional danger of the IRS detection of tax noncompliance by US taxpayers.
Why? The answer is simple – each of the countries that signed Swiss AEOI Agreements must also comply with its FATCA obligations with respect to US taxpayers. As the information exchange traffic increases through Swiss AEOI Agreements, there is a higher probability that FATCA-related information may be accidentally uncovered and transmitted to one of the Parties to the Swiss AEOI Agreements. Then, this Party may turn over this information to the IRS through FATCA reporting or an automatic exchange of information agreement with the IRS (present or future).
Therefore, US taxpayers with undisclosed foreign accounts in Australia, Canada, Guernsey, Iceland, the Isle of Man, Japan, Jersey, Norway, South Korea and Switzerland are at an increased risk of the IRS detection and should immediately consult with an experienced international tax law firm with respect to their voluntary disclosure options.
Contact Sherayzen Law Office for Professional Help With Offshore Voluntary Disclosures Concerning Foreign Assets and Foreign Income
If you have undisclosed foreign assets or foreign income, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is a highly experienced international tax law firm that has helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US tax laws, while reducing their noncompliance penalties and even lowering their tax liabilities (by utilizing missed opportunities for tax optimization in the years covered by voluntary disclosure). We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Argentinian Tax Information Exchange Agreement Signed | FATCA Lawyer
On December 23, 2016, Argentina and the United States signed a Tax Informational Exchange Agreement (“Argentinian Tax Information Exchange Agreement” or “Argentinian TIEA”) in Buenos Aires. Let’s explore the main points of the Argentinian Tax Information Exchange Agreement.
Argentinian Tax Information Exchange Agreement: Information to Be Exchanged
The information to be exchanged under the Argentinian Tax Information Exchange Agreement is described in its very first article. Article 1 states that the parties will provide information to each other that is “foreseeably relevant to the administration and enforcement of the domestic laws of the Contracting Parties concerning taxes covered by this Agreement”.
Article 1 then specifies that such information includes everything “foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of tax matters”.
Argentinian Tax Information Exchange Agreement: Taxes
What are these “taxes” mentioned in Article 1? Article 3 of the Argentinian TIEA explains that the focus is on information related to US federal taxes and all national taxes administered by the Federal Administration of Public Revenue. Obviously, the Argentinian TIEA will apply to any identical or substantially similar taxes that are imposed after the Agreement is signed in addition to, or in place of, the existing taxes. Both parties, Argentina and the United States, agreed to notify each other of any significant changes that have been made in their taxation laws or other laws that relate to the application of the Argentinian TIEA.
Argentinian Tax Information Exchange Agreement: Automatic Exchange, Spontaneous Exchange and Exchange Upon Request
The Argentinian Tax Information Exchange Agreement prescribes three modes of exchange of information. First, Article 6 of the Argentinian TIEA provides for automatic exchange of certain information.
Second, Article 7 allows Argentina and the United States to spontaneously transmit to each other’s respective tax authorities any relevant information that has come to the attention of the either Party’s tax authorities. For example, if Argentinian tax authorities obtain information that points to US tax noncompliance of a dual citizen of Argentina and the United States, Argentina can provide this information to the IRS.
Finally, Article 5 allows Argentina and the United States to request relevant information from each other. There is an interesting clause in Article 5 that removes potential limitations on the exchange of information upon request: “such information shall be exchanged without regard to whether the requested Party needs such information for its own tax purposes or whether the conduct being investigated would constitute a crime under the laws of the requested Party if such conduct occurred in the requested Party.”
Article 5 of the Argentinian Tax Information Exchange Agreement is remarkable in another aspect. It states that, if the information possessed by the “requested Party (i.e. the country that received the request from another country) is insufficient to enable it to comply with the request for information, the requested Party needs to engage in information gathering measures in order to provide the other Party will the requested information. The requested Party needs to do these investigations even if it does not regularly collect this information or need it.
Under Article 5(3), the requested Party, if specially requested so by the applicant Party, has to provide the information in the form of depositions of witnesses and authenticated copies of original records.
Argentinian Tax Information Exchange Agreement: Foreign Bank and Beneficial Ownership Information in Focus
Article 5(4) also clarifies what is at the heart of the exchange of information upon request. First, information “held by banks, other financial institutions, and any person acting in an agency or fiduciary capacity including nominees and trustees.”
Second, the beneficial ownership information of “companies, partnerships, trusts, foundations, "Anstalten" and other persons”. This information should also include all persons in the ownership chain. In the case of trust, “information on settlors, trustees and beneficiaries”. In the case of foundations, “information on founders, members of the foundation council and beneficiaries”. Publicly-traded companies and public collective investment funds are excluded (unless the information can be obtained without giving rise to “disproportionate difficulties” to the requested Party).
Argentinian Tax Information Exchange Agreement: Tax Examinations Abroad
Article 8 of the Argentinian Tax Information Exchange Agreement grants each Party the right to conduct tax examinations abroad. Obviously, the written consent of the persons to be interviewed has to be secured first. However, once both Parties agree to the examination, “all decisions with respect to the conduct of the tax examination shall be made by the Party conducting the examination.”
Argentinian Tax Information Exchange Agreement: Entry Into Force
According to Article 14, the Argentinian Tax Information Exchange Agreement shall enter into force “one month from the date of receipt of Argentina's written notification to the United States that Argentina has completed its necessary internal procedures for entry into force of this Agreement.”
Once the Argentinian TIEA is in force, its provisions will apply for requests “made on or after the date of entry into force, concerning information for taxes relating to taxable periods beginning on or after January 1 of the calendar year next following the year in which this Agreement enters into force or, where there is no taxable period, for all charges to tax arising on or after January 1 of the calendar year next following the year in which this Agreement enters into force.”
Argentinian Tax Information Exchange Agreement: Impact on US Taxpayers
The Argentinian Tax Information Exchange Agreement will have a profound impact on US taxpayers with undisclosed Argentinian income and Argentinian assets. First, the combination of three different disclosure modes – automatic, spontaneous and upon request – greatly increases the risk of the IRS detection of undisclosed Argentinian assets and unreported Argentinian income. The spontaneous exchange of information may be especially dangerous because it increases the probability of indirect (and unpredictable) detection. For example, if information about US tax noncompliance is obtain through an audit of an Argentinian tax return, such information may be turned over to the IRS.
Second, the Argentinian Tax Information Exchange Agreement allows the IRS to obtain witness depositions and other evidence against noncompliant US taxpayers at a relatively low cost. Furthermore, the Argentinian TIEA grants the IRS the ability to conduct examinations in Argentina, greatly enhancing the IRS reach in that country. In other words, the chances of successful imposition of civil penalties and even criminal prosecution by the IRS of noncompliant US taxpayers is substantially increased by the Argentinian TIEA.
Contact Sherayzen Law Office if You Have Undisclosed Foreign Assets and Foreign Income in Argentina
If you have undisclosed Argentinian assets and income, contact Sherayzen Law Office as soon as possible. Once the IRS detects your noncompliance or even just commences an investigation to verify whether you were not tax compliant, then you may lose all of your voluntary disclosure options.
Sherayzen Law Office is an international tax law firm that specializes in offshore voluntary disclosures of undisclosed foreign assets and foreign income. We have helped hundreds of US taxpayers to bring their US tax affairs into full compliance with US tax laws while reducing their penalties and, in many cases, even their tax liabilities. We Can Help You!
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### Related-Statute IRC §6103(h) Violation As a Defense Against FBAR Audit
International tax lawyers should focus not only on substantive, but also on procedural defenses against the results of an FBAR audit. One such potential defense against FBAR audit is a related-statute IRC §6103(h) violation.
Related-Statute IRC §6103(h) Violation: Background Information
In a previous article, I already discussed the fact that IRC §6103(a) limits somewhat the ability of the IRS to use tax returns in an IRS FBAR Audit, because IRC §6103(a) designates all tax return information as confidential. However, IRC §6103(h) provides a limited exception to IRC §6103(a) by allowing IRS employees the disclosure of tax return information for the purposes of tax administration.
Under IRC §6103(b)(4), tax administration is interpreted broadly to cover administration, management and supervision of the Internal Revenue Code and “related statutes”. This means that, if the IRS determines that the Bank Secrecy Act (“BSA”) is a related statute for the purposes of a particular FBAR audit, it can release the tax return information to be used against the taxpayer.
The IRS will deem the BSA as a related statute only if there is a good-faith determination that a BSA violation was committed in furtherance of a Title 26 violation or if such a violation was part of a pattern of conduct that violated Title 26. See IRM 4.26.14.2.3 (07-24-2012). In other words, the tax violation and the FBAR violation has to be related in order for the IRS to disclose tax return information to be utilized in an IRS FBAR Audit.
Related-Statute IRC §6103(h) Violation: Procedural Aspects of Related-Statute Determination
The Internal Revenue Manual (“IRM”) sets forth very specific procedures for making a related-statute determination in the preparation of an IRS FBAR Audit. Generally, this is a two-step process.
First, the examiners are required to prepare a Form 13535, Foreign Bank and Financial Accounts Report Related Statute Memorandum, to establish why the IRS believes that an apparent FBAR violation was in furtherance of a Title 26 violation. Form 13535 must describe tangible objective factors and provide adequate documentation.
Then, Form 13535 goes to the examiner's Territory Manager. The Territory manager should make his decision at that point. If he believes that the related-statute test was not met, tax returns and return information may not be disclosed for the purposes of starting an IRS FBAR Audit. On the other hand, if the Territory Manager determines that the apparent FBAR violation was in furtherance of a Title 26 violation, then all of the tax returns and tax return information will be released to the IRS agent who conducts the audit.
Can Related-Statute IRC §6103(h) Violation Be Utilized as a Defense in FBAR Audit?
We are now about to answer the question that is at the center of this article: if the IRS fails to follow the IRM procedures for related-party determination pursuant to IRC §6103(h), can it be used as a defense in FBAR Audit? Perhaps, the best way to answer the question above is to look at an analogy of whether the failure to follow IRM procedures for related-party determination under IRC §6103(h) can be utilized to support a claim for damages for unauthorized disclosure under IRC §7431.
Generally, the failure by the IRS to follow IRM procedures and make a related-party determination is likely to be insufficient to support a claim under IRC §7431. In Hom v. United States, 2013 U.S. Dist. LEXIS 142818, 2013-2 U.S. Tax Cas. (CCH) P50,529, 112 A.F.T.R.2d (RIA) 6271, 2013 WL 5442960 (N.D. Cal. 2013), aff’d, 645 Fed. Appx. 583, 2016 U.S. App. LEXIS 5528, 117 A.F.T.R.2d (RIA) 1119, 2016 WL 1161577 (9th Cir. Cal. 2016), the court held that the failure of the IRS to make a related-statute determination as required by the IRM did not provide the plaintiff with a claim for damages under IRC §7431. Rather, a plaintiff would have to prove that the failure to file an FBAR was clearly not in furtherance of a Title 26 violation – i.e. the plaintiff would have to prove that BSA was not a related statute in his case.
If we use this analogy, then it seems that the procedural failures by the IRS to follow the related-party determination under IRC §6103(h) would not be sufficient to be used as a defense in an IRS FBAR Audit. There is a possibility, however, that if the FBAR violation was clearly not related to Title 26, then it may be used as a defense to exclude evidence.
Contact Sherayzen Law Office for Help with Your FBAR Audit
If your FBARs are being audited by the IRS, contact Sherayzen Law Office for professional help. Sherayzen Law Office is an international tax law firm that is dedicated to helping businesses and individuals with their US international tax obligations, including FBARs. We have helped hundreds of US taxpayers around the world and we can help you!
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### Guilty Pleas for Secret Swiss-Israeli Bank Accounts | FATCA Lawyer
On January 18, 2017, three US taxpayers pleaded guilty for hiding millions of dollars in their secret Swiss and Israeli bank accounts (hereinafter “Swiss-Israeli Bank Accounts”) and failing to report these Swiss-Israeli Bank Accounts on their FBARs.
Facts of the Case Involving Secret Swiss-Israeli Bank Accounts
All three defendants are relatives – Mr. Dan Farhad Kalili and Mr. David Ramin Kalili are brothers while Mr. David Shahrokh Azarian is their brother-in-law. They are all residents of Newport Coast, California.
According to the documents filed with the court and statements made in connection with the defendants’ guilty pleas, between May 1996 and 2009, Mr. Dan Kalili opened and maintained several undeclared offshore bank accounts at Credit Suisse and UBS in Switzerland. Similarly, Mr. David Kalili opened and maintained several undeclared accounts at Credit Suisse from February 1999 through at least 2009. He also owned several undeclared accounts at UBS from October 1993 through at least 2008. The brothers also maintained joint undeclared Swiss bank accounts at both UBS and Credit Suisse beginning in 2003 and 2004, respectively.
At the same time, Mr. Azarian opened and maintained several undeclared accounts at Credit Suisse from May 1994 through at least 2009. He also owned several accounts at UBS in Switzerland from April 1997 through at least 2008.
In 2006, we had the appearance of the now famous Ms. Beda Singenberger, a Swiss citizen who owned and operated a financial advisory firm called Sinco Truehand AG. She was indicted in New York on July 21, 2011. The charges were: conspiring to defraud the United States, evade U.S. income taxes, and file false U.S. tax returns. Ms. Singenberger remains a fugitive as of the time of this writing.
In July of 2006, Mr. Dan Kalili, with the assistance of Ms. Singenberger, opened an undeclared account at UBS in the name of the Colsa Foundation, a Liechtenstein entity. As of May 2008, the Colsa Foundation account at UBS held approximately $4,927,500 in assets.
In light of the increased IRS tax enforcement and the UBS case, all three defendants attempted to partially hide their prior ownership of Swiss accounts by moving the assets from one account to another. At the same time, they also tried to legitimize partial ownership of their assets.
Mr. Dan Kalili opened an undeclared account at Swiss Bank A in the name of the Colsa Foundation and in May 2008 and transferred his assets from the UBS Colsa Foundation account to Swiss Bank A. He then made partial disclosure of the Swiss Bank A Colsa account on his individual income tax returns. In 2009, Mr. Dan Kalili opened undeclared accounts at Israeli Bank A and at Bank Leumi, both in Israel. He then closed his joint (with his brother) Credit Suisse account and his own undeclared account and transferred all funds to Israel.
At that time of its closure, the undeclared joint account of Dan and David Kalili at Credit Suisse held approximately $2,561,508 in assets. As of December 2009, Dan Kalili’s undeclared account at Israeli Bank A had the approximate value of $1,569,973 and his undeclared account at Bank Leumi was valued at approximately $2,497,931.
Mr. David Kalili followed almost the same pattern. In August of 2008, he opened an account at Israeli Bank A in Israel and transferred to this account all of his funds from his UBS accounts. He later partially declared the Israeli Bank A account on his individual income tax returns. As of August 2009, Mr. David Kalili’s undeclared account at Israeli Bank A held assets valued at approximately $1,369,489.
Finally, Mr. Azarian also opened an account at Israeli Bank A in Israel in August of 2008. In May of 2009, he closed his Credit Suisse account and transferred all funds to his Israeli account. At the time of its closure, Mr. Azarian’s undeclared account at Credit Suisse held assets valued at approximately $1,903,214.
Neither of the three defendants ever filed an FBAR for their secret Swiss-Israeli Bank Accounts on their FBARs during any of the years 2006-2009.
Criminal and Civil Penalties Imposed For Failure to Declare Foreign Income and Swiss-Israeli Bank Accounts
According to the plea agreements, the criminal and civil penalties were severe. Mr. Dan Kalili, Mr. David Kalili and Mr. Azarian each face a statutory maximum sentence of five years in prison, a period of supervised release and restitution for 2003-2009 tax loss and monetary penalties. The defendants also admitted to committing civil fraud, which exposes them to additional civil fraud penalty.
In addition, each defendant agreed to pay a willful FBAR civil penalty in the amount of 50% of the highest balances of their undeclared Swiss-Israeli Bank Accounts. Mr. Dan Kalili agreed to pay the FBAR penalty of $2,674,329, Mr. David Kalili agreed to pay the FBAR penalty of $1,325,121 and Mr. Azarian agreed to pay the FBAR penalty of $951,607.
Lessons to Be Learned from the Defendants’ Handling of Their Undeclared Swiss-Israeli Bank Accounts
This case is a classical example of what not to do if one wishes to avoid criminal prosecution. Let’s point out five main mistakes which exposed the taxpayers to the IRS criminal prosecution.
The first mistake is obvious – the defendants willfully failed to declare their Swiss-Israeli bank accounts on their FBARs and the income generated by these accounts on their US tax returns.
The deleterious impact of the first mistake was magnified by the usage of an offshore shell corporation to hide the ownership of the Swiss-Israeli bank accounts (while the entity was concerned mostly with Swiss accounts, it was also used to hide the source of funds on the defendants’ Israeli bank accounts).
Third, the defendants engaged in the evasive pattern of opening and closing foreign accounts in various banks in order to hide them from the IRS. The defendants obviously underestimated the IRS ability to track these accounts and ended up giving the IRS additional powerful indirect evidence of intent to evade taxes and the willfulness of their failures to file FBARs.
Fourth, the taxpayers engaged in partial voluntary disclosure outside of any actual voluntary disclosure program. By doing partial disclosure, the taxpayers provided additional evidence to the IRS of their knowledge of the requirement to report foreign income and properly complete Schedule B. At the same time, the fact that their disclosure was only partial further emphasized the willfulness of their prior failure to disclosure foreign income and foreign assets. The readers should remember that a voluntary disclosure must always be accurate and complete; otherwise, the taxpayers simply give the IRS more evidence of willfulness of their tax noncompliance.
Finally, it does not appear that the taxpayers ever considered doing a true voluntary disclosure which could have limited their penalties and prevented the IRS criminal prosecution. One of the first thing that the taxpayers should always consider once they find out about their noncompliance or the possibility of the IRS detection of such noncompliance is to retain an international tax lawyer to review their voluntary disclosure options. The taxpayers failed to do so in this case and paid a very high price.
Contact Sherayzen Law Office for Professional Help with the Voluntary Disclosure of Your Foreign Income and Foreign Assets, including Swiss-Israeli Bank Accounts
If you have undisclosed foreign income and foreign assets, you should contact Sherayzen Law Office for professional help as soon as possible. Our international tax law firm has successfully helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance with US laws and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### US-Slovenia Totalization Agreement Signed | International Tax Lawyer Ohio
On January 17, 2017, US-Slovenia Totalization Agreement was signed in Slovenia. Ms. Anja Kopac Mrak, the Slovenian minister of labor, family, social affairs, and equal opportunities, signed on behalf of Slovenia. Mr. Brent Hartley, US Ambassador to Slovenia, signed on behalf of the United States. Signing of the US-Slovenia Totalization Agreement represents a major step toward finalization of the agreement, but there is still a long road ahead.
US–Slovenia Totalization Agreement: What is a Totalization Agreement?
A Totalization Agreement is essentially a Social Security Agreement between two countries aimed to eliminate the burden of dual social security taxation for individuals and businesses who operate in both countries. The Totalization Agreements are authorized by Section 233 of the Social Security Act.
US–Slovenia Totalization Agreement: Why Is It Relevant to US and Slovenian Workers?
As I explained above, a Totalization Agreement is meant to prevent workers and their employers from paying social security taxes on the same earnings in both countries that are signatories to the Agreement. Typically, the potential for this type of double-taxation arises when a worker from country A works in Country B, but he is covered under the social security systems in both countries. In such cases, without a totalization agreement, the worker has to pay social security taxes to both countries A and B on the same earnings.
The US-Slovenia Totalization Agreement, once it enters into force, will prevent the dual taxation by specifying the rules that will determine which of the two countries will impose a social security tax on worker while the other country will be prohibited from doing so. Furthermore, it should be mentioned that the US-Slovenia Totalization Agreement will allow the combination of work credits earned in both countries for the purposes of benefit eligibility determination. Finally, the Certificate of Coverage should be available under the US-Slovenia Totalization Agreement.
US–Slovenia Totalization Agreement Will Become Effective When Both Countries Ratify It
Right now, only 26 Totalization Agreements are in force between the United States and another country: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, South Korea, Spain, Sweden, Switzerland and the United Kingdom.
The reason why the number of Totalization Agreements is so low lies in the fact that it takes a long time to negotiate them and, even more importantly, ratify them. The benefits offered by such an agreement are very extensive and may have to overcome significant domestic opposition before they are ratified. For example, the Totalization Agreement with Mexico was signed on June 29, 2004 and it still has not been ratified (nor is it likely to be in the short future due to significant political position within the United States).
Hence, the fact that the US-Slovenia Totalization Agreement has been signed does not mean that it will be ratified soon. Moreover, it has an important competitor in the form of the US-Brazil Totalization Agreement that was signed on June 20, 2015 and still has not been ratified. Nevertheless, the signing of the US-Slovenia Totalization Agreement was a prerequisite step toward its eventual ratification.
Given the important of the US-Slovenia Totalization Agreement, US international tax lawyers need to closely follow any developments with respect to it.

### Taxation of Royalties Ceases Under Estonia-UK Tax Treaty | MN Tax Lawyer
On January 18, 2017, the HM Revenue & Customs announced that the withholding tax on royalties under the 1994 Estonia-UK tax treaty has been eliminated retroactively as of October 16, 2015.
Under the original Estonia-UK tax treaty, the rates had been 5 percent for industrial, commercial, and scientific equipment royalties and 10 percent in other cases. However, paragraph 7 of the Exchange Notes to the Treaty contains the Most Favoured Nation” (MFN) provision relating to royalties (Article 12). Under the MFN provision, UK tax residents only need to pay the lowest tax withholding rate ever agreed by Estonia in a Double-Taxation Treaty (DTA) it later agrees with an OECD member country that was a member when the UK-Estonia tax treaty was signed in 1994.
It turns that Switzerland was an OECD member country in 1994. In 2002, Estonia signed a tax treaty with Switzerland, but the treaty did not impact the UK withholding tax rate at that time. In 2014, however, Estonia and Switzerland signed an amending protocal to the 2002 Estonia-Switzerland tax treaty. Under the protocol, the treaty was revised to provide for only resident state taxation of royalties.
It was this provision in the 2014 protocol to the Estonia-Switzerland tax treaty that triggered the 1994 MFN provision of the Estonia-UK tax treaty. Therefore, when the 2014 protocol entered into force on October 16, 2015, it effectively eliminated tax withholding on royalties not only in Switzerland (wth respect to Estonia), but also in the United Kingdom. While the taxation of royalties under the Estonia-UK tax treaty ceased on October 16, 2015, the HM Revenue & Customs waited for more than a year to announce it on January 18, 2017.
It should be pointed out that MFN provisions, such as the one in Estonia-UK tax treaty, quite often have an important impact throughout the treaty network of a country. This ripple effect of the MFN provisions creates enormous opportunities for international tax planning that is often utilized by international tax lawyers, including US international tax law firms such as Sherayzen Law Office, Ltd.

### Belarus-Hong Kong Tax Treaty Signed | MN International Tax Attorney
On January 16, 2017, the Belarus-Hong Kong Tax Treaty was signed by government officials from both countries – K.C. Chan, Hong Kong's secretary for financial services and the treasury, and Sergei Nalivaiko, Belarusian minister of taxes and duties. Let’s explore the most important provisions of the new Belarus-Hong Kong Tax Treaty.
Elimination of Double-Taxation Under the Belarus-Hong Kong Tax Treaty
The new tax treaty will provide real benefits to businesses and individuals in both countries. In the absence of the treaty, the profits of Hong Kong companies earned through a permanent establishment in Belarus would be taxed in Belarus and Hong Kong. Similarly, prior to the treaty, the income earned by Belarusian companies in Hong Kong would be subject to both, Belarusian and Hong Kong taxation.
The Belarus-Hong Kong Tax Treaty will now eliminate the risk of double taxation by allowing Belarusian companies to claim a tax credit for taxes paid in Hong Kong. Similarly, Hong Kong companies will be able to claim tax credit for taxes paid in Belarus.
Belarus-Hong Kong Tax Treaty: Taxation of Dividends, Interest and Royalties
The new treaty establishes a 5% maximum tax rate for dividends and interest payments. This is a large reduction from the current highest rate of 13%. Moreover, in certain cases (mainly Hong Kong or Belarusian government-owned entities), dividends and interest are entirely exempt from taxation.
Additionally, under the new treaty, the royalties will generally be taxed also at 5%. However, if the royalties are paid for the use of (or the right to use) aircraft, then the tax withholding rate is further reduced to 3%. Again, this is a major reduction from the current highest rate of 15%.
Belarus-Hong Kong Tax Treaty: Concessions to Hong Kong Airlines
The special reduction for aircraft-related royalties is a major concession to Hong Kong Airlines, but it is not the only one. Additionally, Belarus agreed that Hong Kong Airlines operating flights to Belarus will be taxed at Hong Kong's corporation tax rate. Furthermore, the profits from international shipping transport earned by Hong Kong residents that arise in Belarus (and which are currently taxed in Belarus) will now fully escape Belarusian taxation.
Belarus-Hong Kong Tax Treaty: Other Provisions and Entry into Force
The new treaty contains a number of other provisions regulating taxation of capital gains, pensions, government salaries and other income. Additionally, Article 25 of the treaty provides for exchange of tax-related information between Belarus and Hong Kong. This provision may have an unintended consequence for US tax residents who operate in Belarus and Hong Kong, because some information exchanged between Belarus and Hong Kong may be further provided to the United States under Hong Kong’s FATCA tax information exchange obligations.
The Belarus-Hong Kong Tax Treaty will enter into force once both sides complete their own ratification procedures.

### IRS Civil Penalties and Voluntary Compliance | US International Tax Lawyer
There has been a spectacular growth in the number of the IRS civil penalties. In 1955, there were about 14 penalties in the entire Internal Revenue Code (“IRC”); on the other hand, today, there are over 150 penalties. The most recent growth in penalties has been driven mostly by offshore compliance concerns and the appearance of new requirements to address these concerns. FATCA Form 8938 is just the most recent example of this trend.
Does this growth in the IRS civil penalties mean that our tax system is shifting its focus from encouraging voluntary compliance to punishing abusive behavior? Let’s explore this issue from a historical perspective and try to answer the question.
The Stated Purpose of the IRS Civil Penalties
The US tax system is based on the taxpayers’ voluntary compliance with US tax laws. As I explained in a previous article, “voluntary compliance” really means the self-assessment of tax and the filing of tax returns by US taxpayers; the actual compliance with US tax laws is compulsory.
In other words, the Congress burdened the taxpayers with all of the hassle and complexity of US tax compliance and it still wants them to do it accurately, timely and in direct opposition to their self-interest of paying the least amount of tax. How can such a system function?
The solution lies in the creation of a system of the IRS civil penalties (a discussion of criminal penalties is outside of the scope of this article). The threat of the imposition of the IRS civil penalties during a random audit is meant to “encourage” voluntary compliance. This is the official purpose of the IRS penalties.
How exactly do the IRS civil penalties encourage voluntary compliance according to Congress? First, the penalties establish the standard of compliant behavior by defining noncompliance. Second, the penalties are meant to define the “remedial consequences” for noncompliant behavior. Finally, the IRS civil penalties impose monetary sanctions against the taxpayers and tax professionals who fail to comply with the aforementioned standard.
IRS Civil Penalties Must be Viewed as Precise and Proportional
Yet, in order to properly function and accomplish their goal of encouraging voluntary compliance, the IRS Civil Penalties must be viewed by the taxpayers as precise and proportional to the fault committed and the harm that resulted from that fault. In other words, the taxpayers must view the IRS Civil Penalties as a deterrence of improper conduct rather than punishing innocent taxpayers. If these penalties are viewed as excessive, the goal of voluntary compliance will be undermined.
Unfortunately, with respect to many IRS Civil Penalties, the taxpayers feel that they are disproportionate and imprecise. This is especially true with respect to international information tax returns, such as FBAR, Form 8938, Form 5471 and so on. The FBAR penalties are especially abhorred by the taxpayers because they apply to even non-willful conduct.
IRS Past Efforts to Change Taxpayers' Perspective on the IRS Civil Penalties
The IRS has been trying to battle this impression of unfairness of the IRS civil penalties, though we cannot say that it has been entirely successful in this respect.
Already in February of 1989, the IRS Commissioner’s Executive Task Force issued a “Report on Civil Tax Penalties” which emphasized the complexity and perceived unfairness of the IRS Civil Penalties. This Report remains one of the key documents which has not been substantially modified for past twenty some years.
The report established a philosophy of penalties, provided a statutory analysis of the three broad categories of penalties (filing of returns, payment of tax and accuracy of information), and proposed a list of action items to resolve the inconsistencies between civil penalties.
Among these recommendations, the IRS proposed to:
(1) develop and adopt a single-penalty policy statement emphasizing that civil tax penalties exist for the purpose of encouraging voluntary compliance;
(2) develop a single consolidated handbook on penalties for all employees. The IRS emphasized that the handbook should be sufficiently detailed to serve as a practical everyday guide for most issues of penalty administration and provide clear guidance on computing penalties;
(3) revise existing training programs to ensure consistent administration of penalties in all functions for the purpose of encouraging voluntary compliance;
(4) examine its communications with taxpayers to determine whether these communications do the best possible job of explaining why the penalty was imposed and how to avoid the penalty in the future;
(5) finalize its review and analysis of the quality and clarity of machine-generated letters and notices used in various divisions within the IRS;
(6) consider ways to develop better information concerning the administration and effects of penalties; and
(7) develop a Master File database to provide statistical information regarding the administration of penalties. That IRS envisioned that the information would be continuously reviewed for the purpose of suggesting changes in compliance programs, educational programs, and penalty design and penalty administration.
1989 IMPACT’s Effect on the IRS Civil Penalties
The IRS efforts did not go unnoticed. The Congress responded by enacting the Improved Penalty and Compliance Tax Act (“IMPACT”) as part of its Omnibus Budget Reconciliation Act of 1989.
It appears IMPACT had an overall salutary effect on the IRS civil penalties with respect to domestic activities. However, IMPACT’s role in curbing the perceived unfairness with respect to US international tax penalties has been minimal.
The Restructuring and Reform Act of 1998 Changed the Way the IRS Civil Penalties Are Imposed
At the end of the 1990s, the Congress made one more effort to solidify the image of fairness with respect to the imposition of the IRS civil penalties. The Restructuring and Reform Act of 1998 made a valuable contribution to maintaining the focus on encouraging voluntary compliance by creating the IRC Section 6751(b). IRC Section 6751(b) states that most of the IRS Civil Penalties (other than those automatically calculated by a computer) imposed after June 30, 2001, require a written managerial approval by the immediate manager or higher-level official of the employee who initially proposed the penalty.
The idea behind Section 6751(b) is to bring some restrain in the imposition of penalties by the “trigger-happy” employees. The extra level of review is further meant to promote the image of fairness of process during the imposition of the IRS Civil Penalties.
Conclusion: Encouragement of Voluntary Compliance Remains A Priority in General but the Emphasis on Abusive Transactions Dominates International Tax Law Compliance
Now that we have analyzed the IRS Civil Penalties from a historical perspective, let’s return to the original questions that I posed at the beginning of this article: does the growth in the number of the IRS civil penalties mean that our tax system is shifting its focus from encouraging voluntary compliance to punishing abusive behavior?
Based on the IRS past efforts to improve the taxpayer’s perception of the tax system and civil penalties and the Congress’ effort to encourage voluntary compliance through laws like IMPACT, one can say that, in general, the encouragement of voluntary compliance remains the main purpose of the IRS civil penalties.
There is one area, however, where the application of civil penalties has been driven not by only voluntary compliance considerations, but also by the desire to punish certain modes of behavior. This area is international tax law and, more precisely, abusive offshore transactions.
In fact, it appears more and more that the focus of the current tax policy is on punishing abusive offshore transactions irrespective of how it may affect innocent taxpayers. Since 2001, millions of taxpayers found themselves potentially facing draconian FBAR penalties solely for not reporting their foreign accounts. Thousands of small businesses also face large penalties associated with Forms 5471 and 8865 as well as other US international information return penalties. Finally, FATCA Form 8938 created with a new array of penalties and an added compliance burden to US taxpayers.
The fact that all of these forms may be necessary is not the issue. The problem is that the application of these forms has been indiscriminate almost irrespective of the actual income tax impact and the net worth of the taxpayer. For example, small businesses now have to comply with the burden of US GAAP compliance (normally applied only to publicly-traded companies) on Form 5471 or face severe IRS civil penalties for noncompliance. One non-willfully unreported foreign account which could have produced a few dollars of interest may be subject to a $10,000 FBAR penalty.
Naturally, the disproportionate and imprecise application of the IRS civil penalties in the area of the US international tax compliance has generated a great amount of discontent and resentment among the affected US taxpayers. This is precisely what IMPACT tried to avoid in order to encourage voluntary compliance.
This is why the IRS and Congress should work together to make the application of the IRS civil penalties more precise with respect to who should be paying these penalties and more proportionate to the actual fault (i.e. the damage sustained by the US treasury).

### UK Tax Haven May Be the Result of Brexit | US International Tax Attorney
In her January 17, 2017 speech, the British Prime Minister Theresa May confirmed that the United Kingdom (“UK”) will leave the European Union (“EU”) and seek a free trade deal with the EU. The Prime Minister also appears to have made the threat of creating a UK Tax Haven if the deal is not struck.
UK Tax Haven: UK is Leaving the EU
Since the ground-breaking referendum vote to leave the EU in June of 2016, many analysts have predicted that the UK will not leave and seek some sort of a partial participation in the EU.
On January 17, 2017, the Prime Minister’s response to these doubters was clear: "No, the United Kingdom is leaving the European Union.” She also stated: “We do not seek to hold on to bits of membership as we leave.”
She also outlined the procedural roadmap to how the UK will leave the EU. In particular, the Prime Minister stated that the government would bring the final withdrawal agreement to the Parliament for a vote before the Agreement comes into force. Furthermore, the UK government will repeal the European Communities Act. Surprisingly, the Prime Minister further said that the existing body of the EU law will be converted into British law.
UK Tax Haven: The Freedom to Set Competitive Tax Rates
The Prime Minister’s speech also contained something of great interest to international tax lawyers. She stated that, once the UK leaves the EU, it will “have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain.”
Not surprisingly, the reporters, the opposition and some foreign leaders had interpreted this statement as a threat of converting the UK into a major tax haven for the European companies. It appears that the UK government plans to materializes this threat of the UK tax haven only if the UK is excluded from the EU single economic market as a result of a punitive EU action.
This threat of creating a major UK tax haven echos a similar threat made by the Chancellor of the Exchequer Philip Hammond. In his interview with a German newspaper “Welt am Sonntag”, Mr. Hammond stated that, if the UK is excluded from the EU market, the government will try to contain the damage of such a move by switching away from the European model of taxation.
Is the UK Tax Haven Likely to Become a Reality?
So, is the UK Tax Haven a certainty at this point? Probably not. I view this threat more as a negotiation tool rather than the certainty of enacting a certain plan. The UK economy is one of the most important and complex economies in the world; it is very unlikely that the British government will be even able to pursue a course of action of turning the UK into a full tax haven.
On the other hand, it is obvious that the British government will take advantage of the situation and seek to improve the country’s competitiveness through enaction of certain tax strategies. There is a high likelihood that the corporate tax rate may be lowered to a level where it is better than in most other EU countries, but cannot yet be considered as that of a tax haven.
Furthermore, it is possible that the UK tax haven will materialize only with respect to certain classes of taxpayers from certain countries. For example, the United States can be readily considered as a tax shelter for foreign individuals. The UK may be tempted to adopt a similar approach.
Finally, it is important to remember that the UK is already an attractive country from tax perspective. Its corporate rate is not high (it can even be called relatively low), there is no dividend withholding tax, favorable rules for expats, wide treaty network, and so on. Furthermore, the UK did not enact certain beneficial ownership transparency rules that other European countries already have in place.
Most likely, the UK just wishes to keep its options open for now and there is not going to be a UK tax haven in a traditional sense of this word, despite its threats to do so. International tax lawyers, however, should closely follow the UK developments for any tax opportunities that may become available to their clients.

### Audit Reconsideration | International Tax Lawyers Minnesota
Audit Reconsideration is a very important IRS procedure that may provide a taxpayer with a “second chance” to challenge the results of an established IRS determination without going through the expensive process of tax litigation (assuming it is still available as an option). In this article, I will introduce and explore the concept of audit reconsideration for educational purposes.
Audit Reconsideration: General Purposes
Audit Reconsideration is procedure that allows a taxpayer to contest the results of a prior audit where additional tax was assessed and remains unpaid (or where a tax credit was reversed). This procedure is also utilized to challenge a Substitute for Return (SFR) determination.
When Can a Taxpayer Request Audit Reconsideration?
One of the most important reasons why audit reconsideration is considered to be such an important procedural tool is that it can be requested by a taxpayer at any time after an examination assessment is made (as long as the tax remains unpaid). In other words, Audit Reconsideration provides a taxpayer with the flexibility that is unmatched by any other appeal mechanism.
Reasons for Requesting Audit Reconsideration
Audit Reconsideration can be requested for any of the following five reasons:
1. Taxpayer failed to appear for the IRS audit;
2. Taxpayer moved and never received correspondence from the IRS (often, in a situation involving correspondence audits);
3. Taxpayer has additional information that was not presented during the audit;
4. Taxpayer simply disagrees with the final audit assessment (perhaps, because the IRS committed a computational or processing error in assessing the tax);
5. Taxpayer files an original delinquent return after an assessment was made due to a substitute return executed by the IRS.
Procedural Prerequisites for Requesting Audit Reconsideration
There are two important procedural prerequisites for making the request for audit reconsideration: (i) the taxpayer must have filed a tax return; and (ii) the assessment must remain unpaid or the Service must have reversed tax credits that the taxpayer disputes.
Circumstances When the IRS Will Not Consider a Request for Audit Reconsideration
There are certain circumstances when the IRS will not even consider a request for Audit Reconsideration:
(1) The taxpayer has already been granted an audit reconsideration request and did not provide any additional information with the current request that would change the audit results;
(2) The assessment was made as a result of a closing agreement under Code Section 7121 on IRS Form 906 (signed by a taxpayer pursuant to assessment within the IRS Offshore Voluntary Disclosure Program) or Form 866; same applies to assessments made under Form 870-AD;
(3) The assessment was made as a result of a compromise under Code Section 7122 – such agreements are almost always final and conclusive;
(4) The assessment was made as the result of final TEFRA administrative proceedings;
(5) A final decision with respect to the tax liability was made by the US Tax Court, US District Court or the US Court of Federal Claims.
How to Request Audit Reconsideration
There is not any special form that the IRS requires in order to request an audit reconsideration. Instead, any letter composed by the taxpayer or his representative will be deemed sufficient as long as the prerequisites listed above are satisfied and the request includes the following information:
(1) the request must identify which adjustments the taxpayer is disputing – the proposed changes must be made clear to the IRS;
(2) the request must provide additional information that was not considered during the original examination (only copies of the documents should be mailed to the IRS because originals will not be returned);
(3) a copy of the original Form 4549 should be included with the letter; and
(4) a daytime and evening telephone number and the best time for the IRS to reach the taxpayer.
The request letter with supporting documentation should be mailed to the correct address listed in the IRS Publication 3598 or the office that last corresponded with the taxpayer.
Contact Sherayzen Law Office for Professional Help With Your Request for Audit Reconsideration
If you disagree with the results of your personal or business income tax and/or FBAR audit, contact Sherayzen Law Office to explore your appeal options. Preserving and properly using your administrative IRS appeal options is extremely important given the expense involved in a tax court litigation. At Sherayzen Law Office, we have helped numerous clients with their IRS Appeals and Audit Reconsideration Requests and we can help you!
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### FBAR Third-Party Verification and FATCA | FBAR Tax Lawyer Denver
There is an interesting relationship between the FBAR Third-Party Verification problem and the enaction of FATCA that I would like to explore in this brief article.
Lack of FBAR Third-Party Verification
FBAR is undoubtedly one of the most important information returns administered by the IRS. It is the reigning king with respect to reporting of foreign financial accounts. Its requirements are broad and easy to violate. Its penalty system is unmatched in severity by any form created pursuant to the Internal Revenue Code making FBAR also one of the most effective tax enforcement tools in the IRS enforced tax compliance arsenal.
Yet, as an information return (as opposed to a tax enforcement mechanism), FBAR suffers from a very important defect that has limited its use with respect to collection of information – there is no FBAR Third-Party Verification. In other words, no third parties (such as banks and other financial institutions) are required to submit any data to the IRS so that the IRS can verify the information provided on the filed FBARs.
The fact that there is no FBAR Third-Party Verification stands in stark contract with most other reports required by the Bank Secrecy Act (which created the FBAR). CTRs, CTRCs and Forms 8300 all require banks, casinos and specified businesses to verify the data submitted on these reports. This makes the FBAR the only self-reporting information return with no third-party verification.
Without the FBAR Third-Party Verification, there is no direct way for the IRS to determine whether the information submitted on FBARs is correct. Of course, the IRS can verify the information in an indirect way (such as a treaty request during an investigation of a particular individual or if the information was shared by a financial institution pursuant for some specific reason), but it can only be done with respect to specific taxpayers with significant allocation of resources to each case.
FATCA As a Way to Correct the Lack of FBAR Third-Party Verification
While the Foreign Account Tax Compliance Act (“FATCA”) was not specifically tied to the problems with FBAR, the lack of FBAR Third-Party Verification provided an additional incentive for the enaction of FATCA.
As explained above, the IRS needed to somehow resolve the FBAR problems and find a way to standardize the verification of the foreign account information so that it could be applicable to all US taxpayers. FATCA became the most effective solution. On the one hand, FATCA forced all taxpayers with specified foreign assets to file Forms 8938 with their tax returns, while, on the other hand, it required all foreign financial institutions to verity this data through submission of FATCA-related information on an annual basis.
In other words, FATCA solved the FBAR Third-Party Verification problem. From 2011 on, the IRS acquired valuable tools to fill-in the information gaps left by FBAR. Furthermore, the information collected through FATCA may now be used by the IRS to verify the FBAR information and pursue noncompliant taxpayers for FBAR violations based on the FBAR draconian penalty system.
Contact Sherayzen Law Office for Help with US Tax Compliance Concerning Foreign Bank and Financial Accounts
If you have undisclosed foreign bank and financial accounts, contact Sherayzen Law Office for professional help as soon as possible. Through FATCA third-party information verification, noncompliant US taxpayers are now at a historically-high risk of detection by the IRS. If this happens, they may be subject to extremely high FBAR penalties, including criminal penalties.
Sherayzen Law Office can help you! We have successfully resolved hundreds of FBAR noncompliance cases for US taxpayers residing all over the world. Contact Us Today to Schedule Your Confidential Consultation!

### Voluntary Compliance with US Tax Laws | International Tax Attorney Austin
The IRS has repeatedly stated that the US tax system is a voluntary compliance system. Yet, what does “voluntary compliance” mean in this context? Does it mean that US taxpayers only need to comply with US tax laws whenever they wish to do it? Does it mean that any US taxpayer has a right to refuse to comply with US tax laws or file his tax returns whenever he feels like doing it?
A lot of people tried to take this position and failed. The IRS has always won on the issue that US taxpayers have an obligation to comply with US tax laws, whether they want to do it or not.
Then, what is so “voluntary” about our tax system? Let’s explore this question in more detail.
Voluntary Compliance with US Tax Laws is Obligatory
Let us start with the affirmative statement that the word “voluntary” does not refer to the actual obligation of US taxpayers to comply with US tax laws. In other words, the compliance with US tax laws is compulsory and any noncompliance with US tax laws is punishable to the extent permitted by the law. Intentional noncompliance may even result in incarceration of a noncompliant taxpayer.
The IRS Inability to Engage in Full Enforced Tax Compliance
Since the word “voluntary” does not apply to the actual obligation to comply with US tax laws, we must look at the assessment of US tax liability to understand what voluntary compliance means. In particular, our focus should be on what is known as “enforced tax compliance” – i.e. direct assessment of tax liability and the audit of tax returns.
Here, we encounter an obvious yet interesting fact: the IRS does not have the resources to audit every one of the hundreds of millions of US taxpayers (resident and non-resident, individual and business), especially on an annual basis. Similarly, the IRS also lacks the ability to audit every single tax return every year; in fact, it only audits about 3% of all tax returns per year.
This means that the IRS does not have the capacity to sustain a system of enforced tax compliance and the vast majority of US taxpayers operate outside of this system.
The Definition of Voluntary Compliance
This lack of the IRS ability to engage in 100% enforced tax compliance leads to the inevitable conclusion that it has to rely on US taxpayers to timely file their own tax returns, assess their own tax liability and pay this tax liability to the IRS. It is precisely in this sense that US tax compliance system is “voluntary”.
In other words, voluntary compliance means that US taxpayers do their own self-assessment of their US tax liability (hopefully, in accordance with the IRS guidance) instead of the IRS doing it for each of them. Underlying this voluntary compliance, however, is the threat that the IRS can audit the tax returns and impose noncompliance penalties.
Contact Sherayzen Law Office for Professional Help with Your Voluntary Compliance Concerning US International Tax Laws
The IRS focus on the enforced tax compliance regarding the US international tax obligations of US taxpayers has caused an unprecedented rise in the voluntary compliance in this area of law. Noncompliant US taxpayers are at a historically-high risk of detection by the IRS and may face draconian IRS penalties, including jail time.
This means that, if you have foreign assets and foreign income, you need the professional help of Sherayzen Law Office to bring your tax affairs into full compliance with US tax laws. Our firm is highly experienced in the area of US international tax compliance with hundreds of successful cases closed and millions of dollars saved in US taxes and potential penalties! We can help you!
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### Why the IRS Loves FBAR | International Tax Attorney Houston
The IRS loves FBAR. Undoubtedly, FATCA Form 8938 is a very serious rival, but even this form cannot match the FBAR's popularity among the IRS agents with respect to foreign accounts. What is behind this popularity? Or, stated in another way, why does the IRS love FBAR and prefers them to any other international tax enforcement mechanism for undisclosed foreign accounts?
First Reason Why the IRS Loves FBAR
The first reason why the IRS loves FBAR is because FBAR used to be the main and almost only form that dealt directly with foreign accounts. Until 2011, when Form 8938 appeared for the first time, there was simply no form created pursuant to the Internal Revenue Code that would match the FBAR’s reach with respect to foreign bank and financial accounts.
Second Reason Why the IRS Loves FBAR
The second reason why the IRS loves FBAR is the ease with which a taxpayer can commit an FBAR violation. First, since FBAR comes from Title 31 and it is not part of the Internal Revenue Code, it is a fairly obscure requirement. Obviously, it is much better known now after the IRS voluntary disclosure programs. Still, there are many taxpayers and even accountants who simply do not know of FBAR’s existence.
Second, FBAR has a very low reporting threshold. As long as the highest aggregate balance on the foreign accounts was $10,000 or more at any point during a year, all of the accounts must be reported on FBAR. In essence, any more or less active use of an account is likely to trigger the FBAR requirement.
Third Reason Why the IRS Loves FBAR
The third reason why the IRS loves FBAR is the wide net that the FBAR casts over taxpayers. Not only does the FBAR define the term “account” in a very broad manner (including in this term such odd “accounts” as life insurance policies, bullion gold investments and so on), but its penalty structure forces compliance among all levels of taxpayers irrespective of their earnings or their willfulness (or lack thereof) with respect to FBAR violations.
Fourth Reason Why the IRS Loves FBAR
Finally, the fourth reason why the IRS loves FBAR is its draconian penalty structure that may result in the imposition of penalties that far exceed the balance (to emphasize: not the earnings, but the balance) of the unreported accounts. FBAR imposes high penalties of up to $10,000 even with respect to non-willful violations. Criminal penalties, including jail time, may be possible for willful violations.
In other words, FBAR is the ultimate punishment that the IRS can hammer out on noncompliant US taxpayers. This is probably the most important reason for the popularity of FBAR among IRS agents and even US Department of Justice prosecutors.
Contact Sherayzen Law Office for Professional Help with Undisclosed Foreign Accounts and Foreign Assets
If you have not disclosed your foreign accounts on FBARs or you have other unreported foreign assets, contact Sherayzen Law Office for professional help as soon as possible. Our legal and accounting team is led by one of the best international tax lawyers in the country, Mr. Eugene Sherayzen. We have helped hundreds of US taxpayers around the world with their FBAR compliance and we can help you!
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### FBAR Legislative History | FBAR Tax Attorney Minneapolis
Exploring the FBAR legislative history is not just a theoretical adventure which should interest only legal scholars. Rather, the FBAR legislative history allows us to understand the theoretical and historical basis for the high FBAR penalties and the legal arguments that may serve best to combat the imposition of these severe penalties.
FBAR Legislative History: The Bank Records and Foreign Transactions Act and the Bank Secrecy Act
The obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) originated from the Bank Records and Foreign Transactions Act, which, together with subsequent amendments, is commonly known as the Bank Secrecy Act.
The Bank Secrecy Act (BSA) was first enacted in 1970. The BSA created various financial reporting obligations to identify and collect evidence against money laundering, tax evasion and other criminal activities. One of these reporting obligations is U.S. Code Title 31, Section 5314 which directly discusses what became known as the FBAR.
31 U.S.C. §5314 requires a U.S. person to file reports and keep records regarding this person’s foreign financial accounts maintained with a foreign financial institution: “the Secretary of the Treasury shall require a resident or citizen of the United States or a person in, and doing business in, the United States, to keep records, file reports, or keep records and file reports, when the resident, citizen, or person makes a transaction or maintains a relation for any person with a foreign financial agency.” The statute identifies the basic information required to be reported on FBAR and authorizes the U.S. Department of Treasury to prescribe the requirements, including identifying the classes of persons who should file FBARs and the threshold amount triggering this reporting requirement.
FBAR Legislative History Prior to 2001
Prior to 2001, the FBAR legislative history does not reflect any major changes. In fact, the most important development in the FBAR legislative history prior to 2001 came not from Congress, but from the United States Supreme Court.
Prior to 2001, the BSA required that, in order to impose civil and criminal FBAR penalties, the U.S. government had to prove willful failure to file an FBAR. Here is where the Supreme Court made its decisive contribution in Ratzlaf v. United States, 510 U.S. 135, 149 (1994). In that case, the Court established the willfulness standard as a “voluntary, international violation of a known legal duty”. The Court further held that merely structuring a transaction to avoid the applicability of the BSA did not constitute willfulness.
In other words, after 1994, the DOJ (the U.S. department of Justice) had to show that the defendant structured the transactions with knowledge that such structuring was in itself unlawful. Such a high standard was difficult to satisfy and the FBAR-related indictments became relatively rare.
FBAR Legislative History After 2001
The terrorist attacks on September 11, 2001, resulted in significant changes in the FBAR legislative history which propelled the FBAR to its current prominence. Let’s focus on three such changes.
1. USA PATRIOT Act
The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”) charged the U.S. Treasury Department with improving FBAR enforcement, particularly with respect to illegal offshore banking activities. The USA PATRIOT Act reflected the Congress’s findings that terrorist funding was successfully concealed through offshore banking activities which provided secrecy and anonymity of the parties involved. It is worth noting that the focus of the USA PATRIOT Act was still on the money-laundering and terrorist activities, not tax enforcement.
The USA PATRIOT Act further required the Treasury Department to submit recommendations to improve FBAR policies and procedures.
2. Treasury Reports and the Delegation of FBAR Enforcement to the IRS
In response to the Congress’ request, the Treasury Department released three reports between 2002 and 2004. The importance of these reports lies in the evolution of the FBAR role from the original purpose of fighting terrorism to international tax compliance.
The first report was released in 2002 complained that, due to the small probability of imposition of civil penalties and limited FBAR filing guidance, compliance with the FBAR was lower than 20% (in retrospect, this was still a very generous assessment because FBAR compliance was, in reality, much lower). Therefore, the Treasury Department outlined a number of objectives to improve FBAR policies and procedures, such as improving forms, enhancing outreach and strengthening enforcement.
Most importantly, for the first time, the Treasury Department suggested delegating the enforcement of civil FBAR penalties from FinCEN to the IRS. While nothing yet expressly suggested in the FBAR legislative history that FBAR should be used for tax enforcement, it is difficult to interpret the Treasury Department’s report in any other way. At the very least, the first report hinted at such a possibility.
The second report issued by the Treasury Department (in 2003) was much more direct. The report noted that the civil enforcement of FBAR was already delegated to the IRS and contained the key statement: “one could argue the FBAR is directed more towards tax evasion, as opposed to money laundering or other financial crimes, that lie at the core mission of FinCEN”. This was the first time the IRS officially stated the true purpose of FBAR in the post-9/11 world.
It is worth noting that the final report of the Treasury Department (issued in 2004) happily related to the Congress that the FBAR filings had increased in 2003 by 17% from the year 2000 as a result of the IRS enforcement action, confirming the correctness of the Department’s original objectives stated in the first report.
3. American Jobs Creation Act of 2004
No summary of the post-2001 FBAR legislative history would be complete without discussion of the American Jobs Creation Act of 2004 (“2004 Jobs Act”). The 2004 Jobs Act was enacted partially as a result of the Treasury Department’s reports and its complaints about the difficulty of imposing civil sanctions for a failure to file FBAR and partially seeking an increase revenue. As a result of the 2004 Jobs Act, the Congress made one of the most important changes to FBAR by significantly increasing the FBAR penalties, including the imposition of a non-willful penalty for up to $10,000 per violation.
FBAR Legislative History: New FBAR Deadline Starting 2016 FBAR
The most recent change in the FBAR Legislative History came from the innocently-sounding “The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" that was enacted on July 31, 2015. As a result of this new law, starting with the 2016 FBAR, the FBAR deadline moved from June 30 to April 15 (with an extension possible for the first time in the FBAR legislative history).
Contact Sherayzen Law Office for FBAR Legal and Tax Help
If you have not complied with the FBAR requirement in the past or you need to determine whether FBAR applies in your situation, contact Sherayzen Law Office for professional help. We have helped hundreds of US taxpayers around the world with their FBAR compliance and we can help you!
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### Usefulness of FBARs for the IRS and DOJ | International Tax Law Firm
The usefulness of FBARs for the U.S. tax enforcement agencies may seem to be an odd issue, but, in reality, it concerns every taxpayer with foreign bank and financial accounts. Why the FBAR is important and how the IRS and the U.S. Department of Justice (“DOJ”) utilize it in their prosecution tactics is the subject of this essay.
Two Periods of the Usefulness of FBARs
In describing the usefulness of FBARs, one can distinguish two distinct periods of time. The first period lasted from the time FBAR came into existence in the 1970s through most of the year 2001. It is definitely a simplification to place this entire period of time into one category, but this simplification is intentional in order to contrast this first period of usefulness of FBARs with the second one.
The second period commenced right after the FBAR enforcement function was turned over to the IRS in 2001 and it continues through the present time. In this period of time, the usefulness of FBARs was expanded to a completely different level. It is important to point out, however, that it has not lost its original usefulness that dominated the first period of time of its existence.
Usefulness of FBARs Prior to 2001
Prior to 2001, the main purpose of FBAR had been the enforcement leverage in prosecution of financial crimes. This leverage came from the draconian FBAR penalties which often would offer a worse outcome than the statute associated with a criminal activity (especially after a plea deal). Moreover, it was much easier for prosecutors to establish an FBAR violation (any failure to report a foreign account on the FBAR would do) than to prove specific criminal activity.
The usage of FBAR prosecutions was particularly useful in money laundering cases where it was difficult to prove specified unlawful activities and certain criminal tax cases where it was difficult to establish the receipt of illicit income. In such criminal cases, instead of charging criminals solely with tax evasion or money laundering activities, the prosecutors would opt for charging the criminals with a (willful and/or criminal) failure to file an FBAR that occurred while the defendants engaged in a criminal activity. It was easier to get a plea deal this way, because, obviously, criminals would not report the foreign accounts used in a criminal activity on FBARs.
Why was the usefulness of FBARs limited to being an enforcement leverage; in other words, why were FBARs not used for collection of data? After all, FBAR was born out of the Bank Secrecy Act and its stated purpose was to collect data with respect to foreign bank and financial accounts owed by US persons.
The answer is fairly simple – there was no third-party verification mechanism for the data submitted on FBARs. In other words, the FBAR reporting was completely dependent on honest self-reporting (in fact, this is one of the reasons for the creation of FATCA) and, unless, an investigation was conducted with respect to a specific individual, there was no direct way for FinCEN to corroborate the information submitted on FBARs.
It is important to emphasize that, in this first period of its existence, the usefulness of FBARs was primarily non-tax in nature. It was not until after September 11, 2001, that FBAR commenced to acquire a new level of usefulness with which we are familiar today.
Usefulness of FBARs After 2001
The usefulness of FBARs underwent a tremendous change after the September 11, 2001 terrorist attacks in the United States. Soon after the 9/11 attacks, the enforcement of FBARs was taken away from FinCEN and given to the IRS.
The IRS decided to shift the scope of the usefulness of FBARs from financial crimes to tax evasion. The Congress wholeheartedly agreed and further expanded the already-severe FBAR penalties in the American Jobs Creation Act of 2004 to their current draconian state. From that point on, FBAR became the top international tax compliance enforcement mechanism for the IRS.
The potential FBAR penalties were so extreme that even non-willful taxpayers preferred to enter the IRS Offshore Voluntary Disclosure Program (and, later, Streamlined Compliance Procedures) and pay the appropriate Offshore Penalties rather than to directly confront the potential consequences of FBAR noncompliance. In other words, the usefulness of FBARs expanded further to indirect tax enforcement.
Furthermore, the UBS case victory in 2008 and the enaction of FATCA in 2010 meant that the IRS could now obtain FBAR-required information from third parties (foreign financial institutions) and verify a taxpayer’s compliance with the FBAR requirements. This further reinforced the FBARs already dominant position in US international tax compliance.
This FBARs dominance in the tax enforcement with respect to foreign accounts continues even today despite the appearance of a rival – Form 8938 (born out of FATCA). While Form 8938 has a broader scope of reportable assets, its penalty structure is highly inferior to the terrifying FBAR penalties.
Contact Sherayzen Law Office for Help with FBAR Compliance
If you have foreign bank and financial accounts that were not disclosed on FBARs as required, you should contact Sherayzen Law Office, Ltd. as soon as possible. Sherayzen Law Office is an experienced international tax law firm that has helped hundreds of US taxpayers with their delinquent FBARs, and we can help you!
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### Indianapolis FBAR Lawyer | Foreign Accounts Tax Attorney
One of the advantages of practicing US international tax law is that an international tax lawyer can offer his FBAR services throughout the United States. Why is this case? Why is an international tax lawyer who lives in Minneapolis considered as an Indianapolis FBAR Lawyer?
Indianapolis FBAR Lawyer: FBAR is Federal Law, Not State Law
The answer to the question above is not difficult and, in fact, very logical. FBAR is a part of US federal law and no local law plays a role in defining its requirements or its implementation. This means that any US international tax lawyer can offer FBAR services in any of the 50 states and the District of Columbia irrespective of his physical location. This further means that a lawyer in Minneapolis can be considered as an Indianapolis FBAR Lawyer even though he never visited the State of Indiana.
Indianapolis FBAR Lawyer Must Be a US International Tax Lawyer
It is worth emphasizing that an Indianapolis FBAR Lawyer must be a US international tax lawyer, not just any lawyer. This emphasis is very important because FBAR forms are part of the US international tax law and its penalty structure is deeply connected with a taxpayer’s overall tax compliance. In a voluntary disclosure situation, the relationship between FBAR and the overall US international tax compliance may play a determinative role in the legal position of a taxpayer.
A sophisticated reader might wonder why FBAR forms are part of the US international tax law if the FBAR was created as a result of the Bank Secrecy Act (i.e. Title 31 of the United States Code), whereas the entire Internal Revenue Code is located in Title 26 of the United States Code. The answer is not that simple and deserves a special article.
Nevertheless, I can provide a short answer here: FBAR is administered by the IRS and, as part of its historic evolution, the form became a tax enforcement mechanism.
Sherayzen Law Office Can Be Your Indianapolis FBAR Lawyer
If you are looking for an Indianapolis FBAR Lawyer, Sherayzen Law Office may be the perfect fit for you! Sherayzen Law Office is an international tax law firm that specializes in US tax compliance, including FBARs. We have profound knowledge of this area of law and the extensive experience in helping clients with international tax law issues, including offshore voluntary disclosures with respect to delinquent FBARs. We have helped hundreds of US taxpayers worldwide with their FBAR issues and we can help You!
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### Swiss Bank Program Summary | Offshore Accounts Lawyer
On December 29, 2016, the US Department of Justice (“DOJ”) and the IRS announced that they have reached final resolutions with Swiss banks that have met the requirements of the Swiss Bank Program. In this article, I would like to provide the Swiss Bank Program summary and explain the importance of the Program to the overall US international tax enforcement efforts.
Swiss Bank Program Summary: History of the Swiss Bank Program
The Swiss Bank Program was a groundbreaking initiative of the DOJ and the IRS. It was the very first time when the tax authorities of one country (United States) conducted a voluntary disclosure program for banks in a different country (Switzerland) as if it were not an independent sovereign territory.
At the core of the Swiss Bank Program was the promise of the DOJ not to prosecute Swiss banks that would come forward and participate in the Swiss Bank Program. The banks were divided into four categories.
Category 1 banks were not eligible to participate because they were already under the DOJ investigation.
Category 2 banks had to pay a penalty and consisted of banks for which was a reason to believe that they committed tax-related criminal offenses with respect to undisclosed foreign accounts owned by US persons. In addition to paying a penalty, Category 2 banks also had to disclose all of their cross-border activities and provide detailed information with respect to US-owned accounts to the DOJ and the IRS.
Category 3 consisted of banks that established, with the assistance of an independent internal investigation of their cross-border business, that they did not commit tax or monetary transaction-related offenses and had an effective compliance program in place. These banks did not pay any penalties.
Finally, category 4 was reserved for Swiss banks that were able to demonstrate that they met certain criteria for deemed-compliance under the Foreign Account Tax Compliance Act (FATCA). They also did not pay any penalties.
Swiss Bank Program Summary: Results
Let’s discuss the results of the Program in our Swiss Bank Program summary. The Swiss Bank Program was announced on August 29, 2013 and it was in operation until December 29, 2016. During that time the DOJ executed non-prosecution agreements with 80 Category 2 banks and collected more than $1.36 billion in penalties. The Department also signed a non-prosecution agreement with Finacor, a Swiss asset management firm. Between July and December 2016, four banks and one bank cooperative satisfied the requirements of Category 3, making them eligible for Non-Target Letters. No banks qualified under Category 4 of the Program.
Swiss Bank Program Summary: Legacy
No Swiss Bank Program summary would be complete without a discussion of the legacy of the Program. In our Swiss Bank Program summary, let’s divide the impact of the Program into four parts: impact on Switzerland as a bank secrecy fortress, impact on other tax havens, impact on US tax compliance and the precedent for the future.
The most immediate impact was felt in Switzerland itself. The Swiss Bank Program has in effect completely destroyed the vaunted Swiss bank secrecy laws with respect to US taxpayers and gave the green light to other European countries to conduct similar interventions. In essence, the Swiss Bank Program has completely destroyed the main fortress of bank secrecy that had existed for centuries.
The destruction of the Swiss bank secrecy laws also influenced the other tax havens. Fearing a similar DOJ intervention, the rest of the world’s tax havens have significantly softened their own bank secrecy laws and have agreed to an automatic exchange of information regarding their account owners with the IRS. There can be no doubt that the Swiss Bank Program has greatly facilitated the implementation of FATCA on the global scale.
The combined effect of the Swiss Bank Program, the softening of the bank secrecy laws in tax havens and the implementation of FATCA was acutely felt by noncompliant US taxpayers. Tens of thousands of US taxpayers participated in the IRS voluntary disclosure programs (often, they were urged by the Swiss banks to enter the OVDP, because this is how the banks mitigated their own penalties under the Program). Many more tens of thousands of taxpayers became tax compliant through a noisy or quiet disclosure. The greater awareness of US international tax laws among the tax preparers has greatly improved US annual tax compliance, bringing huge amounts of additional revenue to the US treasury.
Finally, no Swiss Bank Program summary would be complete without mentioning the potential for repetition of the Swiss Bank Program in another country. It may not necessarily come in the same format, but it is very likely that a version of the Program will be implemented elsewhere, especially since the IRS commitment to offshore tax compliance will remain a priority in the immediate future.
Contact Sherayzen Law Office for Help With Your Undisclosed Foreign Accounts
If you have undisclosed foreign accounts or other foreign assets, contact Sherayzen Law Office for professional help. Our legal team will thoroughly analyze your case, explore your voluntary disclosure options, prepare all of the necessary legal documents and tax forms, and defend your case against the IRS.
We have helped hundreds of US taxpayers to bring their tax affairs into full compliance and we can help you! Contact Us Today to Schedule Your Confidential Consultation!

### Adding Children to a Foreign Account and FBAR Issues | IRS FBAR Lawyer
FBAR problems and parental love – at first, it seems that nothing can be more contradictory. Yet, in reality, parental love may often cause grave US tax problems for children if this love extends to adding children to a foreign account, and especially if this is done without the knowledge of the children. In this article, I would like to explore some of the common patterns of adding children to a foreign account and how this act of parental love may cause grave FBAR problems for the children.
FBAR Background
FinCEN Form 114 (the Report of Foreign Bank and Financial Accounts – commonly known as FBAR) is one of the most important information returns for US taxpayers. Generally, FBAR requires a US person to disclose his financial interest in and signatory authority over foreign bank and financial accounts if these accounts, in the aggregate, exceed $10,000 at any point during a calendar year.
The importance of FBAR is tied to its draconian penalties, which include willful penalties of up to 50% of the account or $100,000 (whichever is greater) per violation; each undisclosed account in each year is a violation. Criminal penalties, including jail time, are also possible.
Common Four Patterns of Adding Children to a Foreign Account
While there are many ways of adding children to a foreign account, we can distinguish the four most common patterns for the purposes of this article. The first pattern of adding children to a foreign account is creation of joint accounts with minor and student children; this usually occurs when the parents and their children still live outside of the United States. Millions of parents create joint accounts with a minor child to help them get a credit history, learn about financial responsibility and exercise control over their children’s expenses. The same pattern often applies to already adult children who begin their college lives.
These accounts often still remain in existence long after the expiration of the original purpose of adding children to a foreign account. Most often, this happens as a matter of fact – just out of habit or indifference to the account. Sometimes, the account starts to play a new role of a conduit of financial transactions between adult children and their parents. Whichever is the reason, these foreign accounts often continue to exist even after the children move to the United States.
The second common pattern of adding children to a foreign account occurs on the opposite end of the spectrum of life for estate planning purposes. Under this pattern, non-resident alien parents add their adult children (who may already be US tax residents) to their foreign accounts to make sure that the children have access to the parents’ accounts in case of an emergency or death. Furthermore, in countries with a difficult court system (India is a prominent example), adding children to a foreign account may assure that these children and no one else inherit the funds.
The third common pattern of adding children to a foreign account occurs as part of business succession planning. Children are granted shares of a foreign corporation and are provided with a signatory authority over the corporate accounts in order to assure smooth transition of business ownership and corporate leadership. This pattern is very close to the previous one, but the difference here is that the process of adding children to a foreign account here is done as an integral part of running a foreign business, whereas the second pattern is concerned mostly with non-business estate planning.
Finally, the fourth common pattern involves a situation where parents (usually operating under a power of attorney provided by their children) engage in various business and real estate transactions under their childrens' names. The act of adding children to a foreign account merely constitutes one more part of these transactions. Especially in Southeast Asia (most notably, India, South Korea and China), but also in South America, the parents are conducting various transactions under their children’s names often without ever informing their children about these transactions. The parents can even sign and file local tax returns under their children’s names.
How Adding Children to a Foreign Account Can Cause FBAR Problems
Setting aside the issue of income tax compliance complications, adding children to a foreign account may be highly problematic from the FBAR compliance standpoint. The problems usually occur for three reasons.
The first and most common reason is the simple fact that, in many cases, parents never inform their children about the fact that they added them to their foreign accounts. This often occurs because the parents simply do not know that adding children to a foreign account obligates the children to report such a joint account to the IRS. Since the children do not know about their ownership of a foreign account, they cannot report it on the FBAR (assuming that they know about the existence of this form), thereby subjecting themselves to the draconian FBAR noncompliance penalties. This reason can be present in all four patterns described above.
The second reason for FBAR problems is closely tied to the first pattern of adding children to a foreign account. In cases where accounts have been open for a very long time without active usage, children may simply forget about the existence of these accounts or mentally ignore them as a matter of habit of treating these accounts as childhood accounts that should not be taken seriously.
Finally, the third reason is closely tied to the fourth pattern of adding children to a foreign account. In such cases, children often feel that the accounts do not belong to them since the parents opened them in their interests only as part of their own local business transactions. Hence, the children erroneously believe that these accounts are not reportable on their FBARs, exposing themselves to FBAR penalties. Such cases may present additional difficulties to international tax lawyers because of the amount of documentation (local tax returns under the children’s names, all transaction documents in children’s names, deposits remaining on the children’s accounts, et cetera) that may convince the IRS that FBAR noncompliance was willful.
Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts and Foreign Income
Parents love their children and are prepared to do anything for them. Sometimes, though, parents may unintentionally complicate their children’s lives by adding their children to a foreign account. Failure to report such an account on FBAR may expose the children to draconian civil and criminal FBAR penalties.
In such cases, the help of an experienced international tax law firm is indispensable. Sherayzen Law Office, Ltd. is a highly experienced international tax law firm that specializes in FBAR compliance, including offshore voluntary disclosures. We have helped hundreds of US taxpayers around the globe to bring their US tax affairs into full compliance and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Happy New Year 2017! | International Tax Attorney Minneapolis
Sherayzen Law Office, PLLC wishes a very Happy New Year 2017 to all of our clients and readers of our blog! We wish you great health, happiness and prosperity in this New Year 2017! And, to stay in full compliance with US tax laws!
The New Year 2017 is going to be a complicated one when it comes to international tax compliance. Let us focus today on two primary updates.
The first notable novelty of the New Year 2017 is the shift in the FBAR deadline; from now on, the FBAR is going to be due on April 15. At this point, the IRS guidance is that this deadline is set for April 15 irrespective of whether it falls on a Saturday, Sunday or a holiday. Hence, it is important to remember that the 2016 FBAR will be due on April 15, 2017, even though US tax returns will be due on April 18, 2017. Please, look for additional articles on this issue in January of 2017.
Second, for the first time ever, FATCA Form 8938 will apply to domestic corporations, partnerships and trusts that hold specified foreign financial assets if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year. The IRS has been threatening this expansion of the application of Form 8938 since 2011. Now, in the New Year 2017, US domestic entities will need to comply with these new requirements on their 2016 US tax returns. Sherayzen Law Office will be providing additional updates on this issue throughout this year’s tax season.
There are many New Year 2017 updates made to various forms by the IRS. Some of these updates are fairly specific to certain classes of taxpayers, whereas other updates are more general in nature. Our professional legal and tax team at Sherayzen Law Office closely follows these IRS updates and developments to make sure that we provide our clients with the highest quality of service.
As in prior years, if you are a client of Sherayzen Law Office in this New Year 2017, you can rest assured that your US tax compliance is in good hands and you have an intelligent advocate of your interests on your side.
Hence, enjoy the New Year 2017 celebrations and contact Sherayzen Law Office during this year’s tax season for the high-quality professional legal and tax help!

### Latvian Micro-Enterprise Tax Law Update | International Tax Lawyer Cleveland
On December 20, 2016, the Saeima (Latvian Parliament) approved new amendments to Latvian Micro-Enterprise tax law. While the modifications to the law represented a compromise solution, the overall tax rate went up.
History of Latvian Micro-Enterprise Tax Law
The Latvian Micro-Enterprise Tax Law first entered into force on September 1, 2010. It primary purpose was to establish a lower tax rate for very small businesses, which were defined as businesses with turnover not exceeded 100,000 euros per calendar year. If a business qualified as a small business, under the Latvian Micro-Enterprise Tax Law, it would pay only a 9% tax rate. This rate was included in everything – corporate income tax, social tax and personal income tax.
Changes to Latvian Micro-Enterprise Tax Law
The December 20 changes came after an intense dispute over the best approach to the small business tax. In fact, on November 23, 2016, the Saeima first approved amendments to the law that would lower the income tax to a mere 5%, but the small business owners would have been forced to withhold social insurance contributions from each employee.
In the end, the November 23 amendments were discarded. The December 20 version of the law simply increased the micro-enterprise tax rate to 15% and eliminated the November 23 social insurance contribution withholding requirement due to the fact that it would have been excessively burdensome for small businesses.
It is important to point out, however, that the new changes to the Latvian Micro-Enterprise Tax Law carved-out a limited one-year exception for businesses with a turnover of only 7,000 euros per year; these businesses will only pay a 12% tax rate. This reduced tax rate will only be in effect through December 31, 2017
Furthermore, the Saeima also repealed the November 23 amendment that would have terminated the Latvian Micro-Enterprise Tax Law on December 31, 2018. Instead, the Saeima asked the Latvian Cabinet of Ministers to submit the draft new tax law for small businesses.
Latvia Remains One of the Lowest Tax Jurisdictions in the European Union
Even with the recent changes to Latvian Micro-Enterprise Tax Law, Latvia remains a jurisdiction with one of the lowest tax burdens in the European Union. This fact is often not appreciated by the West European tax professionals, often due to their cultural prejudice against doing business in Eastern Europe. This omission in Latvia may be a serious mistake on their part, depending on the client’s situation.
Sherayzen Law Office follows the development of tax laws in Latvia and believes that there are situations where these laws can offer significant advantages to the firm’s clients for tax planning purposes.

### Boston Foreign Trust Lawyer | International Tax Attorney
Bostonians who are beneficiaries or owners of a foreign trust face a large number of very complex US tax requirements. Failure to properly identify and comply with these requirements may result in imposition of severe tax penalties. For this reason, these Bostonians need to secure the help of a Boston Foreign Trust Lawyer in order to assure timely and correct compliance with all of the US tax requirements associated with foreign trusts. How does one choose the right Boston Foreign Trust Lawyer? Who is considered to be a Boston Foreign Trust Lawyer? Answering these two questions is the purpose of this article.
Boston Foreign Trust Lawyer Definition: Legal Foreign Trust Services Provided in Boston, Massachusetts
In order to answer a question about who is considered to be a Boston Foreign Trust Lawyer, it is important to first explore the legal origin of the foreign trust laws for which the compliance is required. Since Form 3520, Form 3520-A, Form 8938 and all other related forms are administered by the US Department of Treasury, it becomes clear that Bostonian foreign trust owners and foreign trust beneficiaries are dealing with federal law, not just the local state or city laws.
This means that any international tax lawyer who is licensed to practice in any state of the United States can offer his foreign trust tax services in Massachusetts – i.e. the physical presence in Boston, Massachusetts, is not necessary.
This conclusion clarifies the definition of a Boston Foreign Trust Lawyer. First, the definition includes all of the international tax lawyers who reside in Boston. Second, the definition extends to all US international tax lawyers who offer their tax services with respect to foreign trust compliance who reside outside of Boston or even the State of Massachusetts. This means that your lawyer can physically reside in Minneapolis and still be considered as a Boston Foreign Trust Lawyer.
Boston Foreign Trust Lawyer Must Be an International Tax Lawyer
Throughout the last paragraph, I repeatedly referred to “international tax lawyers”. This is not accidental; on the contrary, it was intentional – a Boston Foreign Trust Lawyer should be an international tax lawyer whose main area of practice is US international tax law and who deeply knows various international tax provisions related to US foreign trust tax compliance.
Where does such a strict competence criteria come from? As it was explained above, US foreign trust compliance is part of a much larger US federal law. However, this is a very specific part of US federal law – US international tax law. We can see now why only an international tax lawyer can be a Boston Foreign Trust Lawyer.
Sherayzen Law Office Can Be Your Boston Foreign Trust Lawyer
Sherayzen Law Office is an international tax law firm that specializes US international tax compliance, including foreign trusts. Its legal team, headed by international tax lawyer Eugene Sherayzen, Esq., has extensive experience concerning all major relevant areas of US international tax law relevant to foreign trust compliance including Form 3520, Form 3520-A, foreign business ownership by a foreign trust, FBAR and FATCA compliance and other relevant requirements.
This is why, if you are looking for a Boston Foreign Trust Lawyer, contact Sherayzen Law Office today to schedule Your Confidential Consultation!

### Mistake as Reasonable Cause | Offshore Voluntary Disclosure Lawyer
This article is a continuation of a series of articles on the Reasonable Cause Exception as a defense against various IRS penalties. Today, we will be exploring whether a mistake made by a taxpayer satisfies the ordinary business care and prudence standard and can be considered a reasonable cause.
Mistake Alone Does Not Constitute Reasonable Cause
Generally, the IRS takes the view that a mistake alone is not sufficient to establish a reasonable cause defense to an imposition of an IRS penalty, because it is not considered to be a conduct that would qualify as ordinary business care and prudence – i.e. generally, situations when a taxpayer acted prudently, reasonably and in good faith (taking that degree of care that a reasonably prudent person would exercise) and still could not comply with the relevant tax requirement.  We remind the readers that the ordinary business care and prudence standard is at the heart of the Reasonable Cause Exception.
Mistake Can Help Establish Reasonable Cause
While a taxpayer’s mistake alone is insufficient to establish a reasonable cause, the Internal Revenue Manual (IRM) specifically foresees a possibility that a mistake can help assert a reasonable cause defense. IRM 20.1.1.3.2.2.4 (12-11-2009) specifically states that the Reasonable Cause Exception may be established if mistake with “additional facts and circumstances support the determination that the taxpayer exercised ordinary business care and prudence but nevertheless was unable to comply within the prescribed time”.
In other words, if mistake, in combination with other facts and circumstances, established that a taxpayer’s behavior was consistent with the ordinary business care and prudence standard, the IRS may agree that the tax noncompliance was caused by a reasonable cause.
IRS Factors Supporting Mistake as a Reasonable Cause
IRM 20.1.1.3.2.2.4 (12-11-2009) does not limit the number of factors that will be considered by the IRS in deciding whether there are sufficient facts and circumstances supporting mistake as a reasonable cause. However, it provides five specific factors to which the IRS will pay special attention:
1. When and how the taxpayer became aware of the mistake;
2. The extent to which the taxpayer corrected the error;
3. The relationship between the taxpayer and the subordinate (if the taxpayer delegated the duty);
4. If the taxpayer took timely steps to correct the failure after it was discovered;
5. The supporting documentation.
Contact Sherayzen Law Office for Professional Legal Help with Establishing a Reasonable Cause Exception in Your Case
If the IRS imposed a penalty for your prior tax noncompliance, contact Sherayzen Law Office for the legal help. We will thoroughly review the facts of your case, determine available defense options, including the Reasonable Cause Exception defenses, implement the case strategy with which you feel comfortable, and negotiate the abatement or reduction of your IRS penalties.
Contact Us Today to Schedule Your Confidential Consultation!

### Ordinary Business Care and Prudence Standard | International Tax Lawyer
Ordinary Business Care and Prudence Standard is a requirement that is present, explicitly or implicitly, in all reasonable cause defenses. In this article, I would like to explain what Ordinary Business Care and Prudence Standard means and what are the main factors for analyzing whether a taxpayer met the burden of proof required under the Ordinary Business Care and Prudence Standard.
Ordinary Business Care and Prudence Standard: General Requirements
The ordinary business care and prudence standard is an objective standard. There is no precise definition of this standard, because its application is fact-dependent. Nevertheless, the standard is generally satisfied as long as the taxpayer acted prudently, reasonably and in good faith (taking that degree of care that a reasonably prudent person would exercise) and still could not comply with the relevant tax requirement. IRM 20.1.1.3.2.2 (02-22-2008) adds that “ordinary business care and prudence includes making provisions for business obligations to be met when reasonably foreseeable events occur”.
Ordinary Business Care and Prudence Standard: Common Factors
While the determination under the ordinary business care and prudence standard is highly fact-dependent, there are certain common factors that the IRS will take into account. IRM 20.1.1.3.2.2 (02-22-2008) specifically lists four factors that must be reviewed by the IRS, but states that all available information should be considered. Let’s explore these common factors:
1. Compliance History
The main issue here is to see if this is the first failure to comply with US tax laws by the taxpayer or whether he already violated in the past the tax law provision in question IRM 20.1.1.3.2.2 (02-22-2008) states that “the same penalty, previously assessed or abated, may indicate that the taxpayer is not exercising ordinary business care”. The IRM urges the IRS agents to check at least three preceding tax years for payment patterns and the taxpayer’s overall compliance history.
If the violation was the first time a taxpayer exhibited noncompliant behavior, this will be a positive factor that will be considered with other reasons the taxpayer provided for reasonable cause. While a first-time noncompliance does not by itself establish reasonable cause, taxpayers who violated the same provision more than once will find it more difficult to establish that their behavior satisfied the ordinary business care and prudence standard.
2. Length of Time
At issue here is the time between the event cited as the reason for the initial tax noncompliance and subsequent compliance actions. IRM 20.1.1.3.2.2 (02-22-2008) requires the IRS agents to consider: “(1) when the act was required by law, (2) the period of time during which the taxpayer was unable to comply with the law due to circumstances beyond the taxpayer’s control, and (3) when the taxpayer complied with the law.”
Obviously, if the taxpayer did not discover his noncompliance until one year later and immediately tried to remedy the situation, it will add significant force to his argument that his behavior satisfied the ordinary business care and prudence standard. On the other hand, an unexplained delay between the time the taxpayer discovered his noncompliance and the time he attempted to remedy it will have a negative impact on the overall taxpayer’s argument.
Another highly important factor that plays a crucial role in offshore voluntary disclosures is whether, after discovering his prior noncompliance, the taxpayer voluntarily complied prior to being contacted by the IRS. In a voluntary disclosure context, if the IRS initiates an examination and contacts the taxpayer first, his voluntary disclosure options may be entirely foreclosed. On the other hand, the fact that a taxpayer voluntarily contacted the IRS with his amended tax return that corrected his prior tax noncompliance may play a highly positive role in convincing the IRS that the taxpayer’s prior behavior was consistent with the ordinary business care and prudence standard.
Hence, it is highly important for the taxpayer to explain what happened during the time between his prior noncompliance and his current effort to remedy the situation.
3. Circumstances Beyond the Taxpayer’s Control
The crucial issue here is whether the taxpayer could have anticipated the event that caused the noncompliance. If he could have done it, then his case might be materially weakened. On the other hand, if the taxpayer could not have anticipated the event, then, it might play a very important role in convincing the IRS that his behavior satisfied the ordinary business care and prudence standard.
A lot of sub-factors play a very important role here: the taxpayer’s education, his tax advisors, whether he has been previously subjected to the tax at issue, whether he has filed the tax forms in question before, whether there were any changes to the tax forms or tax law (which the taxpayer could not reasonably be expected to know), and so on. The level of complexity of the issue in question is also an important additional sub-factor.
The “circumstances beyond control” factor is necessarily tied to the “length of time” factor described above, because a taxpayer’s obligation to meet the tax law requirements is ongoing. Ordinary business care and prudence standard generally requires that the taxpayer continue to meet the requirements, even if is he late.
4. Taxpayer’s Reason for Prior Noncompliance
The taxpayer must provide and the IRS agent must consider an actual reason for the prior tax noncompliance whatever it may be and this reason must address the specific penalty imposed. It is the combination of this taxpayer’s reason together with other factors, including the common factors described above, that will form the basis for the taxpayer’s argument that his behavior satisfied the ordinary business care and prudence standard.
Contact Sherayzen Law Office to Contest IRS Penalties based on Reasonable Cause and Ordinary Business Care and Prudence Standard
Since 2005, Sherayzen Law Office has saved its clients millions of dollars in potential IRS penalties. If you wish to challenge the imposition of IRS penalties on your prior US domestic and/or international tax noncompliance, contact Sherayzen Law Office for professional help. We will thoroughly review the facts of your case, determine the available defense strategies to reduce or eliminate IRS penalties (including the determination of whether your case satisfied the ordinary business care and prudence standard), implement these strategies and defend your case against the IRS.
Contact Us Today to Schedule Your Confidential Consultation!

### Streamlined Disclosure Attorney Madison | FATCA OVDP Lawyer
In today’s world connected through an invisible network of new technologies, a great number of persons prefer to choose an attorney based on his qualities rather than his state of residence. The residents of Madison, Wisconsin, similarly search for such an attorney, especially in the area of Streamlined compliance procedures by utilizing the search words: Streamlined Disclosure Attorney Madison.
The question is whether an attorney in Minneapolis falls within the search for Streamlined Disclosure Attorney Madison. Furthermore, is there an ethical problem? – i.e. does a Minnesota attorney’s license extend to help clients in Madison with respect to Streamlined Compliance Procedures? Let’s answer all of these questions in this article.
Streamlined Disclosure Attorney Madison Search Includes Attorneys Who Reside in Another State
The answer to the first question is “yes’ – the search for Streamlined Disclosure Attorney Madison includes an attorney whose residence is in Minneapolis as long as this attorney offers his services in Madison to help clients with international tax law issues.
There can be no doubt that an attorney in Minneapolis is objectively (i.e. setting aside the personal qualities and the level of competence that naturally differ from attorney to attorney even within Madison) qualified to provide services in Madison. On the technological side, the improvements in modern communications technology with online video conferences and email, combined with the traditional express mail, have completely eliminated the logistical and administrative differences between a local attorney in Madison and an attorney from Minneapolis who offers his Streamlined Compliance Procedures services in Madison.
On the legal side, the difference never even existed. While there are still many local Madison legal issues concerning local and state law where local attorneys hold a decisive advantage over out-of-state attorneys, this is not the case when it comes to Streamlined Compliance Procedures. This is because Streamlined Compliance Procedures is a purely federal law with zero Madison or even Wisconsin influence. In fact, these procedures constitute an IRS program within the regulatory framework of the much larger US international tax law.
This means that a search for a Streamlined Disclosure Attorney Madison is really a search for an international tax attorney who deals with the Streamlined Compliance Procedures and helps clients in Madison. There is no requirement that the Streamlined Disclosure Attorney Madison actually resides in Madison.
Streamlined Disclosure Attorney Madison Search Applies to Any US International Tax Attorney Without Any License Limitations
The answer to the second question – whether there are any license limitations for a Minnesota attorney to offer international tax services related to Streamlined Compliance Procedures to clients in Madison – is clear from the discussion above: no, there are no attorney license limitations in this case.
Again, the search for Streamlined Disclosure Attorney Madison is a search for an international tax attorney for a specific US international tax law issue. In fact, a search for Streamlined Disclosure Attorney Madison can be easily replaced by a search for a broader category of International Tax Attorney Madison. There is simply no specific local input from City of Madison or the State of Wisconsin, and, theoretically, any attorney licensed to practice in the United States can practice federal tax law.
Of course, in practice, only highly specialized international tax attorneys are competent enough to practice in the area of US international tax law. The number of such attorneys is extremely small; this means that the persons who search for a Streamlined Disclosure Attorney Madison must necessarily broaden their search to attorneys who reside in other states in order to have a real chance for choosing the right Streamlined Disclosure Attorney Madison.
Sherayzen Law Office Offers Services Related to Streamlined Compliance Procedures and Can Be Your Streamlined Disclosure Attorney Madison
Sherayzen Law Office is an international tax law firm that specializes in all types of offshore voluntary disclosure, including Streamlined Compliance Procedures. Our professional tax team, headed by Mr. Eugene Sherayzen, is highly experienced in helping US clients around the globe with their US international tax issues, including voluntary disclosure of foreign accounts and other foreign assets. This why Sherayzen Law Office should be considered as a top candidate when you search for Streamlined Disclosure Attorney Madison.
Contact Us Today to Schedule Your Confidential Consultation!

### International Business Transactions | Business Tax Lawyer Minneapolis
Despite their apparent diversity and complexity, international business transactions can be grouped into three categories: export of goods and services, licensing and technology transfer and foreign investment transactions.
International Business Transactions: Export of Goods and Services
The first category of international business transactions consists of exports involving a sale of a commodity, manufactured goods or services to a purchaser in a foreign country. Such exports may be done pursuant to a single or series of contracts (first type of export of goods and services) or under a more permanent arrangement (second type of export of goods and services), such as: branch office, sales subsidiary, designated foreign representative, distributor, et cetera.
The first type of exports of goods and services are usually “arms length transactions” whereas the second type often involves related-party transactions. The latter sub-type may often draw the attention of the IRS due to high potential of abuse through tax avoidance measures as well as transfer pricing.
In addition to import tax considerations, exporting goods and services also entails a number of legal considerations and documents, such as the sales contract, insurance, transportation documents (e.g. bill of lading), payment mechanisms (e.g. letters of credit), export and import licenses, et cetera. Even the very establishment of a permanent export structure (franchise, subsidiary, et cetera) may raise an avalanche of legal issues that must be resolved in order for the business structure to work.
International Business Transactions: Licensing and Technology Transfers
The second category of international business transactions involves licensing of intellectual property rights and technology transfers. In reality, the technically-correct classification of international business transactions would place licensing and technology transactions as a variation on the export transactions. However, there are important distinctions between the first and the second categories of international business transactions that justify the classification of licensing and technology transfers as a separate category of international business transactions.
The basic idea behind the licensing and technology transfer transactions is not complex: instead of manufacturing a particular product in its home country and then exporting it to foreign countries, the company that owns the intellectual property rights licenses the actual science and the know-how behind the manufacturing process to a foreign firm so that it can manufacture the goods in the foreign country. In return, the company that owns the IP rights receives either a specified payment or a certain percentage based on annual gross sales or production volume.
The advantage of this type of export transaction is the relative ease with which the owner of IP rights can increase earnings without the need to set up a foreign distribution and services network. Moreover, the costs and risks of such a sales distribution network shift to licensee instead of the owner of the IP rights.
The technology transfer and IP licensing, however, carry significant risks of their own. First of all, there is a significant danger that the foreign licensee will master the new technology to directly compete with the IP owner. We have recently seen such an example with many “clean energy” Chinese companies. Second, there is a risk that the transferred technology may be simply stolen in a country where the IP rights are not property protected. Here, the problem is not only the appearance of an eventual competitor, but also of lost license fees. Finally, the licensee may improperly use the technology and create substandard goods, thereby damaging the reputation of the IP owner.
While these risks may be mitigated with proper business planning, one must be very careful about technology transfers and IP licensing, especially in the industries where technologies and know-how change at a slower pace.
International Business Transactions: Foreign Investment Transactions
The final major type of international business transactions consists of foreign investment transactions. This category, in turn, consists of two sub-categories: direct foreign investments and portfolio foreign investments.
Direct foreign investment usually implies an establishment or acquisition of a production capacity or a permanent enterprise, such as a factory or hotel, in the United States. In the United States, any equity investment of ten percent or more is classified as direct foreign investment. Usually, the foreign investor would directly participate in the management of this enterprise. Of course, the direct foreign investment can be done by a US investor investing directly in a foreign country and a foreign investor investing directly in the United States.
There are two types portfolio foreign investments. The first type consists of investments in debt instructions, such as bonds and debentures. The second type consists of an equity investment in which an investor does not have any management role.
There are many advantages to engaging in foreign investment transactions; I will just point out four such advantages here. First, an investor is investing directly into a foreign enterprise which is considered to be a “local” company, thereby avoiding the complications of exporting goods and services. Second, an acquisition of an already established company with its business network, established workforce and reputation, may facilitate a rapid growth in the sales of the produced goods or services. Third, unlike the first category of international business transactions, the host country may be very interested in a direct foreign investment, because it creates jobs and helps the local economy. Hence, an investor may benefit from government incentives, especially free economic zones which levy low to no tax. Finally, in the case of a portfolio investment, investors have limited exposure due to a diversified portfolio and limited equity stake in a single enterprise.
There may be, however, serious disadvantages to foreign investment transactions; I will mention here only three potential problems. First, a direct foreign investment exposes an investor to potential political and economic changes in the host country. For example, expropriation is a significant risk in South American countries. Second, a direct foreign investment implies an international corporate structure that may be very complex, expensive and require extensive tax and business planning. Finally, a portfolio investor without a management role is at the mercy of the company’s management, which may significantly affect the value of his investment.
International Business Transactions: Hybrid Investments
The classification of international business transactions that I provided above is an ideal one. In reality, hybrid investments (i.e. investments that have the features of more than one category of international business transactions) are widespread. One can easily find examples of portfolio investors who control an enterprise through a management agreement.

### Serious Illness as Reasonable Cause | International Tax Lawyer
We are continuing our series of articles on Reasonable Cause. Today, we will discuss whether a serious illness can establish a reasonable cause for abatement of the IRS penalties. It is important to note that this discussion of serious illness as a reasonable cause is equally applicable to death and unavoidable absence of the taxpayer (in fact, the Internal Revenue Manual (IRM) discusses all three circumstances – death, serious illness and unavoidable absence of taxpayer – at the same time in providing guidance on reasonable cause).
Serious Illness Can Constitute a Reasonable Cause
IRM 20.1.1.3.2.2.1 (11-25-2011) expressly states that serious illness can be used as a Reasonable Cause Exception: “death, serious illness, or unavoidable absence of the taxpayer, or a death or serious illness in the taxpayer's immediate family, may establish reasonable cause for filing, paying, or depositing late... .” In this context, “immediate family” means spouse, siblings, parents, grandparents, or children.
In the business context, a reasonable cause may be established if death, serious illness or other unavoidable absence occurred with respect to a taxpayer (or his immediate family) who had the sole authority to execute the return, make the deposit, or pay the tax. The same rule applies to corporations, partnerships, estates, trusts and other legal vehicles for conducting business.
Taxpayer Has the Burden of Proof to Establish that Serious Illness Constitutes Reasonable Cause for His Prior Tax Noncompliance
Stating that a serious illness can constitute a reasonable cause for abatement of the IRS penalties with respect to prior tax noncompliance is not equivalent to stating that serious illness automatically establishes a reasonable cause.
On the contrary, the taxpayer has the burden of proof to establish that serious illness did indeed constitute reasonable cause with respect to his prior tax noncompliance. In other words, serious illness may not be sufficient to establish reasonable cause for various reasons (for example, in cases where it was not actually related to tax noncompliance).
Factors Relevant to Determination of Whether Serious Illness Is Sufficient to Establish Reasonable Cause Exception
IRM 20.1.1.3.2.2.1 (11-25-2011) provides a list of recommended factors to consider in evaluating a taxpayer’s request for abatement of penalties based on serious illness, death or unavoidable absence. I somewhat modified the list to fit in all factors expressly mentioned in the IRM. Here is the non-exclusive list of factors expressly referenced in the IRM:
1. the relationship of the taxpayer to the other parties involved;
2. the dates, duration, and severity of illness (in case of death, the date of death; in case of unavoidable absence, the dates and reasons for absence);
3. how the event prevented tax compliance;
4. how the event impaired other obligations (including business obligations);
5. if tax duties were attended to promptly when the illness passed (or within a reasonable period of time after a death or absence);
6. (in a business setting) in a situation where someone other than responsible person or the taxpayer was responsible for meeting the infringed business tax obligation, and why that person was unable to meet the obligation;
7. (in a business setting) if only one person was authorized to meet the tax obligation, whether such an arrangement was consistent with ordinary business care and prudence.
This is not an all-inclusive list of factors. The IRM foresees the possibility that any other relevant factors may be considered in the analysis of whether a Reasonable Cause Exception was established based on serious illness, death or unavoidable absence.
Contact Sherayzen Law Office for Experienced Help With Establishing A Reasonable Cause Defense, Including Based on Serious Illness
There is always a risk that the IRS may reject a taxpayer’s reasonable cause argument, often simply because the argument was never properly elaborated by the taxpayer. This is why it is important to maximize your chance of success by timely securing professional legal help.
Sherayzen Law Office is a highly experienced tax law firm that has helped its clients around the world to establish various reasonable cause defenses against IRS domestic and international tax penalties. We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Credit Suisse and Italy Settle Dispute Over Undisclosed Offshore Accounts
On December 14, 2016, Credit Suisse and Italy settled their dispute over Credit Suisse undisclosed offshore accounts owned by Italian tax residents. The settlement between Credit Suisse and Italy was approved by a judge in Milan and obligates Credit Suisse to pay a total of 109.5 million euros – 101 million euros in taxes, interest and penalties; 7.5 million euros as a disgorgement of profits; and 1 million euros as an administrative penalty.
The settlement between Credit Suisse and Italy has ended an investigation by the Italian authorities into the bank’s involvement in helping Italians evade Italian taxes. The Italian government’s inquiry into the Credit Suisse’s role in Italian tax evasion appeared to be thorough and, at times, even combined with significant pressure. For example, in December of 2014, the Italian tax authorities raided the offices of a Credit Suisse’s subsidiary in Milan.
The agreement between Credit Suisse and Italy does not mean the end of the Italian tax authorities’ investigation of Italians with undisclosed offshore accounts. On the contrary, these activities will continue their relentless progress.
While a significant event, the settlement between Credit Suisse and Italy pales in comparison with the settlement between Credit Suisse and the US Department of Justice when Credit Suisse paid $2.6 billion.
Nevertheless, the settlement between Credit Suisse and Italy points to the continued global trend of increased focus on international tax compliance. The new trend really started with the IRS victory in the UBS case in 2008, gained steam with the 2009 Offshore Voluntary Disclosure Program and became worldwide with the passage of FATCA in 2010.
Countries throughout the world, including Italy, have followed the US lead in international tax enforcement. In fact, it appears that the European countries have gone further in some aspects than the United States, especially after the adoption of the Common Reporting Standard (CRS). While the United States refused to join CRS arguing that its revolutionary FATCA already achieved the same goals (and, thereby, effectively turning the United States into a tax shelter for nonresident aliens), the vast majority of the European countries adopted the CRS and applied unprecedented pressure on the financial industry to share the heretofore confidential information with various government tax authorities.
Switzerland has arguably felt more pressure than any other country in the world and has largely been forced to give up its much vaunted bank secrecy. After the US DOJ Program for Swiss Banks dealt the decisive blow to the Swiss bank secrecy laws, various European countries decided to take advantage of the Swiss banks’ defeat and swarmed into Switzerland to get their share of penalties and information regarding tax noncompliance of their own citizens. The recent settlement between Credit Suisse and Italy is just one more example of this continued European squeeze of the Swiss banks for money and information.

### US Airspace and the Definition of the United States | US Tax Lawyers
This article is a continuation of a recent series of articles on the exploration of the definition of the United States. As it was mentioned in a prior article, the general definition of the United States found in IRC § 7701(a)(9) has numerous exceptions throughout the Internal Revenue Code (“IRC”). The US airspace is another example of such exceptions. In this article, I would like to outline some of the ways in which the borders of the United States are defined in the context of the US airspace.
General Tax Definition of the United States Does Not Mention US Airspace
The general tax definition of the United States is found in IRC § 7701(a)(9). According to IRC § 7701(a)(9), the United States is comprised of the 50 states, the District of Columbia and the territorial waters. There is no mention of the US airspace.
This, of course, does not mean that US airspace never constitutes part of the United States. Rather, as I had explained it in a prior article, one needs to look at the specific tax provisions and determine if there is a special definition of the United States that applies to them.
Examples of Various IRC Provisions Including and Excluding US Airspace from the Definition of the United states
Indeed, there is a rich variety of treatment of US airspace that can be found within the IRC. Here, I will just mentioned three examples that demonstrate how differently the IRC provisions define the United States with respect to its airspace.
1. There is an esoteric but important IRC § 965 which deals with the Dividends Received deduction for repatriated corporate earnings. IRS Notice 2005-64 provides foreign tax credit guidance under IRC § 965 and specifically follows the general definition of the United States with the addition of the Continental Shelf. Then, the Notice states: “the term ‘United States’ does not include possessions and territories of the United States or the airspace over the United States and these areas”. Thus, the US airspace is excluded from the tax definition of the United States under IRC § 965.
2. The treatment of the US airspace is the opposite for the purposes of the Foreign Earned Income Exclusion (“FEIE”). Since FEIE allows a taxpayer to exclude only “foreign” earned income, the tax definition of the United States is crucial for this part of the IRC.
In general, the courts have ruled that the airspace over the United States is included within the definition of the United States with respect to IRC § 911. This means that, if you are flying over the United States, you are considered to be within the United States for the purposes of FEIE.
3. When we are dealing with the analysis of whether an individual is a US tax resident under the Substantial Presence Test, we are again back to the same situation as in example 1 – the US airspace is not included in the definition of the United States.
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### US Continental Shelf Definition of the United States | US Tax Attorney
The US continental shelf presents a unique problem to the tax definition of the United States. It is governed by a special tax provision that sets it apart from any other tax definition. If fact, the US continental shelf is only considered to be part of the United States with respect to specific taxpayers who are engaged in a particular activity on or over the continental shelf. In this article, I will explore certain features of the US continental shelf definition of the United States that distinguishes it from any other tax provision in the Internal Revenue Code (IRC).
Definition of the US Continental Shelf
For the purposes of the US income tax, the IRC § 638(1) states that the United States “when used in a geographical sense includes the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the United States and over which the United States has exclusive rights, in accordance with international law, with respect to the exploration and exploitation of natural resources.” The opening clause of IRC § 638 specifically states that this definition of the United States applies only to the activities “with respect to mines, oil and gas wells, and other natural deposits.”
Analysis of the Definition of the US Continental Shelf
Two aspects need to be noted with respect to the definition above. First, the reference to international tax law means that the US government considers 200 miles of land underneath the ocean as its territory (the so-called “Exclusive Economic Zone” or “EEZ”). An interesting assumption that underlies IRC § 638 is that the continental shelf and the EEZ are the same.
Second, I want to emphasize that this is the definition that is tied to land only, not the water above the land – even more precisely, to certain activities on the ocean’s floor rather than in the water. This is a highly important aspect of IRC § 638, because it produces interesting results.
On the one hand, anyone (including foreign vessels and foreign contractors) drilling or exploring oil in the US continental shelf is considered to be engaged in a trade or business in the United States, which subjects these individuals and companies to US income tax. This also means that US tax withholding needs to be done with respect to foreign contractors. Moreover, even personal property (located over the US continental shelf) of a taxpayer engaged in the drilling or the exploration of the US continental shelf would most likely be classified as US personal property within the meaning of IRC § 956.
On the other hand, fishing in a boat in the same zone will not be considered as an activity within the United States, because it is not linked to mines, oil and gas wells, and other natural deposits.
This means that the application of the US Continental Shelf’s definition of the United States depends on the activity of the taxpayer, not just his location.
US Continental Shelf Rules and Foreign Countries
There is one more interesting aspect of the US continental shelf definition of the United States: its application to foreign countries. The first part of IRC § 638(2) states that the same definition of the continental shelf will also apply to foreign countries – i.e. the seabed and subsoil adjacent to the foreign country or possession and over which the country has EEZ rights.
At the end, however, IRC § 638(2) contains an interesting limitation: “ but this paragraph shall apply in the case of a foreign country only if it exercises, directly or indirectly, taxing jurisdiction with respect to such exploration or exploitation.” In other words, if a foreign country exercises its taxing jurisdiction over the continental shelf, then it is considered to be part of a foreign country. Otherwise, it will be considered as “international waters” (since it is also outside of the US continental shelf).
Contact Sherayzen Law Office for Professional Help with US Tax Issues
The definition of the United States in the context of the US continental shelf is just one of many examples of the enormous complexity of US tax laws. While even US citizens with domestic assets only have to struggle with these issues, the complexity of US tax laws is multiplied numerous times when one deals with a foreign individual/company or even US taxpayers with foreign assets. It is just too easy to get yourself into trouble.
This is why you need the help of the professional international tax law firm of Sherayzen Law Office. Our firm specializes in helping US and foreign taxpayers with their annual tax compliance, tax planning and dealing with past US tax noncompliance.
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### Tax Definition of the United States | US Tax Lawyers
The tax definition of the United States is highly important for US tax purposes; in fact, it plays a key role in identifying many aspects of US-source income, US tax residency, foreign assets, foreign income, application of certain provisions of tax treaties, et cetera. While it is usually not difficult to figure out whether a person is operating in the United States, there are some complications associated with the tax definition of the United States that I wish to discuss in this article.
Tax Definition of the United States is Not Uniform Throughout the Internal Revenue Code; Three-Step Analysis is Necessary
From the outset, it is important to understand that the tax definition of the United States is not uniform. Different sections of the Internal Revenue Code (“IRC”) may have different definitions of what “United States” means.
Therefore, one needs to engage in a three-step process to make sure that the right definition of the United States is used. First, the geographical location of the taxpayer must be identified. Second, one needs to determine the activity in which the taxpayer is engaged. Finally, it is necessary to find the right IRC provision governing the taxation of that taxpayer engaged in the identified specific activity in that specific location; then, look up the tax definition of the United States with respect to this specific IRC provision.
General Tax Definition of the United States
Generally, for tax purposes, the United States is comprised of the 50 states and the District of Columbia plus the territorial waters (along the US coastline). See IRC § 7701(a)(9). The territorial waters up to 12 nautical miles from the US shoreline are also included in the term United States.
General Tax Definition of the United States Can Be Replaced by Alternative Definitions
As it was pointed out above, this general definition is often modified by the specific IRC provisions. The statutory reason why this is the case is the opening clause of IRC § 7701(a) which specifically allows for the general definition to be replaced by alternative definitions of the United States: “when used in this title, where not otherwise distinctly expressed or manifestly incompatible with the intent thereof ... .”
Hence, instead of relying on the general tax definition of the United States in IRC § 7701(a), one needs to look for alternative definitions specific to the IRC provision that is being analyzed. Moreover, the fact that there is no express alternative definition is not always sufficient, because one may have to determine the intent (most likely from the legislative history of an IRS provision) behind the analyzed IRC provision to see if an alternative tax definition of the United States should be used.
General Tax Definition and Possessions of the United States
While the object of this small article does not include a detailed discussion of the alternative tax definitions of the United States, it is important to note that the Possessions of the United States (“Possessions”) are not included within the general tax definition of the United States. They are not mentioned in IRC § 7701(a)(9); IRC 1441(e) even states that any noncitizen resident of Puerto Rico is a nonresident alien for tax withholding purposes. Similarly, IRC § 865(i)(3) defines Possessions as foreign countries for the purposes of sourcing income from sale of personal property.
On the other hand, Possessions may be included within some of the alternative tax definitions of the United States. For example, for the purposes of the Foreign Earned Income Exclusion, Possessions are treated as part of the United States.
Thus, it is very important for tax practitioners and their clients who reside in Possessions to look at the specific IRS provisions and determine whether an alternative definition applies to Possessions in their specific situations.
Contact Sherayzen Law Office for Professional Tax Help
If you need professional tax help, contact the international tax law firm of Sherayzen Law Office Ltd. Our legal team is highly experienced in US domestic and international tax law. We have helped hundreds of US taxpayers to resolve their tax issues and We can help You!
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### Legal Threats to Wealth | Asset Protection Lawyer Minneapolis
Legal threats to wealth do not apply only to the wealthiest top 1% of US taxpayers. Rather, they also should concern middle and upper-middle classes of the United States, especially doctors, lawyers, small and mid-size business owners, professionals (self-employed and employed within by companies), high-salaried employees, corporate officers, high-net-worth families and investors.
In this article, I would like to discuss the common legal threats to wealth, whether it was earned or inherited. For the purposes of this writing, “legal threats” mean the threats stemming from various litigation theories, divorce and death.
1. Legal Threats to Wealth: Contract Claims
One of the most common threat to wealth comes from contract litigation. In these cases, a plaintiff would usually assert that the defendant failed to perform under a contract and ask for compensatory, punitive, statutory and/or exemplary damages. In addition to failure to perform under a contract, claims may be asserted with respect to debts, guarantees, contingent liabilities and joint and several partnership obligations.
The contract claim risks can be very hard to anticipate because of the surprising reach of the contract exposure (for example, a judge may interpret a guaranty far beyond its intended scope or grant huge damages to a defendant).
2. Legal Threats to Wealth: Extension of Corporate Liability to Officers and Directors
One of the most dangerous legal threats to wealth is in the trend to hold corporate Officers and Directors liable for the actions or inactions of their employer-corporation. These threats can come from the government and from the private sector.
3. Legal Threats to Wealth: Tort Litigation
The incessant growth in tort litigation is a primary concern for anyone involved in a medical profession, but it also should worry individuals in other fields. It is generally agreed that the United States is the most litigious society in the world and the risk of being sued should always be taken into account.
One of the new legal threats to wealth comes from interspousal tort liability claims – i.e. intentional infliction of emotional distress by one spouse on another. In some cases, these claims can even successfully circumvent premarital agreements.
4. Legal Threats to Wealth: Partnership Obligations
I already alluded to this threat in my discussion of joint and several liability for partners in a partnership. Here, we can also add the appearance of new partners without consent through litigation.
5. Legal Threats to Wealth: Environmental and Other Regulatory Liability
A newer set of threats to wealth comes from various US regulations, particularly the US environmental regulations (such as Comprehensive Environmental Response, Compensation and Liability Act or “CERCLA”) which makes individuals liable for environmental hazards on the land that they own irrespective of whether the present owners created the hazard or bought the land knowing that there was one. The liability can also be shared by former landowners and even officers and directors of a corporate owner (as long as they had “substantial control” over the land).
6. Legal Threats to Wealth: Divorce
The concerns over the division of property during a divorce have grown into one of the most serious threats to wealth. The threat is so critical that it has become a factor in many peoples’ preference for choosing co-living rather than a marriage.
The reason why this problem has become so serious is that, in most US tax jurisdictions, the understandable desire to protect a non-working spouse has grown to the almost automatic fifty-fifty division of property no matter how such property was brought into the marriage and how inequitable such division could be. Moreover, the attempts by lawyers to mitigate this problem though premarital and marital arrangements are often completely overturned by the judges, even in situations where such arrangements seek to protect the children’s inheritance.
7. Legal Threats to Wealth: Compulsory Dispositions
The last common legal threat to wealth that I wish to mention in this article is a forced disposition, usually upon termination of marriage or death. In a civil law system, this threat is usually materialized in the form of “forced heirs”. Dower and curtesy rights exemplify the threat of a compulsory disposition in common law jurisdictions.
Contact Sherayzen Law Office for Tax, Asset Protection and Estate Planning Help with Respect to Your US and Foreign Assets
If you are concerned about protecting your assets in the United States and overseas, contact Sherayzen Law Office for professional help. Our legal team will thoroughly analyze your assets and create an asset protection plan incorporating the necessary tax and estate planning features.

### IRS 2017 Standard Mileage Rates for Business, Medical and Moving
The IRS recently issued the optional IRS 2017 standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
According to the IRS Rev. Proc. 2010-51, a taxpayer may use the business standard mileage rate to substantiate a deduction equal to either the business standard mileage rate times the number of business miles traveled. If he does use the IRS 2017 standard mileage rates, then he cannot deduct the actual costs items. Even if the IRS 2017 standard mileage rates are used, however, the taxpayer can still deduct as separate items the parking fees and tolls attributable to the use of a vehicle for business purposes.
It is important to note that a taxpayer does not have to use the IRS 2017 standard mileage rates. He always has the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. In such a case, all of the actual expenses associated with the business use of the vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.
The IRS 2017 standard mileage rates shall be as follows:
 	53.5 cents per mile for business miles driven (down from 54 cents for 2016);
 	17 cents per mile driven for medical or moving purposes (down from 19 cents for 2016)
 	14 cents per mile driven in service of charitable organizations
The IRS 2017 standard mileage rates are generally lower than last year’s mostly due to the lower price for gasoline. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
On the other hand, in some circumstances, a taxpayer cannot use the IRS 2017 standard mileage rates. For example, a taxpayer cannot use the IRS business standard mileage rate for a vehicle after using any MACRS depreciation method or after claiming a Section 179 deduction for that vehicle. Additionally, the business standard mileage rate cannot be used for more than four vehicles used during the same period of time. More information about the limitations on the usage of the IRS 2017 standard mileage rates can be found in the IRS Rev. Proc. 2010-51.

### Streamlined Disclosure Attorney Indianapolis | IRS OVDP Lawyer
Streamlined Disclosure Attorney Indianapolis is a common search by US taxpayers who are looking for legal help in Indianapolis with their streamlined voluntary disclosure of undeclared foreign assets and foreign income. Let’s analyze this search term – Streamlined Disclosure Attorney Indianapolis – to identify the type of attorney that fits this search best.
Streamlined Disclosure Attorney Indianapolis Search Applies to SDOP and SFOP
The first point to note is that the search for Streamlined Disclosure Attorney Indianapolis includes all attorneys who help clients with both SDOP (Streamlined Domestic Offshore Procedures) and SFOP (Streamlined Foreign Offshore Procedures).
Streamlined Disclosure Attorney Indianapolis Search Is Really a Search for an International Tax Attorney
Second, when a taxpayer is looking for a Streamlined Disclosure Attorney Indianapolis, he is really searching for an international tax attorney. SFOP, SDOP, OVDP closed, FBAR, Form 8938, et cetera – all of these programs and forms are just small parts of the much larger US international tax law which can be only practiced by a US international tax attorney.
Moreover, this attorney must understand not only these small parts of the international tax law, but also how SDOP and SFOP fit into the framework of US international tax law, how the IRS and FinCEN international tax information returns interact with the rest of the US tax laws and Treasury regulations, and how this interaction influences his client’s legal position with respect to SDOP and SFOP.
Hence, a search for Streamlined Disclosure Attorney Indianapolis can easily be replaced by a broader search for “International Tax Attorney Indianapolis”.
Sherayzen Law Office is an International Tax Law Firm that Falls Within the Search for Streamlined Disclosure Attorney Indianapolis
Sherayzen Law Office Ltd. is an international tax law firm that specializes in all types of offshore voluntary disclosures, including SDOP and SFOP. Our legal team is highly experienced in helping US clients around the globe with their US international tax issues, including voluntary disclosure of foreign accounts and other foreign assets. This is why Sherayzen Law Office should be a top candidate when you search for Streamlined Disclosure Attorney Indianapolis!
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### Indians working on H1 Visa Need to Pay US Taxes on Indian Income
US taxes on Indian income is one of the most important topics relevant to the everyday life of Indian-Americans and Indians who reside and work in the United States. In this article, I will focus on the issue of US taxes on Indian Income earned by H1 (mostly H1B) visa holders.
US Taxes on Indian Income and US Tax Residency
Whether an Indian working in the United States needs to pay US taxes on Indian income primarily depends on whether he is a US tax resident. There are three categories of US tax residents – US citizens, US Permanent Residents (i.e. green-card holders), and the individuals who satisfied the Substantial Presence Test.
Any person who is considered to be a US tax resident is required to report his worldwide income on his US tax return and pay US taxes on this income. Hence, if an Indian working in the United States on H1 visa has Indian-source income and he satisfied the Substantial Presence Test, he would be required to pay US taxes on his Indian income, not just income earned in the United States.
US Taxes on Indian Income: the Substantial Presence Test
The Substantial Presence Test is very important in US tax law because it affects millions of foreigners who reside in or visit the United States. The Substantial Presence Test basically states that any individual who is physically present in the United States for 183 days or more within the most recent three-year period is considered to be a US tax resident.
The 183 days are calculated as follows: all days spent in the current year + one-third of the days spent in the year immediately prior to the current year + one-sixth of the days spent in the year right before the prior year (in other words, the second year before the current year) “Current year” here means the year for which you are trying to figure out whether you were a tax resident.
Failure to Pay US Taxes on Indian Income May Result in IRS Penalties and Endangerment of Your Immigration Status
Any Indian who is a US tax resident and fails to pay US taxes on Indian income runs a great risk of the imposition of IRS penalties. If the failure to pay US taxes on Indian income is combined with the failure to file information returns, such as FBARs, then his legal situation in the United States becomes extremely precarious.
Not only are the IRS penalties extremely high (such a person may owe to the IRS more than the balance on your unreported accounts), including criminal penalties with potential jail time, but his immigration status may be endangered as a result of his US tax noncompliance.
Contact Sherayzen Law Office for Professional Help With Your Undisclosed Indian Income and Indian Foreign Accounts
Given these extreme risks, an Indian working in the United States on H1 visa should contact Sherayzen Law Office for professional legal and tax help as soon as possible.
We have helped numerous clients from India to reduce and even, in some cases, completely eliminate their IRS penalties and bring their US tax affairs into full compliance with US tax laws, thereby preserving their immigration status.
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### 2017 Tax Filing Season Begins January 23 & Tax Returns due April 18, 2017
On December 12, 2016, the IRS announced today that the 2017 tax filing season (for the tax year 2016) will begin on January 23, 2017. The 2017 tax filing season e-filings will be accepted by the IRS starting that date. The IRS again expects that more than four out of five tax returns will be prepared electronically using tax return preparation software.
2017 Tax Filing Season Deadline is on April 18, 2017
The filing deadline to submit 2016 tax returns will be April 18, 2017 (Tuesday), rather than the usual April 15. The delay is caused by the fact that April 16 falls on a Saturday which would usually move the deadline to the following Monday (April 17). However, April 17 is the Emancipation Day, which is a legal holiday in the District of Columbia, and the final deadline is pushed to April 18, 2017 (under the law, legal holidays in the District of Columbia affect the national filing deadlines).
Early Paper Filing Offers No Advantage in the 2017 Tax Filing Season
Many software companies and tax professionals will begin accepting tax returns before January 23 and then they will submit the returns when the IRS systems open. It is noteworthy to state, however, that the IRS will begin processing paper tax returns only on January 23. Hence, there is no advantage to filing paper tax returns in early January instead of waiting for the IRS to begin accepting e-filed returns.
Some of the 2017 Tax Filing Season Refunds Could Be Affected by the PATH Act
The IRS also reminded the taxpayers that the Protecting Americans from Tax Hikes Act (the PATH Act) will have a direct impact on the timing of some refunds. In particular, the PATH Act requires the IRS to hold refunds that claim Earned Income Tax Credit (“EITC”) and the Additional Child Tax Credit (“ACTC”) until February 15. The hold applies to the entire refund, not just the portion associated with EITC and ACTC. Then, it will take several days for these refunds to be released and processed through financial institutions. With weekends and holidays, the IRS estimates that many taxpayers will not be able to access their refunds until after February 27, 2017.
The idea behind the new law is to protect the taxpayers by giving the IRS more time to detect and prevent tax fraud, which has become a huge headache for the IRS in the past few years.

### Hong Kong Shell Company and Secret Swiss Bank Account Result in Conviction
On October 7, 2016, the IRS and the DOJ (US Department of Justice) announced yet another conviction related to an undisclosed Swiss Bank Account owned through a Hong Kong shell company.
Facts of the Case: Hong Kong Shell Company Used to Hold Undisclosed Swiss Bank Account
The facts of the case contain a fairly typical scenario for tax evasion criminal convictions based on offshore abusive tax schemes. Nevertheless, the case contains some interesting facts that indicate the growth in the IRS ability to detect willful FBAR and income tax noncompliance.
Mr. Bernhard Rumbold, a resident of Clarkston, Michigan, and an owner of several businesses in Michigan (United States) and Ontario (Canada) decided to use a Hong Kong Shell Company to hide certain income. In November of 2004, he transferred more than $2.6 million from his parents’ trust account (which he managed) into a Swiss bank account registered in the name of a Hong Kong shell company called Wisdom City Limited. This was not just any bank, but Credit Suisse Bank AG.
According to the guilty plea, the Hong Kong shell company existed for the sole purpose of being the named account holder of foreign bank accounts. Mr. Rumbold was the beneficial owner of the account. In December of 2008, however, he decided that he needed further protection against the IRS and transferred the control over the account to a relative. The Credit Suisse bank account was in reality an investment account that produced interest, dividends and capital gains.
None of that income was disclosed on Mr. Rumbold’s 2006-2008 individual income tax returns. It appears that no box was checked on Schedule B either with respect to the his ownership interest in the foreign financial accounts. In October 2010, Rumbold filed his amended 2008 US tax return but he still failed to report the interest, dividends and capital gains generated by the Swiss investment account.
Guilty Plea for Abusive Tax Scheme Involving Hong Kong Shell Company
Under the terms of the guilty plea, it appears that the IRS dropped the FBAR-related charges (or, perhaps, the statute of limitations presented a problem for the case), but focused on the restitution of unpaid tax liabilities (most likely with penalties and interest) for the years 2006 and 2008. Furthermore, Mr. Rumbold is going to be sentenced on February 8, 2017 and he faces a statutory maximum sentence of three years in prison as well as a period of supervised release and monetary penalties.
Lessons of the Rumbold Case: Hong Kong Shell Company is No Longer a Protection Against IRS Investigation
The primary lesson to be drawn from the Rumbold case is the fact that having a Hong Kong shell company no longer protects the beneficial owner from the IRS detection. The Principal Deputy Assistant Attorney General Ciraolo was explicit on this point: “the days when a shell company created in Hong Kong or other jurisdictions could be used successfully to hide funds in foreign financial accounts are over, and those who continue to engage in this conduct will be held accountable.”
On the contrary, having a Hong Kong shell company now simply provides the IRS with additional evidence of a taxpayer’s willfulness in his failure to pay the income taxes due on his foreign income.
Contact Sherayzen Law Office for Help if You Have a Hong Kong Shell Company or Undisclosed Foreign Accounts
If you have undisclosed foreign bank and financial accounts through a Hong Kong shell company, you should contact Sherayzen Law Office as soon as possible. As the Rumbold case demonstrates, the situation can be very dangerous and you need to act quickly to preserve your voluntary disclosure options. We have helped numerous taxpayers who owned undisclosed foreign accounts through shell companies and we can help you!
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### US International Tax Lawyer Lectures at Alliance Française on Offshore Reporting
On December 7, 2016, Mr. Eugene Sherayzen, the founder of Sherayzen Law Office and a US international tax lawyer, gave a lecture at the Minneapolis chapter of Alliance Française. The topic of the lecture was an introduction to reporting of foreign income and foreign assets for individual taxpayers in the United States. The lecture was well-attended and raised a lot of interest among the participants.
US International Tax Lawyer Explained the US Tax Residency Requirements
Mr. Sherayzen first focused on defining the crucial term of “US tax resident”. As he explained during the lecture, the starting point for legal analysis of any US international tax lawyer is often the determination of whether his client is a US person.
During the lecture, Mr. Sherayzen covered three categories of US tax residents – US citizens, US Permanent residents and individuals who met the requirements of the Substantial Presence Test.
He also distinguished the immigration-law concept of US permanent residency (i.e. green-card holders) from the tax concept of US tax residency. The US international tax lawyer also discussed certain exceptions to the Substantial Presence Test, focusing on F-1 and J-1 visas.
US International Tax Lawyer Emphasized Worldwide Income Reporting Requirement
Then, Mr. Sherayzen explained to the audience that US tax residents are required to disclose and pay US taxes on their worldwide income, even if this income was already disclosed on foreign tax returns.
At that point, the US international tax lawyer observed that the worldwide income reporting requirement is one of the most violated laws. Mr. Sherayzen distinguished three groups of US tax residents who are not in compliance with this law.
The first group consisted of US tax residents who were born overseas and were not aware of the worldwide income compliance requirement due to their prior experiences in their home countries (especially those which adopted the territorial model of taxation).
The second group was described as a small group of persons who were aware of the requirement and willfully violated it.
Finally, Mr. Sherayzen distinguished a third group of individuals who knew about the worldwide income reporting requirement, attempted to comply with it to the best of their ability, but failed to do so due to their lack of sufficient knowledge of US tax laws. The US international tax lawyer specifically referenced the Assurance Vie accounts as a representative case for such violations due to huge differences between the US and the French tax treatment of these accounts.
US International Tax Lawyer Described Top Three Reporting Requirements with Respect to Foreign Bank and Financial Accounts
The third part of the presentation was devoted to the discussion of the FBAR, Form 8938 and Form 8621 (PFIC passive foreign investment company) requirements with respect to reporting foreign bank and financial accounts. The discussion concerned the types of accounts that needed to disclosed, the reporting thresholds, the due dates and how the forms needed to be filed. Some history of the forms was provided; due to time limitations, however, only a limited introduction to FATCA was provided to the audience.
This discussion produced a lively Q&A exchange between the US international tax lawyer and the audience.
US International Tax Lawyer Discussed the Reporting of Foreign Gifts and Inheritance
The fourth part of the discussion concentrated on the Form 3520 reporting of foreign gifts and inheritance, including the filing threshold and the penalties associated with the form. Mr. Sherayzen also explained that, in certain circumstances, Form 8938 may be applicable to foreign gifts and inheritance for the purpose of annual tax compliance.
US International Tax Lawyer Introduced the Hypothetical to Illustrate How These Forms Might Apply in a Real-Life Situation
The final part of the presentation was devoted to the analysis of a hypothetical to demonstrate how all of these information returns could apply in a real-life situation. The focus of the hypothetical was on the French and French-Canadian issues. Mr. Sherayzen also invited the audience to participate in the legal analysis of the hypothetical which was enthusiastically welcomed by the audience.
The presentation concluded with an additional fifteen-minute Q&A session.

### Foreign Investment in Real Property Tax Act | US Real Estate Tax Attorney
Foreign Investment in Real Property Tax Act (also referred to as “FIRPTA”) is the most important tax law for foreign investors in US real estate. Not only does FIRPTA determine the tax treatment of the gains on the real estate owned by nonresident aliens, but it also establishes the famous FIRPTA tax withholding mechanism that is important not only to foreign investors, but also to the entire US real estate industry as well as the US buyers of real estate.
In this article, I intend to provide a general introduction to Foreign Investment in Real Property Tax Act. In the subsequent articles, I will provide a more detailed exploration of each individual part of FIRPTA.
Foreign Investment in Real Property Tax Act: Legislative Background
Prior to 1981, nonresident aliens were largely exempt from US capital gain taxes produced by the sales of US real estate. The Foreign Investment in Real Property Tax Act of 1980 was enacted as part of the Omnibus Reconciliation Act of 1980 (Pub. L. No. 96-499, 94 Stat. 2599, 2682 (Dec. 5, 1980)) and dramatically changed this situation.
In essence, FIRPTA forced the nonresident aliens to recognize gain upon disposition of the so-called “US real property interest” (a term of art specifically defined in the Treasury regulations), though a number of exceptions remained. In addition, FIRPTA established a powerful tax withholding mechanism by requiring buyers to act as a withholding agent and withhold 10% of the gross sales price from the payment to a nonresident alien seller.
Obviously, FIRPTA was intended to protect the US purchasers from a flood of foreign investors who could drive up the prices of US real estate. However, over the years, an opposition arose to FIRPTA, especially as the IRS expanded the reach of FIRPTA in its rulings.
The Protecting Americans from Tax Hikes Act (the PATH Act) passed in 2015 was a compromise decision which was meant to encourage certain foreign investment in US real estate while adjusting the withholding rate higher to make up for lost revenue as well as to put it in line with the higher US capital gains tax rate. The PATH act generally increased the tax withholding rate to 15% from the prior 10%, exempted certain qualified foreign pension funds from FIRPTA tax withholding, increased the exemption threshold for publicly traded stock exception, introduced certain changes to domestically-controlled REITs and modified the eligibility criteria for the so-called FIRPTA cleansing rule.
Foreign Investment in Real Property Tax Act: Nonresident Alien Gains from Disposition of US Real Property Interest is Treated as ECI
As I already stated above, the most important part of the Foreign Investment in Real Property Tax Act is the imposition of tax on the disposition US Real Property Interest (the “Disposition”). However, FIRPTA goes further than just subjecting nonresident aliens to a new tax. It actually treats any gain or loss from such a Disposition as income effectively connected with a US trade or business.
In other words, under the Foreign Investment in Real Property Tax Act, the gain or loss from a Disposition is treated according to the regular US income tax laws, including progressive tax rates in some situations and capital gain tax rates in others. This means that, if it is a property directly owned by a nonresident alien, the Disposition gains will generally be taxed at the rate of 15% to most likely 20% (depending on the tax bracket of the nonresident alien). On the other hand, if the nonresident alien owns the real property through a US corporation, the Disposition will generally be taxed at 35% corporate tax rate. Obviously, the exact rates are subject to change due to future changes of the US tax law and the potential variations within the ownership structure.
Foreign Investment in Real Property Tax Act: The Tax Withholding Regime
The Foreign Investment in Real Property Tax Act also generally requires the withholding of 15% of the gross sales price on the Disposition by a non-resident alien. There are a number of exceptions available to the tax withholding rule, but the buyer needs to make sure that all of the requirements for an exception are met (otherwise, he himself may end up being liable for the failure to withhold the tax with penalties and interest).
It is important to understand that the FIRPTA tax withholding acts as a credit against the capital tax due. In other words, a non-resident alien can later file Form 1040NR to claim a tax refund if the FIRPTA withholding exceeds the actual tax due.
Contact Sherayzen Law Office for Help with Foreign Investment in Real Property Tax Act
If you are involved in a transaction where a seller of a US real property interest is a nonresident alien, you may be facing the enormously complex FIRPTA requirements. The introduction provided in this article is merely the tip of the FIRPTA iceberg. Numerous tax reporting requirements, complex tax forms and tax withholding compliance traps make FIRPTA one of the most dangerous US tax laws for almost all parties involved in a disposition of a US real estate property interest by a nonresident alien.
Contact Sherayzen Law Office for Professional Help with the Tax Requirements of the Foreign Investment in Real Property Tax Act!

### Streamlined Disclosure Attorney Austin | FATCA OVDP Lawyer
If you are a resident of Austin, Texas, and you have undisclosed foreign accounts, it is highly likely that you have searched for Streamlined Disclosure Attorney Austin. Let’s analyze this search term – Streamlined Disclosure Attorney Austin – to understand exactly what kind of an attorney fits this search.
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Streamlined Disclosure Attorney Austin Search Applies to SDOP and SFOP
Let’s first look into the search for “Streamlined Disclosure”. In reality, this is a search for an attorney who offers legal help with respect to two types of Streamlined Filing Compliance Procedures: SDOP (Streamlined Domestic Offshore Procedures) and SFOP (Streamlined Foreign Offshore Procedures).
Streamlined Disclosure Attorney Austin Search Applies to Attorneys Who Offer Legal Services in Austin
Now, we need to analyze the geographical aspect of this search – i.e. Austin. What does it mean when one says that he is looking for an Austin attorney? Obviously, it applies to attorneys who reside in Austin and who offer streamlined disclosure services in Austin.
Furthermore, this search for a Streamlined Disclosure Attorney Austin also applies to attorneys who reside outside of Austin but offer their legal services to the residents of Austin. The reason for this conclusion lies in the federal nature of the Streamlined Filing Compliance Procedures – this is purely an IRS program and it has no local input from Austin (except the IRS office in the city). Since this is federal law, the actual residence of your Austin attorney does not matter.
What really matters is whether he offers legal services in Austin and whether he is competent in the matters concerning Streamlined Filing Compliance Procedures. This leads to the final part of the search for Streamlined Disclosure Attorney Austin – what kind of a specialized “attorney” are you searching for?
Streamlined Disclosure Attorney Austin Search Applies Only to International Tax Attorneys
By searching for Streamlined Disclosure Attorney Austin, you are really trying to find a very specific kind of an attorney – an international tax attorney. SFOP, SDOP, OVDP (now closed) and any other voluntary disclosure options are just IRS programs (though, important programs) within the framework of the much larger legal area of US international tax law practice.
Hence, a Streamlined Disclosure Attorney Austin search is an attempt to find an international tax attorney who not only understands Streamlined Filing Compliance Procedures, but who also possesses deep understanding of the US international tax system, its laws and regulations, and the place SDOP and SFOP occupies within this system. This understanding is crucial to an attorney’s ability to properly analyze the case and choose the best legal strategy for his client.
Sherayzen Law Office can be Your International Tax Attorney
Sherayzen Law Office, Ltd. is an international tax law firm that specializes in all types of offshore voluntary disclosures, including OVDP closed, SDOP and SFOP. Our professional tax team, led by attorney Eugene Sherayzen, is highly experienced in helping US clients around the globe with their US international tax issues, including offshore voluntary disclosure. This is why Sherayzen Law Office should be your top candidate when you search for Streamlined Disclosure Attorney Austin.
Contact Us Today to Schedule Your Confidential Consultation!

### Bitcoin Offshore Abusive Tax Scheme | FATCA International Tax Lawyer
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Bitcoin Offshore Abusive Tax scheme is now at the center of the new war against offshore tax noncompliance. The IRS started this war on November 17, 2016, with the John Doe Summons petition against Coinbase, Inc., the largest US bitcoin exchanger. In this petition, the IRS Revenue Agent David Utzke details one variation of the Bitcoin Offshore Abusive Tax scheme that seems to be the main target of the IRS battle against Coinbase. Let’s discuss it in more detail.
Traditional Offshore Abusive Tax Scheme
In the petition, the IRS first provided a description of a common traditional offshore abusive tax scheme based on a real-life example of “Taxpayer 1". In this scheme, Taxpayer 1 retained the services of a foreign promoter who set up a controlled foreign corporation which was merely a shell corporation. The corporation first diverted the taxpayer’s income to a foreign brokerage account and, then, to a foreign bank account. After the funds were transferred to a foreign bank account, Taxpayer 1 was able to repatriate the funds as cash (US dollars) through an ATM machine.
Obviously, this scheme had a number of disadvantages. First, it was not cheap: Taxpayer 1 had to retain foreign attorneys and engage in various other regulatory expenses.
Second and most importantly, the entire scheme was done in US dollars and, hence, ran a relatively high risk of the IRS detection. If the IRS discovered the scheme, it would not be difficult to trace it directly to Taxpayer 1. The weakest point of the scheme was the repatriation in US dollars of the hidden income.
Bitcoin Offshore Abusive Tax Scheme
When Taxpayer 1 discovered bitcoins, he adopted a new model which I will call a Bitcoin Offshore Abusive Tax Scheme. The first two steps (i.e. the diversion of income) were the same – a controlled foreign shell corporation was set up and the funds were diverted to a foreign account.
The difference between the schemes was really in the repatriation process. Under the Bitcoin Offshore Abusive Tax Scheme, the funds from a foreign account were moved to a bank which worked with a virtual currency exchanger (such as Coinbase), converted to bitcoins and placed in a virtual currency account. Then, the taxpayer used the bitcoins to anonymously purchase goods and services without ever converting the hidden income into US dollars. Under this process, Taxpayer 1 had hoped to avoid the IRS detection of the repatriation of funds.
Bitcoin Offshore Abusive Tax Scheme Protects the Taxpayer From IRS Detection During the Repatriation Process
The biggest advantage of the Bitcoin Offshore Abusive Tax Scheme is its ability to protect a taxpayer from the IRS detection when he tries to repatriate the undisclosed income back to the United States. Since bitcoin ownership and purchases are done anonymously and without conversion to US dollars, the IRS may never be able to detect tax noncompliance.
Revenue Agent Utzke himself states in the petition that “because there is no third-party reporting of virtual currency transactions for tax purposes, the risk/reward ratio for a taxpayer in the virtual currency environment is extremely low, and the likelihood of underreporting is significant”.
Indeed, it appears that Taxpayer 1 was highly successful in his Bitcoin Offshore Abusive Tax Scheme. The discovery of that scheme was only made possible due to the voluntary disclosure of Taxpayer 1 to the IRS (most likely Taxpayer 1 prudently decided to enter the OVDP).
Bitcoin Offshore Abusive Tax Scheme Begins to Dominate Offshore Tax Noncompliance
These advantages of the Bitcoin Offshore Abusive Tax Scheme led to its increasing popularity among noncompliant US taxpayers. In fact, it appears that the Bitcoin Offshore Abusive Tax Scheme now dominates this market. Even Agent Utzke admitted that virtual currencies have now largely replaced “traditional abusive tax arrangements as the preferred method for tax evaders”. The John Doe Summons Against Coinbase is Aimed at the Bitcoin Offshore Abusive Tax Scheme.
Given this fact, it is little surprise that the IRS decided to begin a war against abusive tax schemes involving virtual currencies and, especially, bitcoins. The John Doe Summons Petition against Coinbase is the first battle of this war against the Bitcoin Offshore Abusive Tax Scheme.
Given the IRS victory in its battle against Swiss banks, it is very likely that, in one form or another, the IRS will prevail against Coinbase and the virtual currency industry in general. This victory will result in the exposure of noncompliant US taxpayers who will then face a litany of draconian IRS penalties, including possibly criminal penalties and jail time.
Noncompliant US Taxpayer Engaged in a Bitcoin Offshore Abusive Tax Scheme Should Consider Voluntary Disclosure
Given this precarious legal environment and the significant risk of the IRS detection, noncompliant US taxpayers should consider doing a voluntary disclosure while they have the ability to do so. Once the IRS identifies noncompliant taxpayers and commences investigations against them, these taxpayers may lose forever the ability to do a voluntary disclosure to avoid criminal penalties and reduce civil penalties.
This is why these taxpayers urgently need to contact an international tax lawyer to consider their voluntary disclosure options.
Contact Sherayzen Law Office for Legal Help with Bitcoin Tax Noncompliance
If you are a US taxpayer who has engaged in a Bitcoin Offshore Abusive Tax Scheme or any other tax noncompliance involving bitcoins, contact Sherayzen Law Office for professional help as soon as possible. Our legal and accounting team has helped hundreds of US taxpayers with their voluntary disclosures and we can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### First Quarter 2017 Underpayment and Overpayment Interest Rates
On December 5, 2016, the IRS announced that the First Quarter 2017 underpayment and overpayment interest rates will remain the same from the Fourth Quarter of 2016.
This means that, the First Quarter 2017 underpayment and overpayment interest rates will be as follows:
four (4) percent for overpayments (two (3) percent in the case of a corporation);
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The First Quarter 2017 underpayment rates are relevant not only for simple amended tax returns (with amounts due), but also for a number of other different reasons. Here, I would like to emphasize two particular reasons for the importance of the first quarter 2017 underpayment rates. First, it is used to calculate interest for the US taxpayers who participate in the OVDP or the Streamlined Domestic Offshore Procedures.
Second, the first quarter 2017 underpayment rates will be relevant to future PFIC interest calculation on any excess distributions (for default Section 1291 PFICs).

### Atlanta FBAR Lawyer | FATCA International Tax Attorney
Can a lawyer who resides in Minneapolis be considered an Atlanta FBAR Lawyer? What kind of law should such a lawyer practice? These are the two questions that I seek to answer in this article.
Atlanta FBAR Lawyer Definition: Legal FBAR Services Provided in Atlanta, Georgia
Let’s start with the first question. The term Atlanta FBAR Lawyer is comprised of two broad category of lawyers. The first category consists of international tax lawyers who reside in Atlanta and offer FBAR services to the residents of Atlanta. This is self-explanatory.
The second category is a bit more complicated because it is comprised of international tax lawyers who reside outside of Atlanta but offer FBAR services to the residents of Atlanta. At first, this does not seem logical, but, once we look into the legal nature of the FBAR, it makes perfect sense.
FBAR is a federal information return required by Title 31 of the United State Code. This is not a local requirement of Atlanta or the State of Georgia; they have no influence over the interpretation and the implementation of the FBAR requirement. This means that any licensed US international tax lawyer can offer FBAR services in any of the 50 states and the District of Columbia irrespective of his physical location.
Now, it is clear why an Atlanta FBAR lawyer can reside in Minneapolis – since the local law has no influence over FBARs, there is no special knowledge or access to courts associated with local lawyers. In essence, a lawyer in Minneapolis can offer FBAR legal services in Atlanta with the same ease as a lawyer who resides in Atlanta.
Atlanta FBAR Lawyer Must Be a US International Tax Lawyer
Now, we can turn to second question of the relevant practice area of law. Since FBAR constitutes a small part of US international tax law, there is a profound connection between FBAR and international tax law. In fact, it is this relationship between the FBAR and the rest of the international tax law requirements that apply in a particular case (based on the facts of that case) that determines the legal position of the taxpayer in a voluntary disclosure case.
This means that an Atlanta FBAR lawyer must also be an international tax lawyer – i.e. a lawyer who has profound knowledge of US international tax law requirements, including FBAR.
Sherayzen Law Office Can Be Your Atlanta FBAR Lawyer
Sherayzen Law Office specializes in FBARs and the US international tax law. Our legal and accounting team has a profound knowledge of this area of law and the extensive experience in helping clients with international tax law issues, including offshore voluntary compliance with respect to delinquent FBARs. We have helped hundreds of US taxpayers worldwide with their FBAR issues and we can help You!
Contact Sherayzen Law Office today to schedule Your Confidential Consultation!

### Israeli-Swiss AEOI Declaration Signed | FATCA Lawyer New York
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On November 27, 2016, Israel and Switzerland signed a joint declaration committing to implement the automatic exchange of financial account information (AEOI). The joint declaration (the Israeli-Swiss AEOI Declaration) was signed by Moshe Asher, director of the Israel Tax Authority, and Joerg Gasser, Swiss state secretary for international financial matters, on behalf of their respective governments.
Israeli-Swiss AEOI Declaration Will Follow CRS
The Israeli-Swiss AEOI Declaration states that AEOI will be based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters of 25 January 1988, as amended by the Protocol of 27 May 2010, and subject to the signing of the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA). The information subject to exchange will be collected according to the Common Reporting Standard (CRS) adopted by OECD.
The MCAA is based on the international standard for the exchange of information developed by the OECD. The OECD first introduced the standard in February of 2014; the standard was later approved in November of 2015 by the G-20 leaders during their summit in Brisbane, Australia.
Israeli-Swiss AEOI Declaration Sets Forth the Implementation Time Frame
The Israeli and Swiss governments committed to start collecting the CRS-required data in 2018. The actual transmission of data will commence in 2019 and continue onwards.
Israeli-Swiss AEOI Declaration Foresees Voluntary Disclosure Coordination
The Israeli-Swiss AEOI Declaration commits both countries to inform each other about their respective voluntary disclosure programs (i.e. the voluntary disclosures by their citizens of their financial assets). The stated aim is to provide a smooth transition to the AEOI.
Implications of Israeli-Swiss AEOI Declaration for US Taxpayers
The signing of the Israeli-Swiss AEOI Declaration further increases the already high probability of the IRS detection of noncompliant US taxpayers with undisclosed offshore assets in these countries. As financial institutions review their client data, there is an increased probability that they may encounter that some of their taxpayers are US taxpayers whose information needs to be reported to the IRS under FATCA.
Furthermore, under the Israeli-Swiss AEOI Declaration, both countries agree to cooperate with respect to their voluntary disclosure programs. Under these circumstances, it is possible that more information than usual will be revealed during these voluntary disclosures and exchanged between the countries; some of that information may be disclosed to the IRS.
Contact Sherayzen Law Office for Help With the IRS Voluntary Disclosure of Your Undisclosed Foreign Assets and Foreign Income
If you are a US tax resident with undisclosed assets in Israel and/or Switzerland, contact Sherayzen Law Office for help with your IRS voluntary disclosure of these assets as soon as possible. In today’s FATCA-dominated world, the probability that the information regarding your undisclosed assets will be detected by the IRS has increased exponentially. The additional information exchange agreements, such as the recent Israeli-Swiss AEOI Declaration, only make this probability higher. At this point, a US tax resident with undisclosed assets in Israel and Switzerland is running an unacceptably high risk of IRS detection that may result in the imposition of high IRS penalties, including criminal penalties.
Sherayzen Law Office is a leading international tax firm in the area of IRS voluntary disclosure of offshore assets and income. We have helped hundreds of US taxpayers with assets around the globe to bring their tax affairs into full compliance with US tax laws, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Seattle FBAR Lawyer | IRS FATCA International Tax Attorney
I recently received a phone call from a person who was looking for a Seattle FBAR lawyer online and found my website. He asked me whether I can help him even though Sherayzen Law Office is based in Minneapolis, Minnesota. I responded to him: “yes, I can help you”.
This conversation brought to light an important topic of who should be considered a Seattle FBAR Lawyer and why an international tax lawyer based in Minneapolis can help a client in Seattle with FBAR issues.
Seattle FBAR Lawyer Definition: Legal FBAR Services Provided in Seattle, Washington
There are two categories of lawyers that fit the term Seattle FBAR Lawyer. The first category consists of US international tax lawyers who reside in Seattle and offer FBAR services to the residents of Seattle. The second category is comprised of US international tax lawyers who reside outside of Seattle but offer FBAR services to the residents of Seattle.
The first category is clear – if a lawyer resides in Seattle and offers FBAR services, he is considered to be a Seattle FBAR Lawyer. The question is: why is a lawyer who resides outside of Seattle still considered a Seattle FBAR lawyer? The answer lies in the legal nature of FBARs. FBAR is a federal information return, not a local requirement of Seattle or the State of Washington. This means that any licensed US international tax lawyer can offer FBAR services in any of the 50 states and the District of Columbia irrespective of his physical location. This is why a lawyer who resides in Minneapolis can offer FBAR legal services in Seattle with the same ease as a lawyer who resides in Seattle.
Seattle FBAR Lawyer Must Be US International Tax Lawyer
It should be emphasized that, while the residence of a Seattle FBAR Lawyer is not relevant, his area of practice is highly important. A Seattle FBAR lawyer must be an international tax lawyer – i.e. a lawyer who not only knows how to complete FBARS, but who has profound knowledge of US international tax law and the place the FBARs occupy in this law.
This emphasis is based on the fact that FBAR is only a small part of a much larger area of US international tax law. Indeed, there is a deep and complex relationship between the FBAR and international tax law that determines the legal position of a client and the potential voluntary disclosure strategies associated with delinquent FBARs.
This is why your Seattle FBAR lawyer should have deep knowledge of and extensive experience in both FBARs and all related US international tax laws and regulations.
Sherayzen Law Office Can Be Your Seattle FBAR Lawyer
Sherayzen Law Office is an international tax law firm that specializes in FBARs and international tax law. Our legal and accounting team has both: a profound knowledge of this area of law and extensive experience in helping clients with international tax law issues, including offshore voluntary compliance with respect to delinquent FBARs. We have helped hundreds of US taxpayers worldwide with their FBAR issues and we can help You!
Contact Sherayzen Law Office today to schedule Your Confidential Consultation!

### Swiss-Indian AEOI Declaration Signed | FATCA Lawyer New York
On November 22, 2016, Switzerland and India signed a joint declaration on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis. The joint declaration (Swiss-Indian AEOI Declaration) was signed by Sushil Chandra, chair of India's Central Board of Direct Taxes, and Gilles Roduit, deputy chief of mission of the Swiss Embassy in India.
Swiss-Indian AEOI Declaration Will Follow CRS
The Swiss-Indian AEOI Declaration foresees that AEOI will be based on the Common Reporting Standard (CRS) adopted by OECD. From the Swiss legal perspective, the AEOI with India will be based on the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA). The MCAA is based on the international standard for the exchange of information developed by the OECD. The OECD introduced the standard in February of 2014; the G-20 leaders approved it in November of 2015 during the G-20 summit in Brisbane, Australia.
Implementation Time Frame for Swiss-Indian AEOI Declaration
Both governments committed to start collecting the CRS-required data in 2018. The actual exchange of the CRS data will commence in 2019 and continue onwards. Both governments must notify each other of relevant developments regarding the implementation of the CRS in their domestic legislation.
Implications of Swiss-Indian AEOI Declaration for US Taxpayers
The Swiss-Indian AEOI Declaration increases the probability of the IRS being able to obtain FATCA data from both countries regarding noncompliant US taxpayers with assets in Switzerland and/or India. The reason is simple: as financial institutions comb through their client data, there is an increased probability that they may encounter that some of their taxpayers are US taxpayers whose information needs to be reported to the IRS under FATCA.
Moreover, under the Swiss-Indian AEOI Declaration, both countries anticipate that their taxpayers will participate in a local voluntary disclosure program as part of the transaction to the AEOI system. Both countries must notify each other about these programs and it is possible that more information than usual will be revealed during these voluntary disclosures. Hence, the local Swiss and Indian voluntary disclosure programs further increase the probability that the IRS may find out about the assets of noncompliant US taxpayers.
Contact Sherayzen Law Office for Help With the IRS Voluntary Disclosure of Your Unreported Foreign Assets and Foreign Income
If you are a US tax resident with undisclosed assets in India and/or Switzerland, you should contact Sherayzen Law Office for professional help with your IRS voluntary disclosure of these assets as soon as possible. In today’s world, the probability that the information regarding your undisclosed assets will be detected by the IRS has increased exponentially as the recent Swiss-Indian AEOI Declaration demonstrates. Combined with FATCA, you are running an unacceptable risk of IRS detection that may result in the imposition of draconian IRS penalties, including criminal penalties.
Over the past more than 10 years, Sherayzen Law Office has helped hundreds of US taxpayers with assets around the globe to bring their tax affairs into full compliance with US tax laws, and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Inheritance and Stepped-Up Basis | US International Tax Lawyer
If you received a property as part of your foreign inheritance, one of the key questions that you are facing is whether this inherited property is entitled to a stepped-up basis in the United States. This issue was resolved some time ago by the IRS in Revenue Ruling 84-139, 1984-2 C.B. 168.
What is a Stepped-Up Basis?
First, let’s understand the concept of “stepped-up basis”. From the outset, it is important to understand that this is a purely tax concept – the property that existed right before and right after the step-up in the basis is exactly the same property.
There are two terms that we need to understand here: “basis” and “step-up”. Basis is basically the amount of capital investment in a property – i.e. the amount of capital a taxpayer invested in a property, including the purchase price, the construction costs, subsequent improvements of the property, et cetera. Not all expenses are allowed to be “capitalized” or added to the basis (also referred to as “cost-basis”) under US tax law; sometimes, expenses are just deducted in the year they were incurred. Furthermore, the cost-basis may also be reduced by certain usage of a property through appreciation, amortization, depreciation, et cetera.
The “step-up” in the basis means the adjustment of the basis for tax purposes to the fair market value of the asset at the time the “step-up” event occurs. One of the most common step-up events is inheritance.
Of course, this is a simplified explanation of a stepped-up basis and many complexities are simply omitted here (such as step-up in a community property state, et cetera), but, for educational purposes, it is sufficient to provide the general idea.
Is an Inherited Foreign Property Subject to Stepped-Up Basis?
Despite the fact that the foreign inherited property was not subject to an estate tax in the United States, the IRS has clearly ruled that such a property is entitled to a step-up in its basis. The logic is not complex. IRC (Internal Revenue Code) Section 1014(a)(1) states that the basis of a property acquired from a decedent shall be the fair market value of the property at the date of the decedent’s death. IRC Section 1014(b)(1) adds that an inherited property is considered to be acquired under IRC Section 1014(a)(1). Treasury Regulations Section 1.1014-2(b)(2) in essence provides that the stepped-basis applies to a foreign property (because the requirement that such property is includible in the value of a decedent’s gross estate does not apply).
Contact Sherayzen Law Office for Help with US Tax Issues Concerning a Foreign Inheritance
If you received a foreign inheritance, contact Sherayzen Law Office for professional help with your US tax compliance. Sherayzen Law Office is an international tax law firm that has helped its clients around the world with planning for a foreign inheritance, identification of the relevant US tax requirements and the preparation of the necessary tax forms (including Forms 3520). Our legal team has also helped our clients with the issues concerning late reporting of a foreign inheritance, including as part of an offshore voluntary disclosure.
Contact Us Today to Schedule Your Confidential Consultation!

### IRS seeks Bitcoin Accountholder Data from Largest US Bitcoin Exchanger
On November 17, 2016, the IRS and the US Department of Justice (the “DOJ”) opened a new front against offshore tax evasion – bitcoin accountholder data. On that day, the DOJ filed a petition (accompanied by the IRS memorandum) in the U.S. District Court for the Northern District of California seeking permission to serve a John Doe Summons on bitcoin exchanger, Coinbase Inc. (“Coinbase”), in order to obtain bitcoin transaction records and bitcoin accountholder identities. Coinbase already indicated in its blog post that it will oppose the petition for the bitcoin account holder data in court based on the issues related to its customers' privacy.
Bitcoin Background Information
Bitcoin is a cryptocurrency and a payment system; its unique nature is in the fact that it is the first decentralized cryptocurrency. It is also the largest virtual currency on the market and the one that has been recognized by users and merchants in many countries (though others have banned it).
The Anonymity of the Bitcoin Accountholder Data Poses a Problem for the IRS
The IRS sees a big problem with bitcoins. While all of the bitcoin transactions are publicly recorded, the actual identity of a bitcoin owner is completely anonymous. The IRS memorandum in support of the John Doe Summons petition is expressly stating the IRS concerns regarding US taxpayers who do not report taxable income from bitcoin transactions and bitcoin trading. Additionally, the IRS (in its aforementioned memorandum) pointed out that bitcoins can be used for creation of non-existing deductions to reduce taxable income.
Offshore Tax Compliance is at the Heart of the IRS Attack on the Bitcoin Accountholder Data
Furthermore, it is no accident that the IRS memorandum that accompanied the DOJ petition was written by Mr. David Utzke, a senior revenue agent with the IRS's offshore compliance initiatives program. This demonstrates that the IRS views the anonymity of the bitcoin accountholder data not merely a domestic, but also an offshore tax compliance issue. Mr. Utzke expressly states his concerns that bitcoin transactions now replace the more traditional abusive offshore tax schemes.
We also should remember that, in its Notice 2014-21, the IRS treats convertible virtual currency as property for federal tax purposes. This first means that a taxpayer must report any capital gains and losses on his tax returns even if the bitcoin sales occur overseas.
Moreover, this potentially means (though the IRS has not yet expressly stated so) that bitcoins purchased overseas are reportable foreign assets subject to potentially FATCA and FBAR requirements (depending on how they are held – bitcoin wallets can potentially be treated as foreign accounts). The other side of this conclusion is that a bitcoin held overseas may draw FBAR and Form 8938 penalties if it is not timely and properly disclosed. This is indirectly confirmed by Notice 2014-21 which specifically singles out penalties associated with the failure to file an information return under IRC Sections 6721 and 6722.
Sherayzen Law Office Can Help You With Your Bitcoin US Tax Compliance Issues
If you own bitcoins overseas and you have unreported bitcoin income, contact Sherayzen Law Office to help you with your US tax compliance as soon as possible. Time is of the essence; if your identity is disclosed to the IRS and the IRS commences an investigation, you may be precluded from conducting a voluntary disclosure with respect to your bitcoins. In this case, the IRS may impose its draconian tax penalties on unreported income and assets.
Contact Us Today to Schedule Your Confidential Consultation!

### IRS AI Software to Analyze Tax Data | IRS Tax Lawyer Minneapolis
On November 18, 2016, Mr. Benjamin Herndon, the current IRS director for research and analytics, confirmed the recent rumors that the IRS AI Software is being tested to help IRS agents find patterns of tax noncompliance.
The idea is to supplement human analysis of data with the IRS AI software that would analyze any piece of data not only by itself, but also in conjunction with the other data available to the IRS. This way, the IRS AI Software is expected to analyze a very large amount of various data to identify tax noncompliance patterns.
This means that the IRS currently plans to use artificial intelligence for pattern recognition and visualization of data that would help IRS revenue agents uncover tax noncompliance. It is possible that the IRS AI software will even analyze a particular taxpayer’s characteristics in the context of a taxpayer’s behavior to uncover any discrepancies and potential tax noncompliance.
I believe that this is just the first step that the conservative agency is making. In the near future, one can foresee that the IRS AI software will start taking on more and more tasks such as conducting correspondence audits, certain automatized communications with taxpayers, analysis of data during a field audit (the IRS AI Software can be used most effectively during the audits of large corporations which have huge amounts of data), IRS customer support, international tax compliance (particularly analysis of data collected through FATCA and FBARs) and other vital IRS functions. Most likely, the decisions associated with penalty imposition and the negotiation of offer in compromise will rest with human IRS agents for now.
Finally, the biggest immediate impact of the IRS AI software is likely to be felt in the ability of the IRS to more effectively implement US tax laws and conduct more audits due to the fact that the IRS revenue agents will now be able to devote less time to audit analysis and more time to enforcement of tax laws.
In sum, the US taxpayers should be ready for the impending improved ability of the IRS to identify tax noncompliance and conduct more audits due to increased efficiency which will be introduced by the IRS AI Software.

### EU Automatic Exchange of Banking and Beneficial Ownership Data Approved
On November 22, 2016, the European Parliament approved the automatic exchange of banking and beneficial ownership data across the European Union. The directive received an overwhelming support from the Parliament: 590 members voted “yes”, 32 – “no”, and 64 did not vote.
Since the original proposal was already approved by the EU Council on November 8, 2016, the only issue left before the directive will come into force will be the final adoption of the directive by EU Council. Once the directive on the automatic exchange of banking and beneficial ownership data is adopted by the Council, the member states will have until December 31, 2017, to implement it.
The directive represents a major undertaking with respect to the automatic exchange of banking and beneficial ownership data. Once it is adopted, the directive will allow tax authorities of every EU member state to automatically share the banking information such as account balances, interest income and dividends. Moreover, the directive also requires the EU member states to create registers recording the beneficial ownership of companies and trusts. This means that the tax authorities of all EU member states will finally acquire access to the information regarding the true beneficiaries of foreign trusts and opaque corporate structures.
The idea behind the new legislation on the automatic exchanges of banking and beneficial ownership data is to provide the EU member states with tools to fight cross-border fraud and tax evasion, preserving the integrity of their domestic tax systems.
However, it appears that there are still serious implementation issues with respect to the new directive. The most serious problem is that the directive merely allows the automatic exchange of banking and beneficial ownership date in the EU, but it does not obligate the member states to do so. Furthermore, the banking industry’s role in the facilitation of tax evasion is not addressed at all by the legislature.
After the directive on the automatic exchange of banking and beneficial ownership date is adopted, the European Parliament is going to take up the legislation to provide for a cross-border method for accessing the shared information.
An interesting question for US taxpayers is whether any of the information acquired through the EU sharing mechanism will be shared with the IRS through FATCA. The likelihood of this scenario is fairly strong and may further expose noncompliant US taxpayers to IRS detection.

### What to do if the IRS Audits Your Quiet Disclosure | FBAR Lawyer Madison
This essay is concerned with a situation where the IRS audits your quiet disclosure of foreign assets and foreign income. The IRS audit can be an absolute nightmare in this case. Not only will the audit examine the accuracy of the disclosure, but the IRS may actually raise the issue of willful and non-willful FBAR penalties as well as the potential income tax fraud penalty.
So, is everything lost if the IRS audits your quiet disclosure? The answer is “no”. While the situation may undoubtedly be dire, it is not hopeless if the case is handled properly. While it is not possible to discuss in this article the whole spectrum of strategies available to taxpayers in such a situation, this article attempts to line out the three most important steps that you should do if the IRS audits your quiet disclosure.
1. If the IRS Audits Your Quiet Disclosure, You Should Not Panic
An IRS audit is always a stressful event. The stress increases exponentially if the audit involves a quiet disclosure of foreign assets and foreign income.
While your situation may be difficult, you should try to resist the panic. Panic is an emotional condition where a person starts acting irrationally and may follow a course of action that may worsen the already difficult situation.
2. If the IRS Audits Your Quiet Disclosure, Do Not Try to Handle the Audit by Yourself
Do NOT attempt to solve the IRS audit of your quiet disclosure by yourself, even if you believe that you were non-willful in your original noncompliance. This is extremely dangerous and may result in imposition of non-willful or even willful penalties. US international tax law is so complex that you may easily get yourself in trouble even if you believe that you are doing well.
There is a myth that the IRS is somehow gracious when a taxpayer represents himself and will be willing to reduce the penalties – this is completely false, especially in a situation involving a quiet disclosure. The IRS agents follow procedures and they will follow them ruthlessly until they run into a legal defense built by a lawyer. Without such a defense, there is nothing to stop the IRS from imposing penalties to the extent an agent believes is justified by the facts of the case.
3. If the IRS Audits Your Quiet Disclosure, You Should Immediately Find and Retain an International Tax Lawyer
Get yourself an international tax lawyer to help you with an IRS audit of your quiet disclosure. This can be a highly complex situation and you should have a professional by your side to guide you throughout the process. This is the best way to assure that your case will be handled properly.
In this case, a professional must be an international tax lawyer, not an accountant. I am always suspicious of cases where accountants start to go beyond their professional capacity and take on the legal defense of their clients’ cases. While it may be tolerable in simple domestic cases (though still not recommended), it may result in a horrific outcome where the IRS audits a quiet disclosure.
Sherayzen Law Office Can Be Your International Tax Lawyer if the IRS Audits Your Quiet Disclosure
If the IRS audits your quiet disclosure, consider retaining Sherayzen Law Office, Ltd. as your international tax lawyer to represent you during the IRS audit. Sherayzen Law Office is an international tax firm which focuses on helping its clients with their voluntary disclosures and the audits of these voluntary disclosures. The firm is not only a leader in the field, but it has also extensive experience in combating and reducing the IRS penalties associated with prior tax noncompliance.

### Ukrainian FATCA Agreement Authorized for Signature
On November 9, 2016, the Ukrainian government authorized the Ukrainian FATCA Agreement for signature. Let’s explore this new development in more depth.
Ukrainian FATCA Agreement and FATCA Background
The Ukrainian FATCA Agreement is one of the many bilateral FATCA implementation agreements signed by the great majority of jurisdictions around the world. The Foreign Account Tax Compliance Act (FATCA) was enacted into law in 2010 and quickly became the new standard for international tax information exchange.
FATCA is extremely complex, but its core purpose is very clear – increased US international tax compliance (with higher revenue collection) by imposing new reporting requirements on US taxpayers and especially foreign financial institutions (FFIs). Since FFIs are not US taxpayers, the United States has been working with foreign governments to enforce FATCA through negotiation and implementation of FATCA treaties. The Ukrainian FATCA Agreement is just one more example of these bilateral treaties.
Ukrainian FATCA Agreement is a Model 1 FATCA Agreement
There are two types of FATCA treaties – Model 1 and Model 2. Model 2 FATCA treaty requires FFIs to individually enter into a FFI Agreement with the IRS to report the required FATCA information directly to the IRS (for example, Switzerland signed a Model 2 treaty).
On the other hand, Model 1 treaty requires FFIs in the “partner country” (i.e. the country that signed a Model 1 FATCA agreement) to report the required FATCA information regarding US accounts to the local tax authorities. Then, the tax authorities of the partner country share this information with the IRS.
The Ukrainian FATCA Agreement is a Model 1 FATCA Agreement.
When will the Ukrainian FATCA Agreement Enter into Force?
The Ukrainian FATCA Agreement will enter into force once Ukraine notifies the US government that it has completed all of the necessary internal procedures for the ratification of the Agreement.
What is the Impact of Ukrainian FATCA Agreement on Noncompliant US Taxpayers?
The implementation of the Ukrainian FATCA Agreement will mean that the Ukrainian government will force its FFIs to identify all of the FATCA information regarding their US accountholders and share this information with US government.
This further means that any US taxpayers who are currently noncompliant with the US tax reporting requirements (such as FBAR, Form 8938, foreign income reporting, et cetera) are now at an ever increasing risk of detection by the IRS and the imposition of draconian IRS penalties.
Contact Sherayzen Law Office for Help With US Tax Compliance in light of the Ukrainian FATCA Agreement
If you have undisclosed Ukrainian assets (including Ukrainian bank accounts) and Ukrainian foreign income, contact Sherayzen Law Office for help as soon as possible. We have helped hundreds of US taxpayers around the globe (including Ukrainians) to bring their US tax affairs in order and we can help you!

### Russian Taxation of Gifts to Nonresidents: Recent Changes
The Russian Ministry of Finance (“MOF”) recently issued Guidance Letter 03-04-06/64102 (dated October 31) regarding the taxation of gifts from Russian legal entities to nonresidents (i.e. the Russian taxation of gifts to nonresidents). This Letter will have a direct impact on the tax planning for Russians who are tax residents of the United States.
Russian Taxation of Gifts to Nonresidents: Russian-Source Gifts are Taxable
In the letter, the MOF stated that, under the Russian Tax Code Article 209, Section 2, the Russian-source income of individuals who are not tax residents of the Russian Federation is subject to the Russian income tax (the Russian tax residents are taxed on their worldwide income – i.e Russian-source and foreign-source income).
Furthermore, the MOF determined that gifts received by nonresidents from a Russian legal entity are considered to be Russian-source income. This means that these gifts are taxable beyond the exemption amount. According to Tax Code Article 217, section 28, the exemption amount is 4,000 Russian roubles per tax year. Hence, a gift from a Russian legal entity to a non-resident of Russia will be subject to the Russian individual income tax if it exceeds 4,000 rubles.
Russian Taxation of Gifts to Nonresidents: the Place of Gift Does Not Matter
It is important to emphasize that, in this situation, the sourcing of the gift is determined by the giftor – i.e. if the giftor is a Russian legal entity, the gift is considered as Russian-source income irrespective of the actual location of the place where the gift took place. For example, if a Russian legal entity gifts 10,000 rubles in Switzerland, the gift is still considered to be Russian-source income.
Russian Taxation of Gifts to Nonresidents: Tax Withholding Rules
The general rule is that the Russian legal entity who makes the gift to a nonresident is considered to be the withholding agent who is required to withhold from the gift and remit to the MOF the individual income tax due. However, the MOF specified that, if a gift is a non-monetary one or of such a nature that a tax cannot be withheld, then the entity must notify the Russian Federal Tax Service that it could not and did not withhold the tax (with the amount of the tax due). The nonresident would be responsible for the payment of the tax due in this case.
Impact of the Changes in the Russian Taxable of Gifts to Nonresidents on US Tax Residents
The Guidance Letter 03-04-06/64102 will have an important impact on the Russian tax and estate planning strategies with respect to US tax residents. One of the most common strategies for business succession and estate planning in Russia has been gifting of assets to children who were non-residents of Russia and US tax residents. The guidance letter directly impacts this strategy forcing the re-evaluation of the desirability of this entire course of action.

### Milwaukee FBAR Lawyer | IRS FATCA Tax Attorney
Who is considered to be a Milwaukee FBAR Lawyer? This is a question that is important to all residents of Milwaukee, Wisconsin. Let me try to answer this question.
Milwaukee FBAR Lawyer Definition: Legal FBAR Services Provided in Milwaukee, Wisconsin
The term Milwaukee FBAR Lawyer includes two broad categories of international tax lawyers. The first category consists of lawyers who reside in Milwaukee and offer FBAR services to the residents of Milwaukee. The second category is comprised of lawyers who reside outside of Milwaukee but offer FBAR services to the residents of Milwaukee.
The first category is self-explanatory, but the second category requires a bit more explanation of one issue: why is an FBAR lawyer who resides outside of Milwaukee still considered a Milwaukee FBAR lawyer? The answer is relatively simple – FBAR is a federal compliance requirement and any licensed US international tax lawyer can practice it in any of the 50 states and the District of Columbia irrespective of his physical location. Local Milwaukee law and even Wisconsin law have nothing to do with FBARs.
A Milwaukee FBAR Lawyer Must be an International Tax Lawyer
I mentioned above that both categories of the definition of a Milwaukee FBAR Lawyer must consist of only international tax lawyers. I wish to emphasize this point – not any lawyer should advise with respect to FBARs, only US international tax lawyers.
This emphasis on knowledge of the US international tax law is not incidental; it is based on the fact that FBAR is merely a part of a much bigger US international tax law. These concepts are so deeply interrelated that it would be nonsensical to advise a client on his legal position just on the FBARs without the related US international tax law issues or the US international tax law without the FBARs.
This is why your Milwaukee FBAR lawyer should have a profound knowledge of and experience in both FBARs and all related US international tax laws and regulations.
Sherayzen Law Office is a Premier International Firm Well-Positioned to be Your Milwaukee FBAR Lawyer
Sherayzen Law Office is the perfect candidate to be Your Milwaukee FBAR Lawyer. Not only does its team has a profound knowledge of FBARs and US international tax law, but its professional legal team is also highly experienced in dealing with these issues, including all Offshore Voluntary Compliance programs related to delinquent FBARs. We have helped hundreds of US taxpayers worldwide with their FBAR issues and we can help You!
Contact Sherayzen Law Office today to schedule Your Confidential Consultation!

### FATCA PFIC Reporting | International Tax Attorney
FATCA PFIC Reporting is an important feature in today’s U.S. tax compliance. In this article, I will focus on the explanation of the FATCA PFIC Reporting requirement for U.S. shareholders of a PFIC.
FATCA PFIC Reporting: FATCA Background
The Foreign Account Tax Compliance Act (“FATCA”) is contained in Chapters 1471–1474 of the Internal Revenue Code (“IRC”) as enacted into law by section 501(a) of the Hiring Incentives to Restore Employments (HIRE) Act 2010. FATCA was enacted specifically to combat offshore tax evasion by US persons with secret foreign accounts.
There are two large parts of FATCA. The first part concerns only foreign financial institutions (FFIs). Under FATCA, the FFIs are now required to identify US accountholders and report their accounts to the IRS. The second part of FATCA requires US taxpayers to report their foreign assets and foreign income on Form 8938, which is filed with the taxpayers’ US tax return.
This article is mostly concerned with the FATCA PFIC reporting on Form 8938.
FATCA PFIC Reporting: PFIC Background
A Passive Foreign Investment Company, commonly known as PFIC, is one of the most complex tax designations in the United States. The annual tax compliance for PFICs (especially default Section 1291 PFICs) can be tremendously burdensome. Furthermore, distributions and capital gains from PFICs may be subject to a much higher PFIC income tax (and PFIC interest on the PFIC tax).
A PFIC is any foreign corporation that falls within the definition of IRC Section 1297(a), which states that a foreign corporation is a PFIC if: “(1) 75 percent or more of the gross income of such corporation for the taxable year is passive income, or (2) the average percentage of assets (as determined in accordance with subsection (e)) held by such corporation during the taxable year which produce passive income or which are held for the production of passive income is at least 50 percent.” Foreign mutual funds is one of the most common examples of PFICs; however, other companies may also fall within the scope of the IRC Section 1297(a).
If a U.S. taxpayer has PFICs, he is required to file Form 8621 “Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund”. A separate form 8621 should be filed for each PFIC (often, it is more convenient to file a separate Form 8621 for various blocks of the same PFIC; however, one needs to make sure that the same identification number is provided on each Form 8621 filed for the same PFIC).
FATCA PFIC Reporting: Relationship Between Form 8938 and Form 8621
In general, the FATCA foreign financial asset reporting on Form 8938 overlaps with the PFIC reporting obligation on Form 8621, but the relationship between the two forms is fairly clear. If forms 8621 must be filed (and, since 2013, this is pretty much always the case for PFICs), then the PFICs do not need to be reported on Form 8938. The number of forms 8621 must still be specified on Form 8938.
It is also important to remember that PFICs must still be disclosed on FBARs even if they are reported on Forms 8621 and 8938.
Contact Sherayzen Law Office for Help with FATCA PFIC Reporting
PFIC calculations themselves are some of the most complex requirements in the IRC. FATCA PFIC reporting further complicates the already difficult issues surrounding PFICs. It is very easy to make mistakes which result in the imposition of high IRS penalties. The correction of these mistakes will also likely result in additional legal fees.
This is why you need to secure the help of an experienced international tax law firm as early as possible and Sherayzen Law Office is the perfect fit. We have helped numerous US taxpayers around the world with their FATCA PFIC matters and we can help you.
Contact Us Today to Schedule Your Confidential Consultation!

### Offshore Voluntary Compliance Draws 100,000 Taxpayers and $10 Billion
On October 21, 2016, the IRS announced that more than 100,000 US taxpayers participated in its Offshore Voluntary Compliance programs paying a total of more than $10 billion. Let’s explore these Offshore Voluntary Compliance numbers in more depth.
OVDP is Still the King of Offshore Voluntary Compliance but Its Impact is More Targeted
The IRS flagship Offshore Voluntary Disclosure Program (OVDP) is still the most profitable program for the IRS in terms of actual amount of dollars paid by the taxpayers. More than 55,800 taxpayers have come into the OVDP to resolve their past US tax noncompliance. They paid a total of more than $9.9 billion in taxes, interest and penalties since 2009.
These numbers are very impressive, but they also point to a more targeted influence of the OVDP compared to its past. In October of 2015, the IRS reported that more than 54,000 taxpayers entered into the OVDP and paid more than $8 billion. In other words, in the past year (November 2015 – October 2016), about 1,400 taxpayers entered into the OVDP and paid an additional $1.8 billion.
What this means is that the IRS was highly successful in properly addressing the basic original injustice of the OVDP program which was equally painful to small taxpayers and large taxpayers as well as non-willful taxpayers and willful taxpayers. The OVDP now draws a more limited number of people with substantial foreign assets who pay a higher penalty for their prior noncompliance.
The only danger that still remains is the issue of incompetent tax advisors who might be entering their wealthier clients into the OVDP irrespective of their willfulness or non-willfulness.
Streamlined Procedures is the Favorite Offshore Voluntary Compliance Option for “Smaller” Taxpayers
The IRS data also reflects the tremendous popularity of the Streamlined Procedures among the middle-class taxpayers with limited international asset exposure. According to the IRS, as of October of 2016, 48,000 taxpayers have made use of various Streamlined Procedures (SDOP and SFOP) to resolve their prior non-willful US international tax noncompliance. These taxpayers paid a total of about $450 million in taxes, interest and penalties.
In the prior report (October of 2015), the IRS stated that only 30,000 taxpayers used the Streamlined Procedures; 20,000 of them after June of 2014. This means that the Streamlined Procedures continues to attract the great majority of the taxpayers with smaller foreign assets.
Offshore Voluntary Compliance is One of he Key Strategies to Resolve Prior US International Tax Noncompliance
Undoubtedly, Offshore Voluntary Compliance options offer the key strategies to resolve prior US international tax noncompliance. The other options, such as Reasonable Cause Disclosure and Quiet Disclosure, are much more limited in scope and application. In fact, in the case of a Quiet Disclosure, this option may put the taxpayers into a position more dangerous than they were in before their quiet disclosure due to the increased danger of detection without any protection offered by the Offshore Voluntary Compliance options.
Doing nothing is also not a good option for noncompliant taxpayers, because of the increased risk that their prior noncompliance will be deemed willful once the IRS discovers their noncompliance.
The risk of the IRS detection of prior tax noncompliance is very high in today’s world. This detection may come not just from the IRS investigations of a specific taxpayer, the massive disclosures by the banks already being investigated by the IRS or even from the banks that provided information as a result of the Department of Justice’s Swiss Bank Program. Today, the primary danger of detection comes from the third-party reporting under the Foreign Account Tax Compliance Act (FATCA) and the network of inter-governmental agreements (IGAs) between the U.S. and partner jurisdictions.
Contact Sherayzen Law Office to Secure Professional Help With Your Offshore Voluntary Compliance Case
If you have undisclosed foreign accounts or any other foreign assets, contact Sherayzen Law Office as soon as possible for professional help with your voluntary disclosure.
Sherayzen Law Office is a leader in offshore voluntary disclosures which will help you with your entire case, including: the original determination of the best Offshore Voluntary Compliance option; the implementation of this option, including the preparation of all relevant legal documents and tax forms; the filing of the voluntary disclosure package; and the defense of your voluntary disclosure positions against the IRS.
We have helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance in the least painful and most beneficial way, and we can help you!
Contact Us Today to Schedule Your Confidential Initial Consultation!

### IRS OVDPs Comparison For the Years 2009-2016
Between the years 2009-2016, the IRS created three different Offshore Voluntary Disclosure Programs (IRS OVDPs) for U.S. taxpayers to voluntarily disclose their undeclared foreign accounts: 2009 Offshore Voluntary Disclosure Program (2009 OVDP), 2011 Offshore Voluntary Disclosure Initiative (2011 OVDI), and 2012 Offshore Voluntary Disclosure Program (2012 OVDP). 2012 OVDP was subsequently profoundly modified in the year 2014 in what, in essence, became the new 2014 Offshore Voluntary Disclosure Program (2014 OVDP). In this article, I will do a comparative analysis of the different IRS OVDPs based on five factors: application period, disclosure period, principal miscellaneous offshore penalty, reduced offshore penalty options and other penalties.
Application Period of the IRS OVDPs
Application period means the period of time during which the IRS must receive the application from the taxpayer in order for the taxpayer to be considered for acceptance into a voluntary disclosure program.
All of the IRS OVDPs until 2012 had a clearly defined application period. The 2009 OVDP application period ran from March 23, 2009 through October 15, 2009. The 2011 OVDI application period was from February 8, 2011 to September 9, 2011 (actually, the original period was supposed to end on August 30, 2011, but the IRS extended the deadline by 9 days during to an East Coast hurricane).
Since January 9, 2012, however, the 2012 OVDP and its 2014 version have operated without a set closing date. Instead, the IRS has reserved the right to end the 2014 OVDP at any time. While this is always a possibility, it is not likely that the IRS will make such a drastic decision for various administrative reasons as well as due to the fact that OVDP is very profitable.
Disclosure Period of the IRS OVDPs
The disclosure period means the number of tax years or specific tax years which are covered by (i.e. included in) the voluntary disclosure. The disclosure period determines the years for which FBARs and amended tax returns need to be submitted as well as the years involved in the calculation of the Offshore Penalty.
The disclosure period varied greatly among the IRS OVDPs. The 2009 OVDP disclosure period included the six-year period between 2003 and 2008 (which is equivalent to the extended statute of limitations). The 2011 OVDI expanded the disclosure period to eight years to cover the years 2003-2010.
The 2012 OVDP differed from the prior programs, because the program did not have a fixed closing date and, hence, no fixed voluntary disclosure years. Instead, the disclosure period for the 2012 OVDP and its 2014 version apply to the most recent eight years for which the due date has already passed – i.e. the last closed tax year plus the previous seven tax years.
This flexibility on the part of the 2012 and 2014 IRS OVDPs may allow for a certain degree of strategy planning where a decision has to be made with respect to which is the eighth year that is more beneficial to be included. The OVDP application is then submitted in accordance with this strategy.
Principal Miscellaneous Offshore Penalty (the Default Penalty of IRS OVDPs)
All of the IRS OVDPs contain the default or “principle” Miscellaneous Offshore Penalty (the “OVDP Penalty”). The OVDP Penalty is calculated based on the assets subject to penalty (so-called “OVDP penalty base”) as a percentage of these assets.
This percentage of the OVDP Penalty has been steadily going up with each program. The 2009 OVDP Penalty rate was 20%; it grew to 25% for 2011 OVDI and 27.5% to 2012 OVDP.
The 2014 version of the 2012 OVDP introduced a dual Principal OVDP Penalty. It kept the 27.5% penalty rate as a default rate, but it introduced a 50% penalty rate for taxpayers with an account in a foreign financial institution (“FFI”) that had or has been publicly identified by the DOJ as being under investigation or as an entity cooperating with a DOJ investigation. The same 50% penalty rate also applied to facilitators who helped the taxpayer establish or maintain an offshore arrangement.
All such FFIs and facilitators are listed separately by the IRS on the OVDP website.
Reduced Offshore Penalty Options under IRS OVDPs
In addition to the Principal OVDP Penalty, almost all IRS OVDPs (except the 2014 OVDP) contained various Reduced OVDP Penalty options.
Already the 2009 OVDP introduced a reduction to a 5% penalty for so-called “passive account holders”. However, the 2009 OVDP’s definition of the 5% penalty category was fairly primitive and this was the only option for a reduced penalty.
The 2011 OVDI was really the program that perfected the concept of the Reduced OVDP Penalty. It contained and expanded the 5% penalty option defining the “passive account holders” as the taxpayers who: (a) did not open the account or cause the account to be opened, (b) exercised minimal, infrequent contact with respect to the account, (c) did not withdraw more than $1,000 from the account in any year covered by the voluntary disclosure, except in the case of a withdrawal closing the account and transferring the funds to an account in the U.S., and (d) could establish that all applicable U.S. taxes had been paid on the funds deposited to the account (i.e., where only account earnings escaped U.S. taxation).
The 5% penalty option also applied to US citizens who resided overseas and did not know that they were US citizens until the 2011 OVDI.
Furthermore, the 2011 OVDI introduced a new Reduced OVDP Penalty of 12.5% available to taxpayers with the highest aggregate account balance (which was really expanded to more than just bank accounts and included various assets) in each of the eight years covered by the OVDI less than $75,000.
The 2012 OVDP was the last program so far to adopt the Reduced OVDP Penalty structure. It borrowed it completely unchanged from the 2011 OVDI with both 5% and 12.5% options available.
In 2014, the OVDP was modified to remove all Reduced OVDP Penalty options. The reason for such a drastic change was the introduction of the Streamlined Compliance Options (both SDOP and SFOP) which operated under the reduced (in the case of SFOP, reduced to zero) penalty structure for non-willful taxpayers.
Indeed, the non-willful taxpayers won more than anyone else from the changes introduced by 2014 OVDP. However, the willful taxpayers with small bank accounts were the biggest losers from these changes. The 2014 OVDP also marked the rise of the “willfulness vs. non-willfulness” concept to the dominant position in the world of offshore voluntary disclosures.
Other Penalties under the IRS OVDPs
With respect to other penalties (such as failure to file, failure to pay and accuracy related penalties), all of the IRS OVDPs were similar in their structure.
Contact Sherayzen Law Office for Help with Your Voluntary Disclosure of Offshore Accounts and Other Foreign Assets
If you have undisclosed accounts or other assets overseas, you are in grave danger of an IRS discovery and the imposition of draconian noncompliance penalties. This is why you need professional help to evaluate your voluntary disclosure options, including the 2014 OVDP and the Streamlined Compliance Procedures.
The highly experienced team of Sherayzen Law Office Ltd. can help you with your entire voluntary disclosure, including the initial evaluation of your case and your penalty exposure, identification of your voluntary disclosure options, preparation of the chosen voluntary disclosure option including the preparation of all legal and tax documents, and the final negotiations with the IRS.
We have helped hundreds of US taxpayers worldwide and we can help you. Contact Us Today to Schedule Your Confidential Consultation!

### Form 872 Refund Claims | Foreign Accounts International Tax Lawyer
The subject of this article is the discussion of the Form 872 Refund Claims, particularly whether filing Form 872 can extend the time for the taxpayer to claim a refund for the relevant years. Stated broadly, the key question that this article seeks to explore is whether an extension of time for assessment of tax can effect the taxpayer’s ability to file a refund claim for the extended years.
Form 872 Refund Claims – Form 872 and Offshore Voluntary Disclosures
Form 872 is a form used by the IRS to obtain the consent from the taxpayer to extend the time to assess tax. This consent can be obtained for income tax, self-employment tax of FICA tax on tips.
The form is used in a great variety of cases, but, in the US international tax context, it is mostly known for its use in the IRS Offshore Voluntary Disclosure Program (OVDP) now closed. Form 872 is in fact obligatory in the OVDP due to the fact that the OVDP voluntary disclosure period is eight years whereas the standard statute of limitations is only three years (even with 25% gross income, there are still at least two years that cannot be opened by the IRS without claiming fraud). Moreover, Form 872 is also used to prevent the statute of limitations from expiring for the rest of the years while the OVDP case is pending.
Form 872 Refund Claims: Form 872 Extends the Statute of Limitations for Refund Claims
According to IRC §6511(c), if the taxpayer and the IRS agree to extend the time within which the IRS can assess a tax, the taxpayer receives a corresponding extension of the time within which he may file a credit or refund claim. Form 872 itself states in paragraph 4 that:
Without otherwise limiting the applicability of this agreement, this agreement also extends the period of limitations for assessing any tax (including penalties, additions to tax and interest) attributable to any partnership items (see section 6231 (a)(3)), affected items (see section 6231(a)(5)), computational adjustments (see section 6231(a)(6)), and partnership items converted to nonpartnership items (see section 6231(b)). Additionally, this agreement extends the period of limitations for assessing any tax (including penalties, additions to tax, and interest) relating to any amounts carried over from the taxable year specified in paragraph (1) to any other taxable year(s). This agreement extends the period for filing a petition for adjustment under section 6228(b) but only if a timely request for administrative adjustment is filed under section 6227. For partnership items which have converted to nonpartnership items, this agreement extends the period for filing a suit for refund or credit under section 6532, but only if a timely claim for refund is filed for such items.
Limitations on Form 872 Refund Claims
There is an important limitation on Form 872 Refund Claims. Form 872 Refund Claims will only be accepted if the extension agreement is entered into before the expiration of the claim period. See IRC §6511(c)(1). This means that, if Form 872 is entered into by the parties by the time that the statute of limitations had already expired, the taxpayer is unlikely to succeed in his Form 872 Refund Claims.
The Form 872 agreement becomes effective when signed by the taxpayer and the District Director or an Assistant Regional Commissioner (See Treas. Reg. § 301.6511(c)-1).
Let’s look at a basic example to understand this limitation on Form 872 Refund Claims better.  Let’s suppose that a taxpayer X filed his 2003 US tax return on April 15, 2004. In March of 2007, the IRS decided to audit X’s 2003 US tax return and Form 872 was entered into by both parties at that time. In this case, without an agreement (and absent other special circumstances such as foreign tax credit issues, 25% under-reporting of income, et cetera), the presumed expiration of the assessment period would be on April 15, 2007; similarly, X’s refund claim period would have expired on April 15, 2007. Since Form 872 was entered into by both parties in March of 2007 (i.e. prior to the expiration of the normal refund claim period), however, X can file his Form 872 refund claims during the period that covers the duration of the extension plus six months thereafter.
Time to File Form 872 Refund Claims
As it was hinted in the example above, the period within which a taxpayer may file a credit or refund claim arising from the tax liability covered by Form 872 is extended for the period of the extension plus an additional six months. See IRC §6511(c)(1).
What Can Be Claimed on Form 872 Refund Claims
With respect to timely Form 872 Refund Claims, the taxpayer can claim an amount limited to the amount that would have been allowable under the normal limitation rules if the claim had been filed on the date the agreement was executed AND any tax paid after the execution of the agreement but before the filing of the claim. IRC §6511(c)(2).
What is the amount allowable under the normal limitation rules? It varies widely based on for what the refund is claimed (i.e. the type of the claim) and what is the filing period. For example, if Form 872 Refund Claims are filed within the three-year filing period, the amount of the refund or credit is limited to the tax paid on the liability at issue within the three years immediately preceding the filing of the claim plus the period of any extension of time for filing the return. IRC §6511(b)(2)(A). On the other hand, Form 872 Refund Claims based on a foreign tax credit adjustment can be granted many years back because the statute of limitations is ten years.
Form 872 Cannot Reduce the Claim Period for Form 872 Refund Claims
One final point that should be mentioned is that Form 872 and any other agreement to extend the assessment period cannot reduce the refund and credit claim period. The law clearly states that, when an extension agreement is executed, the taxpayer's claim period shall not expire before the expiration of the additional assessment period plus six months.
Contact Sherayzen Law Office for Help With Your Form 872 Refund Claims
If you entered into a Form 872 agreement to extend the time to assess tax (whether as a result of OVDP, opt-out OVDP audit, FBAR Audit or regular audit) or any other type of agreement to extend the assessment period, contact Sherayzen Law Office for help with filing your Form 872 refund claims.

### Totalization Agreement with Romania Progresses | Minnesota Tax Lawyer
On October 26, 2016, the Totalization Agreement with Romania entered a new stage – the government of Romania approved for signature a draft social security (also known as “Totalization”) agreement with the United States.
The Totalization Agreements are authorized by Section 233 of the Social Security Act. The United States currently has Totalization Agreements with 26 countries – Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary (the most recent addition), Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, South Korea, Spain, Sweden, Switzerland and the United Kingdom
The purpose of a Totalization Agreement is to eliminate the burden of dual social security taxes. Such situation arise usually in the context of workers from one country working in another country while they are covered by the social security systems in both countries. In such cases, the Totalization Agreement protects the workers from paying social security taxes in both countries on the same earnings.
The Totalization Agreement with Romania is intended to benefit the Romanian workers who work in the United States and US workers who work in Romania. This is why any advance in the progress of the Totalization Agreement with Romania is of high interest to workers and businesses who work in both countries, United States and Romania.
Obviously, there is still a very long road to go for the Totalization Agreement with Romania. First, the Totalization Agreement with Romania has to be finalized (and it seems that this stage has been reached), then signed by both countries and, finally, ratified by both countries. This process, especially ratification, can take years especially if the US Congress and the new President do not see “eye to eye” on this issue. However, the obvious benefits of the Totalization Agreement with Romania should eventually pave the way to its ratification in both countries.

### PATH Act and New January 31 Filing Deadline | Tax Attorney News
On October 28, 2016, the IRS reminded employers and small business owners of the new January 31, 2017 deadline as a result of the PATH Act.
PATH Act’s Impact on the Filing Deadlines for Forms W-2 and 1099-MISC
In the past, employers typically had until the end of February, if filing on paper, or the end of March, if filing electronically, to submit their copies of these forms. Starting 2017, the new strict W-2 filing deadline of January 31, 2017, will be enforced.
The reason for this change in the deadline is The Protecting Americans from Tax Hikes (PATH) Act of 2015. According to PATH, the employers will now have one filing deadline on January 31 for both employee copies of Forms W-2 and the filing of Forms W-2 with the Social Security Administration.
Moreover the PATH Act also affects the filing deadline for certain Forms 1099-MISC, particularly those reporting amounts in Box 7, Nonemployee Compensation. These Forms 1099-MISC will now also have to be filed on January 31, 2017.
PATH Act’s Impact on Requesting Form W-2 Filing Extension
The PATH Act also has an impact on the availability of Form W-2 filing extensions. Starting 2017, only one 30-day extension to file Form W-2 will be available and this extension is no longer automatic. If an extension is necessary, a Form 8809 “Application for Extension of Time to File Information Returns” must be completed as soon as you know an extension is necessary, but no later than January 31.
PATH Act May Delay Some Refunds Until February 15
The other major impact of the PATH Act that will be felt by many Americans is the potential hold on their refunds until February 15. The PATH Act requirest the IRS to hold the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC); the IRS must hold the entire refund, not just the portion related to the EITC or ACTC.
PATH Act is Meant to Help IRS Fight Fraud and Spot Tax Return Errors
The PATH Act was enacted by Congress and signed into law in December of 2015 in order to make it easier for the IRS to detect and prevent fraud associated with tax refunds. The idea is to give the IRS more time to identify fraudulent refunds through accelerated W-2 filing deadline for employers and holding refunds (which are frequently subject to fraud) until February 15.
Of course, the additional time will allow the IRS to also spot any errors on the tax returns.

### Omaha FBAR Attorney | OVDP IRS International Tax Lawyer
As the headquarters of Berkshire Hathaway, Omaha (Nebraska) draws a large number of foreign-born professionals. A high percentage of these professionals still have foreign accounts overseas and they are in great needs of assistance from an Omaha FBAR attorney. Oftentimes, they cannot find an attorney they like in Omaha (especially, since this is not a very large city with a lot of international tax attorneys) and they not sure they can use the help of out-of-state FBAR attorneys who offer their services in Omaha. This essay is meant to help these persons by defining the term Omaha FBAR Attorney.
Omaha FBAR Attorney: What is FBAR
The Report of Foreign Bank and Financial Accounts (“FBAR”) is probably the most important information return with respect to disclosure of foreign accounts by US tax residents. Its importance stems from the low filing threshold and very high civil and criminal penalties.
As of the calendar year 2016, under the Bank Secrecy Act (“BSA”) §5314 and in accordance with the FinCEN regulations, the FBAR must be filed by a US person who has a financial interest in or signatory authority over one or more foreign financial accounts with an aggregate value greater than $10,000 at any time during the calendar year. See 31 U.S.C. §5314; 31 C.F.R. §1010.350; 31 C.F.R. §1010.306(c).
Thus, there are five requirements that must be satisfied in order for the FBAR filing requirement to arise. First, the filer must be a US person. Second, this US person had a bank or financial account (or accounts) during the calendar year in question. Third, this foreign bank or financial account must be foreign – i.e. in the foreign country. Fourth, during the calendar year, the US person had a financial interest in the account or signature or other authority over the financial account. Finally, the fifth requirement is that the aggregate value of the account or accounts (converted to US dollars) exceeded $10,000 at any point during the calendar year.
All five of these requirements contain important terms (such as “US person”, “financial account” and “financial interest”) which have very specific definitions; so, one must be very careful before making any assumptions about the applicability of FBARs to his situation (in fact, this is really the job for your FBAR attorney). The definition of “financial account” is especially fraught with danger and may include anything from a normal investment account to a gold bar stored under the custody of a foreign bank. Please, see other relevant articles on sherayzenlaw.com for more details.
Omaha FBAR Attorney: Definition
Armed with this understanding of FBARs, we can now turn to the main subject of this article – who is considered to be an Omaha FBAR Attorney? There are two aspects to this concept: geographical and substantive.
From the outset, it should be stated that the geographical location of an attorney does not matter. An attorney can reside in Omaha, Nebraska or Minneapolis, Minnesota and still be considered an Omaha FBAR Attorney if this attorney offers his services in this city.
The reason for this geographical indifference lies in the fact that FBAR is a purely federal compliance requirement; it has no particular ties to Omaha or any other specific city or state (or a foreign country, for that matter). As long as a person is a US tax resident and he has foreign accounts, he is potentially subject to FBAR requirement even if he physically resides outside of the United States. Since FBAR is a uniform requirement that does not respect borders and jurisdictions, the same is almost true of the FBAR attorneys, except that an attorney must be licensed to practice in any of the fifty states or Washington D.C. and FBAR must be within the realm of his main area of practice.
The substantive requirement that forms part of the definition of an Omaha FBAR attorney is related to what I just mentioned – FBAR must be within the realm of the main area of an attorney’s legal practice in order for this attorney to be considered an Omaha FBAR attorney.
What is this main area of practice? US international tax law – an Omaha FBAR attorney must be an international tax attorney, because FBAR compliance is part of the much broader US international tax law.
Retain Sherayzen Law Office as Your Omaha FBAR Attorney
If have undisclosed foreign accounts or if you need assistance with your annual FBAR compliance, contact Sherayzen Law Office for professional help. Sherayzen Law Office is a leading international tax law firm in the area of FBAR compliance. Our highly-experienced international tax team, headed by its founder Attorney Eugene Sherayzen, has helped hundreds of US taxpayers around the globe with their FBAR compliance and other international tax issues (including offshore voluntary disclosures under the OVDP, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause Disclosures (also known as “noisy disclosures”)).
This is why, if you are looking for a Omaha FBAR Attorney, please contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Secret Bank Accounts in Israel and Switzerland Result in a Guilty Plea
The earlier IRS and DOJ (U.S. Department of Justice) investigations of secret bank accounts in Israel and Switzerland continue to produce new guilty pleas. On September 28, 2016, Mr. Markus Hager, a New York City resident, pleaded guilty to tax evasion for the tax years 2003-2005 and 2007-2010 with respect to his secret bank accounts in Israel and Switzerland.
Facts of the Case: Secret Bank Accounts in Israel and Switzerland
The facts of the Hager case are somewhat typical, but contain an exhilarating story of Mr. Hager’s attempts to conceal his ownership of the account – the fact that the IRS and the DOJ were able to uncover the entire history of these transfers of his funds under different names is impressive.
According to information presented in court, between 1987 through 2011, Mr. Hager utilized various secret bank accounts in Israel and Switzerland to hide his foreign funds and foreign income from the IRS. In order to do it, he opened a sham BVI (British Virgin Islands) entity which owned three accounts (two of them were numbered accounts) at UBS. It appears that, until 2008, Mr. Hager also owned some of his UBS accounts personally. By the end of 2004, the value of his undeclared UBS accounts exceeded $7.3 million.
With the IRS victory over UBS in 2008, Mr. Hager closed his UBS accounts and transferred all of his assets to a new opened account at Clariden Leu (which was already controlled at that time mostly by Credit Suisse; in 2012, the bank was integrated into the Credit Suisse corporate structure); the account was held in the name of his BVI entity.
Shortly thereafter, Mr. Hager closed the account at Clariden Leu and transferred the assets to a newly opened account held in the name of the BVI entity at a different Swiss bank. Mr. Hager caused that Swiss bank to falsely record Hager’s Belgian cousin as the owner of the assets on the account. Approximately six months later, he closed this account at the Swiss bank and transferred the assets to an account at a bank in Israel that Mr. Hager caused to be opened in the name of yet another Belgian cousin.
Between 2005 to 2011, Hager also controlled an undeclared bank account at Bank Leumi in Israel, which he falsely held under the name of a relative who was not a U.S. person and who resided outside the United States. In February of 2010, after obtaining an Israeli Identity Card, Hager opened an account in his own name at Bank Leumi in Israel but falsely reported that he lived in the United Kingdom and signed a document, under the penalty of perjury, declaring that he was not a U.S. citizen.
According to the information filed, Mr. Hager repatriated some of the funds from his secret bank accounts in Israel and Switzerland by having his attorney draft a sham loan agreement between himself and the BVI entity. The funds were wired from some of his undeclared bank accounts in Israel and Switzerland into the attorney’s escrow account.
During the relevant years, Mr. Hager filed false federal and New York State income tax returns on which he failed to report the income from his bank accounts in Israel and Switzerland and failed to pay tax on that income. It appears that Mr. Hager evaded approximately $652,580 in federal taxes for tax years 2003 through 2005 and 2007 through 2010. Hager also failed to file his FBAR even though an accounting firm had informed Hager of his obligation to do so and advised him of the civil and criminal penalties he could suffer for the failure to do so.
Sentencing for Failure to Disclose Assets and Income from Secret Bank Accounts in Israel and Switzerland
Sentencing has been set for January 4, 2017. Hager faces a statutory maximum sentence of five years in prison, as well as a term of supervised release and monetary penalties. According to the plea agreement, Hager agreed to pay restitution to the IRS. It is not clear if the FBAR penalty has been resolved by the plea.
Secret Bank Accounts in Israel and Switzerland: Lessons from the Hager Case
The Hager Case contains a full range of facts that lead to a criminal prosecution by the DOJ: the use of a sham foreign corporation in a tax shelter, the conscious and intentional effort to conceal the ownership of the funds by closing and opening bank accounts under different names, the failure to report the ownership of secret bank accounts in Israel and Switzerland even after Mr. Hager was advised by his accounting firms about the existence of the FBAR and its penalties, the failure to report the income from accounts, the filing of false tax returns and the repatriation of funds through a sham loan agreement and using his attorney’s escrow account. All of these items are a checklist of things that one should not do in order to avoid a DOJ criminal prosecution.
One interesting aspect of this case is the number of years for which Mr. Hager was charged with tax evasion. Apparently his especially egregious conduct had earned a total of seven years instead of the usual five years of counts of tax evasion. It is also interesting that the year 2006 was skipped in the plea; it is not clear from the plea why this was the case. My supposition is that the omission of the tax year 2006 was related to the statute of limitations concerns.
Contact Sherayzen Law Office for Professional Help with Disclosure of Your Bank accounts in Israel and Switzerland
If you have undisclosed bank account in Israel, Switzerland or any other country, please contact Sherayzen Law Office, Ltd. for help as soon as possible. Attorney Eugene Sherayzen and his highly-knowledgeable team of tax professionals have helped hundreds of U.S. taxpayers around the world to bring their tax affairs into compliance. You can also benefit from their knowledge, experience, creativity and devotion to their clients’ cases by scheduling a Confidential Consultation today!

### Guilty Plea for Hiding Income from Undeclared Panamanian Bank Account
On September 21, 2016, the IRS and the DOJ scored yet another success in their fight against hiding income in Central American banks – Mr. Saul Hyatt pleaded guilty to hiding income from an undeclared Panamanian bank account.
Facts of the Case: Undeclared Panamanian Bank Account
The Hyatt case falls right within the type of cases that the DOJ loves to prosecute. According to documents filed with the court, Mr. Hyatt conspired with another individual in the United States and others to conceal his assets and income derived from the sale of duty-free alcohol and tobacco products. For that purpose, he used a registered Panamanian corporation, Centennial Group, to buy and sell the duty-free products: alcohol and tobacco. The alcohol was shipped through a customs-bonded warehouse in the Foreign Trade Zone in Fort Lauderdale, Florida. The tobacco products (Chinese-brand cigarettes sold under the names “Chung Hwa” and “Double Happiness”) passed through a customs-bonded warehouse in North Bergen, New Jersey.
It was a very successful business and Mr. Hyatt decided to push it further - he decided to make his profits from selling duty-free products tax free. He opened a Panamanian bank account and, between 2006 and 2012, wire transferred $1,627,832 in profits to this account. Mr. Hyatt never declared the Panamanian bank account on his FBARs.
Then, Mr. Hyatt repatriated at least some of the funds from Panamanian bank account to buy a Mercedes Benz SL 550R automobile and to pay for $19,000 in interior design goods and services. It is possible that these transactions allowed the IRS and the DOJ to trace his undeclared Panamanian bank account.
Consequences of Failure to Report US-Source Income and a Panamanian Bank Account
As a result of his tax evasion scheme and his failure to report his Panamanian bank account, Mr. Hyatt faces a statutory maximum sentence of five years in prison as well as a term of supervised release and monetary penalties. He also agreed to file accurate tax returns and to pay the IRS all taxes and income tax penalties owed. In addition, Mr. Hyatt agreed to pay the FBAR penalty for failure to report his Panamanian Bank Account in the amount of $854,465.50 (looks like a 50% penalty on the highest balance).
Lessons from this Case: How an Undeclared Panamanian Bank Account Led to Criminal Investigation
Mr. Hyatt’s case is a typical case that the DOJ designates from a criminal prosecution. We can distinguish four particular features here. First, he earned a large amount of income in the United States and failed to report it. Mr. Hyatt admitted that his scheme resulted in a tax loss of $521,986.
Second and this is the biggest trigger for a criminal prosecution, Mr. Hyatt decided to actively hide his US-source income by transferring it overseas to a Panamanian bank account.
Third and this is a favored IRS instrument to impose large fines and criminal penalties – Mr. Hyatt failed to declare his Panamanian bank account on FBARs. FBAR (the Report of Foreign Bank and Financial Accounts) is the most severe form in terms of its potential penalties for tax noncompliance and Mr. Hyatt felt it right away; even after negotiating his guilty plea, he still agreed to pay the FBAR penalty in the amount of 854,465.50.
In its press release, the DOJ emphasized the importance of that the fact that Mr. Hyatt failed to file his FBARs. “Concealing income and assets offshore is not tax planning,” said Special Agent in Charge Jonathan D. Larsen of IRS-Criminal Investigation, Newark Field Office. “Plain and simple, this is international tax fraud. The facts in this case are clear. Mr. Hyatt earned income through the sale of duty-free alcohol and tobacco products and intentionally had over $1.6 million of profits wired into an undeclared offshore bank account in Panama. Today’s plea shows how determined we are at the IRS and Department of Justice in uncovering this type of international tax fraud and putting a stop to it.”
Sherayzen Law Office has warned a long time ago that the IRS and the DOJ focused their enforcement efforts not only on Switzerland, but also on Central America, particularly on the schemes involving an undeclared Panamanian bank account.
Finally, Mr. Hyatt used a foreign corporation in his scheme to conceal his US-source profits. It is not known at this point whether Form 5471 was filed for the corporation, but it is likely that it was not.
The combination of these four factors – failure to declare US-source income, attempt to conceal it in a Panamanian bank account, failure to file FBARs to declare the Panamanian bank account and the use of a foreign corporation in a tax evasion scheme – is a typical lethal combination of facts that leads the DOJ and the IRS to decide to criminally prosecute a US taxpayer.
Contact Sherayzen Law Office for Legal Help if You Have an Undeclared Panamanian Bank Account
The penalties for FBAR noncompliance are high and include the possibility of incarceration (as Mr. Hyatt’s case demonstrated once again); therefore, time is of the essence to preempt the IRS and the DOJ through a voluntary disclosure. However, time is of the essence.
Therefore, if you have an undeclared Panamanian bank account or a foreign account in any other country, you should contact Sherayzen Law Office as soon as possible. Our experienced legal team, headed by an international tax attorney Eugene Sherayzen, has helped hundreds of US taxpayers around the world and we can help you!

### New York Foreign Trust Tax Lawyer | FATCA IRS Attorney
The residents of New York who are beneficiaries or owners of a foreign trust are likely to find themselves facing a difficult legal situation and various US tax complications. Failure to properly identify and comply with their tax obligations may result in imposition of severe penalties. This is why they need the help of a New York Foreign Trust Tax Lawyer to safely navigate through the numerous tax minefields of US international tax law. In this brief essay, I will explain who is considered to be a New York Foreign Trust Tax Lawyer and why Sherayzen Law Office should be your preferred choice.
New York Foreign Trust Tax Lawyer Definition: Legal Foreign Trust Services Provided in New York
While New York is one of the few states where there is some state component with respect to foreign trusts (though, more indirect), the main focus is still on the federal law and federal tax forms. This means that any international tax lawyer who is licensed to practice in any state of the United states can offer his foreign trust tax services in New York – i.e. the physical presence in New York is not necessary.
Armed with this understanding, we can now turn to the definition of a New York Foreign Trust Tax Lawyer. It obviously includes all of the New York international tax lawyers who reside in New York. However, the definition of a New York Foreign Trust Tax Lawyer is not limited to New York residents; rather, this concept also includes all international tax lawyers who offer their tax services with respect to foreign trust compliance in New York. This means that your lawyer can residence in Minneapolis and still be considered as a New York Foreign Trust Tax Lawyer.
New York Foreign Trust Tax Lawyer Must Be an International Tax Lawyer
In the previous paragraph, I stated “all international tax lawyers who offer their tax services”. This focus on international tax lawyers is not an accident, because the essential requirement for a New York Foreign Trust Tax Lawyer is that he should be an international tax lawyer.
This means that a foreign trust lawyer cannot be just any tax lawyer, but a lawyer who devotes the majority of his practice to US international tax law, who is highly knowledgeable of the international tax law issues directly and indirectly relevant to foreign trust compliance, and who has experience in this area. It is this competence criteria that should govern your selection of a New York Foreign Trust Tax Lawyer.
Sherayzen Law Office Can Be Your New York Foreign Trust Tax Lawyer
Sherayzen Law Office should undoubtedly be your best choice for a New York Foreign Trust Tax Lawyer. Sherayzen Law Office is an international tax law firm which developed a deep expertise in the issues of US international tax compliance, including foreign trusts. Its legal team, headed by Attorney Eugene Sherayzen, has extensive experience concerning all major relevant areas of US international tax law relevant to foreign trust compliance including Form 3520, Form 3520-A, foreign business ownership within a foreign trust, FBAR and FATCA compliance and other relevant requirements. We have helped numerous taxpayers with their foreign trust issues, including situations involving multiple trusts and multiple jurisdictions. We have also helped our clients defend against IRS attempts to make our clients owners of a foreign trusts where, in reality, they were simply beneficiaries.
This is why, if you are looking for a New York Foreign Trust Tax Lawyer, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Streamlined Disclosure Attorney Minneapolis | FATCA OVDP Lawyer
Streamlined Disclosure Attorney Minneapolis is becoming a common search for an individual who is looking for professional help in Minneapolis with his streamlined voluntary disclosure of undeclared foreign assets and foreign income. Let’s analyze this search term – Streamlined Disclosure Attorney Minneapolis – to understand what kind of an attorney fits into this search.
Streamlined Disclosure Attorney Minneapolis Search Covers SDOP and SFOP
First of all, Streamlined Disclosure Attorney Minneapolis search applies to attorneys who help clients with both SDOP (Streamlined Domestic Offshore Procedures) and SFOP (Streamlined Foreign Offshore Procedures). I already explored the both of these options in earlier articles.
Streamlined Disclosure Attorney Minneapolis Search Applies Only to International Tax Attorneys
Second, Streamlined Disclosure Attorney Minneapolis applies only to international tax attorneys. This is the case because both programs, SFOP and SDOP, form part of the IRS voluntary disclosure options which, in turn, form part of the much larger US international tax law practice. Thus, in order to be a Streamlined Disclosure Attorney in Minneapolis, the attorney must be first and foremost an international tax attorney.
What is the practical application of this conclusion? Simple and yet highly important – an attorney who offers SDOP and SFOP services must be knowledgeable in other areas of international tax law, because both of these voluntary disclosure options are highly dependent on the facts of the case and the interpretation of these facts in light of US international tax laws and regulations (including FATCA). Furthermore, SDOP and SFOP are directly concerned with various US international tax forms such as FBAR, Form 8938, Form 5471, Form 3520, Form 8621 and many others.
Hence, a search for Streamlined Disclosure Attorney Minneapolis can easily be replaced by a search for a broader category of International Tax Attorney Minneapolis.
Sherayzen Law Office is a top choice when you search for Streamlined Disclosure Attorney Minneapolis
Sherayzen Law Office Ltd. is an international tax law firm that specializes in all types of offshore voluntary disclosure, including SDOP and SFOP. Our professional tax team, headed by Mr. Eugene Sherayzen, is highly experienced in helping US clients around the globe with their US international tax issues, including voluntary disclosure of foreign accounts and other foreign assets. This why Sherayzen Law Office should be a top candidate when you search for Streamlined Disclosure Attorney Minneapolis.
Contact Us Today to Schedule Your Confidential Consultation!

### Hapoalim Prepares for Settlement with DOJ | FATCA Tax Attorney
On October 6, 2016, Israeli bank Hapoalim Ltd. announced that, in order to cover the costs of a future settlement with the US Department of Justice (DOJ), it will add a $70 million charge to an existing $50 million provision in its third-quarter results. The expected settlement will cover Hapoalim’s role in helping US tax residents to evade their US tax obligations.
In its news release, Hapoalim stated that its representatives held an initial discussion with the DOJ on September 30, 2016, to discuss the future settlement. The bank did not indicate whether $120 million in charges that it booked to date is the actual amount that Hapoalim will pay under its settlement with the DOJ. Rather, the news release emphasizes the uncertainty that still exists with respect to the actual amount.
The issue of the DOJ investigation dates back to the year 2011. In its recent (June 30, 2016) financial statements Hapoalim confirmed that its Swiss subsidiary Bank Hapoalim (Switzerland) Ltd. had been notified by Swiss authorities in 2011 that it was being investigated by the US government as a result of the DOJ’s suspicions that the bank had assisted US clients in evading federal taxes. The Swiss subsidiary could not resolve this issue in 2013 in the DOJ’s Swiss Bank Program due to the fact that it could not be classified as a Category 2 bank.
It is important to remember that the DOJ is not the only institution that is going after Hapoalim. The State of New York is conducting its own review. In its news release, Hapoalim indicated that the $120 million charge is not related to the New York investigation.
While all of this legal uncertainty makes it difficult for Hapoalim to assess its future liability under any deferred prosecution agreement, one can compare its situation with Bank Leumi. In 2014, Bank Leumi Group entered into a Deferred Prosecution Agreement with the DOJ under which it paid $270 million ($157 million of this penalty was allocated to Bank Leumi’s Swiss accounts held by US taxpayers).
If we rely on this precedent, it appears that Hapoalim is greatly underestimating its penalty, because Bank Leumi and Hapoalim are fairly similar in size as well as their actions in soliciting US clients. One also must not forget about the possible future indictments of Hapoalim’s employees (at least in the United States) by the DOJ.

### How IRS Can Get $718 Billion in Tax Revenue | International Tax Lawyer
On October 4, 2016, the US Public Interest Research Group, Citizens for Tax Justice, and the Institute on Taxation and Economic Policy issued a report called “Offshore Shell Games 2016: the Use of Offshore Tax Havens by Fortune 500 Companies”. The report calculates that eliminating all tax deferral on Fortune 500 US companies’ foreign earnings would allow the IRS to collect almost $718 Billion in additional US tax revenue.
Where does the Amount of $718 Billion Come From?
This amazing report targets the estimated $2.5 trillion in offshore earnings which are assumed to be mostly help by the US companies’ foreign subsidiaries in tax havens. The report calculates that the top 30 (meaning top 30 companies by the amount of offshore holdings) of the Fortune 500 companies account for two-thirds of the total, with Apple ($215 billion), Pfizer ($194 billion), and Microsoft ($124 billion) topping the list. It should be noted that some of the other estimates calculate the amount of total offshore earnings of US companies to be in excess of $5 trillion, i.e. double the amount used by the report.
The number of foreign subsidiaries owned by US multinationals is also impressive – the estimate runs as high as 55,000 subsidiaries owned just by Fortune 500 companies. The report states that, although many offshore subsidiaries do not show up in companies' SEC filings, at least 367 of the Fortune 500 companies maintain subsidiaries in tax havens and the top 20 account for 2,509 of those entities. Subsidiaries of US multinationals reported profits of more than 100 percent of national GDP for five tax havens, including 1,313 percent for the Cayman Islands and 1,884 percent for Bermuda.
The most popular country for organizing the subsidiaries remains the Netherlands. However, Ireland, Luxembourg, Switzerland, Bermuda and Cayman Islands closely follow Netherlands in terms of their popularity among US multinationals.
How is $718 Billion Calculated?
The report sets forth its methodology for the calculation of $718 Billion. In essence, the report focuses on the data from 58 Fortune 500 companies to estimate the additional tax all of the companies would owe upon repatriation of funds to the United States. The final tax rate amount to about 28.8% of the repatriated income; the rest (i.e. the difference between the 35% US statutory rate and the 28.8%) is assumed to be the foreign tax rate that the companies will be able to use as a foreign tax credit to offset their US tax liability. Once 28.8% rates is applied to $2.5 trillion, the total amount of additional tax due to the IRS by the Fortune 500 companies is estimated to be close to $718 Billion.
This methodology, however, is not without its flaws. First, as I already referenced above that the amount of funds in foreign subsidiaries may be substantially higher than the estimated $2.5 trillion. Second, the report’s assumption of 6.2% of foreign tax rate may be too generous, especially for foreign companies owned by US persons for generations; in reality, a lot of companies are able to escape all taxation on a substantial amount of their income. Hence, the $718 Billion amount may actually be an understatement.
How Does the Report Propose to Collect the $718 Billion?
The report offers three approaches to the problem of collecting the $718 billion. The first approach is deceptively simple – end all tax deferral. The problem that I see with this approach is that it essentially expands US tax jurisdiction to foreign entities (which are non-resident alien business structures) to the extent that these entities automatically become US persons as soon as any US person becomes an owner of all or any part of them. In addition to the obvious legal problems with such an approach, there is also a potential to create a real chilling effect to US activities overseas. At the very least, the proposed course of action should be modified to include only controlled foreign entities and large US corporations.
The second approach is less radical; the report suggests tighter anti-inversion rules, elimination of the check-the-box election and the elimination of aggressive tax planning through intellectual property transfers. While many of these rules may be effective to combat future aggressive tax planning, they are unlikely to influence the current IRS inability to collect the $718 billion in additional tax revenue.
Finally, the report also lends support to the Obama administration's (which is actually not a resurrection of older proposals) tax proposal to treat as subpart F income excess profits earned by a controlled foreign corporation from US-developed intangibles. The administration’s proposal is to expand the definition of Subpart F income to all excess income taxed at 10% or less (later expanded to 15%) would be included in subpart F. While a sensible proposal, it also seems to fall short of the expected $718 billion in additional tax revenue.
Also, it seems strange that all of the proposals seems to put foreign companies owned by small US firms and those owned by large US firms on the same footing. This kind of seemingly non-discriminatory approach has had a disproportionally heavy impact on small US firms’ ability to conduct business overseas due to lower resources that small firms can devote to the same type of tax compliance as that required of the Fortune 500 companies. 

### IRS FBAR Audit and IRC Section 6103 | FBAR Tax Attorney Minneapolis
This article explores a certain relationship between tax returns and an IRS FBAR Audit. In particular, the critical question that I seek to answer in this writing is when the IRS is able to use US tax returns as evidence to support and/or commence an IRS FBAR Audit.
IRS FBAR Audit and the IRS Examination of US tax Returns
In discussing the relationship between the US tax returns and IRS FBAR Audit, the focus is on the information uncovered by the IRS during the examination of US tax returns that may be used to commence or advance an IRS FBAR Audit. It is possible, however, for the IRS to use a taxpayer’s tax returns in other contexts, not just examinations, to further an IRS FBAR Audit.
In a previous article, I already discussed the enormous amount of useful information that US tax returns contain and that can be used by the IRS to commence an IRS FBAR Audit. In addition to the obvious Schedule B, the tax returns contain foreign income documents, tax fraud evidence, patterns of noncompliance and other useful evidence that can be used in an IRS FBAR Audit.
This means that, in a lot of cases, there is a direct relationship between tax returns and the subsequent IRS FBAR Audits.
Tax Return Confidentiality Under IRC §6103(a) Prevents Automatic Disclosure for the IRS FBAR Audit Purposes
Despite their utility, there is one problem with the ability of the IRS to use tax return information in an IRS FBAR audit – US tax return information is confidential and protected from disclosure under IRC (Internal Revenue Code) §6103(a). This protection extends to the disclosure of tax returns and tax return information within the IRS, especially for use in investigating a Bank Secrecy Act (“BSA”) violation. Why are we discussing the BSA? The reason is simple – BSA is the legislation that created FBAR.
In other words, the tax return information (which is collected under U.S.C. (United States Code) Title 26 cannot be automatically shared within the IRS for the purposes of Title 31 FBAR violation. Rather, the IRS has to find a legal justification for the disclosure of this information. The usual proper statutory basis for this justification can be found in IRC §6103(h).
IRC §6103(h) and Authorization to Share Tax Return Information for the IRS FBAR Audit Purposes
The exploration of §6103(a) exceptions under §6103(h) leads us into a complicated world of tax analysis. I will try to simplify this analysis while reducing as much as possible the risk of leaving out important details.
In general, under IRC §6103(h), disclosure of returns and return information is authorized without written request to officers and employees of the Treasury Department as long as these officers’ and employees’ official duties require such disclosure for tax administration purposes. “Tax administration” is a term of art in this context – it is a fairly broad term that covers the administration, management and supervision of the Internal Revenue Code and “related statutes”, including assessment, collection and enforcement under the IRC and these “related statutes.” See §6103(b)(4).
The key question then is whether BSA is a “related statute”. If it is, then the IRS employees can use tax return and return information to commence an IRS FBAR Audit.
IRS FBAR Audit: Is BSA a “Related Statute”?
From the outset, it is important to emphasize that the IRS does not treat BSA as a “per se” related statute, because BSA reports are required a variety of purposes, not just tax compliance. For example, FBARs can be used for such government purposes as counter-terrorism, money-laundering investigations and law enforcement in general.
Therefore, the IRS will deem the BSA as a related statute only if there is a good-faith determination that a BSA violation was committed in furtherance of a Title 26 violation or if such violation was part of a patter of conduct that violated Title 26. See IRM 4.26.14.2.3 (07-24-2012). In lay terms, the FBAR violation has to be related to a tax violation in order for the IRS to be able to utilize the taxpayer’s tax returns and tax return information in an IRS FBAR Audit.
Unfortunately, there is no clear-cut straightforward answer to when the FBAR is related to a tax violation. Rather, this determination should be made based on the facts and circumstance of each case.
IRS FBAR Audit vs. DOJ Criminal Investigation: IRC §6103(i)
It is important to emphasize that the “related-statute” limitation applies only to IRS examiners in a civil IRS FBAR Audit. If, however, a taxpayer is the subject of a criminal Department of Justice (“DOJ”) grand jury investigation, then the DOJ prosecutors are not subject to §6103(h). Instead they can use §6103(i) to access the taxpayer’s tax returns and tax return information.
Contact Sherayzen Law Office for Professional Help with an IRS FBAR Audit
If you are subject to an IRS FBAR Audit, contact Sherayzen Law Office as soon as possible for professional help. Without proper representation, an IRS FBAR Audit can lead to disastrous consequences to the taxpayer’s financial life due to imposition of the draconian FBAR Penalties.
Our experienced and highly-knowledgeable legal team, headed by Mr. Eugene Sherayzen, can help you! Contact Us Today to Schedule Your Confidential Consultation!

### First Colombia-US Tax Treaty is Almost Ready | International Tax Lawyer
The first Colombia-US Tax Treaty nears the final stage of negotiations. This announcement was made on September 28, 2016, in Bogota, Colombia, by Colombian Finance Minister Mauricio Cardenas and U.S. Treasury Secretary Jacob Lew (the details of the meeting were published on the Colombian president’s website).
Despite the fact that United States and Colombia already signed a tax information exchange agreement on March 30, 2001, the two countries still do not have an income tax treaty that would protect its citizens and business from the effect of double-taxation.
There are a lot of expectations that the first Colombia-US Tax Treaty will benefit individuals and business in both countries. “La negociación de un tratado de doble tributación entre Colombia y Estados Unidos está cerca del fin, esperemos avanzar para lograr algo que los empresarios colombianos y los empresarios norteamericanos desean, al igual que muchos colombianos que dividen sus actividades entre los dos países”, said Mr. Cárdenas.
It is also possible that, upon ratification of the first Colombia-US Tax Treaty the Colombians who live in the United States and have businesses in Colombia will finally be able to benefit from the long-term capital gains tax rates that apply to qualified foreign dividends.
Of course, there is a still a long way to go for the first Colombia-US Tax Treaty. Even after the negotiations are successfully concluded and finalized, the first Colombia-US Tax Treaty will need to be signed and ratified by both countries before it enters into force. While it is reasonable to expect a relatively fast ratification in Colombia, the United States is a completely different story. Treaties can languish in the United States Senate for years before they are even considered.
Furthermore, Mr. Cárdenas and Mr. Lew may not have sufficient time to conclude the current negotiations. Before they may be done, a new president may be elected in the United States and he may take a different to negotiating with Colombia. If this happens, the conclusion of the negotiations and the ratification of the first Colombia-US Tax Treaty may be postponed even further into the future.
Sherayzen Law Office will continue to observe the situation surrounding the first Colombia-US Tax Treaty.

### Poland AEOI Rules Still Not Implemented | FATCA Lawyers
On September 29, 2016, the European Commission announced that it had asked Poland to fully implement into its domestic law Council Directive 2014/107/EU on mutual assistance in income and capital taxation matters (which amends the earlier Directive 2011/16/EU on mandatory automatic exchange of information between member states). The request came in after the realization that Poland AEOI Rules were still not implemented despite the deadline.
Poland AEOI Rules Implementation, CRS and Council Directive 2014/107/EU
After the United States adopted Foreign Account Tax Compliance Act (FATCA) into law, the OECD (including the European Union) created the Common Reporting Standard (CRS) which established the standard for what type of information needs to be automatically exchanged between signatory countries. AEOI is essentially the practical application of the CRS.
In December 2014, the EU Council adopted Directive 2014/107/EU, which extended cooperation between tax authorities to automatic exchange of financial account information (i.e. AEOI) and expanded the scope of information to be exchanged on an automatic basis to include interest, dividends, and other types of income. Virtually all countries, except Poland and Portugal, have implemented the directive on AEOI
The Delays in Poland AEOI Rules Implementation
In reality, Poland, like other member states, were requires to implement the directive into their national laws by January 1. According to Tax Analysts, the European Commission already sent a formal notice to Poland on January 27, 2016. Then, it send another formal notice in March of 2016. At that time, Poland replied that the government was working on transposing Directive 2014/107/EU into national law.
However, Poland AEOI Rules still have not been implemented. What is worse, it appears that the Polish government has taken no concrete steps into that direction. Poland also has yet to fully inform the Commission of its plans to meet that requirement.
What Happens if Poland AEOI Rules Implementation Stalls
While the latest Commission action comes at a difficult time in Poland (on September 28, 2016, Polish Prime Minister Beata Szydlo sacked Finance Minister Pawel Szalamacha), it may not save Poland from later EU actions. If Poland does not respond in a satisfactory manner within the next two months, the Commission may refer Poland to the Court of Justice of the European Union.

### Seattle FBAR Attorney | FATCA International Tax Lawyer
Due to Seattle’s proximity to Canada and a large amount of foreign professionals employed by high-tech firms (especially Microsoft), there is a large number of residents of Seattle, Washington, who have an obligation to report their foreign accounts. The great majority of these people need the assistance of professional Seattle FBAR attorney, but they find it difficult to decide who to retain. Often, they find that the attorney who they like lives outside of Seattle (for example, in Minneapolis) and they are not sure if they should prefer him over local Seattle FBAR Attorneys. This short essay is devoted to defining the term Seattle FBAR Attorney and the description of the main criteria which should guide you in retaining your Seattle FBAR Attorney.
Seattle FBAR Attorney: Definition
The term Seattle FBAR Attorney includes two groups of FBAR attorneys. First, all of the FBAR Attorneys who reside in Seattle, Washington, should be considered Seattle FBAR Attorneys.
The second group includes all FBAR Attorneys who reside outside of Seattle but offer their FBAR services to the residents of Seattle. Hence, the geographical location of your FBAR Attorney does not actually matter, only the geographical scope of his FBAR services.
Why is this case? The answer is relatively simple – FBAR is a federal compliance requirement. This means that neither the State of Washington nor the city of Seattle have anything to do with it.
Seattle FBAR Attorney: Knowledge of International Tax Law and FBARs is the Key Criteria for Retainer
Now that we know who is considered to be a Seattle FBAR Attorney, we can turn to the key criteria for choosing the right Seattle FBAR Attorney. There are two main considerations in choosing your FBAR Attorney: professional and personal.
The professional criteria consists of the requirement that your Seattle FBAR Attorney be an international tax lawyer with a lot of experience working with FBAR and FBAR-related issues. It is not enough for your attorney to simply know what FBARs are and how to prepare them. FBAR issues are often deeply intertwined with other US international tax requirements that determine a taxpayer’s legal and tax positions. Therefore, your Seattle FBAR Attorney must have profound knowledge of other related international tax law issues, regulations and compliance requirements.
In addition to the knowledge of the subject-matter (i.e. “objective criteria”), there is also a subjective criteria – do you feel he is devoted to your case? The issue of trust is the most important consideration here – both the client and the attorney will feel frustrated with the case if there is a deep distrust between them. This distrust may have a great influence on the outcome of the case.
Thus, in retaining your Seattle FBAR Attorney, you need to be looking for an international tax attorney who satisfies both criteria.
Seattle FBAR Attorney: Means of Communication is Not an Issue
Is there a difference between the ability to communicate with an out-of-state Seattle FBAR Attorney and a local one? Should this issue become part of the retainer criteria?
The answer is “no”: the objective ability to communicate (i.e. the availability of the modes of communication, rather than an attorney’s personal attitude toward communicating with a client) is not an issue in retaining a Seattle FBAR Attorney. The development of modern communications technology has eliminated the entire advantage of retaining a local Seattle FBAR Attorney. Even if your attorney resides in Seattle, almost all of your communication with him is going to be through email, telephone and regular mail – i.e. the same as if your attorney resides in Minneapolis. The person-to-person meetings are now easily replaced by a video Skype conference.
Obviously, personal subjective ability (i.e. availability and readiness to communicate with his clients) of a Seattle FBAR Attorney (irrespective of where he actually resides) to communicate with his clients is part of the subjective criteria for the retainer already discussed above.
Contact Sherayzen Law Office to Retain Your Seattle FBAR Attorney
Based on the analysis above, Sherayzen Law Office should be one of the preferred choices in your search for a Seattle FBAR Attorney. Sherayzen Law Office holds a leading position in the world on FBAR compliance due to its highly-experienced international tax team, headed by its founder Attorney Eugene Sherayzen. We have helped our clients throughout the world with FBAR compliance and all related international tax issues, including voluntary disclosure of foreign accounts under the IRS Offshore Voluntary Disclosure Program, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause Disclosures (also known as “noisy disclosures”).
This is why, if you are looking for a Seattle FBAR Attorney, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Houston FBAR Lawyer | FATCA Tax Attorney
The main thesis of this essay is that the designation of a Houston FBAR Lawyer should be applied based on the geography of services of an FBAR lawyer rather the physical location of a lawyer.
Houston FBAR Lawyer Definition: Legal FBAR Services Provided in Houston, Texas
The old designation where a Houston FBAR Lawyer designation was limited only to lawyers who reside in Houston was incorrect from the very beginning for two reasons.
First, it was based basically on the premise that an out-of-state lawyer cannot effectively provide any legal services to a client who resides in Houston, Texas. Perhaps, to a certain degree, this premise could have been applicable to the time when there were no telephones, emails or other forms of modern communication. However, since the appearance of telephone and Internet-based communications, a modern lawyer can provide services efficiently and effectively at almost any point around the globe as long as he is licensed to do so. Even the face-to-face meetings can now be replaced with video conferences over the Internet (for example, video Skype conferences).
Second, some credence should be given to this old designation in situation where the subject matter is based on local Texas law or required appearance in a Texas court. In these situations, a local attorney indeed appears to have an advantage over an out-of-state attorney (although, even this advantage may be nullified if this is a one-time court appearance or the out-of-state attorney is actually licensed to practice in the State of Texas).
However, a Houston FBAR lawyer deals strictly with just federal subject-matter, because FBAR is a federal law and any US international tax lawyer can practice it irrespective of his physical location as long as this attorney is licensed to practice law in any of the 50 states or District of Columbia. This means that, as long as an international tax lawyer offers his legal FBAR services in Houston, he should be considered a Houston FBAR lawyer even if he resides in Minneapolis.
Houston FBAR Lawyer’s Knowledge of US International Tax Law is the Key Factor
While the physical location of a lawyer is not important in determining whether he is a Houston FBAR lawyer, it is necessary that this lawyer be an international tax lawyer experienced in FBAR issues.
This emphasis on competence in US international tax law is based on the fact that FBAR is just a part of a much bigger area of US international tax law. In fact, the FBAR and international tax law are so completely interrelated this interaction between FBAR and other international tax issues is crucial to determining a taxpayer’s legal position. This is why your Houston FBAR lawyer should have a profound understanding of both FBARs and all other relevant US international tax compliance requirements.
Sherayzen Law Office Should Be Your Houston FBAR Lawyer
Sherayzen Law Office is a highly experienced international tax law firm with profound knowledge of FBARs and all other relevant US international tax compliance requirements. Our team consists of highly-experienced international tax professionals headed by the founder of the firm, attorney Eugene Sherayzen. We have helped hundreds of US taxpayers worldwide with their FBAR issues and we can help you!
This is why, if you are looking for a Houston FBAR lawyer, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### France Asks Switzerland for Names of UBS Accountholders
This is an international tax lawyer news update: on September 26, 2016, Swiss tax officials confirmed that France asked Switzerland to provide the names of the holders of more than 45,000 UBS bank accounts. The request covers years 2006-2008.
Le Parisien newspaper, which first published extracts from the French request that the combined balance in the affected accounts exceeded CHF 11 billion (around $ 11.4 billion.). Le Parisien, which did not disclose how it gained access to the letter, also said the French authorities were able to identify the holders of 4,782 accounts.
The French request came to light after, on September 12th 2016, the Swiss Supreme Court over-ruled the lower court’s rejection of a similar request from the Netherlands for financial details of Dutch residents with accounts at UBS. Despite the Netherlands’ success, doubts still remain about the viability of the French request due to the fact that article 28 of the France-Switzerland tax treaty of 1967, as modified in 2010, provides that accounts that were closed before 2010 are not covered by the agreement and, therefore, should not be subject to information exchange.

### Madison Foreign Trust Lawyer | International Tax Attorney
If you are a US beneficiary or a US owner of a foreign trust and you reside in Madison, Wisconsin, you need the help of an experienced Madison Foreign Trust Lawyer to properly comply with complex US tax reporting requirements regarding foreign trusts and avoid paying very high penalties. Who should you consider retaining as your Madison Foreign Trust Lawyer?
Definition of a Madison Foreign Trust Lawyer: Legal Services Provided in Madison, Wisconsin
First, you want to consider only international tax law firms that offer their services related to foreign trust compliance in Madison, Wisconsin. Note the important language here: “offer their services ... in Madison”. Offering services in Madison is not equivalent to residing in Madison.
This means that the definition of a Madison Foreign Trust Lawyer includes not only international tax lawyers who live in Madison, but also lawyers who reside elsewhere (for example, Minneapolis) and offer their services in Madison. It should be, however, a lawyer is licensed to practice law in any of the 50 states or District of Columbia.
Why is the residence not important when it comes to defining who is a Madison Foreign Trust Lawyer? The answer is rather simple – foreign trust law is mainly federal and the high-penalty tax forms are also federal. This means that, unlike situation which concern local law, the input of Madison or even Wisconsin law is very small and, in most situations, none. Since the focus is on the federal tax compliance, the physical residence of your foreign trust lawyer does not matter.
Madison Foreign Trust Lawyer Must Be an Experienced International Tax Lawyer
Now that you know that you can choose your Madison Foreign Trust Lawyer from a larger pool of lawyers and without any geographical limitations, we can turn to the second retainer criteria – a Madison Foreign Trust Lawyer should be an international tax lawyer who is experienced in the are of foreign trust compliance laws and regulations.
A foreign trust lawyer should be aware of all areas of US international tax law that are directly and indirectly relevant to foreign trusts in order to properly help his clients. He should know the foreign trust classification, foreign trust compliance (including Form 3520), foreign trust income reporting, FATCA issues, the rules concerning indirect ownership of foreign assets through a foreign trust and many other relevant issues. Thus, the competence of your lawyer in the area of foreign trusts should be the most important criteria in your selection of an Madison Foreign Trust Lawyer.
Sherayzen Law Office Should Be Retained as Your Madison Foreign Trust Lawyer
Under this criteria, Sherayzen Law Office should be a top choice for your Madison Foreign Trust Lawyer. Led by its founder and international tax attorney Eugene Sherayzen, this firm is one of the leading experts in the field of foreign trust US tax compliance and planning. Not only does it boast a higher devoted and experienced legal team with extensive knowledge of all major relevant areas of US international tax law (including Form 3520, Form 3520-A, PFIC compliance, FATCA, FBAR and other relevant requirements), but it has also helped its clients with foreign trust voluntary disclosures in cases where its clients did not timely and/or correctly complied with the numerous US tax reporting requirements. Sherayzen Law Office has also defended its clients against the IRS attempts to make its clients owners of a foreign trusts where, in reality, they were simply beneficiaries.
This is why, if you are looking for an Madison Foreign Trust Lawyer, you should contact Sherayzen Law Office today to schedule Your Confidential Consultation!

### IRS FBAR Audits Caused by Tax Returns | FBAR Audit Lawyer
IRS FBAR Audits can lead to catastrophic consequences for noncompliant US taxpayers. While there may be a numbers of factors that influence the IRS decision to commence such an audit, one of the leading sources of the IRS FBAR Audits are the US tax returns. In this article, I would like to explore the main types of documents that the IRS is searching for during a tax return examination in order to uncover the information that may lead to the commencement of IRS FBAR Audits (I will not discuss here the right of the IRS to disclose US tax return information for Title 31 FBAR Audit; this topic is reserved for a subsequent article).
IRS FBAR Audits and IRS Title 26 Examinations
From the outset, it should be made clear that filing of US tax returns does not automatically lead to IRS FBAR Audits. Rather, a great percentage of the IRS FBAR Audits arise from the IRS Title 26 Examinations of these returns– i.e. IRS examinations and audits of US tax returns pursuant to the various provisions of the Internal Revenue Code. During these examinations, the IRS analyzes the audited tax returns and may uncover information related to FBAR non-compliance which usually serves as a cause of the subsequent FBAR audit.
Tax Return Information that May Trigger IRS FBAR Audits
So, what kind of evidence is the IRS looking for that may trigger IRS FBAR audits? First and most logical is Schedule B, particularly looking at whether box in Part III (which has questions related to foreign accounts and foreign trusts) is checked. If there is a discrepancy between the information provided to the IRS and Schedule B, this may lead to IRS FBAR Audits.
Second, foreign income documents from the tax examination administrative case file (which includes the Revenue Agent Reports). Here, the IRS is looking for income related to foreign bank and financial accounts that was not reported. A combination of unreported foreign income and undisclosed foreign accounts is precisely the toxic mix that lays the foundation for IRS FBAR Audits.
Third (and this is a very interesting strategy), copies of tax returns for at least three years before the opening of the offshore account and for all years after the account was opened, to show if a significant drop in reportable income occurred after the account was opened. The analysis of the returns for three years before the opening of the account would give the examiner a better idea of what the taxpayer might have typically reported as income before the foreign account was opened. This strategy shows just how analytical and creative the IRS can be in looking for cases that should be subject to IRS FBAR Audits.
Fourth, copies of any prior Revenue Agent Reports that may show a history of noncompliance. This strategy confirms once again the notion that a large history of noncompliance may lead to more frequent IRS examinations, including IRS FBAR Audits.
Fifth, IRS is also looking into “cash accounting’ - two sets of cash T accounts (a reconciliation of the taxpayer's sources and uses of funds) with one set showing any unreported income in foreign accounts that was identified during the examination and the second set excluding the unreported income in foreign accounts.
Finally, the IRS makes a connection between tax fraud and FBAR noncompliance - the IRS is looking at any documents that would support fraud in commencing IRS FBAR Audits. Such documents include: false explanations regarding understated or omitted income, large discrepancies between actual and reported deductions of income, concealment of income sources, numerous errors which are all in the taxpayer’s favor, fictitious records or other deceptions, large omissions of certain types of income (personal service income, specific items of income, gambling winnings, or illegal income), false deductions, false exemptions, false credits, failure to keep or furnish records, incomplete information given to the return preparer regarding a fraudulent scheme, large and frequent cash dealings that may or may not be common to the taxpayer’s business, and verbal misrepresentations of the facts and circumstances.
Of course, the IRS is not limited to these six types of tax return documents; however, this is the most common evidence that the IRS uncovers during a tax return examination that may lead to subsequent IRS FBAR Audits.
Contact Sherayzen Law Office for Legal Help with IRS FBAR Audits
If you are subject to an IRS FBAR Audit or a tax return examination that involves foreign assets and foreign income, or you have undisclosed foreign assets and you are looking for a way to bring your legal situation into compliance with US tax laws, then contact the international tax law firm of Sherayzen Law Office, Ltd. Sherayzen Law Office is one of the best law firms in the world dedicated to helping US taxpayers with foreign assets and foreign income. Our highly experienced team of tax professionals, headed by an international tax attorney Eugene Sherayzen, provides effective, knowledgeable and reliable legal and tax help to its clients throughout the world, and we can help you deal with any IRS problem.
Contact Us Today to Schedule Your Confidential Consultation!

### 4th Quarter 2016 Underpayment and Overpayment Interest Rates
On September 14, 2016, the IRS announced that the 4th Quarter 2016 underpayment and overpayment interest rates will remain the same.  This means that, the 4th quarter 2016 IRS underpayment and overpayment interest rates will be as follows:
four (4) percent for overpayments (two (3) percent in the case of a corporation);
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code (IRC), the interest rates are determined on a quarterly basis; for taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The IRS underpayment rates are especially important for US taxpayers who participate in the OVDP or a voluntary disclosure under the Streamlined Domestic Offshore Procedures. This is the case because the IRS underpayment rates are used to calculate the interest charged on any tax due as well as PFIC interest (default Section 1291 PFICs) on any excess distributions.
The IRS interest rates remained at 3% for from the 4th quarter of 2011 through the first quarter of 2016. However, in the second quarter of 2016, the IRS raised the interest rates from 3% to 4% following the increase of the federal short-term rate. The recent 4th Quarter 2016 IRS rates remain the same as in the second and third quarters of 2016. However, the situation may change in the 1st quarter of 2017 if the Federal Reserve raises its rates either in September or December of 2016.

### Ignorance of the Law and Reasonable Cause Exception
Ignorance of the Law forms part of a much broader Reasonable Cause Exception which is almost a universal defense against the imposition of IRS civil penalties. Ignorance of the Law is often utilized as a defense against the US international tax information return penalties, including penalties envisioned under FBAR, Form 8938, Form 5471, Form 8865, et cetera. In this article, I would like provide a general description for the Ignorance of the Law defense.
It is important to remember that the application of the Ignorance of the Law defense depends on the specific circumstances of your case and nothing in this article should be interpreted as a legal advice. Rather, you need the help of an experienced tax attorney to determine whether the Ignorance of Law defense applies to your case.
Ignorance of the Law Defense Legal Test
Ignorance of the Law may provide the basis for an effective reasonable cause defense in situations where a taxpayer does no know about his obligations to comply with a tax requirement in question and/or pay taxes. However, the ignorance by itself is not sufficient to establish a reasonable cause; other circumstances must be reviewed in order to determine whether all or the requirements of this defense’s legal test are satisfied.
The legal test for the Ignorance of the Law defense requires that three requirements are satisfied in order the for taxpayer’s conduct to satisfy the reasonable cause exception:
1). The taxpayer was not aware of the tax requirement in question;
2). The taxpayer could not reasonably be expected to know of the requirement; and
3). The taxpayer’s conduct satisfied the “ordinary business care and prudence” standard.
Oftentimes, the second and the third requirement are blended into the same analysis. This is why I now turn to the examination of the ordinary business care and prudence standard for the purposes of the Ignorance of the Law defense.
Ignorance of the Law and Ordinary Business Care and Prudence Standard
Ordinary Business Care and Prudence Standard is a requirement present in all reasonable cause defenses. With respect to the Ignorance of the Law defense, the ordinary business care and prudence standard requires that a taxpayer acts in good faith, reasonably and attempts to determine his tax obligations. This means all of the relevant circumstances must be reviewed before the determination is made whether the taxpayer’s conduct satisfied the ordinary business care and prudence standard.
The precise circumstances that need to be considered depend on the particular facts of a case. Some of the common factors include: the taxpayer’s education, his tax advisors (including what information the taxpayer supplied to his tax advisors, whether he has been previously subject the tax at issue, whether he has filed the tax forms in question before, whether he has been penalized before with respect to the issue at hand, whether there any changes to the tax forms or tax law (which the taxpayer could not reasonably be expected to know), the level of complexity of the issue in question, et cetera.
Contact Sherayzen Law Office for Professional Help with Your Ignorance of the Law Reasonable Cause Defense
If you were penalized by the IRS with respect to a tax requirement and you did not know about this requirement, contact Sherayzen Law Office for professional and experienced legal help. We have helped taxpayers around the world to successfully reduce and even entirely eliminate penalties based on the reasonable cause defense that often stemmed from our clients’ ignorance of relevant tax requirements. We can also help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Boulder FBAR Lawyer | Offshore Accounts Tax Attorney
The definition of a Boulder FBAR Lawyer is much broader than many people believe. In this brief essay, I would like to explain who is considered to be a Boulder FBAR Lawyer and why you should retain the services of Sherayzen Law Office, Ltd. for professional help with your FBAR issues.
Boulder FBAR Lawyer Definition: Legal FBAR Services Provided in Boulder, Colorado
Obviously, the definition of a Boulder FBAR lawyer includes all FBAR lawyers who are physically located in Boulder, Colorado, and offer services there. However, this definition also includes every international tax lawyer who offers FBAR services in Boulder, Colorado,
This is the case because FBAR is a creation of federal law, not state law. This means that, irrespective of his physical location, an international tax lawyer can provide his FBAR services in Boulder as long as he is licensed to practice law in any of the 50 states or District of Columbia. What is really important is the competence and experience of an international tax lawyer, not his residence in Boulder.
Boulder FBAR Lawyer’s Knowledge of US International Tax Law is the Key Factor
Indeed, the competence of a lawyer should be the key factor in retaining the services of a Boulder FBAR lawyer. The level of competence of an FBAR lawyer depends on his knowledge of and the experience in US international tax law in general and FBARs specifically.
Why this emphasis not just on FBARs, but competence in US international tax law? First, FBAR forms just a part of a much bigger area of US international tax law. Second, in almost all cases, the FBAR issues are related to and often depend on other international tax compliance requirements (e.g. foreign income determination). In fact, the interaction between FBAR and other international tax issues is a major factor that determines a taxpayer’s legal position. This is why your Boulder FBAR lawyer should have a profound understanding of both FBARs and US international tax law in general.
Boulder FBAR Lawyer: Out-of-State Ability to Communicate is Not a Problem
Some readers may wonder why I emphasize the competence as a key factor in retainer of a Boulder FBAR lawyer and ignore the ease-of-communication considerations. It seems that some persons still cling to an obsolete belief that it would be more convenient to communicate with a local Boulder FBAR lawyer rather than an out-of-state one.
This is a flawed belief that I have been battling for a long time now. There are two reasons for why the communications factor no longer depends on the actual residence of your Boulder FBAR lawyer. First of all, the development of modern means of communications completely resolved the communications issues of the earlier centuries. Email, Video Skype Conferences, telephone and text messages make your out-of-state Boulder FBAR lawyer as equally accessible as your local Boulder FBAR lawyer.
Second, in reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail. Your local Boulder FBAR lawyer simply would not have the time to meet with you every time he needs to communicate something to you. Moreover, given the large amount of issues that often arise with respect to FBARs, personal meetings on every issue would simply make the case too expensive and inconvenient.
There is one additional point that is worth making here. While the geography of your Boulder FBAR lawyer does not matter, it is important that the lawyer is accessible to you and you can communicate with him on the progress of the case. However, this is a retainer factor that is highly personal to each lawyer.
In my case, my clients have no problems communicating with me; most of the time I will be able to respond before the end of the day and, often, immediately.
Sherayzen Law Office is Your Preferred Choice for Your Boulder FBAR Lawyer
Sherayzen Law Office is a highly experienced international tax law firm with profound knowledge of FBARs. We have been helping our clients worldwide with their FBAR issues for a very long time; in fact, we are one of the few firms which advised clients with respect to all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP and Streamlined Procedures (Domestic and Foreign). We can help you!
This is why, if you are looking for a Boulder FBAR lawyer, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### US–Hungary Totalization Agreement Enters Into Force
On September 1, 2016, the US–Hungary Totalization Agreement entered into force. In this article, I will briefly discuss the main benefits of this Agreement to US and Hungarian nations.
US–Hungary Totalization Agreement: What is a Totalization Agreement?
The Totalization Agreements are authorized by Section 233 of the Social Security Act for the purpose of eliminating the burden of dual social security taxes. In essence, these are social security agreements between two countries that protect the benefit rights of workers who have working careers in both countries and prevent such workers and their employers from paying social security taxes on the same earnings in both countries.
Usually, such a situation arises where a worker from country A works in Country B, but he is covered under the social security systems in both countries. In such cases, without a totalization agreement, the worker has to pay social security taxes to both countries A and B on the same earnings.
US–Hungary Totalization Agreement Background
The US–Hungary Totalization Agreement was signed by the United States and Hungary on February 3, 2015 and entered into force on September 1, 2016. This means that Hungary now joined 25 other countries – Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, South Korea, Spain, Sweden, Switzerland and the United Kingdom – that have similar Totalization Agreements with the United States.
US–Hungary Totalization Agreement: Key Provisions
There are three key provisions of the US–Hungary Totalization Agreement which are relevant to Hungarian and US workers. First, protection of workers’ benefits and prevention of dual taxation. US workers who work in Hungary and are already covered under Hungarian social security system should be exempt from US social security payments, including health insurance (under FICA and SECA only), retirement insurance, survivors and disability insurance contributions. However, US–Hungary Totalization Agreement does not apply to the Medicare; US employees must still make sure that they have adequate medical insurance coverage. Similarly, Hungarian workers who work in the United States and are already covered by the US social security system should be exempt from Hungarian social security taxes.
The second key provision of the US–Hungary Totalization Agreement provides for a Certificate of Coverage. The Certificate can be used by an employee to remain covered under his home country’s social security system for up to 60 months. Additional extensions are possible upon approval by the host country.
Finally, under the US–Hungary Totalization Agreement, workers may qualify for partial US benefits or partial Hungarian benefits based on combined (or “totalized”) work credits from both countries. This means that, where there is insufficient number of periods (or credits in the United States) to claim social security benefits, the periods of contributions in one country can be added to the period of contributions in another country to qualify to these benefits.
Contact Sherayzen Law Office for US Tax Issues Concerning Hungarian Assets and Income
If you have foreign accounts and other assets in Hungary and/or income from these Hungarian assets, contact Sherayzen Law Office for professional help. We have helped hundreds of clients throughout the world, including in Hungary, with their US tax issues and we can help you!

### Miami FBAR Lawyer | Foreign Accounts Tax Attorney
Are you looking for a competent Miami FBAR Lawyer to help you with the filing current or delinquent FBARs? Then, you need to understand who is considered to be a Miami FBAR Lawyer and why you should retain the services of Sherayzen Law Office, Ltd. - an international tax law firm that provides FBAR services to Miami residents.
Miami FBAR Lawyer Definition: Legal FBAR Services Provided in Miami, Florida
The definition of a Miami FBAR lawyer is determined based on the geographical spread of a lawyer’s legal services (i.e. where a lawyer offer his legal services) rather than his physical presence. This means that as long as a lawyer offers his FBAR services in Miami, Florida, he will be regarded as a Miami FBAR lawyer.
The reasoning for this definition is rather straightforward – FBAR is a creation of federal law, not state law. This means a lawyer can provide his services in Miami in the area of US international tax law and specifically FBARs irrespective of his actual location (but as long as he is licensed to practice law in any of the 50 states or District of Columbia).   Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. is an excellent example of such a lawyer -he is physically located in Minneapolis, but successfully provides FBAR services to its clients who reside in Miami.
What are these FBAR services? Mr. Sherayzen helps his clients with current (on-going) FBAR compliance as well as FBAR voluntary disclosures in cases where his clients did not timely comply with their required FBAR filings.
Miami FBAR Lawyer Must Be an International Tax Lawyer
Unlike location, the competence of a lawyer should be the key factor in retaining the services of a Miami FBAR lawyer. The knowledge of FBARs and US international tax law should be the key consideration in this matter.
Why is competence in US international tax law so important? Two Reasons. First, FBAR forms part of a much bigger area of US international tax law. Second, in almost all cases, the FBAR issues are highly related to other international tax compliance requirements. In fact, the interaction between FBAR and other international tax issues is one of the main considerations that determines a taxpayer’s legal position. This is why your Miami FBAR lawyer should be an expert not just FBARs, but US international tax law in general.
Miami FBAR Lawyer: the Local Ease-of-Communication Myth
There is a substantial minority of persons who prefer, in spite of all of the factors in favor of a, for example, Minneapolis-based Miami FBAR lawyer (better knowledge of the FBARs and international tax law, higher experience and sometimes even better fee structure), to retain a local Miami FBAR lawyer mainly due to their belief that it would easier to communicate and control a local lawyer.
This belief is nothing more than an illusion and can be highly harmful to a person’s case. First of all, the development of modern means of communication completely erase any purported advantages of ease of communication with a lawyer in your town. Email, Video Skype Conferences, telephone and text messages make your out-of-state Miami FBAR lawyer at least as equally accessible as your local Miami FBAR lawyer.
Second, it is simply naive to believe that your local lawyer will be meeting with you every day while the case lasts. In addition to the unnecessary expense of such a situation, the lawyer simply will not have the time or the necessity to do it. In reality, almost the entire course of communication between you and your local lawyer is going to be exactly the same as it would be between you and your out-of-state lawyer – i.e. email, telephone and even regular mail. The only exception may be your initial consultation and your final meeting; both of these meetings can be easily replaced by Skype.
Sherayzen Law Office is a Preferred Choice for Your Miami FBAR Lawyer
Sherayzen Law Office is one of the leading US international tax firms with respect to FBARs and US international tax law. Our strength lies in extensive knowledge of the subject matter and large experience concerning all major relevant areas of international tax law including offshore voluntary disclosures (in fact, we are one of the few firms which advised clients regarding all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP, as well as Streamlined Procedures (Domestic and Foreign)).
This is why, if you are looking for a Miami FBAR lawyer, contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Sarshar Guilty Plea & Undisclosed Israeli Bank Accounts | FBAR Lawyer
On August 1, 2016, the IRS scored another victory in a case involving Israeli Bank Accounts; the IRS and the DOJ announced that Mr. Masud Sarshar, a California businessman, was charged with one count of conspiracy to defraud the United States and one count of corruptly endeavoring to impair and impede the due administration of the internal revenue laws. Mr. Sarshar already signed a plea agreement agreeing to plead guilty and pay more than $8.3 million in restitution to the IRS. If the court accepts the parties’ agreement, Mr. Sarshar will be sentenced to 24 months in prison. Additionally, Mr. Sarshar agreed to pay a civil FBAR penalty in the amount of 50 percent of the high balance of his undeclared accounts for failure to disclose his Israeli bank accounts.
Facts of the Sarshar Case
Mr. Sarshar owned and operated Apparel Limited Inc., a clothing design business. Under his plea, he admitted that, between 2006 and 2009, he used unreported bank accounts at Bank Leumi and two other Israeli banks to hide $21 million of business revenue from the IRS. The accounts were owned by him personally and in the name of entities that he created with assistance of at least two relationship managers at the Israeli banks.
Between 2007 and 2012, Mr. Sarshar also earned more than $2.5 million in interest income from these accounts; none of this income was reported on his individual and corporate tax returns. No FBARs were ever filed.
In order to use the funds on his accounts, Mr. Sarshar utilized a creative stratagem where Bank Leumi would loan funds to Mr. Sarshar through its U.S. branch while the funds in Israel were used as a collateral. Mr. Sarshar was able to bring back to the United States approximately $19 million of his offshore assets without creating a paper trail or otherwise disclosing the existence of the offshore accounts to U.S. authorities.
What is particularly surprising about this case is the creativity of the Israeli bankers in getting the information to Mr. Sarshar. At Mr. Sarshar’s request, none of the banks sent him account statements by mail; rather, they provided them to him in person in Los Angeles. In order to conceal the statements, a Bank Leumi banker would upload the account statements on a USB drive which she concealed in necklace worn during her U.S. trips. Sometimes, the meetings with bankers occurred in Mr. Sarshar’s car. Moreover, the Israeli bankers also advised Mr. Sarshar to obtain Israeli and Iranian passports to prevent him from being flagged as a U.S. citizen by the compliance departments at both banks.
Lessons of the Sarshar Case
Several lessons and conclusions can be drawn from this case. The first conclusion is that the IRS continues to focus on Israeli banks in its tax enforcement efforts. The focus on Israel is something that Sherayzen Law Office has repeatedly stated in the past. Again, we want to repeat our prediction that we will see more cases involving Israel and other countries outside of Switzerland. This means that, if you have undeclared bank accounts in Israel, you are at an increased risk of detection and prosecution by the IRS. This lesson can be expanded into a general statement that you run a high risk of getting caught by the IRS if you have undisclosed foreign accounts in any country that has implemented FATCA.
The second lesson that can be drawn from the Sarshar case is that he should have entered into a voluntary disclosure program while he had a chance to do it. It is very important to understand that, in a willful situation, using the IRS offshore voluntary disclosure program is indispensable to prevent the imposition of higher penalties and a criminal prosecution.
The third lesson is that Sarshar case reaffirms the most common fact pattern that leads to IRS criminal prosecution – willful divergence of U.S. earnings to overseas accounts to avoid taxation, the usage of entities to hide the ownership of foreign accounts and persistence in violation of U.S. laws. Even one of these factors might have been sufficient for the IRS to commence a criminal investigation; in this case, all three were present.
Contact Sherayzen Law Office if You Have Undisclosed Foreign Accounts in Israel or Any Other Country
If you have undisclosed foreign accounts in Israel or any other country, contact Sherayzen Law Office for legal help. Our experienced team of international tax professionals, headed by our founder and international tax attorney Eugene Sherayzen, can help you resolve all of your tax problems in the United States.
Contact Us Today to Schedule Your Confidential Consultation!

### Austin Foreign Trust Lawyer | FATCA IRS Attorney
If you reside in Austin, Texas, and you are a US beneficiary or a US owner of a foreign trust, you need the help of an experienced Austin Foreign Trust Lawyer as soon as possible due to very high penalties associated with US tax noncompliance regarding foreign trust reporting. However, a question arises: who is considered to an Austin Foreign Trust Lawyer?
Austin Foreign Trust Lawyer Definition: Legal Services Provided in Austin, Texas
It is first important to understand that the definition of an Austin Foreign Trust Lawyer is not limited by the physical presence of the lawyer in Austin, Texas. On the contrary, any international tax lawyer can be an Austin Foreign Trust Lawyer as long as he offers legal and tax services related to foreign trusts in Austin, Texas. This means that your foreign trust lawyer can reside in Minneapolis and still be considered as Austin Foreign Trust Lawyer even if he has never been to Austin.
Why? The answer is rather simple – the federal reporting requirements concerning foreign trusts are prescribed by federal law which can be practiced by any attorney who is licensed in any state of the United States. Since the focus is on the federal tax compliance, the physical residence of your foreign trust lawyer does not matter.
Austin Foreign Trust Lawyer Must Be an International Tax Lawyer
What really matters is the experience and knowledge of your Foreign Trust Lawyer with respect to foreign trusts and US international tax law that concerns foreign trust. Furthermore, a foreign trust lawyer should be aware of all areas of US international tax law that are indirectly related to foreign trusts in order to provide a proper advice to his clients.  Thus, the competence of your lawyer should be the most important criteria in your selection of an Austin Foreign Trust Lawyer.
Sherayzen Law Office Can Be Your Austin Foreign Trust Lawyer
If you are looking for a competent Austin Foreign Trust Lawyer, Sherayzen Law Office should be your choice. Sherayzen Law Office occupies a leading position in the world on this subject with extensive knowledge and experience concerning all major relevant areas of US international tax law including Form 3520, Form 3520-A, PFIC compliance, FATCA, FBAR and other relevant requirements. We have helped numerous taxpayers with their foreign trust issues, including situations involving multiple trusts and multiple jurisdictions. We have also helped our clients defend against IRS attempts to make our clients owners of a foreign trusts where, in reality, they were simply beneficiaries.
This is why, if you are looking for an Austin Foreign Trust Lawyer, you should contact Sherayzen Law Office today to schedule Your Confidential Consultation!

### Denver FBAR Lawyer | Foreign Accounts Tax Attorney
Finding a good Denver FBAR Lawyer is not easy, especially if you do not know what exactly Denver FBAR Lawyer means. In this essay, I will define what lawyers fit into the definition of a Denver FBAR Lawyer and why you should retain the services of my firm, Sherayzen Law Office, Ltd.
Denver FBAR Lawyer Definition: Legal FBAR Services Provided in Denver, Colorado
Some of the readers may be surprised to learn that the definition of a Denver FBAR Lawyer is not limited by the physical presence of the lawyer. Rather, a Denver FBAR Lawyer is any international tax lawyer who offers legal and tax services related to FBARs in Denver, Colorado. This means that your FBAR lawyer can reside in Minneapolis and still be considered as Denver FBAR Lawyer even if he has never been to Denver.
Why is that? The reason is simple: FBAR is federal law, not state law; i.e. the city of Denver and the State of Colorado have absolutely nothing to do with the implementation of FBAR. Since there is no local input, the physical residence of your lawyer gives you no advantage whatsoever when it comes to legal services related to FBARs.
Denver FBAR Lawyer Must Be an International Tax Lawyer
While the physical location of a your FBAR lawyer is irrelevant, his competence in FBARs and the US international tax law is an indispensable quality. It is important to understand that, in the great majority of cases, the FBAR issues are tightly intertwined with other international tax compliance requirements, and it is the interaction between the FBAR and other international tax issues that is relevant to the determination of a taxpayer’s legal position. This is why your Denver FBAR lawyer should be highly knowledgeable in other areas of international tax law in addition to FBARs.
Denver FBAR Lawyer: the Convenience of Communication
Perhaps, while the readers agree that the definition of a Denver FBAR lawyer should include any experienced international tax lawyer who provides FBAR-related services in Denver, they may still point to old belief of the ease of communication with a local lawyer. In essence, this myth holds that while an out-of-state FBAR lawyer may be more competent in international tax law, it is better to rely on a local FBAR lawyer because it would be easier to communicate with him.
This myth is simply incorrect, because it does not take into account the development modern communications technology and it incorrectly represents a client’s communication with their Denver FBAR lawyer.
The modern communications technology has virtually eliminated the entire advantage of retaining a local Denver FBAR Lawyer. Email, telephone, fax and Skype video conferences provide ample opportunities to communicate with your lawyer wherever he is and at any point of time. In fact, as an international tax lawyer, I have continuously relied on these means of communication to successfully represent all of my out-of-state clients, including Denver, Colorado. There has not been a single case where my geographical location was of any importance.
Furthermore, it is important to understand that, aside from the initial consultation (which can also be conducted on Skype or telephone), almost all of your communication with a local Denver FBAR lawyer will be through the same modern means of communication – email and telephone. This means that 98% of communication between you and your lawyer will be done in the same manner irrespective of whether he resides in Denver!
Sherayzen Law Office is a Top Choice for Your Denver FBAR Lawyer
Sherayzen Law Office occupies a leading position in the world on this subject with extensive knowledge and experience concerning all major relevant areas of international tax law including PFIC compliance, Subpart F rules, all types of US international reporting returns, US income tax returns (individual, partnership and corporate) for domestic and foreign persons, et cetera. Furthermore, this is one of the leading international tax law firms in the world with experience in all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP (now closed).
This is why, if you are looking for a Denver FBAR lawyer, contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Madison FBAR Attorney | FBAR FATCA OVDP IRS Lawyer
Do you reside in Madison and have undisclosed foreign accounts? Are you searching for a highly-knowledgeable Madison FBAR Attorney to help you resolve this situation? Then, read this essay in order to understand who is considered to be a Madison FBAR Attorney and and why you should retain the services of my firm, Sherayzen Law Office, Ltd..
Madison FBAR Attorney: Geographical Location
There is a traditional preference among people to choose an attorney who lives in their city due to perceived communication problems with an attorney outside of their city. Also, often, the fact that their attorney is local sometimes gives an illusion of a better control over the case.
This is an incorrect view when it comes to a case that involves FBARs – in reality, the geographical location of a Madison FBAR Attorney does not have any impact on the attorney’s ability to conduct your FBAR case. The reason is that FBAR is federal law; the state of Wisconsin and the city of Madison have no impact over the implementation and enforcement of FBAR. This means that the physical location of a Madison FBAR Attorney does not affect the effectiveness of his legal representation of his clients in Madison or any other city.
Furthermore, the communication issue is a mythical problem in today’s world. The development of modern communications technologies has eliminated the entire advantage of retaining a local Madison FBAR Attorney. Even if your attorney lives and works in Madison, almost your entire communication with him is going to be through email, telephone and regular mail – i.e. the same as if your attorney resides in Madison. The infrequent person-to-person meetings can now be replicated through a video Skype conference.
Finally, retaining a local Madison FBAR Attorney has no impact on the control over the case by the client. It all depends on the personality of the attorney; a good attorney would maintain control over the legal side of the case, while allowing his client to make informed choices with respect to issues that require a client’s input (such as a personal preference for a voluntary disclosure path).
All of this analysis leads us to two important conclusions. First, a Madison FBAR Attorney is any attorney, irrespective of his residence, who offers his FBAR services in Madison. Second, the geographical location should not have influence over your decision to retain a Madison FBAR Attorney; the personality and, as will be explained below, the knowledge of your attorney is what really matters.
Madison FBAR Attorney: Knowledge of International Tax Law and FBARs is the Key
We are now approaching the key consideration that you should have in retaining a Madison FBAR Attorney: his knowledge of the subject matter.
The subject matter that your Madison FBAR attorney must know should be broader than just FBARs. Rather, he should know about FBAR, the place this form occupies within the US international tax system and how FBAR interacts with other US international tax compliance requirements, such as foreign income reporting, FATCA Form 8938, Form 8621, foreign business ownership information returns, et cetera. This profound knowledge of US international tax law should also include the knowledge of remedying past noncompliance, including the various voluntary disclosure options.
Thus, FBAR issues are often highly intertwined with the rest of the US tax laws and this interaction is what will make the real impact on your tax position in the United States. This is why your Madison FBAR Attorney should be highly knowledgeable in US international tax law in general, not just FBARs.
Madison FBAR Attorney: Contact Sherayzen Law Office
We are now ready to answer the main underlying question of this essay: who should you retain if you are looking for a highly-skilled Madison FBAR Attorney? While the actual choice is ultimately personal, based on the objective criteria, Sherayzen Law Office definitely should be a top candidate in your search.
Sherayzen Law Office is a leading tax firm in the area of FBAR compliance due to profound knowledge of the subject matter and extensive experience of dealing with FBARs and related issues including foreign income reporting, FATCA compliance (Form 8938), PFIC compliance (Form 8621), Subpart F rules, all types of US international reporting returns (3520, 3520-A, 5471, 8865, 8858, 926, et cetera), US income tax returns (individual, partnership and corporate) for domestic and foreign persons and other issues.
Furthermore, Sherayzen Law Office has helped hundreds of clients with their past FBAR noncompliance. In fact, this is one of the leading international tax law firms in the world with experience in all major IRS offshore voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and the still current (as of August of 2016) 2014 OVDP.
This is why, if you are looking for a Madison FBAR Attorney, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Philadelphia FBAR Attorney | Foreign Accounts Lawyers
Are you looking for a highly-skilled Philadelphia FBAR Attorney? Then, you are among many Philadelphians who need to report their foreign accounts, but do not know how to find appropriate legal help. Often, they find the attorney that they like lives outside of Philadelphia and they are not sure if they should prefer him over local Philadelphia FBAR Attorneys. In this short article, I would like to address the issue of who is considered to be a Philadelphia FBAR Attorney and why you should retain the services of my firm, Sherayzen Law Office, Ltd. (Sherayzen Law Office).
Philadelphia FBAR Attorney: Geographical Location
From the outset, it is important to understand that the geographical location of a Philadelphia FBAR Attorney does not have any impact on the attorney’s ability to conduct your FBAR case. The reason for this statement lies in the fact that FBAR is federal law. The state of Pennsylvania and the city of Philadelphia have no influence whatsoever over the implementation and enforcement of FBAR. This means that the physical location of your Philadelphia FBAR Attorney does not affect the effectiveness of his legal representation of his clients in Philadelphia.
Furthermore, the development of modern communications technology has eliminated almost the entire advantage of retaining a local Philadelphia FBAR Attorney. Even if your attorney resides in Philadelphia, almost all of your entire communication with him is going to be through email, telephone and regular mail – i.e. the same as if your attorney resides in Minneapolis. The person-to-person meetings are now easily replaced by a video Skype conference.
All of this analysis leads us to two important conclusions. First, a Philadelphia FBAR Attorney is any attorney, irrespective of his residence, who offers his FBAR services in Philadelphia. Second, the geographical location should not have any impact on your decision to retain a Philadelphia FBAR Attorney.
Philadelphia FBAR Attorney: Knowledge of International Tax Law and FBARs is the Key
The conclusions from the first part of this essay point us now to the key consideration that you should have in retaining a Philadelphia FBAR Attorney: his knowledge of the subject matter.
What is this “subject matter”? Is it only limited to knowing the FBARs or is there something else a Philadelphia FBAR Attorney should know? Indeed, the subject matter that your attorney must know should not be limited to just how to file an FBAR. Rather, he should know about FBAR, the place this form occupies within the US international tax system and how FBAR interacts with other US international tax compliance requirements, such as foreign income reporting, Form 8938, Form 8621, foreign business ownership reporting returns (5471, 8865 and 8858), et cetera.
It is also important to understand that the FBAR issues are often highly intertwined with the rest of the US tax laws and this interaction is what will make the real impact on your tax position in the United States. This is why your Philadelphia FBAR Attorney should be highly knowledgeable in other areas of international tax law in addition to FBARs.
Philadelphia FBAR Attorney: Contact Sherayzen Law Office
We can now revert to the question we already posed at the beginning of the essay: who should you retain if you are looking for a highly-skilled Philadelphia FBAR Attorney. While the actual choice is ultimately personal, based on the objective criteria, Sherayzen Law Office should definitely occupy a top spot in your search.
Sherayzen Law Office holds a leading position in the world on FBAR compliance due to its highly-experienced international tax team, headed by its founder Attorney Eugene Sherayzen, that has been helping its clients throughout the world with FBAR and related international tax issues including foreign income reporting, FATCA compliance (Form 8938), PFIC compliance (Form 8621), Subpart F rules, all types of US tax information returns (3520, 3520-A, 5471, 8865, 8858, 926, et cetera), US income tax returns (individual, partnership and corporate) for domestic and foreign persons and other issues.
Furthermore, Sherayzen Law Office has helped hundreds of clients who are delinquent with respect to their FBAR and other US tax obligations. In fact, Sherayzen Law Office is one of the leading international tax law firms in the world with experience in all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP now closed.
This is why, if you are looking for a Philadelphia FBAR Attorney, you should contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Boston FATCA Lawyer
Often, people are searching for a Boston FATCA lawyer without a clear definition of who a Boston FATCA lawyer is. Indeed, who is a Boston FATCA Lawyer? Just a lawyer who resides in Boston or can a lawyer who resides outside of Boston qualify as a Boston FATCA lawyer? Is it any lawyer or only an international tax lawyer? Do all international tax lawyers qualify as a Boston FATCA lawyer?
Boston FATCA Lawyer Definition: Physical Residence Does Not Matter
Let’s first resolve the issue of physical residence. Here, we find that there are two types of lawyers who can qualify as a Boston FATCA Lawyer. First, a lawyer who resides and works in the city of Boston; this is logical and does not need further explanation.
Second, a Boston FATCA lawyer can also be a lawyer who resides outside of Boston, but who has clients in Boston. There are two reasons for this statement. First, the enormous improvements in modern communication technologies eliminated for all practical purposes the difference between a Boston FATCA lawyer who resides in Boston and a Boston FATCA lawyer who resides outside of Boston. The logistical ability of lawyers who reside outside of Boston to advise (with respect to FATCA) and prepare documents for their clients who live in Boston is virtually the same.
The second reason for why a lawyer who resides outside of Boston can still be considered as a Boston FATCA lawyer is the fact that FATCA is a federal law that concerns US international tax compliance; there is no special relationship between Boston and FATCA.  FATCA applies to all US taxpayers equally, not just US taxpayers who reside in Boston.  The logical extension of this statement is that the lawyers who practice in this area of law are able to provide their services with respect to FATCA irrespective of their residence.  This means that a lawyer in Boston has no inherent advantage over a lawyer who resides outside of Boston, because there is simply no local legal Bostonian addition to FATCA.
Boston FATCA Lawyer Definition: a FATCA Lawyer is an International Tax Lawyer
Not every lawyer qualifies as a Boston FATCA lawyer; in fact, very few lawyers qualify for this title because this is a very narrow specialty. A Boston FATCA lawyer is an international tax lawyer who is knowledgeable about FATCA, foreign accounts voluntary disclosure and the US international tax system in general.
The knowledge of US international tax requirements is highly important for a FATCA Lawyer. Many clients do not initially understand that FATCA is merely a part of a much larger network of international tax laws of the United States. The interaction of these laws with FATCA is what has an actual impact on the tax position of a US taxpayer. This is why it is highly important for a FATCA Lawyer to know not only FATCA itself, but also the entire US international tax law system.
Contact Sherayzen Law Office If You Are Looking for a FATCA Lawyer
If you are looking for a Boston FATCA Lawyer, you should contact Sherayzen Law Office, Ltd. – an international tax law firm that specializes in FATCA compliance, offshore voluntary disclosures of foreign accounts (and other foreign assets) and US international tax issues in general.  While based in Minneapolis, Sherayzen Law Office has provided its services to hundreds of clients throughout the world with respect to their FBAR and FATCA compliance, including correcting past US tax compliance through Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures and Reasonable Cause (Noisy) Disclosures.
Contact Us Today to Schedule Your Confidential Consultation!

### FBAR PFIC Reporting | FBAR Tax Attorney
FBAR PFIC Reporting is an important issue for U.S. shareholders of passive foreign investment companies (“PFICs”). I will now briefly explore the FBAR PFIC Reporting requirement and when it applies to U.S. shareholders of a PFIC.
FBAR PFIC Reporting: FBAR Background
FinCEN Form 114, the Report of Foreign Bank and Financial Accounts, commonly known as FBAR, originally came into existence as a result of the 1970 Bank Secrecy Act. FBAR is one of the main and arguably the most important international tax requirement in the IRS. The form must be filed by every U.S. tax resident who has foreign financial accounts the aggregate value of which exceeds $10,000 at any time during the calendar year. The aggregate value should be calculated based on all foreign bank and financial accounts in which this U.S. tax resident has financial interest or over which he has signatory or other authority.
Failure to file an FBAR may result in the imposition of draconian FBAR penalties, including criminal penalties in grave cases of willful noncompliance.
FBAR PFIC Reporting: PFIC Definition
PFIC (Passive Foreign Investment Company) is one of the most complex tax requirements of the U.S. tax system. In addition to the potentially tremendously burdensome tax compliance required for PFICs, PFICs may result in the imposition of a much higher income tax with PFIC interest on the PFIC tax.
The basic definition of a PFIC is any foreign corporation in which: “(1) 75 percent or more of the gross income of such corporation for the taxable year is passive income, or (2) the average percentage of assets (as determined in accordance with subsection (e)) held by such corporation during the taxable year which produce passive income or which are held for the production of passive income is at least 50 percent.” IRC Section 1297(a). While many types of companies may unexpectedly be classified as PFICs by the IRS, foreign mutual funds seem to be the most common trap for the unwary U.S. taxpayers.
If a U.S. taxpayer has PFICs, he/she is required to file a separate Form 8621 “Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund” for each PFIC.
FBAR PFIC Reporting: Three Potential FBAR Requirements
There are three most common situations when an FBAR should be filed for a PFIC, assuming the statutory aggregate threshold of $10,000 is satisfied. First, FBAR PFIC reporting is required if a PFIC is held in a financial account; in this case, FBAR PFIC reporting will occur for the account itself (which, in India especially, may correspond to the folio number of a PFIC in any case). For example, if a U.S. person has an Assurance Vie account in France that contains PFICs, he would have to report the Assurance Vie account on the FBAR, including the value of the PFICs.
Second, FBAR PFIC reporting is required if a PFIC shareholder has signature authority over foreign financial accounts owned by a PFIC. In this case, FBAR PFIC reporting will occur for these foreign financial accounts in Section IV of the FBAR.
Finally, the third most common situation where FBAR PFIC reporting is required is a scenario where a U.S. person owns more than 50% of a PFIC and this PFIC has foreign financial accounts. In such case, the U.S. person is assumed to have a financial interest in the foreign financial accounts of this PFIC and he needs to disclose these accounts on his FBAR.
FBAR PFIC Reporting: Filing Form 8621 does NOT Satisfy the FBAR Filing Requirement
It is important to emphasize that filing form 8621 for a PFIC does not relieve the filer from his FBAR obligations. Even if Form 8621 is filed, the filer must also file the FBAR.
Contact Sherayzen Law Office for Professional Help with FBAR PFIC Reporting
FBAR PFIC reporting can be extremely complex and it is very easy to make mistakes with respect to what needs to be disclosed and how. These mistakes, however, can be expensive to remedy and may result in imposition of various large penalties.
This is why, if you have PFICs that require FBAR and Form 8621 disclosure, you need to contact Sherayzen Law Office for professional help. Our team of experienced tax professionals will help you properly disclose your PFICs on your FBAR and report your PFIC income on your personal or business tax returns. If you have not complied with your FBAR PFIC reporting requirement in the past and wish to remedy this situation, Sherayzen Law Office will also help you with the voluntary disclosure of your FBARs and PFICs, including the preparation of all necessary tax forms and legal documents.
Contact Us Today to Schedule Your Confidential Consultation!

### Seattle FATCA Lawyers
There are two definitions of who qualifies to be Seattle FATCA lawyers. First, Seattle FATCA lawyers are lawyers who are work in Seattle and who specialize in helping U.S. taxpayers and/or foreign financial institutions with FATCA compliance.
The second type of international tax attorneys who can qualify as Seattle FATCA lawyers became possible as a result of the development of modern communication technologies. These are the lawyers who reside outside of Seattle (e.g. in Minneapolis) and help clients who live and work in Seattle, Washington. Sherayzen Law Office is a good example of such Seattle FATCA lawyers – the firm’s founder, Mr. Sherayzen resides in Minneapolis but provides FATCA-related services to his clients in Seattle.
The residence of Seattle FATCA lawyers does not matter due to the fact that FATCA is federal law and any international tax lawyer who is licensed to practice in any of the fifty states of the United States can help his clients wherever they reside. Modern technologies (such as Internet, email, video Skype conference, et cetera) allow a Minneapolis lawyer to provide at least the same quality of service in Seattle as other Seattle FATCA lawyers. The necessary documents are usually supplied via email, flash drives (or other similar digital storage devices) and regular mail.  If a document needs to contain an original signature (e.g. amended tax return), then it is sent to client either by email or mail, the client signs the document at his home without the need of going to the lawyer’s office then mails it back to his lawyer.
The quality that should really matter to clients who are looking for Seattle FATCA lawyers is that their lawyers have deep knowledge of FATCA, foreign accounts disclosure and the U.S. international tax law in general. The knowledge of U.S. international tax compliance obligations is especially important for Seattle FATCA lawyers, because FATCA is merely a part (though, a very important part) of a much larger set of U.S. international tax laws. All of these laws are related to each other and their interaction creates real tax consequences for U.S. taxpayers, including those who reside in Seattle. This is why it is important for Seattle FATCA lawyers to know the entire U.S. tax structure, not just FATCA itself.
Contact Sherayzen Law Office If You Are Looking for Seattle FATCA lawyers
If you are looking for Seattle FATCA lawyers, contact Sherayzen Law Office, Ltd., an international tax law firm that specializes in FATCA compliance, offshore voluntary disclosures and U.S. international tax compliance in general.
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### H1B Holder FATCA Requirements
There is a confusion in general public about the H1B holder FATCA requirements. The key concept that lies at the heart of the U.S. tax obligations of an H1B holder is tax residency (which is very different from the definition of a U.S. permanent resident in immigration law). In this article, I will discuss the concept of tax residency and the H1B Holder FATCA requirements.
H1B Holder FATCA Requirements: H1B Visa
H1B visa is a non-immigrant visa that allows U.S. companies to hire foreign workers to work in the United States. These workers have to be working in occupations that require theoretical or technical expertise in specialized fields such as in architecture, engineering, mathematics, science and medicine.
H1B Holder FATCA Requirements: FATCA
The Foreign Account Tax Compliance Act (FATCA) was signed into law in the year 2010. This law was passed by U.S. Congress with the specific purpose of combating tax noncompliance of U.S. taxpayers with undeclared offshore accounts. Today, FATCA is one of the most influential tax information exchange regimes in the world; through a huge network of bilateral treaties, the IRS managed to implement FATCA in the great majority of the countries.
FATCA consists of basically two parts. First, it obligates foreign financial institutions to turn over to the IRS certain information regarding foreign accounts owned by U.S. persons as well as certain information regarding the U.S. owners themselves. The H1B Holder FATCA information is also required to be turned over to the IRS.
The second part of FATCA imposes a new reporting requirement, IRS Form 8938, which must be filed with a U.S. tax return. Form 8938 requires U.S. taxpayers to disclose specified foreign assets to the IRS. “Specified Foreign Assets” includes various class assets, including foreign financial accounts.
H1B Holder FATCA Requirements: Tax Residency and FATCA Requirements
The key to understanding H1B holder FATCA requirements is the determination of whether an H1B holder is a tax resident of the United States. In order for an H1B holder to be classified as a U.S. tax resident, he must pass the “substantial presence test”. The substantial presence test determines the tax residency of a person based on the number of days this individual was physically in the United States.
If the substantial presence test is satisfied, the H1B holder is considered to be a tax resident of the United States. As a U.S. tax resident, the H1B holder FATCA requirements will be the same as those of any other U.S. tax resident, including U.S. citizens and U.S. permanent residents.
This means that, under FATCA, foreign banks should disclose to the IRS all of the foreign financial accounts owned directly, indirectly or constructively by the H1B holder. At the same time, the H1B holder FATCA obligations extend to filing Form 8938 for all of the required specified foreign assets, including foreign financial accounts, foreign stocks and other securities, foreign bonds, foreign derivatives and ownership of foreign businesses (unless such ownership is reported on another IRS form; in this case, Form 8938 should indicate the form on which such foreign business ownership is disclosed), and other assets.
H1B Holder FATCA Requirements: Late Disclosure
What if H1B holder FATCA obligations were not timely satisfied (i.e. Forms 8938 should have been filed, but they never were) and the H1B holder just found out about it? If an H1B holder did not file Forms 8938 timely, he may be subject to Form 8938 penalties. Moreover, in most such cases, such an H1B holder is likely to have failed to comply with other important U.S. international tax requirements such as FBAR and worldwide income reporting. The combination of FATCA, FBAR, income reporting and other penalties may create a huge tax liability that may even exceed the total value of the H1B holder’s foreign assets.
In such cases, the H1B holder should contact an international tax attorney experienced in offshore voluntary disclosures as soon as possible. Various offshore voluntary disclosure options offer varying rates of reduced penalties, sometimes even with the possibility of eliminating all penalties. However, time is of the essence – if foreign banks report the H1B holder’s foreign assets as part of their FATCA compliance and the IRS commences its investigation of the H1B holder FATCA noncompliance, then all of the voluntary disclosure options may automatically close.
Contact Sherayzen Law Office for Legal Help with H1B Holder FATCA Compliance
If you work in the United States on H1B visa, have foreign assets which are required to be disclosed under FATCA and have not done so, you should contact Sherayzen Law Office as soon as possible. Sherayzen Law Office is an experienced international tax law firm that specializes in FATCA compliance for U.S. taxpayers, including voluntary disclosures for H1B holders.
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### I am Working in the US on L1 Visa and I have Foreign Accounts
"I am working in US on L1 Visa and I have foreign accounts" – this is the phrase that I often hear from various callers. Usually, these persons know very little about their US tax obligations and are concerned about their US tax compliance. Let’s analyze this phrase – "I am working in US on L1 Visa and I have foreign accounts" – and see if we can draw some general conclusions about the US tax obligations of such individuals.
"I am working in US on L1 Visa and I have Foreign Accounts" – L1 Visa
L1 visa is a a non-immigrant work visa which allows international companies that operate in the United States and abroad to transfer certain classes of employees from its foreign divisions to the US division for up to seven years. Some of clients eventually end up moving to H-1B visa before applying for US permanent residency.
"I am working in US on L1 Visa and I have Foreign Accounts" – US Tax Residency
If a person is working in the United States on L1 visa, a natural question arises about that person’s tax obligations in the United States; more specifically, whether such a person should file For m 1040-NR (as a non-resident) or Form 1040 (as a US tax resident). Since an L1 Visa holder is not a US citizen or a US permanent resident, the key issue here is whether this person satisfies the Substantial Presence Test.
If the Substantial Presence Test is not satisfied, then Form 1040-NR should be filed for US-source income only. However, if the Substantial Presence Test is satisfied, then this individual should file Form 1040 as a US tax resident.
"I am working in US on L1 Visa and I have Foreign Accounts" – Income Tax Consequences of US Tax Residency
If a person becomes a US tax resident under the Substantial Presence Test, he is required to report and pay US taxes on his worldwide income. This is the case even if a person is here just on L1 visa and he is not a US permanent resident. Also, a whole set of US laws comes into effect with respect to this person’s foreign income which may dramatically alter his tax situation.
For example, if an L1 individual satisfies the Substantial Presence Test, his foreign tax-exempt income may suddenly become taxable in the United States. This often occurs with respect to various “building” or “construction” accounts which are present in many countries (for example, Colombia, France, Germany, United Kingdom, et cetera). Moreover, new complexity will be added with PFIC treatment of certain investments in foreign mutual funds.
"I am working in US on L1 Visa and I have Foreign Accounts" – Foreign Accounts
The last part of the phrase – "I am working in US on L1 Visa and I have Foreign Accounts" – is related to the ownership of foreign accounts. If the L1 visa holder satisfies the Substantial Presence Test, he is required to report these foreign accounts to the IRS (and perhaps in more than one way) if the relevant balance thresholds are satisfied. The most important forms for reporting foreign accounts are FinCEN Form 114 (FBAR) and IRS Form 8938. Other forms may also be applicable.
Undoubtedly, FBAR occupies the central place in foreign account reporting. This is the case not only because of the lower reporting thresholds, but also due to the draconian penalties that the IRS may impose for FBAR noncompliance.
"I am working in US on L1 Visa and I have Foreign Accounts" - A Dangerous Phrase that Requires Legal Help
Even from the very general description above, it becomes clear that this phrase – "I am working in US on L1 Visa and I have Foreign Accounts" – indicates a precarious legal situation that needs a detailed examination by an experienced international tax lawyer. The penalties for noncompliance are extraordinarily high making a professional analysis of this person’s situation almost obligatory.
Contact Sherayzen Law Office for Legal Help With Reporting of Your Foreign Accounts and Filing Delinquent Tax Forms
If this phrase – "I am working in US on L1 Visa and I have Foreign Accounts" – applies to your situation, contact Sherayzen Law Office for legal help. Sherayzen Law Office is a highly-experienced international tax law firm that has helped hundreds of US taxpayers around the world to bring their tax affairs into full compliance. We can help You!
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### Mexican Fideicomiso is not a Foreign Trust | International Tax Attorney
Mexican Fideicomiso is one of the most convenient ways for U.S. persons to purchase land in Mexico. Of course, one can purchase the land through a Mexican corporation, but such an arrangement will require additional tax planning and higher annual compliance costs, including potentially filing form 5471, Form 8938 and other forms. Therefore, most U.S. persons prefer to purchase land in Mexico through a Mexican Fideicomiso.
I am often asked a question about whether Mexican Fideicomiso should be considered a foreign trust for U.S. tax purposes. The answer to this questions is fairly straightforward, but it is important to point out a potential pitfall.
Main Rule: Mexican Fideicomiso is Not a Foreign Trust for U.S. Tax Purposes
The U.S. tax treatment of Mexican Fideicomiso was settled by the IRS in PLR 201245003 and, even more authoritatively, IRS Revenue Ruling 2013-14. In PLR 201245003 and Rev. Rul. 2013-14, the IRS decisively ruled that a Mexican Fideicomiso is not a foreign trust for U.S. tax purposes.
Main Rule Applies Only If a True Mexican Fideicomiso Relationship is Preserved
It is important to understand, however, that PLR 201245003 and Rev. Rul. 2013-14 apply only if the true Fideicomiso relationship is preserved. If this relationship is modified with other features and agreements, then the U.S. tax treatment of the new arrangement may actually change. For example, if the trustee of Mexican Fideicomiso suddenly acquires the ability to act independently and in complete disregard of the beneficiary’s instructions, the IRS may start treating this modified Mexican Fideicomiso as a foreign trust.
Contact Sherayzen Law Office for Help with Reporting of Your Foreign Assets and Foreign Income
If you have foreign assets or foreign income, you are facing a difficult challenge of trying to comply with the numerous complex U.S. tax requirements. It is very easy to make mistakes in this area; given the high penalties associated with noncompliance, the cost of remedying these mistakes may be high.
This is why you need the help of Sherayzen Law Office, an experienced international tax law firm that has helped hundreds of U.S. taxpayers around the globe to bring and maintain their tax affairs in full compliance with U.S. tax laws.
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### 2014 IRS OVDP Future is Uncertain Due to Recent TIGTA Report
Recently, there have been signs that the IRS is pondering the future of its flagship Offshore Voluntary Disclosure Program (2014 IRS OVDP): does this means that there is a potential for the 2014 IRS OVDP to end soon?
TIGTA Report and 2014 IRS OVDP
The latest warning signal came on June 2, 2016. On that date, the Treasury Inspector General for Tax Administration (TIGTA) issued a report with six recommendations with respect to the current IRS Offshore Voluntary Disclosure Program (2014 IRS OVDP). The report contained the following enigmatic language: “Although the IRS agreed with the potential value of establishing one mailing address for taxpayer correspondence, this recommendation has been put on hold until a decision is made about the future status of the OVDP.” (Italics added) Furthermore, on page 15 of the report, the IRS again emphasizes the non-permanent nature of the 2014 IRS OVDP and refuses to commit additional resources to one of TIGTA’s recommendations.
2014 IRS OVDP Future is Uncertain
The language contained in TIGTA report should definitely be treated seriously. At the very least, we now have an official, though indirect confirmation that the IRS is thinking about modifying the 2014 IRS OVDP and potentially, the Streamlined Compliance procedures.
Is there a potential for the IRS to cancel the entire 2014 IRS OVDP? It is definitely possible; the IRS has always insisted that 2014 IRS OVDP exists simply as a voluntary IRS initiative that can be terminated at any point. Furthermore, there are signs of significant administrative issues with respect to the 2014 IRS OVDP with significant delays in case resolutions. The IRS budget constrains may simply no longer permit the IRS to sustain 2014 IRS OVDP, despite the funds that this program has brought to the U.S. Treasury.
It is also probable that the success of the Streamlined Compliance procedures, FATCA and the Swiss Bank Program may now allow the IRS to focus on prosecuting willful taxpayers, making the 2014 IRS OVDP superfluous. Of course, this would mean that non-compliant willful U.S. taxpayers would not have any official voluntary disclosure program that would accept them.  Drawing on the experience of prior periods of time between the voluntary disclosure programs, most likely, the absence of an OVDP is likely to force such taxpayers to either try to bury deeper their tax noncompliance or, if they wish to come forward, to negotiate with the IRS directly through the traditional voluntary disclosure program.  If the latter if the case, such a taxpayer will be negotiating with the IRS without any guarantees of a reduced penalty.
Another likely possibility is a significant modification of the terms of the 2014 IRS OVDP (which, itself is just a modification of the official 2012 OVDP). The change in terms could affect anything from penalty rates to procedural changes. For example, it is possible that, under the new program, the default penalty rate would rise to 50% from the current 27.5% and the high penalty rate would go above the current 50%.
U.S. Taxpayers with Undisclosed Foreign Accounts Should Consider 2014 IRS OVDP As Soon As Possible
The TIGTA Report and the great uncertainty surrounding the future of the current 2014 IRS OVDP program directly affect U.S. taxpayers with undisclosed foreign accounts. If 2014 IRS OVDP is significantly altered or even disappears entirely, U.S. taxpayers will lose one of the main voluntary disclosure venues and the only one opened to taxpayers who willfully violated U.S. tax laws.
This is why U.S. taxpayers with undeclared foreign accounts should consider their voluntary disclosure options, including participation in the 2014 IRS OVDP, as soon as possible. In order to properly initiate their voluntary disclosure process, these taxpayers should retain the services of an experienced international tax attorney.
Contact Sherayzen Law Office for Experienced and Professional Legal Help
If you have undeclared foreign accounts, please contact Sherayzen Law Office as soon as possible. Our experienced legal team of tax professionals will thoroughly analyze your case, determine your available offshore voluntary disclosure options, create your voluntary disclosure plan and implement it (including the preparation of all tax forms and legal documents).
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### Foreign Gift Requirements | Foreign Gift Tax Attorney
Foreign Gift Requirements is one of the most important topics for U.S. taxpayers with foreign relatives. In this article, I would like to quickly overview foreign gift requirements for U.S. tax purposes.
Foreign Gift Requirements: What is a Foreign Gift?
Legally, the term “gift” means a definite, voluntary and gratuitous transfer of property from one individual to another. The transfer must be gratuitous (or, in legal terms “without consideration”) to the recipient; there should be no expectation of receiving services or monetary consideration in return.
A foreign gift, would mean a gift received by a U.S. person from a foreign person. A “foreign person” is defined as a nonresident alien individual or foreign corporation, partnership or estate.
General Foreign Gift Requirements to Make a Foreign Gift Effective
There are four general foreign gift requirements for a foreign gift to be legally effective. First, the donor must have a legal capacity to make a gift. Usually, this means that the donor must be of the majority age and have the mental capacity to understand that he is making a gift.
Second, there must be donative intent – i.e. the donor must actually intend to give a gift to the donee. It important to emphasize that a promise to make a gift in the future is not a gift, even if the promise is accompanied by a present transfer of the physical property in question.
The other side of the donative intent is that the donor does not expect to receive any compensation or consideration for the transfer of the gift. The intent can be established through conduct, statements and, most effectively, writings.
Third, a gift must be delivered to the donee; the delivery is complete when it is made directly to the donee or to the third part on the donee’s behalf (if a third party is involved, it may be a bit more complicated to effectuate the delivery). Delivery of a gift can be actual, symbolic, or implied through conduct; in general, the courts look for an affirmative act made by the donor.
Finally, the fourth requirement is the acceptance of the gift by the donee – i.e. the donee unconditionally and affirmatively agrees to take the gift without any coercion or undue influence. Most courts would generally presume that a gift is accepted as long as the gift is beneficial and the donee does not expressly reject the gift.
Foreign Gift Requirements: Form 3520
If a foreign gift was effectively made by a foreign person to a U.S. person, it may need to be reported to the IRS. The disclosure of a foreign gift is done using Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts.
Form 3520 is an information return that needs to be filed with the IRS if, during a tax year, a U.S. taxpayer receives a foreign gift valued at more than $100,000 from a nonresident alien individual. Form 3520 also must be filed if a U.S. taxpayer receives a gift in excess of an annual threshold from a foreign entity (foreign corporation or a partnership). For the tax year 2015, such threshold was $15,601. Gifts from related parties should be combined.
There are also special rules concerning gifts received from what are called “covered expatriates”, which may result in an imposition of tax under IRC Section 2801. Also, an international tax attorney needs to review foreign gifts for potential re-characterization by the IRS. Gifts from foreign trusts are subject to different rules than gifts from foreign persons.
Penalties for Failure to Report Foreign Gifts on Form 3520
Failure to disclose a reportable foreign gift on Form 3520 may result in significant penalties. Under IRC Section 6039F, a monthly penalty of 5% of the value of the gift may be imposed; the penalty is capped at 25% of the total value of the gift. Additionally, penalties under IRC Section 6662(j) may be imposed for the undisclosed foreign financial asset understatement.
Contact Sherayzen Law Office for Professional Help with Your Foreign Gift Requirements
If you receive(d) a reportable foreign gift, you should contact Sherayzen Law Office for legal help. Our team of legal and tax professionals, headed by the highly-experienced international tax attorney, Mr. Sherayzen, has helped U.S. taxpayers around the world with their foreign gift issues (including helping foreign relatives with making gifts to their relatives in the United States). We can help You!
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### Undeclared Accounts in Singapore Are Under IRS Investigation | FBAR Attorney
For several years now, Sherayzen Law Office has been warning U.S. taxpayers about the ever-increasing IRS interest in undeclared accounts in Singapore. On June 22, 2016, the IRS announced that UBS AG has complied with the IRS summons for bank records held in its Singapore office. This news come after repeated initiatives by the IRS to follow the money that was flowing out of what used to be secret Swiss bank accounts into the undeclared accounts in Singapore.
Facts Surrounding the IRS Summons Regarding UBS Undeclared Accounts in Singapore
The IRS served an administrative summons on UBS for records pertaining to accounts held by Ching-Ye “Henry” Hsiaw. According to the petition, the IRS needed the records in order to determine Hsiaw’s federal income tax liabilities for the years 2006 through 2011. Hsiaw transferred funds from a Switzerland-based account with UBS to the UBS Singapore branch in 2002, according to the declaration of a revenue agent filed at the same time as the petition. UBS refused to produce the records, and the United States filed its petition to enforce the summons.
“The Department of Justice and the IRS are committed to making sure that offshore tax evasion is detected and dealt with appropriately,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division. “One critical component of that effort is making sure that the IRS has all of the information it needs to audit taxpayers with offshore assets. In this case, we filed a petition to enforce a summons for offshore documents, but that’s only one of the tools we have available for gathering information. Taxpayers with offshore assets who underreported their income should come forward before we come looking for them.”
Lessons to be Learned from the Recent Summons of UBS Undeclared Accounts in Singapore
The recent IRS summons of UBS undeclared accounts in Singapore and the startling ease with which the IRS obtained the necessary information, confirm three earlier predictions that Sherayzen Law Office made after the announcing of the DOJ Program for Swiss Banks. First, the IRS takes a keen interest in the undeclared accounts in Singapore and it will not satisfy itself simply with destroying the Swiss bank secrecy laws with respect to U.S. taxpayers. The IRS is actively expanding its investigations beyond Switzerland and Singapore is definitely one of its top targets.
Second, the IRS will continue to utilize in its investigations the information that it obtained from the Swiss Bank Program, the IRS offshore voluntary disclosure programs and the IRS compliance procedures. The IRS has obtained mountains of information from these programs regarding not only the “favorite” countries for opening and maintaining undeclared accounts, but also the main patterns of U.S. tax noncompliance. In fact, the IRS now has evidence at its disposal to prosecute foreign banks far beyond Switzerland (a fact confirmed by recent criminal prosecutions of two Cayman Islands financial institutions). Hence, the undeclared accounts in Singapore and the foreign banks which are holding them are under increased IRS scrutiny today.
Finally, the implementation of FATCA combined with the two trends described above makes the discovery of undeclared accounts in Singapore (and most other countries) increasingly likely. Furthermore, it seems that the IRS also feels more and more confident to ask the courts for harsher penalties against noncomplying U.S. taxpayers.
What Should U.S. Taxpayers with Undeclared Accounts in Singapore Do?
U.S. taxpayers with undeclared accounts in Singapore now face a very unpleasant scenario where their discovery by the IRS can occur at any point with the imposition of draconian penalties and even potential prison time. Furthermore, it appears that such a discovery by the IRS is not only possible, but very likely.
Given the high probability of the discovery of their undeclared accounts in Singapore, the noncompliant U.S. taxpayers should retain as soon as possible an experienced international tax firm to explore their voluntary disclosure options. One of the best international tax law firms that provides these services is Sherayzen Law Office, Ltd.
Contact Sherayzen Law Office for Professional Help with Your Undeclared Accounts in Singapore
If you have undeclared accounts in Singapore (or any other country), you should immediately contact Sherayzen Law Office for professional help. Sherayzen Law Office is an international tax law firm that is highly experienced in offshore voluntary disclosures, including IRS Offshore Voluntary Disclosure Program and Streamlined Compliance Procedures (both Domestic and Foreign). You can rely on us with confidence that your case will be handled in an efficient, speedy and professional manner. We will strive for the best result for you!
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### Bergantino Case: Another Swiss Banker Pleads Guilty
On June 22, 2016, the IRS and the US DOJ successfully brought to conclusion the Bergantino Case with a guilty plea by Mr. Michele Bergantino (a citizen of Italy and a resident of Switzerland) to charges related to aiding and assisting U.S. taxpayers in evading their income taxes. Mr. Bergantino, a former Credit Suisse AG banker, pleaded guilty before U.S. District Judge Gerald Bruce Lee to conspiring to defraud the United States by assisting U.S. taxpayers to conceal foreign accounts and evade U.S. tax during his employment as a banker working for Credit Suisse AG on its North American desk.
The Bergantino Case Factual Background
According to the DOJ, Mr. Bergantino admitted that from 2002 to 2009, while working as a relationship manager for Credit Suisse in Switzerland, he participated in a wide-ranging conspiracy to aid and assist U.S. taxpayers in evading their income taxes by concealing assets and income in secret Swiss bank accounts. Mr. Bergantino oversaw a portfolio of accounts, largely owned by U.S. taxpayers residing on the West Coast, which grew to approximately $700 million of assets under management.
During his time as a relationship manager, Mr. Bergantino assisted many U.S. clients in utilizing their Credit Suisse accounts to evade their U.S. income taxes and to facilitate concealment of the U.S. clients’ undeclared financial accounts from the IRS. Among the steps taken by Mr. Bergantino to assist clients in hiding their Swiss accounts were the following: assuring them that Swiss bank secrecy laws would prevent Credit Suisse from disclosing their undeclared accounts to U.S. law enforcement; discussing business with clients only when they traveled to Zurich to meet him; structuring withdrawals from their undeclared accounts by sending multiple checks, each in amounts below $10,000, to clients in the United States; facilitating the withdrawal of large sums of cash by U.S. customers from their Credit Suisse accounts at Credit Suisse offices in the Bahamas, in Switzerland, particularly the Credit Suisse branch at the Zurich airport and at a financial institution in the United Kingdom; holding clients’ mail from delivery to the United States; issuing withdrawal checks from Credit Suisse’s correspondent bank in the United States; and taking actions to remove evidence of a U.S. client’s control over an account because the U.S. client intended to file a false and fraudulent income tax return. Moreover, Mr. Bergantino understood that a number of his U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.
Mr. Bergantino also admitted traveling to the United States approximately one to two times a year to meet with clients, taking careful steps to conceal the purpose of his visits from U.S. law enforcement. He used private couriers to send clients’ account statements to the U.S. hotels where he stayed, so that he would not be caught traveling with clients’ statements in his possession. In addition, Mr. Bergantino obtained “travel” account statements for each client he intended to visit which were devoid of Credit Suisse’s logo and account or customer identification information and used business cards that Credit Suisse provided that contained only his name and office number and did not carry the Credit Suisse name or logo. On entering the United States, Mr. Bergantino provided misleading information regarding the nature and purpose of his visit to U.S. Customs and Border Protection authorities.
In addition to assisting customers in evading their U.S. taxes, Mr. Bergantino also provided illegal advice to U.S. customers regarding investments in U.S. securities. Neither Mr. Bergantino nor Credit Suisse were registered with the U.S. Securities and Exchange Commission and both U.S. law and Credit Suisse policy prohibited Mr. Bergantino and other Credit Suisse employees from providing investment advice in the United States. Nevertheless, Credit Suisse management pressured its employees, including Mr. Bergantino, to make sales in the United States.
Mr. Bergantino faces a statutory maximum sentence of five years in prison. He also faces monetary penalties and restitution. Mr. Bergantino admitted that the tax loss associated with his criminal conduct was more than $1.5 million but less than or equal to $3.5 million.
The Bergantino Case Guilty Plea Comes After Three Wins and One Loss for the IRS
The Bergantino Case allows the IRS to solidify its victory claims against Credit Suisse. Two of Mr. Bergantino’s co-defendants, Mr. Andreas Bachmann and Mr. Josef Dörig, already pleaded guilty to the superseding indictment in 2014 and were sentenced on March 27, 2015. Credit Suisse pleaded guilty in May 2014 for conspiring to aid and assist taxpayers in filing false returns and was sentenced in November 2014 to pay $2.6 billion in fines and restitution. However, Mr. Raoul Weil was acquitted, even though he was the highest-ranking Credit Suisse banker prosecuted by the IRS.
What the Bergantino Case Means to U.S. Taxpayers with Undeclared Offshore Accounts
The Bergantino Case is one more example of the long reach of the IRS and the precarious situation of U.S. taxpayers with undeclared offshore accounts. First, the IRS demonstrated one more time that geographical distance does not matter when it comes to the IRS ability to prosecute those are in violation of U.S. tax laws. “Mr. Bergantino is now the third fugitive to come to the United States and plead guilty to charges in this case,” said Acting Assistant Attorney General Ciraolo. “To those who have actively assisted U.S. taxpayers in using offshore accounts to evade taxes, the message is clear: staying outside the United States will provide little comfort. We will investigate and charge you, and will work relentlessly to hold you to account for your actions.”
Second, with each guilty plea, the IRS obtains more and more evidence against U.S. taxpayers with undeclared offshore accounts, including the patterns for how these accounts were set up and maintained. This allows the IRS to broaden its prosecution of noncomplying taxpayers in a faster and cheaper way.
Contact Sherayzen Law Office for Help with Undeclared Offshore Accounts
If you are a U.S. taxpayer with undeclared offshore accounts and other offshore assets, you should contact Sherayzen Law Office as soon as possible. Our team of tax professionals are highly experienced in the voluntary disclosure of undeclared offshore accounts and we can help you.
Contact Us Today to Schedule Your Confidential Consultation!

### Foreign Inheritance Form 8938 Reporting | Form 8938 Lawyers
Foreign Inheritance Form 8938 reporting has quickly turned into one of the most important tax reporting requirements despite being one of the newest tax forms that debuted barely four years ago in 2012 (for the tax year 2011). In this article, I will discuss when Form 8938 needs to be filed with respect to inherited assets. For the purposes of this article, I will only discuss Form 8938 with respect to the assets actually received, not the assets which are still in the estate. I will also avoid the discussion of Form 3520; it is important to note, though, that Form 3520 is likely to be one of the most relevant reporting requirements with respect to foreign inheritance.
Foreign Inheritance Form 8938 Reporting: Form 8938 Basics
IRS Form 8938 was created by the infamous Foreign Account Tax Compliance Act (FATCA) and, generally, it requires individual U.S. taxpayers to report what are known as “specified foreign financial assets” if the value of those assets exceeds the applicable reporting threshold.
It is beyond the scope of this article to explore Form 8938 filing requirements in detail, but, in essence, IRS Form 8938 requires the reporting of three types of assets. The first category consists of financial accounts maintained at foreign financial institutions. This category closely follows the FBAR reporting requirements (with important exceptions, such as signatory authority accounts) but requires U.S. taxpayers to disclose more information with respect to these accounts.
The second category is the requirement to disclose the ownership of a whole new set of classes of assets grouped together under the vague definition of “other foreign financial assets”. Basically, other foreign financial assets include classes of assets which are held for investment but not held in an account maintained by a financial institution. Such assets include stocks or securities issued by anyone who is not a U.S. person, any interest in a foreign entity, and any financial instrument or contract that has an issuer or counterparty that is other than a U.S. person.
Finally, Form 8938 requires the taxpayer to report whether he disclosed any assets on Forms 5471, 8865, 8621, 3520 and 3520-A.
It should be remembered that Form 8938 has its own set of independent penalties associated with Form 8938 noncompliance. These penalties are imposed in addition to penalties associated with FBARs, Form 3520 and other U.S. information returns.
Foreign Inheritance Form 8938 Reporting: Foreign Financial Accounts
If you received foreign bank and financial accounts as part of your foreign inheritance, you will need to disclose these accounts on Forms 8938 if the relevant filing threshold requirement is satisfied. In a foreign inheritance context, an issue often arises if you are an executor of a foreign estate and have signatory authority over the estate’s financial accounts. Whether Form 8938 would need to be filed for the accounts in this situation is a fact-dependent question and needs to be explored by an international tax attorney (though, in the great majority of cases, an FBAR would need to be filed in this context as long as the relevant reporting threshold is satisfied).
Foreign Inheritance Form 8938 Reporting: Other Investment Instruments
If you received other investment instructions as part of your foreign inheritance, your international tax attorney should explore whether these instruments satisfy the second category of reportable Form 8938 assets. Examples of other foreign financial assets include: a note, bond, debenture, or other form of indebtedness issued by a foreign person; an interest rate swap, currency swap; basis swap; interest rate cap, interest rate floor, commodity swap; equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty; an option or other derivative instrument with respect to any currency or commodity that is entered into with a foreign counterparty or issuer; and other assets held for investment.
Foreign Inheritance Form 8938 Reporting: Foreign Business Ownership
The detailed exploration of the reporting of an ownership interest in a foreign business is beyond the scope of this article. Therefore, I want to briefly mention that, if you inherited an ownership interest in a foreign corporation, partnership or a disregarded entity, this interest may need to be reported on Form 8938. However, it is possible that this interest may also have to be reported on Forms 5471, 8865, 8858 and other U.S. information reports related to business entities. In this case, it is possible that you will only need to report on Form 8938 that the information regarding an ownership interest in a foreign entity was reported on Form 5471, 8865 and/or 8621.
The final decision on how a foreign business ownership needs to be reported to the IRS should rest with your international tax lawyer.
Foreign Inheritance Form 8938 Reporting: Foreign Trust Beneficiary Interest
The detailed exploration of the reporting of a beneficiary interest in a foreign trust is beyond the scope of this article. For the purposes of this article, let me just provide this brief and over-simplified summary – if you inherited a beneficiary interest in a foreign trust, you should report it on Form 8938 unless it is already reported on Forms 3520 and/or 3520-A (if the latter is the case, you just need to check the box on Form 8938 for the appropriate form on which the beneficiary interest was reported). Again, the decision on how to report your foreign trust beneficiary interest should rest with your international tax lawyer.
Contact Sherayzen Law Office for Professional Help with Your Foreign Inheritance Form 8938 Reporting
The U.S. tax requirements related to reporting of your foreign inheritance may be highly complex and it is very easy to run into trouble. Contact Sherayzen Law Office for professional help. Our legal team is highly experienced in foreign inheritance reporting, including Forms 8938, 3520 (all parts of Form 3520: foreign trusts, foreign gifts and foreign inheritance), 3520-A, 5471, 8621, 8865 and other relevant forms. We have also helped U.S. taxpayers around the globe with their offshore voluntary disclosures with respect to late reporting of their foreign inheritance.
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### Denver FATCA Lawyers
There are two types of international tax lawyers who can qualify as Denver FATCA lawyers. First, Denver FATCA lawyers are lawyers who live and work in Denver and who specialize in helping U.S. taxpayers and/or foreign financial institutions with FATCA compliance.
The second type of international tax lawyers who can qualify as Denver FATCA lawyers arose as a result of the development of modern communication technologies. These are the lawyers who reside outside of Denver (i.e. in Minneapolis or any other city) and help clients who live and work in Denver, Colorado. A classic example of such Denver FATCA lawyers is the international tax law firm of Sherayzen Law Office; Mr. Sherayzen resides in Minneapolis but provides services to his clients in Denver, Colorado.
It is important to understand that the actual residence of an international tax lawyer who helps his clients in Denver with FATCA issues does not matter. Modern technologies (such as Internet, email, video Skype conference, et cetera) allow a lawyer in Minneapolis to provide at least the same quality of service in Denver as other Denver FATCA lawyers. The mail qualification of a lawyer that should matter for clients who are looking for Denver FATCA lawyers is that their lawyers are knowledgeable about FATCA, foreign accounts disclosure and the U.S. international tax law in general.
The knowledge of U.S. international tax requirements is especially important for Denver FATCA lawyers. A lot of people do not immediately comprehend that FATCA is merely a part (and, indeed, a very important part) of a much larger set of international tax laws of the United States; these laws interact with each other and this interaction has practical tax consequences for U.S. taxpayers. This is why it is important for Denver FATCA lawyers not only to be knowledgeable about FATCA itself, but also about the U.S. international tax laws in general.
Contact Sherayzen Law Office If You Are Looking for Denver FATCA lawyers
If you are looking for Denver FATCA lawyers, contact Sherayzen Law Office, Ltd., an international tax law firm that specializes in FATCA compliance, offshore voluntary disclosures and U.S. international tax issues in general. Sherayzen Law Office provides its services to clients who reside in Denver, Colorado (as it has already done multiple times in the past).
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### Houston OVDP Tax Attorney
Who is considered to be Houston OVDP tax attorney? Initially, most taxpayers would say that this is a strange question to ask, because the answer is very simple: Houston OVDP tax attorney is an attorney who resides in Houston and specializes in helping U.S. taxpayers disclose their undeclared foreign accounts.
This answer, however, is anachronistic and erroneous, because it does not take into account two important considerations. First, there is no “OVDP” law; OVDP is the IRS Offshore Voluntary Disclosure Program which is administered by the IRS for the purpose of allowing U.S. taxpayers with undeclared offshore assets and offshore income to voluntarily disclose these assets under a mitigated penalty. This means that, in reality, the OVDP “law” is simply a sub-area of international tax law and all “OVPD tax attorneys” are simply international tax attorneys who specialize in IRS OVDPs and are also knowledgeable in other relevant aspects of U.S. international tax law.
Nevertheless, the term Houston OVDP tax attorney is commonly used to describe an international tax attorney who helps his clients with the declaration of undisclosed foreign assets and foreign income.
The second and most important correction is that Houston OVDP tax attorney does not mean that the tax attorney should reside in Houston. OVDP is a federal tax program and can be practiced by an international tax attorney who is licensed in any of the 50 states of the United States. Hence, an international tax attorney who does offshore voluntary disclosures and helps his clients who reside in Houston, Texas, is automatically a Houston OVDP tax attorney.
This means that Houston OVDP tax attorney can actually reside in Minneapolis or any other city. Mr. Sherayzen of Sherayzen Law Office is an example of such a Houston OVDP tax attorney – he resides in Minneapolis but helps his clients throughout the world, including Houston, Texas.
We can now go back and answer my original question: who is considered to be Houston OVDP tax attorney? The answer is as follows: a Houston OVDP tax attorney is an international tax attorney who is licensed to practice in any of the 50 states of the United States, resides anywhere in the United States (Minneapolis, for example) or any other country, and helps his clients in Houston with OVDP disclosures.
Contact Sherayzen Law Office If You Are Looking for A Houston OVDP Tax Attorney
If you are looking for Houston OVDP tax attorney, you should contact Sherayzen Law Office, Ltd., an international tax law firm that specializes in offshore voluntary disclosures and helps its clients in Houston, Texas.
Our professional legal team is highly experienced in the OVDP disclosures; we have helped clients with every major IRS offshore voluntary disclosure program (2009 OVDP, 2011 OVDI, 2012 OVDP and the 2014 OVDP now closed), both types of Streamlined Disclosures (Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures), Delinquent International Information Return Submission Procedures and Delinquent FBAR Submission Procedures.
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### FATCA Form 8938 Foreign Life Insurance Reporting | FATCA Lawyers
FATCA Form 8938 Foreign Life Insurance Policy reporting is one of the most obscure US tax requirements with which many US taxpayers fail to comply. In this article, I would like to explore FATCA Form 8938 foreign life insurance policy reporting.
FATCA Form 8938 Foreign Life Insurance Reporting: Types of Foreign Life Insurance Policies
In a previous article, I already described the three main types of foreign life insurance policies: traditional policies, cash-surrender non-investment policies and investment policies. The traditional policies refer to straightforward life insurance policies with no cash-surrender value; in essence, this is the traditional understanding of what a life insurance policy should be – a sum of money paid out at death to a policy beneficiary.
The cash-surrender non-investment policies are foreign life insurance policies that have cash-surrender value which, usually, can be obtained at any point prior to the maturity of the policy. There is usually no income associated with a policy, but this is not always the case. The cash-surrender value grows over time mostly through premiums, automatic increases in value and a system of bonuses.
Finally, the investment policies are foreign life insurance policies with a cash-surrender value which largely depends on the growth in investments which underlie the policy. While there might be a death benefit to the policy, the investment life insurance policies are usually simply investment accounts wrapped into a life insurance format. Assurance Vie policies in France are a typical example of such a foreign life insurance policy.
FATCA Form 8938 Foreign Life Insurance Reporting: What is Form 8938
FATCA Form 8938 is a relatively recent addition to the already large list of the U.S. international tax forms; yet, it is already the most comprehensive form in the IRS arsenal. FATCA Form 8938 was born out of the feared Foreign Account Tax Compliance Act (FATCA) and it was first due with the 2011 tax return.
FATCA Form 8938 basically requires the reporting of three types of assets. First, it almost duplicates FBAR with respect to reporting foreign bank and financial accounts (with important exceptions, such as signatory authority accounts); more information with respect to these accounts, however, must be supplied by the reporting taxpayer. Second, FATCA Form 8938 introduces the requirement to disclose the ownership of a whole new class of assets which normally would not be reported on any tax form (e.g. paper stock certificates). These are so-called “Other Specified Foreign Assets”. Finally, FATCA Form 8938 requires the taxpayer to report whether he disclosed any assets on Forms 5471, 8865, 8621, 3520 and 3520-A.
FATCA Form 8938 has its own set of independent penalties associated with Form 8938 noncompliance.
FATCA Form 8938 Foreign Life Insurance Policy Reporting Requirements
FATCA Form 8938 Foreign Life Insurance Policy reporting is very similar to the FBAR Foreign Life Insurance Policy reporting. In general, the traditional life insurance policies with no cash-surrender values are ordinarily not reportable (although, there are exceptions). On the other hand, cash-surrender non-investment policies and investment policies should be reported on FATCA Form 8938.
This is just the general guidance. The determination of whether your specific foreign life insurance policies should be reported on FATCA From 8938 must be left to an international tax attorney; I strongly discourage any attempt by US taxpayers to make this determination without professional legal assistance.
Contact Sherayzen Law Office for Help With FATCA Form 8938 Foreign Life Insurance Policy Reporting
Contact the experienced international tax law firm of Sherayzen Law Office for any legal help with your FATCA Form 8938 Foreign Life Insurance Policy reporting. Foreign life insurance policies can be extremely complex and the US reporting requirements associated with them vary from country to country. Sherayzen Law Office has accumulated tremendous experience in dealing with foreign life insurance policies from Australia, Canada, New Zealand, Europe and Asia.
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### Remember to File Your 2015 FBARs | FBAR Tax Attorney
On June 17, 2016, the IRS again reminded U.S. taxpayers with foreign accounts to file their 2015 FBARs by Thursday, June 30, 2016. U.S. taxpayers have to file 2015 FBARs if they had financial interest in or signatory authority (or other authority) over foreign accounts with values which, in the aggregate (i.e. all accounts added together), exceeded $10,000 at any time during the calendar year 2015. The taxpayers who satisfied the FBAR threshold, should e-file their 2015 FBARs through the BSA E-Filing System website.
It is important to note that the number of FBAR filings has grown exponentially. According to FinCEN data, on average, there has been a seventeen percent increase per year during the last five years. In fact, in 2015, FinCEN received a record high 1,163,229 of 2014 FBARs. We can reasonably expect that the number of 2015 FBARs will beat last year’s record.
The growth in the number of FBARs is mainly caused by two factors. First, the greater awareness of the FBAR requirement is due to a series of IRS legal victories against foreign banks and offshore jurisdictions, starting with 2008 UBS case through a complete destruction of the Swiss bank secrecy in the Swiss Bank Program and even more recent criminal conviction of two Caymanian banks.
Second and probably the most important reason is the implementation of the Foreign Account Tax Compliance Act (FATCA) which requires foreign financial institutions to report foreign accounts owned by U.S. persons. Additionally, FATCA created a new filing requirement, IRS Form 8938. Unlike the FBAR, Form 8938 has to be filed with U.S. individual tax returns (the implementation of Form 8938 for business returns still has not occurred). This new requirement created a much greater awareness of the FBAR among the accountants who generally do not file FBARs for their clients due to the fact that FBARs carry criminal penalties.
Both of these factors will continue to play a great role in 2016 when the 2015 FBARs have to filed. Additionally, by June 30, a much greater of foreign banks will have delivered FATCA letters, further promoting FBAR awareness among U.S. persons who have to file 2015 FBARs.
Contact Sherayzen Law Office for FBAR Help
If you have undisclosed foreign accounts for which delinquent FBARs have to be filed or you need help with determining what needs to be filed for 2015 FBAR, contact the experienced international tax law firm of Sherayzen Law Office. Our talented team of tax professionals, headed by a highly-experienced FBAR tax attorney, Mr. Eugene Sherayzen, has helped hundreds of U.S. taxpayers around the world and we can help you!
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### Foreign Inheritance FBAR Reporting | FBAR Lawyer
Foreign Inheritance FBAR Reporting is one of the most common issues among U.S. taxpayers with foreign parents, uncles, aunts, siblings and other relatives. The issue discussed in this article is not reporting foreign inheritance itself (although this is an important concern which I already addressed in other articles), but whether FBAR needs to be filed upon the receipt of a foreign inheritance. Let’s explore this subject in more detail.
Foreign Inheritance FBAR Reporting: What is FBAR?
The Report of Foreign Bank and Financial Accounts, officially now called FinCEN Form 114 and also known as “FBAR”, is one of the main U.S. international tax requirements for reporting bank and financial accounts overseas. FBAR should be filed by every U.S. tax resident who has foreign financial accounts the aggregate value of which exceeds $10,000 at any time during the calendar year. The aggregate value should be calculated on all foreign bank and financial accounts in which this U.S. tax resident has financial interest or over which he has signatory or other authority.
The 2015 FBAR must be received by the IRS by June 30, 2016 without any extension possible; however, starting the reporting for the calendar year 2016 (i.e. 2016 FBAR) the FBARs are due on April 15 (an extension is possible).
Foreign Inheritance FBAR Reporting: Foreign Bank and Financial Accounts
A foreign inheritance may be received by a U.S. heir in a great variety of forms: cash, bank accounts, investments, business ownership, real estate, a foreign trust beneficiary interest, jewelry, art, intellectual property, et cetera. For the FBAR reporting purposes, it is important to understand exactly what the U.S. heir in inheriting.
Foreign Inheritance FBAR reporting becomes relevant when a U.S. heir receives either financial interest in or signatory (or other) authority over any foreign bank and financial accounts. It is important to emphasize that, no matter how brief is this financial interest or signatory authority, the foreign inheritance FBAR reporting will come into play as long as the aggregate value of all accounts exceeds $10,000.
I often see that U.S. heirs would set up foreign accounts in which foreign inheritance is deposited and they would believe that such accounts would not be reportable because they are simply depositing foreign inheritance. This is incorrect - as soon as foreign accounts are involved, foreign inheritance FBAR reporting considerations immediately become relevant whether these are inherited foreign accounts or accounts which are set up to receive the inheritance.
Contact Foreign Inheritance FBAR Lawyer for Professional Help
If you received a foreign inheritance, you need to contact Sherayzen Law Office as soon as possible for professional help. Mr. Sherayzen has successfully advised hundreds of U.S. taxpayers with respect to U.S. tax compliance foreign inheritance issues. He can help You!
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### Foreign Life Insurance Policies - FBAR Reporting
Foreign Life Insurance Policies are very popular around the world, especially in India, Germany and France (Assurance Vie accounts). Yet, very few U.S. taxpayers (especially H-1B holders and U.S. permanent residents) are aware of the fact that these policies may be subject to numerous and complex IRS tax reporting requirements in the United States. In this article, I would like to generally discuss the FBAR requirements applicable to foreign life insurance policies.
I will not be discussing here the requirements for a qualified foreign life insurance policy, because it is mostly irrelevant since the great majority of foreign life insurance policies would not be qualified policies.
Types of Foreign Life Insurance Policies
Before we start exploring which foreign life insurance policies (also known as Life Assurance Policies) are subject to the FBAR requirement, it is important to distinguish three general categories of foreign life insurance policies.
In the order of rising complexity, the first category of foreign life insurance policies consists of simple, straightforward life insurance policies with no cash surrender value, no income payments and no income accumulations. The taxpayer simply makes the required premium payments and he expects a fixed-amount payout at death.
The second category of foreign life insurance policies has a cash-surrender value, but no income. The taxpayer pays a premium and expects a certain payout when the policy is surrendered or matures. The cash surrender value grows over time mostly through premiums and bonuses which would be paid out when the policy is surrendered. There is also a potential death benefit.
Finally, the third category of foreign life insurance policies has a cash-surrender value with investments and/or income. There is a large variety of investment life insurance policies. The most common arrangement, though, is where the taxpayer pays a relatively large initial premium which is invested in foreign mutual funds; the growth in mutual funds will usually determine the cash-surrender value. Oftentimes, the cash-surrender value in these policies is tax-free if certain requirements are met (for example, Assurance Vie policies in France or certain life insurance policies in India).
In some cases (for example, in Malaysia), an investment foreign health insurance policy may be tied into a life insurance policy.
FBAR - FinCEN Form 114
FinCEN Form 114 - Report of Foreign Bank and Financial Accounts (commonly known as FBAR) is the most important US tax information return. FBAR must be filed by a US tax resident if the aggregate value of foreign financial accounts (in which this US person has financial interest and/or over which this US person has signatory authority) exceeds $10,000 at any time during the calendar year. The 2015 FBAR must be received by the IRS by June 30, 2016 without any extension possible; however, starting the reporting for the calendar year 2016 (i.e. 2016 FBAR) the FBARs are due on April 15 with an extension possible.
The importance of FBAR stems from the draconian FBAR penalties. Unlike many other information returns, FBAR imposes penalty not only on the willful non-filing, but also on the non-willful failure to file the FBAR. The willful FBAR penalties range from criminal penalties with up to 5 years in prison to up to $100,000 penalty per account per year. The FBAR statute of limitations is six years, which means that up to six years maybe subject to a penalty (though, usually it would be 2-4 years).
Foreign Life Insurance Policies and FBAR Reporting
Foreign life insurance policies must be reported on the FBAR if they have a cash-surrender value. Therefore, foreign life insurance policies that fall into categories two and three described above are always reportable. Investment foreign life insurance policies promoted by national governments (such as Assurance Vie accounts in France) are reportable even if they are considered to be held by a foreign trust (such as Superannuation Accounts in Australia).
The first category of foreign life insurance policies I listed above (i.e. life insurance policies without any cash-surrender value) are not likely to be reportable, but there are exceptions.
The determination of whether your foreign life insurance policies are reportable on the FBAR should be made by an international tax attorney; I strongly discourage any attempt by US taxpayers to make this determination without legal assistance.
Foreign Life Insurance Policies and Other Reporting Requirements
It is important to note that other US reporting requirements may apply to foreign life insurance policies. Examples include FATCA Form 8938, PFIC compliance, foreign trust reporting, et cetera.
Contact Sherayzen Law Office for Help With Foreign Life Insurance Policies
If you have foreign life insurance policies, contact Sherayzen Law Office for assistance as soon as possible. Foreign life insurance policies can be extremely complex and the US reporting requirements associated with them vary from country to country. Sherayzen Law Office has accumulated tremendous experience in dealing with foreign life insurance policies from Australia, Canada, New Zealand, Europe and Asia. We can help You!
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### First Conviction of Non-Swiss Financial Institutions For Tax Evasion Conspiracy
On March 9, 2016, the IRS announced the first conviction of Non-Swiss Financial Institutions for tax evasion conspiracy. At Sherayzen Law Office, we have been predicting now for years that the IRS would expand its prosecution of financial institutions far beyond the Swiss borders, specifically pointing to tax shelters such as Cayman Islands. Now that our strategic analysis has been confirmed, it is important to analyze this first conviction of Non-Swiss Financial Institutions and its impact on U.S. taxpayers with undisclosed foreign accounts.
Factual Background of the First Conviction of Non-Swiss Financial Institutions
The first conviction of Non-Swiss Financial Institutions concerned two Cayman Island Financial Institutions, Cayman National Securities Ltd. (CNS) and Cayman National Trust Co. Ltd. (CNT). CNS and CNT were Cayman Island affiliates of Cayman National Corporation, which provided investment brokerage and trust management services to individuals and entities within and outside the Cayman Islands, including citizens and residents of the United States (U.S. taxpayers).
According to the IRS and documents filed in Manhattan federal court, from at least 2001 through 2011, CNS and CNT assisted certain U.S. taxpayers in evading their U.S. tax obligations to the IRS and otherwise hiding accounts held at CNS and CNT from the IRS (hereinafter, undeclared accounts). CNS and CNT did so by knowingly opening and maintaining undeclared accounts for U.S. taxpayers at CNS and CNT. Specifically, and among other things, CNS and CNT opened and encouraged many U.S. taxpayer-clients to open accounts held in the name of sham Caymanian companies and trusts (collectively, structures), thereby helping U.S. taxpayers conceal their beneficial ownership of the accounts. Furthermore, CNS and CNT treated these sham Caymanian structures as the account holders and allowed the U.S. beneficial owners of the accounts to trade in U.S. securities without ever requiring these U.S. persons to submit Form W-9. CNS failed to disclose to the IRS the identities of the U.S. beneficial owners who were trading in U.S. securities, in contravention of CNS’s obligations under its Qualified Intermediary Agreement (QIA) with the IRS.
At their high-water mark in 2009, these two Non-Swiss Financial Institutions (CNS and CNT) had approximately $137 million in assets under management relating to undeclared accounts held by U.S. taxpayer-clients. From 2001 through 2011, CNS and CNT earned more than $3.4 million in gross revenues from the undeclared U.S. taxpayer accounts that they maintained.
In 2008, after learning about the investigation of Swiss bank UBS AG (UBS) for assisting U.S. taxpayers to evade their U.S. tax obligations, these two Non-Swiss Financial Institutions (i.e. CNS and CNT) continued to knowingly maintain undeclared accounts for U.S. taxpayer-clients and did not begin to engage in any significant remedial efforts with respect to those accounts until 2011 and 2012.
In or about June 2011, CNT hired a new president, who spearheaded a review of CNT’s files. In the course of that review, not a single file was found to be complete and without tax or other issues. Moreover, with respect to the structures that had U.S. beneficial owners, CNT’s files contained little, if any, evidence of tax compliance.
Guilty Pleas of these Two Non-Swiss Financial Institutions
On March 9, 2016, both Non-Swiss Financial Institutions, CNS and CNT pleaded guilty to a criminal Information charging them with conspiring with many of their U.S. taxpayer-clients to hide more than $130 million in offshore accounts from the IRS and to evade U.S. taxes on the income earned in those accounts. CNS and CNT entered their guilty pleas pursuant to plea agreements.
As part of their plea agreements, CNS and CNT have agreed to cooperate fully with the IRS investigation of the companies’ criminal conduct. The IRS states that, to date, CNS and CNT have already made substantial efforts to cooperate with that investigation, including by: (1) facilitating interviews of CNS and CNT employees, including top level executives; (2) voluntarily producing documents in response to the IRS requests; (3) providing, in response to a treaty request, unredacted client files for approximately 20 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT; and (4) committing to assist in responding to a treaty request that is expected to result in the production of unredacted client files for approximately 90 to 95 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT.
In connection with their guilty pleas, CNS and CNT have also agreed to pay the United States a total of $6 million, which consists of the forfeiture of gross proceeds of their illegal conduct, restitution of the outstanding unpaid taxes from U.S. taxpayers who held undeclared accounts at CNS and CNT, and a fine.
Impact of the Guilty Pleas of Non-Swiss Financial Institutions on U.S. Taxpayers with Undeclared Foreign Accounts
The impact of the guilty pleas of these two Cayman Island Non-Swiss Financial Institutions is difficult to overstate. First, it becomes clear that the IRS feels confident that it can replicate its success in Switzerland in every offshore jurisdiction and there is no limit to their ability to uncover undeclared foreign accounts of U.S. taxpayers.
“Today’s convictions make clear that our focus is not on any one bank, insurance company or asset management firm, or even any one country,” said Acting Deputy Assistant Attorney General Goldberg of the Justice Department’s Tax Division. “The Department and IRS are following the money across the globe – there are no safe havens for U.S. citizens engaged in tax evasion or those actively assisting them.”
Second, it is evident that the IRS strategy is to first force Non-Swiss Financial Institutions to reveal information about their U.S. clients and, then, using the information provided by these institutions, pursue noncompliant U.S. taxpayers. As part of their guilty pleas, CNS and CNT are required to turn over extensive materials about their U.S. clients and these noncompliant U.S. taxpayers should be preparing to face the full wrath of the IRS.
“The guilty pleas of these two Cayman Island companies today represent the first convictions of financial institutions outside Switzerland for conspiring with U.S. taxpayers to evade their lawful and legitimate taxes,” said U.S. Attorney Bharara. “The plea agreements require these Cayman entities to provide this office with the client files, because we are committed to finding and prosecuting not only banks that help U.S. taxpayers evade taxes, but also individual taxpayers who find criminal ways not to pay their fair share. We will follow them no matter how far they go to hide their accounts, whether it is Switzerland, the Cayman Islands, or some other tax haven.”
In essence, between FATCA and the constant IRS pressure on Non-Swiss Financial Institutions, the noncompliant U.S. taxpayers are in the constant danger of discovery, which now becomes more of a question of “when”, rather than “if”.
What Should U.S. Taxpayers With Undeclared Foreign Accounts Do?
In light of this development, U.S. taxpayers with undeclared foreign accounts in Non-Swiss Financial Institutions should explore their voluntary disclosure options as soon as possible. For this purpose, they should contact an experienced international tax law firm that specializes in this field.
Contact the Experienced International Tax Law Firm of Sherayzen Law Office, Ltd. for Professional Help With Your Undeclared Accounts
If you have undeclared foreign accounts, foreign income or foreign business entities, you are encouraged to contact the international tax law firm of Sherayzen Law Office as soon as possible. Our team of experienced tax professionals specializes in this area of law, including the preparation of all necessary legal documents and tax forms. We have helped hundreds of U.S. taxpayers around the world and we can help You!
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### Julius Baer Deferred Prosecution Agreement
On February 4, 2016, the US DOJ announced that it filed criminal charges against Bank Julius Baer & Co. Ltd. (“Julius Baer” or “the company”). At the same time, the DOJ announced a Julius Baer Deferred Prosecution Agreement. Let’s explore this event in more detail.
Julius Baer Deferred Prosecution Agreement Background
Unlike many other Swiss Banks, Julius Baer could not participate in the Swiss Bank Program due to its classification as a Category 1 bank. Hence, the Julius Baer Deferred Prosecution Agreement comes as an independent agreement with the DOJ after the DOJ filed criminal charges against Julius Baer.
According to the IRS and the court documents, from at least the 1990s through 2009, Julius Baer helped many of its U.S. taxpayer-clients evade their U.S. tax obligations, file false federal tax returns with the IRS and otherwise hide accounts held at Julius Baer from the IRS (hereinafter, undeclared accounts). Julius Baer did so by opening and maintaining undeclared accounts for U.S. taxpayers and by allowing third-party asset managers to open undeclared accounts for U.S. taxpayers at Julius Baer. Casadei and Frazzetto, bankers who worked as client advisers at Julius Baer, directly assisted various U.S. taxpayer-clients in maintaining undeclared accounts at Julius Baer in order to evade their obligations under U.S. law. At various times, Casadei, Frazzetto and others advised those U.S. taxpayer-clients that their accounts at Julius Baer would not be disclosed to the IRS because Julius Baer had a long tradition of bank secrecy and no longer had offices in the United States, making Julius Baer less vulnerable to pressure from U.S. law enforcement authorities than other Swiss banks with a presence in the United States.
Julius Baer was aware that many U.S. taxpayer-clients were maintaining undeclared accounts at Julius Baer in order to evade their U.S. tax obligations, in violation of U.S. law. In internal Julius Baer correspondence, undeclared accounts held by U.S. taxpayers were at times referred to as “black money,” “non W-9,” “tax neutral,” “unofficial,” or “sensitive” accounts.
At its high-water mark in 2007, Julius Baer had approximately $4.7 billion in assets under management relating to approximately 2,589 undeclared accounts held by U.S. taxpayer-clients. From 2001 through 2011, Julius Baer earned approximately $87 million in profit on approximately $219 million gross revenues from its undeclared U.S. taxpayer accounts, including accounts held through structures.
However, the IRS noted that the behavior of Julius Baer started to change. By at least 2008, Julius Baer began to implement institutional policy changes to cease providing assistance to U.S. taxpayers in violating their U.S. legal obligations. For example, by November 2008, the company began an “exit” plan for U.S. client accounts that lacked evidence of U.S. tax compliance. In that same month, Julius Baer imposed a prohibition on opening accounts for any U.S. clients without a Form W-9.
Additionally, in November 2009, before Julius Baer became aware of any U.S. investigation into its conduct, Julius Baer decided proactively to approach U.S. law enforcement authorities regarding its conduct relating to U.S. taxpayers. Prior to self-reporting to the Department of Justice, Julius Baer notified its regulator in Switzerland of its intention to contact U.S. law enforcement authorities. This Swiss regulator requested that Julius Baer not contact U.S. authorities in order not to prejudice the Swiss government in any bilateral negotiations with the United States on tax-related matters. Accordingly, Julius Baer did not, at that time, self-report to U.S. law enforcement authorities.
After ultimately engaging with U.S. authorities, Julius Baer has taken extensive actions to demonstrate acceptance and acknowledgment of responsibility for its conduct. Julius Baer conducted a swift and robust internal investigation, and furnished the U.S. government with a continuous flow of unvarnished facts gathered during the course of that internal investigation. As part of its cooperation, Julius Baer also, among other things, (1) successfully advocated in favor of a decision provided by the Swiss Federal Council in April 2012 to allow banks under investigation by the U.S. Department of Justice to legally produce employee and third-party information to the department, and subsequently produced such information immediately upon issuance of that decision; and (2) encouraged certain employees, including specifically Frazzetto and Casadei, to accept responsibility for their participation in the conduct at issue and cooperate with the ongoing investigation.
Julius Baer Deferred Prosecution Agreement Details
Under the Julius Baer Deferred Prosecution Agreement, the bank admitted to helping U.S. taxpayers hide assets and knowingly assisted many of its U.S. taxpayer-clients in evading their tax obligations under U.S. law. The admissions are contained in a detailed Statement of Facts attached to the agreement. The agreement requires Julius Baer to pay a total of $547 million by no later than February 9, 2016, including through a parallel civil forfeiture action also filed today in the Southern District of New York.
Julius Baer Deferred Prosecution Agreement Impact on U.S. Taxpayers
The Julius Baer Deferred Prosecution Agreement signifies yet another IRS victory over the now-defeated Swiss bank secrecy system. The IRS is simply “mopping-up” the left-over issues in Switzerland as it shifts its focus to other major offshore tax havens. Yet, the Julius Baer Deferred Prosecution Agreement is still a major event that has repercussions for U.S. taxpayers with undeclared foreign accounts.
First, the Julius Baer Deferred Prosecution Agreement is likely to continue to impact former Julius Baer U.S. taxpayers who transferred their funds out of this Swiss bank to another country or another bank in the hopes of avoiding IRS detection of their prior non-compliance. Under the agreement, Julius Baer will continue to cooperate with the IRS in the identification of such noncompliant U.S. taxpayers.
Second, Julius Baer is an important Swiss bank and the fact that the Julius Baer Deferred Prosecution Agreement was reached encourages other noncompliant banks (not only in Switzerland, but other countries) to follow its example. Therefore, U.S. taxpayers who believe they are safe outside of Switzerland are now in the ever increasing danger of IRS detection.
Contact Sherayzen Law Office for Professional Help with Your Undeclared Foreign Accounts
The Julius Baer Deferred Prosecution Agreement is another reminder on how dangerous is the current tax environment for noncompliant U.S. taxpayers. Therefore, if you have not disclosed your foreign accounts, foreign assets or foreign income, please contact Sherayzen Law Office as soon as possible. Our team of tax professionals is highly experienced in handling these matters and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### No FBAR Penalty Option
No FBAR Penalty is the result that every taxpayer wishes to achieve. Indeed, having no FBAR penalty is a realistic objective, but only in certain situations. One of such situations is currently offered by the IRS through Delinquent FBAR Submission Procedures.
History of the IRS Procedures Regarding No FBAR Penalty Option
There is a relatively long history behind the option that taxpayers with delinquent FBARs would be charged no FBAR penalty. It comes from the traditional link between income tax noncompliance and the imposition of an FBAR penalty. Prior to 2009 OVDP, the No FBAR Penalty option was unofficial, but very much part of the IRS tradition in situations where a taxpayer would not have any additional U.S. tax liability as a result of his voluntary disclosure of foreign accounts.
The rules for the 2009 IRS Offshore Voluntary Disclosure Programs (“2009 OVDP”) finally officially recognized the No FBAR Penalty option in the answer to Question #9. The FAQ #9 also for the first time properly stated the legal philosophy behind the No FBAR Penalty option: “The purpose for the voluntary disclosure practice is to provide a way for taxpayers who did not report taxable income in the past to voluntarily come forward and resolve their tax matters.” Hence, if a taxpayer “reported and paid tax on all taxable income but did not file FBARs, do not use the voluntary disclosure process.” Rather, the taxpayer was urged to file the FBARs directly with the explanation of why the FBARs were filed late.
Both, the 2011 IRS Offshore Voluntary Disclosure Initiative (“2011 OVDI) and 2012 Offshore Voluntary Disclosure Program (“2012 OVDI) again reinforced the No FBAR Penalty with FAQ #17: “The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.”
On June 18, 2014, with the creation of 2014 Offshore Voluntary Disclosure Program (“2014 OVDP”), the IRS removed the 2014 OVDP FAQ #17 and replaced it the modern official No FBAR Penalty option called Delinquent FBAR Submission Procedures.
No FBAR Penalty Option under the Delinquent FBAR Submission Procedures
Under the Delinquent FBAR Submission Procedures, the IRS promises not to impose FBAR penalties for the failure to file the delinquent FBARs if three requirements are met: (1) the taxpayer properly reported on his U.S. tax returns (and paid all tax on) the income from the foreign financial accounts reported on the delinquent FBARs; (2) the IRS has not contacted the taxpayer previously regarding an income tax examination (civil or criminal) for the years for which the delinquent FBARs are submitted; and (3) the IRS has not previously requested from the taxpayer the FBARs for the years for the years for which the delinquent FBARs are submitted.
If all three requirements are met, the taxpayers can pursue Delinquent FBAR Submission Procedures by filings the delinquent FBARs with FinCEN directly. A statement explaining why the FBARs are filed late must be provided to the IRS.
Contact Sherayzen Law Office to Explore Your No FBAR Penalty Options
Delinquent FBAR Submission Procedures is probably one of the most popular No FBAR penalty options, but it is a limited one because it is not always possible to comply with all three of the formal requirements of the Procedures. Thankfully, these Procedures are not the only No FBAR Penalty Option offered by the IRS.
This is why, if you have undisclosed foreign accounts, you should contact the experienced international tax law firm of Sherayzen Law Office. We will thoroughly explore your case, analyze your No FBAR penalty and voluntary disclosure options, choose the disclosure route that best balances your risks and rewards, prepare all of the required legal documents and tax forms, and defend your case against the IRS. We have helped hundreds of U.S. taxpayers around the world and we can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Third Quarter of 2016 IRS Interest Rates
The Internal Revenue Service recently announced that Third Quarter of 2016 IRS Interest Rates will remain the same for the. Third quarter begins on July 1, 2016 and ends on September 30, 2016) The Third Quarter of 2016 IRS Interest Rates:
four (4) percent for overpayments [three (3) percent in the case of a corporation];
four (4) percent for underpayments;
six (6) percent for large corporate underpayments; and
1 and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis; therefore, US taxpayers and tax professionals should refer to IRS announcements of IRS interest rates on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Third Quarter of 2016 IRS Interest Rates are relevant for various reasons; among these reasons, three main uses stand out. First, these are the rates that will be used to charge an interest on any tax owed by a taxpayer. Second, these rates will be used to calculate the interest rate that the IRS owes with respect to tax refunds on the amended US tax returns.
Finally, Third Quarter of 2016 IRS Interest Rates are relevant to PFIC default 1291 calculations. The PFIC tax that is levied on “excess distribution” is subject to IRS interest rates. Hence, if a PFIC’s holding period includes the third quarter of 2016, the tax attorney who calculates PFIC interest on the PFIC tax will need to use Third Quarter of 2016 IRS Interest Rates.
The IRS interest rates were stagnant at 3% for a very long time (from 2010 through first quarter of 2016). However, in the second quarter of 2016, the IRS raised the interest rates from 3% to 4% following the increase of the federal short-term rate from 0% to 1%. Sherayzen Law Office will continue to closely monitor the moves of the Federal Reserve to increase its interest rates in the future.

### Experienced International Tax Law Firm of Sherayzen Law Office
Most U.S. taxpayers who need international tax services look for an experienced international tax law firm to help them. Sherayzen Law Office, Ltd. is a highly experienced international tax law firm. In this essay, I will conduct the analysis explaining why Sherayzen Law Office is considered such an experienced international tax law firm.
Areas of Law Covered by an Experienced International Tax Law Firm
In order for a firm to be considered an experienced international tax law firm, it must have sufficient breadth of coverage of international law – i.e. a firm cannot be considered experienced if it only operates on the margins of international tax law. Sherayzen Law Office covers the full range of areas of international tax law, including: Offshore Voluntary Disclosures (all types – OVDP (now closed),  Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, Noisy Disclosures and Reasonable Cause Disclosures); Annual International Compliance with respect to PFICs (Form 8621), foreign business ownership (5471, 8865, 8858, et cetera), foreign business transactions (926 and other related forms) and ownership of foreign accounts (FBAR, Form 8938, et cetera); Foreign Gifts and Inheritance (Form 3520), Beneficiary and/or Owner of a Foreign Trust (Form 3520 and 3520-A); Anti-Deferral Regimes (PFICs, Subpart F rules, et cetera); full domestic compliance (1040, 1065, 1120, et cetera); tax withholding; International Tax Planning; FATCA compliance; and numerous other areas and sub-areas of international tax law.
Furthermore, Sherayzen Law Office helps clients with IRS audits (including FBAR audits), IRS Appeals, and tax court appeals.
The expertise developed by Sherayzen Law Office covers both legal and accounting aspects of international tax law. This means that this is one of the few law firms in the United States where a client’s U.S. legal and accounting needs are fully met without the expense and inconvenience of involving third parties.
Experienced International Tax Law Firm and its Clients
Sherayzen Law Office is an experienced international tax law firm not only because it is in this business for more than 10 years, but also because, during this period of time, it has helped hundreds of U.S. taxpayers throughout the world to resolve their U.S. international tax matters. While a minority of our clients belong to middle class, the majority of our clients consist of the upper middle-class and high-net-worth individuals (including owners of foreign and domestic businesses) with highly complex international tax issues.
Countries Covered by an Experienced International Tax Law Firm
The breadth of the geographical experience is one of the most important characteristics of an experienced international tax law firm. Sherayzen Law Office is proud to state that it has worked with U.S. taxpayers with foreign accounts and/or assets in countries in all continents inhabited by humans: North America (Canada, Mexico and the United States), Central America (Costa Rica, Nicaragua and Panama – geographically, part of the North American continent), South America (Argentina, Brazil, Chile and Colombia), the Caribbean region (Bahamas, Barbados, Saint Kitts and Nevis and Cayman Islands), Europe (Austria, Belarus, Belgium, Croatia, Cyprus, Czech Republic, France, Germany, Hungary, Ireland, Italy, Luxembourg, Monaco, Poland, Portugal, Russia, Spain, Switzerland, Ukraine and the United Kingdom), Middle East (Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Turkey and United Arab Emirates – geographically part of Asia), Australia, New Zealand, Africa (Cote D’Ivore, Ethiopia, Morocco and Nigeria), and Asia (Bangladesh, China, India, Hong Kong, Japan, Philippines, Singapore, South Korea and Thailand).
Such a broad geographical spread qualifies Sherayzen Law Office as one of the most experienced international tax law firms in the United States.
Contact Sherayzen Law Office for Professional Help with Your International Tax Issues
U.S. international tax law is extremely complex with numerous reporting requirements and traps for the unwary. This is why you need to make sure that you have the right team of international tax professionals on your side, especially for the purpose of voluntary disclosure of your foreign accounts and income. Sherayzen Law Office is your best choice; our international tax firm is highly knowledgeable and experienced in international tax law and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Cambata Case: IRS Wins Against Former U.S. Citizen on Offshore Income
In the Cambata case, the IRS successfully demonstrated once again that renunciation of U.S. citizenship will not protect a taxpayer from being pursued for unreported income from foreign accounts. On February 3, 2016, Mr. Albert Cambata pleaded guilty to filing a false income tax return with respect to his unreported Swiss account income.
Facts Related to Mr. Cambata’s Unreported Swiss account income
According to court documents, in 2006, Mr. Albert Cambata established Dragonflyer Ltd., a Hong Kong corporate entity, with the assistance of a Swiss banker and a Swiss attorney. Days later, he opened a financial account at Swiss Bank 1 in the name of Dragonflyer. Although he was not listed on the opening documents as a director or an authorized signatory, Mr. Cambata was identified on another bank document (which the IRS obtained most likely through the Swiss Bank program) as the beneficial owner of the Dragonflyer account. That same year, Mr. Cambata received $12 million from Hummingbird Holdings Ltd., a Belizean company. The $12 million originated from a Panamanian aviation management company called Cambata Aviation S.A. and was deposited to the Dragonflyer bank account at Swiss Bank 1 in November 2006.
On his 2007 and 2008 federal income tax returns, Mr. Cambata failed to report interest income earned on his Swiss financial account in the amounts of $77,298 and $206,408, respectively. In April 2008, Mr. Cambata caused the Swiss attorney to request that Swiss Bank 1 send five million Euros from the Swiss financial account to an account Mr. Cambata controlled at the Monaco branch of Swiss Bank 3. In June 2008, Cambata closed his financial account with Swiss Bank 1 in the name of Dragonflyer and moved the funds to an account he controlled at the Singapore branch of Swiss Bank 2.
In 2012, Mr. Cambata, who has lived in Switzerland since 2007, went to the U.S. Embassy in Bratislava, Slovakia, to renounce his U.S. citizenship and informed the U.S. Department of State that he had acquired the nationality of St. Kitts and Nevis by virtue of naturalization.
Link between the Cambata Case and Swiss Bank Program
It appears that the IRS was able to focus on Mr. Cambata due to information provided by one of the Swiss Bank that participated in the Swiss Bank Program. This led to the IRS investigation that unraveled the whole scheme constructed by Mr. Cambata. Additional information might have been provided to the IRS by one of the Category 1 banks as part of a Deferred Prosecution Agreement.
This affirms what the IRS has stated in the past about its determination to continue to pursue older fraud cases based on the information it already obtained from the Swiss banks. “IRS Criminal Investigation will continue to pursue those who do not pay the taxes they owe to the United States,” said Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office. “Today’s plea is a reminder that we are committed to following the money trail across the globe and will not be deterred by the use of sophisticated international financial transactions that hide the real ownership of income taxable by the United States.”
The Global Reach of the IRS Investigations Grows
Mr. Cambata’s accounts were spread out among the local branches of Swiss banks in Monaco, Singapore and Switzerland. The funds originated from companies based in Belize and Panama (the information regarding these companies was probably obtained through John Doe summons issued in 2015).
It becomes obvious from this case that our earlier warnings about the spread of the IRS investigations beyond Switzerland were correct. The IRS now reaches far beyond Switzerland and focuses more and more on jurisdictions like Belize, Cayman Islands, Cook Islands, Monaco, Panama, Singapore and other favorite offshore jurisdictions. The Cambata case is a grave warning to U.S. taxpayers who still operate in offshore jurisdictions to hide assets from the U.S. government.
The Cambata Case is a Warning to Taxpayers Who Pursued Quiet Disclosure to Cover-Up Past Tax Noncompliance
One of the most curious aspects about the Cambata case is that the IRS never imposed any FBAR penalties or tax return penalties with respect to the later years. While it is not clear from the documents, it appears that Mr. Cambata probably did a quiet disclosure in the year 2009 and has properly filed his FBARs and tax returns ever since.
The FBAR statute of limitations probably did not allow the IRS to impose the FBAR penalties, but the IRS still ignored the quiet disclosure and pursued criminal penalties for the 2006 and 2007 fraudulent tax returns (in addition to restitution of $84,849 - presumable the tax Mr. Cambata would have owed had he filed his 2006 and 2007 returns correctly).
Therefore, U.S. taxpayers who filed quiet disclosure should heed one of the main lessons of the Cambata case – quiet disclosure will not protect you from the IRS criminal prosecution.
The Cambata Case is also a Warning to Taxpayers Who Renounced U.S. Citizenship to Hide Past Tax Noncompliance
The Cambata case also dispels another myth common to U.S. taxpayers: renouncing citizenship somehow prevents the IRS criminal prosecution for past noncompliance. On the contrary, U.S. taxpayers who renounce citizenship may draw the IRS attention because they have to certify that they are fully compliant with the tax laws of the United States.
If the IRS is able to prove that these taxpayers are not fully tax-compliant, then, as the Cambata case clearly demonstrates, the IRS can pursue criminal penalties against former U.S. citizens. It is possible that one of the chief purposes of the IRS in this case was to scare other U.S. citizens who renounced their citizenship to hide their past tax noncompliance.
Contact Sherayzen Law Office for Legal Help with Your Foreign Accounts
If you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible. Whether your case involves complex beneficial ownership structures or you own your foreign accounts personally, our highly experienced team of tax professionals can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### 2015 FBAR (FinCEN Form 114) Due on June 30, 2016
2015 FBAR is one of the most important tax information returns required by the IRS this year. While the 2015 FBAR is not the most complicated form, it is definitely the one that is associated with the most severe penalties.
2015 FBAR History
The FBAR is an abbreviation for the Report of Foreign Bank and Financial Accounts (the “FBAR”). The current official name of the FBAR is FinCEN Form 114 (prior to mandatory e-filing, Form TD F 90-22.1 was the name of the FBAR).
Many of my clients are surprised to learn that FBAR is a tax information return with a long history, dating back to the late 1970s. Its origin lies in the Bank Secrecy Act (31 U.S.C. §5311 et seq.) and it was originally meant to combat money laundering. However, after September 11, 2001, the FBAR enforcement was turned over to the IRS and it became a tax-enforcement tool of heretofore unimaginable power due to its heavy penalties.
Who is Required to File 2015 FBAR
The Department of Treasury (the “Treasury”) requires that an FBAR is filed whenever a US person has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. If you had such a situation in 2015, then you must seek an advice from an FBAR lawyer on whether you need to file the 2015 FBAR.
2015 FBAR Deadline
2015 FBAR must be e-filed with the IRS by June 30, 2016; there are no extensions available – the 2015 FBAR must be received by the IRS no later than June 30, 2016. Note: FBAR due date now coincides with due dates for tax returns. 
Consequences of Failure to File Your 2015 FBAR Timely
If your 2015 FBAR is not timely filed, then it will be considered delinquent and might be subject to severe FBAR civil and criminal penalties, depending on your circumstances. It is also important to point out that an incorrect or incomplete 2015 FBAR will also be considered delinquent with the higher possibility of imposition of the FBAR’s draconian penalties.
Multiple Years of FBAR Delinquency
If you did not file the FBARs in the prior years and you were required to do so, this situation is extremely dangerous (especially in our FATCA-dominated world) and may result in imposition of multiple FBAR penalties. This is why you should seek advice of an experienced FBAR lawyer as soon as possible
Contact Sherayzen Law Office for Assistance with Your FBAR Compliance
If you have not filed your FBARs previously and you were required to do so, contact Sherayzen Law Office for help as soon as possible. Our team of experienced tax professionals, headed by attorney Eugene Sherayzen, has helped hundreds of US taxpayers around the world to lower and even eliminate their FBAR penalties. We can help You!
Contact Us NOW to Schedule Your Confidential Consultation

### What is a FATCA Letter?
Over eight million U.S. taxpayers are expected to receive FATCA letters from their foreign banks. The first reaction of most taxpayers is to ask: "What is a FATCA letter?" The next question is: "What should I do if I receive(d) a FATCA Letter?" This article intends to answer both questions.
The FATCA Letter
A FATCA Letter is a communication from your foreign bank to you in order to obtain the information that the foreign bank is required to disclose to the IRS under the Foreign Account Tax Compliance Act (FATCA). The basic purpose of a FATCA Letter is to confirm whether you are a U.S. person. Once this information is confirmed, your foreign bank will disclose to the IRS all of the FATCA-required information, including the account numbers and balances of your foreign account.
Your FATCA Letter will usually arrive with the enclosed Forms W-9 and W-8BEN. Form W-9 usually pertains to U.S. citizens, while the Form W-8BEN is usually reserved for nonresident aliens (for U.S. tax purposes).
What Should I Do if I Received a FATCA Letter and I Have Not Reported My Foreign Accounts to the IRS?
Now that you know what a FATCA Letter is, it is important to consider what you should do when you receive one from your foreign bank.
The first thing is to understand what not to do – you should NOT ignore a FATCA Letter. You now know what a FATCA Letter is and you understand that it is used by the bank to comply with FATCA. Hence, if you ignore your FATCA Letter, the bank must do something to explain to the IRS why it could not comply with its reporting obligations. This “something” is likely to get you in trouble, because not only can your bank close your bank account (depending on the FATCA treaty), but your foreign bank will also report you as a “recalcitrant” taxpayer to the IRS together with the account number and the balance. This will likely lead to a later IRS examination which may prevent you from doing any type of a voluntary disclosure and subject you to draconian FBAR penalties.
Rather, with the understanding of the FATCA Letter, your plan of action should be as follows:
1. Understand the deadline by which you should respond to your FATCA letter and see if you have sufficient time to contact an international tax law firm (such as Sherayzen Law Office) prior to the deadline. If you do not have enough time, contact the bank and ask them for more time due to your need to seek legal advice – 30 to 45 days is usually considered reasonable.
However, try to avoid sending any information to the bank if possible without going through step #2 first. I have seen on the internet suggestions from some attorneys to immediately send to the bank Form W-9 before you consult an attorney; usually, such haste is premature and ill-advised. You need to know your legal position first.
2. Schedule a consultation with an international tax law firm immediately after you receive your FATCA Letter – Sherayzen Law Office would naturally be the best choice as the firm that specializes in dealing with FATCA letters.
3. Prepare as many documents and bank records as you can prior to the consultation. Now that you know about the FATCA Letter, you understand that it will involve your entire tax situation. Ask Attorney Eugene Sherayzen for a list of items needed to be supplied prior to the consultation.
4. Go through with the consultation. The consultation is not going to focus just on the FATCA Letter and how it impacts your case; rather, the majority of the consultation will be centered around the discussion of your legal position, your current tax reporting requirements and your voluntary disclosure options.
5. Retain an international tax law firm to do your voluntary disclosure. Again, my suggestion is to retain Sherayzen Law Office, because this is a firm that specializes in the voluntary disclosures and international tax compliance involving FATCA, FBAR, foreign trusts, foreign inheritance, foreign business ownership, and other IRS requirements that may be applicable to you.

### Taxation of Liquidating Trusts
Liquidating trusts are common in today’s business environment and it is highly important to understand how they are taxed in the United States. This article is a continuation of a series of articles on the general overview of U.S. taxation of different types of foreign and domestic trusts with the focus on liquidating trusts.
Liquidating Trusts: Definition
Regs. §301.7701-4(d) states that a trust will be considered a liquidating trust “if it is organized for the primary purpose of liquidating and distributing the assets transferred to it, and if its activities are all reasonably necessary to, and consistent with, the accomplishment of that purpose”.
Liquidating Trusts: Tax Treatment
Generally, liquidating trusts are treated as trusts for U.S. tax purposes, but only as long as the trust’s business activities do not become so big as to obscure the trust’s liquidating function. Id. If the latter becomes the case (i.e. the trust’s business activities will obscure its liquidating purpose), then the trust will be treated as a partnership or an association taxable as a corporation.
As Regs. §301.7701-4(d) states, “if the liquidation is unreasonably prolonged or if the liquidation purpose becomes so obscured by business activities that the declared purpose of liquidation can be said to be lost or abandoned, the status of the organization will no longer be that of a liquidating trust.”
Presumptively, Regs. §301.7701-4(d) will treat the following entities as liquidating trusts: bondholders' protective committees, voting trusts, and other agencies formed to protect the interests of security holders during insolvency, bankruptcy, or corporate reorganization proceedings are analogous to liquidating trusts. However, if they are “subsequently utilized to further the control or profitable operation of a going business on a permanent continuing basis, they will lose their classification as trusts for purposes of the Internal Revenue Code”. Id.
It should be mentioned that, in Rev. Proc. 94-45, the IRS stated that it will treat organizations created under Chapter 11 of the Bankruptcy Code as liquidating trusts as long as all of the IRS extensive requirements are satisfied. Rev. Proc. 94-45 described in detail eleven IRS requirements.
Liquidating Trusts: IRS Review
In general, during the examination of a taxpayer’s classification of the entity as a liquidating trust, the IRS will engage in a two-step analysis. First, it will focus on the trust’s documents, its stated purpose and the powers of the trustees. Second, the IRS will analyze the actual operations of the trust.
The powers of trustees deserve special attention in liquidating trusts. Generally, granting to a trustee incidental business powers to prevent the loss of the value of distributed assets will not turn a liquidating trust into a corporation. However, where trustees are granted extensive powers to conduct business for a relatively large period of time, there is a significant risk that the IRS will re-classify a liquidating trust as a corporation or a partnership.

### IRS Letter 3708: IRS Demand to Pay FBAR Penalty
After the IRS imposes an FBAR penalty on the taxpayer, the IRS will send the taxpayer IRS Letter 3708 to demand the payment of the part of the FBAR Penalty that remains unpaid. In this article, I would like to discuss IRS Letter 3708 in more detail, particularly focusing on the various FBAR Penalty Collection options that the letter lists.
First Part of IRS Letter 3708: Explanation of FBAR Penalty Imposed and Balance Unpaid
IRS Letter 3708 begins with the statement that this letter is a demand for the payment of the FBAR (Report of Foreign Bank and Financial Accounts) penalty that was assessed to the taxpayer under relevant IRC sections (such as §5321(a)(5) and §5321(a)(6)). Then, the IRS Letter 3708 mentions that the taxpayer should have previously received IRS Letter 3709 with the explanation of penalty imposed based on the facts of the taxpayer’s case.
Second Part of IRS Letter 3708: Account Summary and Payment Instructions
The next part of IRS Letter 3708 is devoted to the summary of the taxpayer’s account – i.e. the amounts owed per each relevant year. At total amount due is provided at the end.
The letter continues with the explanation of the precise payment instructions, including what information needs to be written on the check (in order for the payment to be applied correctly). Also, an option for an installment agreement is mentioned if the payment in full is not possible. However, even in the case of an installment agreement, the interest of at least 1% will be charged (interest rates may change); additional debt servicing fee of about 18% of the penalty amount may also be charged.
Third Part of IRS Letter 3708: Interest and Penalties
Failure to pay the amount due within 30 days may lead to the imposition of interest and penalties. The interest is imposed under IRC Section 3717(a)-(d); the current rate is 1% per year, but it may be raised in the near future.
The late payment penalty is imposed under IRC Section 3717(e)(2); currently, the rate if 6% per year. This penalty is imposed on portion of the FBAR penalty that remains unpaid 90 days from the date listed on IRS Letter 3708.
IRS Letter 3708 also mentions that both, interest and penalties, may be abated under 31 C.F.R. 5.5(b).
Fourth Part of IRS Letter 3708: Collection Enforcement and Costs
The fourth part of the IRS Letter 3708 is very important, because it is devoted entirely to how the IRS can collect the amount due. The letter lists seven different collection enforcement mechanisms that are available to the IRS if the debt not paid within 30 days:
• Referral to the Department of Justice to initiate litigation against the taxpayer.
• Referral to the Department of the Treasury's Financial Management Service. (This referral involves an additional debt-servicing fee that is approximately 18% of the balance due.)
• Referral to private collection agencies. (Referral to a private collection agency increases the additional debt-servicing fee from approximately 18% to 28% of the balance due.)
• Offset of federal payments such as income tax refunds and certain benefit payments such as social security.
• Administrative wage garnishment.
• Revocation or suspension of federal licenses, permits or privileges.
• Ineligibility for federal loans, loan insurance or guarantees
These additional costs may be imposed on noncomplying taxpayer based on 31 U.S.C. §3717(e)(1).
Final Part of IRS Letter 3708: Contesting Penalty Assessment
At the end, IRS Letter 3708 advises the taxpayers of two main options for contesting the penalty assessment. First, the taxpayers can file an administrative appeal with the Appeals Office in Detroit. This option is available if an administrative appeal was not requested based on Letter 3709 or if new situations have occurred since the last administrative review. The appeal must be requested in writing within 30 days from the date listed on IRS Letter 3708.
The second option is to file a refund suit in the United States District Court or the United States Court of Federal Claims. IRS Letter 3708 does not state whether such a suit would be subject to the full-payment rule (such as one that applied in income tax matters).
Contact Sherayzen Law Office if Your Received IRS Letter 3708 or IRS Letter 3709
If you received IRS Letter 3708 or IRS Letter 3709, contact Sherayzen Law Office for legal help as soon as possible. We have helped taxpayers around the world to reduce their FBAR penalties and we can help you!
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### IRS Uses Panama Papers to Identify Noncompliant Taxpayers
In April of 2016, the IRS acknowledged its participation in meetings with Joint International Tax Shelter Information and Collaboration network (“JITSIC”), International Monetary Fund (IMF) and World Bank to take advantage of the data about more than 200,000 offshore companies identified in the Panama Papers. At the same time, the IRS urged noncompliant U.S. taxpayers to come forward before the IRS finds them.
JITSIC and IMF/World Bank Meetings on Panama Papers
The JITSIC meeting regarding Panama Papers brought together senior tax officials from more than forty countries to discuss, per OECD, "opportunities for obtaining data, co-operation and information-sharing in light of the 'Panama Papers' revelations". The IRS officials said they could not discuss who participated and what, specifically, was discussed. But in its statement to NBC News, the IRS described the meeting as "productive and timely" and said "governments around the world are working together cooperatively" to respond to the information released in the Panama Papers, with JITSIC setting itself up as a coordinator.
The following day, the IRS further discussed Panama Papers in gatherings that were part of the annual IMF and World Bank meetings.
After those meetings regarding Panama papers, bankers and finance ministers from the world's twenty largest economies warned tax havens about their future efforts to punish governments that continue to hide billions of dollars in offshore accounts. The IRS also encouraged any U.S. citizens and companies that may have money in offshore accounts to do a voluntary disclosure with respect to these accounts.
Panama Papers Increase Pressure on IRS to Move Forward Against Cayman Islands, Singapore, Bermuda and Other Tax Shelters
According to media reports, the Panama papers may contain information on potentially thousands of U.S. citizens and firms that have at least an indirect connection to offshore accounts affiliated with Mossack Fonseca. The Panama papers, however, are not likely to contain any spectacular information with respect to U.S. taxpayers because these taxpayers mostly prefer to use Cayman Islands, Singapore and Bermuda.
Nevertheless, while the Panama papers might not be very informative about the U.S. citizens, these documents have increased the political pressure on the IRS to move forward against other tax shelters. Therefore, we should not be surprised if we see new bold IRS initiatives in Cayman Islands, Singapore and Bermuda.
This means that the U.S. taxpayers who have undisclosed foreign assets in Cayman Islands, Singapore and Bermuda should analyze their voluntary disclosure options before it is too late. After the IRS discovery, most (and, perhaps, all) of their voluntary disclosure options will be foreclosed due to IRS examinations.
Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure
If you own, directly or indirectly (through a domestic or foreign corporation, LLC, partnership or trust) undisclosed foreign accounts, you should contact the professional legal team of Sherayzen Law Office as soon as possible. Our highly-experienced legal team is headed by one of the leading experts in U.S. international tax law, attorney Eugene Sherayzen. We will thoroughly review the facts of your case, analyze your current U.S. tax exposure and available voluntary disclosure options, prepare all of the necessary legal documents and tax forms and defend your case against the IRS until its completion. We have helped U.S. taxpayers around the world and we can help You!
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### Taxation of Investment Trusts
This article on investment trusts continues a series of articles on classification of foreign trusts. In earlier essays, I explored the definition of foreign trusts and some of the exceptions to this definition. In the present writing, I would like to discuss the general circumstances when investment trusts would be treated as corporations or partnerships rather than ordinary foreign trusts (this discussion focuses on foreign trusts, but it is also equally applicable to domestic trusts).
Investment Trusts: Definition and Taxation
Where several individuals, in a voluntary association, create a trust as a means of pooling their capital into investments in which interests are sold, such a trust is considered to be an “investment trust”. The principal law concerning investment trusts can be found in IRS Regs. §301.7701-4(c).
The taxation of investment trusts is a complex and mostly depends on two factors: the number of classes of ownership interests in the trust and the power vested in the trustee under the trust agreement to vary the investment (and reinvestment) of the certificate holders. In certain circumstances, investment trusts are taxed as ordinary trusts while, in other circumstances, they can be taxed as business entities.
One-Class Investment Trusts: Definition and Taxation
One-Class Investment trusts are investment trusts “with a single class of ownership interests, representing undivided beneficial interests in the assets of the trust”. IRS Regs. §301.7701-4(c)(1).
Generally, one-class investment trusts are taxed as ordinary trusts as long as “there is no power under the trust agreement to vary the investment of the certificate holders.” Id. The concept of “power to vary the investment” is highly complicated and requires detailed exploration of relevant case law and PLRs. The focus of the IRS examination will be on the Trust Agreement and related documents.
Multiple-Class Investment Trusts: Definition and Taxation
Multiple-class investment trusts are investment trusts with multiple classes of ownership interest. Generally, it is much harder for a multiple-class investment trust to be taxed as a trust, rather than a business entity.
IRS Regs. §301.7701-4(c)(1) sets forth the legal test which states that multiple-class investment trusts will generally be taxed as business entities unless two conditions are satisfied: (1) “there is no power under the trust agreement to vary the investment of the certificate holders”, and (2) “the trust is formed to facilitate direct investment in the assets of the trust and the existence of multiple classes of ownership interests is incidental to that purpose”. Id.
This is a tough, but not an impossible test to meet.  In fact, one can point to multiple PLRs where the IRS agreed with the taxpayers that this test was met. Nevertheless, a high degree of precision, planning and professionalism is needed to assure that the test is met.
Contact Sherayzen Law Office for Professional Help With Foreign Trusts
If you are a beneficiary or grantor of a foreign trust, secure the help of an experienced international tax lawyer as soon as possible. Contact Sherayzen Law Office for professional help concerning foreign trusts as soon as possible. Attorney Eugene Sherayzen, has developed deep expertise in international tax law in order to help hundreds of U.S. taxpayers around the world. He can help You!
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### Exceptions to Foreign Trusts: Business Trusts
As I mentioned in an earlier article, U.S. tax law includes a number of important exceptions to legal definition of a foreign trust – i.e. an entity can be classified as a foreign trust for legal purposes and not as a trust (but as a corporation or a partnership) for U.S. tax purposes. This is also true with respect to domestic trusts, but, in international context, the issues are far more complicated and require detailed exploration of facts and, often, local laws. In this article, I would like to discuss one of the most common exceptions to foreign trusts – business trusts.
Business Trusts Taxed as Corporations or Partnerships
Where an entity is organized as a trust but engages in the active conduct of trade or business, the IRS may re-classify this trust as a “business trust” and tax it as a corporation or partnership. The most relevant primary law on this point can be found in IRS Regs. §301.7701-4(b):
There are other arrangements which are known as trusts because the legal title to property is conveyed to trustees for the benefit of beneficiaries, but which are not classified as trusts for purposes of the Internal Revenue Code because they are not simply arrangements to protect or conserve the property for the beneficiaries. These trusts, which are often known as business or commercial trusts, generally are created by the beneficiaries simply as a device to carry on a profit-making business which normally would have been carried on through business organizations that are classified as corporations or partnerships under the Internal Revenue Code. However, the fact that the corpus of the trust is not supplied by the beneficiaries is not sufficient reason in itself for classifying the arrangement as an ordinary trust rather than as an association or partnership. The fact that any organization is technically cast in the trust form, by conveying title to property to trustees for the benefit of persons designated as beneficiaries, will not change the real character of the organization if the organization is more properly classified as a business entity under § 301.7701-2.
Let’s explore these regulations in more depth in order to have a clear idea of the general test for business trusts.
Most Important Features of Business Trusts for Federal Income Tax Purposes
There are two most important factors in determining whether a trust is a business trust. The first and most important distinction between ordinary trusts and business trusts is the conduct of a “profit-making business” which “normally” would have been done by a business entity. It is important to understand that it is not simply the ownership of business assets which re-classifies ordinary trusts in business trusts; rather, while ordinary trusts must be created for the purpose of conservation and preservation of assets for beneficiaries, business trusts should be created for the purpose of the profit-making activities.
How does one determine the purpose for which a trust is created? There are various factors, including the history of the trust. The trust agreement (the document that creates the trust), however, is the key document on which the IRS will focus.
The second important feature of business trusts concerns domestic and foreign trusts which have associates to conduct an active trade or business for their benefit. In such cases, the trusts will be reclassified as business trusts and taxed as corporations or partnerships.
Both of these factors in determining the business nature of a trust rely are highly dependent on facts and require minute analysis of a trust’s history and circumstances. The help of an experienced international tax lawyer is indispensable in this matter.
Contact Sherayzen Law Office for Professional Help With Trust Classification
If you are a beneficiary or grantor of a foreign trust, contact Sherayzen Law Office for professional help in determining the classification of the trust. The founder of our firm, Mr. Eugene Sherayzen, is a highly experienced international tax lawyer who has helped hundreds of taxpayers in and outside of the United States with their U.S. international tax compliance issues.
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### Foreign Trust Classification
This article begins to explore one of the most obscure, yet highly important questions in U.S. international tax law – foreign trust classification and what law is relevant in the determination of such a classification. This area of law is very complex and I cannot hope for more than providing just some general contours of it in this essay.
Foreign Trust Classification: Relevant Law
In order for an entity to be classified as a foreign trust, one must establish that the entity is a “trust” and the entity is “foreign”. In this article, I will only discuss the definition of a trust and leave the subject of determining whether a trust is foreign for future discussion.
Both parts of this definition are determined by federal income tax law. The substantive trust law under which the trust was created, while often determinative of rights and duties of relevant parties (i.e. grantor, trustee and the trust’s beneficiaries), does not establish whether an entity should be treated as a trust. Nevertheless, the substantive trust law is still very important in order to establish the facts and context for federal income tax analysis.
The most important federal income tax law concerning foreign trusts can be found in Section 7701 of the Internal Revenue Code (IRC) and relevant regulations. The IRS decisions and rulings (such as Private Letter Rulings) are also highly important in entity classification.
Foreign Trust Classification: General Definition of a Trust under Federal Law
Generally, at the simplest level, a trust is an arrangement where the title to property is held by a fiduciary – a person with the responsibility to conserve the property for a benefit of another person or person (called beneficiaries). As beneficiaries, these persons should not participate in any fiduciary responsibilities.
IRS Regulations in §301.7701-4(a) provide more details about what entity would be considered as a trust:
In general, the term “trust” as used in the Internal Revenue Code refers to an arrangement created either by a will or by an inter vivos declaration whereby trustees take title to property for the purpose of protecting or conserving it for the beneficiaries under the ordinary rules applied in chancery or probate courts. Usually the beneficiaries of such a trust do no more than accept the benefits thereof and are not the voluntary planners or creators of the trust arrangement. However, the beneficiaries of such a trust may be the persons who create it and it will be recognized as a trust under the Internal Revenue Code if it was created for the purpose of protecting or conserving the trust property for beneficiaries who stand in the same relation to the trust as they would if the trust had been created by others for them. Generally speaking, an arrangement will be treated as a trust under the Internal Revenue Code if it can be shown that the purpose of the arrangement is to vest in trustees responsibility for the protection and conservation of property for beneficiaries who cannot share in the discharge of this responsibility and, therefore, are not associates in a joint enterprise for the conduct of business for profit.
Foreign Trust Classification: Most Important Aspects of this Definition of a Trust
Two aspects of this long definition of a trust are especially relevant for foreign trust classification. First, the title to property has to be held by a fiduciary, not the beneficiary. This means that all arrangements outside of the United States will not fall under the foreign trust classification if the title is preserved by the beneficiary.
Second, for the purposes of foreign trust classification, the most important practical focus of the IRS has been on the separation of management of a foreign trust from the enjoyment of the benefits that the trust provides. Undoubtedly, such inquiry heavily depends on the particular facts of the case and would require a separate exploration beyond the scope of this article. It is worth mentioning, however, that, in situations where the beneficiary preserves the right to dispose of an asset supposedly held by a foreign trust, the IRS may rule that the arrangement does not fall within the boundaries of the foreign trust classification.
Foreign Trust Classification: Exceptions
In another article, I will explore certain exceptions to foreign trust classification. Here, I will simply state that not all trusts are treated as trusts even if the title belongs to the fiduciary. On the other hand, some arrangements will be treated as foreign trusts even in situations where one would not expect such classification (certain foreign pension arrangements, for example).
Contact Sherayzen Law Office for Help With Foreign Trusts
U.S. tax laws concerning foreign trust are highly complex and require substantial tax compliance. If you own a foreign trust or you are a beneficiary of a foreign trust, you need to contact Sherayzen Law Office as soon as possible for professional legal help. We have helped U.S. taxpayers around the world and we can help you!
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### UK FATCA Letters
While the United Kingdom signed its FATCA implementation treaty in 2014, UK FATCA letters (i.e. FATCA letters from UK financial institutions) continue to pour into the mailboxes of U.S. taxpayers. In this article, I would like to discuss the purpose and impact of UK FATCA Letters.
UK FATCA Letters
UK FATCA Letters play an integral role in the FATCA Compliance of UK financial institutions. Under the Foreign Account Tax Compliance Act (FATCA), the UK foreign institutions are obligated to collect certain information regarding U.S. owners of UK bank and financial accounts and provide this information to the IRS. The collected information must include the name, address and social security number (or, EIN number) of U.S. accountholders.
In order to collect the required information and identify who among their clients is a US person for FATCA purposes, the UK financial institutions send UK FATCA Letters to their clients, asking them to provide the information by the required date. If there is no response within the required period of time (which may be extended), the UK financial institutions report the account to the IRS with the classification as a “recalcitrant account”.
UK FATCA Letters and Undisclosed UK Bank and Financial Accounts
While UK FATCA Letters are important to FATCA compliance of UK financial institutions, they also may have important impact on U.S. taxpayers with undisclosed bank and financial accounts in the United Kingdom, particularly on the ability of such U.S. taxpayers to timely disclose their foreign accounts.
Once a U.S. taxpayer receives UK FATCA Letters, he should be aware that the clock has started on his ability to do any type of voluntary disclosure. This is the case because UK FATCA Letters demand a response within certain limited period of time. Then, the UK financial institutions will report the account to the IRS, which may prompt IRS examination which, in turn, may deprive the taxpayer of the ability to take advantage of any type of a voluntary disclosure option.
Furthermore, UK FATCA Letters start the clock for the taxpayers to do their voluntary disclosure in an indirect way. If the taxpayers do not complete their voluntary disclosure within reasonable period of time (which may differ depending on circumstances) after they receive the letters, the IRS may proceed based on the assumption that prior noncompliance with U.S. tax requirements by the still noncompliant taxpayers was willful.
Finally, UK FATCA Letters may impact a U.S. taxpayer’s legal position with respect to current and future tax compliance, because UK FATCA Letters can be used by the IRS as evidence to prove awareness of U.S. tax requirements on the part of noncompliant U.S. taxpayers. This is particularly relevant for taxpayers who receive these letters right before the tax return and FBAR filing deadlines.
Contact Sherayzen Law Office if You Received UK FATCA Letters
If you received one or more UK FATCA Letters from foreign financial institutions, contact Sherayzen Law Office as soon as possible. Attorney Eugene Sherayzen is one of the world’s leading professionals in the area of offshore voluntary disclosures and he will personally analyze your case and create the appropriate voluntary disclosure strategy. Then, under his close supervision, his legal team will implement this strategy, including the preparation of all required tax forms.
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### Indian FATCA Letters
As the FATCA deadline to report Indian preexisting accounts approaches for Indian foreign financial institutions, more and more Indian-Americans and Indians who live and work in the United States receive Indian FATCA Letters (i.e. FATCA letters from Indian foreign financial institutions).
Many U.S. taxpayers of Indian origin are completely unprepared for Indian FATCA Letters and do not understand what they need to do. In this article, I would like to discuss the origin and purpose of Indian FATCA Letters as well as what you should do if you received such a letter.
Indian FATCA Letters
Indian FATCA Letters are the tools used by Indian foreign financial institutions to comply with their FATCA obligations. Since its enaction into law in 2010, the Foreign Account Tax Compliance Act (FATCA) has had a tremendous impact on global tax information exchange, forcing foreign financial institutions from more than 110 jurisdictions to comply with FATCA provisions.
One of the most prominent aspects of FATCA is the fact that it forces foreign financial institutions to report (directly or indirectly) certain information regarding U.S. owners of foreign bank and financial accounts. In essence, foreign financial institutions around the world are now forced to play the role of IRS informants, actively spying and turning over information regarding foreign financial activities of U.S. taxpayers to the IRS.
FATCA is implemented worldwide through a network of bilateral treaties. India signed such a treaty which came into force on August 31, 2015, forcing Indian foreign financial institutions to adopt FATCA-compliant procedures.
Indian FATCA Letters represent this compliance effort by Indian foreign financial institutions. In particular, Indian FATCA Letters are designed to collect various information required by FATCA, such as: the name and address of a U.S. taxpayer, the tax identification number of a U.S. taxpayer, and other information required to determine the U.S. tax status of the accountholder.
Indian FATCA Letters and Undisclosed Indian Bank and Financial Accounts
Indian FATCA Letters may have profound impact on U.S. taxpayers with undisclosed bank and financial accounts in India. First of all, Indian FATCA Letters automatically establish the awareness of U.S. tax requirements on the part of U.S. taxpayers – i.e. after receiving these letters, the taxpayers must take prudent steps to assure current and future U.S. tax compliance if they wish to avoid willful noncompliance with consequent imposition of heavy IRS penalties. This is especially important for taxpayers who receive Indian FATCA letters right before the tax return and FBAR filing deadlines.
Second, Indian FATCA Letters “start the clock” for U.S. taxpayers who wish to do a voluntary disclosure. This is done in two ways – direct and indirect.
The direct impact of Indian FATCA Letters is the FATCA requirement that foreign financial institutions report the required FATCA information to the IRS with respect to their U.S. (or suspected U.S.) accountholders within certain limited period of time. If the taxpayer refuses to answer his Indian FATCA Letters, the financial institutions will report him to the IRS as a “recalcitrant” taxpayer. This, in turn, may lead to a subsequent IRS examination which may deprive the taxpayer of the ability to take advantage of any type of a voluntary disclosure option.
The indirect impact of Indian FATCA Letters is linked to the “knowledge” issue described above – Indian FATCA Letters start the clock for the taxpayers to do their voluntary disclosure. If they do not do it within reasonable period of time (which may differ depending on circumstances), the IRS may proceed based on the assumption that prior noncompliance with U.S. tax requirements by the procrastinating taxpayers was willful.
Contact Sherayzen Law Office if You Received Indian FATCA Letters
If you received one or more Indian FATCA Letters from foreign financial institutions, contact Sherayzen Law Office as soon as possible. Our experienced legal team is led by one of the leading experts in offshore voluntary disclosures in the world – attorney Eugene Sherayzen. He will personally analyze your situation, advise you with respect to your FATCA Letter, and develop your voluntary disclosure strategy. Then, our legal team will implement this strategy, including the preparation of all required tax forms.
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### FBAR and Form 8938 Filings Continue to Grow
On March 15, 2016, the IRS announced that there was continuous growth in the FBAR and Form 8938 filings. While the IRS attributes this growth in FBAR and Form 8938 filings to the greater awareness of taxpayers, one cannot underestimate the impact of the FATCA letter and the increasing knowledge of foreign financial institutions with respect to U.S. tax reporting requirements.
Background Information for the FBAR and Form 8938 Filings
FBAR and Form 8938 are the main forms with respect to reporting of foreign financial accounts and (in the case of Form 8938) “other specified assets”. The Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (commonly known as “FBAR”) should be filed by U.S. taxpayers to report a financial interest in or signatory authority over foreign financial accounts if the aggregate value of these accounts exceeds $10,000. This form is associated with draconian noncompliance penalties.
IRS Form 8938 was created by the famous Foreign Account Tax Compliance Act ("FATCA”). Generally, U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds the required thresholds (the lowest threshold is $50,000, but it varies by taxpayer). The noncompliance with respect to Form 8938 may result in additional penalties, including $10,000 per form.
IRS Registers Sustained Increase in the FBAR and Form 8938 Filings
Compliance with FBAR and, later, Form 8938 is one of the top priorities for the IRS according to the IRS Commissioner John Koskinen. Recent statistics with respect to the FBAR and Form 8938 filings support the conclusion that the IRS has been largely successful in achieving this task.
The IRS states that the FBAR filings have grown on average by 17 percent per year during the last five years, according to FinCEN data. In fact, in 2015, FinCEN received a record high 1,163,229 FBARs.
Similar, but far less successful trends can be seen with respect to Form 8938 filings. In 2011, the IRS received about 200,000 Forms 8938, but the number rose to 300,000 by the tax year 2013. However, it seems to have stagnated at the same number judging from the statistics for the tax year 2014.
While the lower number of Forms 8938 could be explained by the novelty of the form as well as higher thresholds, it appears that some Forms 8938 might not also be filed due to mistaken calculation of the asset base used to determine whether Form 8938 filing requirements were met.
Nevertheless, overall, it appears that the FBAR and Form 8938 filings have grown sufficiently for the IRS to be satisfied with its progress.
Contact Sherayzen Law Office for Professional Help with Your FBAR and Form 8938 Filings
U.S. international tax law is incredibly complex and the penalties are excessively high. If you were supposed to file FBARs and Forms 8938 in the past, but you have not done so, you need to contact Sherayzen Law Office as soon as possible. Mr. Sherayzen and his legal team will thoroughly analyze your case, assess your potential tax liabilities, determine the available voluntary disclosure options, and implement (including the preparation of all legal documents and tax forms) the voluntary disclosure option that fits your case best.
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### Tata Mutual Fund FATCA Letters and Indians in the United States
Tata Mutual Fund FATCA Letters were some of the first FATCA letters received by U.S. investors in India. A lot of these U.S. investors were Indians born in India, but living and working in the United States. However, the process of sending FATCA letters is not over at this point. Therefore, more and more Indian-Americans should expect to receive Tata Mutual Fund FATCA Letters. In this article, I explore the purpose of Tata Mutual Fund FATCA Letters and how these letters affect Indians who live and work in the United States.
FATCA
The Foreign Account Tax Compliance Act (FATCA) became a law in 2010. The main purpose of FATCA is to combat tax noncompliance of U.S. taxpayers with foreign accounts. Since its enaction, FATCA was successfully implemented by most countries around the world and became a new global standard for the exchange of tax information. In fact, more than 110 jurisdictions today operate under the worldwide reach of FATCA.
What makes FATCA different from other tax regimes is the fact that its core target are foreign financial institutions and it has “teeth” in the form of 30% tax withholding on transactions done with noncompliant foreign financial institutions. While the 30% tax withholding provision is important, it is not directly relevant to our discussion.
On the other hand, it is very important to understand how FATCA impacts the behavior of foreign financial institutions – FATCA obligates foreign financial institutions to turn over certain information regarding foreign accounts owned by U.S. persons as well as certain information regarding the U.S. owners themselves. In essence, FATCA effectively turns all compliant foreign financial institutions into de-facto IRS informants.
This means that foreign financial institutions report to the IRS the information which, prior to FATCA, the IRS could only obtain after a long and expensive investigation. Therefore, the investigative reach of the IRS has grown enormously and the IRS is now able to find and track down with far more ease noncompliant U.S. taxpayers.
Furthermore, another part of FATCA is targeting U.S. taxpayers themselves by requiring them to report “Specified Foreign Assets” on Form 8938.
Tata Mutual Fund FATCA Letters
FATCA is usually implemented after an adoption of a FATCA implementation treaty. India signed the Model 1 FATCA treaty which came into force on August 31, 2015.
As a foreign financial institution, Tata Mutual Fund is obligated to comply with the obligations accepted by the Indian government under the FATCA agreement. For this purpose, Tata Mutual Fund needs to collect and turn over certain information regarding its U.S. investors.
Tata Mutual Fund FATCA Letters are designed exactly for this purpose – to collect the required FATCA information regarding U.S. investors into Tata Mutual Fund.
Impact of Tata Mutual Fund FATCA Letters on Indian-American Investors
Tata Mutual Fund FATCA Letters may have a profound impact on Indian who live and work in the United States while investing into Tata Mutual Fund, especially if this investment was not timely disclosed to the IRS. I would like to focus here on two issues: identification and voluntary disclosure.
First, Tata Mutual Fund FATCA Letters would allow IRS to identify noncompliant Indian-American investors into Tata Mutual Fund. This can lead to an IRS investigation and imposition of civil and even criminal penalties (depending on the gravity of tax noncompliance).
Second, by reporting noncompliant U.S. investors, Tata Mutual Fund FATCA Letters may trigger an IRS investigation that may prevent these U.S. investors from doing a timely voluntary disclosure. It must be remembered that, one of the fundamental conditions of all IRS voluntary disclosure options is that the U.S. taxpayer is not under IRS examination or investigation.
Hence, when a U.S. taxpayer receives Tata Mutual Fund FATCA Letters, the clock starts on his ability to do a timely voluntary disclosure. On the other hand, if the taxpayer refuses to provide the requested information, he may be classified as a “recalcitrant taxpayer” (although, the Indian FATCA Agreement offers better treatment to recalcitrant taxpayers than most other FATCA treaties).
Contact Sherayzen Law Office if You Received a FATCA Letter from India
If you are an Indian-American or just an Indian who lives and works in the United States and you received a FATCA letter from your Indian financial institution, please contact Sherayzen Law Office for experienced help. Our professional legal team will thoroughly analyze your situation, propose the best strategy with respect to responding to the FATCA Letter, review your voluntary disclosure options and prepare all legal and tax documents required to complete your voluntary disclosure.
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### Jordanian Bank FATCA Letters
As FATCA continues its triumphant march across the globe, banks from more and more countries continue to send out FATCA letters to their US customers. Recently, the banks in the Kingdom of Jordan sent out additional FATCA letters (hereinafter, “Jordanian Bank FATCA Letters”). Jordanian Bank FATCA letters caught many U.S. taxpayers by surprise; some even refuse to believe that they are obligated to provide this type of information to their banks. Yet, noncompliance with the requests of Jordanian Bank FATCA Letters may have grave consequences for US taxpayers.
FATCA Background
The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to target tax noncompliance of U.S. taxpayers with foreign accounts. Since its enaction, this law established a new global standard for tax information exchange. More than 110 jurisdictions today operate under the worldwide reach of FATCA.
In essence, FATCA is used by U.S. authorities to obtain information regarding foreign accounts held by U.S. persons directly from foreign financial institutions by forcing these institutions to collect and send to the IRS information required by FATCA. Hence, FATCA effectively turns all FATCA-compliant foreign banks into IRS informants.
Additionally, FATCA requires U.S. taxpayers to report “Specified Foreign Assets” (this is a term of art in international tax law) on Forms 8938. Forms 8938 should be attached to the taxpayers’ U.S. tax returns and filed with the IRS.
Jordanian Bank FATCA Letters
FATCA is implemented worldwide through a network of bilateral treaties, which are divided in to Model 1 and Model 2 treaties. However, individual banks can also comply with FATCA without Model 1 and Model 2 treaties. A minority of countries follow this path, and the Kingdom of Jordan is one of them.
This means that Jordanian Bank FATCA Letters are sent out by Jordan banks not due to any Model 1 or Model 2 treaties between the United States and Jordan, but, rather, through direct FATCA compliance (i.e. Jordanian banks register with the IRS and provide the required information directly to the IRS).
The purpose of the Jordanian Bank FATCA Letters are similar to all other FATCA Letters – obtain the information required to be reported under FATCA by foreign financial institutions to the IRS. In particular, this includes information relevant to the account owner’s U.S. tax residency.
Impact of Jordanian Bank FATCA Letters on U.S. taxpayers with Undisclosed Foreign Accounts
Jordanian Bank FATCA Letters may have very important impact on U.S. taxpayers with undisclosed foreign accounts. In this article I want to emphasize the timing aspects of such letters.
By requesting FATCA information, Jordanian Bank FATCA Letters create a timetable for timely voluntary disclosure of the concerned U.S. taxpayers. First of all, the taxpayers who receive Jordanian Bank FATCA Letters have a deadline (ranging usually between 30-45 days, and, occasionally, 90 days) to file the letter with the bank. Since the bank sends the information supplied by U.S. taxpayers to the IRS, these U.S. taxpayers have a limited window of opportunity to timely disclose their foreign accounts. If a taxpayer refuses to provide the required information, the bank may still report him to the IRS as a “recalcitrant taxpayer” and even close his accounts.
Additionally, there is a more subtle impact of Jordanian Bank FATCA Letters on U.S. taxpayers – a notice of existence of FATCA and other U.S. tax reporting requirements. A lot of U.S. taxpayers are able to utilize Streamlined Procedures due to the fact that they did not know about the U.S. tax reporting requirements with respect to foreign accounts and foreign income. However, once U.S. taxpayers receive Jordanian Bank FATCA Letters, they can only claim their lack of knowledge with respect to prior years. It will be very difficult to sustain this argument with respect to current and future tax years.
Contact Sherayzen Law Office if You Received a FATCA Letter (from Jordan or from Any Other Country)
If you received a FATCA Letter from a foreign bank, contact Sherayzen Law Office for professional help. Our experienced legal team will thoroughly analyze your situation, propose the best strategy with respect to responding to the FATCA Letter, review your voluntary disclosure options and prepare all legal and tax documents to complete your voluntary disclosure.
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### SDOP Voluntary Disclosure Period and Tax Return Filing Deadline
A lot of tax professionals and taxpayers fail to recognize the vital connection between a tax return filing deadline (like April 18, 2016) and the determination of the SDOP Voluntary Disclosure Period. In this article, I will explain what the SDOP Voluntary Disclosure Period and how it is related to tax return filing deadlines.
SDOP Background
Streamlined Domestic Offshore Procedure exists in its current format since June 18, 2014, when the IRS announced the most dramatic changes to its Offshore Voluntary Disclosure Program (OVDP) since 2009 OVDP. In essence, SDOP is an alternative to OVDP and allows taxpayers to bring their tax affairs into full compliance with US tax laws in a simpler way with a lower penalty.
SDOP Voluntary Disclosure Period
One of the most important differences between SDOP and OVDP is the Voluntary Disclosure Period – i.e. how many tax years should the voluntary disclosure cover. While OVDP voluntary disclosure period covers the past eight years for FBARs and tax returns, SDOP voluntary disclosure period covers only six past years of FBARs and only three years of past tax returns.
Connection Between SDOP Voluntary Disclosure Period and the Tax Return Filing Deadline
There is an important connection between SDOP voluntary disclosure period and the Tax Return Filing Deadline. As it mentioned above, SDOP Voluntary Disclosure Period covers “past” three years of tax returns.
What does “past year” mean in this context? It means a year for which the U.S. tax return due date (or properly applied for extended due date) has passed. The connection between SDOP voluntary disclosure period and the tax return filing deadline now becomes clear.
Let’s illustrate it further with a hypothetical example. If SDOP is scheduled to be completed on April 1, 2016, the SDOP voluntary disclosure period will cover the most recent three years of U.S. tax returns for which the Tax Return filing Deadline has passed. As of April 1, 2016, the deadline for the 2015 tax return has not yet passed; this means that the SDOP voluntary disclosure period (for tax return purposes) will cover tax years 2012-2014.
If SDOP is scheduled to be completed on April 30, 2016 and the 2015 tax return was timely filed (if not and no extension was filed, the taxpayer will likely be disqualified from participating in SDOP), then the SDOP voluntary disclosure period will shift to the tax years 2013-2015.
What if SDOP is completed on April 30, 2016, and an extension was filed for the 2015 tax return? In this case, the SDOP voluntary disclosure period will remain limited to 2012-2014 tax years.
SDOP Voluntary Disclosure Period’s Relationship to Tax Filing Deadline Offers Planning Opportunities
This relationship between SDOP voluntary disclosure period and the tax filing deadline offers plenty of planning opportunities for SDOP disclosures which are completed around the tax filing deadline because it allows the taxpayer’s attorney (who is doing SDOP on behalf of his client) exercise a certain degree of control over which years will be included in the SDOP voluntary disclosure period.
For example, if a taxpayer has a large tax liability in the tax year 2012 if the return is amended and a small tax liability in the tax year 2015, then the taxpayer’s attorney will likely choose to prepare and file timely 2015 tax return. On the other hand, there are situations where the taxpayer would like to include tax year 2012 in the SDOP voluntary disclosure period (for example, if there is a large foreign capital loss), then the taxpayer’s attorney would opt for filing an extension for the 2015 tax return.
It is important to emphasize that a decision with respect to SDOP voluntary disclosure period should always rest with an international tax attorney who is handling the SDOP disclosure. There may be complex reasons for excluding and including years within SDOP voluntary disclosure period and only an experienced tax professional should make these decisions.
Contact Sherayzen Law Office for Professional Help with Your Voluntary Disclosure
Offshore Voluntary Disclosures with respect to unreported foreign income and foreign assets can be extraordinarily complex, especially in light of draconian IRS penalties that U.S. taxpayers often face. This is why these matters should always be handled by an experienced international tax attorney.
Sherayzen Law Office is one of the most experienced international tax laws firms, especially when it comes to offshore voluntary disclosures. We have helped clients around the world to participate in every major voluntary disclosure program, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP (now closed), Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures and other related voluntary disclosure options. Not only did we help our clients to go through these complex legal procedures and prepared all of their tax forms (including those related to foreign business ownership, trust ownership and PFICs), but we also saved our clients millions in potential penalties and tax liabilities!
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### IRS Increases Interest Rates for the Second Quarter of 2016
On March 16, 2016, the Internal Revenue Service announced that interest rates have increased for the second quarter of 2016, which began on April 1, 2016 and ends on June 30, 2016. The second quarter of 2016 IRS interest rates will be:
four (4) percent for overpayments [three (3) percent in the case of a corporation];
one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000;
four (4) percent for underpayments; and
six (6) percent for large corporate underpayments.
The increase in the IRS interest rates for the second quarter of 2016 is the first such increase since the fourth calendar quarter of 2010. The second quarter of 2016 interest rates are computed from the federal short-term rate determined during January 2016 and went into effect Feb. 1, 2016, based on daily compounding. The federal short-term rate has increased from 0% to 1%. This is the first change to the interest rates since the fourth calendar quarter of 2010 when the federal short-term rate decreased from 1% to 0%.
Under the Internal Revenue Code, the rate of interest for the second quarter of 2016 is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
It is important to note that the increase in the interest rates for the second quarter of 2016 directly affects the calculation of PFIC interest.

### Outbound Foreign Trust: An Introduction
One of the most fundamental distinctions in US foreign trust law is the difference between an inbound foreign trust and an outbound foreign trust. This distinction was emphasized by the landmark piece of legislation “The Small Business Job Protection Act of 1996" and should be clearly understood by US tax lawyers as well as US grantors and US beneficiaries of a foreign trust.
Definition of an Outbound Foreign Trust
In order for a foreign trust to be deemed "outbound", two conditions must be satisfied. First, the trust was created through the transfer of assets by a US person. Second, the trust must be a foreign trust or a domestic trust that later became a foreign trust.
Obviously, a transfer by a foreign person of exclusively foreign assets to a foreign trust which has only foreign beneficiaries is completely irrelevant because there is no nexus with the United States (hence, the foreign trust is not subject to taxation in the United States).
Two Areas of Special Importance of an Outbound Foreign Trust
There are two particular areas of special interest for international tax lawyers with respect to an outbound foreign trust. First, the grantor trust rule under IRC (Internal Revenue Code) Section 679. In general, where a US grantor transfers property to a foreign trust, IRC Section 679 taxes the US grantor as the owner of any portion of a foreign trust attributable to the transferred property in any year in which the trust has a US beneficiary. This is a complex rule that deserves special treatment in a separate article.
The second area of special importance with respect to outbound foreign trusts is the taxation of the transfer of appreciated assets to a nongrantor foreign trust under IRC Section 684 and the excise tax under the already-repealed IRC Sections 1491-1494. Again, this is a topic that should be discussed in a separate article; I just wanted the readers to be aware of the existence of this rule.
Obviously, there are other highly important tax issues associated with an outbound foreign trust, but these issues are usually discussed in conjunction with an inbound foreign trust, taxation of foreign trusts in general, or they are similar to taxation of US domestic trusts.
Contact Sherayzen Law Office for Help With Respect to US Taxation of an Outbound Foreign Trust
The US tax issues associated with foreign trusts in general and an outbound foreign trust in particular are immensely complex. This is why, if you are a US person who is considered to be an owner or a beneficiary of an outbound foreign trust, you should contact Sherayzen Law Office for help with your US tax compliance and planning with respect to this outbound foreign trust.
Contact US Today to Schedule Your Confidential Consultation!

### Streamlined Five Percent Offshore Penalty Calculation
Despite its appearances, the calculation of the Streamlined Domestic Offshore Procedures Title 26 Miscellaneous Offshore Penalty (“Streamlined Five Percent Offshore Penalty) may actually be a complex process. Moreover, the correct calculation of the Streamlined Five Percent Offshore Penalty may lead to some paradoxical conclusions, including a preference for the OVDP Penalty (now closed). Due to the complexity of the calculation of the Streamlined Five Percent Offshore Penalty, this process should be handled by an experienced international tax lawyer. Nevertheless, in this article, I will outline some of the general contours of this process for educational purposes only.
General Calculation of the Streamlined Five Percent Offshore Penalty
The calculation of the Streamlined Five Percent Offshore Penalty is a three-step process. First, you need to identify the Penalty Base. Second, you need to determine the December 31 value of each asset included in the Penalty Base and enter these values into Form 14654. Finally, you need to determine the aggregate value of these assets per year and apply the Streamlined Five Percent Offshore Penalty to the highest aggregate value.
Penalty Base of the Streamlined Five Percent Offshore Penalty
The first and most important step in the calculation is determining the Penalty Base. I strongly advise retaining an international tax lawyer to do this calculation for you; neither the accountants nor the clients themselves should be trusted with this task, because it requires a legal determination of what assets need to be included in the Penalty Base for the Streamlined Five Percent Offshore Penalty.
In general, however, the Penalty Base consists of all foreign assets that are subject to the Streamlined Five Percent Offshore Penalty – i.e. a legal determination needs to be made with respect to which assets need to be included in the calculation of this penalty and which assets do not need to be included.
This determination needs be made with respect to assets that the taxpayer had in each of the last six years – this is called the voluntary disclosure period. For example, in general, the voluntary disclosure period for taxpayers who are filing their voluntary disclosure under the Streamlined Domestic Offshore Procedures in March of 2016 will be calendar years 2009-2014.
After a few changes in its position, the IRS finally established its position on the calculation of the Penalty Base and it is frightfully broad. In general, the Penalty Base for the Streamlined Five Percent Offshore Penalty consists of three types of assets. First, it includes, for each of the six years in the voluntary disclosure period, all foreign financial accounts (as determined by the FBAR rules) in which the taxpayer has a personal financial interest and which should have been, but were not reported, on an FBAR.
The second class of assets, consists of all foreign financial assets (as defined in the instructions for Form 8938) in which the taxpayer has a personal financial interest and that should have been, but were not, reported on Form 8938. Note here the difference in the number of years applicable to this asset class – only in each of the three years in the covered tax return period (i.e. in our example above, in general, it would be years 2012-2014; however, if the 2015 tax return was filed, then, the covered tax return period could shift to 2013-2015). This is very different from the first class of assets reportable on the FBARs. The difference is due to the fact that the Streamlined Domestic Offshore Procedures only require the tax returns to be filed for the past three years, while the FBAR covers the past six years.
This second class of assets is the most problematic, because Form 8938 is very broad and covers a wide range of assets, including interests in foreign businesses and foreign trusts. Moreover, the Streamlined Five Percent Offshore Penalty is even applicable to the assets that are reportable on Forms 3520, 5471, 8621 and other forms which are linked to Form 8938 – i.e. foreign financial assets that would be reportable on Form 8938 had it not been for the provision in Form 8938 instructions designed to eliminate the burden of the duplicate reporting. Other complications may arise with respect to the spectrum of assets that should be included in this second category of the Penalty Base.
The third class of assets includes all foreign financial accounts and other foreign financial assets that were reported on the FBAR and Form 8938, but the gross income for these accounts and assets was not reported in that year. This is called income tax non-compliance.
Valuation of Assets for Streamlined Five Percent Offshore Penalty
After your international tax lawyer determines the assets that need to be included in the Penalty Base, the next step is to value these assets in order to enter them into Form 14654 (here, if you have numerous assets, I recommend that your lawyer creates an attachment that includes all required information). There are two important issues that one must remember with respect to asset valuation for the purpose of calculating the Streamlined Five Percent Offshore Penalty.
First, your lawyer should value the assets as of December 31 value of the applicable year; the IRS is not looking for the highest value of an asset, just the December 31 value. This is easy to do with respect to foreign financial accounts, but the problems arise with respect to other assets included in the Penalty Base, which leads us to the second issue.
Second, special rules apply to valuation of ownership of foreign disregarded entities, corporations and trusts. A reasonable valuation method should be used in making these determinations. Oftentimes, the balance sheet of Form 5471 can be used; however, sometimes an event (for example, a sale of corporate stock) may occur which provides a reasonable value for the stock. Remember, however, the valuation should be done as of December 31. This means that, if the stock is sold on December 30, the value of the stock (for the purpose of the year in which the stock is sold) would be zero.
Application of the Streamlined Five Percent Offshore Penalty to the Highest Aggregate Balance
The last step in the Streamlined Offshore Five Percent Penalty calculation is the easiest. Once the asset values included in the Penalty Base are properly valued and entered into Form 14654, the international tax lawyer needs to add-up the totals for each year and determine the highest aggregate amount among the years. Then, the lawyer should apply the Streamlined Five Percent Offshore Penalty to the highest aggregate balance – this is the amount due to the IRS.
Contact Sherayzen Law Office for Help With Your Voluntary Disclosure Under the Streamlined Domestic Offshore Procedures
The determination of the Streamlined Five Percent Offshore Penalty may be a difficult and tricky process and you need an international tax lawyer to do it. Moreover, the actual choice of the type of voluntary disclosure that a taxpayer should pursue needs be analyzed by an experienced attorney.
Sherayzen Law Office is a leading offshore voluntary disclosure law firm in the world with clients in virtually every continent. We have helped hundreds of US taxpayers to bring their US tax affairs into full compliance with US tax laws and we can help You!
Contact Us to Schedule Your Confidential Consultation!

### Austin FBAR Tax Lawyer
A question that I would like to explore in this article is: Who is considered to be an Austin FBAR tax lawyer?
It seems to be an odd question, because a lot of people would say that an Austin FBAR tax lawyer is an attorney who resides in Austin and does FBAR law.
This, however, is an over-simplistic and incorrect view. First of all, there is no area of “FBAR” law. Rather, FBAR is a tax information return which is being administered by the IRS on behalf of FinCEN. This means that FBAR “law” forms part of a larger compliance framework within the area of international tax law. In essence, all “FBAR tax lawyers” are in reality international tax lawyers who must be knowledgeable not just about the FBARs, but about all relevant areas of international tax law.
However, despite its technical deficiencies, the term FBAR tax lawyers is commonly used to describe an international tax lawyer who helps his clients with FBAR compliance.
Second, an Austin FBAR tax lawyer does not mean that the tax lawyer must reside in Austin. FBAR is part of US federal tax law and can be practiced by an international tax lawyer who is licensed in any of the 50 states of the United States.
Thus, an international tax lawyer who is able to help his clients with FBAR compliance in Austin, Texas, is an Austin FBAR tax lawyer. This means that an Austin FBAR tax lawyer can actually reside in Minneapolis or any other city.
In this case, the modern means of communications usually come into play: email, Skype video conferences, telephone and regular mail. In fact, aside from initial consultation, your communication with an Austin FBAR tax lawyer who actually resides in Austin is likely to be limited exactly to these modern means of communication with very rare (if any) face-to-face meetings.
With this information in mind, we can now go back and answer my original question: Who is considered to be an Austin FBAR tax lawyer? The answer is as follows: An Austin FBAR tax lawyer is an international tax lawyer who is licensed to practice in any of the 50 states of the United States, resides anywhere in the United States (Minneapolis, for example) or any other country, and helps his clients in Austin with FBAR compliance with the help of modern means of communication.
Contact Sherayzen Law Office If You Are Looking for an Austin FBAR Tax Lawyer
If you are looking for an Austin FBAR tax lawyer, contact Sherayzen Law Office, Ltd., an international tax law firm that specializes in FBAR compliance and helps its clients in Austin, Texas.
Our professional legal team is highly experienced in FBAR compliance, including current FBAR compliance and FBAR voluntary disclosures. We have helped clients with every major IRS voluntary disclosure program (2009 OVDP, 2011 OVDI, 2012 OVDP and the currently-existing 2014 OVDP), both types of Streamlined Disclosures (Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures), Delinquent International Information Return Submission Procedures and Delinquent FBAR Submission Procedures.
Contact Us Today to Schedule Your Confidential Consultation!

### New York FBAR Lawyer | Foreign Accounts Tax Attorney
If you are looking for a New York FBAR Lawyer, you should consider retaining the services of Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. While Mr. Sherayzen is not physically located in New York, he has a considerable number of clients in the City of New York and the State of New York.
It is important to understand that the geographical location of a New York FBAR Lawyer does not have any impact on his ability to interpret the federal rules and regulations regarding FBAR precisely for the reason that FBAR is federal law, not state law. Moreover, the development of modern communications technology has basically eliminated virtually the entire advantage of retaining a local New York FBAR Lawyer.
Rather, the most important consideration in retaining a New York FBAR Lawyer should be his experience and knowledge of the subject matter. Here, Sherayzen Law Office, Ltd. holds a considerable advantage due to its profound knowledge in international tax law, particularly FBAR compliance and FBAR voluntary disclosures. In fact, this is one of the leading international tax law firms in the world with experience in all major IRS voluntary disclosure programs, including 2009 OVDP, 2011 OVDI, 2012 OVDP and 2014 OVDP now closed.
It is also important to understand that the FBAR issues are often tightly intertwined with other international tax compliance requirements, such as foreign income reporting, Form 8938, Form 8621, foreign business ownership reporting returns (5471, 8865 and 8858), et cetera. This is why your New York FBAR lawyer should be highly knowledgeable in other areas of international tax law in addition to FBARs.
Again, Sherayzen Law Office occupies a leading position in the world on this subject with extensive knowledge and experience concerning all major relevant areas of international tax law including PFIC compliance, Subpart F rules, all types of US international reporting returns, US income tax returns (individual, partnership and corporate) for domestic and foreign persons, et cetera.
Contact Sherayzen Law Office - Your New York FBAR Lawyer
This is why, if you are looking for a New York FBAR lawyer, contact Sherayzen Law Office, Ltd. today to schedule Your Confidential Consultation!

### Важность пред-иммиграционного налогового планирования
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### Foreign Trust Tax Treatment in the United States: Historical Overview
Over the years, the US tax treatment of foreign trusts has undergone dramatic changes. It is important to study and understand this history in order to properly understand and interpret current US tax laws concerning foreign trust. In this essay, I will provide a broad overview of the history of foreign trust tax treatment in the United States since before 1962 until the present time.
Foreign Trust Tax Treatment Prior to 1962
Before 1962, the US tax laws treated in the same manner all foreign trusts, whether they had a US beneficiary or foreign one. A complex foreign trust established by a US grantor for the benefit of a US beneficiary was taxed similarly to the one established by a foreign granter for a US beneficiary. Moreover, since foreign-source income of a foreign trust was not included in the trust’s gross income for US income tax purposes, this trust would not have any DNI (distributable net income)!
Such treatment of foreign trusts led to a lot of abuse whereby large portions of income were never taxed in the United States. For example, prior to 1962, a foreign trust’s income would not be subject to US taxes in a situation where the trust was located in a country with low or no income taxes and the corpus consisted solely of foreign assets.
While in some situations US beneficiaries might have been taxed when the trust income was actually distributed (under the regular five-year throwback rule), careful tax planning could have prevented even such taxation of the beneficiaries in light of the fact that foreign-source income was excluded from DNI. Moreover, distributions of accumulated foreign trust income contained no undistributed net income (UNI) and were not subject to taxation under even the limited five-year throwback rule.
The Watershed Legislation in Foreign Trust Tax Treatment: the Revenue Act of 1962
The foreign trust tax treatment changed dramatically with the Revenue Act of 1962. The new legislation introduced two major changes to foreign trust tax treatment in the United States. First, it changed the calculation of DNI by requiring foreign trusts to add foreign-source income to it (unless such treatment was exempt by a treaty). Moreover, foreign trusts with US grantors now had to include capital gains in DNI.
Second, the Revenue Act of 1962 created the throwback rule on accumulation distributions from a foreign trust if the trust was created by a US person. Furthermore, important exceptions to throwback rule, such as exclusions for emergency distributions of accumulated income, were made unavailable to foreign trusts by the Act. Finally, the throwback rule became unlimited for foreign trusts while there was a five-year limitation on its application to domestic trusts.
Despite these profound changes in the foreign trust tax treatment, the Revenue Act of 1962 still failed to eliminate some important advantages of using foreign trusts to lower US tax liability. For example, the unlimited throwback rule did not seriously impact the foreign trust advantages in its ability for potentially unlimited tax deferral and tax-free income accumulation. Of course, this meant that the possibility of the rate of earnings of a foreign trust was likely to be much greater than that of US domestic trusts.
Furthermore, nothing was done to limit the ability of the US grantor and beneficiaries (and their families) to access undistributed funds of a foreign trust. For example, they could still receive these funds through loans, private annuities, like-kind exchanges and other similar “indirect” methods.
Finally, with respect to foreign trusts with US grantors, the foreign trusts were required to allocate capital gains to DNI. This meant that every distribution by a foreign trust contained a mixture of ordinary income and capital gains. US domestic trusts could not do that, because capital gains of a domestic trust could not be distributed until current and accumulated ordinary income was distributed.
Thus, perversely, the new foreign trust tax treatment afforded foreign trusts an important advantage in the form of its ability to distribute part of its capital gains to the beneficiaries more quickly than a domestic trust. This advantage became especially evident once the unlimited throwback rule was extended to domestic trusts in 1969.
Tightening of Screws in the Foreign Trust Tax Treatment: the Tax Reform Act of 1976
By 1976, these obvious advantages in the foreign trust tax treatment became unacceptable for the US Congress. Therefore, it acted in a major piece of US tax legislation known as the Tax Reform Act of 1976. While the Act was very broad, there were five key changes to the foreign trust tax treatment in the United States.
First, the new legislation re-classified foreign trusts that were created by US persons and had or could potentially have at least one US beneficiary as a grantor trust under IRC Section 679.
Second, the Act of 1976 required an automatic inclusion of capital gains of a foreign trust in the foreign trust’s DNI.
Third, it eliminated the loophole with respect to foreign trust distributions of income that accumulated prior to a beneficiary’s twenty-first birthday. Now, such distributions were taxed.
Fourth, with the obvious desire to attack the tax advantage in foreign trust tax treatment with respect to accumulated income, the Congress imposed a 6% simple interest charge on the tax imposed on a beneficiary of a foreign trust with respect to accumulations after December 31, 1976.
Finally, the last major change attacked the ability of US grantors to avoid US capital gain taxes by transferring appreciated assets into foreign trusts. The Act of 1976 imposed a 35% excise tax on the transfer of all appreciated assets to a foreign trust by a US grantor, unless the grantor elected to recognize the gain at the time of the transfer.
Changing the Foreign Trust Tax Treatment under IRC Section 672(f)
Another change in the foreign trust tax treatment came under the Revenue Reconciliation Act of 1990 with respect foreign grantor trusts that had a foreign grantor and a US beneficiary who had made gifts to the foreign grantor. This new law was summarized in IRC Section 672(f). Section 672(f) states that, in a situation where a foreign trust has a US beneficiary and should have been a grantor trust under the ordinary grantor trust rules found in IRC Sections 671 through 678 but for the fact that the grantor was a foreign person, this trust should be treated as owned by the trust's US beneficiary to the extent that this beneficiary has made prior gifts to the foreign grantor.
There is still a small exception that a “gift shall not be taken into account to the extent such gift would be excluded from taxable gifts under section 2503(b).” 26 U.S.C. Section 672(f)(5)
1996 and 1997 Changes in the Foreign Trust Tax Treatment
The last major change in foreign trust tax treatment that I wish to mention here was introduced in the Small Business Job Protection Act of 1996 (as slightly modified by the Taxpayer Relief Act of 1997). The Act of 1996 introduced major revisions in the rules of foreign trust tax treatment, arguably on the scale of the Tax Reform Act of 1976.
Five major areas of foreign trust tax treatment were in focus. First, the definition of a foreign trust was clarified with a strong bias toward treating a trust as a foreign trust. Two new tests, the court test and the control test, were introduced (and clarified further in the Treasury regulations). These changes were codified in IRC Section 7701.
Second, the reporting requirements for foreign trusts (Forms 3520 and 3520-A) were introduced. This was a major change in the reporting burden for US taxpayers and foreign trusts with US beneficiaries.
Third, the penalties for failure to report transfers to a foreign trust were introduced.
Fourth, new rules were put in place to reduce the utility of foreign trusts by individuals who were planning to become US residents.
Finally, new restrictions were placed to reduce the utility of using foreign trusts by individuals who were planning to surrender their US residency or citizenship.
Contact Sherayzen Law Office for Tax Help With Foreign Trusts
Over the years, one can see profound changes in the foreign trust tax treatment; in this brief article, I only focused on some of the major changes in the foreign trust tax treatment, but there were other developments that took place (for example, FATCA compliance for foreign trusts).
These changes in foreign trust tax treatment generally indicate the trend toward stricter regulation of foreign trusts, increasing reporting burden on US taxpayers and foreign trusts, and the reduction in any type of an income tax advantage of foreign trusts. In fact, the foreign trust law has become so complex that one should not try to resolve these matters without the help of an experienced tax professional.
Despite these burdens, there is still a large number of foreign trusts with US grantors and US beneficiaries. The latter situation (i.e. US beneficiaries) often occurs when a foreign beneficiary becomes a US beneficiary through immigration. Oftentimes, these new US beneficiaries are not even aware of the existence of foreign trusts until significant US tax non-compliance occurs.
This is why it is so important to contact Sherayzen Law Office for professional help with respect to your foreign trusts as soon as possible. We have helped US beneficiaries, US grantors and foreign trusts around the world to do proper tax planning and comply with US reporting requirements (including Forms 3520, 3520-A and the voluntary disclosures associated with these forms). We can help You!
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### Importance of Pre-Immigration Tax Planning
Pre-immigration tax planning is done by very few of the millions of immigrants who come to the United States. This is highly unfortunate because US tax laws are highly complex and it is very easy to get into trouble. The legal and emotional costs of bringing your tax affairs back into US tax compliance (after you violated any of these complex laws) are usually a lot higher than those of the pre-immigration tax planning. In this writing, I would like to discuss the concept and process of pre-immigration tax planning for persons who wish to immigrate and/or work in the United States.
The concept of pre-immigration tax planning is far more complex than what people generally believe. Most people simply focus on the actions required by local tax laws of their home country; very little attention is actually paid to the tax laws of the future host country – the United States. Perhaps, the only exception to this rule is avoidance of double-taxation; however, even this concept is approached narrowly to avoid only the taxation of US-source income by the home country.
Yet, the pre-immigration tax planning should focus on both, US tax laws and the laws of the home country. It is even safe to argue that a much larger effort should be going into US tax planning due to the much farther reach and the higher level of complexity of the US tax system; in fact, the capacity of US tax laws to invade one’s life is not something for which the new US immigrants are likely to be prepared. Furthermore, once a person emigrates to the United States, he will likely lose his tax residency in his home country.
Once the correct focus on US tax laws is adopted, the pre-immigration tax planning process should begin by securing a consultation with an international tax lawyer in the United States. Beware of using local tax lawyers who are not licensed in the United States to do your pre-immigration tax planning – having an idea of US tax laws is not the same as practicing US tax law. A separate article can be written on how to find and secure the right international tax lawyer, but, if you are reading this article, you already know that you should call Sherayzen Law Office for help with your pre-immigration tax planning!
During the consultation, your international tax lawyer should carefully go over your existing asset structure, their acquisition history, any built-up appreciation and other relevant matters. Then, he should classify the assets according to their likely US tax treatment and identify the problematic assets or assets which need further research. The lawyer should also discuss with you some of the most common US tax compliance requirements.
After the initial consultation, your US international tax lawyer will engage in preliminary pre-immigration tax planning, creating the first draft of your plan solely from US tax perspective.
Then, he will contact a tax professional in your home country (preferably a tax professional that you supply and who is familiar with your asset structure). If you have assets in multiple jurisdictions, the US lawyer should also contact tax attorneys in these jurisdictions in order to find out the tax consequences of his plan in these jurisdictions. He will then modify his plan based on these discussions to create the second draft of your pre-immigration tax plan.
The next step of your pre-immigration tax planning should be the discussion of the relevant details of the modified plan with your immigration lawyer in order to make sure that the plan does not interfere with your immigration goals. Once the immigration lawyer’s approval is secured, you can proceed with the implementation of the tax plan.
Obviously, this discussion of your pre-immigration tax planning is somewhat simplified in some aspects and overly structured in others. Not all of the steps need to be always followed, especially followed in the same order; a lot will depend on your asset structure and how complex or simple it is.
Finally, it is important to emphasize that pre-immigration tax planning applies not only to persons who wish to obtain US permanent residence, but also to persons who just wish to work (either as employees, contractors or business owners) in the United States, because these persons are likely to become US tax residents even if they never become US permanent residents.
Contact Sherayzen Law Office for Experienced Help With Your Pre-Immigration Tax Planning
If you are thinking of immigrating to or working in the United States, contact a leading international tax law firm in this field, Sherayzen Law Office, for professional tax help. Our experienced legal team has helped foreign individuals and families around the world and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### Hiding Assets and Income in Offshore Accounts Again Made the IRS “Dirty Dozen” List
On February 5, 2016, the IRS again stated that avoiding U.S. taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.
The problem with offshore accounts is two-fold. On the one hand, there are numerous con-artists who use offshore accounts to lure taxpayers into scams and schemes. The second and a much larger problem for the IRS is the fact that many U.S. taxpayers used offshore account to hide assets and income from the IRS.
Fighting the strategy of using offshore accounts to hide assets and income has been one of the top priorities of the IRS since the early 2000s. The problem has been complicated by the fact that there are many legitimate reasons for having an offshore account – a fact that, unfortunately, has been largely ignored by journalists and the public opinion in the United States. Therefore, it is necessary for the IRS to approach the problem of offshore accounts carefully in order to avoid hurting innocent people.
Over the years, the IRS (with the help of Congress) has chosen five different and interrelated strategies to fight tax evasion through offshore accounts.
1. IRS Civil and Criminal Enforcement
IRS examinations, audits, subpoenas, and criminal enforcement play a central role in the IRS war against using offshore accounts to hide assets and income. The ability of the IRS to enforce U.S. tax laws is amazingly broad and the IRS will use it whenever it wishes.
Since 2009, the IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.
Hence, brute force still looms large in fighting tax evasion through offshore accounts and creates enormous (and fully justified) fear in the hearts of many U.S. taxpayers. This fear is also central to the IRS ability to use the other four strategies listed below.
2. Extensive Reporting Requirement for Owners of Offshore Accounts
As owners of offshore accounts have already noticed, the number of reporting requirements with respect to offshore accounts has risen dramatically. In addition to FBAR (which has existed since the 1970s), FATCA introduced Form 8938 in 2011. Furthermore, Form 8621 and Schedule B to Form 1040 have been modified to require additional reporting with respect to offshore accounts. Other forms also indirectly require reporting of foreign accounts (through reporting of ownership or a beneficial interest in a foreign entity or a foreign trust).
By forcing U.S .taxpayers to do extensive reporting with respect to their offshore accounts, the IRS has achieved two goals at the same time. First, it has collected an enormous amount of information with respect to U.S. offshore accounts and their owners. This information can be used in a later investigation to track fund and identify patterns of behavior. In a short while, due to the implementation of FATCA in many jurisdictions around the world, this information will also be used to compare the banks’ information with the information provided by the taxpayers on their information returns.
Second, the enormous fines associated with offshore accounts reporting can create huge tax liabilities for noncompliant taxpayers. This provides the IRS with a financial incentive to pursue these taxpayers. These potentially disastrous noncompliance fines also serve to deter many taxpayers from engaging in risky tax evasion schemes.
Of course, one of the biggest problems associated with these reporting requirements is that the majority of persons, including tax accountants, never heard of them until they were already in trouble. When the IRS pressure started to rise, it was already too late for a lot of U.S. taxpayers to do simply current compliance and they had to pay fines to the IRS. It is important to emphasize that the process is by no means over – on the contrary, as the complexity of U.S. tax compliance continues to rise, a lot of taxpayers (and their accountants) still do not know about a lot of these requirements.
3. Voluntary Disclosures
In order to alleviate the reporting noncompliance nightmares for U.S .taxpayers, the IRS created a number of voluntary disclosure programs. The early programs were not very successful; however, after the IRS stunning victory in the 2008 UBS case, the 2009 Offshore Voluntary Disclosure Initiative (OVDI) turned out to be a huge success. The 2011 OVDP, 2012 OVDP and 2014 OVDP with 2014 Streamlined Compliance Procedures followed in quick succession and with even bigger success. Since 2009, more than 54,000 OVDP disclosures took place and the IRS has collected more than $8 billion; this is not taking into account the huge surge in Streamlined disclosures since 2014.
The information that has been collected through OVDP is used to identify noncompliant individuals and entire schemes to evade U.S. taxes through offshore accounts. The IRS then uses this information to pursue taxpayers with undeclared offshore accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas using offshore accounts. The IRS works closely with the Department of Justice (DOJ) to prosecute these tax evasion cases.
4. Swiss Bank Program
In addition to the voluntary disclosure program for individuals, the IRS also created a voluntary disclosure program for Swiss banks. Such voluntary disclosure program is, of course, an unprecedented event – never in history did one country force another country’s entire bank system to do a voluntary disclosure on the territory of that other country.
While the debate over this breach of Swiss sovereignty (although, technically, the Swiss government agreed to the Swiss Bank Program) is interesting, for the purposes of this article, it is important to note that Swiss Bank program was a huge step forward in attacking the usage of offshore accounts to hide assets and income.
By the end of February of 2016, about 80 Swiss banks went through Category 2 voluntary disclosure and paid penalties to the U.S. government. They also turned over enormous amount of information regarding their U.S. accountholders and the various schemes that Swiss bankers developed to hide assets and funds from the IRS. In essence, the Swiss bankers turned over to the IRS substantially all of the blueprints for tax evasion that they had created.
5. FATCA
The final major strategy for fighting the practice of using offshore accounts to hide assets and income from the IRS is the famous Foreign Account Tax Compliance Act or FATCA. Ever since FATCA entered into force, it has changed the global landscape of international tax compliance. One of the most salient features of FATCA is the fact that it forces foreign banks to report to the IRS all of the offshore accounts that they can identify as owned by U.S. persons.
This groundbreaking piece of legislation has had an enormous impact on the ability of the IRS to identify noncompliance by U.S. persons, because foreign banks now act as its agents and voluntarily disclose U.S. persons and their offshore accounts.
Contact Sherayzen Law Office for Help With Your Offshore Accounts
If you have undisclosed offshore accounts, you should contact Sherayzen Law Office as soon as possible. We have helped hundreds of U.S. taxpayers to bring their U.S. tax affairs in order while saving millions of dollars in potential penalty reductions. We furthermore help to reduce your income tax liability as a result of your voluntary disclosure and post-voluntary disclosure tax planning.
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### Mr. Sherayzen Completes Immigration and International Tax Law Seminar
On February 18, 2016, Mr. Sherayzen, in cooperation with two lawyers (an immigration lawyer and a business lawyer) completed another immigration and international tax law seminar “Foreign Investment in the United States: Key Immigration, Business and Tax Considerations”.
During this immigration and international tax law seminar, the immigration lawyer, Mr. Streff, covered a wide range of topics including investors visas, such as E-2 and EB-5, and alternative options for entrepreneurs, such as L-1 intracompany transferees, EB-1 and O-1 extraordinary ability, and National Interest Waivers’ through the Entrepreneurs Pathways initiative.
While immigration and international tax law issues were at the center of the seminar, a substantial part of the seminar was also devoted to business issues associated with various immigration options. The business lawyer, Mr. Vollmers, covered relevant business issues of appropriate entity formation, business plans, international business relationships, investment due diligence, and funds tracing.
Mr. Sherayzen’s presentation focused on the intersection of immigration and international tax law, especially U.S. tax residency classification, disclosure of foreign income and foreign assets, and foreign business ownership compliance requirements. U.S. tax residency is a concept completely different from U.S. permanent residence or “green card” and it occupies the center of any tax inquiry that involves immigration to the United States.
A lot of attention was given to tax compliance requirements with respect to another common intersection of immigration and international tax law issues – business ownership tax compliance issues associated with L-1 visa structures. In particular, Mr. Sherayzen discussed Forms 5471, 5472, 8865 and 8858 as well as PFIC and Subpart F antideferral regimes.
During the seminar, Mr. Sherayzen spent a substantial amount of time to one of the most important points of convergence of immigration and international tax law – reporting of foreign financial assets. Here, he explained the importance of FBAR and Form 8938, as well as FATCA.
Another part of Mr. Sherayzen’s presentation was devoted to the importance of pre-immigration tax planning. It is important for persons who plan to immigrate to the United States to contact a U.S. international tax attorney before they actually become U.S. persons. The international tax attorney should review their existing asset structure and advise on how this structure should be modified in order to avoid the various U.S. tax landmines and maximize favorable treatment under U.S. tax law. Special attention should be paid not only to income tax rules, but also estate and gift tax laws.
Mr. Sherayzen ended his presentation with the emphasis that immigration lawyers are at the forefront of international tax compliance, because they are usually the first to deal with persons who immigrate to the United States. Therefore, it is highly important for the immigration lawyers to be able to identify the most common junctions of immigration and international tax law issues and timely advise their clients to seek professional international tax help.

### Last Swiss Bank Program Category 2 Resolution
On January 27, 2016, the US Department of Justice (DOJ) declared the last Swiss Bank Program Category 2 Resolution. The Swiss Bank Program was proclaimed on August 29, 2013, and constituted an unprecedented triumph of US economic might over the most formidable bank secrecy bulwark (though, already a greatly weakened one since the 2008 UBS case) which Switzerland had been for hundreds of years.
Under the Swiss Bank Program, the Swiss banks were forced to turn over a large amount of information regarding foreign accounts held by US persons, cooperate with US information requests, and, in case of category 2 banks, pay a fine. In return, the Swiss banks were provided a guarantee against US criminal prosecution in the form of non-prosecution agreements.
The Swiss Bank Program was successful, though not every eligible Swiss bank actually chose to participate in the Program. The most profitable part of the Program consisted of the Category 2 banks, which had to pay fines as a condition of their participation in the Swiss Bank Program.
The first resolution with a Category 2 bank occurred on March 30, 2015. On January 27, 2016, the last Swiss Bank Program Category 2 resolution took place after reaching a Non-Prosecution Agreement with HSZH Verwaltungs AG (HSZH).
In total, the DOJ signed Non-Prosecution Agreements with about 80 banks and collected more than $1.36 billion in Swiss Bank Penalties, including $49 million from the last Swiss Bank Program Category 2 resolution. While this amount pales in comparison with the originally-projected amounts (due to penalty mitigation), the enormous impact the Program has had on the worldwide US tax compliance and convincing foreign governments to accept FATCA render this Program an important success for the US government.
The final Swiss Bank Program Category 2 resolution marked the end of the Category 2 part of the Swiss Bank Program, but an important question remains – will we see the re-appearance of the Swiss Bank Program with Category 2 banks in another country? While the implementation of FATCA reduces the probability of a chance of another program similar to Swiss Bank Program, one cannot fully discount this possibility. It is possible that the IRS will identify another important center (such as the Cayman Islands, Hong Kong, Isle of Mann, Singapore, et cetera) of US tax non-compliance based on the information collected in the Swiss Bank Program and attack this center.
On the other hand, one can also see the appearance of a global “Swiss Bank Program” which banks of any country can enter in order to prevent US criminal prosecution.
Whatever form the future voluntary disclosure program for foreign banks will take, one can be certain that the last Swiss Bank Program Category 2 Resolution with HSZH was not the last IRS enforcement effort with respect to foreign banks.

### 2015 Form 8938 and FBAR Currency Conversion Rates
Currency conversion is a critical part of preparing 2015 FBAR and Form 8938. This is why 2015 Form 8938 and FBAR Currency Conversion Rates are so important.
The 2015 Form 8938 and FBAR Currency Conversion Rates are the December 31, 2015 rates officially published by the U.S. Department of Treasury (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”). Recently, the Treasury Department published the FMS rates for December 31, 2015.
The 2015 Form 8938 and FBAR Currency Conversion Rates also serve for other purposes beyond the preparation of the 2015 FBAR and Form 8938.
The instructions to both forms, the FBAR and Form 8938, require (in case of Form 8938, this is the default choice) to use the 2015 Form 8938 and FBAR Currency Conversion Rates published by the Treasury Department.
For this reason, the 2015 Form 8938 and FBAR Currency Conversion Rates are very important to international tax lawyers and international tax accountants. For your convenience, Sherayzen Law Office provides the table below of the official 2015 Form 8938 and FBAR Currency Conversion Rates (keep in mind, you still need to refer to the official website for any updates).
Country
Currency
Foreign Currency to $1.00
Afghanistan
Afghani
67.9000
Albania
Lek
125.5400
Algeria
Dinar
106.8780
Angola
Kwanza
145.0000
Antigua-Barbuda
East Caribbean Dollar
2.7000
Argentina
Peso
12.9460
Armenia
Dram
484.0000
Australia
Dollar
1.3680
Austria
Euro
0.9190
Azerbaijan
Manat
1.6200
Bahamas
Dollar
1.0000
Bahrain
Dinar
0.3770
Bangladesh
Taka
79.0000
Barbados
Dollar
2.0200
Belarus
Ruble
18555.0000
Belgium
Euro
0.9190
Belize
Dollar
2.0000
Benin
CFA Franc
602.7900
Bermuda
Dollar
1.0000
Bolivia
Boliviano
6.8600
Bosnia-Hercegovina
Marka
1.7970
Botswana
Pula
11.2360
Brazil
Real
3.9590
Brunei
Dollar
1.4160
Bulgaria
Lev
1.7970
Burkina Faso
CFA Franc
602.7900
Burma-Myanmar
Kyat
1311.0000
Burundi
Franc
1600.0000
Cambodia (Khmer)
Riel
4103.0000
Cameroon
CFA Franc
602.6800
Canada
Dollar
1.3860
Cape Verde
Escudo
101.2220
Cayman Islands
Dollar
1.0000
Central African Republic
CFA Franc
602.6800
Chad
CFA Franc
602.6800
Chile
Peso
709.9800
China
Renminbi
6.4920
Colombia
Peso
3169.2800
Comoros
Franc
435.3000
Congo
CFA Franc
602.6800
Congo, Dem. Rep
Congolese Franc
920.0000
Costa Rica
Colon
531.9400
Cote D'Ivoire
CFA Franc
602.7900
Croatia
Kuna
6.8200
Cuba
Peso
1.0000
Cyprus
Euro
0.9190
Czech Republic
Koruna
24.2030
Denmark
Krone
6.8560
Djibouti
Franc
177.0000
Dominican Republic
Peso
45.4000
Ecuador
Dolares
1.0000
Egypt
Pound
7.8300
El Salvador
Dolares
1.0000
Equatorial Guinea
CFA Franc
602.6800
Eritrea
Nakfa
15.0000
Estonia
Euro
0.9190
Ethiopia
Birr
21.0700
Euro Zone
Euro
0.9190
Fiji
Dollar
2.1250
Finland
Euro
0.9190
France
Euro
0.9190
Gabon
CFA Franc
602.6800
Gambia
Dalasi
40.0000
Georgia
Lari
2.4000
Germany FRG
Euro
0.9190
Ghana
Cedi
3.8200
Greece
Euro
0.9190
Grenada
East Carribean Dollar
2.7000
Guatemala
Quentzel
7.6320
Guinea
Franc
8004.0000
Guinea Bissau
CFA Franc
602.7900
Guyana
Dollar
202.0000
Haiti
Gourde
56.5840
Honduras
Lempira
22.3000
Hong Kong
Dollar
7.7500
Hungary
Forint
289.9800
Iceland
Krona
129.6700
India
Rupee
66.1000
Indonesia
Rupiah
13550.0000
Iran
Rial
29830.0000
Iraq
Dinar
1166.0000
Ireland
Euro
0.9190
Israel
Shekel
3.8990
Italy
Euro
0.9190
Jamaica
Dollar
118.7000
Japan
Yen
120.4200
Jerusalem
Shekel
3.8990
Jordan
Dinar
0.7080
Kazakhstan
Tenge
339.5000
Kenya
Shilling
102.2000
Korea
Won
1175.9000
Kuwait
Dinar
0.3030
Kyrgyzstan
Som
75.5000
Laos
Kip
8128.0000
Latvia
Euro
0.9190
Lebanon
Pound
1500.0000
Lesotho
South African Rand
15.5560
Liberia
Dollar
88.0000
Libya
Dinar
1.3890
Lithuania
Euro
0.9190
Luxembourg
Euro
0.9190
Macao
Mop
8.0000
Macedonia FYROM
Denar
56.2900
Madagascar
Aria
3196.0000
Malawi
Kwacha
662.0000
Malaysia
Ringgit
4.2900
Mali
CFA Franc
602.7900
Malta
Euro
0.9190
Marshall Islands
Dollar
1.0000
Martinique
Euro
0.9190
Mauritania
Ouguiya
330.0000
Mauritius
Rupee
35.8000
Mexico
New Peso
17.3620
Micronesia
Dollar
1.0000
Moldova
Leu
19.6000
Mongolia
Tugrik
1967.0500
Montenegro
Euro
0.9190
Morocco
Dirham
9.8740
Mozambique
Metical
45.50000
Namibia
Dollar
15.5560
Nepal
Rupee
105.7500
Netherlands
Euro
0.9190
Netherlands Antilles
Guilder
1.7800
New Zealand
Dollar
1.4610
Nicaragua
Cordoba
27.8600
Niger
CFA Franc
602.7900
Nigeria
Naira
198.9000
Norway
Krone
8.8290
Oman
Rial
0.3850
Pakistan
Rupee
104.7000
Palau
Dollar
1.0000
Panama
Balboa
1.0000
Papua New Guinea
Kina
2.9410
Paraguay
Guarani
5750.0000
Peru
Nuevo Sol
3.3940
Philippines
Peso
46.8360
Poland
Zloty
3.9170
Portugal
Euro
0.9190
Qatar
Riyal
3.6410
Romania
Leu
4.1540
Russia
Ruble
73.7950
Rwanda
Franc
742.3300
Sao Tome & Principe
Dobras
22350.3086
Saudi Arabia
Riyal
3.7500
Senegal
CFA Franc
602.7900
Serbia
Dinar
111.2500
Seychelles
Rupee
13.0440
Sierra Leone
Leone
5750.0000
Singapore
Dollar
1.4160
Slovak Republic
Euro
0.9190
Slovenia
Euro
0.9190
Solomon Islands
Dollar
8.0710
South Africa
Rand
15.5560
South Sudananese
Pound
18.5500
Spain
Euro
0.9190
Sri Lanka
Rupee
144.1500
St Lucia
East Carribean Dollar
2.7000
Sudan
Pound
6.6000
Suriname
Guilder
4.0000
Swaziland
Lilangeni
15.5560
Sweden
Krona
8.4430
Switzerland
Franc
0.9940
Syria
Pound
219.6500
Taiwan
Dollar
32.8740
Tajikistan
Somoni
7.0000
Tanzania
Shilling
2155.0000
Thailand
Baht
36.0500
Timor-Leste
Dili
1.0000
Togo
CFA Franc
602.7900
Tonga
Pa'anga
2.1270
Trinidad & Tobago
Dollar
6.4040
Tunisia
Dinar
2.0330
Turkey
Lira
2.9180
Turkmenistan
Manat
3.4910
Uganda
Shilling
3378.0000
Ukraine
Hryvnia
23.9520
United Arab Emirates
Dirham
3.6730
United Kingdom
Pound Sterling
0.6750
Uruguay
New Peso
29.8900
Uzbekistan
Som
2857.0000
Vanuatu
Vatu
108.5500
Venezuela
New Bolivar
6.3000
Vietnam
Dong
22480.0000
Western Samoa
Tala
2.5020
Yemen
Rial
214.5000
Zambia
Kwacha (New)
10.9900
Zambia
Kwacha
5455.0000
Zimbabwe
Dollar
1.0000
1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM - Former Yugoslav Republic of Macedonia.
4. Please, refer to the Treasury’s website for amendments regarding any reportable transactions in January, February, and March of 2015.

### Minneapolis FBAR Attorney | FATCA OVDP Tax Lawyer
If you are looking for a Minneapolis FBAR Attorney, a recommended suggestion would be to retain the services of Mr. Eugene Sherayzen of Sherayzen Law Office, Ltd. (“Sherayzen Law Office”). Mr. Sherayzen is a Minneapolis FBAR Attorney and founder of Sherayzen Law Office.
Minneapolis FBAR Attorney: Sherayzen Law Office FBAR Specialization
Sherayzen Law Office specializes in international tax compliance, including voluntary disclosure of delinquent (i.e. late) FBARs. As a Minneapolis FBAR Attorney, Mr. Sherayzen has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws.
The work of a Minneapolis FBAR Attorney is not limited only to FBARs. Rather, a Minneapolis FBAR Attorney needs to be able to deliver a variety of services and freely operate with experience and knowledge in all relevant areas of international tax law. For example, oftentimes, the calculation of FBAR penalties may depend upon certain legal and accounting interpretations which would allow one to determine whether one has an income-compliant account. These interpretations themselves may be highly technical in nature and may come from different determinations from other areas of the case.
Moreover, as part of an offshore voluntary disclosure, a Minneapolis FBAR Attorney often needs to amend US tax returns, properly prepare foreign financial statements according to US GAAP, correctly calculate PFICs, and innumerable number of other tasks.
Sherayzen Law Office Legal Team Provides Efficient and Cost-Effective Services
In order to make sure that his work as a Minneapolis FBAR Attorney is expeditious and cost-effective, Mr. Sherayzen built a team of tax professionals that he employs within his firm. Each member of the team is trained personally by Mr. Sherayzen and is assigned specific tasks. For example, an international tax accountant helps Mr. Sherayzen prepare the clients’ tax returns while his staff is trained in creating FBARs based on the information already verified by Mr. Sherayzen.
This team of motivated, intelligent and experienced tax professionals allows Sherayzen Law Office to provide an exceptional array of customized offshore voluntary disclosure and international tax compliance services which fully integrate the legal and accounting aspects of international tax compliance and offshore voluntary disclosures in an efficient and cost-effective manner.
Therefore, if you are looking for a Minneapolis FBAR Attorney, please contact Mr. Sherayzen as soon as possible to secure Your Confidential Consultation!

### What Needs to Be Included in the OVDP Preclearance Request
The OVDP Preclearance Request is a very important document that is required to be filed in order to commence a US taxpayer’s voluntary disclosure under the 2014 IRS Offshore Voluntary Disclosure Program (2014 OVDP) which is still in existence at the time of this writing. This is why it is important to understand what actually needs to be included in the OVDP Preclearance Request.
FAQ 23 of the 2014 OVDP details three major requirements for the OVDP Preclearance Request. First, the OVDP Preclearance Request must include the identifying information of the applicant(s), including complete name(s), date(s) of birth, tax identification number(s), address (or adresses), and telephone number(s).
Second, the OVDP Preclearance Request should include the identifying information of all financial institutions at which undisclosed OVDP assets were held during the voluntary disclosure period. The “identifying information” includes complete names of the foreign institutions (including all DBAs and pseudonyms), addresses, and telephone numbers.
It is up to your international tax lawyer to determine the OVDP assets and the voluntary disclosure period prior to filing the OVDP Preclearance Request.
Finally, the OVDP Preclearance Request should include the identifying information of all foreign and domestic business entities (e.g., corporations, partnerships, limited liability companies, foundations, et cetera) and trusts through which the undisclosed OVDP assets (again, this is the determination that needs to be made by your international tax lawyer) were held by the applicant.
Note that this request does not include the entities that are traded on a public stock exchange in the United States or overseas.
This information should be supplied for the entities that were in existence during any period of time during the Voluntary Disclosure Period, including any entities that were dissolved. The determination of the Voluntary Disclosure Period should be done by your international tax lawyer.
The identifying information that should be included in your OVDP Preclearance Request with respect to entities includes: complete names (including all DBAs and pseudonyms), employer identification numbers (if applicable), addresses, and the jurisdiction in which the entities were organized.
The OVDP Preclearance Requests should be accompanied by an executed Form 2848 (IRS Power of Attorney form) if the applicant is represented. I strongly advise that you retain an experienced international tax lawyer to conduct your voluntary disclosure process.
Note that, if your case involves jointly-filed US tax returns, the OVDP Preclearance Request should be prepared for both spouses.
Once the OVDP Preclearance Request is faxed to the IRS, the IRS-CI (Criminal Investigation) may take up to 30 days to notify the applicant’s representative (or the applicant himself (or herself), if the applicant is not represented). In my experience, if the IRS-CI is not busy, it will usually respond within a few weeks, but it can take the whole month. However, there are instances (like the August of 2014 deadline for US taxpayers to secure the 27.5% penalty, instead of 50%) when the IRS-CI is overwhelmed and it can take even a couple of months for them to make the decision on your OVDP Preclearance Request.
Contact Sherayzen Law Office for Experienced and Professional Help With the Voluntary Disclosure of Your Foreign Assets and Foreign Income
If you have undisclosed foreign accounts and you are considering entering the OVDP, you should contact the experienced voluntary disclosure team of Sherayzen Law Office, Ltd. We will handle your entire case, including all legal and accounting documentation (including the preparation of amended tax returns and FBARs). We have helped hundreds of US taxpayers worldwide and we can help you!
Contact Sherayzen Law Office to Schedule Your Confidential Consultation!

### Form 8938 Definition of Foreign Financial Institution
Financial accounts maintained by a Foreign Financial Institution constitute one of the main categories of Specified Foreign Financial Assets that need to be reported on IRS Form 8938. While it seems trivial, it is important to understand what is meant by “Foreign Financial Institution” within the context of Form 8938 – i.e. what is the Form 8938 Definition of Foreign Financial Institution?
There are two parts of Foreign Financial Institution that need to be separately defined: “foreign” and “financial institution”.
Form 8938 Definition of Foreign Financial Institution: What is “Foreign”?
For the purposes of Form 8938, a financial institution is foreign if the financial institution is organized under the laws a of a jurisdiction other than United States and its territories. Thus, a domestic financial institution is the one that is organized under the laws of any of the 50 states of the United States, the district of Columbia, and US territories of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico or US Virgin Islands – everything else is foreign.
It is important to note that a foreign financial institution is defined by the laws of a jurisdiction under which it was organized, not by where it operates. Thus, a domestic institution that operates overseas is not foreign.
Form 8938 Definition of Foreign Financial Institution: What is a “Financial Institution”?
Now that we were able to define the “foreign part of the Foreign Financial Institution, let’s turn our attention to the second part of this term – “financial institution”. This concept is defined broadly. In order for a Foreign Financial Institution to be considered a financial institution, it has to do one of the following:
1. Accept deposits in the ordinary course of a banking or similar business);
2. Hold financial assets for the account of others as a substantial part of its business; and
3. Engage (or holds itself out as being engaged) primarily in the business of investing, reinvesting, or trading in securities, partnership interests, commodities, or any interest (including a futures or forward contract or option) in such securities, partnership interests, or commodities.
This definition easily covers banks, credit unions, brokerages, various financial advisors, and everyone who is involved in any of the activities listed above. This even includes financial trusts.
Moreover, a foreign financial institution includes various investment vehicles such as foreign mutual funds, foreign hedge funds, and foreign private equity funds. It should be noted that these types of investment vehicles may also need to be reported on Form 8621 as PFICs.
Contact Sherayzen Law Office for Help With Form 8938 Filing
Filing a correct Form 8938 is an essential part of your US tax compliance. Moreover, failure to file Form 8938 may lead to various penalties and complicate your Offshore Voluntary Disclosure.
This why you need to help of the experienced tax team of Sherayzen Law Office. We have helped hundreds of US taxpayers to bring and maintain their US tax affairs into full compliance and we can help you.
Contact Us Today to Schedule Your Confidential Consultation!

### Higher OVDP Penalty Risk for US Taxpayers With Foreign Accounts
December of 2015 was one of the most successful months for the DOJ’s Swiss Bank Program as nearly a record number of banks signed non-prosecution agreements. This success for the DOJ means that more and more of non-compliant US taxpayers with foreign accounts are likely to deal with Higher OVDP Penalty with respect to their undisclosed foreign accounts.
DOJ’s Swiss Bank Program
The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program) was announced by the US Department of Justice on August 29, 2013. The Program was intended to achieve multiple goals, but there are four of them that are most important to the understanding of the Higher OVDP Penalty and the Program.
First, this was an “offer that one cannot refuse” for the Swiss banks– the Program was intended to “allow” (or force) Swiss banks to bring themselves into compliance with US tax laws. In exchange, the Swiss banks received a non-prosecution agreement that promised them protection from US legal enforcement actions.
Second, the Program was intended to obtain as much information as possible about non-compliant US taxpayers with foreign accounts.
The third important goal was to create an atmosphere of global enforcement that would make US voluntary disclosure the most rational choice for non-compliant US taxpayers with foreign accounts given the risk of IRS discovery of their undisclosed foreign accounts.
Fourth, the Program was intended to pave the way for easier acceptance of FATCA throughout the world by demonstrating what could potentially happen in any country that decides to resist the implementation of FATCA.
It must be stated that the Swiss Bank Program has been a spectacular success for the DOJ and the IRS. Both, the banks and non-compliant US taxpayers with foreign accounts flocked to the voluntary disclosure programs. Moreover, today, FATCA is the new global standard of international tax enforcement.
2014 OVDP
The current 2014 IRS Offshore Voluntary Disclosure Program is a modification of 2012 OVDP which, in turn, was the continuation of a series of prior IRS offshore voluntary disclosure programs (particularly 2011 OVDI). The 2014 OVDP is designed to help non-compliant US taxpayers with foreign accounts to bring their tax affairs into compliance with US tax laws.
2014 OVDP has a two-tier penalty system. The 50% penalty rate applies to US taxpayers with foreign accounts in the banks on the special IRS list. The 27.5% penalty rate applies to everyone else.
Influence of the Program on the OVDP
The Swiss Bank Program has a direct impact on the IRS Offshore Voluntary Disclosure Program because every Swiss Bank that signs a Non-Prosecution Agreement under the Program is automatically added to the 50% penalty list of foreign banks.
Thus, as more and more Swiss Banks reach an agreement with the DOJ under the Program, the list of 50% penalty banks keeps expanding and so does the list of US taxpayers with foreign accounts who may be subject to this higher penalty rate.
What Should Non-Compliant US Taxpayers With Foreign Accounts Do?
The growing risk of higher OVDP penalty means that non-compliant US taxpayers with foreign accounts should explore their voluntary disclosure options as soon as possible by contacting an experienced international tax lawyer.
It is a mistake to assume that 50% penalty list will grow only as a result of the Swiss Bank Program. Even today, the list already contains banks which are located outside of the United States (such as HSBC India and Israeli Bank Leumi). This means that any bank in almost any part of the world may tomorrow be on the 50% penalty list and US taxpayers with foreign accounts in this bank would be forced to pay a much higher penalty.
Contact Sherayzen Law Office for Professional Tax Help With The Voluntary Disclosure of Your Foreign Accounts
The growing risk of higher OVDP penalty means that you should contact the experienced international tax team of Sherayzen Law Office. International tax attorney and Founder of Sherayzen Law Office, Mr. Eugene Sherayzen, will personally analyze your case, estimate your IRS penalty exposure, determine your offshore voluntary disclosure options, and implement your customized voluntary disclosure plan to resolve your US tax problems.

### 50% Offshore Penalty of the 2014 OVDP
The 50% Offshore Penalty is a unique feature of the 2014 OVDP. What is so unusual about this penalty is that its impact widens with each passing month and year to include and affect more and more US taxpayers. In this article, I would like to explore the emergence of the 50% Offshore Penalty and its importance to US international tax compliance.
2014 OVDP Penalty Structure
On June 18, 2014, the IRS completely changed the entire legal landscape of US voluntary disclosure. The unwieldy and uncompromising penalty structure of the 2012 OVDP was replaced by the new Streamlined Procedures and a completely modified 2014 OVDP.
Under the new rules, the IRS eliminated the 5% and 12.5% penalties of the 2012 OVDP and replaced them with milder and more flexible Streamlined Domestic Offshore Penalty of 5% and Streamlined Foreign Offshore Penalty of 0%. On the other hand, the old default 25% penalty of the 2012 OVDP evolved into a new stringent system of dual penalty structure: 27.5% default Offshore Penalty and 50% Offshore Penalty.
FAQ 7.2 and 50% Offshore Penalty
The 27.5% default Offshore Penalty applies unless the participating US taxpayer has foreign accounts in a bank on a special IRS list as described in FAQ 7.2.
FAQ 7.2 states that, starting August 4, 2014, any taxpayer who enters OVDP will be subject to a 50% Offshore Penalty if, at the time the Preclearance letter is submitted to the IRS-CI (Criminal Investigation), a “public disclosure” has already occurred.
FAQ 7.2. further states that a “public disclosure” has occurred if one of the following three events occurs. First, if the foreign financial institution (FFI) where the undisclosed foreign account is held or another “facilitator who assisted in establishing or maintaining the taxpayer’s offshore arrangement” (“facilitator”) is under IRS or US DOJ investigation. The investigation should be the one that is related to accounts that are beneficially owned by a US person.
Second, the FFI or facilitator is cooperating with the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person. In other words, where a foreign bank signs a Non-Prosecution Agreement with US DOJ; this means every Swiss bank that reached resolution with the DOJ under the Swiss Bank Program; OR
Third, the FFI or facilitator has been identified in a John Doe Summons seeking information about U.S. taxpayers who may hold financial accounts at this FFI or have accounts established or maintained by the facilitator.
FAQ 7.2 provides an example of when a public disclosure occurs: “a public filing in a judicial proceeding by any party or judicial officer; or public disclosure by the Department of Justice regarding a Deferred Prosecution Agreement or Non-Prosecution Agreement with a financial institution or other facilitator.
It is easy to see now why the 50% Offshore Penalty has been increasing in influence – every Non-Prosecution Agreement, every DOJ investigation, every John Doe summons automatically expands the application of the 50% Offshore Penalty to another FFI or even a set of FFIs.
Entire Penalty Base is Subject to 50% Offshore Penalty
If a public disclosure occurs with respect to the FFI or facilitor where the US taxpayer has one or more foreign accounts, the 50% Offshore Penalty applies not only to these accounts but to all of the taxpayer’s assets included in the penalty base. For example, if a US taxpayer has one account at UBS, ten accounts in an Australian bank (for which no public disclosure occurred) and a foreign rental property that generated unreported foreign income, the 50% Offshore Penalty will apply to all of these assets.
List of FFIs and Facilitators
The IRS published the list of all FFIs and Facilitators for which public disclosure has occurred with the dates when the 50% penalty is activated with respect to these FFIs and Facilitators. Here, I am only providing the list up to date through January 7, 2016:
UBS AG
Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
Wegelin & Co.
Liechtensteinische Landesbank AG
Zurcher Kantonalbank
swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
BSI SA (effective 3/30/15)
Vadian Bank AG (effective 5/8/15)
Finter Bank Zurich AG (effective 5/15/15)
Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
MediBank AG (effective 5/28/15)
LBBW (Schweiz) AG (effective 5/28/15)
Scobag Privatbank AG (effective 5/28/15)
Rothschild Bank AG (effective 6/3/15)
Banca Credinvest SA (effective 6/3/15)
Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
Berner Kantonalbank AG (effective 6/9/15)
Bank Linth LLB AG (effective 6/19/15)
Bank Sparhafen Zurich AG (effective 6/19/15)
Ersparniskasse Schaffhausen AG (effective 6/26/15)
Privatbank Von Graffenried AG (effective 7/2/15)
Banque Pasche SA (effective 7/9/15)
ARVEST Privatbank AG (effective 7/9/15)
Mercantil Bank (Schweiz) AG (effective 7/16/15)
Banque Cantonale Neuchateloise (effective 7/16/15)
Nidwaldner Kantonalbank (effective 7/16/15)
SB Saanen Bank AG (effective 7/23/15)
Privatbank Bellerive AG (effective 7/23/15)
PKB Privatbank AG (effective 7/30/15)
Falcon Private Bank AG (effective 7/30/15)
Credito Privato Commerciale in liquidazione SA (effective 7/30/15)
Bank EKI Genossenschaft (effective 8/3/15)
Privatbank Reichmuth & Co. (effective 8/6/15)
Banque Cantonale du Jura SA (effective 8/6/15)
Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15)
bank zweiplus ag (effective 8/20/15)
Banca dello Stato del Cantone Ticino (effective 8/20/15)
Hypothekarbank Lenzburg AG (effective 8/27/15)
Schroder & Co. Bank AG (effective 9/3/15)
Valiant Bank AG (effective 9/10/15)
Bank La Roche & Co AG (effective 9/15/15)
Belize Bank International Limited, Belize Bank Limited, Belize Corporate Services Limited, their predecessors, subsidiaries, and affiliates (effective 9/16/15)
St. Galler Kantonalbank AG (effective 9/17/15)
E. Gutzwiller & Cie, Banquiers (effective 9/17/15)
Migros Bank AG (effective 9/25/15)
Graubundner Katonalbank (effective 9/25/15)
BHF-Bank (Schweiz) AG (effective 10/1/15)
Finacor SA (effective 10/6/15)
Schaffhauser Kantonalbank (effective 10/8/15)
BBVA Suiza S.A. (effective 10/16/15)
Piguet Galland & Cie SA (effective 10/23/15)
Luzerner Kantonalbank AG (effective 10/29/15)
Habib Bank AG Zurich (effective 10/29/15)
Banque Heritage SA (effective 10/29/15)
Hyposwiss Private Bank Genève S.A. (effective 10/29/15)
Banque Bonhôte & Cie SA (effective 11/3/15)
Banque Internationale a Luxembourg (Suisse) SA (effective 11/12/15)
Zuger Kantonalbank (effective 11/12/15)
Standard Chartered Bank (Switzerland) SA, en liquidation (effective 11/13/15)
Maerki Baumann & Co. AG (effective 11/17/15)
BNP Paribas (Suisse) SA (effective 11/19/15)
KBL (Switzerland) Ltd. (effective 11/19/15)
Bank CIC (Switzerland) Ltd. (effective 11/19/15)
Privatbank IHAG Zürich AG (effective 11/24/15)
Deutsche Bank (Suisse) SA (effective 11/24/15)
EFG Bank AG (effective 12/3/15)
EFG Bank European Financial Group SA, Geneva (effective 12/3/15)
Aargauische Kantonalbank (effective 12/8/15)
Cornèr Banca SA (effective 12/10/15)
Bank Coop AG (effective 12/10/15)
Crédit Agricole (Suisse) SA (effective 12/15/15)
Dreyfus Sons & Co Ltd, Banquiers (effective 12/15/15)
Baumann & Cie, Banquiers (effective 12/15/15)
Bordier & Cie Switzerland (effective 12/17/15)
PBZ Verwaltungs AG (effective 12/17/15)
PostFinance AG (effective 12/17/15)
Edmond de Rothschild (Suisse) SA (effective 12/18/15)
Edmond de Rothschild (Lugano) SA (effective 12/18/15)
Bank J. Safra Sarasin AG (effective 12/23/15)
Coutts & Co Ltd (effective 12/23/15)
Gonet & Cie (effective 12/23/15)
Banque Cantonal du Valais (effective 12/23/15)
Banque Cantonale Vaudoise (effective 12/23/15)
Bank Lombard Odier & Co Ltd (effective 12/31/15)
DZ Privatbank (Schweiz) AG (effective 12/31/15)
Union Bancaire Privée , USP SA (effective 1/6/16)
Contact Sherayzen Law Office for Help with Your Undisclosed Foreign Accounts
If you have undisclosed foreign accounts, including those FFIs and Facilitators for which public disclosure has occurred, contact the experienced international tax team of Sherayzen Law Office, Ltd. Our international tax law firm has helped hundreds of US taxpayers around the globe to bring their tax affairs into full compliance with US tax laws, while reducing their penalty exposure.
Contact Us Today to Schedule Your Initial Consultation!

### Swiss Bank Program Penalties Bring More than $1 Billion
On December 23, 2015, as US Department of Justice (DOJ) announced that it reached resolutions with Bank J. Safra Sarasin AG, Coutts & Co Ltd, Gonet & Cie and Banque Cantonal du Valais, it also announced that Swiss Bank Program Penalties reached a landmark - more than $1 Billion. At that time, in addition to Swiss Bank Program Penalties, DOJ also reached agreements with 75 Swiss Banks.
As a reminder to readers, the DOJ Swiss Bank Program was announced by DOJ on August 29, 2013 (per agreement with Swiss government). The Program provides a framework for Swiss Banks to resolve their US tax issues (or “cross-border criminal tax violations”) in exchange for information about the Banks’ US accountholders and, for Category 2 banks, Swiss Bank Program Penalties.
Moreover, according to the terms of the non-prosecution agreements signed by Swiss banks under the Program, Swiss Banks agree to cooperate in any related criminal and civil proceedings, show that the Banks implemented controls to avoid future misconduct with respect to US-held accounts.
While the percentages of Swiss Bank Program Penalties are firmly established, under the terms of the Program, the banks are allowed to mitigate their Swiss Bank Program Penalties if they can show that their US accountholders are either in compliance with their US tax obligations or they entered the IRS Offshore Voluntary Disclosure Program (and, later, Streamlined Procedures).
It should be noted that more Swiss banks reached resolutions with DOJ under the Program since December 23, 2015. This means that the DOJ has already collected even more Swiss Bank Program Penalties.
These resolutions under the Program concern not only Swiss Banks and Swiss Bank Program Penalties, but they also have direct relevance to US owners of undeclared Swiss bank accounts. Two major consequences arise for US taxpayers with undisclosed accounts from their Swiss Bank participation in the Program. First, there is a direct impact of information exchange between the participating Bank and the IRS which may lead to the discovery of the undisclosed accounts by US tax authorities. The subsequent IRS investigation is likely to render any future participation of the taxpayer in the OVDP impossible.
Second, if the participating bank reaches resolution and pays its Swiss Bank Program Penalties to the DOJ before the taxpayer enters OVDP (or, more precisely, files the Preclearance Request), the OVDP penalty on all (not just the taxpayer’s accounts in the participating Bank’s) of the taxpayer’s accounts will jump to 50% (from the normal 27.5%).
Contact Sherayzen Law Office for Help With Your Undisclosed Foreign Accounts
If you have undisclosed foreign accounts or any other foreign assets, you should contact Sherayzen Law Office as soon as possible. Our experienced legal team has helped hundreds of US taxpayers around the world and we can help you!
Contact Us Today to Schedule Your Initial Consultation!

### Tax Deadlines Extended for Certain Mississippi Storm Victims
As a result of the FEMA’s state of disaster declaration, certain Mississippi Storm victims will now benefit from the extension of the 2015 tax return filing and tax payment deadlines. In particular, the residents of Benton, Coahoma, Marshall, Quitman and Tippah counties (as well as other counties that may be added at a later time) will have until May 16, 2016 to file their 2015 tax returns and pay any tax due. All workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization also qualify for relief.
The extended deadline also affects the estimated tax payments; the IRS will waive all penalties associated with these deadlines for Mississippi Storm victims. Individual Mississippi Storm victims will now be able to benefit from this extended deadline with respect to January 15 and April 18 deadlines for making quarterly estimated tax payments.
Business Mississippi Storm victims will also benefit from this deadline extension, including February 1 and May 2 deadlines for quarterly payroll and excise tax returns. Furthermore, the deadline extension applies also to March 1 deadlines for farmers and fisherman who are Mississippi storm victims and choose to forego making estimated tax payments.
Additionally, the IRS will waive late-deposit penalties for federal payroll and excise tax deposits normally due on or after December 23 and before January 7 if the deposits are made by January 7, 2016. Details on available relief can be found on the disaster relief page on IRS.gov.
The IRS will automatically provide filing and penalty relief to any taxpayer with an IRS address of record located in the Mississippi disaster area. Thus, Mississippi storm victims need not contact the IRS to get this relief. However, if an affected taxpayer receives a late filing or late payment penalty notice from the IRS that has an original or extended filing, payment or deposit due date falling within the postponement period, the taxpayer should call the number on the notice to have the penalty abated.
Furthermore, the IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the Mississippi disaster area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227.
Finally, individuals and businesses who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred, or the return for the prior year. See Publication 547 for details.

### US Income Tax Obligations of Green Card Holders: General Overview
There is a common misconception among Green Card Holders (a common name for US permanent residents) that their US income tax obligations are limited in nature in comparison to US citizens. In this article, I seek to dispel this erroneous myth and provide some general outlines of the US income tax obligations of Green Card Holders.
US Income Tax Obligations of Green Card Holders: Worldwide Income Reporting
I receive a lot of phone calls from Green Card holders who believe that their US income tax reporting obligations are limited only to US-source income (sourcing of income, by the way, is also a very complex subject and I often see egregious mistakes committed even by experienced accountants).
This is not correct. In fact, US permanent residents and US citizens are both considered to be “tax residents of the United States.” US tax residents are required to report their worldwide income on US tax returns and pay US income taxes on foreign-source income (and, obviously, US-source income).
Thus, if you have a Green Card and you have foreign assets (such as foreign bank and financial accounts, foreign businesses, foreign trusts, et cetera), you must report the income from such foreign assets on your US tax returns.
Be careful! You must remember that all foreign income must be reported in US dollars and according to US tax laws. Leaving aside the issue of currency conversion (which is a topic for another article), the reporting of foreign income under US tax laws may be extremely challenging because foreign tax laws may treat this income in a different manner. Let me emphasize this point – the treatment of income under foreign local tax rules may not actually be the same as the treatment of the same income under US tax rules.
For example, Assurance Vie accounts in France may be completely tax-exempt if certain conditions are met. However, the annual income from these accounts must be reported on US tax returns.
Moreover, to make matters worse, these accounts may contain PFIC (Passive Foreign Investment Company) investments which are treated in a very complex and generally unfavorable manner under US tax laws. The calculation of US tax liability in this case may be extremely complex (especially since the French banks are not required to keep the kind of information that is necessary to properly calculation PFIC tax and interest).
US Income Tax Obligations of Green Card Holders: Reporting of Foreign Bank and Financial Accounts
As US tax residents, the Green Card holders are also required to disclose their ownership of certain foreign bank and financial accounts to the IRS. Many US permanent residents are shocked to learn about these requirements and the draconian penalties associated with failure to file the required information reports.
The top two bank and financial account reporting requirements are FinCEN Form 114 (known as “FBAR” – the Report of Foreign Bank and Financial Accounts) and Form 8938 (which was born out of FATCA). Other forms, such as Form 8621, may apply.
It is beyond the scope of this article to discuss these requirements in detail. However, it is impossible to overstate their importance, especially the FBAR, due to potentially astronomical non-compliance penalties (including criminal penalties). You can find more information about these requirements at sherayzenlaw.com.
US Income Tax Obligations of Green Card Holders: Reporting of Foreign Business Ownership
Many US permanent residents are surprised to find out that they may be required to provide detailed reports about their foreign businesses – corporations, partnerships and disregarded entities. Indeed, Green Card holders may be subject to burdensome and expensive US reporting requirements on Forms 5471, 8865, 926, 8938, et cetera. These forms may require Green Card holders to provide foreign financial statements translated under US accounting standards, including US GAAP (Generally Accepted Accounting Practices).
Again, you can find more information about these requirement at sherayzenlaw.com.
US Income Tax Obligations of Green Card Holders: Reporting of Foreign Trusts
Another complex trap for Green Card Holders is reporting of an ownership or a beneficiary interest in a foreign trust (generally, on Form 3520). This complicated topic is beyond the scope of this article, but you can find more information about these requirements at sherayzenlaw.com.
US Income Tax Obligations of Green Card Holders: Other Reporting Requirements
There are numerous other US income tax obligations of Green Card Holders that may apply. Moreover, US has multiple income tax treaties with various countries which may modify your particular tax situation. In order to fully determine your US tax obligations as a Green Card holder, it is best to consult with an experienced international tax attorney.
Contact Sherayzen Law Office for Help With Your US Income Tax Obligations
Sherayzen Law Office is a specialized international tax law firm which is highly experienced in helping US Permanent Residents with their US income tax obligations and reporting requirements. One of the unique features of our firm is that our tax team provides both legal and accounting services to our clients throughout the world.
Contact Us Now To Secure Professional Help and Avoid (or Rectify) Costly Mistakes!

### Tax Year 2016 Business Income Tax Deadlines
With the commencement of the new year, it is very important for business owners and corporate executives to focus on the main 2016 business income tax deadlines. In this short review of 2016 business income tax deadlines, I will focus only on the most common income tax deadlines of a corporation that operates on a calendar-year basis (i.e. the corporate fiscal year is the same as the calendar year).
It is important to keep in mind that other 2016 business income tax deadlines (such as employment tax deadlines) may apply to your particular situation. Furthermore, one must remember that the exact deadlines will change if the corporation does not operate on the calendar-year basis, but on its own fiscal year.
Keeping in mind these two important exceptions, here are the most common 2016 business income tax deadlines:
March 15, 2016: Forms 1120 and 1120S for tax year 2015 are due. Schedules K-1 (for S-corporations) are due at that time as well. If, however, the corporation does not wish to file its tax return at that time, it can file Form 7004 by March 15, 2016 to obtain an automatic six-month extension to file 2015 Forms 1120 or 1120S. (However, the estimated 2015 tax liability must still be paid by March 15, 2016). Moreover, electing large partnerships must also furnish Schedule K-1 (Form 1065-B) at that time.
April 18, 2016: There are three major 2016 business income tax deadlines associated with April 18, 2016. (Normally, the deadline would be on April 15, but April 15 2016 falls on a Saturday and April 17 is a federal holiday; therefore, in 2016, the due date shifts to April 18). First, partnerships must file their 2015 Forms 1065 and supply Schedules K-1 to each partner. If a partnership wishes to file its Form 1065 later, it must file Form 7004 by April 18, 2016, in order to obtain an automatic five-month filing extension.
Second, Electing Large Partnerships must file their 2015 Forms 1065-B. Similarly, Form 7004 must be filed by April 18, 2016, if the Electing Large Partnership wishes to obtain an automatic five-month filing extension.
Third, corporations must make their first corporate estimated tax payments by April 18, 2016.
June 15, 2016: Second corporate estimated tax payments are due.
September 15, 2016: There are three major 2016 business income tax deadlines associated with September 15, 2016. First, all partnerships that filed Form 7004 must file their 2015 Forms 1065 by September 15, 2016.
Second, all corporations that obtained six-month extension by filing Form 7004 must file their 2015 Forms 1120 and 1120S by September 15, 2016.
Third, corporations must make their third corporate estimated tax payments by September 15, 2016.
October 17, 2016: Electing Large Corporations must file their extended 2015 Forms 1065-B.
December 15, 2016: Fourth corporate estimated tax payments are due.

### New FBAR Deadline
There has been a lot of confusion surrounding the new FBAR deadline. Since the FBAR is one of the most important US international tax deadlines, it is important to clarify the change in the FBAR filing deadline.
What is “FBAR”?
FinCEN Form 114, commonly known as FBAR, is the Report of Foreign Bank and Financial Accounts. This form is used by US taxpayers to report their financial interest in or signatory authority over foreign financial accounts. Failure to timely file the FBAR may result in draconian IRS penalties.
Traditional FBAR Deadline
Until the recent change in the law, an FBAR for each relevant calendar year was required to be filed by June 30 of the following year. For example, the 2014 FBAR was due on June 30, 2015. No filings extensions were allowed.
New FBAR Deadline Under Surface Transportation and Veterans Health Care Choice Improvement Act of 2015
The bulk of the “Surface Transportation and Veterans Health Care Choice Improvement Act of 2015" has nothing to do with tax law. Yet, some of the most important changes in the IRS filing deadlines were tucked into this innocuously sounding law.
One of the most important changes concerned the new FBAR deadline. Starting the tax year 2016, FBARs will be due on April 15, not June 30. Moreover, a six-month extension will be available until October 15.
2015 and 2016 FBAR Deadlines
Let’s put it all together. The most important issue here is not to confuse 2016 filing deadline for the year 2015 and the filing deadline for the 2016 FBAR. The 2015 FBAR will still be filed under old rules and it will be due on June 30, 2016.
However, the 2016 FBAR will follow the new FBAR Deadline of April 15, 2017 with the possible extension to October 15, 2017.
Contact Sherayzen Law Office for Legal Help with 2015 and 2016 FBARs
If you have any questions regarding the new FBAR deadline, 2015 FBAR or past unfiled FBARs, contact Sherayzen Law Office for professional legal and accounting help. Mr. Eugene Sherayzen, a Minneapolis FBAR lawyer, will review your case, identify your FBAR and other US tax compliance issues, determine the plan for further action and implement the proposed solution.

### Individual IRS Tax Deadlines in the Calendar Year 2016
As the New Year festivities are drawing to an end, the attention of hundreds of millions of US taxpayers focuses more and more on its annual US tax compliance in the calendar year 2016. In this brief article, I would like to summarize some of the most important deadlines of the calendar year 2016. Obviously, other calendar year 2016 deadlines may also apply to you depending on your situation; please, consult your tax attorney for a detailed review of your US tax requirements.
January 15, 2016: Form 1040-ES for the final installment of estimated tax payments for the tax year 2015.
February 1, 2016: If you did not make your final estimated tax payment by January 15, 2016, you can still avoid the penalty by filing your 2015 US tax return by February 1, 2016.
April 18, 2016: Three important deadlines fall on this date.
First, due to the fact that April 15 falls on Saturday and the following Monday (April 17) is a federal holiday, the US taxpayers will receive a few extra days to file their 2015 individual tax returns by April 18, 2016.
Second, April 18 is also the deadline for the first installment of 2016 estimated tax payments that should be filed with Form 1040-ES.
Third, April 18 is the deadline for filing the automatic 6-month extension to file 2015 income tax return. The extension is done by filing Form 4868 with the IRS. Remember, the estimated tax liability must still be paid by April 18 (i.e. the extension applies to the return filing deadline, not to the actual income tax payment).
June 15, 2016: this is a dual deadline for US individual taxpayers who reside outside of the United States. First, June 15 is the 2015 income tax return filing deadline for such individuals. Second, if these US individual taxpayers do not yet desire to file their 2015 individual income tax returns, then they can file an automatic four-month extension by June 15, 2016. Similar to April 18 extensions, however, the estimated 2015 income tax liability must still be paid by June 15, 2016.
Furthermore, June 15, 2016, is the deadline for the second installment for 2016 estimated tax payments.
June 30, 2016: FinCEN Form 114, commonly known as FBAR (Report of Foreign Bank and Financial Accounts), is due for the calendar year 2016. This is one of the most important international tax deadlines and no extensions are allowed.
September 15, 2016: this is the deadline for the third installment for 2016 estimated tax payments.
October 17, 2016: if the filing extensions to file 2015 individual income tax returns were properly filed, these returns will be due on October 17, 2016 (normally, the deadline would be on October 15, but it falls on a Saturday in the 2016 and the deadline shifts to the following Monday).

### Interest Rates for the Fourth Quarter of 2015 and First Quarter of 2016
The IRS underpayment and overpayment interest rates are highly important in US tax law in general, and offshore voluntary disclosures in particular. Not only do these rates determine the interest on additional tax liability on the amended tax returns, but the same rates are sued to determine the PFIC interest rate on “excess distributions”. During the fourth quarter of 2015 and the first quarter of 2016, the IRS underpayment and overpayment interest rates will be:
three (3) percent for overpayments (two (2) percent in the case of a corporation);
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code (IRC), the interest rates are determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

### IRS 2016 Standard Mileage Rates for Business, Medical and Moving
On December 17, 2015, the IRS issued its 2016 standard mileage rates to calculate deductible automobile operation costs for business, charitable, medical or moving purposes.
The 2016 standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
54 cents per mile for business miles driven, down from 57.5 cents for 2015
19 cents per mile driven for medical or moving purposes, down from 23 cents for 2015
14 cents per mile driven in service of charitable organizations
These 2016 standard mileage rates are effective January 1, 2016 and they are optional; taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
There are some circumstances where a taxpayer cannot use the business standard mileage rate. These exceptions include where a vehicle is depreciated using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. Furthermore, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
The 2016 Standard Mileage Rates apply to the vehicles that the taxpayers own or lease (though, there may be additional complications if the vehicle is leased). In addition to standard mileage rates, taxpayers may also deduct, as separate items: parking fees and tolls attributable to the use of a car for business purposes; interest related to the business purchase of a car; state and local personal property taxes (to the extent allowed by IRC Sections 163 and 164).
Parking fees and tools are also available for deduction, as separate items, for the use of a car for charitable, medical, or moving expense purposes. The interest related to the purchase of a car and state/local property taxes are not deductible as charitable, medical or moving expenses; however, they may be deducted as separate items to the extent allowed by IRC Sections 163 and 164.
IRS Notice 2016-01 contains the 2016 standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

### When Foreign Banks Ask For U.S. Taxpayer ID, How Should You Respond?
FATCA letters are everywhere, and foreign banks want you to certify that you're complaint with the IRS. Here's what you should know. read »-- Delivered by Feed43 service
Excerpt: FATCA letters are everywhere, and foreign banks want you to certify that you're complaint with the IRS. Here's what you should know. read »-- Delivered by Feed43 service

### US Tax Return Statute of Limitations and IRC Section 6501(c)(8)
Most tax practitioners are familiar with the general rules of assessment statute of limitation for US tax returns. However, very few of them are aware of the danger of potentially indefinite extension of the statute of limitations contained in IRC Section 6501(c)(8). In this article, I would like to do offer a succinct observation of the impact of IRC Section 6501(c)(8) on the US tax return Statute of Limitations as well as your offshore voluntary disclosure strategy.
Background Information
While IRC Section 6501(c)(8) has existed for a while, its present language came into existence as a result of the infamous HIRE act (the same that gave birth to FATCA) in 2010. The major amendments came from PL 111-147 and PL 111-226.
When IRC Section 6501(c)(8) Applies
IRC Section 6501(c)(8) applies when there has been a failure to by the taxpayer to supply one or more accurate foreign information return(s) with respect to reporting of certain foreign assets and foreign-related transactions under IRC Sections 1295(b), 1298(f), 6038, 6038A, 6038B, 6038D, 6046, 6046A and 6048. In essence, it means IRC Section 6501(c)(8) applies whenever the taxpayer fails to file Forms 8621, 5471, 5472, 926, 3520, 3520-A, 8865, 8858 and 8938 (and potentially other forms). In essence, this Section comes into play with respect to virtually all major international tax reporting requirements, with the exception of FBAR (which is governed by its own Title 31 Statute of Limitations provisions).
It is important to emphasize that it is not just the failure to file these international tax returns that triggers IRC Section 6501(c)(8). Rather, most international tax attorneys agree that, if the filed international tax returns are inaccurate or incomplete, IRC Section 6501(c)(8) still applies.
IRC Section 6501(c)(8) only applies to the returns filed after the date of the enactment of the provisions that amended the section – March 18, 2010. The Section also applies to returns filed on or before March 18, 2010 if the statute of limitations under Section 6501 (without regard to the amendments) has not expired as of March 18, 2010.
The Impact of IRC Section 6501(c)(8) On the Statute of Limitations
As amended by PL 111-147 and PL 111-226, IRC Section 6501(c)(8) may have a truly monstrous effect on the statute of limitations for the entire affected tax return – a failure to file any of the aforementioned international tax forms (including a failure to provide accurate and complete information) will keep the statute of limitations open indefinitely with respect to “any tax return, even, or period to which such information relates”.
Thus, a failure to file a foreign information return may keep the statute of limitations open forever for the entire tax return, not just that particular foreign information return. This means that the IRS can potentially audit a taxpayer’s return and assess additional taxes outside of the usual statute of limitations period; the IRS changes can affect any item on the US tax return, not just the items on the foreign information return.
Reasonable Cause Exception to the “Entire Case” Rule
IRC Section 6501(c)(8)(B) provides a limited exception to the “entire case” rule. Where a taxpayer establishes that the failure to file an accurate international information return was due to a reasonable cause and not willful neglect, only the international tax forms will be subject to indefinite statute of limitations and not the entire return.
Impact of IRC Section 6501(c)(8) on Your Voluntary Disclosure Strategy
IRC Section 6501(c)(8) may have a significant impact on the voluntary disclosure strategy where multiple international tax forms need to be filed. In these cases, the taxpayers are more likely to go into Streamlined disclosures or 2014 OVDP (now closed) rather than attempt doing a reasonable cause disclosure.
This is the case because this indefinite statute of limitations may undermine a reasonable cause strategy if the disclosure period does not coincide with the years in which the international tax returns were due. For example, let’s suppose that US citizen X owned PFICs during the years 2008-2014, but he never filed Forms 8621 even though they were required. If X decides to do a reasonable cause disclosure and files amended 2012-2014 tax returns only, then, the years 2008-2011 will still be open to an IRS audit (though, if X successfully establishes reasonable cause for the earlier non-filing, only Forms 8621 will be subject to an IRS audit). In this case, X may have to make a choice between an unpleasant filing of amended 2008-2011 tax return or doing a Streamlined disclosure.
Obviously, IRC Section 6501(c)(8) is just one factor in what could be a very complex maze of pros and cons of a distinct voluntary disclosure strategy. Other factors need to be taken into effect in determining, including whether the financials were disclosed on the FBAR and Form 8938 and the amounts of underreported income (which may actually keep the statute of limitations open for the years 2009-2011 as well).
These types of decisions need to be made carefully by a tax professional on a case-by-case basis with detailed analysis of the facts and potential legal strategies; I strongly recommend retaining an experienced tax attorney for the creation and implementation of your voluntary disclosure strategy.
Contact Sherayzen Law Office for Help With Your Delinquent International Tax Forms
If you have not filed international tax forms and you were required to do so, contact the professional international tax team of Sherayzen Law Office. Our team is lead by an experienced international tax attorney, Mr. Eugene Sherayzen, and has helped hundreds of US taxpayers around the world to bring their US tax affairs into fully US tax compliance.
Contact Us Today to Schedule Your Confidential Consultation!

### US Tax Consequences of the New Indian Gold Monetisation Scheme
A recent article from Reuters discusses the appearance of the new Indian Gold Monetisation Scheme. The idea is to allow Indians to deposit gold into the banks in return for interest payments; in return, the Indian government is hoping to utilize the gold hoarded by its citizens to reduce gold imports.
While the idea is that the Indian Gold Monetisation Plan will be open to resident Indians only, it is likely that at least some US tax residents will be able to participate in the scheme either as US citizens and US permanent residents (who are US tax residents irrespective of where they live) or as Indian non-residents who never declared their non-residency status in India.
This article intends to explore some of the potential US tax problems that may arise as are result of participation in the Indian Gold Monetisation Scheme. The conclusions drawn in this article are preliminary and they may or may not reflect the actual IRS position in the future; the conclusions are and also should be treated simply as general discussion of the subject, not as a legal advice.
2015 Indian Gold Monetisation Scheme
In October 25, 2015, Indian Prime Minister Narendra Modi announced that a new Indian Gold Monetisation Scheme will be in place by the time of an ancient Hindu festival – Diwali (November 11, 2015). Under the scheme, Indian residents (as well as mutual funds and ETFs) will be able to use gold to open an essentially a fixed-deposit bank account (based on a gold certificate) with an Indian bank; in return, they will receive a gold certificate valued at the “prevailing gold price” at the time the account is opened and they will further receive interest on these gold deposits.
The gold will be collected by the Collection and Purity Testing Centers (CPTCs) certified by the Bureau of Indian Standards. The banks will issue the gold certificates against these gold deposits.
The new bank accounts will start earning interest after the deposited gold is refined into tradable gold bars or 30 days after the receipt of gold at the CPTCs or the bank’s designated branch – whichever is earlier.
There will be three types of fixed-deposit accounts under the Indian Gold Monetisation Scheme: short-term (1-3 years), medium term (5-7 years) and long-term (12-15 years). The banks will determine any premature withdrawal penalties.
Upon the maturity of the fixed-deposit account, the depositor will receive either the gold or the equivalent amount in rupees. The choice of receiving the gold or the rupees needs to be made at the time the account is opened.
Indian Tax Treatment of Interest and Capital Gains Earned As a Result of the Indian Gold Monetisation Scheme
In this Indian Gold Monetisation Scheme, there are three potential points of tax recognition by the participating depositors: capital gain on the original gold deposit, interest earned on the gold deposit at maturity and capital gain at the point of gold redemption (or principal redemption) at the then-current market prices.
The Indian government does not tax any of these three tax recognition events – i.e. neither capital gains nor the interest earned.
Potential US Tax Treatment of Interest Earned As Part of Indian Gold Monetisation Scheme
Despite the fact that Indian government does not tax the interest return on the gold certificates and absent any tax treaty changes, I believe that the most likely outcome is that this interest will be taxed as ordinary income in the United States. There is some marginal potential for the interest to be treated as collectible gain, but I just do not see this as a likely scenario when the IRS has a chance to make a ruling on it.
Potential Problems in US Tax Treatment of the Initial Deposit of Gold to Obtain Gold Certificates under the Indian Gold Monetisation Scheme
Generally, in the United States, any gain on the sale of gold bars and gold jewelry is treated as a capital gain from the sale of a collectible subject to 28% tax gain. There is a potential additional 3.8% Net Investment Income Tax as a result of Obamacare.
The question really becomes whether the opening of the gold account under the Gold Monetisation Scheme, where the gold is being melted into bars and the depositor receives a gold certificate with a rupee account at fair market value, should be considered as a sale or exchange of gold or is this just a 1031 exchange of the like properties?
The answer cannot be given with any certainty at this point, because the IRS has made no rulings on this very subject. However, it is possible that such an even will be treated by the IRS as a taxable exchange, because the gold is transformed into a rupees-based deposit account based on its market value – i.e. the number of rupees given to the depositor is equivalent to the fair market value, not the cost-basis that the depositor has at the point the gold is given to CPTCs.
On the other hand, the IRS could agree with an argument that, under the Indian Gold Monetisation Scheme, the gold is nothing but a guarantee for the rupee deposit account. Since the depositor receives a Gold Certificate and can get the same gold back upon the maturity of the account, it does not seem fair to tax the gain on the gold at this point (this argument, may not work if the deposit chooses to receive the original deposit back in rupees). If the 1031 rules are used to analyze this situation, the majority of secondary sources (such as EFT law firm opinions) seem to indicate that there may not be a taxable exchange for US tax purposes in this case. I tend to agree with this position in most situations, but it is too early to make the final determination at this point.
There is actually merit to both arguments and, until the gold certificates are actually issued and all facts can be analyzed, it is difficult to state what the IRS position will be.
Potential US Tax Treatment of the Gold/Rupee Redemption Based on Gold Certificates Issued under the Indian Gold Monetisation Scheme
There are two issues here: (1) is the gold redemption considered to be a taxable event; (2) is the rupee redemption under the gold certificates considered to be a taxable and how should it be taxed.
1. Gold Redemption
Let’s analyze the physical gold redemption first. It appears that the deposit will be able to obtain the same amount of gold irrespective of the changes in value since the original gold was melted into bars at CPTCs. This means that, if the 1 gram of gold is originally melted at 2,500 rupees, and rises in price to 3,000 rupees within three years, the deposit will still get one gram of gold. There seems to be a gain here of 500 rupees, but there is no actual monetization of gain. This is a hypothetical gain on the conversion of the gold certificate into physical gold.
The taxation of gain in a situation where one form of gold is transformed into another form of gold is one of the most complex topics in the US taxation of collectibles. Often times, even the same certificates may be taxed in a different manner.
Due to the fact that this topic is heavily fact-dependent with little IRS official guidance, it is best to delay the answer of this question until the time when these certificates are issued and can be analyzed in the actual factual context. At that time, if you have any questions regarding taxation of your gold certificate, contact Sherayzen Law Office directly.
2. Rupee Redemption
Unlike the gold redemption (which, depending on the circumstances, may not be taxable at all), the issue of taxability of the rupee redemption of the gold is fairly straightforward – this is a taxable event where gold is exchanged for rupees. Most likely, this exchange will be taxed in the United States as a collectible capital gain rate of 28% percent.
However, there are a couple of complications with respect to calculating the collectible gain. First, it should be remembered that the collectible gain should be calculated in US dollars (contact Sherayzen Law Office directly for more information). Second, the cost-basis of the gold will depend on whether the conversion of gold into a Gold Certificate is considered to be a taxable gain. If it is, then, the cost basis would be the fair market value at the time the gold is submitted by the depositor to be melted into bars at CPTCs. If it is not, then the original cost-basis (i.e. what the gold was actually acquired for) will be used in the determination of the collectible gain.
Other Issues Regarding 2015 Indian Gold Monetisation Scheme
In addition to US collectible and interest tax issues discussed above, investing through Indian Gold Monetisation Scheme may bring forth other US tax requirements. In particular, I wish to emphasize here that accounts opened through Indian Gold Monetisation Scheme are most likely reportable accounts for FBAR and Form 8938 purposes.
Contact Sherayzen Law Office for Help With US Tax Compliance
If you are a US person who has foreign accounts, foreign assets and/or foreign income, you should contact Sherayzen Law Office for professional help with your US tax compliance. Our experienced legal team, headed by the firm’s founder, attorney Eugene Sherayzen, will thoroughly analyze your case, identify your current and past US international tax compliance issues, develop a compliance plan for you (whether for current-year compliance or as part of your voluntary disclosure), and implement this plan, including preparation of all legal documents and tax forms.
US international tax laws are complex and should be handled by professionals with deep knowledge of the subject matter. This why You should contact Sherayzen Law Office Now!

### IRS Starts Offshore Account Data Swaps Under FATCA
Forget bank secrecy, as the IRS and other nations begin swapping tax data under FATCA, the Foreign Account Tax Compliance Act. read »-- Delivered by Feed43 service
Excerpt: Forget bank secrecy, as the IRS and other nations begin swapping tax data under FATCA, the Foreign Account Tax Compliance Act. read »-- Delivered by Feed43 service

### Higher OVDP Penalties May Affect More US Taxpayers
As of August 25, 2015, and as a result of increasing number of DOJ Swiss Bank Program Non-Prosecution agreements, 2015, higher OVDP penalties (50 %) apply to US account holders of 43 banks. Between August 1 and August 20, 2015, six more banks were added to the 50% penalty list. In this article, I would like to discuss this trend of higher OVDP penalties and analyze how it affects US taxpayers with undisclosed foreign accounts.
2014 OVDP Background
The 2014 IRS Offshore Voluntary Disclosure Program (“OVDP”) is a sequel to at least six prior voluntary disclosure initiatives since 2003. In reality, 2014 OVDP most closely resembles 2012 OVDP, but there are some crucial differences between 2014 OVDP and 2012 OVDP both now closed.
2012 OVDP was a voluntary disclosure program created by the IRS to allow U.S. taxpayers with undisclosed foreign accounts to come forward and settle their US tax problems related to foreign accounts under specific terms. The biggest advantage to participating in the 2012 OVDP (and it remains the same for 2014 OVDP) was the reduction of civil penalties (especially in a willful situation) and avoidance of criminal liability.
Over the years, the offshore voluntary disclosure programs have gotten more and more demanding in terms of information that needed to be submitted by the participating taxpayers and penalties that needed to be paid. Since 2012 OVDP never considered the difference between willful and non-willful taxpayers, many international tax lawyers considered it unfair for non-willful taxpayers to participate in the OVDP.
Learning from these experiences, the IRS realized that it could get better and more widespread compliance if it is able to effectively process non-willful taxpayers while, at the same time, imposing harsher penalties on willful taxpayers. Hence, the IRS implemented dramatic changes to the 2012 OVDP; from these changes, the Streamlined Options and 2014 OVDP with higher OVDP penalties were born.
Higher OVDP Penalties under 2014 OVDP
Since most of the non-willful taxpayers were likely to follow the Streamlined options, the IRS felt that it could impose higher OVDP penalties on the more stubborn willful taxpayers, particularly taxpayers with undisclosed Swiss accounts who did not heed the IRS warnings and did not enter the 2014 OVDP timely.
From this desire, the dual-tier OVDP penalty system was born. The first tier imposes a regular 27.5% (of the” OVDP penalty base”) penalty if the foreign accounts of US taxpayers who entered the OVDP program were not held in the banks on the IRS list. Also, there was a limited opportunity to enter the OVDP at 27.5% penalty rate even the “listed” foreign bank accounts if the taxpayer filed the preclearance request prior to August 4, 2014.
The second tier imposes higher OVDP penalties of 50% if the taxpayer filed the preclearance request after August 4, 2014, and the foreign accounts were held at a bank which is on the IRS list of foreign banks/facilitators.
DOJ Swiss Bank Program and the Expansion of the IRS List of Foreign Banks/ Facilitators
Initially, the IRS List of Foreign Banks consisted of a dozen banks already under investigation as of June 18, 2014, which included such big names as UBS, Credit Swiss, Zurcher Kantonalbank, et cetera. This means that higher OVDP penalties were imposed on US taxpayers with undisclosed foreign accounts at these banks if these taxpayers did not file the preclearance request timely.
On August 29, 2013, the US Department of Justice announced an unprecedented initiative – The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (“Swiss Bank Program”) – which was intended to allow Swiss banks avoid DOJ prosecution in exchange for disclosure of their non-compliant US account holders and payment of monetary penalties. In essence, this was a voluntary disclosure program for Swiss banks similar to OVDP for US individuals (and, similarly to higher OVDP penalties, the Swiss Bank Program also had its own graduated scale of penalties).
More than one hundred Swiss banks decided to participate in the DOJ Swiss Bank Program and complied with December 31, 2013 filing deadline. Starting March of 2015, the Swiss Bank Program entered its final stage in which the DOJ and the Swiss banks entered into individualized Non-Prosecution Agreement.
As these banks enter into the Non-Prosecution Agreements, the IRS adds each bank to the IRS List of Foreign Banks. This directly results in higher OVDP penalties for US taxpayers who owned foreign accounts at the “listed” banks and did not file the OVDP preclearance requests prior to the relevant Non-Prosecution Agreement.
As of August 26, 2015, this list consists virtually exclusively of Swiss banks and includes 43 foreign banks:
UBS AG
Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
Wegelin & Co.
Liechtensteinische Landesbank AG
Zurcher Kantonalbank
swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
BSI SA (effective 3/30/15)
Vadian Bank AG (effective 5/8/15)
Finter Bank Zurich AG (effective 5/15/15)
Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
MediBank AG (effective 5/28/15)
LBBW (Schweiz) AG (effective 5/28/15)
Scobag Privatbank AG (effective 5/28/15)
Rothschild Bank AG (effective 6/3/15)
Banca Credinvest SA (effective 6/3/15)
Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
Berner Kantonalbank AG (effective 6/9/15)
Bank Linth LLB AG (effective 6/19/15)
Bank Sparhafen Zurich AG (effective 6/19/15)
Ersparniskasse Schaffhausen AG (effective 6/26/15)
Privatbank Von Graffenried AG (effective 7/2/15)
Banque Pasche SA (effective 7/9/15)
ARVEST Privatbank AG (effective 7/9/15)
Mercantil Bank (Schweiz) AG (effective 7/16/15)
Banque Cantonale Neuchateloise (effective 7/16/15)
Nidwaldner Kantonalbank (effective 7/16/15)
SB Saanen Bank AG (effective 7/23/15)
Privatbank Bellerive AG (effective 7/23/15)
PKB Privatbank AG (effective 7/30/15)
Falcon Private Bank AG (effective 7/30/15)
Credito Privato Commerciale in liquidazione SA (effective 7/30/15)
Bank EKI Genossenschaft (effective 8/3/15)
Privatbank Reichmuth & Co. (effective 8/6/15)
Banque Cantonale du Jura SA (effective 8/6/15)
Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15)
bank zweiplus ag (effective 8/20/15)
Banca dello Stato del Cantone Ticino (effective 8/20/15)
Possible Future Scenario: Higher OVDP Penalties for Non-Swiss Bank Accounts?
Given the success of the Swiss Bank Program, I expect that this experience maybe applied by the IRS in another country and even worldwide. If this happens, higher OVDP penalties may affect a larger percentage of US taxpayers with undisclosed foreign accounts outside of Switzerland. Israel, Singapore, the Caribbean islands (e.g. the Cayman Islands) and other tax shelter and low-tax jurisdictions are all good candidates for the expansion of the Swiss Bank Program.
Impact on US Taxpayers
Given the continuous expansion of the IRS List of Foreign Banks (as a result of Swiss Bank Program Resolutions), more and more US taxpayers are likely to be affected by the higher OVDP penalties. Moreover, in light of the potential expansion of the Swiss Bank Program to other countries, it is very likely that higher OVDP penalties will commence to impact more US taxpayers with non-Swiss foreign accounts. Finally, there is a possibility that the almost worldwide implementation of FATCA may lead to higher OVDP penalties in the future.
Thus, in light of these developments, US taxpayers with undisclosed foreign accounts should contact an experienced international tax attorney to review their offshore voluntary disclosure options. Failure to do so may lead not only to higher OVDP penalties down the road, but also to the total loss of the possibility of doing a voluntary disclosure (for example, if the IRS commences an investigation) and imposition of willful FBAR penalties.
Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure
This is why you should contact the experienced legal team of Sherayzen Law Office lead by the founder of the firm – Eugene Sherayzen, Esq. Mr. Sherayzen is a highly experienced international tax attorney who has helped hundreds of US taxpayers worldwide to bring their US tax affairs in full compliance with US tax laws. He can help you!

### Swiss Bank Program Update:  Bank Zweiplus and Banca Stato del Cantone Ticino
On August 20, 2015, the US Department of Justice announced another Swiss Bank Program update – Bank Zweiplus AG (Bank Zweiplus) and Banca dello Stato del Cantone Ticino (Banca Stato) have reached resolutions under the department’s Swiss Bank Program.
The Swiss Bank Program, which was announced on August 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Swiss Bank Program Update: Bank Zweiplus Background and Non-Prosecution Agreement
As part of its Swiss Bank Program Update, the DOJ provided various background information regarding Bank Zweiplus. The Bank was founded in July 2008 as a retail bank based in Zurich. Offices located in Geneva and Basel, Switzerland, were closed in 2008 and 2012, respectively. Since Aug. 1, 2008, Bank Zweiplus maintained and serviced 44 U.S.-related accounts with an aggregate value of approximately $12.1 million.
Bank Zweiplus was aware that U.S. taxpayers have a legal duty to report to the Internal Revenue Service (IRS) their ownership of bank accounts outside the United States and to pay taxes on income earned in such accounts. Nevertheless, in disregard of U.S. laws, the bank provided a variety of traditional Swiss banking services that assisted some U.S. taxpayers in concealing their undeclared accounts. For example, Bank Zweiplus maintained numbered accounts and accounts held in the name of structures which were effectively owned or controlled by U.S. persons, including structures in the British Virgin Islands and the Bahamas.
Bank Zweiplus cooperated with the department during its participation in the Swiss Bank Program and encouraged its U.S. clients to enter the IRS Offshore Voluntary Disclosure Program (nowclosed). Bank Zweiplus will pay a penalty of $1.089 million.
Swiss Bank Program Update: Banca Stato Background and Non-Prosecution Agreement
As part of its Swiss Bank Program Update, the DOJ provided various background information regarding Banca Stato. Banca Stato was established in 1915 and is headquartered in Bellinzona, Switzerland. Banca Stato was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on the basis of all of their income, including income earned in accounts that the U.S. taxpayers maintained at the bank. Despite this, the bank opened and serviced accounts for U.S. clients who the bank knew or had reason to know were not complying with their U.S. income tax obligations.
During the applicable period, Banca Stato maintained and serviced 187 U.S.-related accounts with an aggregate maximum balance of approximately $137 million. Banca Stato will pay a penalty of $3.393 million.
Impact of this Swiss Bank Program Update on US Taxpayers
Starting August 20, 2015, noncompliant U.S. accountholders at Bank Zweiplus and Banca Stato must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
Follow this link to the DOJ website for more information on this Swiss Bank Program Update.

### India Signs Pact To Give IRS Account Data, Could End Black/White Money Too
India has joined the U.S. in a broad FATCA tax disclosure agreement that will force many American citizens and green card holders to declare Indian accounts. In the long run, it will have even bigger implications. read »-- Delivered by Feed43 service
Excerpt: India has joined the U.S. in a broad FATCA tax disclosure agreement that will force many American citizens and green card holders to declare Indian accounts. In the long run, it will have even bigger implications. read »-- Delivered by Feed43 service

### FATCA Lawyer Update: India Signed FATCA Agreement
On July 9, 2015, India finally signed the Intergovernmental Agreement (IGA) to implement FATCA. The fact is that the Indian signed FATCA Agreement has significant implications for millions of Indian-Americans who reside in the United States as well as outside of the United States.
India Signed FATCA: Background Information on FATCA
The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to specifically target non-compliance by U.S. taxpayers using foreign accounts. Over the past few years, this law established a new global standard for promoting tax transparency and fighting tax evasion. More than 110 jurisdictions today operate under the worldwide reach of FATCA.
Generally, FATCA is a mechanism for US authorities to obtain information regarding foreign accounts held by US persons directly form the financial institutions. In essence, FATCA effectively turns all foreign financial entities that wish to comply with the law into IRS informants. In order to force other countries to accept FATCA, the US Congress armed FATCA with a global enforcement mechanism – the law requires U.S. financial institutions to withhold a portion of certain payments made to non-compliant foreign financial institutions (FFIs).
Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA under U.S. Treasury Regulations or to implement FATCA by entering into one of two alternative Model IGAs with the United States. India chose the latter route.
India Signed FATCA: Model 1 Agreement
On July 9, 2015, India signed FATCA Model 1 IGA. Unlike Model 2 IGA, Model 1 IGA will require Indian FFIs (banks, mutual funds, et cetera) to report information to India’s Central Board of Direct Taxes which will then turn over this information to the IRS. It is expected that various details and information regarding US-held Indian accounts will be provided to the IRS.
India Signed FATCA: US Will Provide Information to India Regarding Indian-held US accounts
India signed FATCA Agreement not only in order to provide information regarding US-held accounts in India, but also to obtain information regarding the assets held in the United States by Indian residents (so-called “black money”). – i.e. the FATCA Agreement signed by India is also a reciprocal Agreement. This means that the United States will also provide information to India regarding Indian-held accounts and assets in the United States.
India Signed FATCA: Implementation Schedule
India singed FATCA IGA with the agreement that the implementation of the IGA will begin on October 1, 2015. The automatic exchange of information between India and the United States is scheduled to begin on September 30, 2015. The reporting period due on October 1, 2015 will be July – December 2014.
India Signed FATCA: Consequences for Indian-Americans With Undisclosed Indian Accounts
For millions of Indian-Americans who have not yet disclosed their ownership of Indian accounts and other assets, the India FATCA IGA represents a potential disaster. They are facing the draconian civil and criminal FBAR penalties, income tax penalties (with interest), PFIC taxes, and other potentially devastating consequences.
The FATCA IGA started the clock for the Indian-Americans to immediately start exploring their voluntary disclosure options. If the IRS finds out about their non-compliance first, some or potentially all voluntary disclosure options may be closed for these taxpayers.
India Signed FATCA: What Should Indian-Americans With Undisclosed Indian Accounts Do?
If you are an Indian who is a US person with undisclosed foreign accounts, contact the experienced international tax team of Sherayzen Law office for professional help. Our legal team has helped hundreds of clients around the world, including Indians. We can hep you!
So, Contact Us to Schedule Your Confidential Initial Consultation Now!

### Privatbank Von Graffenried AG Signs Non-Prosecution Agreement
On July 2, 2015, the US Department of Justice announced that Privatbank Von Graffenried AG became the fifteenth bank to sign a Non-Prosecution Agreement under the DOJ’s Swiss Bank Program. It also became the 27th bank on the 50% penalty list for US taxpayers who wish to enter the OVDP.
Background Information
Von Graffenried is a private bank founded in 1992 and based in Bern, Switzerland. Starting in at least July 1998, Von Graffenried, through certain practices, assisted U.S. taxpayer-clients in evading their U.S. tax obligations, filing false federal tax returns with the Internal Revenue Service (IRS) and otherwise hiding assets maintained overseas from the IRS.
Von Graffenried opened and maintained undeclared accounts for U.S. taxpayers when it knew or should have known that, by doing so, it was helping these U.S. taxpayers violate their legal duties. Von Graffenried offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS. For example, Von Graffenried would hold all mail correspondence, including periodic statements and written communications for client review, thereby keeping documents reflecting the existence of the accounts outside the United States. Von Graffenried also offered numbered account services, replacing the accountholder’s identity with a number on bank statements and other documentation that was sent to the client.
In late 2008 and early 2009, Von Graffenried accepted accounts from two European nationals residing in the United States who had been forced to leave UBS and Credit Suisse, respectively. At the time it accepted the accounts, Von Graffenried knew that UBS was the target of an investigation by the Department of Justice. It also knew that both individuals had been forced to leave their respective banks because the banks were closing their accounts, and that both individuals had U.S. tax obligations and did not want the accounts disclosed to U.S. authorities. Senior management at Von Graffenried approved the opening of these accounts.
When Von Graffenried compliance personnel sought to obtain an IRS Form 8802, Application for U.S. Residency Certification, from one of the accountholders, that accountholder replied that completing the form would be problematic for him and that he believed the relationship manager knew why. The beneficial owner of the second account was referred by an external fiduciary, who handled the account at Credit Suisse. The fiduciary told a Von Graffenried relationship manager that Credit Suisse was attempting to exit its U.S. offshore clients to other banks if the clients would not sign an IRS Form W-9. The relationship manager agreed to take on the account, which was held by a Liechtenstein “stiftung,” or foundation, with the beneficial owner as the primary beneficiary and U.S. citizens as other beneficiaries.
Between July 1998 and July 2000, Von Graffenried accepted approximately two dozen accounts from a specific external asset manager. Von Graffenried was aware that the external asset manager seemed to be targeting U.S. clientele. Sixteen of the accounts were beneficially owned by individuals with U.S. tax and reporting obligations, and most of those accounts were held by U.S. citizens residing in the United States. At the time, Von Graffenried did not have a policy in place that required U.S. clients to show tax compliance. Consequently, Von Graffenried accepted these accounts without obtaining IRS Forms W-9 or assurances that the accounts were in fact tax compliant. By early 2009, Von Graffenried determined that some of the external asset manager’s accountholders likely were attempting to evade U.S. tax requirements. In 2010, Von Graffenried began to close the existing U.S.-related accounts that originated with the external asset manager. Von Graffenried did not complete the exit process for these accounts until late 2012.
Non-Prosecution Agreement with DOJ
According to the terms of the non-prosecution agreement signed on July 2, 2015, Von Graffenried agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Von Graffenried for tax-related criminal offenses.
Since August 1, 2008, Von Graffenried held a total of 58 U.S.-related accounts with approximately $459 million in assets. Von Graffenried will pay a penalty of $287,000.
In accordance with the terms of the Swiss Bank Program, Von Graffenried mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.
Consequences for US Taxpayers With Undisclosed Accounts at Von Graffenried
There are two major consequences (for US taxpayers with undisclosed accounts) of the Von Graffenried’s participation in the Swiss Bank Program. First, as it was mentioned above, if such taxpayers with undisclosed financial accounts at Von Graffenried wish to enter the 2014 IRS Offshore Voluntary Disclosure Penalty, their penalty rate will now go up to 50% of the highest value of the accounts.
Second, as part of its participation in the Swiss Bank Program, Von Graffenried also had provided to the IRS certain account information related to U.S. taxpayers that will enable the IRS to make requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders. If the IRS is successful, then, these accountholders are likely to be rejected from the OVDP participation and may face draconian civil and criminal FBAR and income tax penalties.
Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts
The number of banks which are coming forward to disclose their US clients’ accounts is growing rapidly with each passing month. Moreover, the great majority of the banks worldwide are also attempting to comply with various FATCA requirements.
This means that the longer US taxpayers with undisclosed foreign accounts wait, the more likely it is that their situation will worsen. The risk of the IRS discovery is higher today than ever before, and the consequences of such a discovery may be truly grisly.
This is why, if you have undisclosed foreign accounts or any other assets, contact Sherayzen Law Office as soon as possible. Our professional legal team is highly experienced in handling all types of offshore voluntary disclosures. We can handle the entire process of your voluntary disclosure from the beginning to the end, including the preparation of all tax forms and legal documents.
So, Contact Us Now to Schedule Your Confidential Consultation Now! We Can Help You!

### Ersparniskasse Schaffhausen AG Signs Non-Prosecution Agreement with DOJ
On June 26, 2015, the US Department of Justice announced that Ersparniskasse Schaffhausen AG (Ersparniskasse Schaffhausen) signed a Non-Prosecution Agreement under the department’s Swiss Bank Program.
Ersparniskasse Schaffhausen Background
Ersparniskasse Schaffhausen was founded in 1817 and is wholly owned by a Swiss charitable foundation. It is headquartered in the city and canton of Schaffhausen, Switzerland. Ersparniskasse Schaffhausen opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the Internal Revenue Service (IRS) or the U.S. Department of the Treasury as required by U.S. law.
From 2004 through 2011, Ersparniskasse Schaffhausen accepted referrals of U.S. persons as new clients from an external asset manager who, until 2009, resided in the United States and conducted some of his business through a corporation organized under the laws of the United States. The majority of the accounts that came to Ersparniskasse Schaffhausen as a result of these referrals were held in the names of non-U.S. entities that were beneficially owned by U.S. persons.
In May 2008, with the knowledge and approval of Ersparniskasse Schaffhausen management, the external asset manager and an Ersparniskasse Schaffhausen relationship manager visited five U.S. cities to meet with U.S. clients and attorneys who had the potential to refer new clients. Topics discussed during their meetings included the “crisis” involving Swiss bank UBS AG, client satisfaction with Ersparniskasse Schaffhausen, the performance of client accounts at Ersparniskasse Schaffhausen and the “asset protection” benefits of Ersparniskasse Schaffhausen.
Until 2009, Ersparniskasse Schaffhausen opened numbered accounts for U.S. persons, including code-name or pseudonym accounts, upon request. Upon opening this type of account, an Ersparniskasse Schaffhausen employee would enter the accountholder’s name in a physical register rather than in the bank’s electronic records system. This action limited the number of Ersparniskasse Schaffhausen personnel who knew the client’s identity. Holders of these accounts could also provide documents to Ersparniskasse Schaffhausen using only their code names or numbers as their authorized signatures.
Ersparniskasse Schaffhausen provided all of its clients, including U.S. persons, with the option to request that Ersparniskasse Schaffhausen retain all mail related to a client’s financial accounts in exchange for a standard service fee. Ersparniskasse Schaffhausen understood that providing such hold-mail agreements upon request could allow U.S. persons to keep evidence of their Ersparniskasse Schaffhausen accounts outside of the United States and thus assist them in concealing assets and income from the IRS.
Ersparniskasse Schaffhausen also accepted IRS Forms W-8BEN for U.S.-related accounts held in the names of non-U.S. entities, such as foreign corporations, trusts or foundations. Because Swiss law required Ersparniskasse Schaffhausen to identify the true beneficial owners of the entities on a document called a Form A, Ersparniskasse Schaffhausen knew that these accounts were beneficially owned by U.S. persons. Nonetheless, Ersparniskasse Schaffhausen accepted Forms W-8BEN that it knew falsely stated that the entities were the beneficial owners of the accounts.
Ersparniskasse Schaffhausen was aware of the 2009 IRS Offshore Voluntary Disclosure Program for U.S. persons. Despite knowing of that program and knowing or having reason to know that some of its U.S. clients had likely not declared their Ersparniskasse Schaffhausen accounts to the IRS, Ersparniskasse Schaffhausen made no effort to encourage its U.S. clients to disclose their accounts through that program.
During 2009, consultants reported to Ersparniskasse Schaffhausen, among other things, that Ersparniskasse Schaffhausen had increased risks because of its relationship with the external asset manager; that it was only a matter of time until small banks came into contact with U.S. authorities; and that there was a latent risk that previous revenues from Ersparniskasse Schaffhausen’s “U.S. strategy” could be seized or corresponding fines imposed. According to minutes of a 2009 meeting of the Ersparniskasse Schaffhausen board of directors, an Ersparniskasse Schaffhausen executive stated, among other things, that “there is practically no risk if U.S. customers travel to Switzerland and a customer account is handled locally,” and that he had been informed that Swiss bank Wegelin & Co. was going to keep its previous U.S. customers.
In October 2009, the Ersparniskasse Schaffhausen board of directors voted to continue the account relationships with clients of the external asset manager, including his U.S. clients, under certain conditions, including that his business be relocated to Switzerland. The board also voted to “have the option of entering into new cross-border business relationships.”
Swiss Bank Program Penalty and Ersparniskasse Schaffhausen’s Non-Prosecution Agreement
According to the terms of the non-prosecution agreement signed on June 26, 2015, Ersparniskasse Schaffhausen agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Ersparniskasse Schaffhausen for tax-related criminal offenses.
Since August 1, 2008, Ersparniskasse Schaffhausen provided private banking services for 90 U.S.-related accounts with approximately $65 million in assets. Thirty-seven of these accounts were opened after Aug. 1, 2008. Ersparniskasse Schaffhausen will pay a penalty of $2.066 million.
In accordance with the terms of the Swiss Bank Program, Ersparniskasse Schaffhausen mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.

### Bank Sparhafen Zurich AG Reaches Resolution with DOJ
On June 19, 2015, the Department of Justice announced that Bank Sparhafen Zurich AG (Bank Sparhafen) has reached resolution under the department’s Swiss Bank Program.
Bank Sparhafen Background Information
Bank Sparhafen was founded in 1850 and has its sole office in Zurich. Bank Sparhafen knew that U.S. persons had a duty under U.S. law to report their income to the Internal Revenue Service (IRS) and to pay taxes on that income, including all income earned in accounts that Bank Sparhafen maintained in Switzerland. Despite this knowledge, Bank Sparhafen opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Treasury, as required by U.S. law.
After August 1, 2008, U.S. persons opened 32 U.S.-related accounts at Bank Sparhafen, and only one of them provided a Form W-9 to Bank Sparhafen upon opening an account. In most cases, the U.S. persons who opened accounts at Bank Sparhafen during this period had been required to close their accounts at other Swiss banks, and Bank Sparhafen knew or had reason to know that most of these accounts were likely not declared to the IRS. Moreover, 22 of the U.S.-related accounts opened during this period were funded by transfers from banks that were or are the targets of Justice Department criminal investigation.
Two relationship managers at Bank Sparhafen were responsible for managing most of its U.S.-related accounts in the period since August 1, 2008, and one of those managers directly reported to Bank Sparhafen’s chief executive officer. Bank Sparhafen relationship managers assisted U.S. persons in executing waiver forms that directed the bank not to acquire U.S. securities in their accounts. Bank Sparhafen knew that the purpose and effect of these forms was to avoid disclosing the identities of the U.S. persons to the IRS.
Until 2012, Bank Sparhafen provided its U.S. clients with an option for hold-mail agreements, even though it understood that providing these agreements upon request could allow U.S. persons to keep evidence of their accounts outside of the United States in order to conceal assets and income from the IRS. One U.S. client told his Bank Sparhafen relationship manager by email that the hold-mail fee was “cheap insurance against having my dealings with you come to the attention of the government revenue authorities.”
Bank Sparhafen also offered travel cash cards to its clients, including U.S. persons. A client could instruct Bank Sparhafen to load up to 10,000 Swiss francs, U.S. dollars or euros from his or her Bank Sparhafen bank account onto a travel cash card. The client could then use the card for purchases or remit unused balances back to the Bank Sparhafen account. U.S. persons’ use of these cards facilitated access to or use of undeclared funds on deposit at Bank Sparhafen. One Bank Sparhafen relationship manager sent a brochure about travel cash cards to a U.S. client who did not wish to transfer money to the United States because of “surveillance” concerns.
Bank Sparhafen’s Participation in the Swiss Program for Banks and DOJ Non-Prosecution Agreement
In accordance with the terms of the Swiss Bank Program, Bank Sparhafen described in detail the structure, operation and supervision of its U.S. cross-border business, including the names of relevant individuals and entities. It also encouraged existing and prior holders of U.S.-related accounts to disclose their accounts to the IRS through the Offshore Voluntary Disclosure Program.
According to the terms of the non-prosecution agreements signed on June 19, 2015, Bank Sparhafen agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
Since August 1, 2008, Bank Sparhafen held 91 U.S.-related accounts, with over $25 million in assets. Bank Sparhafen will pay a penalty of $1.81 million. In accordance with the terms of the Swiss Bank Program, Bank Sparhafen mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.
Consequences for US Taxpayers with Undisclosed Accounts at Bank Sparhafen
On August 4, 2014, the IRS increased the OVDP penalty to 50 percent from 27.5 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. This means that, starting June 19, 2015, noncompliant Bank Sparhafen’s U.S. accountholders are likely to now pay a 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

### DOJ Non-Prosecution Agreement with Bank Linth LLB AG
On June 19, 2015, the Department of Justice announced that Bank Linth LLB AG (Bank Linth) signed a Non-Prosecution agreement pursuant to the DOJ’s Swiss Bank Program.
Bank Linth Background
Bank Linth, one of the largest regional banks in Eastern Switzerland, was founded in 1848. It is headquartered in Uznach, Switzerland, which is approximately 35 miles southeast of Zurich. Bank Linth provided private banking and asset management services to U.S. taxpayers through private bankers based in Switzerland. It opened, serviced and profited from accounts for U.S. clients with the knowledge that many were likely not complying with their tax obligations.
Bank Linth’s cross-border banking business aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts. Bank Linth provided this assistance to U.S. clients in a variety of ways, including the following:
Opening and maintaining accounts in the names of sham entities;
Providing U.S. taxpayers with numbered accounts that hid the taxpayers’ identities;
Facilitating U.S. taxpayers’ withdrawal of cash from undeclared accounts; and
Agreeing to hold bank statements and other mail relating to accounts rather than sending them to U.S. taxpayers in the United States.
On several occasions, Bank Linth opened accounts for U.S. taxpayers through an external asset manager, and one of these accounts was opened in the name of a sham foundation. In that instance, Bank Linth knowingly accepted and included in account records forms provided by the directors of the sham foundation that falsely represented the ownership of the assets in the account for U.S. federal income tax purposes.
Participation in the Swiss Bank Program and the Non-Prosecution Agreement
In accordance with the terms of the Swiss Bank Program, Bank Linth described in detail the structure of its banking business, including its management and supervisory structure, and provided the names of management and legal and compliance officials. Bank Linth further provided detailed and specific information related to its illegal U.S. cross-border business, including the bank’s misconduct, policies that contributed to that misconduct and the names of the relationship managers overseeing the bank’s U.S.-related business. Bank Linth also obtained affidavits from bank employees regarding the bank’s conduct and related matters.
According to the terms of the non-prosecution agreements signed today, Bank Linth agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Bank Linth for tax-related criminal offenses.
Since August 1, 2008, Bank Linth held 126 U.S.-related accounts, with over $102 million in assets. Bank Linth will pay a penalty of $4.15 million (this is a post-mitigation penalty).
Consequences for US Taxpayers with Undisclosed Bank Linth Accounts
Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. This means that, starting June 19, 2015, noncompliant Bank Linth U.S. accountholders will now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

### Berner Kantonalbank Non-Prosecution Agreement
On June 9, 2015, the Department of Justice announced that Berner Kantonalbank AG (Berner Kantonalbank), signed a Non-Prosecution Agreement with the DOJ pursuant to the department’s Swiss Bank Program.
Swiss Bank Program Background
The Swiss Bank Program, which was announced on August 29, 2013, provided a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Swiss banks which meet the requirements of the Program are eligible for a non-prosecution agreement.
Berner Kantonalbank Background
Berner Kantonalbank was founded in 1834 as Kantonalbank von Bern, the first Swiss cantonal bank. Berner Kantonalbank is based in the Canton of Bern and presently has 73 branches in Switzerland. Berner Kantonalbank knew or had reason to know that it was likely that some U.S. taxpayers who maintained accounts at Berner Kantonalbank were not complying with their U.S. reporting obligations. Berner Kantonalbank opened, serviced and profited from accounts for U.S. clients who were not complying with their income tax obligations.
Berner Kantonalbank provided services that facilitated some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets in those accounts and related income. These services included opening and maintaining numbered accounts, allowing clients to use code names rather than full account numbers and providing hold mail services. Berner Kantonalbank opened accounts for account holders who exited other Swiss banks and accepted deposits of funds from those banks. Berner Kantonalbank also processed standing orders from U.S. persons to transfer amounts under $10,000 from their U.S.-related accounts. In one instance, a relationship manager asked an accountholder, who was a dual Swiss-U.S. citizen living in the United States, about the Foreign Account Tax Compliance Act (FATCA) and voluntary disclosure. When the accountholder failed to execute FATCA-related documents, Berner Kantonalbank took steps to close the account. In connection with that closing, the accountholder withdrew $70,000 and approximately 500,000 Swiss francs in cash.
Berner Kantonalbank: Participation in the DOJ Program for Swiss Banks
Berner Kantonalbank committed to full cooperation with the U.S. government throughout its participation in the Swiss Bank Program. As part of its cooperation, Berner Kantonalbank provided a list of the names and functions of 16 individuals who structured, operated or supervised its cross-border business. These individuals served as the chairman of the board of directors, members of the executive board, regional managers, heads of departments or heads of divisions. Berner Kantonalbank additionally provided information concerning its relationship managers and external asset managers, and it described in detail the structure of its cross-border business with U.S. persons, including narrative descriptions of high-value U.S.-related accounts and U.S.-related accounts held by entities.
Berner Kantonalbank Non-Prosecution Agreement
According to the terms of the non-prosecution agreement, Berner Kantonalbank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
Since August 1, 2008, Berner Kantonalbank held approximately 720 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $176.5 million. Berner Kantonalbank will pay a penalty of $4.619 million.
In accordance with the terms of the Swiss Bank Program, Berner Kantonalbank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.
Consequences for US Taxpayers With Bank Accounts At Berner Kantonalbank
While U.S. accountholders at Berner Kantonalbank who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.
Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. This means that the noncompliant U.S. accountholders at Berner Kantonalbank must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts
If you have undisclosed foreign accounts at Berner Kantonalbank or any other bank outside of the United States, please contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Our professional experienced legal team has helped hundreds of US taxpayers worldwide to bring their US tax affairs in order. We can help you!
Contact Sherayzen Law Office NOW to Schedule Your Confidential Consultation!

### Société Générale Private Banking Non-Prosecution Agreement
On June 9, 2015, the Department of Justice announced that Société Générale Private Banking (Suisse) SA has reached a resolution under the DOJ’s Swiss Bank Program.
According to the terms of the non-prosecution agreement, Société Générale Private Banking agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
Société Générale Private Banking has had a presence in Switzerland since 1926, and had a U.S.-licensed representative office in Miami from the early 1990s until it closed on August 26, 2013. Société Générale Private Banking opened and maintained accounts for accountholders who had U.S. tax reporting obligations, and was aware that U.S. taxpayers had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on all of their income, including income earned in Société Générale Private Banking accounts. Société Générale Private Banking knew that it was likely that certain U.S. taxpayers who maintained accounts at the bank were not complying with their U.S. income tax obligations.
Société Générale Private Banking’s U.S. cross-border banking business aided and assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the IRS. SGBP-Suisse used a variety of means to assist U.S. clients in hiding their assets and income, including opening and maintaining accounts for U.S. taxpayers in the name of non-U.S. entities, including sham entities, thereby assisting such U.S. taxpayers in concealing their beneficial ownership of the accounts. Such entities included Panama and British Virgin Island corporations, as well as Liechtenstein foundations. In two instances, an Société Générale Private Banking employee acted as a director of entities that had U.S. taxpayers as beneficial owners. In another instance, upon the death of the beneficial owner of an entity, the heirs opened accounts held by sham entities at Société Générale Private Banking to receive their shares of the assets from the entity account.
Société Générale Private Banking further provided numbered accounts, allowing the accountholder to replace his or her identity with a code name or number on documents sent to the client, and held statements and other mail at its offices in Switzerland, rather than sending them to the U.S. taxpayers in the United States. In addition to these services, Société Générale Private Banking:
Processed requests from U.S. taxpayers for cash or gold withdrawals so as not to trigger any transaction reporting requirements;
Processed requests from U.S. taxpayers to transfer funds from U.S.-related accounts at Société Générale Private Banking to accounts at subsidiaries in Lugano, Switzerland, and the Bahamas;
Opened accounts for U.S. taxpayers who had left UBS when the department was investigating that bank;
Processed requests from U.S. taxpayers to transfer assets from accounts being closed to other Société Générale Private Banking accounts held by non-U.S. relatives and/or friends; and
Followed instructions from U.S. beneficial owners to transfer assets to corprate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus.
Throughout its participation in the Swiss Bank Program, Société Générale Private Banking committed to full cooperation with the U.S. government. For example, Société Générale Private Banking described in detail the structure of its U.S. cross-border business, including providing a list of the names and functions of individuals who structured, operated or supervised the cross-border business at Société Générale Private Banking; a summary of U.S.-related accounts by assets under management; written narrative summaries of 98 U.S.-related accounts; and the circumstances surrounding the closure of relevant accounts holding cash or gold. Société Générale Private Banking also provided information to make treaty requests to the Swiss competent authority for U.S. client account records.
Since August 1, 2008, Société Générale Private Banking held and managed approximately 375 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $660 million. Société Générale Private Banking will pay a penalty of $17.807 million.
US taxpayers who have not yet disclosed their Société Générale Private Banking accounts, but who wish to participate in the 2014 OVDP, are likely to face now a 50% OVDP penalty rate.

### Offshore Accounts? Choose OVDP Or Streamlined Despite FATCA
With FATCA, offshore account compliance is even more important. And picking between the several IRS amnesty programs can be nuanced. Be realistic about your facts, and choose carefully. read »-- Delivered by Feed43 service
Excerpt: With FATCA, offshore account compliance is even more important. And picking between the several IRS amnesty programs can be nuanced. Be realistic about your facts, and choose carefully. read »-- Delivered by Feed43 service

### Credinvest Bank Signs Non-Prosecution Agreement
On June 3, 2015, the US Department of Justice (“DOJ”) announced that Banca Credinvest SA (Credinvest Bank), together with Rothschild Bank, signed a Non-Prosecution Agreement that finalized Credinvest Bank’s participation in the DOJ Program for Swiss Banks.
Credinvest Bank History
Located in Lugano, Switzerland, Credinvest Bank started operations as a fully licensed bank in 2005. Credinvest Bank offered a variety of services that it knew could assist, and that did assist, U.S. clients in concealing assets and income from the IRS, including hold mail service and numbered accounts. Credinvest Bank did not set up any formalized internal reporting regarding U.S. clients and did not adopt any procedures to ascertain or monitor the compliance of its U.S. clients with their U.S. tax obligations. In late 2008, an external asset manager referred 11 accounts to Credinvest Bank, all of which were for U.S. clients who had left UBS. The bank delegated to that external asset manager the primary management of those accounts and failed to ascertain the compliance of those clients with their U.S. tax obligations. The bank thus aided and assisted those clients in concealing their accounts from U.S. authorities. Since August 1, 2008, Credinvest Bank had 31 U.S.-related accounts with just over $24 million in assets.
Credinvest Bank Penalty and Disclosures
As other banks in the DOJ Program for Swiss Banks, Credinvest Bank mitigated some of its penalties, but it will still have to pay a penalty of $3.022 million.
In addition, as part of its participation in the DOJ Program for Swiss Banks, Credinvest Bank made a complete disclosure of its cross-border activities, provided detailed information on an account-by-account basis for accounts in which US taxpayers have a direct or indirect interest, and provided detailed information regarding transferred funds to other banks. It is not known at this point if the IRS made any treaty requests to Credinvest Bank.
The most immediate impact of Rothschild Bank Non-Prosecution Agreement will be felt by US accountholders who wish to enter OVDP after June 3, 2015 – their penalty rate will go up from 27.5 percent of the highest value of their foreign accounts and other assets included in the OVDP penalty base to a whopping 50 percent penalty rate.
What Credinvest Bank Non-Prosecution Agreement Means to US Taxpayers
Credinvest Bank Non-Prosecution Agreement is likely to have three important consequences for US taxpayers with undisclosed accounts. First, US taxpayers with undisclosed accounts at Credinvest Bank will now face the higher 50% penalty rate in the OVDP program, instead of the regular 27.5% penalty rate.
Second, US taxpayers who attempted to conceal their Credinvest Bank accounts by closing them and transferring them to other banks will now face an increased risk of IRS detection due to the fact that the IRS now has the transfer information from Credinvest Bank. It is also possible that they may have received this information as part of another Swiss bank’s disclosure under the DOJ Program for Swiss Banks.
Finally, Credinvest Bank participation in the DOJ Program for Swiss Banks is one more reminder that, in this FATCA world, US taxpayers with undisclosed foreign accounts are playing a Russian roulette with their future by persevering in their non-compliance. The IRS may receive information regarding their accounts from various sources – DOJ Program is just one of them.
US Taxpayers With Undisclosed Foreign Accounts Should Explore Voluntary Disclosure
At this point, if you are a US taxpayer with undisclosed foreign accounts, please consult the experienced international tax team of Sherayzen Law Office. Our professional legal team has helped hundreds of US taxpayers around the world and we can help you!
Contact US to Schedule Your Confidential Consultation Now!

### Rothschild Bank AG Signs Non-Prosecution Agreement
On June 3, 2015, the US Department of Justice (“DOJ”) announced that Rothschild Bank AG (Rothschild bank) have reached resolution under the department’s Swiss Bank Program.
Rothschild Bank Facts
Rothschild Bank was founded in 1968 and is headquartered in Zurich, Switzerland. Rothschild Bank offered services that it knew could and did assist U.S. taxpayers in concealing assets and income from the Internal Revenue Service (IRS), including code-named accounts, numbered accounts and hold mail service, where Rothschild Bank would hold all mail correspondence for a particular client at the bank. These services allowed certain U.S. taxpayers to minimize the paper trail associated with the undeclared assets and income they held at Rothschild Bank in Switzerland.
For a number of years, including after Swiss bank UBS AG announced in 2008 that it was under criminal investigation, and following instructions from certain U.S. taxpayers, Rothschild Bank serviced certain U.S. customers without disclosing their identities to the IRS. Some of Rothschild Bank’s U.S. clients had accounts that were nominally structured in the names of non-U.S. entities. In some such cases, Rothschild Bank knew that a U.S. client was the true beneficial owner of the account but nonetheless obtained a form or document that falsely declared that the beneficial owner was not a U.S. taxpayer.
Since August 1, 2008, Rothschild Bank had 66 U.S.-related accounts held by entities created in Panama, Liechtenstein, the British Virgin Islands, the Cayman Islands or other foreign countries with U.S. beneficial owners. At least 21 of these accounts had false IRS Forms W-8BEN in the file, which are used to identify the beneficial owner of an account. Rothschild Bank knew it was highly probable that such U.S. clients were engaging in this scheme to avoid U.S. taxes but permitted these accounts to trade in U.S. securities without reporting account earnings or transmitting any withholding taxes to the IRS, as Rothschild Bank was required to do.
Rothschild Bank also opened accounts for U.S. taxpayers who had left other Swiss banks that the Department of Justice was investigating, including UBS. Since August 1, 2008, Rothschild Bank had 332 U.S.-related accounts with an aggregate maximum balance of approximately $1.5 billion. Of these 332 accounts, 191 accounts had U.S. beneficial owners and an aggregate maximum balance of approximately $836 million.
Rothschild Bank Penalties and Disclosures
In accordance with the terms of the Swiss Bank Program, the Rothschild bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. Nevertheless, Rothschild Bank will pay a penalty of $11.51 million.
Rothschild Bank also made numerous disclosures of various information regarding US-held accounts.
Consequences of Rothschild Bank Non-Prosecution Agreement for US Taxpayers
The most immediate impact of Rothschild Bank Non-Prosecution Agreement will be felt by US accountholders who wish to enter OVDP after June 3, 2015 – their penalty rate will go up from 27.5 percent of the highest value of their foreign accounts and other assets included in the OVDP penalty base to a whopping 50 percent penalty rate.
Furthermore, the US taxpayers with undisclosed accounts which were related in any way to Rothschild Bank face an increased risk of IRS detection due to transfer information turned over to the DOJ by Rothschild Bank. “The days of safely hiding behind shell corporations and numbered bank accounts are over,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “As each additional bank signs up under the Swiss Bank Program, more and more information is flowing to the IRS agents and Justice Department prosecutors going after illegally concealed offshore accounts and the financial professionals who help U.S. taxpayers hide assets abroad.”
Finally, the rest of the US taxpayers with undisclosed accounts must contemplate a potential future that their accounts maybe subject to IRS discovery if the Program for Swiss Banks is extended to other countries. This possibility is increasingly real when one takes into account the impact FATCA has had on the global international tax reporting landscape.
What Should US Taxpayers with Undisclosed Foreign Accounts Do?
If you have undisclosed foreign account and other foreign assets, you should immediately commence the review of your voluntary disclosure options. Since the introduction of the Streamlined Procedures, the IRS has opened up a world of reduced penalties to various non-willful taxpayers. Willful taxpayers should realize that, the longer they wait, the worse their tax position may become.
In order to do your voluntary disclosure properly, please consult Mr. Eugene Sherayzen, an experienced international tax lawyer of Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide and we can help you.
Contact Us to Schedule Your Confidential Consultation Now!

### Four Swiss Banks Sign Non-Prosecution Agreements
On May 28, 2015, four Swiss Banks – Société Générale Private Banking (Lugano-Svizzera), MediBank AG, LBBW (Schweiz) AG and Scobag Privatbank AG – signed Non-Prosecution Agreements under the Department of Justice Swiss Bank Program. These four Swiss banks now increased the list of the Swiss Banks that reached the resolution under the Program to the total of seven as of May 31, 2015.
Four Swiss Banks and Swiss Bank Program
The Swiss Bank Program was announced on August 29, 2013. It offered a path to Swiss banks to resolve all of their potential criminal liabilities in the United States in exchange for voluntarily turning over information regarding certain activities and detailed information regarding US-help financial accounts. Category 2 banks were also supposed to pay certain penalty under the rules specified by the Program.
All of the four Swiss Banks entered the Program and signed the Non-Prosecution Agreements on May 28. Under the program, the banks made a complete disclose of their cross-border activities, provided detailed account-by-account information for US-held accounts (direct and indirect interest), promised to cooperated with any treaty requests regarding account information, provided detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed, agreed to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations, and paid appropriate penalties.
Compliance History of the Four Swiss Banks
The DOJ gave a fairly detailed history of all four Swiss Banks.
The largest of the four Swiss Banks – Société Générale Private Banking (Lugano-Svizzera) SA (SGPB-Lugano) – was established in 1974 and is headquartered in Lugano, Switzerland. Through referrals and pre-existing relationships, SGPB-Lugano accepted, opened and maintained accounts for U.S. taxpayers, and knew that it was likely that certain U.S. taxpayers who maintained accounts there were not complying with their U.S. reporting obligations. Since Aug. 1, 2008, SGPB-Lugano held and managed approximately 109 U.S.-related accounts, with a peak of assets under management of approximately $139.6 million, and offered a variety of services that it knew assisted U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS), including “hold mail” services and numbered accounts. Some U.S. taxpayers expressly instructed SGPB-Lugano not to disclose their names to the IRS, to sell their U.S. securities and to not invest in U.S. securities, which would have required disclosure and withholding. In addition, certain relationship managers actively assisted or otherwise facilitated U.S. taxpayers in establishing and maintaining undeclared accounts in a manner designed to conceal the true ownership or beneficial interest in the accounts, including concealing undeclared accounts by opening and maintaining accounts in the name of non-U.S. entities, including sham entities, having an officer of SGPB-Lugano act as an officer of the sham entities, processing cash withdrawals from accounts being closed and then maintaining the funds in a safe deposit box at the bank and making “transitory” accounts available, thereby allowing multiple accountholders to transfer funds in such a way as to shield the identity and account number of the accountholder. SGPB-Lugano will pay a penalty of $1.363 million.
Created in 1979 and headquartered in Zug, Switzerland, MediBank AG (MediBank) provided private banking services to U.S. taxpayers and assisted in the evasion of U.S. tax obligations by opening and maintaining undeclared accounts. In furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, MediBank failed to comply with its withholding and reporting obligations, providing “hold mail” services and offering numbered accounts, thus reducing the ability of U.S. authorities to learn the identity of the taxpayers. After it became public that the Department of Justice was investigating UBS, MediBank hired a relationship manager from UBS and permitted some of that person’s U.S. clients to open accounts at MediBank. Since Aug. 1, 2008, MediBank had 14 U.S. related accounts with assets under management of $8,620,675. MediBank opened, serviced and profited from accounts for U.S. clients with the knowledge that many likely were not complying with their U.S. tax obligations. MediBank will pay a penalty of $826,000.
Of the four Swiss banks, it appears that LBBW (Schweiz) AG (LBBW-Schweiz) had the largest average balances per US-help account. Since August 2008, LBBW-Schweiz held 35 U.S. related accounts with $128,664,130 in assets under management. After it became public that the department was investigating UBS, LBBW-Schweiz opened accounts from former clients at UBS and Credit Suisse. Despite its knowledge that U.S. taxpayers had a legal duty to report and pay tax on income earned on their accounts, LLBW-Schweiz permitted undeclared accounts to be opened and maintained, and offered a variety of services that would and did assist U.S. clients in the concealment of assets and income from the IRS. These services included following U.S. accountholders instructions not to invest in U.S. securities and not reporting the accounts to the IRS and agreeing to hold statements and other mail, causing documents regarding the accounts to remain outside the United States. LBBW-Schweiz will pay a penalty of $34,000.
Headquartered in Basel, Switzerland, Scobag Privatbank AG (Scobag) was founded in 1968 to provide financial and other services to its founders, and obtained its banking license in 1986. Since August 2008, Scobag had 13 U.S. related accounts, the maximum dollar value of which was $6,945,700. Scobag offered a variety of services that it knew could and did assist U.S. clients in the concealment of assets and income from the IRS, including “hold mail” services and numbered accounts. Scobag will pay a penalty of $9,090.
It is interesting to note that, out of the four Swiss Banks, LBBW-Schweiz and Scobag paid the least penalties. Undoubtedly, the reason lies in the mitigation of penalties due to accounts disclosed by US person as part of their OVDP compliance.
Non-Prosecution Agreements and Four Swiss Banks
According to the terms of the non-prosecution agreements signed today, each of the Four Swiss Banks agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay the penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.
“[These Non-Prosecution] agreements reflect the Tax Division’s continued progress towards reaching appropriate resolutions with the banks that self-reported and voluntarily entered the Swiss Bank Program,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “The department is currently investigating accountholders, bank employees, and other facilitators and institutions based on information supplied by various sources, including the banks participating in this Program. Our message is clear – there is no safe haven.”
Contact Sherayzen Law Office for Professional Help With Your Voluntary Disclosure
As Swiss Banks (in addition to the four Swiss Banks mentioned in this article) sign Non-Prosecution Agreements and turn over information to the DOJ, the US taxpayers with undisclosed accounts in Switzerland, Cayman Islands, Israel, Lebanon, Panama, Singapore and other related foreign jurisdictions are operating under the increased risk of the IRS detection. Moreover, the on-going FATCA compliance introduces a similarly insupportable risk to US taxpayers worldwide.
The IRS discovery of your undisclosed foreign accounts may result in potentially catastrophic consequences, including criminal penalties and incarceration.
This is why, if you have undisclosed foreign financial accounts and any other foreign assets, contact Sherayzen Law Office professional help. Our experienced legal team will thoroughly analyze your case, determine your existing penalty exposure, analyze your voluntary disclosure options and implement the entire voluntary disclosure plan (including preparation of tax forms and legal documents).
Contact Us Today to Schedule Your Confidential Consultation!

### Finter Bank Zurich AG Reaches Resolution with US DOJ
On May 15, 2015, Finter Bank Zurich AG (Finter Bank) became the third Swiss bank to sign a Non-Prosecution Agreement with US DOJ according to the terms of the DOJ Program for Swiss Banks.
DOJ Program for Swiss Banks
On August 29, 2013, the DOJ announced the creation of the “The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program)” with the goal or creating a voluntary disclosure program for Swiss banks. Under the Program, the Swiss banks would prove DOJ with detailed description of specified activities with respect to US-owned accounts as well as the identification of all accounts held by US persons at any point since August of 2008. In exchange, the Program promised Swiss banks an opportunity to forever resolve their past US non-compliance issues (including criminal illegal activities) with respect to US-held accounts. For Category 2 banks, the Program also imposed various penalty requirements. The banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Finter Bank timely entered the Program and payed the required penalties. This is why it became the third Swiss bank to resolve its issues under the Program.
Finter Bank Background
Finter Bank was founded in 1958 in Chiasso, Switzerland, and has a branch office in Lugano, Switzerland. Since August 1, 2008, Finter Bank has maintained 283 U.S.-related accounts with an aggregate maximum balance of approximately $235 million.
Since its establishment and continuing through at least October 2011, Finter Bank, through its managers, employees and others, aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the Internal Revenue Service (IRS). After August 2008, when Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by U.S. tax authorities, Finter Bank accepted accounts from U.S. persons exiting other Swiss banks.
Finter Bank provided services that allowed U.S. clients to eliminate the paper trail associated with the undeclared assets and income, including “hold mail” services and numbered and coded accounts. In addition, Finter Bank assisted clients in using sham entities as nominee beneficial owners of undeclared accounts, solicited Forms W-8BEN that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts, and provided cash cards and credits cards linked to the undeclared accounts.
Finter Bank Non-Prosecution Agreement
According to the terms of the non-prosecution agreement signed on May 15, Finter Bank agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a $5.414 million penalty in return for the department’s agreement not to prosecute Finter Bank for tax-related criminal offenses.
Consequences of Finter Bank Non-Prosecution Agreement for US Taxpayers
In resolving its criminal liabilities under the program, Finter Bank encouraged U.S. accountholders to come into tax compliance and participate in the IRS Offshore Voluntary Disclosure Program. However, the taxpayers who did not listen to Finter Bank’s pleas and have not disclosed their secret Swiss accounts now face an importance consequence as a result of Finter Bank Non-Prosecution Agreement – if these taxpayers wish to enter the OVDP now, the penalty percentage has increased from 27.5 percent to 50% of the highest balance of their accounts for the past eight years.
Contact Sherayzen Law Office for Help With Disclosure of Your Foreign Bank Accounts
If you have undisclosed foreign bank accounts and any other assets, you should contact Sherayzen Law Office for professional help as soon as possible. Our legal team consists of tax professionals who specialize in offshore voluntary disclosures and have helped hundreds of US taxpayers around the world.
We can help You! Contact Us to Schedule Your Confidential Consultation Now!

### Vadian Bank AG Signs Non-Prosecution Agreement with DOJ
On May 8, 2015, Vadian Bank AG (Vadian) became the second bank to sign a Non-Prosecution Agreement with the US Department of Justice (DOJ) pursuant to the DOJ Program for Swiss Banks.
Program for Swiss Banks: Background Information
On August 29, 2013, the DOJ announced the creation of the “The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program)”. The basic goal of the program was to allow Swiss banks to purge themselves of the prior US tax non-compliance (or complicity with such non-compliance) in exchange for providing DOJ with detailed description of their illegal activities, bank accounts owned by US persons and, in many cases, the payment of monetary penalties.
The Program is a really a version of the 2014 OVDP for foreign banks. However, it was not open to all banks. The banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
As of the time of this writing, the application process has already been completed for the great majority of the Swiss banks, and the Program has entered into the resolution phase (i.e. the review of the banks’ disclosure and penalty calculation).
Vadian bank’s case was the second such case that completed the resolution phase (BSI SA was the first bank to do so).
Vadian Bank Background
Vadian has one office and 26 employees. Prior to 2008, Vadian’s business predominantly consisted of savings accounts, residential mortgage lending and small business loans. In 2007, Vadian hired a marketing firm to assist with its planned growth into private banking, and focused its efforts on attracting external asset managers. In 2008, after it became publicly known that UBS was a target of a criminal investigation, Vadian accepted accounts from U.S. persons who were forced out of other Swiss banks. At this time, Vadian’s management was aware that the U.S. authorities were pursuing Swiss banks that facilitated tax evasion for U.S. accountholders in Switzerland, but was not deterred because Vadian had no U.S. presence. As a result of its efforts, after August 2008, Vadian attracted cross-border private banking business and increased its U.S. related accounts from two to more than 70, with $76 million in assets under management.
Through its managers, employees and/or other individuals, Vadian knew or believed that many of its U.S. accountholders were not complying with their U.S. tax obligations, and Vadian would and did assist those clients to conceal assets and income from the IRS. Vadian’s services included: “hold mail” services; numbered accounts, where the client was known to most bank employees only by a number or code name; opening and maintaining accounts for U.S. taxpayers through non-U.S. entities such as corporations, trusts or foundations; and accepting instructions from U.S.-based accountholders to prevent investments from being made in U.S.-based securities that would require disclosure to U.S. tax authorities.
Vadian Bank: Terms the DOJ Non-Prosecution Agreement
According to the terms of the non-prosecution agreement that was signed on May 20, 2015, Vadian agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a $4.253 million penalty in return for the department’s agreement not to prosecute Vadian for tax-related criminal offenses.
In resolving its criminal liabilities under the program, Vadian also provided extensive cooperation and encouraged U.S. accountholders to come into compliance.
Consequences of Vadian Non-Prosecution Agreement for Vadian US Accountholders
If you have (or had at any point since the year 2008) undeclared foreign accounts at Vadian, you may still be eligible to participate in the OVDP (assuming that you can pass the IRS-CI Preclearance process). However, the price of participating in the OVDP has almost doubled from the pre-Agreement 27.5% to the current 50% of the highest value of your undisclosed foreign assets.
Of course, if the behavior was non-willful, Streamlined options remain available at the same penalty rates.
What Should Vadian US Accountholders Do?
If you are a US person and an accountholder at Vadian, please contact the experienced international tax law firm of Sherayzen Law Office to explore your voluntary disclosure options as soon as possible.

### BSI SA is the First Bank to Reach Resolution Under Swiss Bank Program
On March 30, 2015, the US Department of Justice announced that BSI SA, one of the 10 largest private banks in Switzerland, was the first bank to reach a resolution under the DOJ Swiss Bank Program.
Background Information
The Swiss Bank Program, which was announced on August 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared United States-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
“Because of the department’s continuing efforts to root out offshore tax evasion, Swiss banks are operating much differently today than they did just a few years ago, and the department’s Swiss Banking Program is a big part of that change,” said Acting Deputy Attorney General Sally Quillian Yates. “When we announced the program, we said that it would enhance our efforts to pursue those who help facilitate tax evasion and those who use secret offshore accounts to evade taxes. And it has done just that. We are using the information that we have learned from BSI and other Swiss banks in the program to pursue additional investigations into both banks and individuals.”
Since 2009, the department has charged more than 100 offshore bank accountholders, dozens of facilitators, and financial institutions. The department’s offshore enforcement efforts have reached far beyond Switzerland, as evidenced by publicly announced actions involving banking activities in India, Luxembourg, Liechtenstein, Israel and the Caribbean.
“Today’s action sends a clear message to anyone thinking about keeping money offshore in order to evade tax laws,” said Chief Richard Weber of IRS-Criminal Investigation (CI). “Fighting offshore tax evasion continues to be a top priority for IRS-CI and we will trace unreported funds anywhere in the world. IRS-CI special agents are our nation’s best financial investigators, trained to follow the money and enforce our country’s tax laws to ensure fairness for all.”
BSI - DOJ Non-Prosecution Agreement
According to the terms of the non-prosecution agreement signed on March 30, 2015, BSI agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts, and pay a $211 million penalty in return for the department’s agreement not to prosecute BSI for tax-related criminal offenses.
BSI had more than 3,000 active United States-related accounts after 2008, many of which it knew were not disclosed in the United States. In resolving its criminal liabilities under the program, BSI provided extensive cooperation and encouraged hundreds of U.S. accountholders to come into compliance. BSI is also assisting with ongoing treaty requests.
BSI’s Past Activities
BSI helped its U.S. clients create sham corporations and trusts that masked the true identity of its U.S. accountholders. Many of its U.S. clients also opened “numbered” Swiss bank accounts that shielded their identities, even from employees within the Swiss bank. BSI acknowledged that in order to help keep identities secret, it issued credit or debit cards to many U.S. accountholders without names visible on the card itself.
BSI not only helped U.S. clients shield their identity from the Internal Revenue Service (IRS), but helped them repatriate cash as well. BSI admitted that its relationship managers and their U.S. clients used code words in emails to gain access to funds.
Consequences for US Taxpayers With Undisclosed Foreign Accounts
The consequences of the BSI’s participation in the DOJ Program for Swiss Banks are far reaching for the US taxpayers with undisclosed foreign accounts, particularly BSI accounts.
First, the most immediate consequence of the BSI’s Non-Prosecution Agreement is the higher OVDP penalty. Most U.S. taxpayers who enter the IRS offshore voluntary disclosure program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement. With today’s announcement of BSI’s non-prosecution agreement, its noncompliant U.S. accountholders must now pay that 50 percent penalty to the IRS if they wish to enter the OVDP program.
Second, as part of its participation in the DOJ Program for Swiss Banks, BSI provided a very large amount of information regarding its US accountholders as well as individuals who facilitated US tax evasion. This means that these individuals are at the very high risk of being investigated and/or prosecuted by the IRS for tax non-compliance.
Third, as part of its participation in the DOJ Program for Swiss Banks, BSI (and other banks in the Swiss Bank Program) also provided detailed information to the DOJ about transfers of money from Switzerland to other countries. The Tax Division and the IRS intend to follow that money to uncover additional tax evasion schemes.
This means that any US taxpayers who transferred the money out of Switzerland to avoid Swiss bank disclosure are at very high risk of the IRS detection.
What Should US Taxpayers with Undisclosed BSI and Other Swiss Bank Accounts Do?
If you are a US taxpayer who has (or had any point since 2008) undisclosed financial accounts at BSI and any other Swiss bank, you should contact an international tax lawyer to consider your voluntary disclosure options as soon as possible.
What if voluntary disclosure is no longer possible due to investigation by the IRS? The answer that your international tax lawyer will give you is likely to depend on the facts of the case. In some cases, it may be best to pursue a noisy voluntary disclosure option. In other cases, it may be best to contact the IRS and work with them directly to reduce the penalties.
“An individual is not culpable simply because he or she is identified by a bank within the program,” said Acting Assistant Attorney General Caroline D. Ciraolo of the department’s Tax Division. “With that said, the department strongly encourages those individuals and entities currently under indictment, under investigation, or who have concerns regarding their potential criminal liability to contact and fully cooperate with the department to reach a final resolution.”
Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts
If you have (had at any point since the year 2008) undisclosed foreign accounts (whether BSI accounts or any other foreign bank), you should contact the international tax law firm of Sherayzen Law Office for experienced professional help.
We have helped hundreds of US taxpayers around the globe to bring their US tax affairs in compliance with the simultaneous goal of reducing the penalty exposure to a reasonable amount under the IRS rules. And we can help You!
Contact Us to Schedule Your Confidential Consultation Now!

### Minneapolis MN FATCA Tax Lawyer Update: FATCA-Related Forms
As a Minneapolis MN FATCA Tax Lawyer, I often receive questions about what US tax forms precisely are affected by the implementation of the Foreign Account Tax Compliance Act (FATCA). Here is a list of the tax forms most affected by FATCA:
1. Minneapolis MN FATCA Tax Lawyer: IRS Form 1042 and 1042-S
Form 1042 is used as an annual withholding tax return for US-source income of non-US persons. Form 1042-S is used to report income that is considered to be “Amounts Subject to Reporting on Form 1042-S” (basically US-source income paid to foreign persons such as FDAP (fixed or determinable annual or periodical) income; certain gains from the disposal of timber, coal or domestic iron; and gains related to contingent payments received from the sale or exchange of intangible property (such as intellectual property rights), amounts withheld under Chapters 3 and 4 of the Internal Revenue Code, distributions of effectively connected income by a publicly traded partnership (or nominee), and certain federal procurement payments paid to foreign persons who are subject to withholding under Section 5000C.
2. Minneapolis MN FATCA Tax Lawyer: IRS Form 8966
For a Minneapolis MN FATCA Tax Lawyer, IRS Form 8966 is highly important. The main reason is because Form 8966 is an actual FATCA Report that needs to be filed by foreign financial institutions (FFIs) and their variations (PFFI, Us Branch of a PFFI treated as non-US person, RDC FFI, Limited Branch or Limited FFI, and Reporting Model 2 FFI), QI (qualified intermediary), WP (withholding foreign partnership), WT (withholding foreign trust) , direct reporting NFFE, and a Sponsoring Entity.
The purpose of this form is to allow these filers to report the required FATCA information with respect to mainly foreign accounts held (directly or indirectly) by US persons.
3. Minneapolis MN FATCA Tax Lawyer: IRS Forms W-8 Series
The full list of these forms include: Form W-8BEN, Form W-8BEN-E, W-8ECI, Form W-8EXP, and W-8IMY. The full discussion of these forms is beyond the scope of this article; suffice it to state that all of these forms play a critical part in FATCA and tax withholding compliance of various FFIs and NFFEs.
4. Minneapolis MN FATCA Tax Lawyer: IRS Form 8938
As a Minneapolis MN FATCA Tax Lawyer, I believe that IRS Form 8938 is one of the most important developments that came out of FATCA. Unlike the other forms listed in this article, this form needs to be prepared directly by the US taxpayers and filed with their US tax returns. The importance of this form cannot be overstated, because Form 8938 is a “catch-all” form which steps-in with its own reporting requirements when other international tax forms are not required. It also incorporates by reference some of the most important international tax compliance requirements even when other international tax forms contain detailed information.
Minneapolis MN FATCA Tax Lawyer: Other Forms
The four categories of forms above describe the US tax forms that have been impacted by FATCA in a direct and profound way. There are other forms that have been affected by implementation of FATCA, but this impact is a rather indirect one (by reference or implication).

### Cayman Islands FATCA Registration Portal
On March 20, 2015, the Cayman Islands FATCA Registration Portal was launched by the Department for International Tax Cooperation (which is a department within Cayman Islands Tax Information Authority).
Cayman Islands FATCA Background 
The Cayman Islands FATCA Registration Portal is part of the long process of Cayman Islands FATCA compliance. Cayman Islands FATCA IGA (Model 1) was signed with the United States on November 29, 2013. At the same time, Cayman Islands signed the amended Tax Information Exchange Agreement. Both of these developments led to the creation of the Portal as a way to automatically exchange information required by FATCA between Cayman Islands and the United States.
It is also important to point out that Cayman Islands FATCA compliance was not only driven by the US considerations, but also by the UK considerations. As an overseas territory of the United Kingdom, Cayman Islands had to come to an agreement with the United States that could not have been better the terms negotiated between the UK and Cayman Islands with respect to the exchanges of tax-related information.
Purchase of the Portal
The Portal plays a critical role in Cayman Islands FATCA compliance, because it allows Cayman’s financial institutions (including the investment funds based in Cayman islands) to report information required by FATCA to the Cayman Islands Tax Information Authority, which, as it is mandated by Model 1 FATCA agreement, will turn over the required information to the IRS.
Registration
As part of Cayman Islands FATCA compliance, the Cayman Islands Tax Information Authority warned the island’s financial institutions that they much must register via the Portal by April 30, 2015 and provide their names, FATCA classification, principal point of contact and other information.
Reporting Deadline by May 31, 2015
The deadline for reporting the 2014 (calendar year) information by the Cayman’s financial institutions must be done by May 31, 2015. The information that will have to be submitted through the Portal is the one usually required by FATCA, including:
1. US person’s name, address and tax identification number (and date of birth, where applicable);2. US person’s account number or its equivalent;3. Name and ID of the reporting financial institution; and4. Year-End Balance of the account.
Interestingly enough, the UK FATCA requirement for Cayman Islands is much later - May 31, 2016.
Caymans Islands FATCA Compliance Is Not Unique
Cayman Islands FATCA compliance through a Portal is now a common theme throughout the world. In fact, it is expected that most of the Model 1 FATCA countries around the world have either complied with 2014 US FATCA requirements or will do so soon, and they are likely to be using a Portal of some kind.
For example, it is expected that the following jurisdictions will do their FATCA reporting through an information reporting system (deadlines in parenthesis): Ireland (June 30, 2015), Luxembourg (June 30, 2015), United Kingdom (May 31, 2015), Canada (May 2, 2015), and so on.
What Portal Means for US Persons with Undisclosed Cayman Islands Accounts
If you are a US person with undisclosed foreign accounts in Cayman Islands (any many other jurisdictions around the world), you are very likely to have very little time left before your account will be disclosed to the IRS. The penalties (especially FBAR and Form 8938 penalties) for failure to report foreign accounts can be draconian, including potential incarceration. Moreover, once the IRS learns about the existence of your account and initiates an invest, you may not be able to do a voluntary disclosure to reduce your penalties.
This means that US persons with undisclosed foreign accounts need to immediately contact an experienced international tax lawyer to explore their voluntary disclosure options in order to timely file their request for Preclearance.
Contact Sherayzen Law Office for Professional Help With Disclosing Your Foreign Accounts
Sherayzen Law Office, Ltd. is the experienced international tax firm that can help you with the voluntary disclosure of your foreign accounts. We have already successfully helped hundreds of US taxpayers around the world to conduct various types of voluntary disclosures (SDOP (Streamlined Domestic Offshore Procedures), SFOP (Streamlined Foreign Offshore Procedures), Delinquent Information Returns, Delinquent FBAR Submission, and Noisy/Reasonable Cause disclosures), and We can help You!
Contact Us to Schedule Your Confidential Consultation!

### 2015 Second Quarter IRS Underpayment and Overpayment Interest Rates
On March 13, 2015, the IRS announced that the underpayment and overpayment interest rates for the calendar quarter beginning April 1, 2015, will remain unchanged. The rates will be:
three (3) percent for overpayments [two (2) percent in the case of a corporation];three (3) percent for underpayments;five (5) percent for large corporate underpayments; andone-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
How are the IRS Underpayment and Overpayment Rates Determined?
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
What do the IRS Underpayment and Overpayment Rates Affect?
The most important impact of the IRS underpayment and overpayment rates is felt whenever the tax liability of a US taxpayer changes from the liability indicated on the original tax return. Most often, this happens as a result of an amended tax return filed voluntarily by the taxpayer or as a result of an IRS audit.
If, as a result of an audit or an amended tax return, the taxpayer is assessed with additional tax liability, the underpayment interest rate will be applied from the due date of the original tax return (usually, April 15) through the date of assessment of additional tax liability (or the date the amended tax return is filed). Conversely, if an amended tax return or an IRS audit produces a refund, then, the IRS is obligated to pay the overpayment interest rate on the refund due.
IRS Underpayment Rate and PFIC Calculations
The IRS Underpayment Rate has a surprising additional affect on a taxpayer’s liability. If a taxpayer owns a PFIC that is considered a Section 1291 fund, then, under the default PFIC method, he will need to calculate PFIC interest on the PFIC tax due. This PFIC interest is calculated at the IRS underpayment rates.

### 3 IRS Strikes? FATCA, FBARs, An 'Abode' In U.S. Although You Live Abroad
Americans abroad usually assume their first $100K of earnings are tax-free. It's not that simple, and several years of earnings may be at stake when you find out, making FATCA and FBAR problems even worse. read »-- Delivered by Feed43 service
Excerpt: Americans abroad usually assume their first $100K of earnings are tax-free. It's not that simple, and several years of earnings may be at stake when you find out, making FATCA and FBAR problems even worse. read »-- Delivered by Feed43 service

### IRS Unleashes Global FATCA Data Exchange, Offshore Transparency Everywhere
FATCA is America's global tax reporting law that calls for nations everywhere to report U.S. account holders. Better get compliant, and soon. read »-- Delivered by Feed43 service
Excerpt: FATCA is America's global tax reporting law that calls for nations everywhere to report U.S. account holders. Better get compliant, and soon. read »-- Delivered by Feed43 service

### The Vatican Bank, Christmas Cheer, And FATCA
For years, the Vatican Bank has sidestepped EU regulations intended to bring about greater transparency in the financial sector. That was before Pope Francis, who has pledged to restore public confidence in the administration of the Roman Catholic Church. This week we learned the United States and the Holy See have brokered a FATCA agreement for [...] read »-- Delivered by Feed43 service
Excerpt: For years, the Vatican Bank has sidestepped EU regulations intended to bring about greater transparency in the financial sector. That was before Pope Francis, who has pledged to restore public confidence in the administration of the Roman Catholic Church. This week we learned the United States and the Holy See have brokered a FATCA agreement for [...] read »-- Delivered by Feed43 service

### Gibraltar--A Tax Haven--Sues ABC For Calling It A Tax Haven
Gibraltar doesn't like being called a tax haven, but are there any left? America's FATCA has changed the map forever. read »-- Delivered by Feed43 service
Excerpt: Gibraltar doesn't like being called a tax haven, but are there any left? America's FATCA has changed the map forever. read »-- Delivered by Feed43 service

### Vatican Bank Joins 100 Nations In FATCA Offshore Account Hunt
FATCA now counts over 100 nations, with even the Pope's Holy See jumping on the IRS offshore tax compliance bandwagon. read »-- Delivered by Feed43 service
Excerpt: FATCA now counts over 100 nations, with even the Pope's Holy See jumping on the IRS offshore tax compliance bandwagon. read »-- Delivered by Feed43 service

### FATCA Envy Spreads Across Hemisphere
Thanks to FATCA (the Foreign Account Tax Compliance Act), the IRS is now receiving important data on formerly hidden bank accounts, but tax administrators in other countries aren't so fortunate. Their enforcement efforts are stymied by a lack of information on offshore income. As the current spat between Colombia and Panama illustrates, revenue [...] read »-- Delivered by Feed43 service
Excerpt: Thanks to FATCA (the Foreign Account Tax Compliance Act), the IRS is now receiving important data on formerly hidden bank accounts, but tax administrators in other countries aren't so fortunate. Their enforcement efforts are stymied by a lack of information on offshore income. As the current spat between Colombia and Panama illustrates, revenue [...] read »-- Delivered by Feed43 service

### FATCA Letters Promise Disclosure To IRS, What To Do?
Banks Worldwide are Handing Over Americans to the IRS Under FATCA, American's Global Disclosure Law. If Your Bank Writes You, Don't Ignore It. read »-- Delivered by Feed43 service
Excerpt: Banks Worldwide are Handing Over Americans to the IRS Under FATCA, American's Global Disclosure Law. If Your Bank Writes You, Don't Ignore It. read »-- Delivered by Feed43 service

### 51 Nations Swap Offshore Account & Tax Data, FATCA On Steroids
FATCA is Revolutionizing tax compliance Worldwide. Now, the OECD has assembled 51 Nations that are All on the Hunt for tax and Offshore Account Data. read »-- Delivered by Feed43 service
Excerpt: FATCA is Revolutionizing tax compliance Worldwide. Now, the OECD has assembled 51 Nations that are All on the Hunt for tax and Offshore Account Data. read »-- Delivered by Feed43 service

### FATCA Poised To Go Global
The OECD unwrapped a new global version of FATCA to facilitate the exchange of detailed account information between governments read »-- Delivered by Feed43 service
Excerpt: The OECD unwrapped a new global version of FATCA to facilitate the exchange of detailed account information between governments read »-- Delivered by Feed43 service

### Even Non-Owner Signers On Offshore Accounts Face FATCA And FBAR Risks
FATCA Means IRS scrutiny, so better come clean on offshore accounts. But it can be surprisingly confusing who must report on joint accounts. read »-- Delivered by Feed43 service
Excerpt: FATCA Means IRS scrutiny, so better come clean on offshore accounts. But it can be surprisingly confusing who must report on joint accounts. read »-- Delivered by Feed43 service

### FATCA Remains Vulnerable Despite Implementation
There's a direct correlation between the severity of a tax code and the level of effort individuals are willing to put into avoiding or evading taxes. Attempting to address the latter while ignoring the former is a fool's errand. read »-- Delivered by Feed43 service
Excerpt: There's a direct correlation between the severity of a tax code and the level of effort individuals are willing to put into avoiding or evading taxes. Attempting to address the latter while ignoring the former is a fool's errand. read »-- Delivered by Feed43 service

### Financial Firms Get FATCA Reprieve
Global financial firms breathed a brief sigh of relief this week on news that the U.S. Treasury will temporarily relax enforcement on the Foreign Account Tax Compliance Act (FATCA). read »-- Delivered by Feed43 service
Excerpt: Global financial firms breathed a brief sigh of relief this week on news that the U.S. Treasury will temporarily relax enforcement on the Foreign Account Tax Compliance Act (FATCA). read »-- Delivered by Feed43 service

### Incorrect or Delinquent Form 5471 Penalties
Various Form 5471 penalties are associated with failure to file Form 5471 or the filing of an incorrect Form 5471. In this article, I will describe the most important of these penalties.
IRS Form 5471
The IRS Form 5471 is an extremely complex form that is used to satisfy the reporting requirements of two esoteric sections of the Internal Revenue Code: 26 U.S.C. § 6038 ("Information reporting with respect to certain foreign corporations and partnerships") and 26 U.S.C. § 6046 ("Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock").
As long as Form 5471 requirements are met, the Form must be filed by certain U.S. citizens and residents who are officers, directors, or shareholders in specified foreign corporations with their US tax returns.  Failure to file Form 5471 or failure to file a correct Form 5471, can result in steep penalties.
Form 5471 Penalties: Failure to file information required under section 26 U.S.C. § 6038(a) 
From the outset, it is important to note that 26 U.S.C. § 6038 applies to two different parts of Form 5471: the Form 5471 proper (i.e. the first four pages containing the identifying information and Schedules A through I) and Schedule M of Form 5471.   Failure to file either is enough to trigger a $10,000 penalty for each annual accounting period of each foreign corporation. If the IRS sends the taxpayer a notice of a failure to file, an additional $10,000 penalty (per foreign corporation) will be charged for each 30-day period (or fraction thereof), during which the failure continues after the 90-day period in which the notification occurred, has expired. This additional penalty is limited to a maximum of $50,000 for each failed filing.
Furthermore, there is an income tax penalty associated with the failure to comply with 26 U.S.C. § 6038 in a timely manner - the taxpayer may be subject to a 10% reduction of certain available Foreign Tax Credits. A further 5% reduction may be applied for each 3-month period (or fraction thereof), during which the failure to timely report or file continues after the 90-day period of IRS notification has expired. (26 U.S.C. § 6038(c)(2) places certain limitations on this penalty).
The Second Set of Form 5471 Penalties: Failure to file information required by 26 U.S.C. § 6046 and related regulations (Form 5471 and Schedule O)
In addition to 26 U.S.C. § 6038 Form 5471 penalties, there is also an additional set of Form 5471 penalties associated with 26 U.S.C. § 6046 (Form 5471 and Schedule O).  Failure to comply with 26 U.S.C. § 6046 will subject the taxpayer to another $10,000 penalty for each failure for each reportable transaction. Additionally, if the failure to report or file continues for more than 90 days after the date the IRS mails notice of this failure, an additional $10,000 penalty will apply for each 30-day period (or fraction thereof) during which the failure continues after the 90-day period has expired. This additional penalty is limited to a maximum of $50,000.
Form 5471 Non-Compliance May Result in Criminal Penalties
In addition to civil penalties under 26 U.S.C. § 6038 and 26 U.S.C. § 6046, criminal penalties may apply to Form 5471 filers in certain circumstances. In particular, a willful failure to file an accurate Form 5471 may activate the  broad provisions of 26 U.S.C. § 7203 ("Willful failure to file return, supply information, or pay tax"), 26 U.S.C. § 7206 ("Fraud and false statements"), and 26 U.S.C. § 7207 ("Fraudulent returns, statements, or other documents").
Form 5471 Penalties and Persons Other Than the Filer
In situations where the filer should have filed Forms 5471 for other persons, but failed to do so, Form 5471 penalties may be extended to these other persons.
Contact Sherayzen Law Office For Help With Form 5471 Penalties and Compliance
If you partially or fully own a foreign corporation, you may be subject to the Form 5471 requirements.  As explained in this article, failure to timely and/or correctly comply with Forms 5471 may result in steep Form 5471 penalties.
This is why you should contact the experienced Form 5471 tax professionals of Sherayzen Law Office.  We can help you  prepare and file your Form 5471 as part of your annual compliance as well as help deal with the Form 5471 voluntary disclosure. So, Call Us Now to Schedule Your Confidential Consultation!

### FATCA Tax Lawyers Update: FATCA Financial Institution Definition
One of the key concepts in FATCA compliance is a “financial institution”. The definition of a financial institution (“FATCA Financial Institution”) is contained in the FATCA Model IGAs. In this article, I will explore some of the general concepts central to defining a FATCA Financial Institution.
Four Types of FATCA Financial Institutions
The concept of FATCA Financial Institution is defined in the Model IGA Agreements. Both Model 1 and Model 2 IGAs agree on the definition of FATCA Financial Institution: “The term ‘Financial Institution’ means a Custodial Institution, a Depository Institution, an Investment Entity, or a Specified Insurance Company.” Let’s go over each concept in more detail.
Definition of a FATCA Financial Institution: Custodial Institution
FATCA Model Agreements provide a fairly straightforward definition of a Custodial Institution: “The term ‘Custodial Institution’ means any entity that holds, as a substantial portion of its business, financial assets for the account of others.” In this context “substantial” means that, during the specified period of time, twenty percent or more of the entity’s gross income is derived from holding of financial assets and related financial services.
The specified period of time is defined in Model 1 IGA as “the shorter of: (i) the three-year period that ends on the December 31 (or the final day of a non-calendar year accounting period) prior to the year in which the determination is being made; or (ii) the period during which the entity has been in existence.”
Definition of a FATCA Financial Institution: Depository Institution
According to FATCA Model IGAs, “The term ‘Depository Institution’ means any Entity that accepts deposits in the ordinary course of a banking or similar business.”
This definition is fairly self-explanatory, but it should be noted that interest-paying client money accounts operated by insurance companies are included within the definition of a depository institution.
Definition of a FATCA Financial Institution: Specified Insurance Company
According to FATCA Model IGAs, “the term ‘Specified Insurance Company’ means any entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, a Financial Account.” This definition basically applies to all insurance companies that issue or must make payments with respect to an Insurance Cash-Surrender Value Contract or Annuity contract (which is similar to an FBAR).
For the purposes of this essay, I am not going to engage in the discussion of a Financial Account definition (this is an issue that I addressed in another article); suffice it to say that the definition of a Financial Account under FATCA closely follows the FBAR definition of the same concept.
Definition of a FATCA Financial Institution: Investment Entity
Finally, FATCA Model IGAs provide a detailed definition of what constitutes an “Investment Entity”. This concept includes any entity that conducts as a business one or more of the following activities or operations for or on behalf of a customer:“(1) trading in money market instruments (cheques, bills, certificates of deposit, derivatives, etc.); foreign exchange; exchange, interest rate and index instruments; transferable securities; or commodity futures trading;(2) individual and collective portfolio management; or(3) otherwise investing, administering, or managing funds or money on behalf of other persons. This subparagraph 1(j) shall be interpreted in a manner consistent with similar language set forth in the definition of “financial institution” in the Financial Action Task Force Recommendations.”
Notice that this definition encompasses any entity that is managed by an Investment Entity. Further note that the definition of an Investment Entity should be interpreted in a manner consistent with the definition of a “financial institution” in the Financial Action Task Force Recommendations.
Implications if FATCA Financial Institution Definition on Undisclosed Foreign Accounts
The broad definition of a FATCA Financial Institution has a profound impact on US taxpayers with undisclosed foreign accounts. The chief reason for this conclusion is the fact that as soon as an entity is classified as a FATCA Financial Institution, the entity must be FATCA compliant (unless it falls within a FATCA exemption) and should report all of its accounts owned (directly or indirectly) by US taxpayers.
Contact Sherayzen Law Office for Help With Undisclosed Foreign Accounts
The consequences of the IRS discovery of an undisclosed foreign account can be disastrous for the US owner of this account, including extremely high monetary willful civil penalties as well as criminal penalties.
This is why, if you have an undisclosed foreign account, please contact Mr. Eugene Sherayzen, an experienced international tax attorney of Sherayzen Law Office as soon as possible. Our team is well versed in FATCA compliance, FBARs and other foreign reporting issues. We have helped hundreds of US taxpayers around the globe and we can help you.
So, Contact Us Now to Schedule Your Initial Consultation!

### Costa Rica Corporations and U.S. Tax Reporting
It has become common for U.S. citizens to engage in business abroad through a foreign corporation.  Costa Rica is definitely one of the most favored countries in Central America, partially due to its reputation for stability.  It is important to understand, however, that U.S. citizens who engage in business abroad through a foreign corporation must comply with very important tax reporting requirements.   In this article, I will try to briefly go over some of the most common US tax reporting requirements that may concern U.S. owners of Costa Rica corporations.
Form 5471
IRS Form 5471 is the most direct reporting requirement that U.S. owners of Costa Rica corporations may face.  Form 5471 may undoubtedly be considered as one of the most complex U.S. tax forms, both in its content as well as its scope.
As of the time of this writing, there are four non-exclusive (i.e. a taxpayer can belong to multiple categories at the same time) categories of filers of Costa Rica corporations who must file Form 5471.  Determining the categories, if any, to which a taxpayer belongs is a legal decision and a very important one since the number and severity of the reporting requirements directly depends on the number of  categories applicable to the taxpayer.
If the taxpayer is required to Form 5471 for Costa Rica corporations, then he must do so by attaching the completed Form 5471 with all of the numerous attachments to his tax return.
Failure to file Form 5471 for Costa Rica corporations may have severe consequences.  Explore this article for more information on Form 5471 penalties.
Form 8938
IRS Form 8938 is a newcomer to the world of U.S. tax compliance – in fact, the tax year 2001 is the first year that the form must be filed with the taxpayer’s U.S. tax return.
Form 8938 should be filed only if certain threshold requirements are met.  In case the taxpayer already disclosed the information regarding the specified foreign asset on Form 5471, Form 8938 should be filed to cross-reference Form 5471.  Explore this article to learn more about Form 8938.
FBAR
As long as the basic threshold requirement is met, the Report on Foreign Bank and Financial Accounts (“FBAR”) may be required if the taxpayer is the owner of a foreign corporation and has signatory authority (either as an officer of the corporation or an owner) over the corporate accounts.
It is highly important to comply with the FBAR requirement because the FBAR contains perhaps the most severe penalty structure of any other reporting requirement in the entire Internal Revenue Code (IRC).
Subpart “F” Income
If you are an owner of a Controlled Foreign Corporation (“CFC”) and the CFC has subpart “F” income, then you may be required to report subpart “F” income on your personal tax return (e.g. Form 1040).  This income is likely to be treated in a highly unfavorable way by the IRC.
Other Forms
Other forms may be required to be filed as a result of the your ownership of Costa Rica corporations.   Most of these additional tax reporting requirements are triggered by various transactional activities conducted by the corporation or between you and your corporation.  You should consult an international tax attorney for detailed analysis of your specific situation.
Contact Sherayzen Law Office for U.S. Tax Compliance Requirements if You Own Shares of Costa Rica Corporations
If you own a corporation in Costa Rica or you intend to do so, you should contact Sherayzen Law Office.  Owner Eugene Sherayzen will analyze your particular situation, determine what U.S. tax reporting requirements apply to you and help you comply with them, and offer a rigorous ethical tax plan designed to make sure that you do not overpay your U.S. taxes under the current IRC provisions.

### The Location of Your International Tax Lawyers Austin Texas
Choosing your lawyer among International Tax Lawyers Austin Texas is not a simple task, especially for a US taxpayer thinking about doing an offshore voluntary disclosure. One of the critical questions often arises is whether it is better to retain an international tax lawyer in Austin or in Minneapolis if you live in Austin? It is also related to a broader question: is the location of your international tax lawyer important?
Let’s analyze this question in the context of retaining one or more International Tax Lawyers Austin Texas.
International Tax Lawyers Austin Texas: US International Tax Law and Geography
One of the most critical aspects of US international tax law is that it does not respect national or state borders. Rather, it focuses on the individual taxpayer; if the taxpayer is a US person, then he is subject to US international tax law.
Another important aspect of US international tax law is that it applies uniformly (with a few exceptions, such blockades, sanctions, et cetera) irrespective of where the individual taxpayer is.
This means that, if you are in Austin and searching for International Tax Lawyers Austin Texas, it does not matter whether your lawyer is physically located in Austin, Minneapolis or Buenos Aires. The knowledge of international tax law of your lawyer and the application of that law to your specific case does not depend on the physical location of your lawyer.
International Tax Lawyers Austin Texas: Expertise and Experience in International Tax Law is the Critical Criteria, Not Geography
Based on this logic, it is easy to see that the geographical location of your International Tax Lawyers Austin Texas is not the most important factor in your decision to retain an attorney. Rather, it is a lawyer’s expertise in international tax law that should drive your decision.
If you feel comfortable with the lawyer’s grasp of the subject matter and his experience in handling cases involving issues similar to the ones involved in your case, then these factors should be the critical factors on which your decision to retain the an international tax lawyer should be based.
International Tax Lawyers Austin Texas: “Face-to-Face” Meetings Obstacle Has Been Overcome By Modern Technology
There is a common misconception that your international tax lawyer must be near you in order to understand you and be able to render advice.
About a third of my clients are overseas and, additionally, more than a third of my clients are located in the United States but outside of Minnesota, leaving me with only about a quarter of my clients physically located in Minnesota. Yet, this factor never influenced the outcome in any of my cases.
In the modern world of Video Skype Conferences, the value of the face-to-face meetings has deteriorated and, in most cases, completely disappeared.
Contact Sherayzen Law Office for Help With International Tax Issues
Hence, if you are searching for International Tax Lawyers Austin Texas, contact the international tax law team of Sherayzen Law Office (physically based in Minneapolis, MN). Our team of international tax professionals has developed deep expertise in international tax law based on the help that we have rendered to hundreds of US taxpayers worldwide.
So, if you have international tax issues with respect to undeclared foreign accounts, international tax compliance or international tax planning, please contact an experienced international tax attorney, Mr. Eugene Sherayzen of Sherayzen Law Office for comprehensive legal and tax help.
Call Us Today to Schedule Your Confidential Consultation!

### FBAR Lawyers Warn That 2014 FBAR is Due on June 30, 2015
2014 FBAR may be the most important (in terms of potential penalties) of all 2014 information tax returns. The FBAR is an abbreviation for the Report of Foreign Bank and Financial Accounts (the “FBAR”). The current official name of the FBAR is FinCEN Form 114 (prior to mandatory e-filing, Form TD F 90-22.1 was the FBAR).
Under the Bank Secrecy Act (31 U.S.C. §5311 et seq.), the Department of Treasury (the “Treasury”) requires that an FBAR is filed whenever a US person has a financial interest in or signatory authority over foreign financial accounts and the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. If you had such a situation in 2014, then you must seek an advice from an FBAR lawyer on whether you need to file the 2014 FBAR.
If you believe that the 2014 FBAR requirement applies in your case, then the 2014 FBAR must be e-filed with the IRS by June 30, 2015. There are no extensions available; the 2014 FBAR must be received by the IRS no later than June 30, 2015.
2014 FBAR Must Be Filed Timely and Accurately to Avoid Penalties
If your 2014 FBAR is not timely filed, then it will be considered delinquent and potentially subject to severe civil and criminal penalties. Similarly, if the 2014 FBAR is incomplete and/or incorrect, then it will also be considered delinquent with potentially an even higher probability of the assessment of the FBAR's draconian penalties.
Multiple Years of FBAR Delinquency and 2014 FBAR
If you were required to file the FBARs in prior years and you have not done so, you should seek advice of an experienced FBAR lawyer with respect to your voluntary disclosure options. In most cases, the failure to file FBARs in the past should not deter you from filing your 2014 FBAR timely; however, this filing should be done in conjunction with your voluntary disclosure strategy as outlined by your FBAR lawyer.
Contact Sherayzen Law Office for 2014 FBAR Assistance
If you need help with filing your 2014 FBAR or you have multiple years of FBAR delinquency and wish to bring your US tax affairs into full compliance, contact owner Eugene Sherayzen an experienced FBAR lawyer of Sherayzen Law Office as soon as possible. We have helped hundreds of US taxpayers around the world to lower their FBAR penalties and bring themselves into full compliance with US tax laws. And, we can help You!
Contact Us NOW to Schedule Your Confidential Consultation!

### Introduction to US International Tax Anti-Deferral Regimes
Despite their enormous importance to tax compliance, there is a shocking level of ignorance of the US international tax anti-deferral regimes that is being displayed by US taxpayers, foreign bankers, foreign accountants, foreign attorneys, US accountants and even many US tax attorneys. In this article, for educational purposes only, I would like to provide a brief overview of the history and features of the main US international tax anti-deferral regimes.
What is a US International Tax Anti-Deferral Regime?
A US international tax anti-deferral regime is a set of US tax laws designed to prevent US taxpayers from utilizing various offshore strategies to defer US taxation of their income for a period of time or indefinitely.
Three Main US International Tax Anti-Deferral Regimes
Since 1937, there have been three main US international tax anti-deferral regimes: Foreign Personal Holding Company (“FPHC”) rules, subpart F rules, and PFIC rules. Let’s review the brief history and main features of each of these US international tax anti-deferral regimes.
First US International Tax Anti-Deferral Regime: FPHC
In 1937, the Congress for the first time addressed the offshore investment strategy problems by enacting the FPHC regime, which were designed to contemporaneously (i.e. in the year the income was earned) tax certain types of foreign corporations. In particular, FPHC rules targeted foreign corporations that had substantial investment income (i.e. passive income) compared to active business income – i.e. the FPHC rules effectively treat certain corporations as pass-through companies for the purposes of certain categories of passive income..
The FPHC rules were triggered only if both conditions of the then-Code §552(a) were satisfied. First, at least 60% of a foreign corporation’s gross income from the taxable year had to consist of “foreign personal holding company income”. The FPHC income included interest income, dividends, royalties, gains from the sale of securities or commodities, certain rents and certain income from personal services provided by shareholders of the FPHC. This was called the “income test”.
The second condition of the §552(a) was known as the “ownership test”. The ownership test was satisfied if at least 50% of either the total voting power or total value of the stock of the foreign corporation was owned by 5 or fewer individuals who were citizens or residents of the United States.
Despite the appearances, the FPHC regime was not very effective. It was actually not very hard to work around the FPHC rules with careful and creative tax planning. This is why, after the enactment of the Subpart F rules and the PFIC rules (which addressed some of the main inefficacies of the FPCH rules and made them redundant as a US international tax anti-deferral regime), the FPHC regime was finally repealed in the year 2004.
Second US International Tax Anti-Deferral Regime: Subpart F Rules
The second US international tax anti-deferral regime, the Subpart F rules, was enacted in 1962 and, despite numerous amendments, forms the core of the anti-deferral rules with respect to Controlled Foreign Corporations (“CFCs”). It is definitely one of the most important and complex pieces of US tax legislation.
The most important feature of the Subpart F regime is that it greatly expands the scope of the former FPHC regime by expanding the contemporaneous (i.e. pass-through) taxation to a much broader range of income and activities, including many kinds of active business activities as well as passive investment activities of a foreign corporation. Obviously, the focus of this US international tax anti-deferral regime is still on passive income or attempts to disguise passive income as active income.
Third US International Tax Anti-Deferral Regime: PFIC Rules
The third US international tax anti-deferral regime consists of the passive foreign investment company (“PFIC”) rules that were adopted by US Congress in 1986. Perhaps because it is the youngest of all US international tax anti-deferral regimes, the PFIC regime is more aggressive and less forgiving than Subpart F rules or FPHC regime. A lot of innocent taxpayers have fallen victims to this severe law.
The PFIC rules impose a unique additional US income tax in two circumstances: where (1) there is a gain on the disposition of the PFIC stock by the US person; or (2) there are PFIC distributions that are considered “excess distributions”. The PFIC rules also impose an additional PFIC interest (calculated similarly to underpayment interest) on the PFIC tax.
The definition of a PFIC is in some ways reminiscent of FPHC rules, but the PFIC regime is a lot more aggressive. Generally, a PFIC is any foreign corporation if it meets either the income tax or the assets test. The income tax is met if 75% of a foreign corporation’s gross income is passive; the assets test is satisfied if at least an average of 50% of a foreign corporation’s assets produce passive income.
Notice that the PFIC rules apply irrespective of the US ownership percentage of the company. This elimination of the FPHC and Subpart F ownership rules makes PFIC rules a much more comprehensive US international anti-deferral tax regime, because it is very easy to trigger PFIC rules – a lot of US naturalized citizens and permanent residents fall into the PFIC trap by simply owning foreign mutual funds as part of their former home countries’ investment portfolio.
Contact Sherayzen Law Office for Professional Help With Dealing with US International Tax Anti-Deferral Regimes
If you have an ownership interest in a foreign business or have foreign investments, you may be facing the extremely complex rules of US international tax anti-deferral regimes.
Please contact Mr. Eugene Sherayzen, an experienced international tax attorney at Sherayzen Law Office. Our international tax firm has helped hundreds of clients around the globe and we can help you!
Contact Us Today to Schedule Your Confidential Consultation!

### US International Tax Attorney On The Necessity of Anti-Deferral Regimes
As a US international tax attorney, I am fully aware of the crucially important role that the US international tax anti-deferral regimes (the Subpart F rules and PFIC rules) play in the Internal Revenue Code. Yet, the enormous complexity of the US international anti-deferral regimes often makes some people wonder about why we even have them.
As a US international tax attorney, I feel that it is important to educate the general public about the necessity of the anti-deferral regimes and how this necessity is deeply grounded in our tax system. I also wish to address here the issue of why the US anti-deferral regimes are so complex.
US International Tax Attorney: Anti-Deferral Regimes are a Natural Product of Our Tax System
The anti-deferral regimes is a natural legislative response to the anti-deferral strategies that originate from the deep policy contradictions that form the core of the US tax system. The most important of these contradictions arose from the recognition of income rules.
Generally, the US government imposes an income tax only when income is “recognized.” The recognition rules are complex, but there is a basic asymmetry in the treatment of individuals and corporation. On the one hand, US citizens are taxed on their worldwide income which is usually (though, with important exceptions) recognized when it is earned.
On the other hand, in general and without taking into account any anti-deferral regimes, the individuals are not be taxed on the corporate income (even if this is a one-hundred percent owned corporation) until: (a) the income is distributed (for example, as a dividend), or (b) the shares of the corporation are sold.
In the past, US international tax attorneys would combine these rules with the fact that, in general, foreign corporation would not be subject on foreign-source income earned outside of the United States, to build an effective investment strategy – contribution of all investment assets to a foreign corporation in order to avoid current US taxation of the taxpayers’ investment income. If a US international tax attorney was able to extend this strategy indefinitely, then it brought his clients benefits almost as valuable as not paying taxes at all.
Obviously, such an indefinite offshore deferral of US taxation of otherwise taxable income was not considered consistent with the fundamental goals and policies of US government. This is why the US Congress deemed it necessary to enact various anti-deferral regimes to combat offshore tax avoidance.
US International Tax Attorney: Why Are There Two Anti-Deferral Regimes Instead of One?
Even a US international tax attorney would agree that having multiple esoteric anti-deferral regimes with complex interrelationship between each other cannot be the best way to combat offshore tax avoidance investment strategies. Yet, this is our present reality and it is important to understand why this is the case.
There are four reasons for having multiple anti-deferral regimes. First, the US Congress did not create all of the anti-deferral regimes at the same time. Rather, the anti-deferral regimes appeared gradually over time with multiple amendments and shifting IRS interpretations.
Second, undoubtedly, the political influence of various lobbies with competing policies has greatly hampered the creation of a more transparent anti-deferral regime and elimination of many loopholes and exceptions.
Third, as I explained above, the offshore investment policies arose from the basic contradiction between different income recognition rules of the Internal Revenue Code. This contradiction in itself necessitates a more complex approach to combating any strategies of US international tax attorneys that seek to exploit it. It is difficult to do so with only one anti-deferral regime.
Finally, the combination of the sheer complexity of international commerce, conflicting policy priorities (for example, Congress does not want to stifle the US companies’ ability to compete overseas just for the purpose of completely closing off some offshore investments) and the great variety of various fact patterns makes it virtually impossible to address the offshore investment strategies in a simple way. This factor partially explains why there is such a variety of international tax rules that form part of the anti-deferral regimes.
Contact Sherayzen Law Office for Help with Anti-Deferral Regime Compliance and Planning
If you are a US person who owns a foreign business or foreign brokerage accounts, you are very likely to run into either Subpart F rules or PFIC rules. At this point, the extremely complex nature of these anti-deferral regimes makes it a reckless gamble to attempt to conduct business overseas without an advice from an experienced US international tax attorney.
This is why you should contact the experienced US international tax professionals of Sherayzen Law Office. We have helped clients around the globe to comply with and plan for the US anti-deferral regimes, and we can help you!
So, Contact Us Today to Schedule Your Initial Consultation!

### FATCA Compliance Presents Challenges for Hedge Funds
The Foreign Account Tax Compliance Act (FATCA) created a worldwide international tax compliance regime that has influenced more industries than simply foreign financial institutions. FATCA compliance presents a formidable challenge even to hedge funds.
FATCA Compliance Challenges for Hedge Funds
The challenges that FATCA compliance poses to hedge funds is best understood by analyzing what FATCA compliance requires of hedge funds – a multi-group coordination effort from various divisions within a business enterprise: business, operations, technology, finance and compliance.
The compliance department, most likely with the cooperation of the in-house counsel (and outside counsel who specializes in FATCA compliance, if in-house counsel lacks such knowledge) should lay out the FATCA compliance goals and make sure that the FATCA compliance process complies with these goals. The operations division should create the framework for the FATCA compliance process, including how this process should be controlled and managed for tax reporting and tax withholding purposes. The technology division needs to build the IT infrastructure to address the technological challenges of FATCA goals in a cost-effective way. The members of the business division (which incorporates the actual customer intake) should be thoroughly educated in the FATCA compliance process as well as the company’s specific IT solutions.
When this FATCA compliance process is applied to the hedge fund industry, one can clearly see the numerous challenges that the hedge funds face in the implementation of their FATCA compliance. The hedge funds need to register their funds for FATCA on the IRS portal, gather various investor data with respect to numerous (and often changing) customers, review and assess such data, and properly report customer data to the IRS.
Another challenge for hedge funds is the required tax withholding. Unlike previous attempts at international tax legislation, FATCA has very effective enforcement mechanisms which forces all US banks, brokers and financial institutions to essentially work for the IRS, including withholding taxes. In fact, the hedge funds that deal in US dollars are likely to be subject to the withholding tax requirement at an increasing rate in the near future.
However, the tax withholding challenge for hedge funds goes far beyond the more straightforward fact that it will need to withhold tax. Rather, the biggest headache for hedge funds is the identification of the beneficial owners and controlling persons of their clients. A lot of investors in hedge funds operate through unregulated legal vehicles or individual agents; this fact makes the FATCA data collection process a much more difficult challenge for hedge funds.
Finally, the variations in IGAs to implement FATCA present an additional challenge. While this problem is not specific to hedge funds, it is the one that they still have to manage.
Impact of FATCA Compliance By Hedge Funds On US Taxpayers
Despite these challenges, many hedge funds are successfully addressing FATCA compliance issues and are incorporating advanced software solutions to make their look-through process more efficient.
These successes of hedge funds in their FATCA compliance make it difficult for US persons investing in mutual funds through foreign entities to conceal their ownership of these entities. This means that one can expect an increase of the IRS discovery of such investors.
If these investors are not in full compliance with their US tax obligations – particularly with respect to FBAR, Form 8938, foreign business ownership reporting, foreign trust ownership and foreign income disclosure – they may be facing catastrophic US tax consequences, including draconian FBAR willful penalties as well as potential imprisonment.
Contact Sherayzen Law Office for Help With Undisclosed Foreign Assets and Income
If you have undisclosed foreign assets or foreign income, please contact Sherayzen Law Office as soon as possible. After reviewing the facts of your case and analyzing the available voluntary disclosure options, Mr. Sherayzen will conduct your voluntary disclosure process from the beginning through the end, including the preparation all of the required legal documents and tax forms.
Contact Us to Schedule Your Confidential Consultation Now!

### Main Differences between Model FATCA IGAs
As FATCA is being adopted by more and more countries, it is important to understand that there are two types of model FATCA IGAs (i.e. intergovernmental agreements to implement FATCA) that are signed between various countries and the United States. Both model FATCA IGAs were issued by the US Treasury Department and both model FATCA IGAs are perfectly valid, but some countries prefer one model FATCA IGA over the other. In this article, I would like briefly discuss the main differences between the two model FATCA IGAs.
Model FATCA IGAs Background
FATCA (Foreign Account Tax Compliance Act) was enacted by US Congress in 2010 to target tax non-compliance of U.S. taxpayers with foreign accounts. Since that time, this law has established the global standard for promoting tax transparency and has been adopted by a very large number of countries around the globe.
The adoption of FATCA usually occurs as a two-step process. First, a foreign jurisdiction signs one of the two model FATCA IGAs with the IRS. Second, the foreign jurisdiction’s legislature modifies domestic law to implement the provisions of whatever one of the two model FATCA IGAs that the country signed.
Model FATCA IGAs: Model 1
The first of the two Model FATCA IGAs is called “Model 1IGA”. Its principal feature is that it requires foreign financial institutions (FFIs) to report all information required under FATCA to their domestic government tax agencies. The domestic tax agencies would collect all of the FATCA information and turn it over of the IRS.
Since the FFIs would do all of their reporting domestically to their own agencies, Model 1 IGA is sometimes negotiated as a reciprocal agreement. This means that some Model 1 IGAs require the IRS to provide certain information with respect to the tax residents of the country that signed such a reciprocal Model 1 IGA.
Finally, the FFIs covered by a Model 1 IGA do not need to sign an FFI agreement. However, the FFIs will still need to register on the IRS’s FATCA Registration Portal or file IRS Form 8957.
Model FATCA IGAs: Model 2
The second of the two Model FATCA IGAs is called “Model 2 IGA”. Unlike the other model IGA, Model 2 IGA requires FFIs to report the FATCA-related information directly to the IRS and without any intermediaries.
Since the FFIs report all FATCA-related information directly to he IRS, they need to register with the IRS and sign an FFI agreement (which should reflect the specific changes to the model FATCA IGAs negotiated by the foreign jurisdiction).
Both Model FATCA IGAs Lead to Disclosure of Foreign Accounts Held by US Persons
Irrespective of the type of the agreement, it is important to remember that both model FATCA IGAs are designed to perform the same function – disclosure of foreign accounts held by US persons (directly or indirectly). This means that the spread of both types of model FATCA IGAs presents a direct threat to any undisclosed foreign accounts of US persons with potentially catastrophic consequences for these US persons, including potential criminal prosecution and willful FBAR penalties in excess of the balances of these secret accounts.
Contact Sherayzen Law Office for Help with Undisclosed Foreign Accounts
If you have undisclosed foreign accounts, please contact Sherayzen Law Office as soon as possible. Our international tax lawyers will first carefully review the facts of your case and identify the best voluntary disclosure options available to you.  Our international tax professionals will conduct your voluntary disclosure process from the beginning through the end, including the preparation all of the required legal documents and tax forms.
Contact Us Now to Schedule Your Confidential Consultation!

### Prison Sentence for Quiet Disclosure: the Kaminsky Case
On March 4, 2015, Gregg A. Kaminsky, a former UBS client, was sentenced for willfully failing to file a Foreign Bank Account Report (the “FBAR”) with the U.S. Department of Treasury in connection with his concealment of income and assets in accounts in Switzerland, Hong Kong, and Thailand over several years, as well as his failure to report certain income earned in the virtual world, “Second Life.”
“Federal tax revenue is crucial to protecting our borders; fighting terrorism, cybercrime, and other national security threats; providing disaster relief; and to performing other critical government functions,” said Acting U. S. Attorney John Horn. “This office is committed to investigating and prosecuting those who intentionally avoid paying their fair share, whether their schemes involve income earned or hidden offshore, here at home, or even in a virtual world.”
“U.S. citizens who seek to avoid their tax obligations by hiding income in undeclared bank accounts abroad should by now be fully on notice that they will be held accountable for their actions, both civilly and criminally,” stated IRS Criminal Investigation Special Agent in Charge, Veronica F. Hyman-Pillot. “Americans who file accurate, honest and timely returns can be assured that the government will hold accountable those who don't.”
Facts of the Case
According to Acting U.S. Attorney Horn, the charges and other information presented in court:
Kaminsky was an Internet entrepreneur who served as the Chief Executive Officer of Circlenet LLC, based in Atlanta, Georgia. From 2000 through mid-2009, Kaminsky owned and controlled a foreign bank account with Union Bank of Switzerland AG (“UBS”). By 2006, Kaminsky’s UBS account held approximately $1.1 million. From time to time between 2002 and 2009, Kaminsky caused funds to be wire-transferred from his UBS account in Switzerland to other foreign bank accounts controlled by him in Thailand and Hong Kong. Also during that time, Kaminsky caused his income from at least two different U.S. companies to be direct-deposited into his UBS account in Switzerland.
Yet, over this period, Kaminsky did not disclose his UBS account or other foreign financial accounts to the U. S. Treasury Department as required, and thereby concealed several hundred thousand dollars in taxable income, interest, and dividends from the U.S. Internal Revenue Service (IRS).
In addition, in 2007 and 2008, Kaminsky omitted his UBS account and associated income from Free Applications for Federal Student Aid (FAFSA) that he electronically filed with the U.S. Department of Education in order to qualify for need-based federal financial aid to fund his tuition for an Executive MBA program at Emory University. At the time of the FAFSA applications, Kaminsky controlled over a half million dollars in his UBS account, which would have made him ineligible for federal student loan assistance.
On June 30, 2008, the U.S. Department of Justice sought court approval to compel UBS to disclose the identities of U.S. account holders who may be using UBS accounts to hide assets overseas and thereby evade U.S. taxes. The request and the order authorizing it were widely reported by the media throughout the United States, and this coverage continued throughout 2008 and 2009 as the U.S., UBS, and Switzerland negotiated a resolution and UBS began disclosing U.S. account holders to the IRS.
Following this news, Kaminsky closed his UBS account and transferred the balance of his UBS account to an account that he controlled at HSBC Bank in Hong Kong. Further, in spring 2010, Kaminsky filed FBARs for his Swiss and Hong Kong accounts for the very first time, also filing amended individual income tax returns for 2007 and 2008 that disclosed the previously unreported income in his UBS account. However, in his amended 2007 and 2008 returns, and in his subsequently filed returns for 2009 through 2012, Kaminsky still failed to report nearly $150,000 in taxable income earned from his business activities in the virtual world, “Second Life.”
Participants in Second Life, referred to as “residents,” can engage in a wide variety of business activities, including buying, renting, and sub-leasing virtual land and buying and selling other virtual goods, services, and experiences for their “avatars.” Transactions are conducted using a virtual currency, “Linden Dollars.” Linden Dollars can be bought and traded on the “Linden Exchange,” and are redeemable for cash.
Including his virtual world income, Kaminsky failed to report over $400,000 in income to the IRS between 2000 and 2012, resulting in a loss to the IRS of approximately $125,000.
Kaminsky’s Sentence
Kaminsky was sentenced to serve four months in federal prison to be followed by two years of supervised release, two months of home confinement, and 200 hours of community service. Kaminsky was also ordered to pay restitution to the IRS in the amount of $91,983. Kaminsky was convicted on these charges on December 18, 2014, after he pleaded guilty. As part of his plea agreement with the United States, Kaminsky was also required to pay a civil penalty to the IRS in the amount of $250,635.20, which is equivalent to fifty percent of the value of the balance in Kaminsky’s HSBC account in Hong Kong as of June 30, 2009.
Lesson from the Kaminsky’s Case - the Dangers of Attempting Incomplete Quiet Disclosure
Kaminsky’s case is a good illustration of my last year’s article on the how quiet disclosure in the current enforcement environment can be a very dangerous option. Kaminsky amended two tax returns and disclosed income from his UBS account for those two years and filed the FBARs for 2009. This was a fairly standard way of doing quiet disclosure, but it could not in any form qualify as a voluntary disclosure – and Kaminsky paid dearly for this attempt.
However, there is another important lesson of Kaminsky’s case for the persons who intend to engage in a voluntary disclosure – you cannot do a partial voluntary disclosure. Kaminsky failed to report his worldwide income on his amended tax returns – he only reported income that was directly relevant to the foreign accounts. Failure to submit complete and accurate amended tax returns undoubtedly contributed to the criminal sentence in this case.
Contact Sherayzen Law Office for Help with Conducting Proper Voluntary Disclosure
If you have undisclosed foreign accounts and foreign income, contact Sherayzen Law Office for professional legal and tax help. Our international tax lawyer, Mr. Eugene Sherayzen will thoroughly analyze your case and advise you on your voluntary disclosure options. Once you choose your voluntary disclosure path, our firm will prepare all of the necessary documents and legal forms, and conduct your voluntary disclosure in a proper and expeditious manner.
We have helped hundreds of US taxpayers around the globe, and we can help you. So, Call Us Now to Schedule Your Confidential Consultation!

### The Long Reach of the FATCA Letter Notice
The FATCA Letter Notice is a critical component of a FATCA Letter that is causing significant problems for millions of US owners of foreign financial accounts. Yet, a lot of the FATCA letter recipients are completely unaware of the full impact of the FATCA Letter Notice. In this article, I will provide a general explanation of the FATCA Letter Notice and its importance to US owners of foreign bank and financial accounts.
What is a FATCA Letter?
When FATCA was implemented in July of 2014, foreign banks and financial institutions (“FFIs”) started to mail letters to their clients aimed to verify information required for the FFI reporting under FATCA. These letters are called “FATCA Letters”.
The FATCA Letters serve two important functions for the FFIs. First, the questions contained in or referred to by a FATCA Letter are designed to help FFIs verify whether the account holder is a US person. Second, the FATCA Letter is designed to give notice to the US account holders that their accounts will be disclosed to the IRS.
In this article, I will concentrate only on the FATCA Letter Notice and its most significant impact on US taxpayers.
The FATCA Letter Notice
Very few people understand that the there is not just one FATCA Letter Notice, but two different FATCA Letter Notices that serve different functions – the express FATCA Letter Notice and the implicit FATCA Letter Notice. The express FATCA Letter Notice is the official notice with respect to the FFI’s own FATCA compliance. The implicit FATCA Letter Notice is the notice forced upon the US account holders with respect to their US tax compliance.
The Express FATCA Letter Notice
The express FATCA Letter Notice is very simple - the FFI puts the US account holder on notice that his or her account will disclosed to the IRS. This means that the FFI has complied with its due diligence requirements for the US tax purposes as well as the local bank privacy purposes.
The express FATCA Letter Notice is the one that most US taxpayers understand and the one that they are most concerned about. This is understandable because the express FATCA Letter Notice tells US account holders that their accounts will be disclosed to the IRS irrespective of whether the account holders want this disclosure and whether the timing of this disclosure is convenient to them.
The Implicit FATCA Letter Notice
The implicit FATCA Letter Notice consists of the forcing upon the US account holder the knowledge of their past non-compliance with US tax laws. This “forcing” element is accomplished by the FATCA Letter’s statements that all foreign accounts owned by US persons must be disclosed to the IRS by these very persons. As soon as he receives a FATCA Letter, the US person is on notice that his foreign accounts are subject to complex US tax compliance rules and, if it turns out that these accounts were never properly disclosed, he is non-compliant with respect to past filings. In essence, this is a “shock therapy” method of inducing US tax compliance.
This implicit FATCA Letter Notice of past US tax non-compliance is very dangerous for three interrelated reasons. First, it forces the US recipient of a FATCA Letter to conduct current year’s tax compliance to avoid willful non-compliance designation. The current year’s compliance is done irrespective of the recipient’s circumstances and his ability to do so. At the same time, it provides the IRS with the information that this US person owns foreign financial accounts that were never reported previously.
Second, the receipt of the FATCA letter means that the US account holder should promptly take the necessary steps to conduct some form of an offshore voluntary disclosure. Failure to take these steps or a significant delay in conducting a voluntary disclosure may result in the IRS investigation and the account holder’s inability to conduct a voluntary disclosure. Moreover, the delayed reaction to the FATCA Letter Notice may strengthen the IRS case for arguing willful non-compliance with respect to any delinquent FBARs and any other information returns.
Finally, since the US taxpayer is forced to react swiftly to the implicit FATCA Letter Notice (due to the other two factors described above), his ability to choose the right path of his voluntary disclosure may be constrained by the lack of the necessary documentation or knowledge of other important facts. With the changes that the IRS implemented with respect to the 2014 OVDP (now closed), SDOP and SFOP, it is important to remember that engaging in one form of a voluntary disclosure may result in the subsequent inability to switch to another voluntary disclosure path.
Contact Sherayzen Law Office for Help With Your FATCA Letter
As you can see, receiving a FATCA Letter Notice is an event of potentially important implications. An inadequate response to a FATCA Letter Notice may have a highly deleterious effect on the US account holder’s ability to conduct voluntary disclosure (which means facing the draconian FBAR civil and criminal penalties) or choose the right type of voluntary disclosure.
This is why, if you received a FATCA Letter, contact Sherayzen Law Office for help immediately. Our experienced international tax law firm has helped hundreds of US taxpayers like you to bring their US tax affairs into full compliance with US tax laws, and we can help you as well.
So, Contact Us Now to Schedule Your Initial Consultation! Remember, contacting Sherayzen Law Office is Confidential.

### The IRS Onslaught Against Bank Leumi Clients Continues: The Fogel Case
On February 2, 2015, one of Bank Leumi clients, Dr. Baruch Fogel of Laguna Beach, California, pleaded guilty today in the U.S. District Court for the Central District of California to willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR) for tax year 2009. In this article, I would like to explore some of the most pertinent facts of the Fogel Case and analyze this case in the context of the continuous IRS onslaught against Bank Leumi clients.
The Facts and Outcome of the Fogel Case
According to court documents, Fogel, a U.S. citizen, maintained an undeclared bank account held in the name of a foreign corporation at the Luxembourg branch of Bank Leumi. The undeclared foreign bank account and foreign corporation were set up with the assistance of David Kalai, a tax return preparer who owned United Revenue Service (URS). In December 2014, David Kalai and his son, Nadav Kalai, were convicted in the Central District of California of conspiracy to defraud the United States for helping certain URS clients set up foreign corporations and undeclared bank accounts to evade U.S. income taxes and for willfully failing to file FBARs for an undeclared foreign account that they controlled.
According to court documents and evidence introduced at the trial of David and Nadav Kalai, Fogel was a doctor who operated several managed health care businesses. David Kalai suggested to Fogel that he could reduce his taxes by transferring money to a foreign bank account held in the name of a foreign corporation. David Kalai advised Fogel to open up the bank account that was set up in the name of a British Virgin Islands corporation. At a meeting facilitated and attended by David Kalai at the Beverly Hills branch of Bank Leumi, Fogel executed documents to open his Luxembourg bank account at Bank Leumi, becoming one of the many Bank Leumi clients to do so. According to court documents, Fogel diverted at least $8 million to his undeclared bank account at Bank Leumi’s branch in Luxembourg.
Fogel has agreed to pay a civil penalty in the amount of approximately $4.2 million to resolve his civil liability with the IRS for failing to file FBARs. Fogel faces a statutory maximum sentence of five years in prison and a maximum fine of $250,000 or twice the gross gain or loss to any person, whichever is greater.
IRS Recent Onslaught Against Bank Leumi Clients Continues
The Fogel Case is another example of the recent IRS series of victories against former Bank Leumi clients. It is also a direct fallout of the Kalai Case (David Kalai worked with a number of Bank Leumi clients). Bank Leumi itself already admitted late last year to helping its US customers evade income taxes and hide assets.
Bank Leumi Clients and Clients from Other Israeli Banks Should Expect Continuous Pressure from the IRS
With the information already disclosed by other Bank Leumi clients to the IRS as part of their voluntary disclosures through 2011 OVDI, 2012 OVDP and 2014 OVDP, it becomes clear that the IRS has gathered sufficient evidence to investigate and successfully prosecute other Bank Leumi clients, current and former. Bank Leumi itself also agreed to help DOJ efforts against its Bank Leumi clients. It appears that this IRS onslaught against Bank Leumi clients is likely to affect disproportionately the Jewish communities in New York, California and Florida.
However it is not only the Bank Leumi clients that should be worried; as part of its deal with the US Department of Justice, Bank Leumi is required to help the DOJ investigations of other Israeli banks. Given the fact that Bank Leumi is the second largest bank in Israel, one can expect that the information provided by Bank Leumi and Bank Leumi clients is likely to affect all major banks in Israel.
Voluntary Disclosure Options Should Be Explored by Bank Leumi Clients and Clients of Other Israeli Banks
The Fogel case is a somber reminder to Bank Leumi clients that time is running out. For Bank Leumi clients with undisclosed foreign accounts, there is now a high chance of an IRS investigation, imposition of civil penalties and even of criminal prosecution.  Hence, it appears that the best course of action of the Bank Leumi clients and customers of other Israeli banks is to explore their voluntary disclosure options as soon as possible.
Contact Sherayzen Law Office for Help With Your Undisclosed Israeli Accounts
If you have undisclosed foreign financial accounts and other foreign assets in Israel or through an Israeli bank (and especially if you are one of the Bank Leumi clients), contact Sherayzen Law Office for professional legal and tax help as soon as possible.
Once our experienced international tax law firm will review the facts of your case and recommend the voluntary disclosure options available in your case; you will be able to choose the voluntary disclosure option that best appeals to you. We will then prepare all of the necessary legal documents and tax forms, and Mr. Sherayzen will personally negotiate the final settlement of your case with the IRS, bringing you into full US tax compliance.
So, Contact Us Now to Schedule Your Confidential Consultation!

### Who is Required to File IRS Form 1041
IRS Form 1041 (“U.S. Income Tax Return for Estates and Trusts”) is used by a fiduciary of a domestic decedent's estate, trust, or bankruptcy estate for a number of important reporting reasons. It is utilized to report income, deductions, gains, losses, and related items of an estate or trust; income that is either accumulated or held for future distribution or distributed currently to its beneficiaries; any income tax liability of the estate or trust; and employment taxes on wages paid to household employees. (It is also used to report the Net Investment Income Tax from Form 8960, line 21, on the Tax Computation section under Schedule G).
This article will cover the basics of who is required to file IRS Form 1041 for decedent's estates and trusts in general; it is not intended to convey tax or legal advice. If you have further questions regarding filing IRS Form 1041, please contact Sherayzen Law Office, Ltd.
Who Must File IRS Form 1041?
In general, the fiduciary (or one of the joint fiduciaries) for a decedent's domestic estate must file IRS Form 1041 if the estate has gross income for the tax year of $600 or more, or if it has a beneficiary who is a nonresident alien.
An estate is considered to be a “domestic” estate if it is not a foreign estate; a foreign estate is one in which its income is from sources outside the United States that is not effectively connected with the conduct of a U.S. trade or business, and is not includible in gross income. Note that fiduciaries of foreign estates file Form 1040NR, U.S. Nonresident Alien Income Tax Return, rather than IRS Form 1041.
In addition, the fiduciary (or one of the joint fiduciaries) of domestic trusts that are taxable under Internal Revenue Code (“IRC”) Section 641 must file the form if the trust has any taxable income for the tax year, if it has gross income of $600 or more (regardless of whether it has taxable income), or if it has a beneficiary who is a nonresident alien.
A trust is considered to be “domestic” if a U.S. court is able to exercise primary supervision over the administration of the trust (the “court test”), and one or more U.S. persons have the authority to control all substantial decisions of the trust (the “control test”). Additionally, a trust may be treated as a domestic trust (other than a trust treated as wholly owned by the grantor) if it was in existence on August 20, 1996, was treated as a domestic trust on August 19, 1996, and elected to continue to be treated as a domestic trust.
Trusts that are not considered to be domestic trusts will be deemed foreign trusts, and the trustees for such trusts file Form 1040NR instead of IRS Form 1041, and a foreign trust with a U.S. owner may also be required to file Form 3520-A, (“Annual Information Return of Foreign Trust With a U.S. Owner”). Further, if a domestic trust becomes a foreign trust, it will be treated as having transferred all of its assets to a foreign trust, except to the extent that a grantor or another person is treated as being the owner of the trust when the trust becomes a foreign trust (See IRC Section 684 for more information).
Contact Sherayzen Law Office for Help With the IRS Form 1041, Estate and Trust Tax Compliance
Tax compliance for trusts and estates often involves many complex issues, and you are advised to seek the advice of a tax attorney. Eugene Sherayzen, an experienced international tax attorney of Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.

### 2015 UBS Probe Poses Threat to US Owners of Undisclosed UBS Accounts
This week, UBS Group AG confirmed that it was under a new investigation over whether the Switzerland bank sold unregistered securities to US taxpayers in violation of US law. This article will discuss the new UBS probe and the threat it poses to US owners of undisclosed UBS accounts who never went through an offshore voluntary disclosure. This article is not intended to convey tax or legal advice.
Prior Investigations and 2009 Deferred-Prosecution Agreement
The 2015 bearer bond investigation of UBS is the latest in the series of DOJ investigations of UBS. Previously, in 2009, as a result a landmark DOJ victory that started the today’s rout of bank secrecy laws throughout the world, UBS paid a $780 million dollar fine and disclosed 250 previously undisclosed UBS accounts of US taxpayers to the DOJ (some of the owners of these undisclosed UBS accounts were later criminally prosecuted by the IRS). The bank promised that it would be compliant with US law under its deferred-prosecution agreement with the DOJ. The agreement expired in October, 2010. This was a critical agreement for the US owners of undisclosed UBS accounts, and we will come back to this subject below.
In addition to the deferred-prosecution agreement in 2009, UBS also settled an antitrust case in 2011 concerning the municipal-bond investments market, and resolved a 2012 DOJ investigation involving alleged rigging of the London interbank offered rate (Libor). UBS was granted an agreement to extend the term of its non-prosecution deal in the latter investigation until later this year. Additionally, in a probe not involving the DOJ, UBS paid US, UK and Swiss authorities nearly $800 million in November to settle allegations that they did not have satisfactory controls to prevent traders from attempting to rig Forex dealing.
The DOJ also has reportedly also opened a new investigation concerning certain currency-linked structured products sold by UBS. International tax attorneys who worked with undisclosed UBS accounts for their US clients in the past know how common it was for UBS to sell these products to their US clients.
The 2015 UBS Investigation
As noted above, the new investigation is being conducted by the U.S. Attorney's Office for the Eastern District of New York and from the U.S. Securities and Exchange Commission. UBS stated in its fourth-quarter report, "In January 2015, we received inquiries from the U.S. Attorney's Office for the Eastern District of New York and from the U.S. Securities and Exchange Commission, which are investigating potential sales to U.S. persons of bearer bonds and other unregistered securities.” UBS added that it was cooperating with the authorities in the probes. According to various new sources, the bank is also being probed as to whether the alleged sales occurred while the bank was under DOJ supervision from its earlier 2009 tax evasion case.
Bearer bonds can be redeemed by anybody physically holding them. Because of the ease with which these instruments can be transferred, they are a potentially useful tool for enabling individuals to hide assets and evade taxes. While bearer bonds were not deposited on undisclosed UBS accounts, some US owners of undisclosed UBS accounts were owners of these unregulated instruments.
Undisclosed UBS Accounts and the 2015 UBS Investigation
According to various sources, if UBS is found to have breached the agreement by selling the unregistered bearer bonds to US persons in violation of US law during the time period in which the agreement was still in effect, it is possible that the DOJ will prosecute the bank under the original conspiracy charge, in addition to filing new charges and penalties.
The significance of this scenario lies in the fact that there may still be US taxpayers with undisclosed UBS accounts (whether owned directly, indirectly or constructively). Many of these taxpayers were trying to hide in the relative safety of the UBS 2009 Deferred-Prosecution Agreement, hoping that the worst was over for UBS.
Moreover, because UBS was classified as a Category 1 bank, it could not participate in the DOJ Program for Swiss Banks. This gave a wrong type of encouragement to some US owners of undisclosed UBS accounts not to come forward and go through a voluntary disclosure program.
In reality, however, due to the fact that UBS was the first bank that succumbed to the pressure from the US DOJ and disclosed previously undisclosed UBS accounts owned by US persons, the DOJ’s deal with UBS was relatively mild compared to the later penalties on other large Swiss Banks (such as Credit Suisse). Hence, there is a great incentive for the DOJ to re-open the investigation into UBS to force the bank to pay an amount equivalent to its other Swiss peers.
This means that, if the 2015 investigation is successful and the DOJ can get around the 2009 Deferred-Prosecution Agreement, the UBS may, in a new deal with DOJ, conduct a wholesale disclosure of the US owners of undisclosed UBS accounts – not only the current owners, but also the US owners who had undisclosed UBS accounts in the years 2008-2010.
What Should the US Owners of Undisclosed UBS Accounts Do?
Thus, the 2015 DOJ investigation of UBS could have disastrous consequences for US persons who owned undisclosed UBS accounts between the years 2008 and the present time. The premature disclosure of undisclosed UBS accounts may foreclose very important voluntary disclosure options for the US owners of these undisclosed UBS accounts. The subsequent investigations by the IRS may result in draconian civil penalties and even criminal prosecutions.
This is why US persons who owned undisclosed UBS accounts should contact an experienced international tax attorney to discuss their voluntary disclosure options as soon as possible.
Contact Sherayzen Law Office for Help with Your Undisclosed Foreign Accounts
If you are have not disclosed your foreign accounts (including undisclosed UBS accounts) to the IRS, you are advised to immediately contact the experienced international tax law firm of Sherayzen Law Office, Ltd. For many years now, we have been helping US taxpayers like you to bring their US tax affairs into full compliance, and we can help you.
Contact Us to Schedule Your Initial Consultation! Remember, contacting Sherayzen Law Office is Confidential!

### IRS Form 14654 for Streamlined Domestic Offshore Procedures
IRS Form 14654 is probably the most important part of the taxpayer’s voluntary disclosure under the Streamlined Domestic Offshore Procedures (“SDOP”). In this article, I would like to explore the various parts of IRS Form 14654 and explain why this form is so important.
Please, note that IRS Form 14654 was just revised in January of 2015. (Note: Latest update is September of 2017).
SDOP and IRS Form 14654
In June of 2014, the IRS announced the creation of a brand-new voluntary disclosure option for the taxpayers who reside in the United States – SDOP. As part of the disclosure package under SDOP, the IRS required U.S. taxpayers to submit a Certification of Non-Willfulness with respect to the taxpayers’ failure to timely disclose their foreign income and assets. At the end of August of 2014, this Certification became the new IRS Form 14654.
Purpose of IRS Form 14654
IRS Form 14654 constitutes an essential part of SDOP because this is the form used by the taxpayer to certify his non-willfulness with respect to his failure to timely and accurately report his foreign income and assets. Moreover, IRS Form 14654 also functions as a convenient summary of the calculation of the income tax liability as well as the SDOP Title 26 Miscellaneous Offshore Penalty (“Miscellaneous Offshore Penalty”). Finally, IRS Form 14654 allows the taxpayer to make a statement in support of his non-willfulness.
In order to accomplish these multiple tasks, IRS Form 14654 incorporates three different parts: income tax summary, Miscellaneous Offshore Penalty calculation, and the Certification with Explanation of Non-Willfulness.
Let’s take a closer look at each of these three parts of IRS Form 14654.
IRS Form 14654: Income Tax Summary
The very first part of the Certification is with respect to income tax liability. There is a pre-set language in IRS Form 14654 that requires the taxpayer to certify that: he is providing amended tax returns for each of the three most recent years, he filed the original tax returns previously, and he properly calculated his additional tax due with statutory interest on IRS Form 14654.
There is already a self-calculating table in the form that allows the taxpayer to quickly summarize his additional income tax liability with statutory interest per each covered year and the total amount due (which should be included on the checks written to the IRS).
IRS Form 14654: Miscellaneous Offshore Penalty Base
The second part of the certification is concerned with the taxpayer’s calculation of the Miscellaneous Offshore Penalty, or more precisely its penalty base. IRS Form 14654 provides a set of self-calculating tables to be completed by the taxpayer for all of the foreign accounts and other assets subject to the Miscellaneous Offshore Penalty. Each table requires the taxpayer to disclose the financial institution with address and description of the asset, the account number (where applicable), when the account was opened or asset acquired, and the end-of-year balance/asset value in U.S. dollars.
If additional space is needed, my experience has been that it would be best to attach to IRS Form 14654 a detailed statement disclosing all of this information. Note, the attachment should contain the taxpayer’s name, TIN and original signature.
In addition to the Miscellaneous Offshore Penalty’s penalty base calculation, IRS Form 14654 already contains the language which states that the taxpayer already filed his FBARs for the past six years and he met all of the eligibility requirements for SDOP.
IRS Form 14654: Calculation of Payments Due
The next part of the certification requires the taxpayer to summarize all of the payments due – the calculation of the Miscellaneous offshore Penalty, the total due and the total interest due. At the end of this section, the taxpayer should add all of these payments together to equal to the “Total Payment” due.
IRS Form 14654: “Comprehensive Certification” and Explanation of Non-Willfulness
Following the completion of the payment calculations section, IRS Form 14654 turns to the most important part of a SDOP case – the certification of non-willfulness with respect to income, tax payments and information returns.
The actual language for the certification of non-willfulness is already provided by the IRS on IRS Form 14654; this is a standard text that the taxpayer must agree to if he wishes to do a SDOP disclosure (i.e. this language cannot be modified). It is very important for international tax lawyers to discuss this language with their clients to make sure that they understand what they are agreeing to.
In addition to providing the standard certification text, IRS Form 14654 requires the taxpayer to provide a statement of facts and specific reasons for the original failure to report all income, pay all tax and submit all required information returns, including FBARs.
Please, note that the January of 2015 revision of IRS Form 14654 specifically allows the taxpayer to provide the explanation not only on the form itself, but also on a separate signed attachment (this clarified a previous confusion over the statement must be provided on the form only). Moreover, the new revision specifically states that the failure to provide a narrative statement of facts will result in the certification being deemed incomplete and the taxpayer will not qualify for the SDOP penalty relief.
The explanation of non-willfulness is undoubtedly the most important part of IRS Form 14654, because here the taxpayer has a unique opportunity to establish his legal case for non-willfulness. If this explanation is not deemed satisfactory to the IRS, the taxpayer may face willful FBAR penalties, civil fraud penalties and potentially even criminal penalties (see note below on the certification under the penalty of perjury).
In fact, the explanation of non-willfulness is so crucial to the taxpayer’s SDOP case, that I strongly recommend that the taxpayer refrains from completing the Streamlined certification himself or letting his accountant to do it. This is the job only for the taxpayer’s international tax attorney.
IRS Form 14654: Signature under the Penalties of Perjury
The last part of certification requires the taxpayer to sign the Form under the penalties of perjury. By signing IRS Form 14654, the taxpayer is certifying (1) that he is eligible for the Streamlined Domestic Offshore Procedures; (2) that all required FBARs have now been filed; (3) that the failure to report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct; and (4) that the miscellaneous offshore penalty amount is accurate.
Contact Sherayzen Law Office for Help with IRS Form 14654 and Your Voluntary Disclosure Under the Streamlined Domestic Offshore Procedures
If you wish to do the voluntary disclosure of your foreign accounts under the Streamlined Domestic Offshore Procedures, contact Sherayzen Law Office for professional help. Despite the fact that SDOP only appeared last June and IRS Form 14654 was created at the end of August of 2014, our international tax law firm has already completed SDOP disclosures for a number of our clients, and we can also help you.
Contact Us to Schedule Your Initial Consultation! Remember, contact Sherayzen Law Office is Confidential!

### Treasury 2014 FBAR Currency Conversion Rates of December 31, 2014
According to the June 2014 FBAR currency conversion rates instructions published by FinCEN, in order to determine the maximum value of a foreign bank account, the Treasury’s Financial Management Service (still called so even though Financial Management Service was consolidated into the Bureau of the Fiscal Service within the Treasury Department) rates must be used. In particular, the 2014 FBAR currency conversion rates instructions state:
In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury's Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
The 2014 FBAR Currency Conversion rates are highly important for any international tax attorney who deals with FBARs.  For your convenience, Sherayzen Law Office provides a table of the official Treasury FBAR currency conversion rates below (keep in mind, you still need to refer to the official website for any updates):
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI
57.9000
ALBANIA - LEK
115.1000
ALGERIA - DINAR
87.8100
ANGOLA - KWANZA
104.0000
ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR
2.7000
ARGENTINA-PESO
8.3730
ARMENIA - DRAM
470.0000
AUSTRALIA - DOLLAR
1.2190
AUSTRIA - EURO
0.8220
AZERBAIJAN - NEW MANAT
0.8000
BAHAMAS - DOLLAR
1.0000
BAHRAIN - DINAR
0.3770
BANGLADESH - TAKA
79.0000
BARBADOS - DOLLAR
2.0200
BELARUS - RUBLE
13779.0000
BELGIUM-EURO
0.8220
BELIZE - DOLLAR
2.0000
BENIN - CFA FRANC
538.7000
BERMUDA - DOLLAR
1.0000
BOLIVIA - BOLIVIANO
6.8600
BOSNIA-HERCEGOVINA MARKA
1.6080
BOTSWANA - PULA
9.4970
BRAZIL - REAL
2.6570
BRUNEI - DOLLAR
1.2540
BULGARIA - LEV
1.6090
BURKINA FASO - CFA FRANC
538.7000
BURMA - KYAT
1028.0000
BURUNDI - FRANC
1550.0000
CAMBODIA (KHMER) - RIEL
4103.0000
CAMEROON - CFA FRANC
538.8200
CANADA - DOLLAR
1.1580
CAPE VERDE - ESCUDO
87.8710
CAYMAN ISLANDS - DOLLAR
0.8200
CENTRAL AFRICAN REPUBLIC - CFA FRANC
538.8200
CHAD - CFA FRANC
538.8200
CHILE - PESO
607.1600
CHINA - RENMINBI
6.2050
COLOMBIA - PESO
2372.6000
COMOROS - FRANC
361.3500
CONGO - CFA FRANC
538.8200
CONGO, DEM. REP - CONGOLESE FRANC
920.0000
COSTA RICA - COLON
533.2500
COTE D'IVOIRE - CFA FRANC
538.7000
CROATIA - KUNA
6.1500
CUBA-PESO
1.0000
CYPRUS-EURO
0.8220
CZECH - KORUNA
22.3260
DENMARK - KRONE
6.1240
DJIBOUTI - FRANC
177.0000
DOMINICAN REPUBLIC - PESO
44.1300
ECAUDOR-DOLARES
1.0000
EGYPT - POUND
7.1500
EL SALVADOR-DOLARES
1.0000
EQUATORIAL GUINEA - CFA FRANC
538.8200
ERITREA - NAKFA
15.0000
ESTONIA-EURO
0.8220
ETHIOPIA - BIRR
20.0900
EURO ZONE - EURO
0.82200
FIJI - DOLLAR
1.9580
FINLAND-EURO
0.8220
FRANCE-EURO
0.8220
GABON - CFA FRANC
538.8200
GAMBIA - DALASI
45.0000
GEORGIA-LARI
1.8700
GERMANY FRG-EURO
0.8220
GHANA - CEDI
3.2100
GREECE-EURO
0.8220
GRENADA - EAST CARIBBEAN DOLLAR
2.7000
GUATEMALA - QUENTZAL
7.5970
GUINEA - FRANC
7136.0000
GUINEA BISSAU - CFA FRANC
538.7000
GUYANA - DOLLAR
202.0000
HAITI - GOURDE
46.7500
HONDURAS - LEMPIRA
21.2700
HONG KONG - DOLLAR
7.7560
HUNGARY - FORINT
259.4400
ICELAND - KRONA
126.7500
INDIA - RUPEE
63.2000
INDONESIA - RUPIAH
12350.0000
IRAN - RIAL
8229.0000
IRAQ - DINAR
1166.0000
IRELAND-EURO
0.8220
ISRAEL-SHEKEL
3.8810
ITALY-EURO
0.8220
JAMAICA - DOLLAR
113.9000
JAPAN - YEN
119.4500
JERUSALEM-SHEKEL
3.8810
JORDAN - DINAR
0.7080
KAZAKHSTAN - TENGE
182.4000
KENYA - SHILLING
90.6500
KOREA - WON
1086.8700
KUWAIT - DINAR
0.2930
KYRGYZSTAN - SOM
58.7000
LAOS - KIP
8078.0000
LATVIA - LATS
0.8220
LEBANON - POUND
1500.0000
LESOTHO - SOUTH AFRICAN RAND
11.5660
LIBERIA - U.S. DOLLAR
82.0000
LIBYA-DINAR
1.1950
LITHUANIA - LITAS
2.8390
LUXEMBOURG-EURO
0.8220
MACAO - MOP
8.0000
MACEDONIA FYROM - DENAR
49.2000
MADAGASCAR-ARIA
2596.7300
MALAWI - KWACHA
505.0000
MALAYSIA - RINGGIT
3.4950
MALI - CFA FRANC
538.7000
MALTA-EURO
0.8220
MARSHALLS ISLANDS - DOLLAR
1.0000
MARTINIQUE-EURO
0.82200
MAURITANIA - OUGUIYA
305.0000
MAURITIUS - RUPEE
31.7000
MEXICO - NEW PESO
14.7020
MICRONESIA - DOLLAR
1.0000
MOLDOVA - LEU
15.5520
MONGOLIA - TUGRIK
1885.6000
MONTENEGRO-EURO
0.8220
MOROCCO - DIRHAM
9.0240
MOZAMBIQUE - METICAL
33.0500
NAMIBIA-DOLLAR
11.5660
NEPAL - RUPEE
101.4000
NETHERLANDS-EURO
0.8220
NETHERLANDS ANTILLES - GUILDER
1.7800
NEW ZEALAND - DOLLAR
1.2750
NICARAGUA - CORDOBA
26.6000
NIGER - CFA FRANC
538.7000
NIGERIA - NAIRA
182.9000
NORWAY - KRONE
7.3900
OMAN - RIAL
0.3850
PAKISTAN - RUPEE
100.9000
PALAU-DOLLAR
1.0000
PANAMA - BALBOA
1.0000
PAPUA NEW GUINEA - KINA
2.5440
PARAGUAY - GUARANI
4629.3000
PERU - NUEVO SOL
2.9000
PHILIPPINES - PESO
44.77500
POLAND - ZLOTY
3.5130
PORTUGAL-EURO
0.8220
QATAR - RIYAL
3.6420
ROMANIA - LEU
3.6850
RUSSIA - RUBLE
58.6760
RWANDA - FRANC
689.1900
SAO TOME & PRINCIPE - DOBRAS
20087.7110
SAUDI ARABIA - RIYAL
3.7500
SENEGAL - CFA FRANC
538.7000
SERBIA-DINAR
99.4600
SEYCHELLES - RUPEE
12.9800
SIERRA LEONE - LEONE
4990.0000
SINGAPORE - DOLLAR
1.3210
SLOVAK REPUBLIC - EURO
0.8220
SLOVENIA - EURO
0.8220
SOLOMON ISLANDS - DOLLAR
7.3100
SOUTH AFRICA - RAND
11.5660
SOUTH SUDANESE - POUND
3.0000
SPAIN - EURO
0.8220
SRI LANKA - RUPEE
131.1500
ST LUCIA - EC DOLLAR
2.7000
SUDAN - SUDANESE POUND
6.4000
SURINAME - GUILDER
3.3500
SWAZILAND - LILANGENI
11.5660
SWEDEN - KRONA
7.7130
SWITZERLAND - FRANC
0.9890
SYRIA - POUND
179.2000
TAIWAN - DOLLAR
31.6400
TAJIKISTAN - SOMONI
5.3000
TANZANIA - SHILLING
1730.0000
THAILAND - BAHT
32.9200
TIMOR - LESTE DILI
1.0000
TOGO - CFA FRANC
538.7000
TONGA - PA'ANGA
1.8700
TRINIDAD & TOBAGO - DOLLAR
6.3560
TUNISIA - DINAR
1.8590
TURKEY - LIRA
2.3270
TURKMENISTAN - MANAT
2.8400
UGANDA - SHILLING
2770.0000
UKRAINE - HRYVNIA
15.7680
UNITED ARAB EMIRATES - DIRHAM
3.6700
UNITED KINGDOM - POUND STERLING
0.6420
URUGUAY - PESO
23.9600
UZBEKISTAN - SOM
2461.0000
VANUATU - VATU
99.9300
VENEZUELA - BOLIVAR
6.3000
VIETNAM - DONG
21400.0000
WESTERN SAMOA - TALA
2.3530
YEMEN - RIAL
214.5000
ZAMBIA - KWACHA (NEW)
6.3750
ZAMBIA - KWACHA (OLD)
5455.0000
ZIMBABWE - DOLLAR
1.0000
1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM - former Yugoslav Republic of Macedonia.
4. Latvia’s Lats converted to the Euro on January 1, 2014. This means that the Euro 2014 FBAR Currency Conversion rate may also need to used for the determination of the highest balance of accounts in Latvia. Contact Sherayzen Law Office for more details.

### Abusive Tax Shelters on the IRS “Dirty Dozen” List of 2015
On February 3, 2015, the IRS said using abusive tax shelters and structures to avoid paying taxes continues to be a problem and remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season.
"The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them," said IRS Commissioner John Koskinen. "The vast majority of taxpayers pay their fair share, and we are warning everyone to watch out for people peddling tax shelters that sound too good to be true.”
Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes.
Abusive tax shelters are classified as illegal scams and can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.
Abusive Tax Shelters
Abusive tax shelters have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions.
IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax shelters. CI's primary focus is on the identification and investigation of the promoters of the abusive tax shelters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax shelters, such as accountants or lawyers. Just as important is the investigation of investors who knowingly participate in abusive tax shelters.
What are these abusive tax shelters? The Abusive Tax Schemes program encompasses violations of the Internal Revenue Code (IRC) and related statutes where multiple flow-through entities are used as an integral part of the taxpayer's scheme to evade taxes. These abusive tax shelters are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments. The abusive tax shelters are usually complex involving multi-layer transactions for the purpose of concealing the true nature and ownership of the taxable income and/or assets.
Whether something is “too good to be true” is important to consider before buying into any arrangements that promise to “eliminate” or “substantially reduce” your tax liability. If an arrangement uses unnecessary steps or a form that does not match its substance, then that arrangement may be classified as abusive tax shelter. Another thing to remember is that the promoters of abusive tax shelters often employ financial instruments in their schemes; however, the instruments are used for improper purposes including the facilitation of tax evasion.
Abusive Tax Shelters: Misuse of Trusts
Trusts also commonly show up in abusive tax shelters. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, reduced (even to zero) self-employment taxes, and reduced estate or gift transfer taxes.
These transactions commonly arise when taxpayers are transferring wealth from one generation to another. Questionable trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.
IRS personnel continue to see an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses, as well as to avoid estate transfer taxes. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.
Abusive Tax Shelters: Captive Insurance
Another abuse involving a legitimate tax structure involves certain small or “micro” captive insurance companies. Tax law allows businesses to create “captive” insurance companies to enable those businesses to protect against certain risks. The insured claims deductions under the tax code for premiums paid for the insurance policies while the premiums end up with the captive insurance company owned by same owners of the insured or family members.
The captive insurance company, in turn, can elect under a separate section of the tax code to be taxed only on the investment income from the pool of premiums, excluding taxable income of up to $1.2 million per year in net written premiums.
In the abusive tax shelters, unscrupulous promoters persuade closely held entities to participate in this scheme by assisting entities to create captive insurance companies onshore or offshore, drafting organizational documents and preparing initial filings to state insurance authorities and the IRS. The promoters assist with creating and “selling” to the entities oftentimes poorly drafted “insurance” binders and policies to cover ordinary business risks or esoteric, implausible risks for exorbitant “premiums,” while maintaining their economical commercial coverage with traditional insurers.
Total amounts of annual premiums often equal the amount of deductions business entities need to reduce income for the year; or, for a wealthy entity, total premiums amount to $1.2 million annually to take full advantage of the Code provision. Underwriting and actuarial substantiation for the insurance premiums paid are either missing or insufficient. The promoters manage the entities’ captive insurance companies year after year for hefty fees, assisting taxpayers unsophisticated in insurance to continue the charade.

### New Convictions for Helping Hide Millions in Israeli Offshore Accounts
On December 19, 2014, a federal jury sitting in Los Angeles convicted two California tax return preparers of one count of conspiracy to defraud the Internal Revenue Service (IRS) and two counts of willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR) with respect to secret Israeli Offshore Accounts.
Israeli Offshore Accounts: Facts of the Case
According to the second superseding indictment and evidence introduced at trial, David Kalai and Nadav Kalai were principals of United Revenue Service Inc. (URS), a tax preparation business with 12 offices located throughout the United States. David Kalai worked primarily at URS’s former headquarters in Newport Beach, California, and later at URS’s location in Costa Mesa, California. Nadav Kalai, who is David Kalai’s son, worked out of URS’s headquarters in Bethesda, Maryland, as well as the URS locations in Newport Beach and Costa Mesa. David Almog was the branch manager of the New York office of URS and supervised tax return preparers for URS’s East Coast locations.
The second superseding indictment and the evidence introduced at trial established that the co-conspirators prepared false individual income tax returns that did not disclose the clients’ secret Israeli Offshore Accounts nor reported any income earned from these Israeli Offshore Accounts. In order to conceal the clients’ ownership and control of Israeli Offshore Accounts and to conceal the clients’ income from the IRS, the co-conspirators incorporated offshore companies in Belize and elsewhere and helped clients open secret Israeli Offshore Accounts at the Luxembourg locations of two Israeli banks, Bank A and Bank B. Bank A is a large financial institution headquartered in Tel -Aviv, Israel, with branches worldwide. Bank B is a mid-size financial institution, also headquartered in Tel Aviv, with a presence on four continents.
As further proven at trial, the co-conspirators incorporated offshore companies in Belize and elsewhere to act as named account holders on the secret Israeli Offshore Accounts. The co-conspirators then facilitated the transfer of client funds to the secret Israeli Offshore Accounts and prepared and filed tax returns that falsely reported the money sent offshore as a false investment loss or a false business expense. The co-conspirators also failed to disclose the existence of, and the clients’ financial interest in and authority over, the secret Israeli Offshore Accounts and caused the clients to fail to file FBARs with the U.S. Treasury.
The evidence at trial established that David Kalai and Nadav Kalai each failed to file FBARs for calendar years 2008 and 2009 concerning secret Israeli Offshore Accounts. The bank account for Bank A in Luxembourg was held in the name of a nominee corporation in Belize and held over $300,000.
“The Kalais created sham foreign corporate entities and used banks in Luxembourg and Israel as havens for hiding their U.S. clients’ money from the U.S. government,” said Acting Deputy Assistant Attorney General Wszalek. “Today’s guilty verdict sends a clear message that those professionals who facilitate tax evasion through the use of offshore bank accounts will be held accountable for their criminal conduct. The Tax Division will continue its vigorous tax enforcement efforts in prosecuting return preparers, bankers, and other facilitators who assist clients in concealing assets offshore.”
“As the defendants in this case have learned, hiding income and assets offshore is not tax planning; it’s tax fraud,” said Chief Richard Weber IRS-Criminal Investigation. “There is no secret formula that can eliminate an individual’s tax obligations. Today’s verdict reinforces our commitment to every American taxpayer that we will identify and prosecute those who implement off-shore tax schemes designed to evade the payment of taxes.”
Sentencing of the defendants is scheduled for March 16, 2015.
Israeli Offshore Accounts: Obligation to Report Foreign Accounts and Income Including Israeli Offshore Accounts
U.S. citizens, resident aliens and legal permanent residents have an obligation to report to the IRS on Schedule B of the U.S. Individual Income Tax Return, Form 1040, whether they had a financial interest in, or signature authority over, a financial account in a foreign country in a particular year by checking “yes” or “no” in the appropriate box and identifying the country where the account is maintained. They further have an obligation to report all income earned from the foreign financial account on the tax returns. Separately, U.S. citizens, resident aliens and legal permanent residents with a foreign financial interest in, or signatory authority over, a foreign financial account worth more than $10,000 in a particular year must also file an FBAR with the U.S. Treasury disclosing such an account by June 30th of the following year.
Israeli Offshore Accounts: Lessons from the Kalai Case
The Kalai case is pretty much in line with other similar cases where the IRS was able to obtain criminal conviction for failing to file FBARs to disclose foreign accounts, including secret Israeli Offshore Accounts.
The highly negative factors include: evidence of sophisticated planning to conceal the identify of the secret Israeli Offshore Accounts owners; evidence of international concealment of funds (by reporting them as a business loss) that formed the balances of the secret Israeli Offshore Accounts; evidence of intentional failure to report income from the secret Israeli Offshore Accounts; and the education level of Kalai as tax preparers.
What is critically important for US taxpayers with undisclosed secret Israeli Offshore Accounts to remember is that, if they engaged tax preparers to avoid disclosing their Israeli Offshore Accounts or foreign financial accounts in any other country, they are at an even higher risk of exposure. The reason is because these tax preparers are likely to have engaged in similar pattern of criminal behavior with respect to their other clients; when these other clients do their voluntary disclosure, they are very likely to exposure their tax preparers as well.
This is why it is critically important for US taxpayers with undisclosed secret Israeli Offshore Accounts or foreign financial accounts in any other country to explore their voluntary disclosure options as soon possible and before they are precluded by an IRS investigation.
Contact Sherayzen Law Office for Help with Your Undisclosed Foreign Accounts
If you have undisclosed foreign financial accounts and any other foreign assets, contact Sherayzen Law Office for professional legal and tax help. We will thoroughly analyze your current penalty exposure, identify the offshore voluntary disclosure options available to you, prepare all legal documents and tax forms (including amended tax returns) needed in your case, rigorously defend your interests in front of the IRS, and guide you through the entire voluntary disclosure process.
Contact Us Today to Schedule Your Confidential Consultation!

### IRS Criminal Investigation Co-Hosts First International Criminal Tax Symposium
The Internal Revenue Service Criminal Investigation Division (IRS-CI) and Her Majesty’s Revenue & Customs (HMRC) co-hosted a three-day International Criminal Tax Symposium in Washington, D.C. on January 27 – 29, 2015. The symposium focused on combating offshore tax evasion and international financial crimes. It is worth mentioning that delegates from criminal tax and enforcement programs from Australia, Canada, The Netherlands, Norway and New Zealand also attended the symposium.
IRS states that, recognizing the increasing trends in sophisticated tax evasion and other financial crimes crossing international borders, the symposium participants discussed best practices and methods of effective investigations as well as other strategies to combat emerging issues.
“The IRS continues to enhance its international efforts through a number of strategies working with international law enforcement and actively participating in a number of international financial task force groups. We will continue our recent successes in international cases, following the money across the world to bring criminals to justice,” said Richard Weber, Chief, IRS-Criminal Investigation. “Those who believe they can cross international borders to commit financial crimes will find that they have far fewer places to hide.”
“HMRC is committed to tackling tax crimes through international collaboration and ensuring there is no safe haven for the proceeds of crime,” said Richard Summersgill, Director, HMRC Criminal Investigation. “The world is becoming a much smaller place for those who want to hide themselves and their assets behind anonymous corporate structures.”
Focus of the Symposium
The delegates focused on four key areas: combating beneficial ownerships and the use of shell companies, transnational organized crime, combating offshore tax evasion and refund crimes and repayment fraud.
Combating international financial crimes is a top priority for all of the participating countries and each actively pursues offshore tax evaders, promoters and financial institutions involved in hiding income and assets offshore. Currently, many countries coordinate through international and interagency task forces, exchange of information methods, joint investigations and other formal and informal methods of international cooperation. The IRS affirms that the symposium delegates discussed further enhancements to this international collaboration moving forward.
FATCA and Beneficial Ownership Issue
The beneficial ownership problem is one that is probably most difficult to trace for the IRS at this point, because it may not be as easily detectable through FATCA as, for example, individual or partnership ownership of foreign accounts. Therefore, it is not surprising that the symposium emphasized this aspect of international tax enforcement.
Symposium and Non-Compliant Foreign Accounts
This symposium is one more evidence of an ever closer cooperation between countries in terms tackling international tax enforcement. With FATCA being adopted as the global standard for tax enforcement, US owners of non-compliant foreign accounts are in ever-more present danger of discovery.
If the evidence is found that these owners used foreign entities to conceal their beneficial ownership of the foreign accounts, there is a very high likelihood of the IRS pursuing criminal penalties against non-compliant US taxpayers.
This is why it is so important for non-compliant US taxpayers to consider their voluntary disclosure options before it is too late (if the IRS commences an investigation of these accounts, the voluntary disclosure options may be entirely precluded).
Contact Sherayzen Law Office for Experienced Help with Undisclosed Foreign Accounts and Other Assets
If you are a US person with undisclosed foreign accounts, please contact Sherayzen Law Office to secure professional, experienced and creative legal help. Our experienced law firm will thoroughly analyze your case, discuss with you the available voluntary disclosure options, prepare and file your entire voluntary disclosure case (including all legal documents and tax forms), and negotiate the final settlement with the IRS.

### Streamlined Domestic Offshore Compliance Process
In a previous article, I discussed the eligibility requirement with respect to the Streamlined Domestic Offshore Procedures. In this article, I would like to explore the specific filing requirements under the Streamlined Domestic Offshore Procedures.
As a side note, it is important to emphasize that this is just an educational article on the general overview of technical filing requirements. However, this article does not constitute legal advice and omits some very important complexities that may arise in individual cases. This is why I strongly discourage pro se (i.e. self-representation) disclosures under the Streamlined Domestic Offshore Procedures. On the contrary, the decision to engage in the Streamlined Domestic Offshore option should only be handled by an experienced international tax lawyer.
The Streamlined Domestic offshore filings can be organized in the following seven parts. Note that not all of the discussed requirements may apply in some cases and additional documents may be required in other cases.
1. Streamlined Domestic Offshore Procedures: U.S. Tax Returns
Very precise instructions were issued by the IRS with respect to filing U.S. tax returns under the Streamlined Domestic Offshore procedures. For each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the taxpayer must submit Form 1040X together with any of the required information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621).
The taxpayer should include at the top of the first page of each delinquent or amended tax return and at the top of each information return “Streamlined Domestic Offshore” written in red to indicate that the returns are being submitted under these procedures. The IRS warns that this is critical to ensure that the taxpayer’s returns are processed through Streamlined Domestic Offshore Procedures. My practice is to apply the same stamp to each of the required information returns submitted under the Streamlined Domestic Offshore Procedures, even if these returns are attached to the amended tax returns.
Two important issues must be kept in mind when submitting tax returns under the Streamlined Domestic Offshore Procedures. First, the information returns mentioned above (e.g. Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) should be submitted with the amended U.S. income tax returns even if these information returns would normally not be submitted with the Form 1040 had the taxpayer filed a complete and accurate original return.
Second, the taxpayer may not file delinquent income tax returns (including Form 1040, U.S. Individual Income Tax Return) using Streamlined Domestic Offshore Procedures. This is one of the most critical differences between the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures.
2. Streamlined Domestic Offshore Procedures: Payment of Tax Due
Together with the U.S. tax returns, the taxpayer should submit the payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts. The taxpayer’s taxpayer identification number must be included on each check. Under the Streamlined Domestic Offshore Procedures, the taxpayer is not required to pay any failure-to-pay penalties and accuracy-related penalties,
3. Streamlined Domestic Offshore Procedures: FBARs
The Streamlined Domestic Offshore Procedures follow the FBAR statute of limitations and require the taxpayer to file delinquent FBARs for each of the most recent 6 years for which the FBAR due date has passed. The FBARs should be filed according to the FBAR instructions and they should include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures.
All FBARs must be e-filed at FinCen. On the cover page of the electronic form, select “Other” as the reason for filing late. An explanation box will appear. In the explanation box, enter “Streamlined Filing Compliance Procedures.” While not required, it may be beneficial to include a more expanded statement to briefly state the circumstances – it is the job of an international tax attorney to critically look at his client’s case and see if this is the right strategy.
4. Streamlined Domestic Offshore Procedures: Payment of the Miscellaneous Offshore Penalty
In a stark contrast to Streamlined Foreign Offshore Procedures, the Streamlined Domestic Offshore Procedures option requires the participating taxpayers to pay the Title 26 Miscellaneous Offshore Penalty of 5%. The definition of the Title 26 Miscellaneous Offshore Penalty is beyond the scope of this article; however, you can read this article I posted earlier for a more elaborate discussion of this penalty and how it is calculated.
The check for the payment of the Miscellaneous Offshore penalty should be made payable to the “United States Treasury” and the taxpayer’s taxpayer identification number must be included on the check.
5. Streamlined Domestic Offshore Procedures: Certification of Non-Willfulness (IRS Form 14654)
This is the most critical part of the voluntary disclosure package under the Streamlined Domestic Offshore Procedures. The taxpayer must complete and sign Form 14654, “Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures”. The taxpayer must submit the original signed Form 14654 to the IRS. Furthermore, he must also attach copies of the statement to each tax return and information return being submitted through Streamlined Domestic Offshore Procedures.
The IRS warns that failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of the Streamlined Domestic Offshore Procedures.
At this point, the IRS does not currently require the attachment of copies of Form 14654 to FBARs, but this may change in the future.
6. Streamlined Domestic Offshore Procedures: Late Deferral Requests
The taxpayer may also use the Streamlined Domestic Offshore Procedures to make retroactive elections requests. If the taxpayer seeks relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty, he should submit the following items as part of his disclosure package under the Streamlined Domestic Offshore Procedures:
a). A statement requesting an extension of time to make an election to defer income tax and identifying the applicable treaty provision;
b). A dated statement signed by you under penalties of perjury describing: (i) the events that led to the failure to make the election; (ii) the events that led to the discovery of the failure, and (iii) if the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities; and
c). For relevant Canadian plans, a Form 8891 for each tax year and each plan and a description of the type of plan covered by the submission.
7. Streamlined Domestic Offshore Procedures: Mailing Address as of January 29, 2015
Once the above-described documents are gathered into one package (together with the payments), this package should be sent in paper format to the following address:
Internal Revenue Service
3651 South I-H 35Stop 6063 AUSC
Attn: Streamlined Domestic Offshore
Austin, TX 78741
This address may only be used for returns filed under Streamlined Offshore Domestic Procedures and may change over time; so an international tax lawyer should verify any changes to the address prior to submission of any documents under the Streamlined Domestic Offshore Procedures.
Contact Sherayzen Law Office for Legal Help with Your Voluntary Disclosure Under Streamlined Domestic Offshore Procedures
If you have undisclosed foreign financial accounts and other assets, please contact Mr. Eugene Sherayzen an experienced tax attorney, owner of Sherayzen Law Office for legal and tax help. Our experienced international tax firm specializes in offshore voluntary disclosures and we can help you.
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### Title 26 Miscellaneous Offshore Penalty under SDOP
The Title 26 Miscellaneous Offshore Penalty (“Miscellaneous Offshore Penalty”) is one of the most critical aspects of the Streamlined Domestic Offshore Procedures (“SDOP”). In this article, I want to conduct a general overview of how the Miscellaneous Offshore Penalty is calculated.
As a side note, it is important to keep in mind that this is an educational article which aims to provide a general overview of the calculation of the Miscellaneous Offshore Penalty in common situations. In providing this general overview of the SDOP Miscellaneous Offshore Penalty, the article necessarily glosses over some complex issues that may change the determination of Miscellaneous Offshore Penalty in a particular case.  In order to calculate your Miscellaneous Offshore Penalty properly, the readers should contact an experienced international tax attorney for a legal advice based on their specific facts and circumstances.
What is Miscellaneous Offshore Penalty?
A taxpayer who enters SDOP is required to pay a 5% Miscellaneous Offshore Penalty as part of the SDOP requirements. The Miscellaneous Offshore Penalty is paid in lieu of the penalties associated with the delinquent filings of FBARs, Forms 8938 and other information returns.
The calculation of SDOP Miscellaneous Offshore Penalty is very different from 2014 OVDP calculation in terms of the relevant time period and the penalty base. (Note: OVDP is now closed). Let’s explore each of these factors.
Miscellaneous Offshore Penalty: Time Period
Miscellaneous Offshore Penalty is equal to 5 percent of the highest aggregate balance/value of the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered tax return period and the covered FBAR period. Generally, this means that the Miscellaneous Offshore Penalty is imposed on the past six years covered by the FBAR statute of limitations.
However, there is an exception where the three-year tax covered tax return period does not completely overlap with the six-year covered FBAR period. For example, the SDOP disclosure for tax returns covers years 2012 and 2014 because the due date for the 2014 tax return is passed, but the FBAR period is 2008-2013 because the due date for the 2014 FBAR has not passed. In such cases, the Miscellaneous Offshore Penalty is imposed on the highest aggregate value of the foreign financial assets for the past seven years.
In most cases, six years will be the standard time period for the calculation of the Miscellaneous Offshore Penalty, which is a lot better than the 2014 OVDP eight-year disclosure period.
Miscellaneous Offshore Penalty: Penalty Base
SDOP introduced a new way to calculate Miscellaneous Offshore Penalty which mixed the old FBAR-focused penalty orientation of the 2014 OVDP with the new FATCA-focused Form 8938.
In general, the Miscellaneous Offshore Penalty is imposed on any foreign financial asset in a given year within the covered SDOP time period if one of the following is true:
1. The asset should have been, but was not, reported on an FBAR (FinCEN Form 114) for that year;
2. The asset should have been, but was not, reported on a Form 8938 for that year; or
3. If the asset was properly reported for that year, but gross income in respect of the asset was not reported in that year.
Two important features of this calculation of the penalty base under SDOP must be emphasized. First, the Miscellaneous Offshore Penalty should be calculated not only on the foreign bank and financial accounts listed on the FBAR, but also on “other specified assets” required to be listed on Form 8938. This means that many more assets outside of a foreign financial account can now be subject to the Miscellaneous Offshore Penalty . Examples of such assets include but not limited to: foreign stocks not held in a financial account, a capital or profits interest in a foreign partnership, certain forms of indebtedness issued by a foreign person (such as a note, bond, debenture, an interest in a foreign trust, foreign swaps, foreign options, foreign derivatives and other assets. It should be remembered, though, that this is a generalization and, in certain circumstances, an international tax attorney may except certain such assets from Miscellaneous Offshore Penalty base.
The second critical difference between SDOP Miscellaneous Offshore Penalty and 2014 OVDP Offshore Penalty is the inclusion in the calculation of the penalty base the assets for which no additional income needs to be reported. There are a lot of nuances with respect to the exclusion and inclusion of assets under the 2014 OVDP which are beyond the scope of this article. For the purposes of the present discussion, I will ignore them and concentrate on the general rule only (again, this is an area that should be explored with an international tax attorney based on the specific facts of a client's case) that if an asset should have been reported on Forms 8938 and FinCEN Form 114 and it was not, then, it should be included in the penalty base.
Miscellaneous Offshore Penalty: Calculation of Highest Aggregate Value of Assets
As it was mentioned above, the Miscellaneous Offshore Penalty is calculated based on the highest aggregate balance/value of the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered tax return period and the covered FBAR period. The issue is how this “highest aggregate balance/value of assets” is calculated.
For the purposes of SDOP Miscellaneous Offshore Penalty, the highest aggregate balance/value is determined by a two-step process. First, you need to aggregate the year-end account balances and year-end asset values of all the foreign financial assets subject to the miscellaneous offshore penalty for each of the years in the covered tax return period and the covered FBAR period. Then, you select the highest aggregate balance/value from among those years and calculate the 5% value of this balance.
It is the first step that is radically different from the 2014 OVDP Offshore Penalty determination process, and it can produce very interesting results especially in the case of bank accounts. The most surprising result is that an account that was closed in one of the covered years is likely to produce a zero end-of-year balance irrespective of how much money was on it prior to December 31.
This factor can be a very important consideration when one decides to participate in SDOP. For this reason, I highly encourage the readers to consult an experienced international tax lawyer in these matters.
Contact Sherayzen Law Office for Professional Help with Your Undisclosed Foreign Assets
If you have undisclosed foreign accounts and any other assets, contact Sherayzen Law Office for professional legal and tax help. Our team of experienced tax professionals will thoroughly analyze your case, estimate your current penalty exposure, identify the offshore voluntary disclosure options available to you, prepare all legal documents and tax forms (including amended tax returns) needed in your case, rigorously defend your interests in front of the IRS, and guide you through the entire voluntary disclosure process.
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### Determining the Residency of a Trust in Cross-Border Situations
One of the most important tax aspects involving trusts in cross-border tax situations is the determination of the residency of a trust- i.e. whether it is a domestic or foreign trust for US tax purposes. This determination of the residency of a trust will have important tax consequences for US taxpayers.
In this article we will do a general exploration of how the residency of a trust in cross-border situations is determined; this article is not intended to convey tax or legal advice. Please contact Eugene Sherayzen an experienced tax attorney at Sherayzen Law Office, Ltd. if you have questions concerning trust planning or compliance.
General Criteria for Determining the Residency of a Trust
The general determination of the residency of a trust is described in the Internal Revenue Code (IRC) Section 7701 and Regulation Section 301.7701-7. Under these tax provisions, a trust will be deemed to be a U.S. person if: “(i) A court within the United States is able to exercise primary supervision over the administration of the trust (court test); and (ii) One or more United States persons have the authority to control all substantial decisions of the trust (control test).” (See explanations of the court test and the control test in the paragraphs below). Under the regulation, a trust will be a U.S. person for the purposes of the IRC on any day that the trust meets both of these tests. If a trust does not satisfy both of these tests, it will be considered to be a foreign trust for U.S. reporting purposes.
Determining the Residency of a Trust: The Court Test
In determining the residency of a trust under the Court Test, we need to consult the Treasury Regulations. Regulation Section 301.7701-7(c)(1) provides a safe harbor in which a trust will satisfy this (i.e. US residency) test if: “(i) The trust instrument does not direct that the trust be administered outside of the United States; (ii) The trust in fact is administered exclusively in the United States; and (iii) The trust is not subject to an automatic migration provision...”. For the purposes of the regulation, the term “court” is defined in the regulation to mean any federal, state, or local court, and the United States is used a geographical manner (thus including only the States and the District of Columbia, and not a court within a territory or possession of the United States or within a foreign country).
The term primary supervision means that a court has or would have the authority to determine substantially all issues regarding the administration of the entire trust.” The term “administration” is defined in the regulation to mean, “the carrying out of the duties imposed by the terms of the trust instrument and applicable law, including maintaining the books and records of the trust, filing tax returns, managing and investing the assets of the trust, defending the trust from suits by creditors, and determining the amount and timing of distributions.” The regulations further provide examples of situations that will cause a trust to fail or satisfy the court test.
Determining the Residency of a Trust: The Control test
The Control Test is often the key area of dispute in determining the residency of a trust. “Control” in the control test is explained in the regulation to mean, “having the power, by vote or otherwise, to make all of the substantial decisions of the trust, with no other person having the power to veto any of the substantial decisions.” Critically important – it is required under the regulation to consider all individuals who may have authority to make “substantial decisions”, and not simply the trust fiduciaries.
Under the regulation, the term “substantial decisions” (see usage in first paragraph) is defined to mean, “those decisions that persons are authorized or required to make under the terms of the trust instrument and applicable law and that are not ministerial.” (Some examples of “ministerial” decisions are provided in the regulation, including, bookkeeping, the collection of rents, and the execution of investment decisions).
The regulation further provides numerous examples of substantial decisions: “(A) Whether and when to distribute income or corpus; (B) The amount of any distributions; (C) The selection of a beneficiary; (D) Whether a receipt is allocable to income or principal; (E) Whether to terminate the trust; (F) Whether to compromise, arbitrate, or abandon claims of the trust; (G) Whether to sue on behalf of the trust or to defend suits against the trust; (H) Whether to remove, add, or replace a trustee; (I) Whether to appoint a successor trustee to succeed a trustee who has died, resigned, or otherwise ceased to act as a trustee…; and (J) Investment decisions; however, if a United States person under section 7701(a)(30) hires an investment advisor for the trust, the investment decisions made by the investment advisor will be considered substantial decisions controlled by the United States person if the United States person can terminate the investment advisor's power to make investment decisions at will.”
Contact Sherayzen Law Office for Tax and Legal Help With Issues Involving Foreign Trusts
Determination of the residency of a trust is just one of a myriad of highly complex issues than an international tax attorney can help you resolve with respect to U.S. tax compliance, tax planning and estate planning. If you are an owner or a beneficiary of a foreign trust, contact Sherayzen Law Office for professional legal and tax help.
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### FATCA Attorneys Update: IRS Launches International Data Exchange Service
On January 12, 2015, the IRS announced the opening of the International Data Exchange Service (IDES) for enrollment. The appearance of IDES is not a surprise to FATCA Attorneys, because most FATCA attorneys knew IDES was the next logical step since its purpose is going to be for foreign financial institutions (FFIs) and host country tax authorities (HCTAs) to securely send their FATCA reports about US account holders under regular FATCA compliance or pursuant to the terms of an intergovernmental agreement (IGA), as applicable.
So far, more than 145,000 financial institutions have registered through the IRS FATCA Registration System. Moreover, the IRS made tremendous progress with IGAs – there are now more than 110 IGAs, either signed or agreed in substance.
FATCA Attorneys Update: How Will IDES Function?
Using IDES, a web application, the sender encrypts the data and IDES encrypts the transmission pathway to protect data transfers. Encryption at both the file and transmission level safeguards sensitive tax information. This means that FFIs and HCTAs can have a high level of confidence in the data about US account holders that they will be transmitted to the IRS.
“The opening of the International Data Exchange Service is a milestone in the implementation of FATCA,” said IRS Commissioner John Koskinen. “With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system.”
Where a jurisdiction has a reciprocal IGA and the jurisdiction has the necessary safeguards and infrastructure in place, the IRS will also use IDES to provide similar information to the host country tax authority on accounts in U.S. financial institutions held by the jurisdiction’s residents.
IDES runs on all major browsers, including Chrome, Internet Explorer, Safari, and Firefox and will support application-to-application exchanges through the SFTP transmission protocol enabling a wide variety of users to interact with IDES without building additional infrastructure to support transmission.
FATCA Attorneys Update: IDES and Model 2 IGA Jurisdictions
The IRS encourages HCTAs in Model 2 IGA jurisdictions and FFIs to begin the enrollment process well in advance of their reporting deadline. To begin transmitting information in IDES,an FFI or HCTA will need to first obtain a digital certificate. Digital certificates bind digital information to physical identities and provide data integrity. IDES stores each user’s public key and related digital certificate. All IDES enrollees (including host country tax authorities) must obtain a proper digital certificate in order to enroll (there is a list of approved Certificate Authorities available on irs.gov).
FATCA Attorneys Update: IDES and Model 1 IGA Jurisdictions
For HCTAs in Model 1 IGA jurisdictions, the IRS will directly notify them to let them know when it is time to enroll. FFIs will initiate enrollment online on their own; in order to enroll, the financial institution will need to have registered as a participating financial institution through the IRS FATCA Registration System and have a global intermediary identification number (GIIN) that appears on the IRS FATCA FFI list. The online address for IDES enrollment can be found here.
FATCA Attorneys Update: IDES and Offshore Voluntary Disclosure
The opening of IDES is considered by FATCA attorneys as an important development in FATCA implementation which is likely to affect a very large number of US persons with undisclosed foreign accounts. It should be remembers that if the IRS receives the information about an undisclosed foreign account through IDES, it may prevent the US owner of such an undisclosed foreign account from being able to enter into the IRS Offshore Voluntary Disclosure Program.
FATCA attorneys also should warn their US clients who closed their foreign accounts prior to 2014 that the closure of such accounts prior to the implementation of FATCA does not mean that these accounts will not be reported later. On the contrary, FATCA attorneys should stress to their clients that the IDES is likely to be used by FFIs and HCTAs to report prior non-compliance with respect to closed accounts to the IRS as early as March 31, 2016 if not earlier.
Contact Sherayzen Law Office for Help With Undisclosed Foreign Accounts
Almost all FATCA attorneys stress that time is running out for US persons with undisclosed foreign accounts to start their voluntary disclosure process. With the introduction of IDES, a significant practical hurdle to FATCA implementation has been removed. This means that your undisclosed foreign account may be reported at any point now to the IRS.
If you have undisclosed foreign accounts, you should contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Our experienced FATCA law firm will thoroughly analyze your case, determine your existing exposure to U.S. tax penalties, identify the available voluntary disclosure options, prepare all legal and tax documents for your voluntary disclosure, and vigorously advocate your position against the IRS.
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### Who Must File Form 1120-F ?
Form 1120-F (“U.S. Income Tax Return of a Foreign Corporation”) is used to report the income, gains, losses, deductions, credits, and to figure the U.S. income tax liability of a foreign corporation. The form is also used to claim any refund due, to transmit Form 8833 (“Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)”), or to calculate and pay a foreign corporation's branch profits tax liability and tax on excess interest, if any, under Internal Revenue Code Section 884.
In this article, we will explain who is required to file Form 1120-F. This article is not intended to convey tax or legal advice. Please contact Mr. Eugene Sherayzen, an experienced tax attorney at Sherayzen Law Office, Ltd. if you have further questions.
Who Must File Form 1120-F?
In general, unless an exception exists or a special return is required, a foreign corporation must file Form 1120-F if any of the following is true:
1. A foreign corporation engaged in a trade or business in the United States, whether or not it had U.S. source income from that trade or business, and whether or not income from such trade or business is exempt from U.S. tax under a tax treaty;
2. A foreign corporation had income, gains, or losses that were treated as if they were effectively connected with the conduct of a U.S. trade or business;
3. A foreign corporation was not engaged in a trade or business in the United States, but it had US-source income and its tax liability has not been fully satisfied by the withholding of tax at source (under chapter 3 of the Internal Revenue Code);
4. Special circumstances require the foreign corporation to file Form 1120-F in certain other instances. For example, if a foreign corporation is claiming the benefit of any deductions or credits, or is making a claim for the refund of an overpayment of tax for the tax year, Form 1120F should be filed (also see below for more detailed description of come of these circumstances when Form 1120-F must be filed); or
5. Certain specific types of entities or individuals may be required to file Form 1120-F. In particular, instructions to Form 5471 state that a Mexican or Canadian branch of a U.S. mutual life insurance company is required to file Form 1120-F if the U.S. company elects to exclude the branch's income and expenses from its own gross income. Furthermore, a receiver, assignee, or trustee in dissolution or bankruptcy must file Form 1120-F, if that person has or holds title to virtually all of a foreign corporation's property or business. Note that Form 1120-F is due whether or not the property or business is being operated. Finally, an agent of a foreign corporation in the United States should file Form 1120-F if the foreign corporation has no office or place of business in the United States when the return is due.
Form 1120-F Required for Claiming Treaty or Code Exemption
As mentioned above, even if a foreign corporation does not have any gross income for the tax year because it is claiming a treaty or IRC exemption, it still must demonstrate that the income was properly exempted by filing Form 1120-F to provide the IRS with the identifying information and attaching a statement to Form 1120-F noting the nature and amount of the exclusions claimed. If there was tax withholding at source in such a case, the foreign corporation must complete the Computation of Tax Due or Overpayment section of Form 1120-F in order to claim a refund on the amounts withheld.
Entities that Elect to be Taxed as Foreign Corporations
In general, Form 1120-F must be filed by a foreign eligible entity that elects to be classified as a corporation, and it must attach a copy of Form 8832 (“Entity Classification Election”) with Form 1120-F.
Exceptions to Filing Form 1120-F
Various exceptions may apply for foreign corporations that would otherwise be required to file the form. The most prominent examples of these exceptions to filing Form 1120-F are the following: (i) if the foreign corporation did not engage in a U.S. trade or business during the tax year and its full U.S. tax was withheld at source; (ii) if the foreign corporation’s only U.S. source income is exempt from U.S. taxation under Internal Revenue Code Section 881(c) or (d); or (iii) if the foreign corporation is a beneficiary of an estate or trust engaged in a U.S. trade or business, but it would itself otherwise not be required to file.
Contact Sherayzen Law Office for Help With U.S. Compliance For Foreign Corporations
U.S. tax compliance for foreign corporations can involve many complexities and it is easy to ran afoul of the numerous U.S. tax requirements. This is why, if you have a foreign corporation, you are well-advised to seek help from the experienced international tax professionals of Sherayzen Law Office. Contact Us to Schedule Your Confidential Consultation Now!

### BCGE FATCA Letter
In a previous article, I started the discussion of various FATCA letters issued by banks around the world by concentrating on the HSBC FATCA letter. In this article, I would like to shift focus to a different part of the world and discuss the Swiss format with BCGE FATCA Letter.
BCGE FATCA Letter: General Format
BCGE (Banque Cantonale de Geneve) is determined to comply with FATCA. For this purpose, it developed its own format of a FATCA letter which closely follows the format adopted by most Swiss banks.
BCGE FATCA Letter follows what I call “comprehensive format” (as opposed to the “reference format” followed by HSBC). This means that BCGE FATCA Letter contains all of the main questions within the body of the letter and references only supplementary US forms (like W8BEN and W9). Thus, BCGE FATCA Letter allows BCGE to collect all of the information necessary for its own FATCA compliance in one place and without the need to create any other specialized forms.
It should be noted that the description of the format so far concentrated on the most common BCGE FATCA Letter for individuals, but there are variations in the form for trusts and corporations. Furthermore, there is a variation for the form for certain other circumstances. Since most US account holders who receive a BCGE FATCA are individuals, I will concentrate on the most common format only.
Let’s review each part of the common BCGE FATCA Letter.
BCGE FATCA Letter: Personal Information
The BCGE FATCA Letter commences with the confirmation of the identity and personal information (including place of residence) of the account holder. This section also commences the examination of the account holder’s US tax status by requiring the account holder to list all of his nationalities and the country of birth.
BCGE FATCA Letter: “Per Se” US Status
This is the most critical part of BCGE FATCA Letter because it focuses on the main designations of US person. In particular, this part of BCGE FATCA Letter asks whether the account holder has US national, is a US tax resident (which is asked in two different ways which mean the same thing – lawful permanent resident and the “green card” test), and whether the substantial presence test is satisfied. Definition for the later is provided in a footnote.
If there is at least one affirmative answer to these first four questions, BCGE will automatically classify the account holder as a US person subject to FATCA reporting. Once this determination is made, BCGE FATCA Letter requires the account holder to submit Form W-9 and a special BCGE Form 6387 “Consent to the disclosure of data according to FATCA”. Failure to complete Form 6387 may result in the BCGE designation of the account under FATCA as belonging to a “recalcitrant account holder”.
Please, note that once a status of US person is established, BCGE is very likely to close any securities accounts of a US account holder.
BCGE FATCA Letter Questions 1.5-1.8 on Potential US Status
If the account holder negatively answered the first four questions, the next part of the BCGE FATCA Letter asks a series of questions to see if the account holder if a US person in some other way. Most of these questions also require a submission of Form W-8BEN (with a non-US passport) or W-9.
BCGE FATCA Letter usually contains the following questions. First, whether the account holder was born in the USA or in a US territory (a definition is provided for this term). If the answer is “yes”, but the account holder believes that he is still not a US person, then he must submit Form W-8BEN, a non-US passport or a similar document, and a copy of the certificate of loss of US nationality. If the certificate cannot be produced, BCGE FATCA Letter automatically classifies the account holder as a US person and requires him to submit Form W-9 and a Consent to the disclosure of data under FATCA.
Second, BCGE FATCA Letter asks whether the account holder is a US taxpayer for any other reason – this a “catch all” question to make sure that BCGE does not miss a potential FATCA requirement. BCGE FATCA Letter lists a number of possibilities of how one becomes a US person : joint tax status with a US spouse, in the process of renouncing US nationality or green card, effectively connected income and owner of a US property. Again, supporting documentation or Form W-9 with the Disclosure Consent under FATCA are required.
Finally, BCGE FATCA Letter addresses the remaining potential for the account holder to be a US taxpayer such as US mailing address, care-of address, postbox, and fixed or mobile telephone number. If the account holder has any of these items, then BCGE FATCA Letter asks him to provide Form W-8BEN with a non-US passport (or similar documentation).
BCGE FATCA letter: Confirmation of Beneficial Ownership Status
By signing BCGE FATCA Letter, the account holder affirms that he is the beneficial owner of the bank account.
BCGE FATCA Letter: Treaty Relief Considerations
If it is established that the account holder is NOT a US person, BCGE FATCA Letter contains a fairly unique aspect - discussion of the possibility of claiming a favorable tax status with respect to investments into US Securities. Most other banks usually discuss this important issue in a separate letter, but BCGE FATCA Letter actually incorporates this issue within its body. Form W-8BEN is required to proceed.
BCGE FATCA Letter: Notice and Reimbursement Requirements Imposed on Account Holder
Finally, a BCGE FATCA Letter usually contains another interesting topic – the shift of risk to the account holder through imposition of notice requirements. Since this is a tactic which is adopted increasingly by foreign banks, it is useful to explore this requirement with specificity.
BCGE FATCA Letter states that, by signing the Letter, the account holder “undertakes to inform the Bank of any changes in circumstances resulting in a change of tax status, as the one indicated below and transmit the necessary documents or forms within 30 days after the change in circumstances.” BCGE FATCA Letter sets forth three such changes: change of residence, change of nationality and amendment of the account holder’s tax status (such as receipt of green card, substantial presence in the United States, et cetera).
BCGE FATCA Letter goes on to state that if the declarations made by the account holder in the Letter become invalid for some reason (such as belated discovery of U.S. status), the account holder must transmit to BCGE a new declaration of status with a Form W-9 and FATCA waiver.
The key phrase, however, is with respect to what happens if the information submitted by the account holder within the BCGE FATCA Letter turns out to be incorrect or incomplete. In such a case, the account holder “undertakes to indemnify the Bank for all damages it may suffer” as a result of relying on the incorrect declarations made in the BCGE FATCA Letter. It is unclear whether failure to comply with the Notice requirement is equally subject to this reimbursement requirements, but it seems to be the case.
Thus, it appears that BCGE FATCA Letter decisively shifts all risk of an incorrect declaration (even if non-willful due to belated discovery) from BCGE to the account holder. This is why it is important for the account holder’s attorney to carefully review this document and negotiate the necessary changes.
Contact Sherayzen Law Office for Help With FATCA Compliance
If you received a FATCA letter regarding an undisclosed personal or business account, contact Sherayzen Law Office for professional help. Our team of international experts will thoroughly review your case, analyze your current FBAR and FATCA exposure, recommend the proper voluntary disclosure plan and help you implement it (including preparation of all necessary legal documents and tax forms).
Contact Us to Schedule Your Confidential Consultation Now!

### IRS Loses Two Offshore Tax Cases: Weil & Baravarian
Last month, a federal jury in Fort Lauderdale, Florida acquitted Raoul Weil, a former top UBS Swiss banking executive, of tax evasion charges. Weil was indicted in 2008 under 18 U.S.C. § 371 (“Conspiracy to commit offense or to defraud United States”) and it was alleged that he helped nearly 17,000 wealthy US persons hide $20 Billion in Swiss bank accounts from the IRS. Weil had been extradited to the US to stand trial after being arrested by Interpol while vacationing in Italy in 2013. He would have faced up to five years in prison and a $250,000 fine, if found guilty. Weil did not testify in the case.
From 2002 through 2007, Weil was head of Swiss Bank's wealth management business, which included US cross-border business and other businesses. In July of 2007, he became the CEO a division that oversaw the United States cross-border business and world-wide private banking. The verdict for the trial (which began on October 14), was quickly reached in less than an hour and a half of deliberation. According to a news report, Weil’s attorney told the jury that Weil was not culpable because, “There’s no evidence in this case that Mr. Weil knew and much less participated in activities by low-level bankers who were violating the bank’s own policies.” In response, a former DOJ tax division assistant attorney general, Nathan Hochman, was quoted after the verdict stating, “The verdict shows you the difficulty of going after senior management who can at times blame the bank’s customers and lower-level employees for the bank’s mistakes.” Prosecutors also failed to show that “a single overall conspiracy” existed under the law.
Weil was the highest-ranking foreign banker to be charged by the US during its lengthy probe of offshore tax evasion cases. The failure by the IRS and DOJ to obtain a conviction in this case represents a significant setback as they have been very successful in prosecuting such cases (and UBS itself had previously paid a $780 million fine in 2009 and admitted to assisting clients evade US taxes in exchange for non-prosecution).
The jury verdict in Weil’s case comes on the heels of another case in which a retired senior vice president at the Los Angeles branch of a bank headquartered in Tel Aviv, Israel Mizrahi Tefahot Bank Ltd., Shokrollah Baravarian, was acquitted in a federal court of charges of conspiring to defraud the U.S. government and of helping clients prepare false tax returns. Baravarian was alleged to have conspired to conceal the existence of undeclared offshore accounts owned and controlled by U.S. customers by opening them under pseudonyms, code names and the names of nominee entities set up in the British Virgin Islands and the island of Nevis. Like Weil, he also would have faced a potential maximum prison term of five years and a maximum fine of $250,000, if convicted.
Contact Sherayzen Law Office for Help with Your Offshore-Related US Tax Compliance Issues
As can be seen from the two acquittals highlighted above, legal challenges to the IRS and DOJ in offshore tax cases can be successful. Certain US persons who reported foreign accounts through the OVDP may also find that they wish to challenge their FBAR determinations in court. If you have any questions regarding OVDP-related litigation or compliance, please contact our experienced tax practice at Sherayzen Law Office, Ltd.

### 2015 Inflation Adjustments to Tax Benefits
The IRS recently announced annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2014-61 provides details about these 2015 inflation adjustments. In this writing, I would like to highlight main 2015 inflation adjustments.
1. 2015 inflation adjustments for income tax brackets. The tax rate of 39.6 percent affects singles whose income exceeds $413,200 ($464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
2. 2015 inflation adjustments for Standard Deduction. The standard deduction rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.
3. 2015 inflation adjustments for Itemized Deduction Limitation. The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
4. 2015 inflation adjustments for Personal Exemption Amounts. The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly.)
5. 2015 inflation adjustments for Alternative Minimum Tax (AMT): AMT exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).
6. 2015 inflation adjustments for Earned Income Credit (EIC) amount. The maximum EIC amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
7. 2015 inflation adjustments for Estate Basic Exclusion Amounts. Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of decedents who died in 2014.
8. 2015 inflation adjustments for Foreign Spouse Gifts. The exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014.
9. 2015 inflation adjustments for Foreign Earned Income Exclusion (FEIE). The 2015 FEIE breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014.
10. 2015 inflation adjustments for Annual Gift Exclusion Amount. The annual exclusion for gifts remains at $14,000 for 2015.

### IRS Form 1041 Penalties and Interest
Form 1041 (“U.S. Income Tax Return for Estates and Trusts”) is used by a fiduciary of a domestic decedent's estate, trust, or bankruptcy estate for a number of important reporting reasons. Interest may be charged and various penalties may be assessed for failure to meet reporting requirements and to pay necessary taxes.
In this article, we will detail the various penalties that may be imposed, and interest that may be charged, concerning Form 1041. This article is not intended to convey tax or legal advice. If you have any questions about filing Form 1041, or any other tax or legal questions, please contact Mr. Eugene Sherayzen, an experienced tax attorney at Sherayzen Law Office, Ltd.
Form 1041 Interest
Interest will be charged on any taxes that were not paid by the due date of Form 1041, regardless of whether an extension of time to file was granted. In addition, interest will also be charged on any Form 1041 penalties imposed resulting from failure to file, negligence, fraud, substantial valuation misstatements, substantial understatements of tax, and reportable transaction understatements.
Interest is charged on the penalty from the date the Form 1041 is due, including any extensions, and is charged at a rate determined under Internal Revenue Code Section 6621.
Form 1041 Late Filing Penalty
A penalty may be assessed for 5% of the tax due for each month (or part of a month) for which Form 1041 is not filed, up to a maximum of 25% of the tax due (and 15% for each month, or part of a month, up to a maximum of 75% if the failure to file is fraudulent). If the late Form 1041 is more than 60 days late, the minimum penalty to be assessed will be the smaller of $135 or the tax due. In certain cases, penalties may not be imposed if a taxpayer can prove the failure to file Form 1041 was due to reasonable cause.
Form 1041 Late Payment of Tax Penalty
A penalty for not paying tax owed when due may apply to any unpaid tax as calculated on Form 1041; the late payment Form 1041 penalty is an addition to interest charges on late payments. In general, the late payment penalty is 0.5% of the unpaid amount for each month (or part of a month), up to a maximum penalty is 25% of the unpaid amount.
Penalty for Failure to Provide (Form 1040) K-1 Timely
Because Schedule K-1 (Form 1041) must be provided on or before the day Form 1041 is required to be filed to each beneficiary who receives a distribution of property or an allocation of an item of the estate, a penalty for the failure to provide this information timely if Form K-1 if filed late. This penalty applies to both a failure to provide Schedule K-1 to a beneficiary when due and for each failure to include on Schedule K-1 all the information required to be shown (or the inclusion of incorrect information).
The standard penalty for failure to provide Form 1041 K-1 timely is $100. The maximum penalty up to $1.5 million for all such failures during a calendar year may be imposed. Furthermore, if the requirement to report information was intentionally disregarded, each $100 penalty will be increased to $250 or, if greater, 10% of the aggregate amount of items that were required to be reported; in this case, the $1.5 million maximum will not apply.
However, if a fiduciary can demonstrate that the failure to provide information timely was due to reasonable cause and not due to willful neglect, this penalty may not be imposed.
Underpaid Estimated Tax Penalty
In situations in which a fiduciary underpaid estimated tax, Form 2210 (“Underpayment of Estimated Tax by Individuals, Estates, and Trusts”) will need to be utilized to figure any penalty; this amount is then input onto line 26 of Form 1041.
Trust Fund Recovery Penalty
A Trust Fund Recovery Penalty may be imposed if certain excise, income, social security, and Medicare taxes that were required to collected or withheld, were not, or if such taxes were not paid. This penalty may apply to all persons responsible for collecting, accounting for, or paying over these taxes, and who acted willfully in not doing so. The Trust Fund Recovery Penalty will be equal to the unpaid trust fund tax.
Other Form 1041 Penalties
In addition, other standard penalties may apply to Form 1041, such as negligence and substantial understatement of tax penalties, among others. The IRS defines negligence to mean “[A] failure to make a reasonable attempt to comply with the tax law or to exercise ordinary and reasonable care in preparing a return. Negligence also includes failure to keep adequate books and records.” A substantial understatement of tax will occur when an understatement is more than the greater of 10% of the correct tax or $5,000, subject to certain exceptions.
Contact Sherayzen Law Office for Help With Trust Tax Compliance Issues
Trust tax compliance may involve complex issues, and the penalties for failing to meet Form 1041 compliance requirements can potentially be significant. You are advised to seek the advice of an attorney practicing in this area. If you have any questions, please contact Sherayzen Law Office, Ltd. for all of your tax and legal needs.

### Who Must File IRS Form 1042
Form 1042 (“Annual Withholding Tax Return for U.S. Source Income of Foreign Persons”) serves a number of important reporting purposes. In general, it is used to report the tax withheld under chapter 3 of the Internal Revenue Code (“IRC”) on certain income of foreign persons (such as nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts), as well as to report the tax withheld under chapter 4 of the IRC on payments subject to tax withholding. It also utilized to report tax withheld pursuant to IRC Section 5000C (“Imposition of tax on certain foreign procurement”), and reportable payments from Form 1042-S under chapters 3 or 4.
In this article, we will cover who is responsible for filing Form 1042. US individuals involved with cross-border businesses or living overseas should be aware of this form as they may be subject to the form’s filing requirements for a variety of common reasons, without even knowing it. For instance, US-source alimony paid to a nonresident alien former spouse may be reportable by a withholding agent on Form 1042 (in addition to 1042-S), even if the entire amount is exempt under a tax treaty.
This article provides general information and is not intended to convey tax or legal advice. Please contact Mr. Eugene Sherayzen, an experienced tax attorney at Sherayzen Law Office, Ltd. if you have any questions about filing this form, or any other US-international tax questions.
Who is Responsible for Filing Form 1042?
As noted by the IRS, unless an exception applies, “every withholding agent or intermediary who receives, controls, has custody of, disposes of, or pays a withholdable payment, including any fixed or determinable annual or periodical income, must file an annual return for the preceding calendar year” on Form 1042. The IRS defines “withholding agent” to mean any person who is required to withhold tax. This definition is expansive and can include, in general, any individual, trust, estate, partnership, corporation, nominee, government agency, association, or tax-exempt foundation (both domestic and foreign) that is required to withhold tax. Withholding agents are personally liable for any tax required to be withheld, as well as interest and applicable penalties.
An “intermediary” means, “a person who acts as a custodian, broker, nominee, or otherwise as an agent for another person, regardless of whether that other person is the beneficial owner of the amount paid, a flow-through entity, or another intermediary.”
When Must Form 1042 Be Filed?
Form 1042 must be filed in a number of different circumstances. As stated by the IRS, an individual or entity must file the form if, “you are required to file or otherwise file Form(s) 1042-S for purposes of either chapter 3 or 4 (whether or not any tax was withheld or was required to be withheld to the extent reporting is required)…; You file Form(s) 1042-S to report to a recipient tax withheld by your withholding agent; You pay gross investment income to foreign private foundations that are subject to tax under section 4948(a); You pay any foreign person specified federal procurement payments that are subject to withholding under section 5000C; You are a qualified intermediary (QI), withholding foreign partnership (WP), withholding foreign trust (WT), participating foreign financial institution (FFI), or reporting Model 1 FFI making a claim for a collective refund under your respective agreement with the IRS.” Note, that the FFI classification may also require other extensive reporting under FATCA.
2014 Form 1042: Due Date and Place of Filing
The 2014 Form 1042 must be filed by March 16, 2015, to the IRS’ Ogden (UT) Service Center, and an extension of time to file may be granted by submitting Form 7004, (“Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns”).
Contact Sherayzen Law Office for Help With International Tax Compliance
US-International tax reporting and planning can involve many complex areas, and you are advised to seek the advice of attorneys practicing in this area. If you have any questions, please contact Sherayzen Law Office, Ltd. for all of your tax and legal needs.

### Kentucky Resident Charged for Maintaining Secret Swiss Bank Accounts
U.S. Attorney Preet Bharara for the Southern District of New York and Acting Special Agent in Charge Shantelle P. Kitchen of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office announced on November 18, 2014, the unsealing of an indictment against Peter Canale, a U.S. citizen and resident of Kentucky, for conspiring to defraud the IRS and evade taxes by establishing and maintaining secret Swiss bank accounts. Canale was arrested on November 18, 2014, at his residence in Jamestown, Kentucky, and is expected to be presented later today in the US District Court for the Eastern District of Kentucky. Canale is scheduled to be arraigned before US District Judge Katherine B. Forrest in Manhattan federal court on December 3, 2014, at 3:00 p.m.
Facts of the Case With Respect to Secret Swiss Bank Accounts According to Indictment
According to the allegations in the indictment unsealed on November 18, 2014, in Manhattan federal court, Canale conspired with others – including Michael Canale, his brother, Beda Singenberger, a Swiss citizen who ran a financial advisory firm, and Hans Thomann, a Swiss citizen who served as a client adviser at UBS and certain Swiss asset management firms – to establish and maintain secret Swiss bank accounts and to hide those accounts from the IRS. Canale used a sham entity to conceal from the IRS his ownership of the secret Swiss Bank Accounts and deliberately failed to report the accounts and the income generated in the accounts to the IRS.
One of the most surprising facts in this case is the source of money – it was foreign inheritance. In approximately 2000, a relative of Canale’s who held an undeclared bank account in Switzerland died and left a substantial portion of the assets in the undeclared account to Canale and Michael Canale. Canale and his brother met with Thomann and Singenberger and determined they would continue to maintain the assets in the secret Swiss Bank accounts for the benefit of Canale and his brother.
Thereafter, in approximately 2005, Canale, with Singenberger’s assistance, opened secret Swiss Bank Accounts at Wegelin bank (no longer in existence). The account was opened in the name of a sham foundation formed under the laws of Lichtenstein to conceal Canale’s ownership.
Equally surprising is that a criminal case was brought against an account that was under $1,000,000. As of December 31, 2009, the account held assets valued at approximately $789,000.
For each of the calendar years from 2007 through 2010, Canale willfully failed to report on his tax returns his interest in the secret Swiss Bank Accounts and the income generated in those secret Swiss Bank accounts. For each of these years, Canale also failed to file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS, as the law required him to do.
Canale, 61, is charged with one count of conspiracy to defraud the United States, evade taxes, and file a false and fraudulent income tax return, which carries a statutory maximum sentence of five years in prison. The maximum potential sentence is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.
Secret Swiss Bank Accounts Charges Related to a Client List Obtained from Indicted Swiss Banker
The Canale case is another example of an indictment stemming directly from a misplaced letter mailed by a Swiss financial adviser Singenberger (the same advisor who helped Canale open his secret Swiss Bank Accounts) that ended up in the hands of the US tax authorities. The IRS has been picking off the clients on the list one by one since 2013 (including Jacques Wajsfelner and Michael Reiss).
Lessons to be Learned from Canale Case
As I mentioned in a recent article regarding the Cohen case, there has been a growing trend where the IRS is pursuing criminal prosecutions in cases that involve smaller balances on secret Swiss Bank Accounts as long as the IRS is comfortable with its ability to establish willfulness with respect to FBAR non-reporting.
Canale case is just one more example of this trend. The balances were not large at all – the highest balance was far under $1 million. However, the Canale case also included an aggravating factor of allegedly using a sham foundation to conceal his identity; these cases usually carry a higher than usual probability of an IRS criminal prosecution.
What was unusual about the Canale case is how little weight was given to the source of the funds on the secret Swiss Bank Accounts – inheritance. It appears that, in all likelihood, other circumstances were so negative as to simply overwhelm the positive nature of this factor.
Contact Sherayzen Law Office for Professional Help Regarding Your Undisclosed Foreign Accounts
If you had undisclosed foreign accounts at any point since the year 2006, you should consider your voluntary disclosure options as soon as possible. While the DOJ Program for Swiss Banks makes the maintenance of secret Swiss Bank Accounts extremely dangerous at this point, the implementation of FATCA since July 1, 2014, carries a far more potent chance that you undisclosed foreign accounts will be discovered even if they are outside of Switzerland.
If you need help, contact Mr. Sherayzen, a voluntary disclosure professional and international tax attorney at Sherayzen Law Office. Our team will thoroughly analyze your case, evaluate your current voluntary disclosure options, and proceed to implement your voluntary disclosure plan (including preparation of all legal documents and tax forms).
Contact Us to Schedule Your Confidential Consultation Now.

### HSBC FATCA Letter
In a previous article, I explained why FATCA Letters mark a critical event for the voluntary disclosure process of a US taxpayer with undisclosed foreign accounts. While I mentioned that the content of a FATCA letter is usually more or less the same, I emphasized that the actual format of a FATCA letter may differ dramatically from bank to bank. With this article, I am starting a series of article devoted to various FATCA letter formats adopted by various banks around the world. Today, I wish to concentrate on the HSBC FATCA Letter.
HSBC FATCA Letter: General Format
HSBC FATCA Letter follows what I call a “reference format”. Unlike the “comprehensive format” usually followed by FATCA letters issued by Swiss banks, the reference format of the HSBC FATCA Letter means that the HSBC FATCA Letter is fairly concise but it references (hence the name) various forms that need to be completed by the HSBC customers.
Basically, this means that the HSBC FATCA Letter itself does not ask any questions, but it acts as kind of a checklist for various supplementary forms that need to be completed by the account holder in order to provide the bank with the information necessary for its own FATCA compliance. Failure to provide such information would result in the bank classifying the US taxpayer as a “recalcitrant account holder”.
An interesting aspect about the format that the HSBC FATCA Letter follows is that some (but not all) of the supplementary forms were developed and modified by the bank for the sole purpose of FATCA compliance. Thus, there are two types of supplementary forms that are referenced by HSBC FATCA letter: US standard forms (W-8, W-9, et cetera) and proprietary forms developed by the HSBC itself (SW, S1, S3, et cetera).
HSBC FATCA Letter: US Supplementary Forms
Similar to every FATCA letter issued by other banks around the world, HSBC FATCA letter references the main relevant forms developed by the US government – Form W8 (usually, W8BEN) and Form W9. Form W9 is of course the critical form that must be provided to a foreign bank in order to verify the US taxpayer’s social security number. Form W8, on the other hand, provides the critical information for the foreign bank for the purpose of tax withholding under relevant tax treaties. It also allows the bank to indirectly confirm the account holder’s non-US tax status.
HSBC FATCA Letter: Proprietary Forms Developed by HSBC
HSBC FATCA letter references a variety of forms developed or modified by HSBC according to FATCA requirements. The most common documents are S1, S2 and S3. Form S1 is basically asks for a government-issued ID establishing non-US status. Form S2 is a copy of Individual Certification of Loss of Nationality (again for establishing the Non-US Citizenship status) which is very relevant in the limited 9(though, rapidly growing) situation where a US taxpayer gives up his US citizenship.
Form S3 is one of the most important forms referenced by the HSBC FATCA letter. Officially titled as “Explanation of a US address and/or US Phone Number”, Form S-1 requires a fairly intrusive explanation of whether the account holder has US phone number and US telephone address, and why. What is very interesting about Form S3 issued by HSBC is that it requires the taxpayer to make a detailed determination whether the substantial presence test has been met. It even contains a fairly detailed explanation of the test itself.
Contact Sherayzen Law Office for Help with HSBC FATCA Letter
If you have undisclosed bank accounts with HSBC (whether Hong Kong, India, or any other country except the United States itself), you should immediately begin the exploration of your voluntary disclosure options before HSBC discloses your account to the IRS.
This is why you will need the professional help of Mr. Eugene Sherayzen, an experienced international tax lawyer who already has helped hundreds of US taxpayers around the world with respect to their US tax compliance. We can also help you!
Contact US to Schedule Your Confidential Consultation Now!

### IRS 2014 Final and Proposed Regulations Regarding Form 5472
In 2014, the IRS issued both final (T.D. 9667), and proposed (REG-114942-14) regulations amending the rules for filing Form 5472, (“Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business”). Form 5472 is used to provide the information required under Internal Revenue Code (“IRC”) Sections 6038A and 6038C when reportable transactions occur during the taxable year of a reporting corporation with a foreign or domestic related party.
This article will briefly explain the final and proposed regulations affecting Form 5472; it is not intended to convey tax or legal advice. If you have questions regarding filing of Form 5472 or any international tax matters, please contact owner Eugene Sherayzen, an experienced tax attorney at Sherayzen Law Office, Ltd.
Form 5472 Final Regulation (T.D. 9667)
On June 10, 2011, under the above-mentioned IRC Sections, the IRS had previously published temporary regulations and a notice of proposed rulemaking by cross-reference to the temporary regulations in the Federal Register (76 FR 33997, TD 9529, 2011–30 IRB 57; REG–101352–11, 76 FR 34019) (2011 regulations), amending final regulations to provide that a duplicate filing of Form 5472 generally (previously required in Regulation Section 1.6038A-2(d)) would no longer be required, regardless of whether the filer files a paper or an electronic income tax return. This was determined because of advances in IRS electronic processing and data collections.
The 2014 final regulation, T.D. 9667, adopts the 2011 regulations without substantive change as final regulations, and removes the previous temporary regulations. The regulation became effective as of June 6, 2014.
Form 5472 Proposed Regulation (REG-114942-14)
On the same date as the final regulation was issued, the IRS concurrently issued proposed regulation (REG-114942-14). At issue was a provision (Treas. Reg. Section 1.6038A-2(e)), allowing for timely filing of Form 5472 separately from an income tax return that is untimely filed.
Because of the significant penalties involved for failing to file a timely and accurate Form 5472 (as noted in the proposed regulation and subject to reasonable cause exception, “an initial penalty of $10,000 (with possible additional penalties for continued failure) shall be assessed for each taxable year and for each related party with respect to which the failure occurs”), this process could be utilized by filers in such circumstances.
However, the IRS stated in the proposed regulation that, “with the benefit of experience”, it determined that the untimely-filed return provision was not conducive to efficient tax administration and that filing Form 5472 should not differ significantly from the methods and penalties applicable to similar information returns, such as Form 5471, (“Information Return of U.S. Persons With Respect to Certain Foreign Corporations”) and Form 8865 (“Return of U.S. Persons With Respect to Certain Foreign Partnerships”). As noted in the proposed regulation, “those forms must be filed with the filer's income tax return for the taxable year by the due date (including extensions) of the return, and there is no provision equivalent to the untimely filed return provision under § 1.6038A-2T(e) of the 2011 temporary regulations that would require or permit separate filing of those forms. See §§ 1.6038-2(i) and 1.6038-3(i)(1). Accordingly, it is proposed that the untimely-filed return provision contained in § 1.6038A-2(e) be removed.”
Contact Sherayzen Law Office for Help With Form 5472 Compliance
If you have any questions regarding the filing of your Form 5472 or you just need complex tax planning for cross-border business entities, please contact our experienced international tax team at Sherayzen Law Office, Ltd.

### FATCA Letters
Following the implementation of Foreign Account Tax Compliance Act (“FATCA”) on July 1, 2014, foreign banks around the world started sending out FATCA Letters to their US (or suspected US) customers who had accounts on record prior to as well as on June 30, 2014. In a previous article, I discussed the reason for FATCA Letters and their impact on US taxpayers with undisclosed foreign accounts. In this article, I would like to focus the discussion on what type of information is typically contained in FATCA Letters.
FATCA Letters: Background Information
FATCA is codified in the Internal Revenue Code Sections 1471 through 1474 and contains an unprecedented amount of new international tax requirements for US persons, foreign financial institutions (FFIs), and US withholding agents (USWAs).
For the purpose of this article, I will concentrate solely on the FATCA requirement to analyze pre-existing accounts and report them to the IRS. Currently, according to the new deadline extensions found in IRS Notice 2014-43, “pre-existing” accounts are those accounts that were maintained by FFIs prior to or on June 30, 2014.
These pre-existing accounts are the main target for FATCA letters sent out to their clients by foreign banks. Of course, FATCA letters may also apply to the accounts opened after July 1, 2014, but, in many cases, these accounts were already opened according to FATCA account opening procedures (hence, all of the questions that are usually contained in FATCA letters should have been asked at the point when the account was opened).
The purpose for FATCA letters is for the FFI to obtain the necessary information to comply with its own FATCA reporting requirements. Hence ,the content of the FATCA letters is going to be fairly uniform irrespective of the FFI that sends it, even though the format of FATCA letters may differ greatly among the countries and even FFIs within a country.
FATCA Letters: Typical Content
As I mentioned above, virtually every FATCA Letter is geared toward obtaining certain types of information which is necessary for the FFI’s own reporting to the IRS (either directly or through a national tax authority). The overall requested information can be divided into three categories:
1. Personal Information
FATCA letters first typically try to confirm the exact name, nationality and address of the account holder. Most FATCA letters will also ask for the date of birth, country of birth and the account holder’s telephone number.
2. Determination of US Status and Form W-9
This is the most critical part of FATCA Letters, because it aims at verifying whether the account holder is a US person in any common way. The exact format of this part differs greatly from bank to bank, but a typical FATCA letter would either request the account holder to fill-out a Form W-9 directly or first ask a few questions (such as “do you have US nationality”, “are you a US Lawful Permanent Resident”, or “Have you spent a substantial period of time in the USA”) and then ask to fill-out Form W-9 if any of these questions are answered positively.
Also, depending on a country, an FFI would also typically ask the taxpayer to sign some sort of a consent to the disclosure of FATCA data to the IRS. In Switzerland, it is always present.
3. Further Determination of Status Questions; Possible Forms W-8BEN and W-9
Once the first basic part of the US status determination is finished, FATCA letters go on to ask a second set of questions aimed at uncovering potential inconsistencies in the status claim and verify if the account holder may be a US person in some other way.
In this part, FATCA letters typically ask whether the account holder was born in the United States, is a US person for any other reason, has effectively connected US income, has US mailing address, and has a US telephone number.
If the answer to any of these questions is “yes”, FATCA letters would generally ask the taxpayer to provide further information. For example, where the account holder is a US person for any other reason or cannot prove that he is not a US person if he was born in the United States, then FATCA letters would request Form W-9 and a consent to the disclosure of FATCA data to the IRS.
On the other hand, if the account holder persists in being considered as a non-US person and can prove it, then FATCA letters would ask for Form W-8BEN and a non-US passport (or other similar documentation). In case the account holder was born in the United States but claims to be a non-US person, FATCA letters would demand a copy of the certificate of loss of US nationality.
W-8BEN may also be required if the account holder is not a US person but has US-source income.
Impact of FATCA Letters on US Account Holders
The basic purpose behind FATCA is to allow the IRS to easily identify a US person’s non-compliance with US tax laws concerning reporting of foreign-source income and foreign assets. FATCA letters allow the FFIs to quickly identify with a fair degree of certainty whether their account holders are US persons and ultimately relate this information to the IRS on Form 8966.
This means that US taxpayers with undisclosed foreign accounts are currently facing an imminent risk of a third-party disclosure of their tax non-compliance to the IRS. If these taxpayers do not do anything, the risk of the IRS finding them has become unacceptably high.
Moreover, if the IRS commences an investigation of these US taxpayers before they engage in any type of voluntary disclosure, these taxpayers are not likely to be able to enter the IRS Offshore Voluntary Disclosure Program leaving them potentially unprotected to the draconian FBAR criminal and civil penalties as well as potentially large income tax penalties.
Thus, the receipt of FATCA letters is a critical legal event that starts the clock for these taxpayers in terms of their ability to voluntarily disclose their accounts. This means that these taxpayers need to act quickly and immediately consult an international tax attorney who specializes in this area to explore their voluntary disclosure options.
Contact Sherayzen Law Office if You Received a FATCA Letter
If you have undisclosed foreign accounts and you received a FATCA letter from your foreign bank, contact Sherayzen Law Office immediately. Mr. Eugene Sherayzen is an experienced international tax attorney who has successfully helped hundreds of US taxpayers like you to bring their affairs back into US tax compliance. Sherayzen Law Office, Ltd. can help you!
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### Brazil FATCA IGA Signed
The long-awaited Brazil FATCA IGA (Intergovernmental Agreement) was finally signed on September 23, 2014. This is an event of high importance and, in this article, I would like to explore Brazil FATCA IGA in more detail.
FATCA & Model Treaties
FATCA (“Foreign Account Tax Compliance Act”) was signed into law in 2010. This is a grand piece of US legislation that has already made a huge impact on international tax compliance landscape, and US taxpayers with undisclosed foreign accounts are feeling the pressure of this law more than anyone else.
In essence, FATCA directs foreign financial institutions (FFIs) to identify and report to the IRS all of their US customers with the account balances of $50,000 or more. How this reporting is done will depend on the tax treaty that is signed by the relevant foreign country.
There are two Model treaties that IRS created for the foreign countries to sign. Model I treaty that requires FFIs to send the reporting information regarding US-held accounts to their national tax authority which will report this information to the IRS. Model II treaty skips the national authority – it requires FFIs to directly turn over the US-owned account information directly to the IRS.
Brazil FATCA IGA is a reciprocal Model I treaty.
Brazil FATCA IGA
Since Brazil FATCA IGA is a Model I treaty, under the Brazil FATCA IGA, Brazilian FFIs will turn over the information regarding US accountholders to Receita Federal Brasileira (the national tax authority in Brazil). Receita Federal Brasileira will then turn over all of this information to the IRS. A Brazilian FFI that complies Brazil FATCA IGA due diligence and reporting requirements will be eligible to be treated as a registered deemed-compliant FFI for FATCA purposes.
Remember that Brazil FATCA IGA is a reciprocal treaty. This means that the United States will also have to share information with the Receita Federal Brasileira regarding accounts held by Brazilian residents with certain US financial institutions.
Impact of Brazil FATCA IGA on US Taxpayers with Undisclosed Accounts in Brazil
The signing of Brazil FATCA IGA suddenly raised the stakes for US taxpayers with undisclosed bank and financial accounts in Brazil, because there is almost a certainty that these accounts will now be reported to the IRS. This, in turn, means nothing else than full exposure of undisclosed US-held accounts to a potential IRS investigation with potential criminal and willful FBAR penalties as well as additional penalties (including criminal) with respect to US tax returns.
Moreover, the implementation of Brazil FATCA IGA means that this exposure to the IRS investigation is likely to occur very soon, perhaps as soon as December 31, 2014 or (more likely) March 31, 2015. If the IRS learns about the existence of these undisclosed accounts from Receita Federal Brasileira before the US taxpayer with undisclosed Brazilian accounts attempts his voluntary disclosure, it is very likely that this taxpayer will not be able to enter the 2014 Offshore Voluntary Disclosure Program.
Contact Sherayzen Law Office for Professional Help With Undisclosed Bank and Financial Accounts in Brazil
If you have undisclosed foreign and financial accounts in Brazil, you should contact Sherayzen Law Office for legal and tax help as soon as possible. Our international tax law office is highly experienced in the matters related to the Offshore Voluntary Disclosures and has helped hundreds of US taxpayers worldwide to bring their tax affairs into full compliance with US tax laws.
Contact Sherayzen Law Office to Schedule Your Confidential Consultation Now.

### Ireland to End Double Irish Tax Loophole used by many US Companies
Less than a month ago, Irish Finance Minister Michael Noonan announced in an address introducing the 2015 budget to the Irish parliament that the country will be changing its tax code to require all companies registered in Ireland to be tax residents, thereby ending the so-called Double Irish loophole utilized by many US companies and multinationals to reduce their tax liabilities. Noonan was quoted in one recent article as stating, “Aggressive tax planning by the multinational companies has been criticized by governments across the globe, and has damaged the reputation of many countries.”
This article will briefly examine the Double Irish structure used by US companies and others, and the new changes that will affect this structure; this article is not intended to convey tax or legal advice under either US or Irish laws.
The changes to the Double Irish loophole, combined with the recent Department of the Treasury and Internal Revenue Service Notice 2014-52, “Rules Regarding Inversions and Related Transactions” will significantly affect many US companies. Tax planning and compliance will become even more important the days ahead. Please contact Mr. Eugene Sherayzen, an experienced international tax attorney at Sherayzen Law Office, PLLC for questions about your tax and legal needs.
The Double Irish Loophole
Before the new changes, multinationals could utilize a structure commonly referred to as the “Double Irish”. In general, under the Double Irish structure, companies would take advantage of Irish territorial taxation laws, meaning that the income of an Irish subsidiary operating outside of Ireland would not be subject to taxation. Prior to the new change, an entity in Ireland would be considered to be a tax resident not where it was incorporated, but rather where its controlling managers were located; thus, an entity registered in Ireland with its managers located in a tax haven would be considered to be a tax resident of the tax haven, and not Ireland, if properly structured.
US companies would often take advantage of this structure by forming offshore subsidiary entities that would own the rights to intellectual property located outside the United States, typically without paying US tax, through a cost sharing agreement between US parents and offshore companies. The non-US intellectual property rights would then be licensed to a second Irish subsidiary (hence the “Double Irish” phrase), which would be an Irish tax resident, generally in return for royalty payments, or similar fees. The second Irish subsidiary would additionally be able to deduct the royalties or other fees paid to the entity in the tax haven, thereby reducing its taxable profits (and subjecting any remaining profits to Ireland’s competitive 12.5% rate). Until such profits were remitted to the US, they would typically not be subject to US taxation.
Many US companies, such as LinkedIn, Facebook, Google, Twitter and others successfully used the Double Irish loophole to reduce their overall tax liabilities.
Ending the Double Irish Loophole
Under the new changes to the Double Irish loophole, beginning in January of 2015, all newly Irish-registered entities will automatically be deemed to be Irish tax residents. The new rules will not apply to companies currently utilizing the Double Irish structure; however, such companies will need to be compliant with the new rules by the end of 2020. Ireland will still retain its favorable 12.5% corporate tax rate.
The changes to the Double Irish loophole were made as a result of intense international criticism and potentially adverse consequences for Ireland. This year, the European Commission announced that it would conduct a formal investigation into the practices of various companies with Irish subsidiaries, including the Double Irish loophole. According to various news reports, European Union officials have expressed preliminary support for the new changes.
To address the possible loss of jobs resulting from the new changes (one news report puts the number of jobs created by foreign firms registering in Ireland to be 160,000 jobs, or approximately one in ten workers in the country - a lot of these jobs were created as a result of the Double Irish loophole), Noonan announced that he intended to create a new taxable rate for income derived from intellectual property in the form of a "Knowledge Development Box". However, the EU is currently investigating so-called “patent boxes” (which could likely be similar to Noonan’s future proposal) utilized by various other European countries, such as the U.K. and the Netherlands.
Contact Sherayzen Law Office for Professional Help With International Tax Planning
Since 2008, the world has experienced an almost unprecedented surge in the international tax enforcement, reflecting the desire (and the great economic need) of many countries to be able to obtain what these countries consider their fair share of tax revenues from international companies. The recent change to Irish tax laws with respect to the Double Irish loophole is just the latest example of this growing trend.
As tax enforcement rises, many US companies operating overseas and foreign companies operating in the United States are facing increasing risks of over-taxation with a direct threat to their profitability. For a number of reasons, the mid-size and small companies that operate internationally face a disproportionate increase in these risks than large multinational companies.
Sherayzen Law Office has successfully helped companies around the world to successfully operate internationally while reducing the risks of being subject to unfair tax treatment. If you have a small or mid-size business that operates internationally, you should contact our international tax team for professional legal and tax help.

### Are the new IRS Inversion Regulations in Notice 2014-52 Working?
On September 22, 2014, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) issued Notice 2014-52, “Rules Regarding Inversions and Related Transactions” in the wake of recent inversions.
In previous articles on Hopscotch loans and de-control of CFCs, we covered certain aspects of the new regulations to be issued. This article will examine some of the changes that various corporations have recently made to pending inversions as a consequence of the new IRS Notice 2014-52; the article is not intended to convey tax or legal advice. Please contact Sherayzen Law Office, Ltd. for questions about your tax and legal needs.
IRS Notice 2014-52 Intended to Address Tax Avoidance
As stated in Notice 2014-52, Treasury and the IRS “understand that certain inversion transactions are motivated in substantial part by the ability to engage in certain tax avoidance transactions after the inversion that would not be possible in the absence of the inversion.” Such inversions were viewed to be specifically inconsistent with the purposes of Internal Revenue Code (“IRC”) Section 7874 and 367, and accordingly, Treasury and the IRS intend to issue new regulations under IRC Sections 304(b)(5)(B), 367, 956(e), 7701(l), and 7874. After Notice 2014-52 was issued, Treasury Secretary Jacob Lew was quoted as saying that the new regulations would "significantly diminish the ability of inverted companies to escape U.S. taxation." Treasury and the IRS are also “considering guidance to address strategies that avoid U.S. tax on U.S. operations by shifting or “stripping” U.S.-source earnings to lower-tax jurisdictions, including through intercompany debt.” Notice 2014-52 is currently in the comment period.
At Least One Inversion Deal Cancelled
On October 3, 2014, the Raleigh, North Carolina-based Salix Pharmaceuticals Ltd, announced that it would be cancelling a deal to merge with an Irish subsidiary of the Italian company, Cosmo Pharmaceuticals SpA, specifically referencing Notice 2014-52 as creating “more uncertainty regarding the potential benefits we expected to achieve.”
Notice 2014-52 appears to have sufficiently created its intended result in this case. The CEO for Cosmo, Alessandro Della Cha, was quoted in an article as saying, "The (U.S.) administration has taken steps to make inversions more difficult and to make it harder to extract the benefits."
Scuttling the deal was particularly costly for Salix as it also had to pay Cosmo a break-up fee of $25 million; however, according to various reports, the company has also been sought for a potential deal by Allergan Inc. as well as a Actavis Plc.
Medtronic Adjusts Deal in Response to Notice 2014-52
Unlike the response that Salix took to Notice 2014-52, Minnesota-based Medtronic Inc. recently announced that it would still close the proposed deal to acquire Ireland-based Covidien Plc by the end of this year, or early next year.
However, instead of the originally-proposed deal to use cash from its foreign subsidiaries to purchase the company, it will borrow $16 billion to close the approximately $43 billion transaction. As with Salix, a spokesman for Medtronic cited Notice 2014-52 as the reason for the change in the terms of the transaction.
As tax experts study proposed deals under the new IRS rules, it is very likely that more companies planning inversions will adjust their deals in a similar manner.
Contact Sherayzen Law Office for Professional Help with Complex International Tax Planning
Notice 2014-52 is just the latest in the avalanche of recent IRS initiatives in international tax enforcement. The recent explosion in the number of international tax regulations has greatly complicated the ability of US persons conduct business overseas. This is why you are advised contact Mr. Eugene Sherayzen an experienced international tax attorney at Sherayzen Law Office, Ltd. for professional legal and tax guidance in this increasingly complex area of law.

### Guilty Plea for Failure to Report Income from Undeclared UBS Account
On October 20, 2014, the Justice Department and the IRS announced that Menashe Cohen pleaded guilty in the U.S. District Court for the District of New Hampshire to filing a false federal income tax return for tax year 2009. In addition, Mr. Cohen has agreed to resolve his civil liability for failure to report his financial interest in the undeclared UBS account on a FBAR by paying a 50 percent civil penalty to the IRS based on the high balance of his ownership of the undeclared UBS account.
Main Facts of the Case
According to court documents, Mr. Cohen, an oriental carpet dealer, and his sister maintained an undeclared UBS account in Switzerland that had a balance of approximately $1.3 million. Mr. Cohen also maintained bank accounts in Israel and in Jersey, a British Crown dependency located in the Channel Islands off the coast of Normandy, France. It appears that the defendant did report the Israeli and Jersey account on his 2009 FBAR, but he failed to report his financial interest in the undeclared UBS account in Switzerland. In total, for tax years 2006 through 2009, Cohen failed to report approximately $170,000 in income earned from offshore bank accounts.
The actual guilty plea, however, is related only to the 2009 tax return where Mr. Cohen reported only $350 in interest income, when in fact he had received approximately $66,500 in interest from his undeclared UBS account.
Mr. Cohen faces a statutory potential maximum sentence of three years in prison and a maximum fine of $250,000 at his January 26, 2015, sentencing.
Case Highlights
Mr. Cohen’s case is actually quite troubling because it involves a criminal pursuit of an owner with an undeclared UBS account even though many of the usual criminal facts are not present in the case.
There was no complex tax planning with an intention to conceal the ownership of the undeclared UBS account. The balance on the undeclared UBS account is on the milder side ($1.3 million is not a small amount of money, but the criminal cases tend to concentrate in the amount higher than $3 million); in this case, half of the undeclared UBS account was not even owned by Mr. Cohen, but his sister. Finally, the under-reported amount of interest from the undeclared UBS account was not such a large amount as to normally warrant criminal prosecution.
It appears that two factors steered this case toward criminal prosecution. First, partial FBAR reporting – the fact that Mr. Cohen reported two out of three accounts gave rise to the inference that he acted willfully with respect to his undeclared UBS account.
Second, it appears that the under-reporting of income might have involved all three accounts, not just the undeclared UBS account. If this was the case, then it might have a been a contributory factor in favor of the prosecution as well.
The Importance of the Case to Other Taxpayers With Undeclared Foreign Accounts
Mr. Cohen’s case with respect to his undeclared UBS account contains a strong warning to other US taxpayers with undeclared foreign accounts – it appears that the IRS is now willing to prosecute cases involving lower dollar amounts than in the past. While an undeclared UBS account has its special negative connotations in US tax enforcement, it does appear that there is a growing trend toward criminal prosecution of under-reported foreign income as long as the IRS is comfortable with being able to establish willfulness with respect to FBAR non-reporting.
This means that the taxpayers with balances under $1 million on their undeclared foreign accounts should not take the risk of criminal prosecution lightly. The exact probability of a criminal prosecution should be determined by an international tax lawyer based on the particular facts of a taxpayer’s case.
Contact Sherayzen Law Office for Professional Help with the Voluntary Disclosure of Your Foreign Accounts
If you have undeclared foreign accounts, you should contact Sherayzen Law Office for legal and tax help. We are a team of highly experienced tax professionals who will thoroughly analyze, determine the proper path of your voluntary disclosure, and prepare all of the necessary legal and tax documents. Once your voluntary disclosure is filed, our international tax firm will be there to defend your case against the IRS.
Contact Us Now to Schedule Your Confidential Consultation.

### New IRS Regulations to Address Transactions to De-Control CFCs
On September 22, 2014, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) issued Notice 2014-52, “Rules Regarding Inversions and Related Transactions” (“Notice”) in the wake of the recent wave of inversions. In a previous article, we covered the new regulations to be issued regarding Internal Revenue Code (“IRC”) Section 956 so-called “Hopscotch loans” and related transactions. In this article, we will examine the new Treasury and IRS regulations to be issued to address transactions to de-control or significantly dilute controlled foreign corporations (“CFCs’”) under Notice Section 3.02.
This article is intended to provide explanatory material regarding the new inversion regulations as they relate to IRC Section Sections 954, 964, and 367 de-control aspects; the article does not convey legal or tax advice. Please contact the experienced international tax law practice of Sherayzen Law Office, Ltd. for questions about your tax and legal needs.
Transactions to De-Control or Significantly Dilute CFCs
In general, foreign subsidiaries of acquired U.S. corporations will continue to hold CFC status following most expatriation transactions; such status makes these CFCs subject to U.S. taxation under the IRC subpart F provisions. Prior to the Notice, however, companies could structure inversions so that the newly-formed foreign parent would purchase sufficient stock in order to remove control (or “de-control”) of an expatriated foreign subsidiary away from the former U.S. parent company so that the foreign subsidiary would no longer be treated as a CFC.
By ceasing to be a CFC, as noted in the Notice, companies could thus “Avoid the imposition of U.S. income tax, so as to avoid U.S. tax on the CFC’s pre-inversion earnings and profits. For example, after an inversion transaction, a foreign acquiring corporation could issue a note or transfer property to an expatriated foreign subsidiary in exchange for stock representing at least 50 percent of the voting power and value of the expatriated foreign subsidiary. The expatriated foreign subsidiary would stop being a CFC, and the U.S. shareholders would no longer be subject to subpart F of the Code with respect to the expatriated foreign subsidiary…” Such an effect could also be achieved if the foreign acquiring corporation acquired enough stock to substantially dilute a U.S. shareholder’s ownership of the CFC; U.S. taxation of the CFC’s pre-inversion earnings and profits could be avoided if the CFC later redeemed on a non-pro rata basis, its stock held by the foreign acquiring corporation. (The Notice also provides other similar examples of pre-Notice tax avoidance strategies).
Regulations to Address Transactions to De-Control or Significantly Dilute CFCs
In response to the concerns addressed in the previous paragraphs, under Notice Section 3.02, Treasury and the IRS will issue regulations under IRC Section 7701(l) to “Recharacterize certain transactions that facilitate the avoidance of U.S. tax on the expatriated foreign subsidiary’s pre-inversion earnings and profits”, and they also intend to issue new regulations to modify the application of IRC Section 367(b) in order to require, “[I]ncome inclusion in certain nonrecognition transactions that dilute a U.S. shareholder’s ownership of a CFC.”
Under IRC Section 7701(l), Treasury and the IRS intend to issue regulations providing that a “specified transaction” will be recharacterized under the procedures of the Notice. A specified transaction is defined to be a, “[T]ransaction in which stock in an expatriated foreign subsidiary… is transferred (including by issuance) to a ‘specified related person.’” A specified person is defined to mean a, “[N]on-CFC foreign related person… a U.S. partnership that has one or more partners that if completed during is a non-CFC foreign related person, or a U.S. trust that has one or more beneficiaries that is a non-CFC foreign related person.”
Under the Notice, “if an expatriated foreign subsidiary issues specified stock to a specified related person, the specified transaction will be recharacterized as follows: (i) the property transferred by the specified related person to acquire the specified stock (transferred property) will be treated as having been transferred by the specified related person to the section 958(a) U.S. shareholder(s) of the expatriated foreign subsidiary in exchange for instruments deemed issued by the section 958(a) U.S. shareholder(s) (deemed instrument(s)); and (ii) the transferred property or proportionate share thereof will be treated as having been contributed by the section 958(a) U.S. shareholder(s) (through intervening entities, if any, in exchange for equity in such entities) to the expatriated foreign subsidiary in exchange for stock in the expatriated foreign subsidiary.” (See Notice for further information).
Further, under IRC Section 367(b), Treasury and the IRS also intend to amend the section’s regulations, in general, to require that “an exchanging shareholder described in §1.367(b)-4(b)(1)(i)(A) will be required to include in income as a deemed dividend the section 1248 amount attributable to the stock of an expatriated foreign subsidiary exchanged in a “specified exchange”. A specified exchange is defined to mean an exchange “in which a shareholder of an expatriated foreign subsidiary exchanges stock in the expatriated foreign subsidiary for stock in another foreign corporation pursuant to a transaction described in §1.367(b)-4(a).” Exceptions may be applicable in certain cases under the Notice. (See Notice for more details).
Effective Date for Notice Section 3.02(e)
The effective dates of Notice Section 3.02(e) will apply to specified transactions and specified exchanges (see definitions above) completed on, or after, September 22, 2014 (but only if the inversion transaction is completed on, or after, September 22, 2014). The Notice is currently in the comment period.
Contact Sherayzen Law Office for Complex International Tax Planning
With the new Treasury and IRS Notice, the need for successful international tax and legal planning will only increase. If you need legal and tax assistance, please contact Attorney Eugene Sherayzen at Sherayzen Law Office, Ltd. for questions about your tax and legal needs.

### Receiving FATCA Letter from Your Foreign Bank
Since July 1, 2014, the most feared US legislation regarding international tax enforcement – Foreign Account Tax Compliance Act (“FATCA”) – is being implemented by most banks around the world. As part of this compliance, foreign banks are sending out so-called FATCA letters to their customers seeking to verify certain types of information. In this article, I would like to introduce this FATCA letter and what the FATCA letter may mean to a US taxpayer with undisclosed foreign bank and financial accounts.
What is FATCA?
FATCA was signed into law in 2010 and codified in Sections 1471 through 1474 of the Internal Revenue Code. The law was enacted in order to reduce offshore tax evasion by US persons with undisclosed offshore accounts. There are two parts to FATCA – US taxpayer reporting of foreign assets and income on Form 8938 and reporting by a foreign financial institution (FFI) of foreign bank and financial account to the IRS.  Here, I will concentrate on the latter, because it is an FFI that sends out the FATCA letter.
FATCA generally requires a foreign payee (i.e. FFI) to identify certain US accountholders and report their accounts to the IRS. Such reporting is done either through an FFI Agreement directly to the IRS or through a set of local laws that implement FATCA.
If an FFI refuses to do so or otherwise does not satisfy these requirements (and is not otherwise exempt), US-source payments made to the FFI may be subject to withholding under FATCA at a rate of 30%. Note that FATCA information reporting and withholding requirements generally do not apply to FFIs that are treated as “deemed-compliant” because they present a relatively low risk of being used for tax evasion or are otherwise exempt from FATCA withholding.
FATCA Implementation and FATCA Letter
As of July 1, 2014, the FATCA went into full effect, which means that FFIs now have to report the required FATCA information to the IRS. However, it appears that the IRS is not likely to fully enforce the penalties until the end of 2014 just to give FFIs enough time to comply.
Nevertheless, many FFIs are making a full effort to comply with FATCA. As part of this effort, FFIs around the world have been sending out “FATCA letters”. A FATCA letter is basically a letter from your bank or other financial institution which introduces FATCA to their customers and asks them to provide answers to a various set of questions aiming to find out information specific to FATCA compliance. Often, instead of asking all of these questions directly a FATCA letter would simply list out a series of forms that contain these questions (for example, W9, W8BEN, et cetera).
If the customer refuses to answer the questions or provide the necessary forms, the financial institution would often close the account and report it as a “recalcitrant account" to the IRS.
Impact of FATCA Letter on US Taxpayers with Undisclosed Accounts
A FATCA letter may have a very profound impact on a US taxpayer with foreign accounts which were not properly disclosed to the IRS (usually on the FBAR and/or Form 8938). Let’s concentrate on two most important aspects of receiving a FATCA letter. First, a FATCA letter puts the taxpayer on notice that he is required to report his foreign financial accounts and foreign income to the IRS. This may have a big impact on whether the taxpayer can later certify his non-willfulness for the purposes of the Streamlined Filing Compliance Procedures.
Second, a FATCA letter starts the clock for the taxpayer to beat the bank’s disclosure of his account to the IRS.
In essence, receiving a FATCA letter forces the taxpayer to quickly choose the path of his voluntary disclosure under significant time pressure.
Contact Sherayzen Law Office if You Received a FATCA Letter
If you received a FATCA letter from your bank or any other financial institution, contact Sherayzen Law Office immediately to assess your situation and determine the path of your voluntary disclosure. Our highly experienced team of international tax professionals will thoroughly analyze your case, prepare all of the required documentation (legal documents and tax forms), conduct the voluntary disclosure and defend your interests before the IRS.
Remember, time is of the essence in these matters. So, Call Us Now to Schedule Your Confidential Consultation!

### IRS Announces Retirement Plan Contribution Limits for 2015
On October 23, 2014, the Internal Revenue Service (IRS) announced the tax-year 2015 cost of living adjustments (COLAs) affecting the dollar limitations for pension plan contributions and plan contributions for other retirement-related plans. While many pension plan limitations will change for 2015 because the COLAs met the statutory thresholds triggering their adjustment, not all limitations met the necessary threshold, and will thus remain unchanged.
This article will briefly explain some of the notable items that are changed and unchanged for tax year 2015; the article is not intended to convey tax or legal advice.
401(k), 403(b), 403(b), Most 457 Plans, and the Federal Government’s Thrift Savings Plan
The annual elective plan contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan will increased from $17,500 in 2014 to $18,000 in 2015.
The 401(k) Catch-Up Plan Contribution Limit
For employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan, the catch-up contribution limit will increase to $6,000 in 2015, up from $5,500 in 2014.
Contribution Limitations to an Individual Retirement Arrangement
The annual contribution limitation to an Individual Retirement Arrangement (IRA) will remain unchanged at $5,500. Furthermore, the additional catch-up contribution limit for those individuals aged 50 and over is not subject to annual COLAs, and will also remain unchanged, at $1,000.
Roth IRA Phase-Outs
For taxpayers making contributions to Roth IRA’s, the AGI phase-out range will increase to $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For single individuals and heads of household, the income phase-out range will be $116,000 to $131,000 in 2015, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to annual COLAs, and the range will remain from $0 to $10,000.
Deductible IRA Phase-Outs
For taxpayers making contributions to a traditional IRA, the 2015 deduction phases out for singles and heads of household who are covered by a workplace retirement plan and have modified AGI between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range will increase to $98,000 to $118,000 for 2015, up from $96,000 to $116,000.
For IRA contributors not covered by workplace retirement plans, and who are married to someone who is covered, the deduction will phase out between $183,000 and $193,000 (for the couple’s income), up from $181,000 and $191,000 in 2014. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to annual COLAs; this range will remain changed at $0 to $10,000.
The Saver’s Credit
The Adjusted Gross Income (AGI) limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers will be $61,000 for married couples filing jointly for 2015, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for single individuals, up from $30,000.
Defined Benefit and Defined Contribution Plans
The contribution limit for defined benefit plans (under Internal Revenue Code Section 415(b)(1)(A)) will remain unchanged at $210,000 for 2015. The annual limitation for defined contribution plans (under IRC Section 415(c)(1)(A)) will increase to $53,000 in 2015, up from $52,000 in 2014.

### IRS Notice 2014-52 Regarding Inversions and “Hopscotch Loans”
On September 22, 2014, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) issued Notice 2014-52, “Rules Regarding Inversions and Related Transactions” (“Notice”) in the wake of recent inversions conducted by many US companies such as by Medtronic, Chiquita Brands, Pfizer and others.  Treasury and the IRS highlighted in the Notice that they were “concerned that certain recent inversion transactions are inconsistent with the purposes of sections 7874 and 367 of the Internal Revenue Code… certain inversion transactions are motivated in substantial part by the ability to engage in certain tax avoidance transactions after the inversion that would not be possible in the absence of the inversion.”
To address these concerns regarding inversions, Treasury and the IRS announced in the Notice that they intend to issue new regulations under Internal Revenue Code (“IRC”) Sections 304(b)(5)(B), 367, 956(e), 7701(l), and 7874. In this article we will briefly explain the new regulations intended to be issued under IRC Section 956 that seek to prevent the avoidance of tax in this section “[T]hrough post-inversion acquisitions by controlled foreign corporations (“CFC’s”) of obligations of (or equity investments in) the new foreign parent corporation or certain foreign affiliates”. Such obligations are also commonly referred to as “Hopscotch loans”. Notice Section 3.01, “Regulations to Address Acquisitions of Obligations and Stock that Avoid Section 956” specifically addresses such issues.
This article is intended to provide explanatory material regarding the new inversion regulations as they relate to IRC Section 956 aspects; the article does not convey legal or tax advice. Please contact experienced international tax attorney Eugene Sherayzen for questions about your tax and legal needs.
Inversions and the Use of “Hopscotch Loans” to Avoid U.S. Taxation under Pre-Notice Rules
In general, under IRC Section 956, if a CFC subsidiary of a U.S. parent makes a loan to (or equity investment in) the U.S. parent, it will be treated as a deemed repatriation of the CFC's earnings and profits, even though no actual dividend may be distributed. IRC Section 956(c)(1) specifically provides that U.S. property is “[A] any property acquired after December 31, 1962, which is… (B) stock of a domestic corporation; (C) an obligation of a United States person…” (See Section 956 for additional definitions of “U.S. property” for the purposes of this provision).
This deemed repatriation will be taxable to the CFC’s U.S. shareholders. As stated in the Notice, the taxable amount for any taxable year is the lesser of, “(1) the excess (if any) of—(A) such shareholder’s pro rata share of the average of the amounts of United States property held (directly or indirectly) by the controlled foreign corporation as of the close of each quarter of such taxable year, over (B) the amount of earnings and profits described in section 959(c)(1)(A) with respect to such shareholder, or (2) such shareholder’s pro rata share of the applicable earnings of such controlled foreign corporation.”
This is why many U.S. parents and CFC subsidiaries sought to avoid taxation by doing inversions in which new foreign parent companies would be formed that were not CFCs; the existing CFC would then make a loan to the new foreign parent (the “Hopscotch loan”), and the amount could at some future point then be lent to the former U.S. parent. As Treasury and the IRS stated in the Notice, “The ability of the new foreign parent to access deferred CFC earnings and profits would in many cases eliminate the need for the CFCs to pay dividends to the U.S. shareholders, thereby circumventing the purposes of section 956.”
Changes to Inversions under Notice 2014-52, Section 3.10(b)
Under IRC Section 956(e) the Treasury Secretary is directed to prescribe regulations to prevent tax avoidance of the provisions of section 956 through reorganizations or otherwise, and the Notice specified that inversions constitute such transactions. To address the inversions strategy, Treasury and the IRS noted that they intend to issue regulations, “[P]roviding that, solely for purposes of section 956, any obligation or stock of a foreign related person (within the meaning of section 7874(d)(3) other than an “expatriated foreign subsidiary”) (such person, a “non-CFC foreign related person”) will be treated as United States property within the meaning of section 956(c)(1) to the extent such obligation or stock is acquired by an expatriated foreign subsidiary during the applicable period (within the meaning of section 7874(d)(1)).”
An “expatriated foreign subsidiary” is defined in the Notice (except as provided in the succeeding paragraph) as a “CFC with respect to which an expatriated entity… is a U.S. shareholder”, but it does not include a “CFC that is a member of the EAG immediately after the acquisition and all transactions related to the acquisition are completed (completion date) if the domestic entity is not a U.S. shareholder with respect to the CFC on or before the completion date” (“EAG” is defined in the Notice to mean an “expanded affiliated group”). Additionally, under the Notice, “[A]n expatriated foreign subsidiary that is a pledgor or guarantor of an obligation of a non-CFC foreign related person under the principles of section 956(d) and §1.956-2(c) will be considered as holding such obligation.”
Effective Dates of the New Regulation Concerning Inversions
Subject to certain exceptions, the regulations under Notice section 3.01(b), “[W]ill apply to acquisitions of obligations or stock of a non-CFC foreign related person by an expatriated foreign subsidiary completed on or after September 22, 2014, but only if the inversion transaction is completed on or after September 22, 2014.”
Contact Sherayzen Law Office for Help With International Tax Matters
International tax matters often involve very complex issues, and it is advisable to seek the assistance of a tax attorney in this area. If you have questions regarding taxation of CFC’s, are in need of international tax planning, or have any other tax and legal questions, please contact Sherayzen Law Office, Ltd.

### Same Interest Rates for the Fourth Quarter of 2014
On September 3, 2014, the IRS announced that the underpayment and overpayment interest rates for the fourth quarter of 2014 will remain the same The rates will be:
three (3) percent for overpayments (two (2) percent in the case of a corporation);
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.  You can trace the interest rates for the fourth quarter of 2014 directly to this calculation.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.  The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.  The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
It is important to note that the underpayment interest rates for the fourth quarter of 2014 will be used to determine the PFIC interest rate on the excess distribution for the fourth quarter of 2014.

### Treatment of Business Profits under the Canada-US Tax Treaty
In this article we will briefly examine the treatment of the business profits of a resident of a contracting State under the Canada-US Income Tax Convention, and the important definition of a “permanent establishment” for purposes of determining the potential taxability of income of such profits.
This article is intended to provide informative material for US taxpayers involved with US-Canada cross-border businesses, and is not intended to constitute tax or legal advice. Please contact the experienced international tax law firm of Sherayzen Law Office, Ltd. for issues involving the Canada-US Tax Treaty.
Business Profits under the Canada-US  Tax Treaty
Under the US-Canada Tax Treaty, the business profits of a resident of a Contracting State, “[S]hall be taxable only in that State unless the resident carries on business in the other Contracting State through a permanent establishment situated therein.” (See the definition of “permanent establishment” in next section). Hence, if the resident of a Contracting State carries on, or has carried on, such business, then the business profits of the resident may be taxed in the other State but only to the extent attributable to the permanent establishment.
In determining the business profits of a permanent establishment, certain deductions incurred for the purposes of the permanent establishment, such as executive and general administrative expenses (whether in the State in which the permanent establishment is situated, or elsewhere) may be allowed. However, under the Canada-US Tax Treaty, a Contracting State is not required to allow the deduction of an expenditure which is not generally deductible under the taxation laws of such State.
Additionally, the Canada-US Tax Treaty states that “no business profits shall be attributed to a permanent establishment of a resident of a Contracting State by reason of the use thereof for either the mere purchase of goods or merchandise or the mere provision of executive, managerial or administrative facilities or services for such resident.”
Definition of Permanent Establishment under the Canada-US Tax Treaty
Article V of the Canada-US Tax Treaty provided the original definition of the term “permanent establishment”. As stated in the Canada-US Tax Treaty, the term is defined to mean “[a] fixed place of business through which the business of a resident of a Contracting State is wholly or partly carried on.” Under the Canada-US Tax Treaty, permanent establishment includes: (a) a place of management; (b) a branch; (c) an office; (d) a factory; (e) a workshop; and (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources. Furthermore, a building site or construction or installation project constitutes a permanent establishment provided that it lasts more than 12 months. In addition, “A person acting in a Contracting State on behalf of a resident of the other Contracting State other than an agent of an independent status to whom paragraph 7 applies shall be deemed to be a permanent establishment in the first-mentioned State if such person has, and habitually exercises in that State, an authority to conclude contracts in the name of the resident.” (Please see Article V of the Canada-US Tax Treaty for more specific examples of a "permanent establishment").
The Fifth Protocol (the “Protocol”) to the Canada-US Tax Treaty, signed in September of 2007 and entered into force on December 15, 2008, further modified the definition of permanent establishment. Under the Protocol (Article 3, Paragraph 2), an “enterprise of a Contracting State” that provides services in the other Contracting State may be deemed to have a permanent establishment if it meets at least one of the following conditions:
“(a) Those services are performed in that other State by an individual who is present in that other State for a period or periods aggregating 183 days or more in any twelve-month period, and, during that period or periods, more than 50 percent of the gross active business revenues of the enterprise consists of income derived from the services performed in that other State by that individual; or (b) The services are provided in that other State for an aggregate of 183 days or more in any twelve-month period with respect to the same or connected project for customers who are either residents of that other State or who maintain a permanent establishment in that other State and the services are provided in respect of that permanent establishment.”
Further, the diplomatic notes of Annex B to the Protocol added that, “[t]he principles of the OECD Transfer Pricing Guidelines shall apply for purposes of determining the profits attributable to a permanent establishment”.
Elimination of Article XIV of the Canada-US Tax Treaty
The Protocal had further important impact with respect to services defined as “Independent Personal Services” – Article 9 of the Protocol eliminated Article XIV of the Canada-US Tax Treaty (“Independent Personal Services”). Under previous Article XIV a resident of a Contracting State performing independent personal services in the other Contracting State could be taxed if such “individual has or had a fixed base regularly available to him in that other State but only to the extent that the income is attributable to the fixed base.” The business profits rules explained above and the various definitions of permanent establishment now determine the taxability of such cases.
Contact Sherayzen Law Office for legal help with respect to Canada-US Tax Treaty
Treaty interpretation, international tax resolution and international tax planning may involve very complex issues, and it is advisable to seek the assistance of an international tax attorney in this area. This is why it is advised that you contact Sherayzen Law Office to secure professional legal help involving issues related to Canada-US Tax Treaty.
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### FBAR Reporting of Foreign Gold and Silver Storage Accounts
There is a great deal of confusion about the reporting of foreign gold and silver storage accounts on the Report of Foreign Bank and Financial Accounts (FBAR). In this article, I would like to set forth the general legal framework for the analysis of the reporting requirements for the foreign gold and silver storage accounts. However, it should be remembered that this article is for educational purposes only and it does not provide any legal advice; whether your particular foreign gold and silver accounts should be reported on the FBAR is a legal question that should be analyzed by an international tax attorney within your particular fact setting.
FBAR Background
FBAR’s official name is FinCEN Form 114 (formerly form TD F 90-22.1). Generally, the FBAR is used by US persons to report foreign bank and financial accounts whenever the aggregate balance on these accounts exceeds the threshold of $10,000. The FBAR applies to accounts which are directly, indirectly and constructively owned; it further applies to situations where a US person has signatory or other authority over a foreign account.
The above description contains numerous terms of art that have very specific meaning (even with respect to such common terms as “US person” and “accounts”). I only provide a very general definition of the FBAR here, but there is plenty of FBAR articles on sherayzenlaw.com that you can read to learn more about this requirement.
General Rule for Reporting of Foreign Gold and Silver Storage Accounts
In general, if you have a foreign gold and silver storage accounts, they are reportable on the FBAR as long as the threshold requirement is satisfied. However, as almost everything in international tax law, you have to look closely at the definition of terms. In this case, the critical issue is what situations fall within the definition of foreign gold and silver storage accounts.
What are Foreign Gold and Silver Storage Accounts?
It is important to understand that certain facts and details may play a great role in determining whether one has foreign gold and silver storage accounts – this is why it is so important to have an international tax attorney review the particular facts of your case.
Nevertheless, there are certain general legal concepts that provide helpful guidance to international tax attorneys in their FBAR analysis. The most important FBAR factors for determining whether a particular arrangement is defined as foreign gold and silver storage accounts are two interrelated concepts of “custodial relationship” and “control”.
Generally, where another person or entity has access and/or control of assets or funds on your behalf, the IRS is very likely to find that a custodial relationship exists and all such arrangements would be reportable on the FBAR as foreign gold and silver storage accounts. For example, if one buys gold and silver through BullionVault or Goldmoney (whether allocated or non-allocated), one creates foreign gold and silver storage accounts because BullionVault or Goldmoney would handle the transaction on your behalf and store the precious metals on your behalf (and, as mentioned above, even allocate your holdings to a particular gold or silver bar).
A word of caution: the IRS tends to interpret the definitions of “account” and “custodial relationship” very broadly and one must not indulge oneself with false thoughts of security because one thinks that he was able to circumvent a particular fact setting. Again, the existence of foreign gold and silver storage accounts is a legal question that should be reviewed by an experienced international tax lawyer.
Foreign Gold and Silver Storage Accounts: What about a Safe Deposit Box?
There is a situation that comes up often in my practice (particularly for clients with Australian, Hong Kong and Swiss accounts) with respect to FBAR reporting of precious metals – putting gold, silver and other precious metals in a foreign safe deposit box. There is a dangerous myth that safe deposit boxes are never reportable – this is incorrect.
In general, it is true that precious metals held in a safe deposit box are not reportable, but if and only if no account relationship exists. If there is an account relationship with respect to a safe deposit box, then it would be considered a reportable foreign gold and silver storage account for the FBAR purposes.
What does this mean? Let’s go back to the definition of a custodial relationship cited above – an account relationship exists whenever another person or entity has control of funds or assets on your behalf. If one applies this definition to a safe deposit box, then it is likely that the IRS will interpret any situation where an institution or person has access to a safe deposit box as an existence of an account. Moreover, the IRS is likely to find that foreign gold and silver storage accounts exist where an owner (direct or indirect) of the safe deposit box can instruct the institution to sell the gold from the safe deposit box.
Other Reporting Requirements May Apply to Foreign Gold and Silver Storage Accounts
It is important to mention that FBAR is just one of potential reporting requirements under US tax laws. Other reporting requirements (such as Form 8938, 8621, 5471, 8865 and so on) may apply depending on the nature of the foreign gold and silver storage accounts, form of ownership, whether a foreign entity is involved, and numerous other facts. You will need to contact an experienced international tax lawyer to determine your international tax reporting requirements under US tax laws.
Contact Sherayzen Law Office for Professional Help with Reporting of Foreign Gold and Silver Accounts
If you have unreported foreign gold and silver storage accounts, contact Sherayzen Law Office for professional help. Owner Eugene Sherayzen is an experienced international tax attorney who will thoroughly analyze your case, determine the extent of your current reporting requirements and potential non-compliance liability, analyze your voluntary disclosure options, and implement the preferred legal option (including preparation of all legal documents and tax forms).
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### OVDP lawyers: Recent News Regarding the DOJ Program for Swiss Banks
For OVDP lawyers, one of the most significant recent developments in the US international tax law enforcement was the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (“Program”) announced by the US Department of Justice (“DOJ”) on August 29, 2013. Since the Program began functioning, more than a hundred Swiss banks (out of the approximate total of three hundred eligible banks) elected to enter the Program.
This article will briefly highlight some recent developments concerning Swiss banks participating in the Program, as well as the likely future focus of the DOJ efforts to locate the offshore accounts of US taxpayers (an important focus for OVDP lawyers and their clients). This article is not intended to convey tax or legal advice. If you have an offshore account, you should seek the advice of a tax attorney as significant penalties may be involved. Please contact the experienced OVDP International tax firm, Sherayzen Law Office, Ltd. for professional legal and tax assistance.
OVDP Lawyers: At Least Ten Swiss Banks Have Withdrawn From the Program
It appears that some of the Swiss banks entered the Program out of pure caution. According to a recent article in the Swiss newspaper, NZZ am Sonntag, at least ten Swiss banks have withdrawn their participation in the Program. The paper, citing anonymous sources, did not specify which banks withdrew. However, the banks reportedly determined that they had not broken applicable US laws, and according to various news reports, the DOJ had no objection to the banks withdrawing from the Program.
One Swiss bank that publicly announced that it was withdrawing last month is the Liechtenstein-based private bank, VP Bank. According to a news report citing an official statement, the bank noted, “Thorough internal investigations and external expert opinions showed that the conditions for continued participation did not exist…VP Bank therefore withdrew from the U.S. programme.”
For OVDP lawyers, this maybe an important fact that may affect the voluntary disclosure strategies of their clients.
OVDP Lawyers: Many Swiss Banks May Have to Wait Until 2015 to Resolve Disputes in the Program
An important issue for the Swiss Banks and OVDP lawyers is when the DOJ will reach the final resolution under the Program. In a recent article published in the Swiss financial newspaper, finews.ch, Shelby du Pasquier, a partner at the Geneva law firm Lenz & Staehelin representing more than twenty Swiss banks enrolled in the Program, gave the opinion that for most banks enrolled, settling disputes in the Program would last until spring of 2015. He noted that this was his “personal opinion” and not the official opinion of any of the twenty (unnamed) banks he represents. In a separate news report, Boris Collardi, CEO of Julius Baer, was quoted in July of this year as stating that he expects his bank to find a “fair and equitable solution” within the next few months. Du Pasquier seconded the opinion that Julius Baer will likely be one of the next large Swiss banks to settle, along with an unnamed “smaller bank.”
Du Pasquier also opined that the US DOJ is likely to increase scrutiny of accounts in other offshore jurisdictions, especially the Bahamas, Hong Kong and Singapore, and any Swiss bank subsidiaries operating in such countries.
At Sherayzen Law Office, Mr. Sherayzen already expressed his opinion that the IRS is already in the process of widening its scope of enforcement with the particular emphasis on the Carribean region, Central America, Hong Kong, India, Singapore in addition to its already deep involvement in Israel. Mr. Sherayzen also seconded the opinion that the resolution of the issues under the Program is unlikely to be reached for most of the participants in 2014; most likely, we are looking at 2015 and maybe even 2016 for the most difficult cases.
OVDP Lawyers: Several Swiss Banks Seek More US Customers for Offshore Accounts
While most Swiss banks no longer pursue US customers desiring offshore accounts and funds because of the recent increased IRS and DOJ efforts, several Swiss banks have actually increased marketing for this customer base. The new marketing efforts are legal if such offshore funds are properly registered with the US Securities and Exchange Commission (SEC), or other applicable authorities.
In a recent news article in swissinfo.ch, René Marty, CEO of UBS Swiss Financial Advisers (UBS-SFA) stated, “We only accept clients who have declared all their assets.” The Swiss Bank, Vontobel, not only registered with the SEC, but also established a branch in Texas to pursue US customers.
UBS-SFA, Vontobel, and Pictet North America Advisors are the Swiss leaders in this targeted market. Furthermore, from a practical perspective, these banks may provide the only option for US persons living overseas who have declared their offshore accounts, but are unable to open accounts in various Swiss banks that now view having US customers as a stigma.
For OVDP lawyers, it is important to advise their clients that these offshore banks are likely to be subject to additional US tax reporting requirements.
Contact Sherayzen Law Office for Help with Undisclosed Foreign Accounts and Other Foreign Assets
If you have undisclosed foreign accounts, you may be running a grave risk of IRS detection and investigation due to FATCA enforcement as well as the widening scope of IRS investigations as it goes through the piles of information it collected as a result of the voluntary disclosure programs and the Swiss Program for Banks. This is why you need the help of an experienced OVDP lawyer to properly advise you with respect to your voluntary disclosure options.
We can help you as we have helped hundreds of our clients around the world. Our international tax team is highly experienced in all voluntary disclosure options involving offshore accounts and other foreign assets. Our international tax compliance team will thoroughly review your case, identify the international tax issues involved, analyze the penalty exposure and the available voluntary disclosure options, and implement the preferred voluntary disclosure plan for you (including preparation of all legal documents and tax forms).
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### Illegal Use of Offshore Accounts in the Caribbeans: Advisor Sentenced
In an earlier article, we referred to a case where a investment advisors used offshore accounts in the Caribbeans to launder and conceal funds. On September 5, 2014, the IRS ad the DOJ announced one of these advisors, Mr. Joshua Vandyk, was sentenced to serve 30 months in prison.
Mr. Vandyk, a U.S. citizen, and Mr. Eric St-Cyr and Mr. Patrick Poulin, Canadian citizens, were indicted by a grand jury in the U.S. District Court for the Eastern District of Virginia on March 6, and the indictment was unsealed March 12 after the defendants were arrested in Miami. Mr. Vandyk, 34, pleaded guilty on June 12, Mr. St-Cyr, 50, pleaded guilty on June 27, and Mr. Poulin, 41, pleaded guilty on July 11. St-Cyr and Poulin are scheduled to be sentenced on October 3, 2014.
According to the plea agreements and statements of facts, All three advisors conspired to conceal and disguise the nature, location, source, ownership and control of $2 million (believed to be the proceeds of bank fraud) through the use of the Offshore Accounts in the Caribbeans. The Offshore Accounts in the Caribbeans are often used not only to conceal illegal funds, but also perfectly legal earnings of U.S. persons.
In addition to the use of the Offshore Accounts in the Caribbeans, the advisors assisted undercover law enforcement agents posing as U.S. clients in laundering purported criminal proceeds through an offshore structure designed to conceal the true identity of the proceeds' owners. Moreover, Mr. Vandyk helped invest the laundered funds on the clients' behalf and represented that the funds in the Offshore Accounts in the Caribbeans would not be reported to the U.S. government.
According to court documents, Mr. Poulin established an offshore corporation called Zero Exposure Inc. for the undercover agents and served as a nominal board member in lieu of the clients. Mr. Poulin then transferred approximately $200,000 that the defendants believed to be the proceeds of bank fraud from the offshore corporation to the Cayman Islands, where Mr. Vandyk and Mr. St-Cyr invested those funds outside of the United States in the name of the offshore corporation. The investment firm represented that it would neither disclose the investments or any investment gains to the U.S. government, nor would it provide monthly statements or other investment statements with respect to the Offshore Accounts in the Caribbeans to the clients. Clients were able to monitor their investments in the Offshore Accounts in the Caribbeans online through the use of anonymous, numeric passcodes. Upon request from the U.S. client, Mr. Vandyk and Mr. St-Cyr liquidated investments and transfered money from the Offshore Accounts in the Caribbeans, through Mr. Poulin, back to the United States.
This case is just one more example of the increased IRS international tax enforcement with respect to the Offshore Accounts in the Caribbeans.

### History and Success of the Main Voluntary Disclosure Programs
In order to bring back into the system the non-compliant taxpayers with undisclosed foreign assets, the IRS created various offshore voluntary disclosure programs. The voluntary disclosure programs have been part of a wider effort to stop offshore tax evasion, which includes enhanced enforcement, criminal prosecutions and implementation of third-party reporting via the Foreign Account Tax Compliance Act (FATCA). Recently, the IRS shared the statistics regarding the success of its three latest and most voluntary disclosure programs: 2009 OVDP, 2011 OVDI and 2012 OVDP (recently updated to become the 2014 OVDP).
Results for All Three Programs
The outcome of the three voluntary disclosure programs is indeed impressive. Overall, the three voluntary programs have resulted in more than 45,000 voluntary disclosures from individuals who have paid about $6.5 billion in back taxes, interest and penalties.
Let’s take a closer look at each program.
2009 OVDP
This was the first of the “troika” of the latest voluntary disclosure programs. The IRS announced the 2009 Offshore Voluntary Disclosure Program (OVDP) in March 2009. It offered taxpayers an opportunity to avoid criminal prosecution and a settlement of a variety of civil and criminal penalties in the form of single miscellaneous offshore penalty. It was based on existing voluntary disclosure practices used by IRS Criminal Investigation.
Generally, the miscellaneous offshore penalty for the 2009 program was 20 percent of the highest aggregate value of the unreported offshore accounts from 2003 to 2008. Participants were also required to file amended or late returns and FBARs for those years.
In the 2009 OVDP the IRS received 15,000 disclosures prior to the October 15, 2009 closing date. It resulted in the collection of $3.4 billion in back taxes, interest and penalties. It also led to another 3,000 disclosures after the closing date.
No doubt that the success of the 2009 OVDP was made possible by the IRS victory in the UBS case in August of 2008 and the action it started to take to follow-up on this victory. The UBS case became the turning point in the offshore compliance for U.S. taxpayers because the victory was achieved over one of the largest banks in the world in the country which was considered to be the most formidable fortress of bank secrecy for centuries.
2011 OVDI
While the 2009 program was the first of the post-UBS voluntary disclosure programs, the 2011 Offshore Voluntary Disclosure Initiative (OVDI) was the program that established the offshore voluntary disclosure programs as one of the main pillars of U.S. voluntary tax compliance. The 2011 OVDI was announced in February of 2011 and lasted until September 9 of that year (originally, it was supposed to close on August 31, 2011, but the IRS extended the deadline to September 9).
Generally, participants of this program paid a 25% miscellaneous offshore penalty on the highest aggregate value of unreported offshore accounts from 2003 to 2010. In addition, some participants were eligible for special 5% or 12.5% penalties, but there were very strict requirements to qualify for this treatment.
The 2011 OVDI was extremely popular. It drew 15,000 disclosures and resulted in the collection of $1.6 billion in back taxes, interest and penalties for the 70 percent of cases that were closed that year.
2012 OVDP
After analyzing the results from the two prior voluntary disclosure programs and reflecting on the best way to induce tax compliance (while intensifying international tax enforcement and looking forward to the implementation of FATCA), the IRS created a new 2012 Offshore Voluntary Disclosure Program (2012 OVDP) in January of 2012 and 2014 OVDP now closed.
In constructing the 2012 OVDP rules, the IRS drew on its experience from the experience from the prior voluntary disclosure programs, revised the terms of the 2011 OVDI program and made the 2012 OVDP permanent until further notice. Under the 2012 OVDP, participants paid a penalty of 27.5 percent of the highest aggregate balance or value of offshore assets during the prior eight years. The 5% or 12.5% penalties remained in effect for certain taxpayers. This 2012 program has drawn 12,000 disclosures since its inception.
2012 Streamlined Option
In June of 2012, the IRS expanded its voluntary disclosure programs beyond 2012 OVDP and added an option to the existing disclosure program that enabled some U.S. citizens and others residing abroad to catch up on their filing requirements and avoid large penalties if they owed little or no back taxes. This option took effect in September of that year.
2014 Changes to Offshore Voluntary Disclosure Programs
In June of 2014, the IRS announced major changes in the 2012 offshore account compliance programs. As a result of these changes, the taxpayers now currently have to analyze up to five different voluntary disclosure paths. The more prominent changes to the voluntary disclosure programs include: new 2014 OVDP with the double-penalty structure of 27.5% and 50%, major enhancement of the Streamlined Foreign Offshore Procedures, introduction of the brand-new Streamlined Domestic Offshore Procedures with its new 5% penalty structure, slightly modified Delinquent FBAR Submission rules, and slightly modified Delinquent Information Return Submission rules (which partially incorporates now the statutory Reasonable Cause exception).
The changes are anticipated to provide thousands of people a new avenue to come back into compliance with their tax obligations.
Contact Sherayzen Law Office for Professional Advice Regarding Your Offshore Voluntary Disclosure Options
If you have undisclosed foreign accounts and other foreign assets, you are likely to face very steep penalties if the IRS discovers your non-compliance. This is why it is prudent to consider your voluntary disclosure options as soon as possible.
Sherayzen Law Office is a firm that specializes in international tax compliance and offshore voluntary disclosures. Our experienced international tax law firm can offer professional advice with respect to your voluntary disclosure options and conduct the entire offshore voluntary disclosure for you. Contact Us to Schedule Your Confidential Consultation Now!

### Underpayment and Overpayment Interest Rates for the Third Quarter of 2014
Underpayment and Overpayment Interest Rates are important to all taxpayers who are either due a refund or owe taxes to the IRS, because the interest on the refund or the amount due will be calculated based on these Interest Rates. This essay reminds U.S. taxpayers that the IRS announced that the interest rates will remain the same for the calendar quarter beginning July 1, 2014. The rates will be:
three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### New Guilty Pleas For Using Cayman Islands Bank Accounts to Conceal Funds
On July 11, 2014, the DOJ and the IRS announced that Joshua Vandyk, a U.S. citizen, and Eric St-Cyr and Patrick Poulin, Canadian citizens, have each pleaded guilty to conspiring to launder monetary instruments and conceal funds using Cayman Islands bank accounts (mostly through foreign corporations). Patrick Poulin, 41, pleaded guilty on July 11, 2014, Vandyk, 34, pleaded guilty on June 12, 2014, and St-Cyr, 50, pleaded guilty on June 27, 2014. The three defendants were indicted by a grand jury in the U.S. District Court for the Eastern District of Virginia on March 6, 2014, and the indictment was unsealed on March 12, 2014, after the defendants were arrested in Miami.
According to the plea agreements and statements of facts, Vandyk, St-Cyr and Poulin conspired to conceal and disguise the nature, location, source, ownership and control of property believed to be the proceeds of bank fraud, specifically $2 million by using Cayman Islands bank accounts and foreign corporations. Vandyk, St-Cyr and Poulin assisted undercover law enforcement agents posing as U.S. clients in laundering purported criminal proceeds through an offshore structure and Cayman Islands bank accounts designed to conceal the true identity of the proceeds' owners. Vandyk and St-Cyr invested the laundered funds on the clients' behalf and represented that the funds and the Cayman Islands bank accounts would not be reported to the U.S. government.
"These three defendants played a shell game by creating offshore entities designed to help their U.S. clients evade taxes and other legal requirements, and they used that same shell game to launder purported criminal proceeds," said U.S. Attorney Dana J. Boente for the Eastern District of Virginia. "We are committed to working with our law enforcement partners to penetrate and combat these schemes wherever they occur."
According to the DOJ, Vandyk and St-Cyr lived in the Cayman Islands and worked for an investment firm based in the Cayman Islands. St-Cyr was the founder and head of the investment firm, whose clientele included numerous U.S. citizens. Poulin, an attorney at a law firm based in Turks and Caicos, worked and resided in Canada as well as the Turks and Caicos. His clientele also included numerous U.S. citizens. Vandyk, St-Cyr and Poulin solicited U.S. citizens to use their services (including creations of Cayman Islands bank accounts) to hide assets from the U.S. government, including the IRS. Vandyk and St-Cyr directed the undercover agents posing as U.S. clients to create an offshore corporation (and Cayman Islands bank accounts) with the assistance of Poulin and others because they and the investment firm did not want to appear to deal with U.S. clients. Vandyk, St-Cyr and Poulin used the offshore entity to move money into the Cayman Islands bank accounts and used Poulin as a nominee intermediary for the transactions.
This case just emphasizes again how the focus of the IRS has expanded far beyond Switzerland into Central America, including Cayman Islands bank accounts.
Contact Sherayzen Law Office for Legal Help with Undisclosed Foreign Financial Accounts
If you have any undisclosed foreign financial accounts (including Cayman Islands bank accounts), contact Sherayzen Law Office for legal help. Our international tax firm has experienced professionals who specialize in advising U.S. persons with respect to the voluntary disclosure of their foreign financial accounts. We can help you!
Contact Us to Schedule Your Confidential Consultation.

### Filings Required Under the Streamlined Foreign Offshore Procedures
In a previous article, I discussed the eligibility requirements and the general process of the Streamlined Foreign Offshore Procedures. In this article, I would like to explore further the specific filing requirements that should be met under the Streamlined Foreign Offshore Procedures. As a side note, while this article contains an overview of filing instructions, it greatly simplifies the matter and glosses over the potential complexities that may arise in an individual case. This is why only an international tax attorney should be handling the preparation and submission of documents in a voluntary disclosure context – I strongly discourage any “self-representation” in the Streamlined Foreign Offshore Procedures due to the complexity of the issues involved.
It is useful to organized the filing requirements based on relevant categories of documents. There are five categories of documents that may need to be filed under the Streamlined Foreign Offshore Procedures: tax returns, tax payment, FBARs, Certification, and late Deferral and ITIN Requests.
Streamlined Foreign Offshore Procedures: Filing Requirement Related to U.S. Tax Returns
The IRS issued precise instructions regarding submitting U.S. tax returns under the Streamlined Foreign Offshore Procedures. There are two possible scenarios with respect to submitted U.S. tax returns under Streamlined Foreign Offshore Procedures.
First, assuming that the taxpayer never filed a tax return, for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the taxpayer must submit a complete and accurate delinquent tax return using Form 1040, U.S. Individual Income Tax Return, together with the required information returns (e.g., Forms 3520, 5471, and 8938) even if these information returns would normally be filed separately from the Form 1040 had the taxpayer filed on time.
However, if a U.S. tax return has been filed previously, then the taxpayer must submit a complete and accurate amended tax return using Form 1040X, Amended U.S. Individual Income Tax Return, together with the required information returns (e.g., Forms 3520, 5471, and 8938) even if these information returns would normally be filed separately from the Form 1040 had the taxpayer filed a complete and accurate original return.
Irrespective of whether this is a delinquent tax return or an amended tax return, the taxpayer should include at the top of the first page of each delinquent or amended tax return and at the top of each information return "Streamlined Foreign Offshore" written in red to indicate that the returns are being submitted under these procedures. The IRS warns that this is critical to ensure that the taxpayer’s returns are processed through Streamlined Foreign Offshore Procedures.
Streamlined Foreign Offshore Procedures: Payment of Tax Due
Together with the U.S. tax returns, the taxpayer should submit the payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts. The taxpayer’s taxpayer identification number must be included on your check. As mentioned previously, under the Streamlined Foreign Offshore Procedures, the taxpayer is not required to pay any failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.
Streamlined Foreign Offshore Procedures: FBARs
Unlike the 2014 OVDP, the Streamlined Foreign Offshore Procedures follow the general FBAR statute of limitations and require the taxpayer to file delinquent FBARs for each of the most recent 6 years for which the FBAR due date has passed. The FBARs should be filed according to the FBAR instructions and they should include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures.
All FBARs must be e-filed at FinCEN. On the cover page of the electronic form, select “Other” as the reason for filing late. An explanation box will appear. In the explanation box, enter “Streamlined Filing Compliance Procedures.” While not required, it may be beneficial to include a more expanded statement to briefly state the circumstances – it is the job of an international tax attorney to critically look at his client’s case and see if this is the right strategy.
Streamlined Foreign Offshore Procedures: Certification of Non-Willfulness
This is the most critical part of the voluntary disclosure package under the Streamlined Foreign Offshore Procedures. The taxpayer must complete and sign a statement on the Certification by U.S. Person Residing Outside of the U.S. certifying (1) that he is eligible for the Streamlined Foreign Offshore Procedures; (2) that all required FBARs have now been filed; and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct.
The taxpayer must submit the original signed statement to the IRS. Furthermore, he must also attach copies of the statement to each tax return and information return being submitted through Streamlined Foreign Offshore Procedures.
The IRS warns that failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of the Streamlined Foreign Offshore Procedures.
At this point, the IRS does not require the attachment of copies of the Certification statement to FBARs, but this may change in the future (it appears that the FBARs may acquire at some future time the capability of submitting an attached pdf statement).
Streamlined Foreign Offshore Procedures: Late Deferral and ITIN Requests
Where relevant, the taxpayer may also utilize the Streamlined Foreign Offshore Procedures to make retroactive elections that otherwise would be late as well as to make ITIN requests.
If the taxpayer is not eligible to have a Social Security Number and does not already have an ITIN, he should submit an application for an ITIN along with the required tax returns, information returns, and other documents filed under these streamlined procedures.
In situations where the taxpayer seeks relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty, he should submit the following items as part of his disclosure package under the Streamlined Foreign Offshore Procedures:
a). A statement requesting an extension of time to make an election to defer income tax and identifying the applicable treaty provision;
b). A dated statement signed by you under penalties of perjury describing: (i) the events that led to the failure to make the election; (ii) the events that led to the discovery of the failure, and (iii)
if the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities; and
c). For relevant Canadian plans, a Form 8891 for each tax year and each plan and a description of the type of plan covered by the submission.
Streamlined Foreign Offshore Procedures: Mailing Address as of July 7, 2014
Once the above-described documents are gathered into one package (together with the payments), this package should be sent in paper format to the following address:
Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741
This address may only be used for returns filed under these procedures and may change over time; so, an international tax lawyer should verify any changes to the address prior to submission of any documents under the Streamlined Foreign Offshore Procedures.
Contact Sherayzen Law Office for Help with Disclosure of Your Foreign Accounts and Other Assets
If you own foreign financial accounts and other assets, you should contact Mr. Eugene Sherayzen, an experienced tax attorney of Sherayzen Law Office for legal help. Our experienced international tax law firm specializes in offshore voluntary disclosures and we can help you.
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### Streamlined Domestic Offshore Procedures: Eligibility Requirements
One of the most significant changes introduced by the 2014 update to the voluntary disclosure structure is the unprecedented introduction of the streamlined voluntary disclosure option to the U.S. taxpayers who reside in the United States – the so called, Streamlined Domestic Offshore Procedures. The introduction of the Streamlined Domestic Offshore Procedures means that the IRS finally recognized that there is a very large number of U.S. taxpayers who were non-willful with respect to their inability to comply with numerous obscure complex requirements of U.S. tax laws. They now have a new official option to deal with their situation.
Since the new option of the participation in the Streamlined Domestic Offshore Procedures is somewhat important to the voluntary disclosure, I would like to focus this short article on the general eligibility requirements for the Streamlined Domestic Offshore Procedures.
There are three eligibility requirements that must be met in order be able to utilize the Streamlined Domestic Offshore Procedures. First, the taxpayer must be a U.S. citizen, U.S. lawful permanent resident, or he must have met the substantial presence test.
The substantial presence test is outlined in 26 U.S.C. 7701(b)(3). Under 26 U.S.C. §7701(b)(3), an individual meets the substantial presence test if the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier) equals or exceeds 183 days.
The second requirement is critical to the participation in the Streamlined Domestic Offshore Procedures – taxpayer’s violations of the applicable U.S. tax requirements must be non-willful. The failures to report the income from a foreign financial asset, pay tax as required by U.S. law, file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and file other international information returns (such as Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) should have been non-willful. If the failure to file the FBAR and any other information returns was willful, the participation in the Streamlined Domestic Offshore Procedures is not likely to be possible.
Finally, the third eligibility requirement for the participation in the Streamlined Domestic Offshore Procedure is that the participating taxpayer is not subject to an IRS civil examination or an IRS criminal investigation, irrespective of the examination is related to undisclosed foreign financial assets or involves any of the years subject to the voluntary disclosure. In either case, the taxpayer will not be eligible to use the Streamlined Domestic Offshore Procedure.
Contact Sherayzen Law Office for Legal Help With Your Offshore Voluntary Disclosure
If you have undisclosed foreign accounts or any other offshore assets, contact Sherayzen Law Office for professional legal help. Our experienced international tax law firm will thoroughly analyze your case, estimate your current FBAR penalty exposure, and determine your eligibility for the available voluntary disclosure options, including the 2014 OVDP (now closed) Streamlined procedures and the Modified Voluntary Disclosure.
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### Non-Residency Requirement of the Streamlined Foreign Offshore Procedures
One of the key issues facing U.S. taxpayers who wish to use the Streamlined Foreign Offshore Procedures is meeting the non-residency requirement. If the non-residency requirement is not met (and assuming the regular delinquent FBAR submission procedure is not applicable), the U.S. taxpayer faces the less pleasant choice of either following the Streamlined Domestic Offshore Procedures with a 5% penalty, entering the 2014 Offshore Voluntary Disclosure Program (now closed) with its 27.5% penalty or pursuing an altogether distinct choice of the statutory reasonable cause exception (also known as Modified Voluntary Disclosure or Noisy Disclosure).
In this article, I will focus on outlining the non-residency requirement under the Streamlined Foreign Offshore Procedures. This article is for the educational purposes only; my strong recommendation is to retain an international tax attorney to determine whether your situation meets this non-residency requirement.
General Framework of the Non-Residency Requirement
In order to make sure that you are applying the correct legal test, you need to understand the dual framework of the non-residency requirement. The IRS draws a sharp distinction between two groups of U.S. taxpayers. The first group consists of U.S. citizens, U.S. lawful permanent residents (i.e. the green card holders), and estates of U.S. persons or lawful permanent residents. The second group consists of the U.S. taxpayers who are not U.S. citizens, U.S. lawful permanent residents, or estates of U.S. persons or lawful permanent residents. A large swath of people (primarily foreign workers and investors) fall under this category. For example, people who came here on the H-1, L and E visas as well as people who are in the process of obtaining their U.S. permanent residency.
Distinct non-residency requirement will be applicable to each group of taxpayers.
Non-Residency Requirement for U.S. citizens, Green Card Holders and Their Estates
In order to meet the non-residency requirement under the Streamlined Foreign Offshore Procedures, individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents:
1. In any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed,
2. Should not have had a U.S. abode, and
3. Should have been physically outside the United States for at least 330 full days.
Neither temporary presence of the individual in the United States nor maintenance of a dwelling in the United States by an individual necessarily mean that the individual’s abode is in the United States. The IRS made it clear that IRC section 911 and its regulations apply for the purposes of determining whether the non-residency requirement was met for the purposes of the Streamlined Foreign Offshore Procedures.
Non-Residency Requirement for Individuals Who are Not U.S. citizens or Lawful Permanent Residents
The key issue for the second group of individuals is understanding 26 U.S.C. 7701(b)(3). In order to meet the non-residency requirement under the Streamlined Foreign Offshore Procedures, individuals who are not U.S. citizens or lawful permanent residents, or estates of individuals who were not U.S. citizens or lawful permanent:
1. In any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed,
2. Should not have met the substantial presence test under IRC Section 7701(b)(3).
Under 26 U.S.C. §7701(b)(3), an individual meets the substantial presence test if the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier) equals or exceeds 183 days.
The IRS kindly provided this example:
Ms. X is not a U.S. citizen or lawful permanent resident, was born in France, and resided in France until May 1, 2012, when her employer transferred her to the United States. Ms. X was physically present in the U.S. for more than 183 days in both 2012 and 2013. The most recent 3 years for which Ms. X’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011. While Ms. X met the substantial presence test for 2012 and 2013, she did not meet the substantial presence test for 2011. Ms. X meets the non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents.
Contact Sherayzen Law Office for Legal Help with Your Undisclosed Foreign Accounts
If you have undisclosed foreign accounts, contact Sherayzen Law Office. Our experienced international tax law firm has helped numerous clients throughout the world with various types of voluntary disclosures from Modified Voluntary Disclosure to 2009 OVDP, 2011 OVDI, and 2012 OVDP. Our clients can be found on virtually all continents and in all major regions of the world.
If you are looking for reliable, experienced and creative ethical legal help, Contact Us to Schedule Your Confidential Consultation.

### Streamlined Foreign Offshore Procedure
One of the most dramatic changes to the voluntary disclosure process made by the IRS on June 18, 2014, was the complete revamping of the Streamlined Foreign Offshore Procedure. As long as the taxpayer can honestly certify that his prior violations of U.S. tax laws were non-willful, the Streamlined Foreign Offshore Procedure offers a unique opportunity for such a taxpayer to bring his tax affairs with respect to foreign accounts and other offshore assets into complete compliance with the U.S. tax rules with potentially no penalties. In this article, I am going to outline the Streamlined Foreign Offshore Procedure and discuss why it is important to take advantage of it as soon as possible.
Old Streamlined Foreign Offshore Procedure
The Streamlined Foreign Offshore Procedure already existed prior to June 18 changes. However, while it offered a no penalty solution to U.S. taxpayers residing overseas, it also imposed severe limitations preventing the great majority of these taxpayers from qualifying to participate in the Streamlined Foreign Offshore Procedure.
The most difficult conditions were the $1,500 additional tax liability threshold and the risk assessment process (to comply with the “simple return” rule). Further complications would arise from the failure to timely file original tax returns.
2014 Changes to Streamlined Foreign Offshore Procedure
It is precisely these difficult requirements that were removed by the IRS in June of 2014, thereby opening up a tremendous opportunity to U.S. taxpayers residing overseas: the $1,500 tax limit was gone, the risk assessment process was gone, and the importance of timely filed U.S. tax returns was also downgraded. Instead, the IRS created a new advantageous (to U.S. taxpayers) Streamlined Foreign Offshore Procedure with simplified eligibility requirements.
If these requirements are met, a U.S. taxpayer residing overseas can now avoid the imposition of all FBAR penalties if he follows the Streamlined Foreign Offshore Procedure for filing amended tax returns and delinquent FBARs.  Moreover, as an additional bonus, the IRS is stating that it will waive all failure-to-file and failure-to-pay penalties, accuracy-related penalties, and information return penalties.
There are some limitations on this generous gift. Any previously assessed penalties with respect to those years, however, will not be abated. Furthermore, as with any U.S. tax return filed in the normal course, if the IRS determines an additional tax deficiency for a return submitted under these procedures, the IRS may assert applicable additions to tax and penalties relating to that additional deficiency.
Since Streamlined Foreign Offshore Procedure offers such tremendous benefits to U.S. taxpayers who reside outside of the United States, it is important to make sure that all of the eligibility and filing requirements are met.
Streamlined Foreign Offshore Procedure: Eligibility requirements
There are three main eligibility requirements for participation in the Streamlined Foreign Offshore Procedure. First, the taxpayer must meet the applicable non-residency requirement. Here is the first caveat, for joint return filers, both spouses must meet the applicable non-residency requirement. Different rules apply to taxpayers who are U.S. citizens and U.S. permanent residents than to those taxpayers who do not fall into these categories.
The second requirement of the Streamlined Foreign Offshore Procedure is that the taxpayer violated the applicable U.S. tax requirements non-willfully – i.e. the taxpayer failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and such failures resulted from non-willful conduct.
The third requirement of the Streamlined Foreign Offshore Procedure is that the participating taxpayer is not subject to an IRS civil examination or an IRS criminal investigation.  Two important points here – it does not matter whether the examination relates to undisclosed foreign financial assets and it does not matter whether the examination involves any of the years subject to the voluntary disclosure.  In either case,  the taxpayer will not be eligible to use the Streamlined Foreign Offshore Procedure.
In reality, there is a more obscure fourth requirement that there is a valid Taxpayer Identification Number (TIN), but this issue can be solved by enclosing a completed ITIN application with the disclosure package under the Streamlined Foreign Offshore Procedure.
Filing Requirements Under the Streamlined Foreign Offshore Procedure
There are five main filing requirements that must be met in order to comply with the Streamlined Foreign Offshore Procedure.
The first filing requirement under the Streamlined Foreign Offshore Procedure is that, for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the taxpayer must file delinquent or amended tax returns, together with all required information returns (e.g., Forms 3520, 5471, and 8938). Specific procedures must be followed in the preparation of these returns.
The second filing requirement under the Streamlined Foreign Offshore Procedure is that, for each of the most recent 6 years for which the FBAR due date has passed, the taxpayer must file delinquent FBARs according to the FBAR instructions and include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures. The taxpayer is required to file these delinquent FBARs electronically at FinCEN. Detailed instructions must be followed to file these FBARs properly.
The third filing requirement under the Streamlined Foreign Offshore Procedure is the submission of the payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts. The taxpayer’s TIN must be included on the check.
The fourth filing requirement under the Streamlined Foreign Offshore Procedure is the submission of any requests for relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty.  Specific additional requirements apply to this request (especially, in the Canadian RRSP context).
Finally, the fifth filing requirement under the Streamlined Foreign Offshore Procedure is the most important part of this application – completed and signed “Certification by U.S. Person Residing Outside of the U.S.” (as of July 4, 2014, this is still in draft format but the final version should appear soon).
This is the most important legal document in the Streamlined Foreign Offshore Procedure. This is the statement that certifies that the taxpayer: (1) is eligible for the Streamlined Foreign Offshore Procedures; (2) that all required FBARs have now been properly filed; and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct. I cannot emphasize enough the importance of contacting your international tax attorney prior to submitting this document to the IRS.
The taxpayer must submit the original signed statement as well as attach copies of the statement to each tax return and information return being submitted through these procedures.
Streamlined Foreign Offshore Procedure: Some Considerations
While participation in the Streamlined Foreign Offshore Procedure may offer tremendous benefits to U.S. taxpayers who reside outside of the United States, it is important to understand that this may not be a simple process and all considerations should be taken into account. From the legal determination of whether the residency requirements are met to the very complicated legal decision on whether the “non-willful” determination applies, Streamlined Foreign Offshore Procedure involves significant legal analysis.
Based on my extensive experience, I believe that the great majority of the U.S. taxpayers who are currently not in compliance with the FBAR requirements are non-willful at heart. However, it is important to make sure that the legal case supports this finding – i.e. the facts of the case should support the determination of legal non-willfulness.
I strongly advise against making such determination without the help of an international tax lawyer. You need an attorney who can look at your case objectively and with a “cool head”, and make such determination based on his experience and knowledge of law.
Finally, it is essential to understand that there is no guarantee that Streamlined Foreign Offshore Procedure will be available even in half a year in the same format.  The IRS reserved the power to change the rules regarding  Streamlined Foreign Offshore Procedure at any point.  This is why it is so important to act fast to make sure that you are able to take advantage of this unique opportunity.
Contact Sherayzen Law Office for Professional Help with Your Participation in the Streamlined Foreign Offshore Procedure
If you have undisclosed foreign accounts, contact Sherayzen Law Office for a professional analysis of your voluntary disclosure options. Our international tax law firm has helped hundreds of U.S. taxpayers worldwide and we can help you.
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### Offshore Accounts Tax Lawyer: Delinquent FBAR Submission
If there is anything familiar left of the old offshore voluntary disclosure landscape for an Offshore Accounts Tax Lawyer after the 2014 update to the IRS Offshore Voluntary Disclosure Program (“OVDP”),  it will be the submission of delinquent FBARs under the old FAQ 17. Of course, under the new 2014 OVDP, there is no FAQ 17.
However, an Offshore Accounts Tax Lawyer will find a very similar language under the new “Delinquent FBAR Submission Procedures”.
Offshore Accounts Tax Lawyer: Old 2012 OVDP FAQ 17
Under the old 2012 OVDP FAQ 17, an Offshore Accounts Tax Lawyer would advise his U.S. clients who reported and paid tax on all their taxable income for prior years but did not file FBARs that there would be no penalties for the failure to file the delinquent FBARs. The key to the application of Q&A 17 is that there should be no underreported tax liabilities (actually, no underreported income at all) by the taxpayer and the taxpayer was not previously contacted regarding an income tax examination or a request for delinquent returns.
Offshore Accounts Tax Lawyer: New 2014 OVDP Delinquent FBAR Submission Procedure
The 2014 OVDP rules offer to an Offshore Accounts Tax Lawyer fairly similar language. They state that, where neither Streamlined Filing Compliance Procedures nor the OVDP rules are applicable because the taxpayer does not need to file delinquent or amended tax returns to report and pay additional tax, the IRS is not likely to impose penalties as long as three conditions are met:
1. The taxpayer has not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114, previously Form TD F 90-22.1);
2. The taxpayer is not under a civil examination or a criminal investigation by the IRS; and
3. The taxpayer has not already been contacted by the IRS about the delinquent FBARs.
In such case, an Offshore Accounts Tax Lawyer should advise his clients to file the delinquent FBARs according to the FBAR instructions and include a statement explaining why the FBARs are filed late. All FBARs are required to be filed electronically at FinCen (contact an Offshore Accounts Tax Lawyer for more details).
If all of these conditions are met and the taxpayer voluntary files the FBARs with an explanatory statement, the IRS promises not to impose FBAR penalties. However, an Offshore Accounts Tax Lawyer should point out to his clients that, while the FBARs will not be automatically subject to audit, there is always a possibility that these FBARs may be selected for audit through the existing audit selection processes that are in place for any tax or information return.
Offshore Accounts Tax Lawyer: Issue of Streamlined vs. Delinquent FBAR Procedure
An interesting issue arises for an Offshore Accounts Tax Lawyer where the client closed his accounts four years ago (for example, in 2010) but still would have additional tax liability for the two years prior to that for year period (in this example, 2008 and 2009). Should an Offshore Accounts Tax Lawyer advise his client to enter the Streamlined Option at this point even though the amended tax returns would show no additional tax liability for the past three years?
In reality, situations are rarely as clear cut as this example and the legal determinations with respect to the path of your voluntary disclosure must be discussed with an experienced Offshore Account Tax Lawyer, at the international tax law firm of Sherayzen Law Office.
Contact Sherayzen Law Office for Help With Your Delinquent FBARs
If you have undisclosed foreign accounts, contact Sherayzen Law Office for professional legal help. Our experienced international tax law firm specializes in Offshore Voluntary disclosures and we can provide our expert opinion with respect to every offshore voluntary disclosure option open in your case.
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### 2014 OVDP Lawyers: August 4 2014 Deadline and New 50% OVDP Penalty
2014 OVDP Lawyers identified August 4, 2014, as an important filing deadline to any U.S. taxpayers who intend to enter into the IRS Offshore Voluntary Disclosure Program (“OVDP”). This new deadline stems directly from the recent 2014 update to the OVDP. In this article, I want to briefly describe the deadline and its background, and why so many 2014 OVDP Lawyers are concerned about it.
2014 OVDP Lawyers: 2014 OVDP Background
The 2014 OVDP (really just an update to 2012 OVDP), like its predecessors, is a voluntary disclosure program created by the IRS to allow U.S. taxpayers with undisclosed foreign accounts to come forward under specific terms. The biggest advantage to participating in the OVDP is the reduction of civil penalties (especially in a willful situation) and avoidance of criminal liability.
Over the years, the offshore voluntary disclosure programs have gotten tougher and tougher, which, in the context of the 2012 OVDP, was considered by many 2014 OVDP Lawyers as unfair to taxpayers who were non-willful in their inability to comply with the U.S. tax requirements, especially FBARs (the Report of Foreign Bank and Financial Accounts).
Drawing on its own prior OVDP experience, the IRS finally agreed with the 2014 OVDP Lawyers and has made tremendous change to the OVDP on June 18, 2014. This new change is now known as the 2014 OVDP.
2014 OVDP Lawyers: The Resurrection of Willfulness vs. Non-Willfulness
One the biggest changes to the OVDP program is the resurrection of the distinction between willful and non-willful failure to comply with U.S .tax laws – a distinction that has always existed in the statutory framework of U.S. tax laws, but has been ignored by the designers of the OVDP until June 18, 2014.
As a result of this new approach to OVDP, many 2014 OVDP Lawyers now argue that 2014 OVDP is strictly reserved to U.S. taxpayers who were willful in their non-compliance with the FBAR deadlines and other U.S. international tax reporting requirements. The non-willful U.S. taxpayers now have the option of entering a Streamlined Procedure to do their voluntary disclosure.
2014 OVDP Lawyers: August 4 Increase in Offshore Penalty to 50%
Due to this re-discovered distinction between willful and non-willful conduct, the IRS now appears to have assumed that anyone entering OVDP has willfully violated U.S. tax laws. Hence, as of August 4, 2014, the IRS intends to toughen the OVDP penalties.
Under the prior 2012 OVDP, the 2014 OVDP Lawyers were familiar with a three-tier penalty structure with the penalty rates of 5%, 12.5% and 27.5%. The 2014 OVDP completely replaced this structure with a new two-tier penalty structure. Until August 4, 2014, everyone in the OVDP or submitting the preclearance letter to the IRS Criminal Investigation Unit will be subject to a 27.5% penalty.
However, beginning on August 4, 2014, any taxpayer who has an undisclosed foreign financial account will be subject to a 50% Offshore Penalty if, at the time of submitting the preclearance letter to IRS Criminal Investigation, an event has already occurred that constitutes a “public disclosure”.
2014 OVDP Lawyers: Definition of “Public Disclosure”
Many 2014 OVDP Lawyers are now becoming familiar with a new definition of what constitutes a “public disclosure” under the new 2014 OVDP rules. There are three events specifically listed by the IRS as constituting “public disclosure”.
First, there is a public disclosure of a foreign account if “the foreign financial institution where the account is held, or another facilitator who assisted in establishing or maintaining the taxpayer’s offshore arrangement, is or has been under investigation by the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person.” FAQ 7.2 for 2014 OVDP. In other words, if the your foreign bank is under the investigation from the IRS or the Department of Justice, your account is deemed to have been publicly disclosed by the IRS.
In essence, this means that U.S.-held accounts in any banks designated as Category One banks (contact 2014 OVDP Lawyers for further clarification of this definition) by the DOJ Program for Swiss Banks are deemed to have been publicly disclosed. Moreover, other banks can be easily added by the IRS to the list and any accounts held in these banks will also be subject to the 50% penalty.
Second, there is a public disclosure of a foreign account if “the foreign financial institution or other facilitator is cooperating with the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person.” Id.
Finally, there is a public disclosure of a foreign account if “the foreign financial institution or other facilitator has been identified in a court- approved issuance of a summons seeking information about U.S. taxpayers who may hold financial accounts (a ‘John Doe summons’) at the foreign financial institution or have accounts established or maintained by the facilitator.” Id. The IRS further states that examples of a public disclosure include, among others, a public filing in a judicial proceeding by any party or judicial officer, or public disclosure by the Department of Justice regarding a Deferred Prosecution Agreement or Non-Prosecution Agreement with a financial institution or other facilitator.
2014 OVDP Lawyers: June 18, 2014 List of Banks Included in the Definition of “Public Disclosure”
Here is the IRS list of these financial institutions current as of June 18, 2014 (as stated above, the IRS can expand this list at any moment):
1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
2014 OVDP lawyers should be aware of this list when talking with their clients.
2014 OVDP Lawyers: Scope of 50% Penalty
Understanding the scope of the 50% penalty is very important for the 2014 OVDP lawyers and their clients. The crucial feature of the 50% penalty is that, once it is applied to one account or asset, the IRS will apply it to all of the taxpayer’s assets subject to the Offshore Penalty. This even includes accounts which are held at another bank and which have not been “publicly disclosed”.
Contact Sherayzen Law Office for Help With Your Voluntary Disclosure of Foreign Accounts
If you have undisclosed foreign accounts and any other foreign assets, you should contact Sherayzen Law Office for professional legal help with your offshore voluntary disclosure. The new 2014 OVDP contains many crucial deadlines and new options. Our experienced international tax law firm has helped hundreds of U.S. taxpayers throughout the world and we can help you.
Contact Us to Schedule Your Confidential Consultation.

### DOJ Program for Swiss Banks: Important June 2014 Developments
In a series of articles, we covered the U.S. Department of Justice’s new voluntary disclosure program for Swiss banks and the four filing categories involved. In June of 2014, a number of important developments regarding the DOJ Program for Swiss Banks occurred.
In this article, we will explain some of these new developments. This article is intended to provide interested individuals with general information about these developments, and does not convey tax or legal advice. If you have an offshore account, you should seek the advice of a tax attorney as significant penalties are involved. The experienced tax law firm of Sherayzen Law Office, Ltd. can assist you in your voluntary offshore disclosure and other tax and legal matters.
DOJ Program for Swiss Banks: DOJ Extends Deadline for Category 2 Swiss Banks
On June 5, 2014, the U.S. Department of Justice announced that it would extend the original June 30 deadline for category 2 Swiss banks for one month until July 31st. According to various new sources, the deadline was extended because of the difficulties Swiss banks were having in attempting to verify whether the accounts of U.S. taxpayers were undeclared or disclosed in a timely fashion to the IRS.
More than 100 Swiss banks have already applied under the DOJ program for Swiss Banks. For U.S. taxpayers with undisclosed bank accounts in Switzerland, this is highly welcome news.
Goldman Sachs and Morgan Stanley Swiss Units Apply to Enter the DOJ Program for Swiss Banks; Citigroup and J.P. Morgan Maybe Next
Recently, the Swiss units of Goldman Sachs Group Inc. and Morgan Stanley announced that they will enter the DOJ Program for Swiss Banks. According to various sources, Goldman's Swiss private bank managed nearly $12 billion in assets as of year-end 2013. Morgan Stanley's Swiss private bank managed about $50.7 billion- most of this amount however, was located in its branches in Hong Kong and Singapore.
Citigroup Inc. and J.P. Morgan also have Swiss operations; according to several news sources, Citibank Switzerland AG did not yet enter category 2, but this is definitely a possibility. Same is true of J.P. Morgan's private Swiss bank.
DOJ Program for Swiss Banks: Credit Suisse Pleads Guilty
Recently, Credit Suisse pleaded guilty to conspiracy and agreed to pay $2.6 billion in a settlement with the DOJ. Please, read this article for more information.
DOJ Likely to Increase Focus on Undisclosed Accounts of US Taxpayers in the Cayman Islands, Singapore and Cook Islands, Among Others
The DOJ and the IRS have provided various indications that they intend to expand the scope of the U.S. pursuit of undisclosed foreign accounts to other major tax havens, such as Cayman Islands, Singapore, Cook Islands, Panama, et cetera.
For example, in an interview concerning the Credit Suisse case, Kathryn Keneally, former head of the Justice Department's tax division, signaled the DOJ’s intentions to increase their focus on other tax-havens. After noting that the U.S. has traced (often, using the information collected during the DOJ Program for Swiss Banks) the money transfers to accounts held by U.S. persons in banks located in the Cayman Islands and other Caribbean countries, India, Israel, Luxembourg, and Lichtenstein, she highlighted the following: “It's fair to say we know where the tax-haven countries are. You've got Singapore, you've got the Cook Islands… .”
The DOJ Program for Swiss Banks has provided an enormous amount of information regarding not only the Swiss bank accounts, but transfers to other countries. As Dena Iverson, a DOJ spokeswoman noted in a recent news article, “Through the program [the DOJ Program for Swiss Banks], as well as through ongoing investigations and other law enforcement tools, we are confident that we will obtain information that will lead us to account holders who have thought for too long that they can keep hiding.”
U.S. persons who hold accounts in Singapore, Cook Islands, Cayman Islands, Israel, India, Lebanon and other “target” countries should immediately seek advice in disclosing their offshore accounts. The worldwide FATCA compliance, combined with the potential of having another equivalent of the DOJ Program for Swiss Banks in any other of these countries, makes it simply reckless to wait for the DOJ and the IRS investigations.
2014 OVDP
On June 18, 2014, the IRS announced a major update to its 2012 Offshore Voluntary Disclosure Program (OVDP), which includes new opportunities and penalties. See this article for further information.
The 2014 OVDP is directly relevant to U.S. taxpayers with undisclosed accounts in Swiss Banks which are currently working within the DOJ Program for Swiss Banks, because the banks’ disclosure of the unreported accounts may substantially reduce the available voluntary disclosure options for the U.S. taxpayers who own these accounts. Moreover, the US taxpayers with undisclosed accounts in the entities that are categorized under the DOJ Program for Swiss Banks as Category 1 banks may be subject to heightened penalties under the new 2014 OVDP rules.
This is why it is very important to coordinate your voluntary disclosure with the DOJ Program for Swiss Banks.
Contact Sherayzen Law Office for Professional Help with Your Offshore Voluntary Disclosure
If you have undisclosed foreign accounts in Switzerland, contact Sherayzen Law Office for experienced legal help. Whether or not you received a letter from a Swiss Bank pursuant to the DOJ Program for Swiss Banks, time is likely to be of critical importance for you.
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### 2013 FBAR is Due on June 30, 2014
The most dangerous information report – the Report of Foreign Bank and Financial Accounts (the “FBAR”) – is due at the end of this month. The 2013 FBAR (i.e. the FBAR for the calendar year 2013) is due on June 30, 2014.
Pursuant to the Bank Secrecy Act, 31 U.S.C. §5311 et seq., the Department of Treasury (the “Treasury”) 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 you had such a situation in 2013 and if the aggregate balances of such foreign accounts exceed $10,000 at any time during 2013, the 2013 FBAR must be filed with the Treasury.
What constitutes an account for the purpose of complying with 2013 FBAR can be a complex question. Generally, the IRS is using a very broad definition of the “account” to include the great majority of custodial situations, even those that are not usually associated with the concept of an “account” (for example, a precious metals storage or a foreign life insurance policy may have to be reported on the 2013 FBAR). You need to contact an experienced international tax attorney to determine what accounts need to be reported on your 2013 FBAR.
The FBAR must be filed by June 30 of each relevant year, including this year (2013). Thus, the 2013 FBAR must be received by the Treasury by June 30, 2014. This rule is contrary to your regular tax returns where the mailing date determines whether the filing is timely. There are no extensions available – the 2013 FBAR must be received by June 30 or it will be considered delinquent.
If the 2013 FBAR becomes delinquent, it may be subject to severe penalties.
Contact Sherayzen Law Office for FBAR Assistance
If you have any questions or concerns regarding whether you need to file the 2013 FBAR, please contact Sherayzen Law Office directly. If you have not previous filed FBARs and you were required to do so, you may be subject to severe penalties and you may need to do some form of a voluntary disclosure.
If this is the case, you need to contact our experienced international tax law office to schedule a consultation as soon as possible. Attorney Eugene Sherayzen will assess your situation, determine your potential FBAR liability, explain the available options, prepare all of the required tax forms and the necessary legal documentation, guide you through this complex process of voluntary disclosure, and vigorously represent your interests during your negotiations with the IRS.

### New 2014 OVDP Update: Introduction
On June 18, 2014, the IRS made a major upgrade to its existing Offshore Voluntary Disclosure Program (“OVDP”).  The new OVDP will now be called 2014 OVDP.  While the changes to the OVDP rules are significant, the new rules regarding the Streamlined Procedure are maybe even more important.
Here is a summary of the 2014 changes to the 2012 OVDP:
2014 OVDP Update: New Miscellaneous 50% Penalty
The IRS added a new FAQ 7.2 which imposes a 50% offshore penalty on taxpayers who participate in the OVDP if: either a foreign financial institution at which the taxpayer has or had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement has been publicly identified as being under investigation or as cooperating with a government investigation.
I believe that this new penalty is a direct consequence of the successful IRS and DOJ efforts to enforce FATCA overseas, particularly the Swiss Program for Banks.  Read this article for more information.
2014 OVDP Update: Elimination of the Reduced Penalty Structure Under FAQ 52 and 53
The reduced 12.5% and 5% penalty structure under former FAQs 52 and 53 has been eliminated due to the expansion of the Streamlined Filing Compliance Procedures. Rather, the new Streamline Offshore Procedure will take over. Special procedures apply to the taxpayer who already entered the OVDP program. I will provide more details in a later article.
2014 OVDP Update: Elimination of FAQ 17 and 18; Procedure is Still Available
This change is just the clarification of the already existing rules. While technically both rules are eliminated, the taxpayer can still use both rules.  Read this article with respect to the Delinquent FBAR Submission Procedures (replacing FAQ 17). I will provide the FAQ 18 details in a later article.
2014 OVDP Update: New Streamline Procedure Rules - US Residents are Included
It finally happened - taxpayers residing in the United States now have the option to enter the streamline procedures which were first announced on September 1, 2012. Other major changes include the elimination of the $1,500 tax threshold and elimination of the risk assessment process. I will provide more details in a later article.
2014 OVDP Update: Updated Streamlined Foreign Offshore Procedures
The IRS greatly expanded the eligibility requirements for the U.S. taxpayers who reside overseas.  Read this article on the Streamlined Foreign Offshore Procedures.
2014 OVDP Update: Major Changes to FAQ 31-41
These are the important changes that the 2014 OVDP Update made to the calculation of the asset base to which the offshore penalty will apply.
2014 OVDP Update: New Pre-Clearance Procedural Change under FAQ 23
Now, the IRS wants to know more information about you before granting the pre-clearance to apply for the OVDP. The 2014 OVDP Update greatly expands the information required to be submitted under FAQ 23. I will provide more details in a later article.
2014 OVDP Update: Offshore Penalty Must Be Paid With Submission of the OVDP Package
This is a major 2014 OVDP Update to FAQ 7. Now the Offshore Penalty must be paid with the submission of the OVDP Package. Again, I will provide more details in a later article.
Other 2014 OVDP Updates: Procedural Changes
The rest of the 2014 OVDP Update changes are more procedural in nature, but may have real substantive impact. Among them, the changes in the FAQ 25 (requiring the submission of account statements irrespective of the size of the disclosure), new OVDP Letter, new OVDP Letter Attachment, and other technical changes. Once again, I will provide more details in a later article.
Contact Sherayzen Law Office for a Professional Advice Regarding Your Offshore Voluntary Options
The new 2014 OVDP Update presents new opportunities mixed with new traps. It is important to make sure that you get expert advice regarding your Offshore Voluntary Disclosure. Contact the experienced tax law firm of Sherayzen Law Office. We have helped clients throughout the world and we can help you.
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### Credit Suisse Pleaded Guilty; Disclosure of US-Held Bank Accounts
On May 19, 2014, Credit Suisse AG pleaded guilty to conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the IRS. Credit Suisse agreed to pay huge fines and disclose certain information to the IRS and the US DOJ. Let’s look closer at certain parts of this deal and what this means to U.S. taxpayers who still hold undisclosed bank accounts at Credit Suisse or who held such accounts in any years since 2008.
Illegal Activities of Credit Suisse Acknowledged as Part of the Plea
The DOJ stated that, as part of the plea agreement, Credit Suisse acknowledged that, for decades prior to and through 2009, it operated an illegal cross-border banking business that knowingly and willfully aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS.
According to the statement of facts filed with the plea agreement, Credit Suisse employed a variety of means to assist U.S. clients in concealing their undeclared accounts, including by:
assisting clients in using sham entities to hide undeclared accounts;
soliciting IRS forms that falsely stated, under penalties of perjury, that the sham entities were the beneficial owners of the assets in the accounts;
failing to maintain in the United States records related to the accounts;
destroying account records sent to the United States for client review;
using Credit Suisse managers and employees as unregistered investment advisors on undeclared accounts
facilitating withdrawals of funds from the undeclared accounts by either providing hand-delivered cash in the United States or using Credit Suisse's correspondent bank accounts in the United States;
structuring transfers of funds to evade currency transaction reporting requirements; and
providing offshore credit and debit cards to repatriate funds in the undeclared accounts.
Fines that Credit Suisse Will Pay - A Huge Victory for the US Department of Justice
The giant bank agreed to pay a total of $2.6 billion - $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services. Earlier this year, Credit Suisse already paid approximately $196 million in disgorgement, interest and penalties to the Securities and Exchange Commission (SEC) for violating the federal securities laws by providing cross-border brokerage and investment advisory services to U.S. clients without first registering with the SEC.
Credit Suisse has also agreed to implement programs to ensure its compliance with U.S. laws, including its reporting obligations under the Foreign Account Tax Compliance Act and relevant tax treaties, in all its current and future dealings with U.S. customers.
"This case shows that no financial institution, no matter its size or global reach, is above the law," said Attorney General Holder. "Credit Suisse conspired to help U.S. citizens hide assets in offshore accounts in order to evade paying taxes. When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here."
"This prosecution and plea should serve notice that secret accounts and assisting the evasion of income taxes have a high cost," said U.S. Attorney Boente. "Concealing financial accounts from the U.S. government is not a legitimate part of wealth management or private banking services."
"Pursuing international tax evasion is a priority area for IRS Criminal Investigation, and we will continue to follow the money here in the United States and around the world" said IRS Commissioner Koskinen. "I want to commend the special agents in IRS-Criminal Investigation for all of their hard work in this area and the close cooperation with the Department of Justice. Today's guilty plea is another important milestone in ongoing law enforcement efforts to investigate the use of offshore accounts to evade taxes. People should no longer feel comfortable hiding their assets and income from the IRS."
What Credit Suisse Will Further Disclose as Part of the Plea
This is the part which is most relevant to the U.S. taxpayers who had (or still have) undisclosed bank accounts at Credit Suisse at any point after January 1, 2008.
As part of the plea agreement, Credit Suisse agreed to make a complete disclosure of its cross-border activities, cooperate in treaty requests for account information, provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed, and to close accounts of account holders who fail to come into compliance with U.S. reporting obligations.
What Credit Suisse Guilty Plea Means to US Taxpayers with Undisclosed Credit Suisse Accounts
The guilty plea of Credit Suisse is likely to have a profound impact on U.S. taxpayers with undisclosed accounts. While the UBS case was a landmark victory for the IRS that changed the nature of the international tax enforcement, it was actually much more limited in “exposure” scope with respect to its own US accountholders than the Credit Suisse guilty plea (this is a true testament to how much more powerful the DOJ has become in Switzerland since 2008).
In essence, at this point, any US taxpayers with undisclosed Credit Suisse accounts should now assume that their non-compliant accounts now be closed (unless they do some type of voluntary disclosure) and/or they are likely to be disclosed by Credit Suisse to the IRS if the IRS makes a treaty request. Even worse, for any US taxpayers who had accounts at some point in 2008 and closed them prior to the guilty plea by Credit Suisse, there is no guarantee that these accounts will not be disclosed by Credit Suisse to the IRS. I would even venture to guess that the likelihood of the exposure of these accounts is very high now.
However, the IRS victory over Credit Suisse does not just stop at the Credit Suisse accountholders, but also all banks that dealt with Credit Suisse with respect to these US-owned accounts. This means that US taxpayers who transferred their funds out of Credit Suisse (presumably when they closed their non-compliant accounts) are likely to be at high risk of IRS detection.
Finally, Credit Suisse is likely to disclose to the IRS its main strategies with respect to opening, closing and maintaining non-compliant accounts through a business entity or a trust. This means that the IRS will now be able to initiate investigations based on patterns of activity, without necessarily having specific information about a given account. This means that all US taxpayers who benefitted from Credit Suisse help prior to the guilty plea by the bank, are likely to now be exposed (whether the intention behind this planning was tax evasion or legitimate asset protection).
The upshot of all of these factors is that US taxpayers who have had any undisclosed foreign bank accounts in Credit Suisse since 2008 are likely to be at high risk of IRS criminal investigation with huge FBAR monetary penalty exposure and potential jail sentence.
This means that these US taxpayers with undisclosed Credit Suisse bank accounts should consider their voluntary disclosure options as soon as possible. If the IRS learns about their identity prior to entering into a voluntary disclosure problem, the path to the OVDP (Offshore Voluntary Disclosure Program) may be closed with potentially huge disadvantages to such taxpayers.
Contact Sherayzen Law Office for Help with the Voluntary Disclosure of Your Credit Suisse Accounts
If you have undisclosed Credit Suisse accounts, contact Sherayzen Law Office for professional help. Owner Eugene Sherayzen is an experienced international tax lawyer who will thoroughly review the facts of your case, analyze your voluntary disclosure options, create a comprehensive voluntary disclosure strategy and implements (including preparation of all legal documents and tax forms as well as rigorous IRS representation).
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### Surgeon Indicted for Secret Bank Accounts in Panama and Costa Rica
Previously, I already discussed the high exposure of the US-owned undisclosed bank accounts in Panama and Costa Rica. Last week, the IRS gave a perfect example (thought with an unusual set of facts) of such exposure of bank accounts in Panama and Costa Rica. On May 23, 2014, the Justice Department and Internal Revenue Service (IRS) announced that a federal grand jury in Anchorage, Alaska, returned a superseding indictment charging Michael D. Brandner, an Anchorage physician specializing in plastic surgery, on three counts of tax evasion.
Facts of the Case
The unusual aspect of this case is that one of the major motivations for opening the accounts in Panama and Costa Rica was the divorce that Dr. Bradner was going through.
According to court documents, Dr. Brandner engaged in a scheme to hide and conceal millions of dollars of assets from the Alaska courts and from his wife of 28 years who was divorcing him. Shortly after the divorce was filed, Dr. Brandner left Alaska and drove to Central America after converting assets into five cashier's checks worth over $3,000,000.
Then, in 2008, after the Alaska court ordered Dr. Bradner to give up the $1.26 million self-directed IRA, he moved all of that money to his Panama account. Later, he moved another $200,000 to Panama.
In 2011, Dr. Bradner’s tax advisor in Panama (who was an informant cooperating with the IRS) advised Dr. Bradner about the tax treaty signed by Panama in 2010 on the disclosure of foreign accounts. He was able to convince Dr. Bradner to create a foreign corporation which opened a bank account in the United States. This account was supposed to hold the funds from Central America to avoid their disclosure to the IRS, but the Department of Homeland Security seized the funds when Dr. Bradner attempted to wire-transfer them to his corporation’s U.S. account.
According to the superseding indictment, Dr. Brandner attempted to evade his taxes, including making false and misleading statement to IRS special agents and filing false tax returns for 2008, 2009 and 2010. In the three false returns, Dr. Brandner failed to report the existence of financial accounts in Panama and Costa Rica over which he had signature authority, and also failed to report foreign interest income of more than $9,000 for 2008, more than $150,000 for 2009, and more than $150,000 for 2010. The indictment also alleges that Dr. Brandner attempted to evade more than $600,000 in federal income taxes over the three years.
The last interesting fact of this case is that (in a secretly-taped conversation) the Panamanian advisor specifically stated to Dr. Bradner and advised him about the FBAR form – a statement which was allegedly acknowledged by the doctor.
IRS Focus Expands to Undisclosed Bank Accounts in Panama and Costa Rica
There are some very interesting facts about this case. Some facts, like the conceded knowledge of the FBAR and the use of foreign corporation to conceal unreported assets and income, will undoubtedly greatly complicate Dr. Bradner’s legal position. They also correspond to the general pattern of facts for cases which are chosen by the IRS for criminal prosecution.
The most interesting side of this case, however, is that this case testifies to the ever expanding scope of IRS investigation of undisclosed foreign accounts, with the particular focus on the bank accounts in Panama and Costa Rica. About two years ago, I predicted that there will be more criminal prosecutions coming out of Central America once the IRS gradually expands its focus beyond Switzerland and Israel.
While there are other prominent candidates, the bank accounts in Panama and Costa Rica offer special rewards to the IRS: there is a large concentration of retired Americans (and Israeli-Americans) in Central America, the Panamanian tax cooperation and exchange agreement signed in 2010 (i.e. almost two years after the UBS case, allowing the IRS to pursue more cases down the road without any major statute of limitations hassles), and there has certainly been a certain amount of abuse committed by tax professionals in Central America in cooperation with Swiss tax advisors (shockingly, a lot of tax attorneys in Central America are still oblivious to important U.S. tax requirements, including FBARs).
This is why the investigations of the undisclosed bank accounts in Panama and Costa Rica will only grow in prominence in the coming years as IRS will seek to deepen U.S. tax compliance in this region.
Contact Sherayzen Law Office for Professional Help with Your Voluntary Disclosure of Bank Accounts in Panama and Costa Rica
If you have undisclosed bank accounts in Panama and Costa Rica, you may face severe FBAR penalties. This is why you need to contact the experienced international tax law firm of Sherayzen Law Office as soon as possible. We can guide you through your voluntary disclosure options, create and help you implement the voluntary disclosure plan, and defend your interests against the IRS.
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### Businessman Jailed for Using Nevis Bank Account to Conceal Income
On May 7, 2014, the IRS and the DOJ announced the Robert C. Sathre was sentenced to serve thirty-six months in federal prison for tax evasion; Mr. Sathre was also ordered to pay $3,113,882 in restitution to the IRS and to serve three years of supervised release. Sathre pleaded guilty on February 26, 2014, to willfully evading the payment of his 1995 and 1996 tax liability.
Facts of the Case
According to court documents and proceedings, Mr. Sathre sold a Minnesota business and received installment payments in 1995 and 1996 of more than $3 million. Mr. Sathre concealed his income by filing a 1995 tax return in which he reported only $64,928 in total income. Mr. Sathre then purchased land and set up another business, a gas station and convenience store in Sheridan, Wyoming, known as the Rock Stop.
According to the DOJ, Mr. Sathre concealed assets by opening a foreign bank account in the Caribbean island of Nevis and by using purported trusts. During the ten-month period during 2005-2006, Mr. Sathre sent over $500,000 to the account in Nevis to keep the funds out of reach from the IRS. When Mr. Sathre sold the Rock Stop in 2007, he wired over $1,250,000 from the sale proceeds to the trust account of a Wyoming law firm. He later directed the law firm to wire $900,000 from the trust account to his account at the Bank of Nevis. Mr. Sathre also provided a false declaration and false promissory note to the Bank of Nevis to conceal the source of this transfer and obtained a debit card linked to the foreign account to access funds locally. In addition, Mr. Sathre provided the Bank of Sheridan with an IRS form on which he falsely claimed that he was neither a citizen nor a resident of the United States.
Analysis of Relevant Facts
The first interesting detail here is the period of time involved - 1995 and 1996. This is something to keep in mind for U.S. taxpayers with undisclosed offshore accounts – the IRS can look beyond the three- and six-year statutes of limitations in certain cases involving fraud and other criminal conduct.
Second, this seems to be one of the cases that would not have come out had the defendant not broken the U.S. tax laws again. It appears that the under-reporting on the 1995 and 1996 returns was not detected originally. However, when Mr. Sathre appears to have engaged in tax evasion with the second sale of Rock Stop in 2007 and commenced to transfer money to Nevis, he must have triggered an IRS investigation.
In fact, this case is an excellent illustration of the difference in the international tax enforcement between the pre-2001 period (i.e. prior to the IRS enforcement of FBAR and the DOJ campaign to enforce U.S. tax laws internationally) and the post-2001 period, especially after the UBS case and FATCA global enforcement.
Finally, as in many other criminal cases involving foreign accounts, the engagement in complex planning (i.e. using foreign trusts) to conceal the transaction must have greatly contributed to the decision by the IRS and the DOJ to pursue criminal penalties.
A Warning to U.S. Taxpayers with Undisclosed Nevis Bank Accounts
The Sathre case should be considered a warning to the U.S. taxpayers with undisclosed Nevis bank accounts. The IRS was able to retrace all of the transactions between the United States and Nevis. With FATCA global enforcement gaining steam, it is highly important for these taxpayers to realize that their undisclosed Nevis bank accounts may be discovered by the IRS and it may happen soon.
The consequences of such an investigation by the IRS may be grave as the present Sathre case demonstrates: large monetary penalties and incarceration.
This is why it is highly important for U.S. taxpayers with undisclosed Nevis Bank accounts to consider their voluntary disclosure options as soon as possible. My strong suggestion is to retain an international tax lawyer for this process.
Contact Sherayzen Law Office for Help With the Voluntary Disclosure of Your Nevis Bank Accounts
If you have an undisclosed Nevis bank account, contact Sherayzen Law Office for professional help. Our international tax law firm is highly experienced in the matters of offshore voluntary disclosures. We have helped hundreds of taxpayers around the world and we can help you!
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### Attorney Jailed for Helping Hide Money for Clients  at Their Swiss Bank Accounts
On March 18, 2014, the IRS and U.S. Department of Justice announced the California attorney Christopher M. Rusch was sentenced to serve 10 months in prison for helping his clients Mr. Stephen M. Kerr and Mr. Michael Quiel, both businessmen from Phoenix, hide millions of dollars in secret Swiss bank accounts at UBS AG and Pictet & Cie. Additionally, U.S. District Judge James A. Teilborg also ordered Rusch to serve three years of supervised release following his prison sentence.
The sentencing following the February 6, 2013, Mr. Rusch guilty plea to conspiracy to defraud US government and failing to file a Report of Foreign Bank and Financial Accounts (FBAR). Mr. Kerr and Mr. Quiel were sentenced in September of 2013 to each serve 10 months in prison after both were tried and convicted of filing false income tax returns for 2007 and 2008. The jury also convicted Mr. Kerr of failing to file FBARs for 2007 and 2008 (with respect to the Swiss bank accounts).
Facts of the Case
According to the DOJ, Mr. Kerr and Mr. Quiel, with the assistance of Mr. Rusch and others (including Swiss nationals) established nominee foreign entities and corresponding bank accounts in Switzerland to conceal Mr. Kerr and Mr. Quiel’s ownership and control of stock and income they deposited in these accounts. Mr. Rusch testified at trial, admitting that he and others caused the sale of the shares of stock through the undeclared accounts.
Rusch further testified that, at Mr. Kerr and Mr. Quiel’s direction, he transferred some of the money in the secret accounts back to the United States through Mr. Rusch’s Interest on Lawyer’s Trust Account before dispersing the money for Mr. Kerr and Mr. Quiel’s benefit, including the purchase of a multi-million dollar golf course in Erie, Colorado. According to court documents and evidence presented at trial, with Mr. Rusch’s assistance, Mr. Kerr and Mr. Quiel each failed to report more than $ 4,600,000 and $2,000,000 of income, respectively, during 2007 and 2008 which they hid in the undeclared accounts with Mr. Rusch’s assistance.
IRS and DOJ Continue Pursuit of US Tax Advisors for US Taxpayers with Undisclosed Swiss Bank Accounts
Since the 2008 UBS case victory, the IRS and the DOJ have been continuously increasing the pressure on the US and foreign tax advisors who help their US clients hide money in offshore accounts, particularly Swiss bank accounts.
“This prosecution serves notice that the Department of Justice will not tolerate fraudulent activity designed to undermine the integrity of our income tax system,” said U.S. Attorney John S. Leonardo for the District of Arizona.
“Today, Mr. Rusch has been held accountable for his actions in assisting wealthy individuals hide millions of dollars in secret offshore bank accounts and dodge the tax system,” said Chief of IRS-Criminal Investigation Richard Weber. "In addition, Mr. Rusch used his attorney trust account to funnel money from the secret offshore accounts back to Mr. Kerr and Mr. Quiel for their personal benefit, including the purchase of a multi-million dollar golf course. As the investigation into offshore tax evasion continues, Criminal Investigation will leave no financial stone unturned as we continue to vigorously pursue new leads."
Top Three Lessons from Rusch Case
Mr. Rusch has committed three “cardinal sins” of tax advising. First, he helped his clients in their pursuit of tax evasions. Second, he used the nominee corporate structures to help his clients evade taxes, thereby tinting the first sin with additional degree of consciousness, willfulness and complexity, providing the IRS with an additional incentive to pursue criminal charges. Finally, Mr. Rusch abused his position as an attorney with a client trust account (which is an ethical violation in addition to legal violation).
The combination of these factors really hurt the Mr. Rusch’s case and provide the IRS and the DOJ with ample ammunition to pursue criminal charges. Of course, the fact that Swiss bank accounts were involved only aggravated Mr. Rusch’s already difficult legal position.

### Liechtenstein Offshore Accounts After the Non-Prosecution Agreement
Liechtenstein offshore accounts no longer offer to U.S. taxpayers the bank secrecy protection for which they were famous for a very long time prior to 2008. In fact, after the Non-Prosecution Agreement between the U.S. Department of Justice (“DOJ”) and Liechtensteinische Landesbank AG, after the passage of the 2012 tax law in Liechtenstein, and after achieving the agreement in substance with respect to the implementation of FATCA on April 2, 2014, one can say that Liechtenstein offshore accounts are no longer the tax haven for U.S. taxpayers.
This article explores the substance of the Non-Prosecution Agreement between the DOJ and Liechtensteinische Landesbank AG with respect to Liechtenstein Offshore Accounts, the FATCA triumph in Liechtenstein, and the generally recommended course of action for the U.S. taxpayers with still undisclosed Liechtenstein offshore accounts.
Non-Prosecution Agreement with Respect to Liechtenstein Offshore Accounts
On July 30, 2013, the DOJ and the IRS Criminal Investigation until announced that they reached a non-prosecution agreement (“NPA”) with Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein (“LLB-Vaduz”). Under the Agreement, LLB-Vaduz agreed to pay more than $23.8 million to the United States (a sum of forfeiture of $16,316,000, representing the total gross revenues that it earned in maintaining these undeclared accounts, and $7,525,542 in restitution to the IRS) and turned over more than 200 files of U.S. taxpayers who held undeclared Liechtenstein offshore accounts at LLB-Vaduz, directly or through sham corporations, foundations or trusts ("structures").
Moreover, as part of the NPA, LLB-Vaduz admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, LLB-Vaduz admitted that it knew certain U.S. taxpayers were maintaining undeclared accounts at LLB-Vaduz in order to evade their U.S. tax obligations, in violation of U.S. law. In addition, LLB-Vaduz admitted that it knew of the high probability that other U.S. taxpayers who held undeclared Liechtenstein offshore accounts did so for the same unlawful purpose because significant numbers of U.S. taxpayers employed structures to hold their Liechtenstein offshore accounts , instructed LLB-Vaduz to use code names or numbers to refer to them on account statements and other bank documents, instructed LLB-Vaduz not to mail such documents to them in the United States, and instructed LLB-Vaduz not to disclose their identity to the IRS, among other things. According to the DOJ, at the end of 2006, LLB-Vaduz held more than $340 million of undeclared assets on behalf of U.S. taxpayers in more than 900 Liechtenstein offshore accounts .
Furthermore, under the NPA, LLB-Vaduz was obligated to continue to cooperate with the United States for at least three years from the date of the agreement.
Finally, though it does not appear to be part of the formal Agreement, LLB-Vaduz has decided to close its wholly-owned Swiss subsidiary, Liechtensteinische Landesbank (Switzerland) Ltd. and has also decided to sell another wholly-owned subsidiary, Jura Trust AG.
In return, under the NPA, the DOJ and the IRS promised that LLB-Vaduz will not be criminally prosecuted for opening and maintaining undeclared Liechtenstein offshore accounts for U.S. taxpayers from 2001 through 2011, when LLB-Vaduz assisted a significant number of U.S. taxpayers in evading their U.S. tax obligations, filing false federal tax returns with the IRS and otherwise hiding Liechtenstein offshore accounts held at LLB-Vaduz from the IRS.
Lesson of the NPA for the Foreign Banks
The NPA with LLB-Vaduz contains a lot of lessons for foreign banks on how to deal with past misconduct with respect to undeclared foreign accounts. The DOJ specifically acknowledged the following factors:
LLB-Vaduz's voluntary implementation of various remedial measures beginning in June 2008, before the investigation of its conduct began;
LLB-Vaduz's voluntary cooperation with this Office and the government of Liechtenstein after becoming aware of this Office's investigation;
LLB-Vaduz's willingness to continue to cooperate with this Office and the IRS to the extent permitted by applicable law;
LLB-Vaduz's substantial support for the 2012 Law, which has already permitted the production to the Department of Justice of more than 200 account files of U.S. taxpayers who held undeclared accounts at LLB-Vaduz;
LLB-Vaduz's representation, based on an investigation by external counsel, that the misconduct under investigation did not, and does not, extend beyond that described in the statement of facts;
The point of cooperation was emphasized by the Assistant Attorney General Kathryn Keneally: "this non-prosecution agreement addresses the past wrongful conduct of LLB-Vaduz in allowing U.S. taxpayers to evade their legal obligations through the use of undisclosed Liechtenstein bank accounts, while also acknowledging the extraordinary efforts of the bank in bringing about significant changes in Liechtenstein law."
U.S. Attorney Preet Bharara concurred in the following statement: "Today's agreement with Liechtensteinische Landesbank AG reflects the unprecedented nature of the bank's cooperation... ."
In its press release, the DOJ recognized that, in 2008, before the IRS and the U.S. Attorney's Office began the investigation, LLB-Vaduz voluntarily implemented a series of remedial measures to stop assisting undeclared U.S. taxpayers in evading federal income taxes. The DOJ also emphasized LLB-Vaduz's extraordinary cooperation in the form of its support and assistance in 2012 to obtain a change in law by the Liechtenstein Parliament that permitted the Department of Justice to request and obtain the bank files of non-compliant U.S. taxpayers from Liechtenstein without having to identify the taxpayers by name (the "2012 Law").
So, a foreign bank that discovers potential U.S. tax non-compliance should be proactive in its conduct, document well its efforts to do due diligence, use an independent counsel to investigate the potential non-compliance, and report such non-compliance to the IRS to the extent permitted by the local law.
Impact of the NPA on US Taxpayers with Liechtenstein Offshore Accounts
The DOJ and the IRS have made it clear – the NPA applies only to LLB-Vaduz and not to any of its subsidiaries or any individuals. Therefore, U.S. Taxpayers with undeclared Liechtenstein Offshore Accounts are not protected by the NPA.
Developments Since the NPA Relevant to US Taxpayers with Liechtenstein Offshore Accounts
Two developments since the NPA are particularly relevant to U.S. Taxpayers with undeclared Liechtenstein Offshore Accounts. First, pursuant to the 2012 Law in Liechtenstein, the Department of Justice submitted a second request to the Liechtenstein government for records relating to various Liechtenstein firms that provided trust administration and other fiduciary services that enabled U.S. taxpayers to hold undeclared accounts through structures at banks in Liechtenstein, Switzerland and elsewhere.
Second, on April 2, 2014, the DOJ and the IRS confirmed that Liechtenstein and the United states have reached an agreement in substance with respect to the implementation of the Foreign Account Tax Compliance Act (“FATCA”).
US Taxpayers with Liechtenstein Offshore Accounts Should Immediately Consider Their Voluntary Disclosure Options.
The NPA, combined with the second request for records and FATCA implementation agreement, presents a potentially highly damaging threat to U.S. taxpayers with undisclosed Liechtenstein offshore accounts. At this point, these taxpayers are under a very high probability of detection and are well-advised to consider their voluntary disclosure options in order to reduce the possibility of criminal prosecution.
Contact Sherayzen Law Office for Professional Help With Your Offshore Voluntary Disclosure
If you have undeclared foreign accounts in Liechtenstein or any other foreign country, contact Sherayzen Law Office for professional help. Our experienced team of international tax professionals can help you with its thorough analysis of your case and the available voluntary disclosure options. We can then implement these voluntary disclosure strategies for you and vigorously defend your case against the IRS.
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### IRS Pursuit of Mizrahi Bank Clients Gains Steam
It is well-known that the IRS is in hot pursuit of U.S. taxpayers with undisclosed bank accounts in Mizrahi Bank. There have been a number of victories that the IRS has scored against Mizrahi Bank clients. The latest example of this is the case of Monajem Hakimijoo who plead guilty on February 13, 2014.
According to court documents, Mr. Hakimijoo, a U.S. citizen, and his brother maintained an undeclared bank account in Israel at Mizrahi Bank in the name of Kalamar Enterprises, a Turks and Caicos Islands entity they used to conceal their ownership of the account. Mr. Hakimijoo and his brother used the funds in the Kalamar account as collateral for back-to-back loans obtained from the Los Angeles branch of Mizrahi Bank. Although Mr. Hakimijoo and his brother claimed the interest paid on the back-to-back loans as a business deduction for federal tax purposes, they failed to report the interest income earned in their undeclared, Israel-based account as income on their tax returns. In total, Mr. Hakimijoo failed to report approximately $282,000 in interest income. The highest balance in the Kalamar Enterprises account was approximately $4,030,000.
As further described in the release by the U.S. DOJ, in March 2013, Mr. Hakimijoo was scheduled to be interviewed by Justice Department attorneys and IRS special agents. Prior to the interview, Mr. Mr. Hakimijoo, through counsel, provided the attorneys and special agents with copies of his amended tax returns for 2004 and 2005. When asked if the amended tax returns had been filed with the IRS, Mr. Hakimijoo indicated that the returns had been filed. Shortly thereafter, the IRS determined there was no record of the amended returns being filed with the IRS. When Mr. Hakimijoo was asked to provide copies of cancelled checks to prove that the taxes reflected on the amended returns had been paid, none were provided.
Points of Interest of the Mr. Hakimijoo Case
Several features are prominent in this case. First, the Mizrahi Bank account in question was not in Switzerland, but Israel itself. This is one more example of the IRS interest in countries other than Switzerland. Israel is an obvious target, but it appears that it will not take long for the IRS to expand into the neighboring country of Lebanon.
Second, it seems incredible that Mr. Hakimijoo would engage in such reckless conduct as to gamble on the IRS not finding out that he has not filed the amended tax returns. Equally puzzling is the fact that the guilty plea did not involve any type of a false statement charge.
Finally, unfortunately for Mr. Hakimijoo, the facts of his case were greatly influenced by the use of an entity to conceal the ownership of the Mizrahi Bank account.
U.S. Taxpayers with Undisclosed Accounts in Israel Should Do Some Type of Voluntary Disclosure
Mr. Hakimijoo is the latest in a series of defendants charged in the U.S. District Court for the Central District of California with concealing undeclared bank accounts in Israel that were used to obtain back-to-back loans in the United States. It is unlikely that the IRS will relent its pursuit at this point given the wealth of information that has been collected through the IRS voluntary disclosure programs as well as the Swiss voluntary disclosure program for banks.
The biggest lesson for U.S. taxpayers with undisclosed accounts in Israel and Mizrahi Bank specifically is that the IRS will not limit itself to Switzerland. Hence, there is a great urgency for these taxpayers to commence the analysis of their voluntary disclosure options as soon as possible. Some options may still be open if these taxpayers come forward now; these options may be closed once the taxpayer is subject to an IRS investigation.
Contact Sherayzen Law Office for Experienced Professional Help with Your Voluntary Disclosure
If you are a U.S. person who has (or had at any point since 2007) undisclosed bank or financial accounts in Israel and any other foreign country, you should contact Sherayzen Law Office as soon as possible for professional help. Our experienced international tax law firm has helped taxpayers throughout the world with their voluntary disclosures and we can help you.
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### IRS Increases Use of John Doe Summons for Unreported Offshore Bank Accounts
Some time ago, in a joint statement before the Permanent Subcommittee on Investigations Committee on Homeland Security and Government Affairs of the United States Senate for a hearing on “Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Offshore Accounts”, Deputy US Attorney General James M. Cole and Assistant Attorney General, Tax Division, Kathryn Keneally detailed a number of enforcement actions targeting US taxpayers with undisclosed foreign bank accounts and the foreign banks in question.
The Internal Revenue Service and the U.S. Department of Justice utilize various tools to track and hold accountable individuals who evade their taxes and reporting obligations by sheltering money in undisclosed foreign bank accounts. One important law enforcement mechanism that has led to much success in gathering information about foreign accounts has been the use of John Doe summons. The IRS defines a John Doe summons as “[A]ny summons where the name of the taxpayer under investigation is unknown and therefore not specifically identified.” A John Doe summons, if authorized, allows the IRS request the identities of U.S. taxpayers who may have offshore bank accounts.
If you are an individual subject to U.S. taxes and you have an undisclosed foreign bank account, you should be aware that the odds are increasing each year that the IRS will eventually determine your identity. The penalties for not disclosing a foreign bank account are severe; if you have such an account you should seek the advice of a tax attorney. The experienced international tax law firm of Sherayzen Law Office, Ltd. can assist you in these important matters.
John Doe Summons and Other Enforcement Mechanisms
In a previous article, we covered the IRS John Doe summons seeking records of the correspondent account at Wells Fargo for Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB), a Barbados-based bank with branches in eighteen Caribbean countries. The IRS has been utilizing John Doe summons frequently and will likely increase its use in the future. For example, in a recent high-profile case, the federal district court for the Southern District of New York entered an order authorizing the IRS to issue a John Doe summons seeking records for Wegelin Bank’s U.S. correspondent account at the Swiss bank, UBS.
According to the joint statement, on November 13, 2013, the same court, “[E]ntered an order authorizing the IRS to issue John Doe summonses seeking records of the Zurcher Kantonalbank and its affiliates (collectively ZKB) correspondent accounts at Bank of New York Mellon and Citibank NA for information relating to U.S. taxpayers holding undisclosed accounts in ZKB.” Several days later the court also issued an order that authorized the IRS to issue John Doe summonses seeking correspondent account records held by the Bank of N.T. Butterfield & Son Limited and its affiliates in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland and the United Kingdom at Bank of New York Mellon, Citibank NA, HSBC Bank NA, JPMorgan Chase Bank NA, and Bank of America NA.
In the joint statement, it was also noted that the DOJ has also “[E]nforced summonses and subpoenas for records that account holders are required to maintain concerning their foreign banking activities through the successful litigation of the applicability of the ‘required record’ exception to the production privilege under the Fifth Amendment.” The statement notes that every appellate court that has reviewed the issue has, “[R]ejected the argument that witnesses can refuse to comply with a subpoena for the bank records that are required by law to be kept and presented for inspection as a condition of maintaining an offshore account.”
Impact on U.S. Taxpayers with Undisclosed Foreign Accounts
John Doe Summons constitute a very useful technique for the IRS to find non-complying U.S. taxpayers with undisclosed foreign accounts. It is important to keep in mind that the enforcement mechanisms detailed in this article are in addition to other programs, such as the Offshore Voluntary Disclosure Program and the US-Switzerland Bank Disclosure program, among others. Moreover, with the continuous expansion of FATCA enforcement, the non-complying U.S. taxpayers are now running a very high risk of detection by the IRS.
The consequences for these non-complying U.S. taxpayers can be very grave. There are extremely high civil penalties as well as potential criminal penalties that may be applied in such cases.
Contact Sherayzen Law Office for Professional Help with Your Offshore Voluntary Disclosure
The analysis above means that, if you are a U.S. taxpayer with an undisclosed offshore bank account, you need to consider your voluntary disclosure options as soon as possible.
We can help you. At Sherayzen Law Office, Mr. Eugene Sherayzen an experienced international tax attorney will thoroughly analyze your case, estimate your potential FBAR exposure, create a plan for your voluntary disclosure and implement it (i.e. we will prepare all of the tax forms and legal documents that you need for the voluntary disclosure). We will guide you every step of the way and offer rigorous ethical representation before the IRS.
Contact Us to Schedule Your Confidential Consultation Now!

### Filing an Extension for US Taxpayers Residing Outside of the United States
As is commonly known, US taxpayers who file on a calendar year basis have a filing due date of April 15th. In general, if a tax is owed, it should be paid by the due date of your tax return, without regard to any extension of time for filing the return. Most US taxpayers who reside in the United States are aware that they can obtain a tax return filing extension. But what if you are one of the numerous US taxpayers residing outside of the United States when a tax return is due? Can an extension be filed, and if so, will any penalties be applied if the tax owed is not paid on time? Will interest be owed on the unpaid tax?
This article strives to answer these questions and explain different types of extensions that the IRS may grant for US taxpayers who are not in the country when their returns are due.
Extension Options for US Taxpayers Residing Outside of the United States
In general, there are four possible types of extensions the IRS may grant for US taxpayers who are out of the country: an automatic two-month extension, an automatic six-month extension (in reality, this is a four-month extension), an additional extension for taxpayers residing outside of the United States, and an extension of time to meet tests (also for the US taxpayers residing outside of the United States).
The information contained in this article is intended for general knowledge, and does not constitute tax or legal advice. If you have further questions, please contact the experienced US-International tax law firm of Sherayzen Law Office, Ltd.
Automatic Two-Month Extension for US Taxpayers Residing Outside of the United States
Taxpayers are allowed an automatic two-month extension to file their return and pay federal income taxes owed if they are US citizens or resident aliens, and on the regular due date of the return, they are either US taxpayers residing outside the United States and Puerto Rico or their post of duty is outside the US and Puerto Rico (or if they are in military or naval service on duty outside the US and Puerto Rico).
In order to qualify for this extension, taxpayers must attach a statement to their returns demonstrating which of these two circumstances they meet. Note though, that even if taxpayers are granted this extension (or any extension detailed in this article), they will still have to pay any interest on any tax liability owed by the regular due date of their return (April 15th for calendar year taxpayers).
Automatic Six-Month Extension for US Taxpayers Residing Outside of the United States
In addition to the automatic two-month extension, US taxpayers who are not able to file their returns on time by the due date can generally get an automatic six-month extension of time to file. The two-month and the six-month extensions start at the same time; so, in reality, this is a merely four-month additional extension for US taxpayers residing outside of the United States.
It is important to emphasize that this additional automatic extension however does not extend the time to pay.
In order to get this automatic extension, the taxpayer must file Form 4868 or use the IRS efile system showing a correctly-estimated tax liability based on all available information. However, if a taxpayer intends for the IRS to figure his or her tax, or is under a court order to file by the regular due date, they may not be eligible for this extension
Additional Extension of Time (Two-Months) for US Taxpayers Residing Outside of the United States
In addition to the six-month extension, a taxpayer who is out of the country can also request a discretionary two-month additional extension of time to file his or her tax return (to December 15 for calendar year taxpayers) by sending the IRS a letter detailing the reasons why the additional two-month extension is necessary. The letter needs to be sent by the extended due date (October 15 for calendar year taxpayers) to the Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045 address. Check irs.gov for any mailing changes and updates.
Note that taxpayers will not receive any notification from the IRS unless their requests are denied. In addition, taxpayers who have an approved extension of time to file Form 2350 (described below) will not be able to request the discretionary two-month additional extension.
Extension of Time to Meet Tests for US Taxpayers Residing Outside of the United States
In general, a taxpayer cannot get an extension of more than six months (or eight months if you count the additional extension of time for taxpayers residing outside of the United States). However, an exception may exist if a taxpayer is outside the US and meets certain requirements. A taxpayer may be granted an extension of more than six months to file a tax return if time is needed to meet either the bona fide residence test or the physical presence test in order to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction (see IRS rules for specifics of the exclusion or deduction).
Taxpayers should request an extension of time to meet tests if all three of the following factors are applicable: 1) They are US citizens or resident aliens, 2) they anticipate meeting either the bona fide residence test or the physical presence test, but not until after their tax return are due, and 3) their tax homes are in foreign countries throughout the period of bona fide residence or physical presence, whichever applies.
In general, if a taxpayer is granted this extension it will typically be 30 days beyond the date on which either the bona fide residence test or the physical presence test can reasonably be expected to be met. (If a taxpayer has moving expenses that are for services performed in two years, the extension may be granted as long as an until after the end of the second year).
To apply for this extension, Form 2350 (“Application for Extension of Time To File US Income Tax Return”) will need to be filed by the due date for filing a taxpayer’s return. The IRS notes, “Generally, if both your tax home and your abode are outside the United States and Puerto Rico on the regular due date of your return and you file on a calendar year basis, the due date for filing your return is June 15.” Note that if a taxpayer meets either test, but happens to file a tax return before the test is actually met, the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction can subsequently be claimed on a Form 1040X.
Contact Sherayzen Law Office for Professional Help with Your Tax Returns as a Taxpayer Residing Outside of the United States
If you are a US taxpayer who is residing outside of the United States, contact Sherayzen Law Office for professional help with your US compliance. In additional to preparing your US tax return, we will do a thorough overview of your other potential US tax compliance requirements (such as PFICs, FBARs, Form 8938, et cetera) so that you remain in full compliance with US tax laws.
Contact Us to schedule a Confidential Consultation!

### Liquidating a Corporation and IRS Form 966
If you have a corporation that you have liquidated, or plan to liquidate, you need to be aware of the requirements of the IRS Form 966. Form 966 (“Corporate Dissolution or Liquidation”) must be filed by corporations (including for corporations filing Form 1120, 1120-L, 1120-IC-DISC, 1120S, and farmer’s cooperatives) if they have adopted a resolution or plan to dissolve the corporation, or to liquidate any of its corporate stock.
This article will explain the basics of Form 966; it is not intended to constitute tax or legal advice. Please consult an experienced tax attorney if you have further questions. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.
Filing Form 966
Under Internal Revenue Code Section 6043(a) and applicable regulations, Form 966 must be filed with the IRS center where the corporation or farmer’s cooperative filed its income tax return within 30 days after the resolution or plan is adopted to dissolve the corporation or liquidate any of its stock. If the original resolution or plan is amended or supplemented after Form 966 has been filed, required companies must file another Form 966 within 30 days after the amendment or supplement was adopted. The IRS notes that this additional form will be sufficient if the “[D]ate the earlier form was filed is entered on line 11 and a certified copy of the amendment or supplement is attached. Include all information required by Form 966 that was not given in the earlier form.”
Qualified subchapter S subsidiaries (see IRC Section 1361(b) (3) for definition and requirements) should not file Form 966. Instead, they should submit Form 8869 (“Qualified Subchapter S Subsidiary Election”). Likewise, exempt organizations should not file Form 966; these organizations will need to review the instructions for Form 990 (“Return of Organization Exempt From Income Tax”), or Form 990-PF (“Return of Private Foundation or Section 4947(a)(1) Trust Treated as Private Foundation”). Additionally, in general, foreign corporations that are not required to file Form 1120-F (“U.S. Income Tax Return of a Foreign Corporation”), or any other type of U.S. tax return are not required to file Form 966.
Form 966 should also not be filed for a deemed liquidation (such as an IRC Section 338 election, or an election to be treated as a disregarded entity under IRS Regulations Section 301.7701-3).
Information Necessary for Form 966
In addition to the identifying information typically required on IRS forms (name of corporation, EIN, date of incorporation, etc.), various additional information is required to be reported on Form 966. For example, line 5 requests the type of liquidation a company has undertaken- partial or complete. On line 10, filers are required to specify the IRC Code Section under which the corporation is to be dissolved or liquidated; for instance, corporations that have completely or partially liquidated will enter “Section 331”, while a corporation completely liquidating a subsidiary corporation (that meets the requirements of section 332(b)) would enter “Section 332”. Information regarding any amendments to plans may be required on line 9 or 11, depending upon the circumstances involved.
Contact Sherayzen Law Office for Tax and Legal Advice With Respect to Liquidation of Your Corporation
If you are planning on liquidating your corporation, you should seek advice of a tax attorney. The experienced tax law firm of Sherayzen Law Office, Ltd. can help you with the entire process of liquidating the corporation with respect to both, legal and tax sides of this process. Contact Us for a Confidential Consultation!

### Form 8889 for Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) were created in 2003 as a means of addressing increasing health care costs. HSAs give individuals enrolled in high-deductible health plans (HDHPs) tax-preferred treatment for money saved for medical expenses. In general, HSAs allow for individuals to defer taxes when money is contributed (even if a taxpayer does not itemize on Form 1040 Schedule A), and money that is eventually withdrawn and used to pay for qualified medical expenses is also usually tax-free.
In this article, we will explain the basics of Form 8889 for HSAs. This explanation is not intended to convey tax or legal advice. Please consult a tax attorney if you have further questions.
Form 8889
Form 8889 is used for all of the following purposes: to report health savings account (HSA) contributions (including those made on behalf of taxpayers, and employer contributions), to report distributions from HSAs, to calculate the correct HSA deduction amount, and to calculate the amounts that taxpayers must include in income and any additional tax that may be owed if a taxpayers fails to qualify as an eligible individual. The IRS defines an HSA as, “[A] health savings account set up exclusively for paying the qualified medical expenses of the account beneficiary or the account beneficiary's spouse or dependents.” In general, distributions received from an HSA to pay for “qualified medical expenses” (see IRS publications for the specific definition) of an account beneficiary, a spouse, or dependents are excluded from the determination of gross income.
For the 2013 tax year, Form 8889 must be filed under any of the following circumstances: if a taxpayer (or somebody on behalf of a taxpayer, such as an employer) made contributions to an HSA in 2013, if HSA distributions were received in 2013 by a taxpayer, if a taxpayer failed to be deemed an eligible individual during the applicable testing period and certain amounts must therefore be included in the taxpayer’s income, or if an interest in an HSA was acquired due to the death of the account beneficiary. The testing period begins with the month a contribution to a qualified HSA is made, and ends on the last day of the twelfth month following that month.
Subject to certain exceptions, taxpayers who fail to remain eligible individuals must include the qualified HSA funding distribution in income in the year in which they do not meet the eligibility requirement, (and this amount is also subject to a 10% Additional Tax for Failure to Maintain HDHP Coverage).
HSA Deductions
In general, the maximum amount that one can contribute to a HSA plan is dependent upon the type of HDHP coverage that an individual has (For 2013 and 2014, HDHPs require minimum annual deductibles of at least $1,250 for individuals and $2,500 for families). For individuals who have self-coverage, the maximum contribution for 2013 is $3,250, and taxpayers with family coverage, the maximum amount that may be contributed is $6,450. (For 2014, the contribution limit is raised to $3,300 for individuals HSAs, and $6,550 for family HSAs). Individuals who are at least 55 years of age as of the end of their tax year may make an additional catch-up contribution of $1,000 (and this amount will be unchanged for 2014). The maximum HSA contribution amount, however, is reduced by any employer contributions to an HSA, and contributions made to an Archer MSA, and any qualified HSA funding distributions.
In addition, any contributions made to an HSA during the month in which a taxpayer was enrolled in Medicare will not be deductible. Further, HSA contributions are not deductible if a taxpayer can be claimed as a dependent on Form 1040 by somebody else.

### Form 8960 and the Net Investment Income Tax
The new Net Investment Income Tax imposed by Internal Revenue Code Section 1411 went into effect on January 1, 2013 for income tax returns of individuals, estates and trusts, beginning with their first taxable year starting on (or after) January 1, 2013. The Net Investment Income Tax applies at a rate of 3.8% on certain net investment income of individuals, estates and trusts that have income above statutory threshold limits.
Form 8960 is used by individuals, estates, and trusts to compute their Net Investment Income Tax. The IRS has posted a draft version of the instructions to Form 8960, and recently, it released the final version of the form itself.
This article will explain the basics of Form 8960 and the Net Investment Income Tax. Future articles on this topic will also provide more information about this tax. The article is not intended to convey tax or legal advice. Please consult a tax attorney if you have further questions. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.
The Net Investment Income Tax
As mentioned above, the Net Investment Income Tax applies at a 3.8 percent to certain net investment income of individuals, estates and trusts that have income above statutory threshold limits. If individuals have Net Investment Income, they will owe the Net Investment Income Tax if they have modified adjusted gross income, for purposes of the Net Investment Income Tax (note that individuals with income from controlled foreign corporations (CFCs) and passive foreign investment companies (PFICs) may have additional adjustments to their AGI) above the following thresholds: for married filing jointly returns, the threshold is $250,000; for married filing separately returns, the threshold amount is $125,000; for single taxpayers or Head of household (with qualifying person), the threshold is $200,000; for a qualifying widow or widower with a dependent child, the threshold is $250,000.
Note also that these threshold amounts are not indexed for inflation.
According to the IRS, “In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer (within the meaning of section 469). To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income.” Certain common income items, such as tax-exempt interest, Alaska Permanent Fund Dividends, and distributions from certain Qualified Plans (those described in sections 401(a), 403(a), 403(b), 408, 408A or 457(b)), are not treated as Net Investment Income.
US Persons and Nonresident Aliens
Dual-status individuals, who are US residents for a part of the year and Nonresident Aliens (NRAs) for the other part of the year, are subject to the Net Investment Income Tax only with respect to the portion of the year during which they are US residents. The threshold amounts described above, however, are not reduced or prorated for dual-status residents.
Dual-resident individuals, (see regulation §301.7701(b)-7(a)(1) for more information) who determine that they are residents of foreign countries for tax purposes pursuant to US-foreign country income tax treaties, and who claim benefits of such treaties as nonresidents of the US, are deemed to be NRAs for Net Investment Income Tax purposes.
NRAs are not subject to the Net Investment Income Tax. For married couples in which one spouse is an NRA, and the other is a U.S. citizen or resident, and the NRA has made, or is planning to make, an election to be treated as a resident alien for purposes of filing a married filing jointly return, IRS final regulations provide these couples with special rules and a respective Net Investment Income Tax IRC Section 6013(g) or (h) election.
Contact Sherayzen Law Office for Professional Tax Planning Advice
In previous articles, we covered some of the new tax changes and deduction phase-outs for 2013 tax returns to be filed in 2014 that could trigger a much higher tax liability for many taxpayers. The Net Investment Income Tax will only add to the tax liabilities many high net-worth taxpayers will face. Professional tax planning may be very important in order to help you lower your future tax liabilities. The experienced tax law firm of Sherayzen Law Office, Ltd. can assist with this goal.

### FBAR Tax Attorney St Louis: Another Swiss Banker Pleads Guilty to Tax Evasion
On March 12, 2014, the IRS and the DOJ announced that Andreas Bachmann, 56, of Switzerland, pleaded guilty to conspiring to defraud the Internal Revenue Service (IRS) in connection with his work as a banking and investment adviser for U.S. customers. It appears (at least from the perspective of an FBAR Tax Attorney St Louis) that Mr. Bachmann helped his U.S. customers conceal assets in secret Swiss Bank Accounts and other tax havens.
FBAR Tax Attorney St Louis: Background Information
In a statement of facts filed with the plea agreement, Mr. Bachmann admitted that between 1994 and 2006, while working as a relationship manager in Switzerland for a subsidiary of an international bank, he engaged in a wide-ranging conspiracy to aid and assist U.S. customers in evading their income taxes by concealing assets and income in secret Swiss bank accounts. Moreover, Mr. Bachmann traveled to the United States twice each year to provide banking services and investment advice to his U.S. customers (note from FBAR Tax Attorney St Louis: this could have been critical information for building the IRS case against Mr. Bachmann).
According to the IRS, Mr. Bachmann also engaged in cash transactions while traveling in the United States. In the course of arranging meetings with U.S. customers, some clients would request that Mr. Bachmann either provide them with cash as withdrawals from their undeclared accounts or take cash from them as a deposit to their undeclared accounts. As part of that process, Mr. Bachmann agreed to receive cash from U.S. customers and used that cash to pay withdrawals to other U.S. clients.
The IRS describes how, in one instance, Mr. Bachmann received $50,000 in cash from one U.S. customer in New York City and intended to deliver the money to another U.S. client in Southern Florida. Airport officials in New York discovered the cash but let Mr. Bachmann keep the money after questioning him (note from FBAR Tax Attorney St Louis: by that time, the IRS was probably already taking interest in Mr. Bachmann). The client in Florida refused to take the money after the client learned about the questioning by New York airport officials, and Mr. Bachmann returned to Switzerland with the $50,000 in cash in his checked baggage. Mr. Bachmann advised the executive management of the subsidiary about the incident with the cash.
The IRS further alleges that Mr. Bachmann also understood that a number of his U.S. customers concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations.
FBAR Tax Attorney St Louis: IRS is Pleased
The IRS and the DOJ seem to be pleased with the result of their investigation. “Today’s plea is just the latest step in our wide-ranging investigations into Swiss banking activities and demonstrates the Department of Justice's commitment to global enforcement against those that facilitate offshore tax evasion,” said Deputy Attorney General Cole. “We fully expect additional developments over the course of the coming months.”
Mr. Bachmann was charged in a one-count superseding indictment on July 21, 2011, and faces a maximum penalty of five years in prison when he is sentenced on August 8, 2014.
FBAR Tax Attorney St Louis: IRS and DOJ Are Stepping Up Criminal Enforcement of FBARs and International Tax Laws of the United States
As I predicted earlier, the IRS and the DOJ are in high gear of criminal enforcement of FBARs and international tax laws of the United States. As they work through the mountains of information that they received from the U.S. taxpayers participating in the Offshore Voluntary Disclosure Program (now closed) and the defendants, like Mr. Bachmann, I fully expect the enforcement efforts to increase in the near future.
Moreover, with the new information disclosed by the Swiss banks as part of the U.S. Department of Justice (“DOJ”) The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”), the IRS will get an unprecedented new fountain of information that will allow it to reach ever further.
FBAR Tax Attorney St Louis: U.S. Taxpayers with Undisclosed Bank Accounts Should Consider Their Voluntary Disclosure Options As Soon As Possible
Given the fact that a large number of Swiss banks that participate in the Program will disclose all of their U.S.-held bank accounts by April 30, 2014 (assuming they have not already disclosed them), U.S. taxpayers with undisclosed accounts in Switzerland must act as soon as possible and consider their voluntary disclosure options. Failure to do so may result in the imposition of willful civil and even criminal penalties.
Contact Sherayzen Law Office for Help With Undisclosed Swiss Accounts
Sherayzen Law Office can help you with the voluntary disclosure of your Swiss accounts. Owner and attorney Eugene Sherayzen is an international tax expert in this field. He will thoroughly analyze the facts of your case and explain to you the available voluntary disclosure options. After you choose the voluntary disclosure option, our firm can prepare all legal documents and tax forms required for your voluntary disclosure, fully implement the ethically available strategies and rigorously defend your position against the IRS.
Contact Us to Schedule a Confidential Consultation NOW!

### Student Loan Interest Deduction and 2014 Phase-outs
With the costs of higher education increasing each year, the deductibility of interest paid on student loans is an important tax topic for many younger individuals. However, taxpayers are sometimes surprised to learn that there is a phase-out for various applicable income levels for this deduction, and above certain income levels, the deduction is completely eliminated.
This article will briefly explain the basics of the deduction for interest paid on student loans, as well as the deduction phase-outs. This explanation is not intended to convey tax or legal advice.
Student Loan Interest
Under IRS tax rules, interest paid for personal loans is typically not deductible for taxpayers; however, there is an exception to this general rule for interest paid on higher-education student loans (also referred to as education loans). Because this deduction is taken as an adjustment to income, qualifying taxpayers may claim this deduction even though that may not itemize their deductions on Form 1040 Schedule A.
In order to qualify, a student loan is required to have been taken out solely to pay qualified education expenses, and the loan must not be from a related person or made under a qualified employer plan. Also, students claiming the deduction must either be the taxpayers themselves, their spouses, or their dependents, and students must be enrolled at least half-time in a degree program (see applicable IRS publications for more specific definitions).
For 2013, qualifying taxpayers may reduce the amount of their income subject to taxation by the lesser of $2,500 or the amount of interest actually paid with this deduction. Taxpayers may claim the deduction if all of the following requirements are met: (1) they file under any status except married filing separately, (2) the exemption for the taxpayer is not being claimed by somebody else, (3) the taxpayer is under a legal obligation to pay interest on a qualified student loan, and (4) interest was actually paid on a qualifying student loan.
Student Loan Interest Deduction Phase-outs
The amount that a taxpayer may deduct for student loan interest paid is subject to phase-outs based upon their filing status and their Modified adjusted gross income (MAGI). For most taxpayers, MAGI will be their adjusted gross income (AGI) as determined on Form 1040 before the deduction for student loan interest is subtracted.
For taxpayers filing as single, head of household, or qualifying widow(er), and making not more than $60,000 MAGI, there is no reduction of the deduction. For taxpayers in those categories making more than $60,000 MAGI but less than $75,000, the phase-out will apply, and for taxpayers making more than $75,000 MAGI, the deduction will be completely eliminated.
For taxpayers filing as married filing jointly, and making not more than $125,000 MAGI, there is no reduction of the deduction. For taxpayers in those categories making more than $125,000 MAGI but less than $155,000, the phase-out will apply, and for taxpayers making more than $155,000 MAGI, the deduction will be completely eliminated.
The phase-out itself is usually determined by the following calculation: a taxpayer’s interest deduction (before the phase-out) is multiplied by a fraction. The numerator is the taxpayer’s MAGI minus $60,000 (or $125,000 for married filing jointly), and the denominator is $15,000 ($30,000 for married filing jointly). The result is then subtracted from the original interest deduction (before the phase-out), and this amount is what the taxpayer may actually deduct.

### Form 5472 Basics
Form 5472 (“Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business”) occupies a place of special importance for an international tax attorney. The chief reason is because, unlike most other international tax forms familiar to an international corporate tax attorney, Form 5472 deals with corporate activities directly in the United States. In particular, the Form is used to provide the IRS with required information (under Internal Revenue Code (IRC) Sections 6038A and 6038C) when a reporting corporation had reportable transactions with a foreign or domestic related party.
Form 5472 is also a form that is often overlooked by the taxpayers; this is why an international corporate tax attorney must be especially vigilant when it comes to U.S. corporations which are partially or fully owned by foreign persons. This is especially important for an international corporate tax attorney, because failure to file Form 5472 can lead to substantial penalties and the IRS has not been shy about imposing these penalties.
In this article, we will explain the basics of Form 5472, and the various penalties that may be imposed on corporations that fail to file the form or do not comply with other requirements. This article is not intended to convey tax or legal advice. U.S. international tax compliance and planning frequently involve many complex areas, and you are advised to consult an experienced tax attorney in these matters. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.
Reporting Corporation
Defining the “reporting corporation” is the first step in the analysis of an international corporate tax attorney. In general, for the purposes of Form 5472, a corporation is defined as “reporting corporation” if it is either: (1) a 25% foreign-owned U.S. corporation, or (2) a foreign corporation engaged in a trade or business within the U.S.
As an international corporate tax attorney, I can tell you that this is not where the issue ends. In addition to direct ownership, the IRC constructive ownership provisions will apply for determining Form 5471 ownership percentages. According to the IRS, a related party is defined to be, “Any direct or indirect 25% foreign shareholder of the reporting corporation, any person who is related (within the meaning of section 267(b) or 707(b)(1)) to the reporting corporation, any person who is related (within the meaning of section 267(b) or 707(b)(1)) to a 25% foreign shareholder of the reporting corporation, or any other person who is related to the reporting corporation within the meaning of section 482 and the related regulations.” However, a related party does not include any corporation that is filing a consolidated tax return with the reporting corporation.
An international corporate tax attorney should be consulted in determining whether your corporation is a “reportable corporation” for Form 5472 purposes.
Reportable Transactions
As noted above, reporting corporations must file Form 5472 if they had a reportable transaction with a foreign or domestic related party. In general, a reportable transaction may cover a wide array of possible transactions.
First, reportable transactions include any type of transactions listed in Part IV of Form 5472 for which monetary consideration was the only consideration paid or received during the reporting corporation’s tax year for any of the following items: sales of stock in trade (inventory); rents or royalties received (for other than intangible property rights); sales, leases, licenses, etc., of intangible property rights; interest received; commissions received, and other categories.
Second, a reportable transaction also includes any type of transaction (or group of transactions) listed in Part V, if any part of the consideration paid or received was not monetary consideration, or in cases where less than full consideration was paid or received.
Whether you have a reportable transaction is a very complex topic; this is why you need to consult an international corporate tax attorney to deal with this issue. I strongly advise against a “do it yourself” attitude in this matter.
Form 5472 Penalties
Several penalties may be imposed for failure to meet various requirements for Form 5472. First, the IRS may assess a failure to file penalty of $10,000 on any reporting corporation that fails to file Form 5472 when due and under the proper compliance requirements (this is the most common penalty that an international corporate tax attorney is likely to see). Note, filing a substantially incomplete Form 5472 will also constitute a failure to file Form 5472 for the purposes of the penalty.
Furthermore, failure by a reporting corporation to maintain records (as required under IRS Regulations section 1.6038A-3), will be deemed to be a failure to file. As an international corporate tax attorney, I often see this penalty imposed in conjunction with other Form 5472 penalties.
There is a further complication: each member of a group of corporations filing a consolidated information return is treated as a separate reporting corporation subject to a separate $10,000 penalty, and each member is jointly and severally liable for such penalty.
Third, if a reporting corporation fails to file Form 5472 for more than 90 days after notification by the IRS, an additional penalty of $10,000 will apply. According to the IRS, “This penalty applies with respect to each related party for which a failure occurs for each 30-day period (or part of a 30-day period) during which the failure continues after the 90-day period ends.”
Finally, in addition to the civil penalties, criminal penalties under IRC sections 7203 (“Willful failure to file return, supply information, or pay tax”), 7206 (“Fraud and false statements”), and 7207 (“Fraudulent returns, statements, or other documents”), may also apply if the reporting corporation fails to submit required information or files false or fraudulent information.
Contact Sherayzen Law Office for Professional Help With Forms 5472
As you can see, filing Form 5472 is not a trivial matter and requires the expertise of an international corporate tax attorney. If you are required to file Form 5472, contact the experienced international corporate tax law firm of Sherayzen Law Office.
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### International Tax Planning Lawyers: Importance of Business Purpose Doctrine
It is surprising how often international tax planning lawyers ignore the importance of business purpose doctrine to international tax planning. It seems that a lot of U.S. accountants and, to a smaller degree, attorneys have been limited to the parochial view of the application of the doctrine within the borders of the United States, whereas they seem to lose caution in the context of international business transactions. In this article, I urge the readers to consider the very important role of the business purpose doctrine to international tax planning.
International Tax Planning Lawyers: Business Purpose Doctrine; Combination with the Economic Substance Doctrine
This short writing does not pretend to do justice to the complex analysis of the history, development and interpretation of the business purpose doctrine. I will merely attempt to broadly sketch some important points and the general meaning of the doctrine to provide the necessary background to the discussion below.
The Business Purpose Doctrine (“the Doctrine”) is often cited to have originated in the old Supreme Court case Gregory v. Helvering, 293 U.S. 465 (1935) (even though, upon detailed consideration, it appears that this case stands for a much more limited proposition than the current Doctrine). In reality, the modern Doctrine received a much broader development in the seminal case of Goldstein v. Commissioner, 364 F.2d 734 (2d Cir. 1966), which incorporates the economic substance doctrine into the Doctrine.
The combined effect of both legal developments can be summarized as a two-prong test which says that the IRS will respect a business transaction if: (1) the transaction has objective economic substance (i.e. whether transaction affected the taxpayer’s financial position in any way); and/OR (2) the taxpayer has a subjective non-tax business purpose for conducting the transaction (i.e. whether the transaction was motivated solely by tax avoidance considerations to such a degree that the business purpose is no more than a facade). Notice, the capital “OR” – there is a disagreement among the courts on whether the both, subjective (business purpose doctrine) and objective (economic substance doctrine) prongs should be satisfied, or is it enough that one of them is satisfied.
International Tax Planning Lawyers: the Doctrine is Relevant to International Tax Planning
The application of the Doctrine has been extremely important to International Tax Planning, and international tax planning lawyers should take care to make sure that their tax plans are not merely done for tax avoidance purposes, but reflect the real business purpose behind engaging into the transaction. Moreover, the international tax planning lawyers should impress upon their clients this understanding of importance of the Doctrine to the tax consequences of their business transactions.
A recent IRS victory stand as a stark reminder of the importance of the Doctrine and why international tax planning lawyers must not ignore it. In Chemtech Royalty Associates , L.P. v. United States of America (February of 2013), the federal district court in Louisiana rejected two separate tax shelter transactions entered into by The Dow Chemical Company (“Dow Chemical”) that purported to create approximately $1 billion in tax deductions.
The first transaction rejected by Chief Judge Jackson was created by Goldman Sachs and basically allowed Dow Chemical to claim royalty expense deductions on its own patent through a scheme called Special Limited Investment Partnerships (“SLIPs”). The basic idea behind SLIPs is to create a tax shelter known as a “lease-strip” – the U.S. taxable income is stripped away to a non-US partnership. In the process, some small Swiss tax was paid, but only minor U.S. tax consequences were triggered on Dow Chemical’s US tax return.
The second transaction that was rejected by Chief Judge Jackson involved depreciation by Dow Chemical of a chemical plan asset that had already, for the most part, been fully depreciated. The second scheme (created by King & Spalding) arose due to changes in U.S. tax law which made the first transaction unprofitable from the tax standpoint.
While the economic substance was not the only doctrine discussed by court (the Sham Partnership Doctrine played a large role in the decision as well), it certainly occupied the central role in the decision.
The end result for Dow Chemical – disallowance of $1 billion of deductions and an imposition of 20% penalty (i.e. $200 million) plus interest. As the readers can see, it is highly important for international tax planning lawyers to pay attention to the Doctrine.
Contact Sherayzen Law Office for Professional Help with International Tax Planning
While the precedent-setting cases usually involve large corporations, international tax planning concerns any company that does business internationally. Equally important for all companies is to make sure that they comply with all of the numerous complex U.S. tax reporting requirements concerning international business transactions.
If you have a substantial ownership interest in or an officer of a small or mid-size company that does business internationally, contact Sherayzen Law Office for professional help with international tax planning and compliance. Attorney Eugene Sherayzen will thoroughly analyze your case, create an ethical business tax plan to make sure that you do not over-pay taxes under the Internal Revenue Code provisions, and prepare all of the tax and legal documents that are required for your U.S. tax compliance.
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### Swiss Accounts IRS Tax Lawyer News: US v. Victor Lipukhin
On March 20, 2014, the politics and FBAR criminal enforcement met again in a new case, U.S. v. Victor Lipukhin – a case of continuous interest for a Swiss Accounts IRS Tax Lawyer. While the timing is most likely driven by politics, this case also resulted from the fallout of the UBS 2009 settlement; under the settlement, the UBS paid a fine and disclosed a large number of the secret Swiss bank accounts held by U.S. persons.
In U.S. v. Victor Lipukhin, Mr. Lipukhin was charged with an attempt to interfere with the administration of the internal revenue laws and filing false tax returns. Specifically, obstruction charges under IRC Section 7212(a) and filing of false tax returns charges under Section 7206(1) were mentioned. According to the U.S. Department of Justice (DOJ) and the IRS, the “charges relate to Lipukhin hiding millions of dollars in several Swiss bank accounts held at UBS AG.” While it is not expressly spelled-out by the DOJ, it appears that there are multiple counts of violations under both IRC sections.
Swiss Accounts IRS Tax Lawyer News: Facts of the Case
According to the indictment, Mr. Lipukhin kept between $4,000,000 and $7,500,000 in assets in two bank accounts with UBS in Switzerland from at least 2002 through 2007. The first account was opened in 2002 under the name of a Bahamian entity, “Old Orchard”. The account was initially funded with over $47,000,000 transferred into the account from a previously maintained UBS account in the Bahamas. The second account was maintained at UBS in Switzerland in the name of another Bahamian entity, “Lone Star”.
DOJ alleges that Mr. Lipukhin directed virtually all transactions in the accounts, typically through a Bahamian national who served as the nominee director of the Old Orchard and Lone Star entities. The DOJ also alleges that, “in order to further conceal his ownership of the undisclosed UBS accounts, Lipukhin utilized fictitious mortgages through an entity called Dapaul Management, controlled by a Canadian attorney, to conceal his purchase of real estate in the United States with funds from the UBS accounts.” The assets include a purchase of a historic building for $900,000 in the name of Charlestal LLC, a domestic entity controlled by Lipukhin. He also transferred funds from his UBS accounts to the Canadian attorney for the ultimate transfer to a domestic Charlestal bank account in order to conceal the source of the funds. Mr. Lipukhin then used the funds in the Charlestal account to pay for various personal expenses and to withdraw cash for personal use.
The final charge in the indictment is a curious one: “Lipukhin impeded the administration of Internal Revenue laws by attempting to prevent an automobile dealer from filing a Form 8300 – which is required for certain cash transactions over $10,000 – with the IRS in order to report Lipukhin’s cash payment to purchase an automobile.”
According to DOJ, Mr. Lipukhin failed to report his ownership of these accounts (on Schedule B and the FBARs) and failed to report any income earned in these accounts on his tax returns.
Swiss Accounts IRS Tax Lawyer News: Potential Penalties
According to the indictment, Mr. Lipukhin is charged with committing a crime. He faces a potential maximum sentence of three years of imprisonment on each count.
Swiss Accounts IRS Tax Lawyer News: Peculiar Facts
Some of the facts of the case here are of a very high interest to a Swiss Accounts IRS Tax Lawyer and U.S. taxpayers with undisclosed Swiss accounts.
The first important feature of the case is the fact that Mr. Lipukhin was never a U.S. citizen. He is a citizen of the Russian Federation and a former lawful permanent U.S. resident. While it may be true that the current political context had a lot to do with the timing of the charges being filed by the DOJ, this is another example that negates the false myth that is being propagated by some tax preparers (especially in the ethnic communities – particularly Indian and Chinese) that IRS would not criminally charge a non-citizen permanent resident. Nothing in my practice suggests that the citizenship of a U.S. taxpayer has any serious impact on the IRS enforcement of FBAR criminal penalties.
The second important feature to notice are the years involved in the indictment: 2002 through 2007. This case is bound to have an interesting development with respect to the Statute of Limitations (although, it will be difficult to get around IRC Section 6501(c) except by negating the charge of the “false tax return”) and it partially explains why there were no FBAR charges filed against Mr. Lipukhin (see below).
Third, notice the use of third parties and the various offshore entities to conceal the ownership of UBS Swiss accounts. As any experienced Swiss Accounts IRS Tax Lawyer would confirm, this is a highly negative set of facts and has tremendously contributed to the filing of criminal charges against Mr. Lipukhin. U.S. taxpayers with undisclosed Swiss accounts owned by sham offshore entities should be aware of the criminal implications of such an action. On the other hand, if they were advised incorrectly to do so for purely asset protection purposes, this fact should be analyzed by their Swiss Accounts IRS Tax Lawyer.
Fourth, it is important to consider the circle of transactions that led the money back to the United States with the purchase of U.S. real estate. There are very important implications of these moves in the voluntary disclosure context, but, here, I just want to mention that this case is another example of the falsehood of another myth – that, as long as the money is back in the United States, the IRS will not conduct a criminal investigation of the formerly non-compliant U.S. taxpayers. I am not sure where this myth originated, but I have seen some foreign-born U.S. taxpayers being trapped in this misconception.
Finally, the last charge of impeding the filing of Form 8300 for cash purchase of a car is highly unusual for a Swiss Accounts IRS Tax Lawyer to see in this context. It also appears that Mr. Lipukhin’s attempt to prevent the filing of Form 8300 was not successful and Form 8300 was actually filed. If this is the case, it seems that this charge is probably more politically motivated; though, it could have been used to buttress the case for criminal non-compliance further. Nevertheless, it is important to remember that an interference with a third-party tax compliance is a federal crime and may be prosecuted by the DOJ.
Swiss Accounts IRS Tax Lawyer News: Why FBAR Charges Were Not Included
For a Swiss Accounts IRS Tax Lawyer, U.S. v. Lipukhin is also an interesting case from another perspective – the statute of limitations with respect to filing an FBAR. The statute of limitations can be found in IRC 5321(b)(1). Generally, it is six years from the date of transaction (i.e. the IRS has six years from the date of transaction to assess FBAR penalties). For the purposes of the FBAR filing violations, the date of the transaction is the due date for filing the FBAR (i.e. formerly June 30 of the calendar year following the year to be reported).
This explains why the FBAR charges were not filed by the IRS for the years 2002-2006; the assessment period has expired for these years. However, it should be noted that 2007 statute of limitations is still open until June 30, 2014; it is unclear why the IRS chose not to pursue the FBAR criminal penalties with respect to 2007 (perhaps, the accounts were already closed or had an insignificant balance by that time).
Contact Sherayzen Law Office for Help With Respect to Foreign Bank and Financial Accounts
If you have undisclosed Swiss bank accounts; if you are facing civil FBAR penalties; or if you are facing other IRS penalties; contact Sherayzen Law Office experienced international tax law firm for professional help.

### Swiss Bank Letters Cause Legal Complications for U.S. Taxpayers
The Swiss Bank letters continue to pour into the mailboxes of U.S. taxpayers with bank and financial accounts in Switzerland as the April 30th deadline approaches for many Swiss banks that participate in the ongoing U.S. Department of Justice (“DOJ”) The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). In an earlier article, I already discussed what the Swiss Bank letters contain, and the importance of the need for the comprehensive analysis of the offshore voluntary disclosure options. In this article, I would like to concentrate on another aspect of Swiss Bank letters – the top three legal complications that these Swiss Bank letters cause to U.S. taxpayers.
1. Swiss Bank Letters Provide Notice of Non-Compliance with the FBAR and Other International Tax Compliance Requirements
The first problem with the Swiss Bank Letters is that they provide the notice of non-compliance with the FBAR and other important international tax requirements (depending on the Bank, it can include such Forms as 5471, 8865, 926, 3520 and so on). The issue here is not so much that the Banks are making their U.S. taxpayers aware of the U.S. tax reporting requirements, but the context in which this is done.
If the Swiss Bank letters were to arrive upon the opening of a Swiss bank account or, at least, prior to the Program, it would be a huge benefit to the unsuspecting U.S. taxpayers. However, this is not the case. Rather, the notice of these requirements is given after a potentially substantial period of non-compliance with these requirements.
Moreover, the Swiss Bank letters provide a notice of non-compliance in the context of forced disclosure under the terms of the Program. Such notice has a potential to taint disclosures outside of the OVDP with the same air of the taxpayer being “forced” to disclose as opposed to doing it voluntarily (at the very least, the argument that the taxpayer is doing this disclosure without any pressure from the IRS definitely loses credibility).
Finally, the Swiss Bank letters provide a Notice of non-compliance with requirements, without even attempting to educate their audience about these requirements or suggesting to contact an international tax attorney to see if these taxpayers are really in violation of these requirements. For example, how would a taxpayer know whether Form 3520 requirement actually applies to him?
2. Swiss Bank Letters Start the Clock for Disclosure Under Extreme Time Pressure
The second problem with Swiss Bank letters is that they start the clock for the taxpayer to be able to disclosure his accounts voluntarily under an enormous time pressure. A lot of the banks that send these Swiss Bank letters will disclose by April 30, 2014. This means that the taxpayers who receive the Notice today have less than two months to disclose their accounts voluntarily before they run an enormous risk of prior disclosure of their accounts by Swiss banks to the IRS (with the effect on potentially preventing these taxpayers from entering into the OVDP). Even the taxpayers who received notices at the end of last year and January of this year are not much better off.
This is a very big problem, because time pressure may not allow the taxpayers to choose the right type of voluntary disclosure. Moreover, even if they wanted to do one type of disclosure rather than another, their options may be limited due to insufficient time to implement the strategies necessary to make their preferred choice of the voluntary disclosure successful.
3. Swiss Bank Letters May Mislead U.S. Taxpayers in Believing that OVDP is the Only Option
Swiss Bank letters uniformly advise their clients to enter into the OVDP without ever mentioning any alternatives. It is as if the assumption of willful failure to file FBARs is already written into the Swiss Bank letters. Theoretically, one could even argue that, by advising taxpayers to enter the OVDP instead of consulting an international tax attorney about their options, some of the Swiss Bank letters over-step their boundaries and enter the world of giving legal advice without a license.
At the practical level, the problem is even more profound. The Swiss Bank letters have the potential to mislead U.S. taxpayers with undisclosed accounts into believing that OVDP is the only option available to them and they have to take this option because their bank will soon disclose their accounts to the IRS. While, undoubtedly, OVDP may be the best option in many cases, this may not be true in other cases. The problem is that, the way Swiss Bank letters are drafted, the U.S. taxpayers may never be even given the choice.
Contact Sherayzen Law Office for Help If You Received Swiss Bank Letters
Sherayzen Law Office is here to help you with the voluntary disclosure of your Swiss bank and financial accounts. Owner Eugene Sherayzen is an international tax attorney and expert in this field who can analyze the facts of your case and explain to you the available voluntary disclosure options. After you choose the voluntary disclosure option, our firm can prepare all legal documents and tax forms required for your voluntary disclosure, fully implement the ethically available strategies and rigorously defend your position against the IRS.
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### Quiet Disclosure: The Russian Roulette of FBAR Disclosures
There used to be a time when quiet disclosures with respect to offshore income and accounts were routinely recommended by accountants and even attorneys. Even as the tide turned against non-compliant U.S. taxpayers with offshore accounts in 2008-2009 with the spectacular IRS success in the UBS case and the announcement of the 2009 Offshore Voluntary Disclosure Program, these tax professionals persisted in advising their clients to follow the “quiet” course of action. Amazingly enough, even in March of 2014, I still see clients who have been advised to conduct quiet disclosures without adequate assessment of risks that such course of action entails.
In this article, I will argue that the era of quiet disclosures is over and a non-compliant taxpayer who embarks on this course is assuming the risks comparable to engaging in a game of a Russian Roulette with the IRS.
Definition of “Quiet Disclosure”
The definition of what constitutes “quiet disclosure” has changed over time; at some point, there were tax professionals who used it in such as a broad manner as to include something that we would not consider as quiet disclosure today but rather “reasonable cause disclosures” (also known as “modified voluntary disclosures” or “noisy disclosures”).
Today, the term generally refers to disclosures where a taxpayer would file amended returns, pay any related tax and interest (oftentimes, the payment of accuracy-related penalties is included in such a disclosure) for previously unreported offshore income, and file the current year’s information returns without otherwise notifying the IRS.
Note the two critical aspects of this definition that differentiate quiet disclosures from any other types of voluntary disclosures. First and foremost – “without otherwise notifying the IRS”. This is the “quiet” aspect of the disclosure. At no point is the taxpayer notifying the IRS about his non-compliance; he just simply hopes to pay the tax with interest without attracting IRS attention to his prior non-compliance.
The second critical aspect of quiet disclosures is compliance with current year’s information returns (such as FBARs, Forms 5471, et cetera), but not prior years’ information returns. Filing prior years’ information returns would imply providing IRS with evidence of prior non-compliance and, without adequate explanation, a set of penalties may be imposed on the taxpayer. This is why, in a quiet disclosure, the non-compliant taxpayer only files the current year’s FBAR.
Current International Tax Enforcement of FBAR Compliance; Impact of FATCA
It is my argument that, in the current international tax enforcement environment, the quiet discloser strategy is likely to have a counter-productive effect and may actually lead to disastrous results later. So, what is so different about today’s world versus the one in 2007?
Two words summarize the difference: “UBS” and “FATCA”. The IRS victory in the UBS case in 2008 marked a radical change to the worldwide tax compliance and completely overthrew the traditional conception of the bank secrecy laws (at least, with respect to U.S. taxpayers). The IRS proved that it can get to U.S. taxpayers wherever they have their accounts despite the sovereign objections of other countries; most shockingly, the IRS proved it in a country the name of which was synonymous with “bank secrecy” for centuries. This is one of the reasons why the 2009 OVDP, 2011 OVDI and the current 2012 OVDP, 2014 OVDP programs (now closed) proved to be such a success.
If the UBS case seriously crippled the bank secrecy laws in Switzerland, the enaction of the Foreign Account Tax Compliance Act (“FATCA”) by the U.S. Congress in 2010 dealt a death blow to the bank secrecy laws worldwide with far reaching consequences. FATCA not only swept away the bank secrecy considerations in Switzerland, but the great majority of other jurisdictions such as Liechtenstein, Monaco, Jersey Islands, Lebanon, Panama, the various Caribbean islands, and other places where bank secrecy laws protected non-compliant U.S. taxpayers.
Moreover, by turning foreign banks into U.S. reporting agents who voluntarily report information on all of their U.S. accountholders, the IRS is gradually achieving its long-term goal of worldwide tax compliance with only a fraction of the costs that would otherwise be necessary if the IRS were to investigate each bank in the world individually (something that the IRS simply would not have the resources to do).
In such a tax enforcement environment, it is dangerously naive to expect prior FBAR non-compliance would not be discovered by the IRS – an assumption that forms the core of the quiet disclosure strategy.
Swiss Program for Banks; Willful and Criminal Penalties
In addition to the tectonic shifts in the international tax compliance as a result of the UBS Case and FATCA, the U.S. government pushed the concept of the “voluntary compliance” to the extreme through the U.S. Department of Justice (“DOJ”) Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). In essence, this is a voluntary disclosure program for the Swiss Banks, where the Swiss Banks have to disclose information with respect to U.S. taxpayers in exchange for the DOJ”s promise not to sue them.
There is one particular aspect of the Program that I want to emphasize because of its relevance to the quiet disclosure strategy – the disclosure of U.S. accountholders goes back to August 1, 2008. This means that if a U.S. taxpayer with unreported Swiss accounts from 2008 made a quiet disclosure in the tax year 2009, his former non-compliance will be exposed by the Program.
Not only that, but, at this point, his prior non-compliance is likely to be considered willful and the prospect of gigantic willful civil and criminal penalties becomes almost imminent (especially, if his ability to enter the OVDP is hindered for one reason or another). See, for example, this passage from the FAQ instructions to OVDP: “When criminal behavior is evident and the disclosure does not meet the requirements of a voluntary disclosure under IRM 9.5.11.9, the IRS may recommend criminal prosecution to the Department of Justice” (see FAQ 16).
It is important to note that there are very good reasons to believe that the "Swiss Program for Banks" scenario is likely to be repeated elsewhere with uncertain look-back periods.
FBAR Quiet Disclosure Is Likely to Lead to Untenable Willful FBAR Non-Compliance in the Event of IRS Discovery
Now, we are approaching the core reasoning behind my earlier argument that quiet disclosure is similar to playing a Russian roulette. We have already established that the possibility of the IRS discovery of prior non-compliance has become increasingly likely under FATCA. We have also determined that willful failure to file an FBAR under the quiet disclosure strategy may lead to the imposition of willful civil and, possibly, criminal penalties. Finally, we also considered that a third-party disclosure (most likely, a bank that discloses under FATCA or the Program) is likely to prevent the taxpayer from entering the OVDP.
The effect of putting these three propositions together is obvious and explosive at the same time: engaging in a quiet disclosure policy may result in the discovery of prior FBAR non-compliance, such non-compliance is likely to be considered by the IRS as willful, and the taxpayer is likely to lose the safe harbor of the OVDP. The end result may be absolutely disastrous: FBAR willful civil penalties of up to $100,000 per account per year with potential FBAR criminal penalties (huge monetary penalties and incarceration).
The IRS has stated this openly in its FAQ instructions to the OVDP: “Taxpayers are strongly encouraged to come forward under the OVDP to make timely, accurate, and complete disclosures. Those taxpayers making ‘quiet’ disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years” (see FAQ #15).
Contact Sherayzen Law Office of Professional Help With Your Offshore Voluntary Disclosure of Foreign Assets and Foreign Income
If you have undisclosed foreign account or other assets, do not fall prey to the Russian Roulette quiet disclosure solution.
Rather, you should contact the international tax law firm of Sherayzen Law Office. We are a team of experienced tax professionals who have an expertise in the offshore voluntary disclosure of offshore assets and income. We can help you.
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### Choosing Your Offshore Voluntary Disclosure Lawyer
Choosing the right Offshore Voluntary Disclosure Lawyer is a very important decision that may determine the fate of your entire offshore voluntary disclosure case. While making this choice, I recommend that you consider the following five main factors while choosing your Offshore Voluntary Disclosure Lawyer.
1. Areas of Practice of Your Offshore Voluntary Disclosure Lawyer
The first factor is to determine whether your Offshore Voluntary Disclosure lawyer really practices in this area of law. There are attorneys (especially in large and general practice law firms) out there who like to “dabble” in various areas of law but who really do not know international tax law in depth. You are well advised to stay away from such firms.
You should be looking for an attorney who has devoted the great majority of his practice to international tax law, particularly Offshore Voluntary Disclosure. Remember, Offshore Voluntary Disclosure involves not only the sophisticated analysis of the voluntary disclosure options of the foreign bank and financial accounts (i.e. issues associated with the Report of Foreign Bank and Financial Accounts – “FBAR”), but also the complex interaction of various other parts of international tax compliance requirements (such as PFICs, ownership of foreign business entities, ownership of Foreign trusts and so on).
Sherayzen Law Office is a law firm that specializes in international tax law and specifically in Offshore Voluntary Disclosures. Virtually our entire practice is devoted to helping clients throughout the world to comply with the complex requirements of U.S. international tax law, particularly voluntary disclosure of foreign income, offshore bank and financial accounts, foreign gifts and inheritance, and ownership of foreign business entities and trusts.
2. Experience of Your Offshore Voluntary Disclosure Lawyer
After making sure that he really practices in the area of Offshore Voluntary Disclosure, you should find out about the experience of your Offshore Voluntary Disclosure lawyer. What you should be looking for is the concentration of the experience as well as number of years that the attorney practices law (at least five years).
Do not be fooled by someone who says that he has thirty years of Offshore Voluntary Disclosure experience – this is a relatively new and quickly developing area of practice. the IRS implemented its first voluntary disclosure program (which was quite unknown at that time) in 2003. The first voluntary disclosure program of real importance was the 2009 OVDP and it served as a prototype for the highly successful 2011 OVDI and the later 2012 OVDP and 2014 OVDP (which closed in 2018).
Since 2005, Sherayzen Law Office has developed a unique expertise in the area of Offshore Voluntary Disclosure helping clients throughout the world, and it has practiced international tax law with the emphasis on offshore voluntary disclosures during the existence of all major IRS Voluntary Disclosure Programs.
3. Personal Attention of Your Offshore Voluntary Disclosure Lawyer to Your Voluntary Disclosure Case
The key point here is that, since offshore voluntary disclosures are highly fact-dependent, it is very important the experienced offshore voluntary disclosure lawyer that you wish to retain for your case is the one who will actually handle the entire case, not just the voluntary disclosure. Similarly, you want to make sure that your offshore voluntary disclosure lawyer is able to communicate with you personally with respect to the case.
Unfortunately, it is common practice for large law firms to divide up the work between the partner and the associates to the extent that the partner (usually an experienced attorney) contributes very little beyond getting you to sign the retainer agreement while less-experienced and even complete inexperienced associates do most of the work, potentially jeopardizing your entire voluntary disclosure.
Eugene Sherayzen, the founder and owner of Sherayzen Law Office, will personally handle your initial consultation and your entire case. Of course, parts of the case will be given to associates, accountants and staff members; however, Mr. Sherayzen invests a substantial amount of his time in training and supervision of all members of Sherayzen Law Office, making sure that the high quality of our firm’s work is maintained while certain cost benefits are passed through to the client. Moreover, Mr. Sherayzen is personally available for personal communication throughout the progress of your case.
4. Ethical Creativity of Your Offshore Voluntary Disclosure Lawyer
Offshore voluntary disclosures require consideration of interaction of various strategies and possibilities before the your disclosure options are finalized. This requires a healthy degree of ethical creativity that must be displayed by your offshore voluntary disclosure lawyer as early as the initial consultation.
If the offshore voluntary disclosure lawyer only proposes one option without considering any facts or without at least mentioning the other options and why they are rejected, then you may wish to get a second opinion. Similarly, if the attorney only concentrates on the OVDP penalty (program now closed) without discussion of the FBAR penalty structure, something may not be right.
Also, stay away from attorneys (and accountants) who propose unethical solutions which involve concealment of truth from the IRS or who propose easy solutions. Your voluntary disclosure is required to be truthful and complete; anything short of this standard may get you in deep troubles with the IRS and result in high civil and even criminal penalties.
Sherayzen Law Office follows a very high standard for ethical creativity, making sure that the required disclosures are honestly made the IRS while implementing ethical creative solutions based on legitimate interpretations of the Internal Revenue Code and Treasury regulations. In the end, we strive to achieve the combination of the required transparency with the tax and penalty reductions permitted by the Code.
5. Trust in Your Offshore Voluntary Disclosure Lawyer
This fifth factor of “trust” is highly important. If, after your initial consultation, you have a feeling of distrust and suspicion of the voluntary disclosure lawyer or his tactics, my suggestion is to try another attorney.
The stakes in the offshore voluntary disclosure can be very high and the information involved can be very sensitive. In such situations, at least some feeling of trust in the abilities and honesty of your Offshore Voluntary Disclosure Lawyer is crucial to the success of your case.
Contact Sherayzen Law Office to Retain The Right Offshore Voluntary Disclosure Lawyer for Your Case
If you are thinking about doing an Offshore Voluntary Disclosure with respect to your foreign assets and foreign income, contact Sherayzen Law Office for experienced professional help.
Over the years, Mr. Eugene Sherayzen, an experienced Offshore Voluntary Disclosure Lawyer has developed a unique expertise in the Offshore Voluntary Disclosure which allows Sherayzen Law Office to successfully help clients throughout the United States and the world. We offer a comprehensive approach which produces realistic voluntary disclosure options assessment on which you can rely. Then, once the voluntary disclosure option is chosen, we will implement the necessary ethical strategies (including drafting of legal documents and completing the necessary tax forms) and rigorously defend your position against the IRS.
Contact Us to schedule a Confidential Consultation now.

### Lebanon FATCA Note: Is the “Switzerland of Middle East” in the Crosshair of FATCA?
This Lebanon FATCA update is intended to provide a broad analysis of the impact of the U.S. Foreign Account Tax Compliance Act (“FATCA”) on the numerous U.S. accountholders in Lebanon.
Lebanon FATCA: Background Information
The Lebanese banking secrecy rules, commonly known as the “1956 Law”, have earned the country the unofficial title of the “Switzerland of the Middle East”. It is estimated that as many as 100,000 U.S. taxpayers took advantage of the 1956 law and opened foreign bank and financial accounts in Lebanon.
Lebanon FATCA: Foreign Account Tax Compliance Act Threatens the 1956 Law
The UBS case in 2008 became a crucial turning point in global tax compliance, because, for the first time, the US was able to leverage its economic might to break through the wall of bank secrecy in the country which, until recently, was synonymous with bank secrecy.
Encouraged by the crucial success over UBS in 2008, the IRS and U.S. Congress took an unprecedented step in international tax compliance with the passage of FATCA in 2010. FATCA is not just another law, but a new global standard for the international tax transparency which endangered all U.S. taxpayers with undisclosed foreign accounts.
One of the unique aspects of FATCA is that it requires foreign financial institutions (“FFIs”) to report directly or indirectly to the IRS all bank and financial accounts held by their U.S. customers. In essence, it turned foreign banks into the agents of the IRS compliance effort.
While FATCA requires legislative adjustments in many countries, in Lebanon, FATCA ran counter to the spirit and letter of the 1956 Law.
Lebanon FATCA: Initial and Subsequent Reaction in Lebanon
At first, the reaction of the Lebanese banks was very negative with even talk of accepting the 30% tax withholding requirement imposed by FATCA. As late as the first quarter of 2012, Lebanon was considered as one of the potentially most vexatious non-compliant countries.
By April of 2012, however, the attitude of the Lebanese banks and Lebanese financial authorities began to change rapidly. In February of 2013, the head of Lebanon’s banking association stated that the Lebanese banks will cooperate with FATCA.
At the present time, all major Lebanese Banks (such as Bank Audi, Blom Bank, Bank of Beirut and so on) are in the process of implementing FATCA regulations. Given the another unprecedented step by the U.S. government – voluntary disclosure program for banks in Switzerland – it is expected that the Lebanese Banks (as the example of Bank of Beirut demonstrated) will strive to implement FATCA as fast as possible.
Lebanon FATCA: What Does FATCA Compliance Mean for U.S. Taxpayers with Undisclosed Accounts in Lebanon
The move of the Lebanese banks toward FATCA compliance has profound consequences for all U.S. taxpayers with undisclosed bank and financial accounts in Lebanon even though the exact impact is not likely to be felt in the same way by all U.S. accountholders (due to the individual circumstances of each U.S. taxpayer).
At this point, these U.S. taxpayers with Lebanese accounts should understand that their account information is likely to be reported by the Lebanese banks to the IRS within a fairly short time (it is hard to state it exactly and some of the account information may have already been disclosed, but I would expect the Lebanon FATCA compliance to be firmly implemented by the end of 2014 or early 2015). This development is likely to have two major effects on U.S. taxpayers. First, the U.S. accountholders whose information will be disclosed to the IRS are not going to be able to enter the OVDP (unless there is a specific exception or a chance in the OVDP rules - program is now closed), which is the official IRS voluntary disclosure program for offshore accounts.
Second, once the IRS follows up on the information that it receives from the Lebanese banks (i.e. opens up an investigation), these taxpayers are likely to suffer from the imposition of the draconian FBAR willful penalties. Criminal penalties, including jail time, are also possible. See this article for a more detailed explanation of the FBAR penalties.
Thus, the implementation of FATCA in Lebanon means the end of 1956 Law and Lebanese Bank Secrecy for U.S. taxpayers. It also means that the U.S. taxpayers with undisclosed Lebanese accounts are currently in a very dangerous position and may face heavy penalties.
Lebanon FATCA: U.S. Taxpayers with Undisclosed Accounts in Lebanon Should Explore their Voluntary Disclosure Options As Soon As Possible
With the implementation of FATCA in Lebanon, U.S. taxpayers have to act fast if they want to reduce or avoid IRS penalties. This is why they should consult an experienced international tax attorney who specializes in offshore voluntary disclosures as soon as possible.
Contact Sherayzen Law Office for Professional Legal and Tax Help With the Voluntary Disclosure of Lebanese Bank and Financial Accounts
If you have undisclosed bank or financial accounts in Lebanon, contact the offshore voluntary disclosure experts of Sherayzen Law Office now. Our experienced international tax law firm will thoroughly analyze your case, advise on the available voluntary disclosure options, prepare all necessary tax forms and legal documents, and professionally represent your interests through the IRS voluntary disclosure process.

### Letters from Swiss Banks: What Should You Do?
Since the last quarter of 2013, an increasing number of U.S. taxpayers with accounts in Swiss banks have received letters from Swiss Banks regarding participation in the U.S. Department of Justice (“DOJ”) The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). It is very important to react to these letters in a thoughtful yet rapid manner.
Letters from Swiss Banks: What They Usually Say
In these letters from Swiss Banks, the taxpayers are typically advised (sometimes with the somewhat offensive phrase “as you almost certainly know”) of the fact that their Bank will participate in the Program and disclose the taxpayer’s accounts in Switzerland. Then, the letters typically discuss three issues (note: different banks would follow different format, but the essence is the same).
First, the letters from Swiss Banks ask the taxpayer to confirm whether he has already properly disclosed their Swiss bank accounts to the IRS. Some banks, like Banque Cantonale Vaudoise (“BCV”) even go as far as asking the taxpayers to confirm that other international tax compliance forms, such as Forms 5471, 3520 and, surprisingly, PFIC Form 8621, have also been filed with the IRS. Other banks just ask for some sort of documentation that everything has been properly declared to the IRS.
Then, the letters from Swiss Banks ask the taxpayers are asked to verify if his Swiss bank accounts were disclosed as part of the official IRS Offshore Voluntary Disclosure Program (“OVDP”) now closed.
Finally, the letters from Swiss Banks inform the taxpayers with undisclosed Swiss Bank accounts about the existence of the OVDP and propose such actions for the readers as considering to enter into the OVDP, obtaining more information about the OVDP from the Bank, and, finally, offering to provide the necessary bank statements for the taxpayer to enter the OVDP. Some banks (for example, Nue Privat Bank) will even later offer to supply the tax information (though, these reports should be approached with a great deal of skepticism because these statements could contain a number of mistakes, such as failure to recognize the application of PFIC rules). Most letters from Swiss Banks also provide space for the taxpayers to express their consent to the disclosure of their undisclosed Swiss bank and financial accounts to the IRS.
Consequences for U.S. Taxpayers Who Received Letters from Swiss Banks
It is difficult to overstate the great impact that these letters from Swiss Banks may have on the taxpayer’s position. I want to concentrate on two most important effects of the letters from Swiss Banks. First and foremost, they provide notice to the taxpayer about the requirement to disclose their Swiss bank and financial accounts (and, in case of BCV and some other banks, other foreign assets such as business ownership) to the United States. Even if a taxpayer simply did not know about the FBAR requirement in the past, his behavior as a result of receiving these letters from Swiss Banks will now be subject to scrutiny – failure to act on these letters for a long time and willful disregard of them may change the taxpayer’s position from non-willful to willful, subjecting him to draconian FBAR willful penalties, including opening the possibility of criminal penalties to be applied.
Second, upon fulfilling the Notice requirement with these letters, the Swiss banks are free to disclose certain information to the IRS under the US-Swiss FATCA treaty. Once the IRS receives such information from the Swiss Banks, the exposed U.S. taxpayers most likely will not be able to participate in the OVDP.
Hence, once the taxpayers receive these letters, time becomes a crucial factor, because, if the decision to enter the OVDP is made by these taxpayers, it should be implemented as soon as possible.
What Should You Do Upon Receipt of Letters from Swiss Banks?
Your initial response to the letters from Swiss Banks may determine the entire course of your case.
1. Consult an International Tax Attorney
The first and most crucial step is not to panic and contact an international tax attorney who specializes in the voluntary disclosure of the foreign bank and financial accounts as well as other assets.
I want to emphasize that you need to contact an experienced international tax attorney, not an accountant. Offshore voluntary disclosure is a legal issue and its venue should be determined by an attorney, not an accountant. I have seen too many cases where accountants horribly mishandled their clients’ cases (on both strategic and tactical issues) because the accountants overstep the limitations of their profession and enter the world of legal advice.
The geographic location of your international tax attorney should not matter; a much more important factor should be the attorney’s experience in the case and you personal feeling of trust. If the attorney immediately advises you to enter the OVDP program without even considering the facts of your case, consider it a red flag and seek second opinion.
2. Try to Obtain As Much Information As Possible While Preparing for the Initial Consultation
During the initial consultation, the attorney will have no choice but to rely on you for the initial information required to assess the state of your case. So, try to get as much information as possible regarding your foreign bank accounts while preparing for the initial consultation.
3. Retain an International Tax Attorney to Handle Your Case According to the Proposed Strategy
After the initial consultation, you should have a pretty good idea of what your options are. Think about these options and the attorney’s recommendations, but not take too much time to do so (remember, time is of the essence in these cases). Make your decision and retain an international tax attorney that you like for your case.
Contact Sherayzen Law Office for Professional and Experienced Legal Help With the Voluntary Disclosure of Your Swiss Bank Accounts
As soon as you receive your letters from Swiss Banks, contact Sherayzen Law Office for professional legal and tax help with your voluntary disclosure. Our experienced international tax law firm has helped numerous U.S. taxpayers with the voluntary disclosure of their Swiss bank and financial accounts as well as other foreign assets.
We can help you! Contact Us to Schedule a Confidential Consultation Now.

### Second Quarter of 2014 IRS Underpayment and Overpayment Interest Rates
On March 14, 2014, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning April 1, 2014. The rates will be:
three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### OVDP International Tax Attorney: Letters from Swiss Banks & OVDP
This is a natural question for an OVDP International Tax Attorney: in light of the ongoing U.S. Department of Justice (“DOJ”) The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”), should every U.S. taxpayer with undisclosed Swiss accounts enter the Program?
As everything in international tax law, the answer of whether you should enter the OVDP program (now closed) after receiving a letter from the Swiss Bank is not that simple and depends (as any good OVDP International Tax Attorney will tell you) on the particular circumstances of your case. The article below is not intended to give legal advice, but it is merely a discussion of various possibilities - please contact Mr. Eugene Sherayzen, an experienced international tax attorney of Sherayzen Law Office for professional advice with respect to your undisclosed foreign accounts.
OVDP International Tax Attorney: Letters from Swiss Banks
Ever since more than a hundred banks officially announced (and a lot of private banks did so unofficially) that they will enter the Program, U.S. taxpayers with undisclosed Swiss bank accounts have received letters from their Swiss banks asking the taxpayers whether they are in compliance with U.S. tax laws, whether they have filed their FBARs (Report of Foreign Bank and Financial Accounts, currently Form FinCen 114 (formely TD F 90-22.1))and, if not, whether they entered the IRS Offshore Voluntary Disclosure Program (OVDP).
Indeed the emphasis in all of the letters has been on the OVDP without any regard to the individual circumstances of the taxpayers and despite the fact that many of these taxpayers learned about the existence of the FBARs from the very letters from their Swiss banks.
OVDP International Tax Attorney: Common Chorus to Join OVDP
It is not only the Swiss banks that are urging these taxpayers to enter the OVDP. The IRS is also very eager to see as many people enter the OVDP as possible. Shockingly, the great majority of accountants readily take on the legal (not accounting) issue of whether a client should enter the OVDP. The accountants herd their clients into the OVDP without ever discussing the consequences of doing so or any other legal alternatives.
The end result of this common stance has been to convince the terrified taxpayers that OVDP is the only route available to them irrespective of their circumstances, whether the FBAR non-compliance was willful or non-willful, whether they have reasonable cause for the delayed filing of their FBARs or not, whether they owe any taxes or not, and so on.
OVDP International Tax Attorney: OVDP is Option #1
Of course, as an OVDP International Tax Attorney, I agree that there is no doubt that OVDP is Option #1 that must be considered by U.S. taxpayers who received a letter from their Swiss banks However, being Option #1 does not mean the only option and does not mean that it should be automatically followed.
Moreover, even under the OVDP, there are many issues, strategies and possibilities that must be explored by your OVDP International Tax Attorney.
Undoubtedly, OVDP has tremendous benefits to offer to U.S. taxpayers with willful non-compliance and who may be facing realistic criminal penalties. On the other hand, the calculation becomes much more complicated when your client simply did not know about the FBARs and the IRS is not likely to be able to sustain its burden of proof on the willfulness issue.
Comprehensive Legal Analysis of the Voluntary Disclosure Alternatives Must Be Considered
In all cases, but even more so in the non-willful cases, a very complex calculation and cost-benefit analysis must be conducted by your OVDP International Tax Attorney, comparing traditional FBAR penalty structure with the OVDP penalty structure. Outside factors, such as time, legal fees, complexity of the issues, impact on tax returns, appeal possibilities, and many others, should be considered your OVDP International Tax Attorney. Once all factors are considered, the Attorney should advise you on the available Voluntary Disclosure alternatives and the probability of success.
Only then, armed with this knowledge and based on the analysis of a good OVDP International Tax Attorney, should a U.S. taxpayer with undisclosed Swiss accounts make his decision.
Contact Sherayzen Law Office for Professional Legal and Tax Help With the Voluntary Disclosure of Your Foreign Accounts
The point of this article is not to diminish the value of the OVDP, but to argue that all U.S. taxpayers with undisclosed foreign accounts should be given a chance to consider all of their voluntary disclosure options based on the comprehensive analysis of their particular circumstances.
This is precisely what Sherayzen Law Office experienced international tax firm can do for you. We will thoroughly analyze the facts of your case, assess the potential FBAR and OVDP penalties and tax liabilities, analyze the voluntary disclosure alternatives, create a comprehensive voluntary disclosure plan for you, and implement this plan (including the preparation of all legal documents and tax forms).
Contact Us to schedule a Confidential Consultation with an experienced International Tax Attorney.

### OVDP Foreign Accounts Lawyers: Swiss Banks Disclosure Deadline on April 30, 2014
As many OVDP Foreign Accounts Lawyers know, April 30, 2014 is a crucial deadline for the U.S. Department of Justice (“DOJ”) The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). By this date, numerous Swiss banks will have to disclose the names of US accountholders, account balance information, and various other data with respect to U.S. accountholders.
OVDP Foreign Accounts Lawyers: What Banks Will Disclose U.S. Taxpayers by April 30, 2014
The list of Swiss Banks who will disclose their U.S. taxpayers to the IRS and DOJ by April 30, 2014 is very large and includes prominent banks such as:
Aargauische KantonalbankAcrevis Bank AGAEK Bank 1826Appenzeller KantonalbankBaloise Bank SoBaBank am BellevueBank Coop AGBanque Cantonale de FribourgBanque Cantonale de GenèveBanque cantonale du JuraBanque cantonale du ValaisBanque Cantonale NeuchâteloiseBanque Cantonale VaudoisBanque Privee Edmond de RothschildBasellandschaftliche KantonalbankBerner KantonalbankCembra Money Bank AGCornèr Banca SAEdmond de Rothschild GroupEFG International AGGlarus BankGraubündner KantonalbankHyposwiss Privatbank Zurich AGHyposwiss Private Bank Geneve SAHypothekarbank LenzburgLinth BankLombard Odier & Cie.Luzerner KantonalbankMigros BankNidwaldner KantonalbankPiquet Galland & Cie SAPost FinanceRaiffeisenRothschild Bank AG, ZurichSaanen BankSchaffhauser KantonalbankSchwyzer KantonalbankSt. Galler KantonalbankTicino Cantonal BankUnion Bancaire PriveeValartis Bank (Switzerland)Valiant Holding AGVontobel Holding AGVP Bank (Switzerland)Walliser KantonalbankZuger Kantonalbank
Note: this is just a selective list - many other banks that are not named here are participating in the Program. This is particularly true for many private banks that are not required to disclose publicly whether they are participating in the Program.
OVDP Foreign Accounts Lawyers: Two Cantonal Banks and Other Category 1 Banks Excluded from the Program
The US Department of Justice (DOJ) previously launched investigations against two other Swiss cantonal banks, such as Baser Kantonalbank and Zürcher Kantonalbank. These banks are classified as Category 1 banks and will not be allowed to enroll in the Program. Similarly, otehr Category 1 banks cannot participate in the program Credit Suisse, Julius Baer, Pictet, HSBC Privatbank, Liechtensteinische Landesbank, Bank Leumi, Bank Hapoalim, Bank Mizrahi, Rahn & Bodmer, Bank Wegelin, Bank Frey, Neue Zürcher Bank.
OVDP Foreign Accounts Lawyers: Letters from Banks
As part of their “voluntary disclosure” under the Program, the Swiss Banks have already sent out letters to the majority of their U.S. account holders. These letters are not mere warnings (though, they also are exactly that to many unsuspecting U.S. taxpayers) to U.S. taxpayers with undisclosed Swiss accounts, but they are also a way for the Swiss Banks to minimize their penalty exposure (because, in calculating their own penalty base, Category 2 banks do not have to count the bank accounts which are already disclosed to the IRS).
OVDP Foreign Accounts Lawyers: What Does April 30, 2014 Mean for U.S. Taxpayers With Undisclosed Foreign Accounts
As most OVDP Foreign Accounts Lawyers indicate, April 30, 2014, marks a very important deadline for U.S. taxpayers with undisclosed foreign accounts in Switzerland. The reason is found in the Offshore Voluntary Disclosure Program (“OVDP”) acceptance rules.
The rules basically state that if the IRS receives the information about undisclosed foreign accounts from a third party before U.S. owner of these accounts enters the OVDP program, then the IRS will likely reject (or, as it was in the case with some OVDP participants last year - eject such U.S. owner from the OVDP) such U.S. owner’s application to participate in the OVDP program.
Therefore, OVDP Foreign Accounts Lawyers advise their clients that a very important and the most official route to voluntary disclosure will simply become completely closed to many U.S. taxpayers who fail to enter OVDP and disclose their Swiss accounts prior to April 30, 2014.
Of course, it is important to note, that it is possible that some of the Swiss banks have already disclosed such unreported accounts owned by U.S. taxpayers and many more are likely to do it in advance of the April 30, 2014, deadline.
In such case, U.S. taxpayers who either hold or previously held undisclosed bank accounts at any of the Swiss cantonal banks eligible for enrollment in the Program, or any bank already under investigation, may face substantial civil and potential criminal penalties if they do nothing or if their cases are not handled properly.
Therefore, it is imperative for U.S. taxpayers with undisclosed Swiss bank and financial accounts to contact OVDP Foreign Accounts Lawyers who specializes in the OVDP disclosure of foreign accounts.
Contact Sherayzen Law Office for Professional Help with Undisclosed Swiss Accounts
Experienced OVDP (program now closed) foreign accounts lawyer Eugene Sherayzen of Sherayzen Law Office, Ltd. can help you with all of your voluntary disclosure issues. Our experienced tax law office will thoroughly review your case, estimate your existing tax and FBAR liability in the United States, identify the available voluntary disclosure options, prepare your voluntary disclosure package (including all legal documents and tax forms) and rigorously defend your interests during your negotiations with the IRS.
Contact Us Now to schedule a Confidential Consultation as soon as possible.

### Minnesota Tax Attorneys: Corporate Deadlines on March 17, 2014
Minnesota tax attorneys and attorneys in other states warn their clients that there are two important IRS deadlines next Monday, March 17, 2014.
First, corporate income tax returns are due for corporations with fiscal year ending on December 31, 2013. Normally, the deadline would be on March 15, but because this date falls on Saturday, the deadline in 2014 is March 17.
If you are not ready to file corporate income tax return, you can request an extension using Form 7004 for an additional six months until September 15, 2014. Note, if you file an extension, you still must pay the corporate taxes due by March 17, 2014 (in such a case, Minnesota tax attorneys estimate the final tax liability of the corporation for 2013 and ask their corporate clients to pay the amount due with extension). As Minnesota tax attorneys advise, in most cases, EFTPS system should be used by the corporations to make such a payment.
Minnesota tax attorneys also warn about a second important deadline on March 17 ,2014. This deadline concerns the Subchapter S election for the corporations with tax years ending on December 31, 2013. The corporation can make such an election no later than two months and fifteen days after the beginning of the tax year in which the election is to take place. Again, since March 15 is Saturday, the deadline for this election is moved to March 17, 2014.
Whether your corporation may benefit from becoming an S-corporation is a question that depends on your particular facts. In such case, Minnesota tax attorneys weigh in multiple consideration, legal and tax, before giving an advice to their corporation clients.
Of course, corporations with fiscal years ending on a date other than December 31, 2013, have their own deadlines, but the rule behind calculating the deadlines in such cases are similar. Therefore, you should contact your Minnesota tax attorney to determine the exact due date of the income tax return of your corporation.

### Canada FATCA: Canada Agrees to Implement FATCA
On February 5, 2014, the U.S. Department of the Treasury announced that the United States signed an intergovernmental agreement (IGA) with Canada to implement the Foreign Account Tax Compliance Act (FATCA). Since Treasury last announced multiple IGA signings in mid-December 2013, agreements have also been signed with Italy and Mauritius, the latter of which also signed a new tax information exchange agreement.
Congress enacted FATCA in 2010 to target non-compliance by U.S. taxpayers using foreign accounts, and the provision has since become the global standard for promoting tax transparency. As of February 5, 2014, the United States had signed 22 IGAs and had 12 agreements in substance.  Canada FATCA Agreement is one of the most recent IGAs to be signed.
In general, FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of certain payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on U.S. account holders. Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA under U.S. Treasury Regulations or to implement FATCA by entering into one of two alternative Model IGAs with the United States.
Canada FATCA: Model 1 IGA Signed by Canada
Canada FATCA implementation agreement is classified as Model 1 IGA. Under the Canada FATCA implementation agreement, FFIs will report the information required under FATCA about U.S. accounts to Canada Revenue Agency (“CRA”) , which in turn will report the information (as required by the Canada FATCA IGA) to the IRS.
Canada FATCA: US Taxpayers with Undisclosed Canadian Bank and Financial Accounts Are in Danger
What do these Canada FATCA developments mean for US taxpayers with undisclosed Canadian Bank and Financial Accounts? It means that all of these accounts are likely to be disclosed by the Canadian banks to the IRS, and these taxpayers have very little time to act.
If the IRS finds out about these undisclosed accounts, these U.S. taxpayers may face draconian willful civil and even criminal FBAR penalties.
This means that the owners of undisclosed Canadian accounts should consult an international tax expert in undisclosed foreign accounts as soon as possible.
Contact Sherayzen Law Office for Professional Help with the Voluntary Disclosure of Your Canadian Bank and Financial Accounts
If you have undisclosed financial accounts in Canada, contact Sherayzen Law Office as soon as possible to schedule a consultation. Our law firm has experienced expertise in voluntary disclosure of undisclosed foreign accounts and foreign assets. We have helped U.S. taxpayers around the world to bring themselves back into US tax compliance, while minimizing their tax and FBAR penalty exposure. Call or email us NOW!

### OVDP International Tax Lawyer: Swiss Cantonal Banks Enter US Program for Banks
As an OVDP International Tax Lawyer, I continue to point out the centrality of the current U.S. Department of Justice (“DOJ”) The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) to the global international tax compliance efforts of the United States. As previous explained, the Program basically operates as a voluntary disclosure program for Swiss banks, similar to the US Internal Revenue Service’s Offshore Voluntary Disclosure Program (“OVDP”) for U.S. taxpayers holding undisclosed offshore accounts. The DOJ promises that, in return for providing disclosure of the accounts held by U.S. taxpayers and, in some case, paying various penalties, the qualifying Swiss banks can avoid U.S. criminal prosecution.
Cantonal Swiss Banks deserve a special attention from U.S. taxpayers precisely because they tend to be smaller, more involved in local life and (prior to the Program) would have been least likely to be concerned with the U.S. tax compliance. Yet, as it is explained below, these Swiss banks are actively participating in the Program. U.S taxpayers with undisclosed accounts in Switzerland are now faced with an even more immediate impact on their U.S. tax compliance. It is very important that they seek advice from an experienced OVDP International Tax Lawyer found at Sherayzen Law Office.
OVDP International Tax Lawyer: Switzerland Cantonal Banks Enter the Program
According to recent news reports, half of Switzerland’s publicly-backed cantonal banks (which are either majority or entirely-owned by the Swiss cantons) have announced they will join the Program. In general, many of these banks are protected by a full state guarantee (each respective canton has a subsidiary responsibility its bank’s liabilities). Switzerland has twenty-four cantonal banks in total, serving Switzerland’s twenty-six cantons. As of the end of 2013, the following cantonal banks have stated they will enter the Program:
Aargau (Aargauische Kantonalbank) (AKB)Appenzell (Appenzeller Kantonalbank) (APPKB)Geneva (Banque Cantonale de Geneve (BCGE)Glarus (Glarner Kantonalbank) (GLKB)Graubünden (Graubundner Kantonalbank) (GKB)Lucerne (Luzerner Kantonalbank) (LUKB)Nidwalden (Nidwaldner Kantonabank) (NWKB)Obwalden (Obwaldner Kantonalbank (OWKB)Schwyz (Schwyzer Kantonalbank) (SZKB)St. Gallen (St. Galler Kantonalbank) (SGKB), along with its subsidiaries Hyposwiss Privatbank Zurich AG and Hyposwiss Private Bank Geneve SA)Vaud (Banque Cantonale Vaudoise (BCV), along with its subsidiary Piquet Galland & Cie SA)Zug (Zuger Kantonalbank) (ZugerKB)
At least eight of twelve cantonal banks have opted to apply under “Category 2” for Swiss banks likely to accounts held by US persons (see here for more information about this category), which could result in substantial fines, but absolve bank officials from criminal liabilities. Zuger Kantonalbank, for example, stated that it would apply under this category even though it claimed it did not actively seek US customers.
As of the end of 2013, four cantonal banks stated that will enroll in the Program under Category 4 for essentially local Swiss banks that are unlikely to have assets consisting of undeclared U.S.-taxpayer accounts. Swiss banks applying under Category 3 or 4 have a limited time available between July-October, 2014 in which to notify the US as to whether they will enter the Program.
OVDP International Tax Lawyer: Two Cantonal Banks Excluded from the Program
The US Department of Justice (DOJ) previously launched investigations against two other Swiss cantonal banks, such as Basler Kantonalbank (Basel) and Zürcher Kantonalbank (Zurich). These banks are classified as Category 1 banks and will not be allowed to enroll in the Program.
Contact Sherayzen Law Office for Legal Help with Undisclosed Swiss Accounts
U.S. taxpayers who either hold or previously held undisclosed bank accounts at any of the Swiss cantonal banks eligible for enrollment in the Program, or any bank already under investigation, 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. At Sherayzen Law Office, Ltd., we can help with your all of your voluntary disclosure issues.

### Foreign Partnership Tax Attorneys: Filing Form 8865 Schedule O (Part I)
Foreign Partnership Tax Attorneys should point out to their clients that Form 8865 should be used by US taxpayers to report the information required under IRC section 6038 (reporting regarding controlled foreign partnerships), section 6038B (reporting of transfers made to foreign partnerships), and/or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests).
This article will explain the basics of Part I (“Transfers Reportable Under Section 6038B”) for Schedule O- “Transfer of Property to a Foreign Partnership”, an additional form submitted with Form 8865 that must be completed by certain categories of taxpayers. This article is not intended to convey tax or legal advice. US-International partnership taxation can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
Foreign Partnership Tax Attorneys: Who Must File Schedule O?
Schedule O is typically required to be filed by Category 3 filers under the Form 8865 instructions. In general, Category 3 filers are US persons who contributed property during their tax year to a foreign partnership in exchange for a partnership interest in the partnership (a section 721 transfer), if such persons either owned (directly or constructively) at least a 10% interest in the foreign partnership immediately after the contribution, or if value of the property contributed, when added to the value of any other property contributed to the partnership by such persons (including related persons), during the 12-month period ending on the date of the contribution is greater than $100,000.
Note, this is a general summary of Category 3 filers, and does not include all possibilities. It is very important to consult a foreign partnership tax attorney for help. Please see the instructions or contact Sherayzen Law Office for further details.
Foreign Partnership Tax Attorneys: Schedule O, Part I (“Transfers Reportable Under Section 6038B”)
Part I of Schedule O is used to report the contribution of property to a foreign partnership. In column (a), taxpayers must fill out the date of the property transfer (and if the transfer consisted of multiple transactions over a number of dates, the date the transfer was completed, would be entered). In Column (b), taxpayers list the number of items of property contributed, and in column (c), the fair market value of the property transferred, as of the date of the transfer, must be specified. Column (d) needs to be completed to detail the contributed property’s adjusted basis as of the date of transfer.
If appreciated property was contributed by a taxpayer, column (e) must be filled out, and the method (traditional, traditional with curative allocations, or remedial) used by the foreign partnership to make section 704(c) allocations with respect to each item of property must be specified (see Regulations section 1.704-3(b), (c), and (d) for more information). Also note that the instructions require that if appreciated property or intangible property is contributed, taxpayers must, “[P]rovide the information required in columns (a) through (g) separately with respect to each item of property transferred (except to the extent you are allowed to aggregate the property under Regulations sections 1.704-3(e)(2), (3), and (4)).” If gain was recognized by the taxpayer on the contribution of property, then column (f) must be completed. In Column (g), taxpayers need to state their percentage interest in the foreign partnership immediately after the property transfer (see the instructions for further information about specific types of percentage interest).
Finally, taxpayers may need to provide supplemental information, if required. Further, if property was contributed to a foreign partnership as part of a broader transaction, information about the transaction should be described.
Contact Sherayzen Law Office for Help With Foreign Partnership Compliance
If you have an ownership interest in a foreign partnership, please contact Sherayzen Law Office for help. Our experienced foreign partnership tax law firm will thoroughly review the facts and circumstances of your case, properly prepare all of the required tax compliance documents and offer further planning with respect to U.S. taxes.

### New Deduction Phase-outs for 2013 Tax Returns
Upper-income US taxpayers should be aware that new deduction phase-out IRS rules in effect for 2013 tax returns to be filed in 2014 may increase their tax liabilities or reduce refunds. Two new important changes for high-earning individuals or couples are the new itemized deduction phase-outs and personal and dependent exemption deduction phase-outs. Because of these changes in the deduction phase-out rules, along with other new IRS rules that we have covered in previous articles, the necessity for proper tax planning will only increase in future years.
This article will briefly explain the changes in the deduction phase-out 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.
New Itemized Deduction Phase-Out Changes
Under the new US tax rules, the amount of itemized deductions that high-earning individuals or couples may take on Form 1040 is subject to a phase-out limitation. Specifically, allowable itemized deductions will be reduced by 3% of the amount of adjusted gross income (AGI) above the certain income thresholds (however, this reduction will not exceed 80% of the original total amount of a taxpayer’s itemized deductions).
The income thresholds are the following: $250,000 for single individuals, $300,000 for married filing jointly couples, $150,000 for married filing separately couples, and $275,000 for heads of households. As an example, consider a married couple filing jointly with AGI of $500,000, and $50,000 of original itemized deductions for Schedule A. Because their AGI is $200,000 over the income threshold, their allowable itemized deductions will be reduced by 3% of the excess ($200,000 multiplied by 3%, equaling $6,000). Thus, their allowable itemized deductions will be reduced to $44,000.
New Personal and Dependent Exemption Deduction Phase-Out Changes
While under the general IRS rule, the amount that taxpayers may deduct for each applicable exemption increased from 2012 (at $3,800) to 2013 (now $3,900), certain taxpayers may lose some or all of the benefit of their exemptions if their AGI exceeds certain thresholds under the new Personal Exemption Phase-out (PEP). Under this rule, the dollar amount of each personal exemption must be reduced from its original value by 2 percent for each $2,500 or part of $2,500 ($1,250 for married filing separately) that AGI is above the above specified income thresholds.
For 2013 tax year returns, the phase-out starts at the following amounts: $250,000 for single individuals, $300,000 for married filing-jointly couples and qualifying widowers, $150,000 for married filing separately returns, and $275,000 for heads of households. If taxpayer’s AGI exceeds these applicable amounts by more than $122,500 ($61,250 for married filing separately returns), their deductions for exemptions amount will be reduced to zero.
Contact Sherayzen Law Office for Help With Your Tax and Estate Planning
Combined with the new 3.8% Medicare surtax on investment income and the new 0.9% Medicare surtax on salaries and self-employment income earned by certain high-earning individuals, and the increased threshold amount for Schedule A itemized medical expense deductions, the new phase-out rules detailed in this article will dramatically impact many taxpayers. Professional tax planning may help lower your future tax liabilities.
This is why you need 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.

### Official Treasury Currency Conversion Rates of December 31, 2008
This post describes the Official 2008 FBAR Conversion Rates that should be used by U.S. taxpayers engaged in a voluntary disclosure of foreign financial accounts and filing late FBARs for 2008.  Every year, the U.S. Department of Treasure publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates”); I will refer to the “FBAR Conversion Rates”.   The schedule table of these rates for each year is used to prepare an FBAR for the corresponding year.
The latest  (October, 2013) FBAR instructions require the use of Treasury’s Financial Management Service rates, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:
In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
For this reason, the international tax attorneys take their time to compile these rates with all updates. For your convenience, Sherayzen Law Office provides a table of the official  2008 FBAR Conversion Rates below (keep in mind, you still need to refer to the official website for any updates).
OFFICIAL 2008 FBAR CONVERSION RATES
COUNTRY-CURRENCY
F.C. TO $1.00
AFGHANISTAN - AFGHANI
47.0100
ALBANIA - LEK
91.0800
ALGERIA - DINAR
69.8740
ANGOLA - KWANZA
75.0000
ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR
2.7000
ARGENTINA-PESO
3.4530
ARMENIA - DRAM
307.0000
AUSTRALIA - DOLLAR
1.3910
AUSTRIA - EURO
0.7310
AZERBAIJAN - MANAT
0.8200
BAHAMAS - DOLLAR
1.0000
BAHRAIN - DINAR
0.3770
BANGLADESH - TAKA
68.0000
BARBADOS - DOLLAR
2.0200
BELARUS - RUBLE
2657.0000
BELGIUM-EURO
0.7310
BELIZE - DOLLAR
2.0000
BENIN - CFA FRANC
479.5000
BERMUDA - DOLLAR
1.0000
BOLIVIA - BOLIVIANO
6.9400
BOSNIA-HERCEGOVINA MARKA
1.4300
BOTSWANA - PULA
7.5470
BRAZIL - REAL
2.2310
BRUNEI - DOLLAR
1.4720
BULGARIA - LEV
1.4300
BURKINA FASO - CFA FRANC
479.5000
BURMA - KYAT
450.0000
BURUNDI - FRANC
1200.0000
CAMBODIA (KHMER) - RIEL
4077.0000
CAMEROON - CFA FRANC
479.5000
CANADA - DOLLAR
1.1910
CAPE VERDE - ESCUDO
79.8560
CENTRAL AFRICAN REPUBLIC - CFA FRANC
479.5000
CHAD - CFA FRANC
479.5000
CHILE - PESO
630.5000
CHINA - RENMINBI
6.8330
COLOMBIA - PESO
2213.9000
COMOROS - FRANC
361.3500
CONGO - CFA FRANC
479.5000
COSTA RICA - COLON
557.7000
COTE D'IVOIRE - CFA FRANC
479.5000
CROATIA - KUNA
5.2000
CUBA-PESO
0.9260
CYPRUS - POUND
0.3980
CZECH - KORUNA
18.7830
DEM REP OF CONGO-CONGOLESE FRANC
655.0000
DENMARK - KRONE
5.4480
DJIBOUTI - FRANC
177.0000
DOMINICAN REPUBLIC - PESO
35.3200
EAST TIMOR-DILI
1.0000
ECAUDOR-DOLARES
1.0000
EGYPT - POUND
5.4700
EL SALVADOR-DOLARES
1.0000
EQUATORIAL GUINEA - CFA FRANC
479.5000
ERITREA - NAKFA
15.0000
ESTONIA - KROON
11.4400
ETHIOPIA - BIRR
10.4500
EURO ZONE - EURO
0.7310
FIJI - DOLLAR
1.7190
FINLAND-EURO
0.7310
FRANCE-EURO
0.7310
GABON - CFA FRANC
479.5000
GAMBIA - DALASI
27.0000
GEORGIA-LARI
1.6700
GERMANY FRG-EURO
0.7310
GHANA - CEDI
1.2760
GREECE-EURO
0.7310
GRENADA - EAST CARIBBEAN DOLLAR
2.7000
GUATEMALA-QUENTZEL
7.8100
GUINEA - FRANC
4536.0000
GUINEA BISSAU - CFA FRANC
479.5000
GUYANA - DOLLAR
200.3400
HAITI - GOURDE
39.2500
HONDURAS - LEMPIRA
18.9000
HONG KONG - DOLLAR
7.7510
HUNGARY - FORINT
195.7500
ICELAND - KRONA
123.1700
INDIA - RUPEE
48.2000
INDONESIA - RUPIAH
10700.0000
IRAN - RIAL
8229.0000
IRAQ - DINAR
1140.0000
IRELAND-EURO
0.7310
ISRAEL-SHEKEL
3.8780
ITALY-EURO
0.7310
JAMAICA - DOLLAR
80.5000
JAPAN - YEN
92.6500
JERESALEM-SHEKEL
3.8780
JORDAN - DINAR
0.7080
KAZAKHSTAN - TENGE
120.9000
KENYA - SHILLING
78.1500
KOREA - WON
1292.3000
KUWAIT - DINAR
0.2820
KYRGYZSTAN - SOM
39.4000
LAOS - KIP
8468.0000
LATVIA - LATS
0.5160
LEBANON - POUND
1500.0000
LESOTHO - SOUTH AFRICAN RAND
9.4660
LIBERIA - U.S. DOLLAR
49.0000
LIBYA-DINAR
1.2860
LITHUANIA - LITAS
2.5230
LUXEMBOURG-EURO
0.7310
MACAO - MOP
8.0000
MACEDONIA FYROM - DENAR
43.0500
MADAGASCAR-ARIA
1897.4100
MALAWI - KWACHA
142.0060
MALAYSIA - RINGGIT
3.4980
MALI - CFA FRANC
479.5000
MALTA - LIRA
0.2940
MARSHALLS ISLANDS - DOLLAR
1.0000
MARTINIQUE-EURO
0.7310
MAURITANIA - OUGUIYA
260.0000
MAURITIUS - RUPEE
31.7500
MEXICO - NEW PESO
13.4270
MICRONESIA - DOLLAR
1.0000
MOLDOVA - LEU
10.3300
MONGOLIA - TUGRIK
1295.0200
MONTENEGRO-EURO
0.7310
MOROCCO - DIRHAM
8.3830
MOZAMBIQUE - METICAL
25.2400
NAMIBIA-DOLLAR
9.4660
NEPAL - RUPEE
77.6500
NETHERLANDS-EURO
0.7310
NETHERLANDS ANTILLES - GUILDER
1.7800
NEW ZEALAND - DOLLAR
1.6690
NICARAGUA - CORDOBA
19.8400
NIGER - CFA FRANC
479.5000
NIGERIA - NAIRA
138.9000
NORWAY - KRONE
6.8720
OMAN - RIAL
0.3850
PAKISTAN - RUPEE
77.7000
PALAU-DOLLAR
1.0000
PANAMA - BALBOA
1.0000
PAPUA NEW GUINEA - KINA
2.5450
PARAGUAY - GUARANI
4880.0000
PERU - INTI
0.0000
PERU - NUEVO SOL
3.1400
PHILIPPINES - PESO
46.3400
POLAND - ZLOTY
2.9340
PORTUGAL-EURO
0.7310
QATAR - RIYAL
3.6410
ROMANIA - LEU
3.0100
RUSSIA-RUBLE
29.1450
RWANDA - FRANC
558.4000
SAO TOME & PRINCIPE - DOBRAS
15841.7530
SAUDI ARABIA - RIYAL
3.7500
SENEGAL - CFA FRANC
479.5000
SERBIA-DINAR
67.2200
SEYCHELLES - RUPEE
15.8360
SIERRA LEONE - LEONE
3000.0000
SINGAPORE - DOLLAR
1.4710
SLOVAK REPUBLIC - KORUNA
21.5460
SLOVENIA-EURO
0.7310
SOLOMON ISLANDS - DOLLAR
7.7520
SOUTH AFRICA - RAND
9.4660
SPAIN-EURO
0.7310
SRI LANKA - RUPEE
113.7300
ST LUCIA - EC DOLLAR
2.7000
SUDAN-POUND
2.1720
SURINAME - GUILDER
2.8000
SWAZILAND - LILANGENI
9.4660
SWEDEN - KRONA
7.7500
SWITZERLAND - FRANC
1.0980
SYRIA - POUND
46.5000
TAIWAN - DOLLAR
32.9650
TAJIKISTAN-SOMONI
3.4800
TANZANIA - SHILLING
1334.0000
THAILAND - BAHT
34.8200
TOGO - CFA FRANC
479.5000
TONGA - PA'ANGA
2.0480
TRINIDAD & TOBAGO - DOLLAR
6.2400
TUNISIA - DINAR
1.3320
TURKEY-LIRA
1.5330
TURKMENISTAN - MANAT
14215.0000
UGANDA - SHILLING
1935.0000
UKRAINE - HRYVNIA
8.0000
UNITED ARAB EMIRATES - DIRHAM
3.6730
UNITED KINGDOM - POUND STERLING
0.6570
URUGUAY - NEW PESO
24.2500
UZBEKISTAN - SOM
1399.0000
VANUATU - VATU
108.5000
VENEZUELA - BOLIVAR
2150.0000
VENZEULA - NEW BOLIVAR
2.1500
VIETNAM - DONG
17426.0000
WESTERN SAMOA - TALA
2.7610
YEMEN - RIAL
199.0000
YUGOSLAVIA - DINAR
67.2200
ZAMBIA-KWACHA
4880.0000
ZIMBABWE - DOLLAR
6000000000.0000

### Official Treasury Currency Conversion Rates of December 31, 2009
These Official Treasury 2009 FBAR Conversion Rates are posted here due to the fact that U.S. taxpayers who are doing voluntary disclosure for prior years with respect to delinquent FBARs are required to use these rates to prepare the FBARs for 2009.  Every year, the U.S. Department of Treasure publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates”); I will refer to the “FBAR Conversion Rates”.
The latest (October 2013) FBAR instructions require the use of Treasury’s Financial Management Service rates, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:
In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
For this reason, the international tax attorneys take their time to compile these rates with all updates. For your convenience, Sherayzen Law Office provides a table of the official  2009 FBAR Conversion Rates below (keep in mind, you still need to refer to the official website for any updates).
COUNTRY-CURRENCY
F.C. TO $1.00
AFGHANISTAN - AFGHANI
47.9200
ALBANIA - LEK
95.4300
ALGERIA - DINAR
70.3330
ANGOLA - KWANZA
75.0000
ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR
2.7000
ARGENTINA-PESO
3.7980
ARMENIA - DRAM
375.0000
AUSTRALIA - DOLLAR
1.1110
AUSTRIA - EURO
0.6950
AZERBAIJAN - MANAT
0.8200
BAHAMAS - DOLLAR
1.0000
BAHRAIN - DINAR
0.3770
BANGLADESH - TAKA
68.0000
BARBADOS - DOLLAR
2.0200
BELARUS - RUBLE
2880.0000
BELGIUM-EURO
0.6950
BELIZE - DOLLAR
2.0000
BENIN - CFA FRANC
454.8900
BERMUDA - DOLLAR
1.0000
BOLIVIA - BOLIVIANO
6.9700
BOSNIA-HERCEGOVINA MARKA
1.3590
BOTSWANA - PULA
6.6530
BRAZIL - REAL
1.7400
BRUNEI - DOLLAR
1.4010
BULGARIA - LEV
1.3580
BURKINA FASO - CFA FRANC
454.8900
BURMA - KYAT
450.0000
BURUNDI - FRANC
1200.0000
CAMBODIA (KHMER) - RIEL
4163.0000
CAMEROON - CFA FRANC
454.8900
CANADA - DOLLAR
1.0510
CAPE VERDE - ESCUDO
74.7270
CAYMAN ISLANDS - DOLLAR
0.8200
CENTRAL AFRICAN REPUBLIC - CFA FRANC
454.8900
CHAD - CFA FRANC
454.8900
CHILE - PESO
507.0000
CHINA - RENMINBI
6.8260
COLOMBIA - PESO
2046.5000
COMOROS - FRANC
361.3500
CONGO - CFA FRANC
454.8900
COSTA RICA - COLON
553.7000
COTE D'IVOIRE - CFA FRANC
454.8900
CROATIA - KUNA
5.0000
CUBA-PESO
0.9260
CYPRUS-EURO
0.6950
CZECH - KORUNA
18.1190
DEM REP OF CONGO-CONGOLESE FRANC
900.0000
DENMARK - KRONE
5.1670
DJIBOUTI - FRANC
177.0000
DOMINICAN REPUBLIC - PESO
36.1000
EAST TIMOR-DILI
1.0000
ECAUDOR-DOLARES
1.0000
EGYPT - POUND
5.4840
EL SALVADOR-DOLARES
1.0000
EQUATORIAL GUINEA - CFA FRANC
454.8900
ERITREA - NAKFA
15.0000
ESTONIA - KROON
10.8650
ETHIOPIA - BIRR
12.6400
EURO ZONE - EURO
0.6950
FIJI - DOLLAR
1.9250
FINLAND-EURO
0.6950
FRANCE-EURO
0.6950
GABON - CFA FRANC
454.8900
GAMBIA - DALASI
27.0000
GEORGIA-LARI
1.6900
GERMANY FRG-EURO
0.6950
GHANA - CEDI
1.4290
GREECE-EURO
0.6950
GRENADA - EAST CARIBBEAN DOLLAR
2.7000
GUATEMALA-QUENTZEL
8.3320
GUINEA -FRANC
4924.0000
GUINEA BISSAU - CFA FRANC
454.8900
GUYANA - DOLLAR
201.0000
HAITI - GOURDE
40.7500
HONDURAS - LEMPIRA
18.9000
HONG KONG - DOLLAR
7.7540
HUNGARY - FORINT
187.7700
ICELAND - KRONA
124.4500
INDIA - RUPEE
46.4000
INDONESIA - RUPIAH
9350.0000
IRAN - RIAL
8229.0000
IRAQ - DINAR
1150.0000
IRELAND-EURO
0.6950
ISRAEL-SHEKEL
3.7800
ITALY-EURO
0.6950
JAMAICA - DOLLAR
89.3000
JAPAN - YEN
92.3900
JERESALEM-SHEKEL
3.7800
JORDAN - DINAR
0.7080
KAZAKHSTAN - TENGE
148.4000
KENYA - SHILLING
75.8500
KOREA - WON
1163.6500
KUWAIT - DINAR
0.2860
KYRGYZSTAN - SOM
44.0000
LAOS - KIP
8476.0000
LATVIA - LATS
0.4920
LEBANON - POUND
1500.0000
LESOTHO - SOUTH AFRICAN RAND
7.3690
LIBERIA - U.S. DOLLAR
49.0000
LIBYA-DINAR
1.2340
LITHUANIA - LITAS
2.3980
LUXEMBOURG-EURO
0.6950
MACAO - MOP
8.0000
MACEDONIA FYROM - DENAR
42.3000
MADAGASCAR-ARIA
1954.6400
MALAWI - KWACHA
146.0000
MALAYSIA - RINGGIT
3.4220
MALI - CFA FRANC
454.8900
MALTA-EURO
0.6950
MARSHALLS ISLANDS - DOLLAR
1.0000
MARTINIQUE-EURO
0.6950
MAURITANIA - OUGUIYA
270.0000
MAURITIUS - RUPEE
29.0000
MEXICO - NEW PESO
13.0990
MICRONESIA - DOLLAR
1.0000
MOLDOVA - LEU
12.1850
MONGOLIA - TUGRIK
1435.8800
MONTENEGRO-EURO
0.6950
MOROCCO - DIRHAM
7.9030
MOZAMBIQUE - METICAL
29.2800
NAMIBIA-DOLLAR
7.3690
NEPAL - RUPEE
74.4000
NETHERLANDS-EURO
0.6950
NETHERLANDS ANTILLES - GUILDER
1.7800
NEW ZEALAND - DOLLAR
1.3740
NICARAGUA - CORDOBA
20.8400
NIGER - CFA FRANC
454.8900
NIGERIA - NAIRA
149.4500
NORWAY - KRONE
5.7640
OMAN - RIAL
0.3850
PAKISTAN - RUPEE
84.2000
PALAU-DOLLAR
1.0000
PANAMA - BALBOA
1.0000
PAPUA NEW GUINEA - KINA
2.5230
PARAGUAY - GUARANI
4650.0000
PERU - INTI
0.0000
PERU - NUEVO SOL
2.8900
PHILIPPINES - PESO
46.4500
POLAND - ZLOTY
2.8500
PORTUGAL-EURO
0.6950
QATAR - RIYAL
3.6420
ROMANIA - LEU
2.9420
RUSSIA-RUBLE
30.3110
RWANDA - FRANC
569.4700
SAO TOME & PRINCIPE - DOBRAS
16539.2150
SAUDI ARABIA - RIYAL
3.7500
SENEGAL - CFA FRANC
454.8900
SERBIA-DINAR
66.7300
SEYCHELLES - RUPEE
10.9180
SIERRA LEONE - LEONE
3930.0000
SINGAPORE - DOLLAR
1.4010
SLOVAK-EURO
0.6950
SLOVENIA-EURO
0.6950
SOLOMON ISLANDS - DOLLAR
7.3580
SOUTH AFRICA - RAND
7.3690
SPAIN-EURO
0.6950
SRI LANKA - RUPEE
114.3500
ST LUCIA - EC DOLLAR
2.7000
SUDAN-POUND
2.3140
SURINAME - GUILDER
2.8000
SWAZILAND - LILANGENI
7.3690
SWEDEN - KRONA
7.1160
SWITZERLAND - FRANC
1.0310
SYRIA - POUND
45.5000
TAIWAN - DOLLAR
31.9500
TAJIKISTAN-SOMONI
4.3800
TANZANIA - SHILLING
1335.0000
THAILAND - BAHT
33.3000
TOGO - CFA FRANC
454.8900
TONGA - PA'ANGA
1.8760
TRINIDAD & TOBAGO - DOLLAR
6.3300
TUNISIA - DINAR
1.3180
TURKEY-LIRA
1.4930
TURKMENISTAN - MANAT
2.8430
UGANDA - SHILLING
1895.0000
UKRAINE - HRYVNIA
8.0300
UNITED ARAB EMIRATES - DIRHAM
3.6730
UNITED KINGDOM - POUND STERLING
0.6160
URUGUAY - NEW PESO
19.4500
UZBEKISTAN - SOM
1525.0000
VANUATU - VATU
96.0900
VENZEULA - NEW BOLIVAR
2.1500
VIETNAM - DONG
18469.0000
WESTERN SAMOA - TALA
2.5190
YEMEN - RIAL
206.0000
YUGOSLAVIA - DINAR
66.7300
ZAMBIA-KWACHA
4640.0000
ZIMBABWE - DOLLAR
0.0000

### Official Treasury Currency Conversion Rates of December 31, 2013 - 2013 FBAR Conversion Rates
Every year, the U.S. Department of Treasure publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates”); I will refer to the "FBAR Conversion Rates". Recently, the Treasury Department published the FBAR Conversion rates for December 31, 2013. While there are other good reasons for the existence of these rates, the 2013 FBAR Conversion Rates are especially important for persons who are required to file the FBARs.
The latest (October 2013) FBAR instructions require the use of Treasury’s Financial Management Service rates, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:
In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
For this reason, the international tax attorneys take their time to compile these rates with all updates. For your convenience, Sherayzen Law Office provides a table of the official  2013 FBAR Conversion Rates below (keep in mind, you still need to refer to the official website for any updates).
Country - Currency
Foreign Currency to $1.00
AFGHANISTAN - AFGHANI
56.0000
ALBANIA - LEK
101.7000
ALGERIA - DINAR
78.0250
ANGOLA - KWANZA
95.0000
ANTIGUA - BARBUDA - E. CARIBBEAN DOLLAR
2.7000
ARGENTINA - PESO
6.5180
ARMENIA - DRAM
404.0000
AUSTRALIA - DOLLAR
1.1200
AUSTRIA - EURO
0.7260
AZERBAIJAN - NEW MANAT
0.8000
BAHAMAS - DOLLAR
1.0000
BAHRAIN - DINAR
0.3770
BANGLADESH - TAKA
79.0000
BARBADOS - DOLLAR
2.0200
BELARUS - RUBLE
9510.0000
BELGIUM - EURO
0.7260
BELIZE - DOLLAR
2.0000
BENIN - CFA FRANC
475.0000
BERMUDA - DOLLAR
1.0000
BOLIVIA - BOLIVIANO
6.8600
BOSNIA-HERCEGOVINA MARKA
1.4210
BOTSWANA - PULA
8.7490
BRAZIL - REAL
2.3620
BRUNEI - DOLLAR
1.2540
BULGARIA - LEV
1.4210
BURKINA FASO - CFA FRANC
475.0000
BURMA - KYAT
980.0000
BURUNDI - FRANC
1540.0000
CAMBODIA (KHMER) - RIEL
4103.0000
CAMEROON - CFA FRANC
476.5400
CANADA - DOLLAR
1.0640
CAPE VERDE - ESCUDO
80.3030
CAYMAN ISLANDS - DOLLAR
0.8200
CENTRAL AFRICAN REPUBLIC - CFA FRANC
475.0000
CHAD - CFA FRANC
476.5400
CHILE - PESO
525.3200
CHINA - RENMINBI
6.0540
COLOMBIA - PESO
1924.9800
COMOROS - FRANC
361.3500
CONGO - CFA FRANC
475.0000
CONGO, DEM. REP - CONGOLESE FRANC
920.0000
COSTA RICA - COLON
495.2000
COTE D'IVOIRE - CFA FRANC
475.0000
CROATIA - KUNA
5.4600
CUBA-PESO
1.0000
CYPRUS - EURO
0.7260
CZECH - KORUNA
19.4570
DENMARK - KRONE
5.4190
DJIBOUTI - FRANC
177.0000
DOMINICAN REPUBLIC - PESO
42.6500
ECAUDOR - DOLARES
1.0000
EGYPT - POUND
6.9480
EL SALVADOR - DOLARES
1.0000
EQUATORIAL GUINEA - CFA FRANC
476.5400
ERITREA - NAKFA
15.0000
ESTONIA - EURO
0.7260
ETHIOPIA - BIRR
19.0600
EURO ZONE - EURO
0.7260
FIJI - DOLLAR
1.8640
FINLAND-EURO
0.7260
FRANCE-EURO
0.7260
GABON - CFA FRANC
476.5400
GAMBIA - DALASI
39.0000
GEORGIA - LARI
1.7400
GERMANY FRG - EURO
0.7260
GHANA - CEDI
2.3500
GREECE - EURO
0.7260
GRENADA - EAST CARIBBEAN DOLLAR
2.7000
GUATEMALA - QUENTZAL
7.8410
GUINEA - FRANC
7006.0000
GUINEA BISSAU - CFA FRANC
475.0000
GUYANA - DOLLAR
202.0000
HAITI - GOURDE
43.5500
HONDURAS - LEMPIRA
20.4200
HONG KONG - DOLLAR
7.7530
HUNGARY - FORINT
215.7300
ICELAND - KRONA
115.0300
INDIA - RUPEE
61.5000
INDONESIA - RUPIAH
12100.0000
IRAN - RIAL
8229.0000
IRAQ - DINAR
1166.0000
IRELAND-EURO
0.7260
ISRAEL-SHEKEL
3.4690
ITALY-EURO
0.7260
JAMAICA - DOLLAR
104.0000
JAPAN - YEN
105.0100
JERUSALEM-SHEKEL
3.4690
JORDAN - DINAR
0.7080
KAZAKHSTAN - TENGE
153.6000
KENYA - SHILLING
86.4000
KOREA - WON
1055.2500
KUWAIT - DINAR
0.2820
KYRGYZSTAN - SOM
49.4000
LAOS - KIP
8006.0000
LATVIA - LATS
0.5080
LEBANON - POUND
1500.0000
LESOTHO - SOUTH AFRICAN RAND
10.4800
LIBERIA - U.S. DOLLAR
79.0100
LIBYA-DINAR
1.2290
LITHUANIA - LITAS
2.5080
LUXEMBOURG-EURO
0.7260
MACAO - MOP
8.0000
MACEDONIA FYROM - DENAR
>43.4000
MADAGASCAR-ARIA
2236.0100
MALAWI - KWACHA
448.0000
MALAYSIA - RINGGIT
3.2770
MALI - CFA FRANC
475.0000
MALTA-EURO
0.7260
MARSHALLS ISLANDS - DOLLAR
1.0000
MARTINIQUE-EURO
0.7260
MAURITANIA - OUGUIYA
295.0000
MAURITIUS - RUPEE
29.9500
MEXICO - NEW PESO
13.0890
MICRONESIA - DOLLAR
1.0000
MOLDOVA - LEU
12.8950
MONGOLIA - TUGRIK
1654.1000
MONTENEGRO-EURO
0.7260
MOROCCO - DIRHAM
8.1470
MOZAMBIQUE - METICAL
29.8000
NAMIBIA - DOLLAR
10.4800
NEPAL - RUPEE
98.8000
NETHERLANDS - EURO
0.7260
NETHERLANDS ANTILLES - GUILDER
1.7800
NEW ZEALAND - DOLLAR
1.2160
NICARAGUA - CORDOBA
25.3300
NIGER - CFA FRANC
475.0000
NIGERIA - NAIRA
159.7000
NORWAY - KRONE
6.0830
OMAN - RIAL
0.3850
PAKISTAN - RUPEE
105.1600
PALAU-DOLLAR
1.0000
PANAMA - BALBOA
1.0000
PAPUA NEW GUINEA - KINA
2.3530
PARAGUAY - GUARANI
4585.4400
PERU - NUEVO SOL
2.7900
PHILIPPINES - PESO
44.3800
POLAND - ZLOTY
3.0140
PORTUGAL-EURO
0.7260
QATAR - RIYAL
3.6410
ROMANIA - LEU
3.2500
RUSSIA - RUBLE
32.8640
RWANDA - FRANC
665.6900
SAO TOME & PRINCIPE - DOBRAS
17736.4360
SAUDI ARABIA - RIYAL
3.7500
SENEGAL - CFA FRANC
475.0000
SERBIA-DINAR
83.1300
SEYCHELLES - RUPEE
11.9420
SIERRA LEONE - LEONE
4340.0000
SINGAPORE - DOLLAR
1.2630
SLOVAK REPUBLIC - EURO
0.7260
SLOVENIA - EURO
0.7260
SOLOMON ISLANDS - DOLLAR
7.0320
SOUTH AFRICA - RAND
10.4800
SOUTH SUDANESE - POUND
3.0000
SPAIN - EURO
0.7260
SRI LANKA - RUPEE
130.7500
ST LUCIA - EC DOLLAR
2.7000
SUDAN - SUDANESE POUND
6.1000
SURINAME - GUILDER
3.3500
SWAZILAND - LILANGENI
10.4800
SWEDEN - KRONA
6.4140
SWITZERLAND - FRANC
0.8910
SYRIA - POUND
141.3700
TAIWAN - DOLLAR
29.8150
TAJIKISTAN - SOMONI
4.7700
TANZANIA - SHILLING
1585.0000
THAILAND - BAHT
32.7400
TIMOR - LESTE DILI
1.0000
TOGO - CFA FRANC
475.0000
TONGA - PA'ANGA
1.7420
TRINIDAD & TOBAGO - DOLLAR
6.3800
TUNISIA - DINAR
1.6430
TURKEY - LIRA
2.1360
TURKMENISTAN - MANAT
2.8430
UGANDA - SHILLING
2520.0000
UKRAINE - HRYVNIA
8.2300
UNITED ARAB EMIRATES - DIRHAM
3.6730
UNITED KINGDOM - POUND STERLING
0.6050
URUGUAY - PESO
21.1000
UZBEKISTAN - SOM
2237.0000
VANUATU - VATU
95.3600
VENEZUELA - BOLIVAR
6.3000
VIETNAM - DONG
21100.0000
WESTERN SAMOA - TALA
2.2590
YEMEN - RIAL
214.5000
ZAMBIA - NEW KWACHA
5.5000
ZAMBIA - KWACHA
5455.0000
ZIMBABWE - DOLLAR
1.0000

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

### FATCA Tax Lawyers: Six More Agreements to Implement FATCA
On December 19, 2013, the U.S. Department of the Treasury announced that the United States has signed bilateral agreements with six additional jurisdictions to implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). The six jurisdictions are: Malta, the Netherlands, The Islands of Bermuda, and three UK Crown Dependencies – Jersey, Guernsey, and the Isle of Man.
Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. With these most recent agreements, the United States has signed 18 FATCA intergovernmental agreements (IGAs), has 11 agreements in substance, and is engaged in related discussions with many other jurisdictions.
In general, FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of certain payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on U.S. account holders. Governments have the option of permitting their FFIs to enter into agreements directly with the IRS to comply with FATCA under U.S. Treasury Regulations or to implement FATCA by entering into one of two alternative Model IGAs with the United States.
FATCA Tax Lawyers: Model 1 IGAs Signed by Fix Jurisdictions
Malta, the Netherlands, Jersey, Guernsey, and the Isle of Man signed Model 1 IGAs. Under these agreements, FFIs will report the information required under FATCA about U.S. accounts to their home governments, which in turn will report the information to the IRS. These agreements are reciprocal, meaning that the United States will also provide similar tax information to these governments regarding individuals and entities from their jurisdictions with accounts in the United States.
In addition to these FATCA agreements, protocols to the existing tax information exchange agreements with Jersey, Guernsey, and the Isle of Man were also signed.
FATCA Tax Lawyers: Bermuda Signs Model 2 IGA
Unlike the other jurisdictions, Bermuda signed Model 2 IGA meaning that Bermuda will direct and legally enable FFIs in Bermuda to register with the IRS and report the information required by FATCA about consenting U.S. accounts directly to the IRS. This requirement is supplemented by government-to-government exchange of information regarding certain pre-existing non-consenting accounts on request.
FATCA Tax Lawyers: Tax Shelters Are No Longer Information Shelters
The fact that Bermuda, Jersey, Guernsey, and the Isle of Man (all of which are considered to be offshore havens) signed FATCA is a fact that is indicative of a general trend that I have emphasized since the appearance of FATCA – there are no reasonable safe havens for non-compliant U.S. taxpayers outside of few important jurisdictions, such as China. Even Russia has declared its intention to sign FATCA. More importantly, the jurisdictions that are generally regarded as tax shelter or low-tax jurisdictions are likely to allow the IRS to impose its will on their banks.
"FATCA continues to gather momentum as we work with partners worldwide to combat offshore tax evasion," said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. "This large number of signings in one week alone sends a strong signal to tax evaders everywhere: international support for FATCA is growing."
FATCA Tax Lawyers: Implications of Recent Agreements for Non-Compliant US Taxpayers
These developments continue to support the argument that non-compliant U.S. taxpayers worldwide need to urgently consider their options with respect to the voluntary disclosure of their foreign financial accounts and other foreign assets. Each new jurisdiction that signs FATCA is going to turn over the information about the non-compliant accounts to the IRS in one way or another. In such circumstances, procrastination with a voluntary disclosure may result in a dramatic reduction of available disclosure options and increase the chances of a criminal prosecution by the IRS.
Contact Sherayzen Law Office for Help with Your Voluntary Disclosure of Offshore Assets
If you have undisclosed foreign financial accounts or any other assets subject to U.S. reporting, contact Sherayzen Law Office. Our experienced international tax law firm will thoroughly analyze your case, review the available options and implement a customized plan of your voluntary disclosure (including the preparation of any required legal documents and tax forms).

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

### Assurance Vie Accounts, PFICs and FBARs
Most French citizens who come to the United States with Assurance Vie accounts are completely unaware of the serious implications that Assurance Vie may have with respect to their U.S. tax reporting requirements. What is even more problematic is that tax advisors in France and even United States are not even aware of how bad these consequences can be.
Assurance Vie and French Life Insurance Contracts
French life insurance contracts and Assurance Vie accounts are essentially investment vehicles with significant tax advantages under the French tax code. In general, in France, no income tax is levied on the Assurance Vie funds if they are not withdrawn and there are additional favorable tax treatment available in certain cases when the funds are withdrawn.
These contracts usually consist of a mix of bonds, stocks and mutual funds; in most cases, the contracts are not life contingent (if they are, then the analysis may become more complex). All of these investments are officially wrapped under the general designation of a life insurance contract under French law (but are not considered as such in the United States, because the U.S. definition of a “life insurance contract” is vastly different).
In France, the chief advantage of these Assurance Vie Accounts is that the earnings are allowed to remain in the account tax-free as long as these funds are not withdrawn. Even when they are withdrawn, additional advantages include the option that the owner of an Assurance Vie account has in terms of choosing the tax rate that will apply. Finally, Assurance Vie policies offer unique estate tax advantages under the French law, because these policies allow the amounts on the Assurance Vie accounts to transfer directly to the beneficiary without being included in the estate (subject to certain limitations, but even the excess amounts are likely to be taxed at an advantageous estate tax rate).
U.S. Treatment of Most Assurance Vie Policies That Include Mutual Funds – PFICs
Given these advantages under the French tax law, it is little wonder that Assurance Vie contracts are wildly popular among the French. However, what happens when a French national becomes a U.S. tax resident – i.e. how will the IRS treat Assurance Vie accounts?
In the United States, the treatment of the Assurance Vie accounts is vastly inferior and may be highly disadvantageous and extremely troublesome for the owners of the Assurance Vie policies. First of all, Assurance Vie accounts are taxable in the United States. Second, none of the tax advantages from French law pass to the U.S. law, including the estate tax treatment (which may be a complex question in itself).
Finally and most importantly, Assurance Vie policies usually consist of mutual funds which are treated as Passive Foreign Investment Companies (PFICs) under U.S. tax law. As such, the Assurance Vie policies may be subject to the most draconian tax treatment under the 1291 fund (default PFIC) rules, especially because the QEF treatment is usually not available and MTM treatment may result in additional taxes (assuming that the French owner of the Assurance Vie policy timely made the election – usually, this is not the case).
PFIC Definition
IRC Section 1297(a) defines a PFIC to mean any foreign corporation if: “(1) 75 percent or more of the gross income of such corporation for the taxable year is passive income, or (2) the average percentage of assets (as determined in accordance with subsection (e)) held by such corporation during the taxable year which produce passive income or which are held for the production of passive income is at least 50 percent.” If a US person is required to report PFIC income, the Form 8621, “Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund” will need to be filed for each PFIC held.
Unfavorable Tax Regime for Assurance Vie Accounts Under U.S. Tax Rules
With a few exceptions, it is most likely that an Assurance Vie account that is subject to PFIC rules will fall under the highly unfavorable rules of the default IRC Section 1291 PFIC rules.
In general, under such rules, US taxpayers receiving “excess distributions” will be subject to the special PFIC tax and interest regime the combined effect of which is likely to exceed the most unfavorable tax result possible under any other regular tax laws.
An excess distribution is defined by the IRS to mean the portion of a distribution received in the current year, “[T]hat is greater than 125% of the average distributions received in respect of such stock by the shareholder during the 3 preceding tax years (or, if shorter, the portion of the shareholder’s holding period before the current tax year). No part of a distribution received or deemed received during the first tax year of the shareholder’s holding period of the stock will be treated as an excess distribution.” (Conversely, the entire amount of any gain recognized on a disposition of PFIC shares will be treated as an excess distribution).
Thus, the PFIC tax regime is likely to overshadow whatever French tax benefits the owner of an Assurance Vie account may derive from holding this account. Moreover, the tax compliance costs associated with calculating PFICs may be very high.
Assurance Vie Accounts May Suffer From Severe Inability to Produce Proper PFIC Information
As if it were not enough, in addition to the prospect of facing the highest marginal tax rate with interest combined with high legal fees, the U.S. owners of an Assurance Vie account face one more difficult problem – a very limited ability to be able to produce the information required for proper PFIC calculations.
At the core of the problem is the fact that French banks are not required to keep the information that is necessary for proper PFIC calculations in the United States. My clients often encounter tremendous problems with trying to obtain the necessary information from French banks (especially since some of the information would be required for the years which are far beyond the recordkeeping requirements of many French banks) with respect to Assurance Vie PFICs.
FBAR and Form 8938 Compliance Requirements
In addition to PFIC compliance, it is important to remember that Assurance Vie accounts are financial accounts subject to reporting on FinCEN Form 114 (commonly known as FBAR and formerly associated with Form TD F 90-22.1) and FATCA Form 8938.
Contact Sherayzen Law Office for Help With Assurance Vie PFICs
If you have undisclosed Assurance Vie accounts, contact Sherayzen Law Office for professional expert help.

### PFIC Attorneys: UBS Swiss Accounts and PFICs
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### US-Switzerland Bank Program: Migros Bank, Bank Coop, Linth Bank, Berner Kantonalbank and Vontobel Holding
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.

### FBAR Penalties: Outrageous, Draconian but Real
If you have undisclosed foreign financial accounts that should have been reported on the Report of Foreign Bank and Financial Accounts ("FBAR"), you may be facing FBAR penalties. By far, the FBAR contains the most severe civil penalties and significant criminal penalties among all international tax forms. It is important to understand that these penalties, despite their apparently extreme nature, are real and you may be facing them.
FBAR Criminal Penalties
The two most common cases for criminal prosecution are willful failure to file an FBAR and willful filing a false FBAR, especially when combined with potential tax evasion. The criminal FBAR penalties in these cases may be up to the limit set in 31 U.S.C. § 5322. This means that, potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to a prison term of up to 10 years, criminal penalties of up to $500,000 or both.
FBAR Civil Penalties
In addition to criminal penalties, FBAR penalties include a rich arsenal of civil penalties. The exact penalties that a person may be facing will depend on that person's particular circumstances; these circumstances must be evaluated by an experienced international tax attorney.
In general, where the taxpayer willfully failed to file the FBAR, or destroyed or otherwise failed to maintain proper records of account, and the IRS learned about it (e.g. during an investigation), the taxpayer is likely to face the worst-case scenario with draconian penalties. The IRS may impose civil FBAR penalties of up to the greater of $100,000, or 50 percent of the value of the account at the time of the violation (in addition to the already discussed criminal FBAR penalties of up to $500,000, or 10 years of imprisonment, or both).
In certain circumstances, it is possible to mitigate the penalties, but this issue should be evaluated by an experienced international tax attorney. If mitigation is an option for you, then it may dramatically alter your calculation of willful penalties.
A less severe round of civil FBAR penalties may be imposed if a US person negligently and non-willfully failed to file the FBAR, and the IRS learned about it during an investigation. Unlike the first scenario, there are unlikely to be criminal penalties for the non-willful failure to file the FBAR. Rather, the taxpayer is likely to face non-willful FBAR penalties of up to $10,000 per violation (i.e. each unreported account in each year). However, where there is a pattern of negligence, additional civil FBAR penalties of no more than $50,000 may be imposed per each violation. Again, in limited circumstances, the taxpayer maybe eligible for the mitigation the penalties, but this issue should be evaluated by an experienced international tax attorney. While the impact of non-willful mitigation is not likely to be as dramatic as that of the willful penalties, such mitigation may still have a significant impact on the total number of penalties.
Reasonable Cause Exception and OVDP FAQ #17 (OVDP Is Now Closed)
There are two major exceptions to FBAR penalties. First, if you are able to establish reasonable cause, you may be able to escape all FBAR penalties. Again, an experienced international tax attorney should be consulted on whether you have a valid reasonable cause exception and the chances that this strategy will succeed. Second, in general, pursuant to OVDP FAQ #17 (obsolete), you may be able to avoid FBAR penalties if you have no additional U.S. tax liability as a result of  your voluntary disclosure and you already reported all of the income associated with the undisclosed foreign financial account on your tax returns. I cannot stress enough the importance of consulting an international tax attorney to  determine whether your case fits within the requirements of the OVDP Q&A #17.
IRS Offshore Voluntary Disclosure Program Closed
It is important to note that the FBAR penalty structure outlined above is not followed by the official IRS Offshore Voluntary Disclosure Program (OVDP) now closed. Rather, OVDP replaces this penalty structure with its own three-tiered penalty system with the emphasis on the aggregate balance of all accounts, rather than the number of accounts. Moreover, there is no reasonable cause exception to the OVDP (now closed) structure of penalties. However, OVDP FAQ #17 can still be applied to  the foreign financial accounts of the participating taxpayer whenever the situation warrants its application.
Given the enormous differences that exist between the IRS OVDP and the traditional statutory FBAR penalties, it is crucially important to consult an experienced international tax attorney in choosing your way to reduce your FBAR penalties.
Contact Sherayzen Law Office for Help With Your FBAR Penalties
If you have undisclosed foreign financial accounts and you are facing the FBAR penalties, contact Sherayzen Law Office as soon as possible. Our international tax firm will thoroughly analyze your case, estimate your FBAR penalties (both, under the traditional and OVDP (obsolete) penalty structures), determine the options and strategies that may be used in your Offshore Voluntary Disclosure, and implement your case plan (including the creation of any necessary legal documents and tax forms).
We are the tax experts you are looking for to handle your case!

### Foreign Accounts Tax Attorney: FATCA - Nowhere to Hide
As a foreign accounts tax attorney, I get a lot of questions from US taxpayers with undisclosed offshore accounts with respect to what FATCA means for the purposes of global transparency. As any foreign accounts tax attorney would tell you, FATCA will and already does make a huge dent in U.S. tax non-compliance. The purpose of this article is to explain why that is the case from a perspective of a foreign accounts tax attorney.
FATCA Background
The Foreign Accounts Tax Compliance Act (FATCA) was enacted as part of the Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act” or “Act”). From the perspective of a foreign accounts tax attorney, there are two major parts of FATCA that make this law so unique.
First, FATCA imposed a new set of foreign asset disclosure requirements on U.S. persons which has to be filed with a U.S. tax return: Form 8938. Second, FATCA imposes an international reporting regime of offshore accounts owned by U.S. persons. This regime is enforced through a network of FATCA implementation treaties which are negotiated between the IRS and governments of foreign jurisdictions.
Form 8938 Reporting Requirement
Form 8938 compliance is one of the most immediate concerns for a foreign accounts tax attorney. In a previous article, I detailed Form 8938 reporting requirements. For the purposes of this article, I will briefly summarize these requirements here. In general, under IRC section 6038D, disclosure is required if the aggregate value of all “specified foreign financial assets” as defined in the statute, exceeds $50,000 (compare this threshold to the FBAR requirement of $10,000). This information must be attached to the current year tax returns. This provision of FATCA is effective as of tax year 2011. Covered individuals or entities must disclose the maximum value of the asset(s) during the year, as well as other pertinent information regarding the account, stock, financial instrument, contract, interest, or related items.
Worldwide Foreign Accounts Reporting
In addition to targeting U.S. taxpayers directly with Form 8938, FATCA also establishes the framework for the worldwide reporting of US-owned foreign accounts by foreign financial institutions (the "FFI"). Through a network of FATCA-implementation treaties with other foreign governments, the FFIs will be (and, in some countries, already are) required to report foreign financial accounts owed by U.S. persons and impose a withholding tax on the earnings of these accounts.
In essence, as a Foreign Accounts Tax Attorney would assert, FATCA turns the FFIs into the IRS withholding and reporting agents on an unprecedented, systematic scale of the entire globe (or, at least, the participating countries which are likely to include some of the largest world economies, particularly European countries and Japan).
Cumulative Impact of FATCA Provisions on the Non-Compliant US Taxpayers
In the long term, as a Foreign Accounts Tax Attorney, I believe that FATCA has the ability to create the environment of global tax compliance with respect to undisclosed foreign accounts - probably, not 100%, but close. Of course, a lot will depend on the ability of the US government to promote FATCA implementation treaties around the globe. As a Foreign Accounts Tax Attorney, I anticipate great unwillingness of countries like China and Russia to fully participate in the Program. Nevertheless, at this point, it appears that Western Europe, Canada, Australia and Japan are likely join the global web of FATCA enforcement. I predict that special pressure may be applied to certain Central American countries, Singapore and the Caribbean countries to enroll them into FATCA compliance as soon as possible.
For non-compliant US taxpayers, this means that it is time to consider the impact of global FATCA enforcement as well as learn from the lessons of the Program for Swiss Banks. This means that the voluntary disclosure options should be considered as soon as possible to avoid dire consequences later. This type of analysis should be undertaken by an experienced Foreign Accounts Tax Attorney.
Contact Sherayzen Law Office for Help with the Voluntary Disclosure of the Offshore Accounts
If you have undisclosed offshore accounts, contact Sherayzen Law Office for help with your voluntary disclosure as soon as possible. Our experienced Foreign Accounts Tax law firm will thoroughly analyze your case, identify your voluntary disclosure options, prepare all of the necessary legal documents and tax forms, file your voluntary disclosure package and rigorously defend your case during the IRS negotiations.

### OVDP Lawyers Little Rock:  Raiffeisen and Postfinance Join Program for Swiss Banks
On December 13, 2013, two Swiss Banks, Raiffeisen and Postfinance, joined the growing number of Swiss Banks who announced their participation in the The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) initiated by the U.S. Department of Justice (“DOJ”) on August 29, 2013 - an event long anticipated by many OVDP lawyers, including the OVDP lawyers Little Rock. These news further confirm the precarious situation of the U.S. taxpayers with undisclosed foreign accounts in Switzerland.
OVDP Lawyers Little Rock: The Program
The DOJ, in cooperation with the Swiss government, instituted the Program at the end of August of 2013. I already described the Program in detail in another article; for the purpose of the present writing, it is sufficient to state that the Program is essentially a voluntary disclosure program for Swiss Banks, not that dissimilar from the OVDP (the Offshore Voluntary Disclosure Program) currently available to U.S. taxpayers. Essentially, in return for turning over very detailed information about their cross-border operations and U.S. accountholders with accounts over $50,000 (going back to August 1, 2008), the banks receive either a Non-Prosecution Letter or a Non-Target Letter which basically promises that the U.S. government is not going to criminally prosecute or target the participating banks. As in the OVDP, the Program excludes banks currently under the DOJ investigation from participating in the Program. Another similar with the OVDP feature – category 2 banks will pay a hefty penalty.
OVDP Lawyers Little Rock: Why the Joining of Raiffeisen and PostFinance Significant
Size matters, and this why the cooperation of Raiffeisen and PostFinance is important. Raiffeisen is the third largest bank in Switzerlan. Postfinance, is the banking arm of the Swiss state-owned postal services company and the fifth-biggest retail financial institution in Switzerland.
OVDP Lawyers Little Rock: Growing Number of Swiss Banks Join the Program
A total of seven banks (among them: St. Galler Kantonalbank, Valiant Holding, Berner Kantonalbank and Vontobel Holding AG) have now come forward to say that they are participating in the Program. Most of them will participate as a Category 2 bank while the rest intend to participate as a Category 3 bank. PostFinance will be participating in the Program as a Category 2 bank, while Raiffeisen said that it is likely that it will register as a Category 3 bank (even though, the bank did not rule the possibility that some of the its U.S. clients may have been non-compliant with U.S. tax laws). It seems that Vontobel is the only other bank that adopted this position.
These seven banks, however, constitute but a tiny part of the total number of banks who are likely to participate in the Program. While the total number of banks varies, it is expected that about 100 banks are expected to enter the Program by December 31, 2013, deadline.
The DOJ strongly encourages Swiss Banks to participate in the Program and promises tough action with respect to non-participating Banks. "Banks that facilitated U.S. tax evasion but do not come forward by the December 31 deadline bear significant risks that information provided by others may cause the bank to be targeted and prosecuted," said Assistant Attorney General Kathryn Keneally.
Side Effect on Category 1 Banks
The Program has had a peculiar side effect on the Category 1 banks who are not eligible to participate in the Program (e.g. UBS, Credit Suisse, Julius Baer, et cetera). The cases of these banks have been frozen by the DOJ pending the resolution of the Program in the wider Swiss banking sector.
As some OVDP Lawyers Little Rock may predict, the number of banks that participate in the Program will likely affect the DOJ's attitude toward the other banks.
Direct Effect of the Program: Non-Compliant US Taxpayers Should Consider Voluntary Disclosure NOW
The effect of the Program on US Taxpayers with undisclosed Swiss accounts is very direct and severe. They are quickly running out of options. If they do not consider their voluntary disclosure options at this point, they may lose the ability to participate in the IRS Offshore Voluntary Disclosure Program ("OVDP").
Contact Sherayzen Law Office for Help with the Voluntary Disclosure of Your Swiss Financial Accounts
Given the time limitations, it is extremely important that you contact Sherayzen Law Office as soon as possible. Owner Eugene Sherayzen, an experienced offshore voluntary disclosure attorney will thoroughly analyze your case, identify the available voluntary disclosure options, prepare your voluntary disclosure package and negotiate the Closing Agreement with the IRS (for the OVDP cases).

### 2014 First Quarter Underpayment and Overpayment Interest Rates
On December 9, 2013, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning January 1, 2014. The rates will be:
	three (3) percent for overpayments [two (2) percent in the case of a corporation];
	three (3) percent for underpayments;
	five (5) percent for large corporate underpayments; and
	one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### Valiant Holding AG Enters DOJ Program for Banks; Others will Follow
With the Swiss Financial Market Supervisory Authority (“FINMA”) deadline ending today on December 9, 2013, Valiant Holding AG made it official - it is the first bank to officially announce its intention to enter the The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). While the first one to do it, Valiant Holding AG will definitely not be the only bank to do it. As Sherayzen Law Office predicted earlier, there will be an avalanche of Swiss Banks following in the footsteps of Valiant Holding AG.
Background
On August 29, 2013, the U.S. Department of Justice (“DOJ”) and the government of Switzerland issued a joint statement instituting The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”). Sherayzen Law Office, Ltd. has covered the specific details of the Program in a previous article. Essentially, the Program functions as a voluntary disclosure program for Swiss banks, similar to the US Internal Revenue Service’s Offshore Voluntary Disclosure Program (“OVDP”) now closed for U.S. taxpayers holding undisclosed offshore accounts. In general, in return for providing extensive disclosure of the accounts held by U.S. taxpayers, banks that qualify for the Program can avoid U.S. criminal prosecution.
As also explained earlier, the Program is only open to non-“Category 1” banks (fourteen Category 1 Swiss banks are already under criminal investigations by the DOJ, including Credit Suisse, Rahn & Bodmer, Zuercher Kantonalbank, Basler Kantonalbank, and Bank Leumi, among others). As I explained earlier in another article, under the Program, “Category 2” banks will face potentially substantial penalties.
There is actually fear that the costs of compliance combined with penalties will simply overwhelm a large portion of small Swiss banks, with some predicting the loss of at least one-quarter of the Swiss banks who enter the Program. It is not known whether Valiant Holding AG has sufficient resources to sustain the effort required to participate in the Program, though no one really raised this issue yet.
FINMA Deadline of December 9, 2013
According to Swiss regulatory officials, Swiss banks had it until today (December 9th) to notify the FINMA whether they intend to participate in the Program. This is why Valiant Holding AG announced its participation today.
FINMA Encourages Swiss Banks to Participate in the Program
Recently, various members of the FINMA, such as their CEO, Dr. Patrick Raaflaub, have issued statements and press releases encouraging various Swiss banks to enter the Program. (FINMA is responsible for implementing the Financial Market Supervision Act and financial market legislation, and according to their website, “As an independent supervisory authority, FINMA acts to protect the interests of creditors, investors and insured persons and to ensure the proper functioning of the financial markets.”) For example, in a recent edition of the Swiss Neue Zürcher Zeitung newspaper, Raaflaub emphasized the strong possibility that Swiss banks that chose not to enter the Program would likely face years of costly legal risks and even more coercive enforcement measures by the DOJ in the future. Further, although participation in the Program is onerous, he noted that it would provide participating Swiss banks with long-needed legal certainty.
Adding to the pressure that Swiss banks face is the fact that Raoul Weil, former UBS Chairman and chief executive officer of Global Wealth Management & Business Banking, was arrested in October while on holiday at a luxury hotel in Italy. Weil agreed to extradition to the US for trial for allegedly assisting U.S. persons in hiding $20 billion from the IRS.
The various public statements by FINMA, however, have understandably caused consternation among Swiss bankers. There is a sentiment in Switzerland that FINMA is not doing enough to protect Swiss interest and to counter the U.S. DOJ’s tactics.
Many Swiss Banks Likely to Enter the Program Following Valiant Holding AG
Despite the anti-US rhetoric, however, it appears that numerous non-Category 1 Swiss banks will follow the example set by Valiant Holding AG and will likely enter the Program today. According to recent US news reports, most of Switzerland’s approximately 300 or so smaller banks are expected to enter the Program (FINMA has not disclosed yet as to how many have done so). Therefore, Valiant Holding AG announcement, while somewhat historic, is not actually surprising.
A spokesman for Berner Kantonalbank noted that, "Participating in the program is absolutely an issue for us” and that the board would take a final vote on the matter; a spokeswoman for south Switzerland’s Corner Bank also stated that the bank was considering entering the Program. Other banks, such as Vontobel, EFG International, Banque Cantonale Vaudoise, St. Galler Kantonalbank, and Linth Bank, either have not made a decision yet, or did not issue public comments as of last week.
U.S. Taxpayers With Undisclosed Accounts In Valiant Holding AG and Other Swiss Banks Must Act Quickly
The Program presents a tremendous risk to U.S. taxpayers with undisclosed financial accounts in Valiant Holding AG and other Swiss Banks. Not only are their accounts likely to be disclosed to the IRS, but it will be done in a very short period of time.
As noted earlier, the due date for these banks is today; within a short period of time, Valiant Holding AG and other Swiss Banks will likely proceed with their disclosures to the DOJ and the IRS. In these case, 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.
Therefore, U.S. taxpayers who either hold or previously held undisclosed bank accounts in Valiant Holding AG or any of the Swiss banks eligible for the Program should seek competent and experienced legal assistance as soon as possible to avoid potentially disastrous consequences.
Contact Sherayzen Law Office for Experienced, Professional Legal Help With Your Offshore Voluntary Disclosure
The experienced offshore voluntary disclosure attorney Mr. Eugene Sherayzen at Sherayzen Law Office, Ltd. can help with your all of your voluntary disclosure issues. We are a team of highly experienced team of international tax professionals who are dedicated to helping our clients. Our ethical creative balanced solutions have helped people throughout the world to properly disclose their foreign financial accounts to the IRS while avoiding the numerous voluntary disclosure pitfalls.
Contact Sherayzen Law Office NOW!

### Does Location Matter? Retaining Orlando International Tax Attorney
Retaining an international tax attorney is a very important decision. One of the frequent issues that my clients in Florida face is whether it is better to retain an international tax attorney in Orlando or in Minneapolis if you live in Orlando, Florida? If you were to search “Orlando international tax attorney”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Orlando. The question is: should the geographical proximity of an international tax attorney play a role in the retainer decision?
The answer is “NO”! Obviously, in a case that involves a local matter, such as Florida sales tax issues, you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and an attorney familiar with local sales tax issues would be the best choice for handling a sales tax case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
However, if you are searching for an Orlando international tax attorney because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of offshore voluntary disclosures will become the most important factors in retaining an international tax attorney.
What if you have an international tax lawyer in Orlando, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is a lawyer in Orlando. Sherayzen Law Office provides professional legal expertise in international tax law that may be more helpful to you than a local attorney in Orlando.
Second, in addition to differences in personal qualities, the experience of the international tax attorney in the area of offshore voluntary disclosures and the ability to analyze the specific subject matter of the undisclosed accounts in the broader context of the voluntary disclosure (including potential strategies that may become available due to client’s specific facts) are very important factors in retaining the attorney and should override the attorney’s particular geography.
One of the most unique features about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most Orlando international tax attorneys in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The unique business model adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.
So, the next time you search for a Orlando international tax attorney, keep these issues in mind while retaining an attorney from Minneapolis or any other city.
Contact Sherayzen Law Office for Help With International Tax Issues
If you have any international tax issues with respect to undeclared foreign financial accounts or international tax compliance in general, please contact Sherayzen Law Office for comprehensive legal and tax help.

### Offshore Voluntary Disclosure of Swiss Accounts and the Program for Banks
Since September, an increasing number of my clients come to me with respect to the offshore voluntary disclosure of Swiss accounts. No doubt that the increase in the offshore voluntary disclosure of Swiss accounts comes from The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) initiated by the U.S. Department of Justice (“DOJ”) on August 29, 2013. In this article, I will try to trace the precise influence of the Program on the offshore voluntary disclosure of Swiss accounts.
The Program
At the end of August of 2013, the DOJ, in cooperation with the Swiss government, instituted the Program. What is the Program? I describe it in detail in this article; for the purpose of the present writing, it is sufficient to state that the Program is essentially a voluntary disclosure program for Swiss Banks, not that dissimilar from the OVDP (the Offshore Voluntary Disclosure Program) now closed.
Essentially, in return for turning over very detailed information about their cross-border operations and U.S. accountholders with accounts over $50,000 (going back to August 1, 2008), the banks receive either a Non-Prosecution Letter or a Non-Target Letter which basically promises that the U.S. government is not going to criminally prosecute or target the participating banks. As in the OVDP, the Program excludes banks currently under the DOJ investigation from participating in the Program. Another similar with the OVDP feature – category 2 banks will pay a hefty penalty.
The Program Increases Pressure on the U.S. Taxpayers to Disclose
U.S. taxpayers with undisclosed bank accounts in Switzerland cannot personally participate in the Program. Nevertheless, the Program has a tremendously deep impact on these taxpayers.
First, under the Program, the Swiss banks should send out letters to all U.S. taxpayers with undisclosed accounts urging them to do the offshore voluntary disclosure of Swiss accounts. The Swiss banks are not only required to do so, but may actually benefit if the U.S. taxpayers enter the OVDP (due to potential penalty reductions).
Second, the participating Swiss banks should turn over very detailed information with respect to U.S. taxpayers and their Swiss accounts. Hence, there is a tremendously high risk of exposure for all U.S. taxpayers with undisclosed Swiss accounts. Moreover, if the IRS receives the information from the Swiss banks about a U.S. taxpayer’s accounts before such taxpayer enters the OVDP, then the IRS is likely to disqualify such U.S. taxpayer from participating in the OVDP.
Finally, because the participating Swiss banks should further disclose various information related to how they obtained business from U.S. taxpayers in the past, it is likely that the IRS will be able to identify the non-compliant accounts indirectly (i.e. even if a taxpayer is not directly identified by the participating Swiss Bank). This means that U.S. taxpayers who indirectly own undisclosed accounts in Switzerland are also at high risk of detection, investigation and, ultimately, criminal prosecution.
Offshore Voluntary Disclosure of Swiss Accounts
As the number of options narrow for U.S. taxpayers, they should seriously consider doing an offshore voluntary disclosure of Swiss accounts.
Be careful, however, not to fall into the trap of thinking that OVDP is the only way to disclosure your Swiss accounts. The exact route of Offshore Voluntary Disclosure of Swiss accounts is likely to depend on the individual circumstances of your case and other venues may be open to you, even though they are not described in the letter that you may have received from a Swiss bank. You should consult an experienced international tax attorney in this matter.
Contact Sherayzen Law Office for Professional Guidance on the Offshore Voluntary Disclosure of Swiss Accounts
If you are thinking about conducting an Offshore Voluntary Disclosure of Swiss Accounts, contact Sherayzen Law Office for professional help. Our law firm specializes in helping people like you!

### Retaining Savannah International Tax Attorney: Location Choice
One of the important issues that US taxpayers with undisclosed foreign accounts face is whether it is better to retain an international tax attorney in Savannah or in Minneapolis if you live in Savannah, Georgia? If you were to search “Savannah international tax attorney”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Savannah. The question is: should the geographical proximity of an attorney play a role in the retainer decision?
The answer depends on many factors. On the one hand, if you are looking for a sales tax attorney, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and an attorney familiar with local sales tax issues would be the best choice for handling a sales tax case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
One the other end of the spectrum, if you are searching for a Savannah international tax attorney because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of offshore voluntary disclosures will become the most important factors in retaining an international tax attorney.
What if you have an international tax lawyer in Savannah, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is a lawyer in Savannah.
Second, in addition to differences in personal qualities, the experience of the international tax attorney in the area of offshore voluntary disclosures and the ability to analyze the specific subject matter of the undisclosed accounts in the broader context of the voluntary disclosure (including potential strategies that may become available due to client’s specific facts) are very important factors in retaining the attorney and should override the attorney’s particular geography.
What is a fairly unique feature about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most Savannah international tax attorneys in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The approach adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.
So, the next time you search for a Savannah international tax attorney, keep these issues in mind while retaining an attorney from Minneapolis or any other city.
Contact Sherayzen Law Office for Help With International Tax Issues
If you have any international tax issues with respect to undeclared foreign financial accounts or international tax compliance in general, contact Sherayzen Law Office for comprehensive legal and tax help.

### Swiss Program for Banks and Undisclosed Bank Accounts in Israel
With the DOJ Program for Swiss Banks raging in Switzerland, an obvious question arises about whether this program would be applicable in other places, most prominently, to undisclosed bank accounts in Israel. It is my opinion, as an international tax attorney, that the DOJ will attempt to apply its Swiss Program for Banks to other places, including undisclosed bank accounts in Israel.
Background Information on the Program for Swiss Banks
On August 29, 2013, the DOJ announced a new initiative – The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program) – which is intended to allow Swiss banks to bring themselves into compliance with DOJ requirements and avoid any US enforcement action in exchanged for detailed disclosures and, in some cases, the payment of monetary penalties.
In essence, this is a voluntary disclosure program, only for Swiss Banks. Under the Program, the Swiss banks are required to turn over a vast amount of extensive and detailed information regarding its US account holders, including list the value of accounts greater than $50,000 during three separate periods; on an account by account basis, the highest value during the period beginning August 1, 2008; the number of persons affiliated with the account and their functions; whether the account was held in a structure (a foreign corporation, foundation, etc.), et cetera.
In return, the banks that participate in the Program can use it to effectively close-out any potential U.S. compliance issues and prevent future criminal prosecution of the banks.
Benefits of the Program for the IRS
The Program offers tremendous benefits to the IRS; I will just list the chief long-term benefits. First and foremost, it is unrealistic for the IRS and the DOJ to investigate every single bank in Switzerland by itself. In essence, the Program allows the IRS to achieve this goal by using the banks themselves to investigate whether they are compliance with U.S. tax laws.
Second, the Program will provide the IRS with a tremendous amount of information regarding the schemes and techniques used by non-compliant U.S. taxpayers and their advisors (as well as the identify of these advisors). This will allow the IRS to develop the procedures to quickly identifying and investigating future potential non-compliance schemes.
Finally, the Program has the potential to identify all of the non-compliance U.S. taxpayers with undisclosed accounts in Switzerland as well as to trace whether these funds were taken out of Switzerland and moved elsewhere, especially to undisclosed bank accounts in Israel (which is already a major target for the DOJ).
As I mentioned before, there are many more other advantageous to the program; among them: establishing the precedent for future use of a similar program in another country, focusing the investigation on particular individuals and banks, and the high publicity of the program should force banks in other countries to step-up their compliance with U.S. tax laws (in case a similar approach is adopted in their countries).
The Program Is Ready to be Applied to Other Countries, including Israel
Because of its tremendous utility to the DOJ and the IRS, I believe it is highly possible that the Program will be applied in other countries, though, most likely in a modified form. The exact form of the Program is likely to be dependent on the type of the FATCA treaty that was signed between the United States and the target country as well as the target country’s government and its willingness to give in to the U.S. demands for transparency.
It is also not inconceivable that the Program will be eventually applied worldwide so that every non-compliant bank would have an opportunity to enter it. However, it is perhaps a bit premature to discuss when such a program would be enacted and what shape it would take.
The likelihood that the Program would be applied to undisclosed bank accounts in Israel is very high. First, Israel is already a focus of several DOJ investigations. Second, the IRS can already confirm (and will find more evidence of this happening after the banks submit the required information under the Program) that numerous bank accounts were closed in Switzerland by Israeli-Americans and moved elsewhere. Finally, it appears that the Israeli government would likely cooperate with the U.S. government in this area.
High Risks for U.S. Persons with Undisclosed Bank Accounts in Israel
At this point, the situation has grown intolerably dangerous for U.S. taxpayers with undisclosed bank accounts in Israel. Not only are they already potentially subject to the IRS investigation, but, if the Program is applied in Israel, there will be no safe haven for non-compliant U.S. taxpayers with undisclosed bank accounts in Israel.
In such a situation, the most prudent step for U.S. taxpayers with undisclosed bank accounts in Israel would be to retain an international tax attorney experienced in offshore voluntary disclosures in order to conduct some type of a voluntary disclosure before it is too late.
Contact Sherayzen Law Office for Professional Help with Undisclosed Bank Accounts in Israel
If you have undisclosed bank accounts in Israel, you should contact Sherayzen Law Office to conduct your offshore voluntary disclosure. Our firm consists of international tax professionals highly experienced in the offshore voluntary disclosure matters. We will thoroughly analyze your case, determine the available voluntary disclosure options for your offshore assets, and meticulously implement the chosen plan of action (including preparation of all legal documents and tax forms). Contact Sherayzen Law Office

### 2014 Individual Income Tax Rates
The IRS recently announced the 2014 individual income tax rates with inflation adjustments wit respect to each tax bracket. Remember, since the American Taxpayer Relief Act of 2012 was signed into law on January 2, 2013, a new tax bracket of 39.4% appeared. Also, note that the 2014 individual income tax rates listed below do not include other taxes such as those imposed on investment income by the new health care laws. Finally, it is important to remember that the default PFIC regime calculations do not depend on your personal tax rate.
As adjusted for inflation, the following marginal income tax rates will apply to individuals in the tax year 2014:
Filing Single
10% $0 – $9,075
15% $9,076 – $36,900
25% $36,901 – $89,350
28% $89,351 – $186,350
33% $186,351 – $405,100
35% $405,101 – $406,750
39.6% $406,751 and greater
Notice the small range of the 35% tax bracket.
Filing Married Filing Jointly and Surviving Spouses
10% $0 – $18,150
15% $18,151 – $73,800
25% $73,801 – $148,850
28% $148,851 – $226,850
33% $226,851 – $405,100
35% $405,101 – $457,600
39.6% $457,601 and greater
Filing Married Filing Separately
10% $0 – $9,075
15% $9,076 – $36,900
25% $36,901 – $74,425
28% $74,426 – $113,425
33% $113,426– $202,550
35% $202,551 – $228,800
39.6% $228,801 and greater
Filing Head of Household
10% $0 – $12,950
15% $12,951 – $49,400
25% $49,401 – $127,550
28% $127,551 – $206,600
33% $206,601 – $405,100
35% $405,101 – $432,200
39.6% $432,201 and greater

### 2013 Minnesota Income Tax Rates
Below, I list the information provided by the Minnesota Department of Revenue with respect to 2013 Minnesota Income Tax Rates. Notice, the new 9.85% tax bracket that was created last year and introduced a radical new change to 2013 Minnesota Income Tax Rates. Taxpayers who file estimated taxes may use this information to plan and pay taxes beginning in April 2013.
Single
For income between $ 0- 24,270: 5.35%
For income between $ 24,271-79,730: 7.05%
For income between $ 79,731-150,000: $7.85%
For income $150,001 and above: 9.85%
Married Filing Jointly
For income between $ 0-35,480: 5.35%
For income between $35,481-140,960: 7.05%
For income between $140,961-250,000: 7.85%
For income $250,000 and above: 9.85%
Married Filing Separately
For income between $ 0-17,140: 5.35%
For income between $17,741-70,480: 7.05%
For income between $ 70,481-125,000: $7.85%
For income $125,001 and above: 9.85%
Head of Household
For income between $ 0- 29,880: 5.35%
For income between $ 29,881- 120,070: 7.05%
For income between $ 120,071- 200,000: $7.85%
For income $200,001 and above: 9.85%

### 2014 Foreign Earned Income Exclusion
On November 18, 2013, the IRS announced that the foreign earned income exclusion amount under §911(b)(2)(D)(i) is going to be $99,200 for tax year 2014. This up from $97,600 in 2013 and $95,100 in 2012.
Generally, if a qualified individual meets certain requirements of I.R.C. §911, he may exclude part or all of his foreign earned income from taxable gross income for the U.S. income tax purposes. This income may still be subject to U.S. Social Security taxes.
Remember, if your overseas earnings are above $99,200 for the tax year 2013, then you may be subject to U.S. income taxation on the excess amount (i.e. amount exceeding the 2014 foreign earned income exclusion).
It is also important to note, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion). For most U.S. expatriates, this means that the tax bracket is likely to start at 25% or higher. If you are self-employed, however, your situation may differ from this description.
Furthermore, it is worth noting that additional amount of earnings may also be excluded under the foreign housing exclusion.
Contact Sherayzen Law Office For Foreign Earned Income Exclusion Legal Help
If you are a U.S. taxpayer living abroad or you are planning to accept a job overseas, contact us to discuss your tax situation. Our experienced tax law office will guide you through the complex maze of U.S. tax reporting requirements, help you make sure that you are in full compliance with U.S. tax laws, and help you take advantage of the relevant provisions of the Internal Revenue Code to make sure that you do not over-pay your taxes in the United States.

### Tax Year 2014: Various Tax Benefits Increase Due to Inflation Adjustments
The Internal Revenue Service recently announced an annual inflation adjustments for the tax year 2014 for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.
The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.
The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)
The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
The annual exclusion for gifts remains at $14,000 for 2014.
The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.
Details on these inflation adjustments and others not listed in this release can be found in Revenue Procedure 2013-35, which will be published in Internal Revenue Bulletin 2013-47 on Nov. 18, 2013.

### IRS Announces 2014 Retirement Plan Limitations
On October 31, 2013, the Internal Revenue Service announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2014. Some pension limitations such as those governing 401(k) plans and IRAs will remain unchanged because the increase in the Consumer Price Index did not meet the statutory thresholds for their adjustment. However, other pension plan limitations will increase for 2014.
Below is the description of the changes (or lack thereof) for some of the most common plans.
401(k), 403(b) and most 457 plans
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $17,500.
The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $5,500.
IRA Annual Contribution Limitations
The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $60,000 and $70,000, up from $59,000 and $69,000 in 2013. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $96,000 to $116,000, up from $95,000 to $115,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $181,000 and $191,000, up from $178,000 and $188,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Roth IRA Contribution Limitations
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married couples filing jointly, up from $178,000 to $188,000 in 2013. For singles and heads of household, the income phase-out range is $114,000 to $129,000, up from $112,000 to $127,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
Retirement Savings Contribution Credit
The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $60,000 for married couples filing jointly, up from $59,000 in 2013; $45,000 for heads of household, up from $44,250; and $30,000 for married individuals filing separately and for singles, up from $29,500.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $35,500 to $36,000; the limitation under Section 25B(b)(1)(B) is increased from $38,500 to $39,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $59,000 to $60,000.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $26,625 to $27,000; the limitation under Section 25B(b)(1)(B) is increased from $28,875 to $29,250; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $44,250 to $45,000.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $17,750 to $18,000; the limitation under Section 25B(b)(1)(B) is increased from $19,250 to $19,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $29,500 to $30,000.
Qualified Retirement and Pension Plans
Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
Effective January 1, 2014, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $205,000 to $210,000. For a participant who separated from service before January 1, 2014, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2013, by 1.0155.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2014 from $51,000 to $52,000.
The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2014 are as follows:
The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) remains unchanged at $17,500.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $255,000 to $260,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $165,000 to $170,000.
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,035,000 to $1,050,000, while the dollar amount used to determine the lengthening of the 5 year distribution period is increased from $205,000 to $210,000.
The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $115,000.
The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $380,000 to $385,000.
The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,000.
The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations remains unchanged at $17,500.
The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes is increased from $100,000 to $105,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $205,000 to $210,000.
 Various Income Limitations
The Code also provides that several pension-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2014 are as follows:
The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.
The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $95,000 to $96,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $59,000 to $60,000. The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $178,000 to $181,000.
The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $178,000 to $181,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $112,000 to $114,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,066,000 to $1,084,000.

### Undisclosed Bank Accounts in Switzerland: Category 2 Swiss Banks
As the voluntary disclosure program for Swiss Banks proceeds at a rapid pace, the question number one among U.S. international tax attorneys is what will happen to the undisclosed bank accounts in Switzerland. In order to understand the impact of the US Department of Justice (“DOJ”) the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) on the undisclosed bank accounts in Switzerland, one needs to understand the basic operation of this Program. In an earlier article, I outlined the eligibility requirements for the Swiss Banks. In this article, I want to define the Category 2 banks and what implications this classification will have on the Swiss banks in this category and, ultimately, what type of disclosure US taxpayers with undisclosed bank accounts in Switzerland should expect.
Category 2 Banks Defined
Category 2 banks are those that "have a reason to believe" that they have committed tax offenses under Titles 18 or 26 of the US Code or monetary transactions offenses under Sections 5314 or 5322 of Title 31 of the US Code, in connection with undeclared U.S. Related Accounts held by the Swiss Bank during the Applicable Period (obviously undisclosed bank accounts in Switzerland is among these offenses).
This definition is based on several other definitions that need to be laid out here in order to understand the scope of the Category 2. An important point here is that this definition of Category 2 Swiss banks is very closely intertwined with the FATCA Treaty signed by Switzerland.
First, Titles 18, 26 and 31 are related to criminal prosecution. Obviously, they are broader than solely criminal prosecution, but the important point here is that a Swiss bank should have a reason to believe that it has committed a potentially criminal offense in order to fit in the category 2 (obviously, most U.S. international tax forms may potentially have criminal penalties; so the scope here is fairly broad).
Second, “U.S. Related Accounts” is defined separately by the DOJ. From the outset, one should notice that there is a crucial monetary value limitation; U.S. Related Accounts applies only to accounts that exceed $50,000 at any time during the Applicable Period (see below for the definition) based on the account balance on the last day of each month.
U.S. Related Accounts apply to all accounts “as to which indicia exist” that a U.S. Person or Entity (both terms are defined in the FATCA treaty) has financial or beneficial interest in, ownership of, or signatory and other authority. Other authority includes such powers as: authority to withdraw funds, make investment decisions, receive account statements, receive trade confirmations, receive other account information; or receive advise or solicitations.
How should the Swiss banks find out if such “indicia” exists? The procedures are set forth in the FATCA Agreement, Annext I, Part II due diligence procedures. Some procedures would apply to “Lower Value Accounts” with $250,000 or less in value at all times during the Applicable Period (again see below). Other procedures would be applicable to “High-Value Accounts” with more than $250,00 in value at any time during the Applicable Period (see below).
Finally, what is this “Applicable Period”? DOJ defines the term in a very precise manner: at any time between August 1, 2008 and either (a) the later of December 31, 2014 or the effective date of an FFI Agreement; OR (b) the date of the Non-Prosecution Agreement or (in case of a Category 3 and 4 bank) Non-Target Letter, if that date is earlier than December 31, 2014.
Category 2 Banks: What Do Participating Banks Get for Their Participation in the Program?
Category 2 banks are eligible for a non-prosecution agreement ("NPA"). Basically, if the DOJ concludes that the Category 2 Swiss Bank has met all of its obligations under the NPA, the DOJ will not prosecute this Bank criminally for any of the offenses under Titles 18, 26 and 31 of the United States Code.
However, there is an important exception that may put certain participating banks at a disadvantage. If after the review of the information submitted by a Swiss bank under the NPA request, the DOJ determines that the Swiss bank's conduct demonstrates extraordinary culpability, the DOJ may require the Swiss bank to enter a Deferred Prosecution Agreement ("DPA") instead of an NPA.
Category 2 Swiss Banks: What Is the Price for the Participation in the Program?
The price for the Category 2 Swiss Banks who agree to request the NPA can be surprisingly high. There three types of cost: intangible reputation costs, significant penalties under the Program and waiver of the Statute of Limitations Defenses in case the DOJ decides, in its sole discretion, that NPA was violated by the Swiss Bank.
The intangible costs are high to assess and may depend on the particular fact pattern. Generally, the Swiss banks with higher exposure to US clients will suffer more than the Swiss banks who have limited exposure to U.S. capital. Nevertheless, the bank secrecy reputation of the Swiss banks has likely suffered a death blow among U.S. taxpayers, both tax-compliant and those with undisclosed bank accounts in Switzerland. It is without a doubt that the Swiss banks will suffer tremendous intangible losses as a result of the Program participation.
A much more immediate problem is astonishingly high civil penalties imposed on the Swiss banks for having US clients with undisclosed bank accounts in Switzerland, especially given the fact that it is possible that the Swiss banks may not have been aware that these accounts were not properly disclosed to the IRS on the FBARs and Forms 8938.
These civil penalties are imposed by the DOJ on the Swiss Banks upon the execution of the NPA. The exact penalties depend on the opening dates of the accounts.
1. For U.S. Related undisclosed bank accounts in Switzerland that existed on August 1, 2008, the Program would require the Swiss banks to pay a 20% penalty to the United States of the maximum aggregate dollar value of all such accounts during the Applicable Period (see above for definition).
2. For U.S. Related undisclosed bank accounts in Switzerland that were opened between August 1, 2008 and February 28, 2009, the DOJ requires the Swiss Banks to pay a 30% penalty to the United States of the maximum aggregate dollar value of all such accounts;
3. For U.S. Related undisclosed bank accounts in Switzerland that were opened after February 28, 2009, the DOJ requires the Swiss Banks to pay a 50% penalty to the United States of the maximum aggregate dollar value of all such accounts;
The maximum dollar value of the aggregate US Related bank accounts in Switzerland may be reduced by the dollar value of each account as to which the Swiss banks are able to demonstrate, to the DOJ’s satisfaction, was not an undeclared account, was disclosed by the Swiss Banks to the IRS or was disclosed to the IRS through the OVDP (Offshore Voluntary Disclosure Program) or OVDI (Offshore Voluntary Disclosure Initiative) following the notification by the Swiss Bank of the US accountholders (this is why many of US taxpayers with undisclosed bank accounts in Switzerland are now getting these notices) of this program prior to the execution of the NPA.
Of course, in addition to civil penalties, the actual expenses related to going through the program and implementing the proceduring in compliance with an NPA can be very substantial.
Finally, in cases where the DOJ determines in its discretion that the NPA is violated, by executing the NPA, the Swiss banks agree to waive all defenses based on the expiration of the statute of limitations as well as any constitutional, statutory or other claim concerning pre-indictment delay with respect to any prosecutions under Titles 18, 26 and 31 of the United States Code are not time-barred by the applicable state of limitations on the date of the announcement of the Program. Moreover, the Swiss Banks further agree that such waiver is knowing, voluntary, and in express reliance upon the advice of the Swill Bank’s counsel.
Required Reporting with Respect to Undisclosed Bank Accounts in Switzerland
Any Category 2 bank that wishes to obtain an NPA must submit a letter of intent to the DOJ Tax Division containing certain disclosures by December 31, 2013. The letter must include a plan for complying with the program requirements within reasonable time (not to exceed 120 days from the date of the letter of intent); provide the identity and qualifications of an independent examiner (a qualified attorney or accountant who will certify the information); state that the Swiss bank will maintain all records required for compliance with the terms of an NPA, including all records that may be sought by treaty; and acknowledge that the bank will waive any potential defense based on the statute of limitations for the period August 29, 2013 to the issuance of the NPA.
If the Swiss Bank cannot comply with all of the Program requirements within 120 days from the date of the letter of intent, the DOJ will grant a one-time extension of 60 days upon a showing of good cause.
The critical issue for U.S. taxpayers with undisclosed bank accounts in Switzerland is with respect to what type of disclosures constitute the aforementioned “program requirements” .
Program Requirements Prior to the Execution of an NPA
Prior to the execution of an NPA, a Category 2 Swiss bank must disclose to the DOJ the following evidence and information:
a. Explanation of how the cross-border business for US Related Accounts was structured, operated, and supervised (including internal reporting and other communications with and among management);
b. The name and function of the individuals who structured, operated or supervised the cross-border business for US Related Accounts;
c. Explanation of how the bank attracted and serviced account holders;
d. An in-person presentation and documentation, properly translated, supporting the disclosure of the above information, as well as cooperation and assistance with further explanation of information and materials so presented, upon request, or production fo additional explanatory materials as needed; AND
e. Disclosure of the total number of US Related Accounts and maximum dollar value of accounts greater than $50,000 during three separate periods (corresponding to the penalty-calculation periods listed above).
Program Requirements Upon the Execution of an NPA
Upon execution of an NPA, the Category 2 Swiss banks must provide further details about US-related accounts that were closed after August 1, 2008, including the total number of accounts, and as to each account:
a) the maximum value (in USD) of each account;b) whether the account was held in the name of an individual or an entity;c) the number of US persons or entities affiliated or potentially affiliated with each account;d) the nature of the relationship to each account (e.g. a financial interest, beneficial interest, ownership, signatory authority, other authority);e) whether the account held U.S. securities at any time during the Applicable Period;f) the name and role of any relationship manager, client advisor, asset manager, financial advisor, trustee, fiduciary, nominee, attorney, accountant, or other individual or entity functioning in a similar capacity known to the participating Swiss Bank to be affiliated with said account at any time during the Applicable Period; ANDg) various information concerning the transfer of duns into and out of the account during the Applicable Period on a monthly basis.
Furthermore, the Swiss Bank must, at its own expense, retain an Independent Examiner who will verify all of the information submitted to the DOJ. The verification must include a statement from the Independent Examiner that FATCA due diligence standards were applied in collecting this information.
Post-Execution NPA Requirements: Assistance and Record Retention
NPA imposes continuous obligations upon the participating Swiss Banks after the NPA is executed. In the future, the Swiss bank must provide all necessary information for the United States to draft treaty requests to seek account information, and the bank must collect and maintain all records that are potentially responsive to any treaty requests to facilitate prompt responses. Extraordinarily, the NPA further requires that the Swiss bank, upon request, provides testimony of competent witness or information as needed to enable the United States to use the information and evidence obtained pursuant to the Program or separate treaty request in any criminal or other proceeding. The Swiss Bank, at its own expense, is also required to provide assistance in identification and translation of significant documents.
The recordkeeping requirement is very broad. The Swiss bank must agree to retain records of all US Related Accounts closed after August 1, 2013 for a period of 10 years from the termination date of the NPA. Same requirement applies to the records related to the Swiss Bank’s U.S. cross-border business in general.
Moreover, the Category 2 Swiss bank must also agree to close any and all accounts of recalcitrant account holders (as defined in I.R.C. Section 1471(d)(6)) and implement procedures to prevent its employees from assisting recalcitrant account holders to engage in acts of further concealment.
Finally, under the NPA, the Swiss Bank agrees not to open any US Related Accounts (irrespective of their size - i.e. this applies to account below the $50,000 threshold) except on the conditions that ensure that the account will be declared to the United States and will be subject to disclosure by the Swiss bank,
What Happens If the Swiss Banks Fails to Comply With the Reporting Requirements
If the DOJ determines, in its sole discretion, that any information or evidence provided by the Swiss Bank is materially false, incomplete or misleading, then the DOJ may decline to enter into an NPA.
If the DOJ discovers that the provided information was materially false, incomplete or misleading after entering into an NPA or that the Swiss Bank otherwise materially violated the terms of the NPA the DOJ may pursue any and all legal remedies available to it, including criminal investigation and prosecution against the violating Swiss Bank, without regard to any other provision of the NPA or the Program. As stated above, by entering into an NPA, the Swiss Bank waives various defenses to such prosecutions, including the ones based on the expiration of the Statute of Limitations.
Contact Sherayzen Law Office if You Have Undisclosed Bank Accounts in Switzerland
If you have undisclosed bank accounts in Switzerland, contact Sherayzen Law Office for professional help with your voluntary disclosure. It should be clear to U.S. taxpayers that continuing to maintain undisclosed accounts in Switzerland is likely to result in heavy civil and potentially criminal penalties.
Our experienced international tax law firm will thoroughly analyze your case, recommend the appropriate strategy for your voluntary disclosure, prepare all of the required tax forms and legal documents and rigorously represent your interests during your negotiations with the IRS.

### France FATCA Agreement Signed
On November 14, 2013, the U.S. Department of the Treasury announced that the United States has signed an intergovernmental agreement (IGA) with France to implement the Foreign Account Tax Compliance Act (FATCA). Enacted in 2010, France FATCA IGA aims to curtail offshore tax evasion by facilitating the exchange of tax information. With France FATCA IGA, 10 FATCA IGAs have been signed to date (Denmark, France, Germany, Ireland, Mexico, Norway, Spain, United Kingdom, Japan and Switzerland).
"France has been an enthusiastic supporter of our effort to promote global tax transparency and critical to drafting a model of FATCA implementation," said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. "This agreement demonstrates the growing global momentum behind FATCA and strong support from the world's most important economies."
France was among the first countries to champion the underlying goals of FATCA and its intergovernmental approach in 2012. France FATCA IGA was signed today by U.S. Ambassador to France Charles H. Rivkin and French Finance Minister Pierre Moscovici.
"The signing of this agreement marks an important step forward in the collaboration between the United States and France to combat tax evasion," said Ambassador Rivkin.
FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on U.S. account holders. FFIs have the option of entering into agreements directly with the IRS, or through one of two alternative Model IGAs signed by their home country.
The IGA between the United States and France is the Model 1A version, meaning that FFIs in France will be required to report tax information about U.S. account holders directly to the French government, which will in turn relay that information to the IRS. The IRS will reciprocate with similar information about French account holders.
In addition to the 10 FATCA IGAs that have been signed to date, Treasury has also reached 16 agreements in substance and is engaged in related conversations with many more jurisdictions.
Contact Sherayzen Law Office For Help With Undisclosed Accounts in France
If you have undisclosed financial accounts in France, contact Sherayzen Law Office for professional IRS representation. Our team consists of dedicated, experienced tax professionals who will thoroughly analyze your case, advise on the available voluntary disclosure options, prepare all necessary tax forms and legal documents, and professionally represent your interests through the IRS voluntary disclosure process.

### FATCA Switzerland: Swiss Senate Approves FATCA
FATCA Switzerland: FATCA Legislation Approved
On September 23, 2013, Swiss Senate voted to approve the implementation of Foreign Account Tax Compliance Act (FATCA). This event came barely a few weeks after the Swiss House of Representative approved the same legislation.
At this point, Swiss Banks have a clear way to cooperate with the IRS and US Department of Justice in turning over the required information regarding U.S. accountholders in Switzerland.
At the same time, on August 29, 2013, the DOJ announced the creation of the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”) – a voluntary disclosure program for Swiss Banks.
FATCA Switzerland: What is Driving Swiss Acceptance?
While there may have been strong reasons to oppose the bill, it appears that the driving force behind the acceptance of FATCA by Switzerland has been the fear that Swiss banks would be effectively excluded from the US capital markets if they did not accept FATCA. Most representatives acknowledged that FATCA is a reality, whether Switzerland likes it or not.
FATCA Switzerland: Model 2 Treaty
Unlike most European countries currently engaged in FATCA negotiations, Switzerland opted for the “model two” FATCA implementation treaty. Swiss banks will have to report accounts belonging to US taxpayers with more than $50,000, but client data will only be exchanged once the US authorities have requested administrative assistance (there are exceptions, especially under the Program).
Most European Union countries have accepted another type of FATCA implementation treaty, in which information is exchanged automatically, the so-called “model one”.
FATCA Switzerland: Impact on U.S. Taxpayers With Undeclared Financial Accounts
The FATCA bill will be implemented in Switzerland in stages starting in July 2014. In the meantime, however, the Program will be the main event with respect to FATCA compliance.
The impact on the U.S. taxpayers with undeclared financial accounts is likely to be a dramatic one, though not unexpected. We can already observe a rise in the OVDP (the IRS Offshore Voluntary Disclosure Program now closed) participation and the expectation is that 2014 will reflect a major participation of US non-compliant taxpayers in the program.
From the IRS perspective, starting the second half of 2014 and especially 2015, we also expect to see a large increase in criminal prosecutions and investigations of U.S. persons with undeclared financial accounts. This is because, through OVDP and the Program, the IRS will accumulate a massive amount of information allowing it to target non-compliant taxpayers with terrifying precision.
Contact Sherayzen Law Office For Help With Undeclared Foreign Accounts
If you are a U.S. taxpayer with undeclared foreign accounts, you should contact Sherayzen Law Office as soon as possible. Our firm consists of a team of highly intelligent and experienced tax professionals dedicated to helping U.S. taxpayers to bring themselves into compliance with U.S. tax law in a reasonable ethical manner. Not only will we be able to advise you on your voluntary disclosure options, but we will also be able to prepare all of the required tax forms and legal documents for you under the protection of the Attorney-Client Privilege.

### Offshore Voluntary Disclosure Lawyers: Eligibility for Program for Swiss Banks
As offshore voluntary disclosure lawyers know very well, Switzerland continues to be the center of the unprecedented IRS and US Department of Justice enforcement of U.S. international tax laws, including FATCA. In a recent article, I described a new initiative, The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”), which is essentially a voluntary disclosure program for Swiss banks. In the Program, eligible banks can avoid US criminal prosecution in exchange for detailed disclosure of the accounts owned by U.S. taxpayers (as well as, in some cases, payment of monetary penalties).
The issue is: what banks in Switzerland are eligible to participate in the program? The issue is not only relevant to the banks themselves, but also for U.S. accountholders in Switzerland how have and have had foreign financial accounts in Switzerland during any time between January 1, 2008 and the present time. The chief reason is because these are accounts are most likely to be disclosed as early as the first quarter of 2014, thereby very likely preventing these U.S. taxpayers from entering into the OVDP program since closed.
Swiss Banks Under Grand Jury Investigation Are Not Eligible
Swiss banks which are classified by the DOJ as Category 1 banks are not eligible to participate in the Program. Currently, there are at least fifteen banks which are included in this category. Most likely (thought not officially named by the DOJ) these banks are: Julius Baer Group AG, Credit Suisse, Rahn & Bodmer, Zuercher Kantonalbank, Basler Kantonalbank, Bank Hapoalim, Mizrahi-Tefahot Bank, Bank Leumi and others.
Types of Institutions Open to the Program
Many Offshore Voluntary Disclosure Lawyers pay close attention to the fact that the Program applies only custodial and depository financial institutions.
So, Swiss insurance companies, various fiduciaries, and many other investment companies cannot take advantage of the Program). It is not open to individuals; hence, asset managers, financial advisors and lawyers cannot participate in the program.
Impact on Offshore Voluntary Disclosure Program in the United States
If you are the taxpayer with an undisclosed financial account in a Swiss Bank that is eligible to participate in the Program, you need to consider your voluntary disclosure options immediately. As many offshore voluntary disclosure lawyers will tell you, if the IRS receives the information from a Swiss bank participating in the Program before you disclosure your account and initiates an investigation against you, it is very likely that you will not be accepted into the Offshore Voluntary Disclosure Program.
I expect that the letters sent out by the Swiss banks which intend to participate in the Program to their current and former U.S. customers will have a dramatic impact on the rising number of participants in the OVDP or OVDI. In fact, this trend can already be observed from the fact over 40,000 people have already participated in the IRS offshore voluntary disclosure programs.
Contact Sherayzen Law Office for Help with Your Undisclosed Swiss Bank Accounts
If you currently have undisclosed foreign accounts in Switzerland or you had such accounts at any point prior and after January 1, 2008, and closed these accounts, contact Sherayzen Law Office for help with your offshore voluntary disclosure options. Our experienced offshore voluntary disclosure tax firm will thoroughly review your case, estimate your existing tax and FBAR liability in the United States, identify the available voluntary disclosure options, prepare your voluntary disclosure package (including all legal documents and tax forms) and rigorously defend your interests during your negotiations with the IRS.

### San Francisco International Tax Lawyer: Influence of Location
While looking for a San Francisco international tax lawyer, one of the important issues that clients face is whether it is better to retain an international tax attorney in San Francisco or in Minneapolis if you live in San Francisco? If you were to search “San Francisco international tax lawyer”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in San Francisco. The question is: should the geographical proximity of an attorney play a role in the retainer decision?
The answer depends on many factors. On the one extreme, if you are looking for a sales tax lawyer, then you may not have a choice but to find a local lawyer. This is because local law and procedure would govern in this case, and an lawyer familiar with local sales tax issues would be the best choice for handling a sales tax case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside lawyer are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
One the other end of the spectrum, if you are searching for a San Francisco international tax lawyer because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of a lawyer in his area of practice (i.e. international tax law) will become the overriding factors in retaining a San Francisco international tax lawyer.
What if you have an international tax lawyer in San Francisco, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax lawyers differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax lawyer in Minneapolis even if there is a lawyer in San Francisco.
Second, in addition to differences in personal qualities, the experience of the international tax lawyer in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the lawyer and should override the lawyer’s particular geography.
What is a fairly unique feature about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most San Francisco international tax lawyers in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The approach adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.
So, the next time you search for a San Francisco international tax lawyer, keep these issues in mind while retaining a lawyer from Minneapolis or any other city.
Contact Sherayzen Law Office for Help With International Tax Issues
If you have any international tax issues with respect to undeclared foreign assets, international tax compliance or international tax planning, contact Eugene Sherayzen, an experienced tax attorney of Sherayzen Law Office for comprehensive legal and tax help.

### Philadelphia International Tax Attorney: Retainer by Location
Retaining the right Philadelphia international tax attorney is not easy. One of the important issues that taxpayers face is whether it is better to retain an international tax attorney in Philadelphia or in Minneapolis if you live in Philadelphia? If you were to search “Philadelphia international tax attorney”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Philadelphia. The question is: should the geographical proximity of an attorney play a role in the retainer decision?
The answer depends on many factors. On the one extreme, if you are looking for a sales tax attorney, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and an attorney familiar with local sales tax issues would be the best choice for handling a sales tax case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
One the other end of the spectrum, if you are searching for a Philadelphia international tax attorney because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of practice (i.e. international tax law) will become the overriding factors in retaining an international tax attorney.
What if you have an international tax attorney in Philadelphia, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is an attorney in Philadelphia.
Second, in addition to differences in personal qualities, the experience of the international tax attorney in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the attorney and should override the attorney’s particular geography.
What is a fairly unique feature about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most Philadelphia international tax attorneys in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The approach adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.
So, the next time you search for a Philadelphia international tax attorney, keep these issues in mind while retaining an attorney from Minneapolis or any other city.
Contact Sherayzen Law Office for Help With International Tax Issues
If you have any international tax issues with respect to undeclared foreign assets, international tax compliance or international tax planning, contact the experienced international tax team of Sherayzen Law Office for comprehensive legal and tax help.

### Retirement Savings Contributions Credit 2013
You may be eligible for a tax credit if you make eligible contributions (other than rollover contributions) to an employer-sponsored retirement plan or to an individual retirement arrangement.
Eligible Plans
The eligible plans for the retirement savings contribution credit include: traditional and Roth IRAs, 401(k), 403(b), governmental 457, SEP, SIMPLE, 501(c)(18)(D) and contributions to a qualified retirement plan as defined in section 4974(c) (including federal Thrift Savings Plan).
Additional Requirements and Limitations
Other important eligibility requirements and limitations include:
1. Income Limitations
You cannot exceed the following income limits in order to be able to take the Retirement Savings Contributions Credit (these are 2013 numbers):
• Single, married filing separately, or qualifying widow(er), with income up to $29,500
• Head of Household with income up to $44,250
• Married Filing Jointly, with income up to $59,000
2. Age Limitation
To be eligible for the Retirement Savings Contributions Credit you must have been born before January 2, 1996.
3. Full-Time Students Not Eligible
You cannot have been a full-time student during the calendar year if you wish to claim the Retirement Savings Contributions Credit (there are some specific definitions regarding the “student” status).
4. Cannot Be a Dependent on Another Person’s Tax Return
If you were claimed as a dependent on someone else’s 2013 tax return, you cannot take the Retirement Savings Contributions Credit.
5. Distributions are Deducted From Contributions
When figuring the Retirement Savings Contributions Credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date - including extensions - for filing the return for the credit year.
Credit amount
If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.
Also note that the Retirement Savings Contributions Credit is a benefit in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA.

### FBARs and Polish Lokata Accounts
In recent years, I have received a number of questions from my Polish clients about whether “Lokata” accounts are reportable on the FBARs. The short answer is “Yes”.
Lokata Accounts
Lokata is a fixed-term deposit account which is very common in Polish banks; a Lokata is very similar to U.S. CD-type of accounts. There are many types of lokatas - overnight, three-month, six-month and even twelve-month lokatas. Usually, the bank would automatically take the funds from a current account (so-called “rachunek biezacy”) and deposit it on the lokata at a certain fixed percent. At the end of the lokata period, the lokata is closed by the bank and the balance with interest (minus automatic 19% tax withholding for non-business accounts) is returned to the current account.
All major Polish banks (e.g. DZ Bank and Bank Zchodni WBK S.A.) offer lokatas to their clients.
Lokata and FBAR Complications
Every time lokata is opened, it is assigned a separate account number. For the purposes of the FBAR, it is a bank account which should be reported on the FBAR separately from the current accounts (contrary to some of the widely-held beliefs among U.S. taxpayers living and working in Poland).
So far, this sounds fairly simple. However, there are serious complications with respect to reporting lokata accounts on the FBAR. First, most current bank account statements are not likely to fully identify lokata accounts.
Second, even where a lokata is identified by a separate number, you still need to make sure that the amount shown on the statements actually reflects the gross amount (i.e. before tax withholding). Usually, it would not and you will need to request the bank to supply a separate bank statement for each lokata and keep track of all gross interest and withholding tax amounts.
Third, the sheer number of lokata accounts can be overwhelming. While there are may be renewable long-term lokatas, oftentimes, it is the opposite. The problem with short-term lokatas is that they terminate once the funds with interest are returned to the current account. This means that a new lokata account is likely to be open every time a new deposit is made. Imagine if a new lokata is opened every week, every three days or every day?! This can be an extremely burdensome requirement for U.S. taxpayers who maintain bank accounts in Poland.
Other problems may arise where the taxpayer needs records for prior years, a lokata is opened in one year and is closed in the following year, et cetera.
Contact Sherayzen Law Office for Help with Reporting Undisclosed Lokata Accounts
If you have undisclosed bank and financial accounts in Poland, contact Sherayzen Law Office for help with your voluntary disclosure. Our team of experienced international tax professionals will thoroughly analyze your case, estimate your current potential FBAR liabilities, propose a solution to your FBAR problems, and implement your voluntary disclosure plan, including preparation of all required legal documents and tax forms.

### Form 114(a): Authorization to Efile FBARs
In response to numerous requests made by the international tax attorneys and individual FBAR filers of the Reports of Foreign Bank and Financial Accounts (FBARs) jointly with spouses, or wish to submit them via third-party preparers, the Financial Crimes Enforcement Network (FinCEN) introduced FinCEN Form 114(a), Record of Authorization to Electronically File FBARs. A copy of this form would be maintained by the filer and the account owner, but not submitted to FinCEN. The form would be made available upon request by FinCEN or the Internal Revenue Service (IRS).
New Version of the FBAR
Note, that Form 114(a) came out just ahead of the new version of the FBAR which was tested in October of 2013.
FBARs are used by U.S. taxpayers to disclose foreign financial accounts and they were due on June 30; the filing deadlines now coincide with tax return deadlines (April and October) for each preceding calendar year. There is an automatic extension to October if you cannot file your FBAR by April 15th. Failure to file FBARs on time can lead to severe penalties and even criminal prosecution.
Modified Voluntary Disclosure Based on Reasonable Cause
It is important to emphasize that Form 114(a) should be provided to your international tax attorney if he is filing FBARs on your behalf. This is irrespective of whether you are filing your FBARs a few days late or whether your international tax attorney is e-filing the FBARs as part of your modified voluntary disclosure based on reasonable cause. Note that, starting October 1, 2013, the OVDP/OVDI participants are also required to e-file the FBARs ; special reference to the OVDP/OVDI program should also be submitted - contact Sherayzen Law Office for details.
Contact Sherayzen Law Office for Help with E-filing FBARs for Undisclosed Accounts
If you have foreign bank accounts and need help with e-filing late FBARs for undisclosed accounts, contact Sherayzen Law Office for legal and tax help. Our law firm consists of highly experienced international tax professionals who will thoroughly review your case, identify available options and prepare all of the legal documents and tax forms necessary for your voluntary disclosure process.

### New 2013 FBAR form: E-filing Explanation for Late FBARs
On October 1, 2013, in response to various requests from FBAR tax lawyers and accountants, FinCEN updated the online FBAR filing form. There are various new technical additions and a much friendlier user interface, but the inclusion of the explanation for the delay in FBAR filing is definitely the key new feature for the FBAR tax lawyers who are thinking about recommending the reasonable cause disclosure (a/k/a Modified Voluntary Disclosure) to their clients.
The late FBAR explanation has two particularly interesting characteristics.
Analysis of the Late Filing Explanation Choices
First, a taxpayer who files his FBAR late can choose among the following ten answers to explain the reason for filing the FBAR late:
A. Forgot to fileB. Did not know that I had to fileC. Thought account balance was below reporting thresholdD. Did not know that my account qualified as foreignE. Account statement not received in timeF. Account statement lost (replacement requested)G. Late receiving missing required account informationH. Unable to obtain joint spouse signature in timeI. Unable to access BSA E-Filing SystemZ. Other
These choices are somewhat surprising for FBAR tax lawyers because some of these choices would not normally constitute a reasonable cause, others are repetitive and some may actually get the taxpayer (especially a taxpayer who is not represented by an FBAR tax lawyer).
The most dangerous answer is “A” – forgetting the FBAR means that the taxpayer admits to the knowledge of the existence of the FBAR requirement and non-willfully but negligently fails to comply with the FBAR requirement. Potentially, the IRS can use this answer to impose a $10,000 penalty per violation.
Choice “B” is a good but insufficient choice. Lack of knowledge of the FBAR may help establish non-willfulness, but it is not sufficient in itself for a reasonable cause. FBAR tax lawyers usually start with non-willfulness, but this is not where they end.
Choices “C” and, to a lesser extent, “F” may be dangerous because it is unclear where the confusion (in case of “C”) comes from and why the statements (in the case of “F”) were lost. The taxpayer could be opening the door to potential charge that he is not compliant with the FBAR recordkeeping requirements.
Outside of U.S. territories, I am not certain who would be using answer “D”. In any case, by itself, it does not appear to be sufficient to avoid the imposition of an FBAR penalty.
Choices “E” and “G” are pretty much the same and would be useful in presenting the argument for the reasonable cause, but this task can hardly accomplished without presenting a comprehensive context in which these events occurred. The same problem applies to “H” and “I”.
Choice “Z” - Other Explanation
The second and most important feature of the new FBAR is that it provides the space for writing an explanation for why the FBARs are filed late – this is the last choice “Z”.
There is, however, a very important limitation with respect to choice “Z”; there are only a maximum of 750 characters allowed. In other words, FinCEN and the IRS only gave taxpayers a few tweets to present a complex argument for non-willfulness and reasonable cause. Most FBAR tax lawyers will agree that 750 characters is a laughable amount of space for a reasonable cause explanation.
I believe that this feature will continue to be a great obstacle to submitting reasonable cause explanations purely electronically. More likely, the electronic explanation will need to reference the reasonable cause statement on paper.
Possibility of PDF File Upload in the Future
It seems that the IRS also understands that there is a big problem with choice Z. I fully expect the IRS to finish and implement a new feature (probably in the next version of the FBAR) that would allow FBAR tax lawyers to upload their reasonable cause statements as a pdf file (in a same manner as it is currently done in many court systems in the United States).
Contact Sherayzen Law Office for Legal Help With Late FBARs
If you have undisclosed foreign accounts and you are facing a situation where your FBARs will be filed late, contact Sherayzen Law Office for professional legal help with your late FBARs. Our experienced FBAR tax firm will thoroughly analyze your case, present the available choices, and properly conduct your voluntary disclosure, including the preparation and filing of late FBARs and other necessary legal documents and tax forms.

### Offshore Voluntary Disclosure Attorney: Introduction to Program for Swiss Banks
Since the early 2000s, the IRS has engaged in a multi-layered effort to enforce U.S. tax laws overseas, in particular (at least from the perspective of an offshore voluntary disclosure attorney) curb tax evasion in Switzerland with the emphasis on undisclosed Swiss financial accounts (mainly FBAR compliance). In 2008, the U.S. Department of Justice (DOJ) scored a major victory in the now-famous UBS case.
Since that case, DOJ has pursued a large number of criminal investigations against the U.S. accountholders, Swiss tax and financial advisors and, actually, Swiss banks. There has also been a tremendous surge in IRS civil audits and John Doe summons. Even the Whistleblower Office became engaged in the international tax compliance efforts. A number of new laws and treaties, stemming from FATCA, have been utilized by the U.S. government in its worldwide efforts to increase U.S. tax compliance internationally.
As the DOJ increased its pressure on the U.S. taxpayers who have undisclosed foreign accounts, the IRS created a number of voluntary disclosure programs, 2012 Offshore Voluntary Disclosure Program (OVDP) being the latest example. As of September of 2013, it is estimated that about 40,000 U.S. taxpayers have voluntary participated in this program OVDP is now closed.
The Program – Voluntary Disclosure Program for Swiss Banks
On August 29, 2013, the DOJ announced a new, unprecedented initiative – The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program) – which is intended to allow Swiss banks to bring themselves into compliance with DOJ requirements and avoid any US enforcement action in exchanged for detailed disclosures and, in some cases, the payment of monetary penalties.
In essence, this is a voluntary disclosure program. Unlike the OVDP, however, this is “OVDP” for foreign banks in a foreign country! This is a truly unique reach that the DOJ and IRS have achieved in a country which has been celebrated for centuries for its bank secrecy laws.
Outlines of Required Disclosure
Under the Program, the Swiss banks are required to turn over a vast amount of extensive and detailed information regarding its account holders, including providing the following information: description of how the banks structured, operated and supervised their cross-border activities; list of names and functions of all individuals who participated in any of this activity; description of how a bank marketed its services to U.S. persons and serviced their accounts; list the value of accounts greater than $50,000 during three separate periods; on an account by account basis, the highest value during the period beginning August 1, 2008; the number of persons affiliated with the account and their functions; whether the account was held in a structure (a foreign corporation, foundation, etc.); whether it held U.S. securities; the name and role of any outside advisor affiliated with the account; information about transfers of funds into or out of the account; and other detailed information (note: these are some of the disclosure requirements, but there are many more - contact offshore voluntary disclosure attorney Eugene Sherayzen at Sherayzen Law Office for more information).
In essence, with this information, the IRS and DOJ can freely pursue civil and criminal investigations of U.S. persons who have had undisclosed bank accounts since 2008 (and possibly earlier).
Consequences for Swiss Banks
The banks who participate in the Program can use the it to effectively close-out any potential U.S. compliance issues and prevent future criminal prosecution of the banks. The hope is that it will enable Swiss banks to put this issue behind them and enable them to develop a more attractive investment environment in the future.
Consequences for U.S. Accountholders
As any offshore voluntary disclosure attorney will tell you, the consequences for the U.S. accountholders with undisclosed accounts in Switzerland are infinitely more dire. Armed with such detailed information, the IRS should have no problems auditing and, ultimately, prosecuting U.S. taxpayers who are not compliant with U.S. tax laws.
Furthermore, those individuals who have engaged in quiet disclosure at any point since 2008 are under severe risk of exposure and potential prosecution. For example, if a U.S. taxpayer had an undisclosed account since 2004 and engaged in quiet disclosure in 2012, he may now potentially face an IRS audit for all years going back to 2007 (and potentially further).
Additionally, there is a great uncertainly for U.S. taxpayers with Swiss accounts who wish to enter the OVDP, because their accounts may have already been disclosed independently by Swiss banks to the IRS. In this case, the OVDP participation may be precluded.
Contact Sherayzen Law Office for Legal Help with Undisclosed Swiss Accounts
If you have undisclosed Swiss accounts at any point since 2005, contact Sherayzen Law Office for professional help. Our international tax law firm is highly experienced in the voluntary disclosures of foreign financial accounts and other offshore assets. We will thoroughly analyze your case, determine the available voluntary disclosure options for your offshore assets, and meticulously implement the chosen plan of action (including preparation of all legal documents and tax forms).

### FBAR Penalties vs Offshore Voluntary Disclosure Program Penalties
There is a great confusion among international tax attorneys and Offshore Voluntary Disclosure Program (OVDP) applicants with respect to the OVDP Offshore Penalty and how it differs from the FBAR penalties. I already described in another article the OVDP penalties. In this article, I would like to compare and contrast some of the major features of the OVDP Offshore Penalty with the FBAR penalties.
FBAR Penalties
FBAR is one of the most unforgiving forms on the planet. The penalties associated with delinquent FBARs can be terrifying.
At the apex of the penalty structure are the criminal penalties that are imposed in association with a willful violation of the FBAR filing requirements under 31 U.S.C. section 5322(a), 31 U.S.C. section 5322(b), or 18 U.S.C. Section 1001. The criminal penalties may be up to 10 years in jail and $500,000 in fines.
Willful (i.e. where a person willfully fails to report an account or account identifying information) civil penalties equal to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation. See 31 U.S.C. section 5321(a)(5). Note, that a penalty in this case applies to each violation which is defined as each undisclosed account per year.
Even where the violation is non-willful, a person may be subject to a civil penalty of $10,000 per violation. Again, note that this is a penalty per violation – i.e. per each unreported account per each year.
For the purposes of this article, it is also important to note that the penalties apply only to “foreign financial accounts”. This term is defined broadly to include various types of accounts which are not normally associated with the word “account” (for example: a precious metals storage or a life insurance policy with a cash-surrender value). Nevertheless, the FBAR penalty would not apply to real estate or a business interest; it would apply only to foreign financial accounts – i.e. the balances on the foreign financial accounts and the number of these accounts constitute the primary penalty base for the calculation of the FBAR penalties.
OVDP Offshore Penalties
In contrast to traditional FBAR penalties, OVDP Offshore Penalty may mean a completely different penalty range and penalty base.
Offshore Penalty Range
Unlike the FBAR penalties, OVDP Offshore Penalty is a limited penalty - i.e. there is a certain penalty that you have to pay by virtue of participating into the program. It is very important to understand that most individual circumstances, willfulness, non-willfulness and reasonable case have virtually no impact on the calculation of the Offshore Penalty.
There are three tiers of the OVDP Offshore Penalty. First, there is a 5% penalty tier. There are various possibilities how one would be entitled to such a favorable treatment; a detailed discussion of the 5% penalty possibilities is described elsewhere on sherayzenlaw.com.
Second, there is a 12.5% penalty tier. An OVDP applicant would be entitled to this penalty tier only if, during each of the years covered by the OVDP, the taxpayer’s penalty base (see below for detailed explanation of what “penalty base” means) is less than $75,000.
Finally, if neither 5% nor 12.5% penalty tiers apply, the default penalty of 27.5% of the penalty base will apply.
Penalty Base
As important as the penalty range, it pales in comparison to the determination of the OVDP Offshore Penalty base, because these calculations can be vastly different from the FBAR penalties.
First, the Offshore Penalty is imposed only once on the highest amount of the penalty base during the Voluntary Disclosure period (i.e. years covered by the OVDP which sometimes can be quite tricky to figure out).
Second, the base for the Offshore Penalty includes a wide variety of assets including foreign bank accounts, the fair market value of assets in undisclosed offshore entities, and the fair market value of any foreign assets that were either acquired with improperly untaxed funds or produced improperly untaxed income. The general rule is that the offshore penalty is intended to apply to all of the taxpayer’s offshore holdings that are related in any way to tax non-compliance, regardless of the form of the taxpayer’s ownership or the character of the asset.
This means that the Offshore Penalty may include such assets as business ownership interests, stocks, artwork, automobiles, patents, trademarks, and (very important) real estate. Even ownership of U.S. businesses acquired with tainted funds may be open to the Offshore Penalty.
In other words, the penalty base of the OVDP Offshore Penalty may include a much greater variety of assets in addition to the assets already covered by the FBAR.
Penalty Differences Between FBARs and OVDP Should Influence Your Voluntary Disclosure Options
Given the tremendous differences in the range of penalties and the calculation of the penalty base, it is highly important (and I cannot stress this point enough) to properly analyze the potential tax liabilities under both methods before making the decision on whether to enter the OVDP or pursue a reasonable cause (so-called “noisy” or “modified”) voluntary disclosure. It is highly important that the client understands the differences in the calculations and the potential risks of pursuing either option.
Contact Sherayzen Law Office for Professional Help With the Disclosure of Your Foreign Financial Accounts
If you have undisclosed foreign financial accounts or other offshore assets, contact Sherayzen Law Office for legal help. Our experienced international tax law firm will thoroughly analyze your case, calculate your potential tax liabilities, present you with a range of options, and implement your voluntary disclosure plan (including preparation of all tax forms and legal documents).

### Foreign Tax Credit for Individuals: Who Can Take It?
If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take these qualified foreign taxes as a tax credit to offset (in part or in full) your U.S. tax liability. An important questions arises for foreign tax credit attorneys: who is eligible to claim a foreign tax credit on his individual U.S. tax returns.
The first and most obvious category consists of U.S. citizens. If you are a U.S. citizen, you would usually be entitled to take a credit for foreign taxes that you paid or accrued. Part of the reason for this eligibility is the fact that, as a U.S. citizen, you are taxed by the U.S. government on your worldwide income irrespective of where you live.
Resident aliens constitute the second eligible category to claim foreign tax credit. Same reasoning applies as to U.S. citizens.
In most cases, nonresident aliens would not be able to take a foreign tax credit. However, there are important exceptions. The two major exceptions are: Puerto Rico residency or ECI (Effectively Connected Income).
The latter exception requires a bit more explanation. If you are a non-resident alien who pays or accrues tax to a foreign country or a U.S. possession on income from foreign sources that is effectively connected (here where the “ECI” term comes into play) with a trade or business in the United States, then you may be able to claim foreign tax credit on your individual U.S. tax return. ECI is a term of art and whether your foreign income is effectively connected with a trade or business in the United States is a complex legal question that should be reviewed by an international tax attorney.
Note that, where a non-resident alien pays foreign taxes on income from U.S. sources only because he is a citizen or resident of that foreign country, then this tax cannot be used in figuring the amount of the foreign tax credit.
Contact Sherayzen Law Office for Professional Help with Your Foreign Tax Credit
Claiming a foreign tax credit can be a very complex tax question and you need the right professionals to help you. Contact Sherayzen Law Office for experienced professional help with your foreign tax credit issues.

### 2013 4th Quarter Underpayment and Overpayment Interest Rates
The underpayment and overpayment interest rates will remain the same for the calendar quarter beginning October 1, 2013. The rates will be:
three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### 2014 Tax Season to Start Later Following Government Closure
The IRS recently announced a delay of approximately one to two weeks to the start of the 2014 filing season to allow adequate time to program and test tax processing systems following the 16-day federal government closure.
The IRS is exploring options to shorten the expected delay and will announce a final decision on the start of the 2014 filing season in December, Acting IRS Commissioner Danny Werfel said. The original start date of the 2014 filing season was January 21, 2014, and with a one- to two-week delay, the IRS would start accepting and processing 2013 individual tax returns no earlier than January 28.
The government closure came during the peak period for preparing IRS systems for the 2014 filing season. Programming, testing and deployment of more than 50 IRS systems is needed to handle processing of nearly 150 million tax returns. Updating these core systems is a complex, year-round process with the majority of the work beginning in the fall of each year.
About 90 percent of IRS operations were closed during the shutdown, with some major workstreams closed entirely during this period, putting the IRS nearly three weeks behind its tight timetable for being ready to start the 2014 filing season. There are additional training, programming and testing demands on IRS systems this year in order to provide additional refund fraud and identity theft detection and prevention.
“Readying our systems to handle the tax season is an intricate, detailed process, and we must take the time to get it right,” Werfel said. “The adjustment to the start of the filing season provides us the necessary time to program, test and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers. We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.”
The IRS will not process paper tax returns before the start date, which will be announced in December. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit. The April 15 tax deadline is set by statute and will remain in place.

### IRS Releases Proposed Guidance for FFIs under FATCA
On October 29, 2013, many Austin FATCA tax lawyers received the news that the U.S. Department of the Treasury and the Internal Revenue Service issued a notice for foreign financial institutions (FFIs) to comply with the information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA). FATCA is rapidly becoming the global standard in the effort to curb offshore tax evasion.
To date, Treasury has signed nine intergovernmental agreements (IGAs), has reached 16 agreements in substance, and is engaged in related conversations with many more jurisdictions.
The notice, which is the next step in implementation, previews proposed guidance and provides a draft agreement for participating FFIs directly engaging in agreements with the IRS and those reporting through a Model 2 IGA (like Switzerland). It provides FFIs with advance notice prior to the beginning of FATCA withholding and account due diligence requirements on July 1, 2014. The FFI agreement will be finalized by year end.
“The Agreement and forthcoming guidance have been designed to minimize administrative burdens and related costs for foreign financial institutions and withholding agents,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “Today’s preview demonstrates the Administration’s commitment to ensuring full global cooperation and a smooth implementation.”
Congress enacted FATCA in 2010 as a way to identify U.S. citizens using foreign accounts to evade their U.S. tax responsibilities. FATCA requires U.S. financial institutions to withhold a portion of payments made to FFIs that do not agree to identify and report information on U.S. account holders.
Treasury has taken a global approach to the exchange of tax information in its implementation of FATCA. To address situations where foreign law would prevent an FFI from complying with the terms of an FFI agreement, Treasury developed two alternative model IGAs. Under Model 1, FFIs report to their respective governments who then relay that information to the IRS. Under Model 2, FFIs report directly to the IRS to the extent that the account holder consents or such reporting is otherwise legally permitted, and such direct reporting is supplemented by information exchange between governments with respect to non-consenting accounts.
October 29th Notice provides guidance to FFIs entering into agreements directly with the IRS, and to those reporting through a Model 2 IGA. The notice incorporates updates to certain due diligence, withholding, and other reporting requirements, and includes a draft FFI agreement. The draft FFI agreement will be finalized by December 31, 2013. Treasury and the IRS will continue to provide more detailed guidance on FATCA implementation as necessary.
The regulations were intentionally designed to appropriately balance the scope of entities and accounts subject to FATCA with due diligence requirements, while also phasing in the related obligations over several years. For example, the final regulations exempt all preexisting accounts held by individuals with $50,000 or less from review. For similar accounts with less than $1,000,000, an FFI is only required to search the account information that is electronically available. In many cases, FFIs are permitted to rely on information that they already must collect for local anti-money laundering and know-your-customer rules.
Many of these cost-saving simplifications were the result of comments received from affected financial institutions and foreign governments, which helped us to tailor the rules to achieve the policy objectives of the statute without imposing undue burdens or costs.
While withholding requirements begin next July and the first report of FATCA information is due in 2015, the IRS FATCA registration website is already open so that FFIs can begin testing the registration process and entering information.
Contact Sherayzen Law Office for Help with Undisclosed Offshore Accounts
If you have undisclosed foreign financial accounts overseas, contact Sherayzen Law Office for professional legal and accounting help. Our experienced international tax firm will thoroughly review your case, analyze the existing potential liabilities, propose appropriate solutions and implement the plan tailored to the facts of your case.

### Tax-Filing Extension for Individuals Expires on October 15, 2013
Individual taxpayers who filed Form 4868 to request a six-month extension to file their 2012 tax returns should be cognizant of the fast-approaching October 15, 2013 final deadline to timely file these extended tax returns. This is also the last day the IRS will accept an electronically filed tax return for the year 2012.
The deadline equally applies to the extended 2012 tax returns for the taxpayers who reside in the United States and outside of the United States. It also applies to the filing of any required information tax returns such as Forms 3520, 8865, 5471, et cetera. Particular attention should be paid to Forms 8938 (the new forms created by the IRS in 2011 as a result of FATCA).
While this is not true in every situation, generally, the taxpayers who are in the Offshore Voluntary Disclosure Program should nevertheless attempt to file their extended 2012 tax returns timely.
Moreover, October 15, 2013, is the final deadline to fund a SEP-IRA or solo 401(k) for tax year 2012 if the taxpayer requested an automatic extension of time to file.
This essay is provided as a courtesy notice by Sherayzen Law Office, Ltd. a Minnesota international tax law firm for businesses and individuals; the essay does not constitute a legal or tax advice on your particular situation.

### IRS Recognized All Legal Same-Sex Marriages For Federal Tax Purposes
On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.
The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.
Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.
Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.
Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.
Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.
Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.
Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.
How to File a Claim for Refund
Taxpayers who wish to file a refund claim for income taxes should use Form 1040X, Amended U.S. Individual Income Tax Return.
Taxpayers who wish to file a refund claim for gift or estate taxes should file Form 843, Claim for Refund and Request for Abatement. For information on filing an amended return, see Tax Topic 308, Amended Returns, available on IRS.gov, or the Instructions to Forms 1040X and 843. Information on where to file your amended returns is available in the instructions to the form.
Future Guidance
Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. Treasury and IRS also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this Revenue Ruling.
Other agencies may provide guidance on other federal programs that they administer that are affected by the Code.
Revenue Ruling 2013-17, along with updated Frequently Asked Questions for same-sex couples and updated FAQs for registered domestic partners and individuals in civil unions, are available today on IRS.gov. See also Publication 555, Community Property.
Treasury and the IRS will begin applying the terms of Revenue Ruling 2013-17 on Sept. 16, 2013, but taxpayers who wish to rely on the terms of the Revenue Ruling for earlier periods may choose to do so, as long as the statute of limitations for the earlier period has not expired.

### Boston International Tax Attorney: Retainer by Location
Retaining a Boston international tax attorney is a very important decision. One of the basic issues that taxpayers face is whether it is better to retain an international tax attorney in Boston or in Minneapolis if you live in Boston? If you were to search “international tax attorney Boston”, Sherayzen Law Office, Ltd. (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Boston. The question is: should the geographical proximity of an attorney play a role in the retainer decision?
The answer depends on many factors. On the one extreme, if you are looking for a DUI attorney, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and only an attorney admitted to practice before the court of a local jurisdiction should handle the case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
One the other end of the spectrum, if you are searching for a Boston international tax attorney because you have undeclared offshore accounts, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of practice (i.e. international tax law) will become the overriding factors in retaining an international tax attorney.
What if you have an international tax attorney in Boston, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is an attorney in Boston.
Second, in addition to differences in personal qualities, the experience of the international tax attorney in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the attorney and should override the attorney’s particular geography.
What is a fairly unique feature about Sherayzen Law Office is that we can handle the entire case internally – both, the legal and the accounting sides of it. Most Boston international tax attorneys in this area of law do not do that and rely on the outside accountant to provide such additional services. The outsourcing approach has various disadvantages, including potential leak of information, lack of close coordination between both sides of the case, increased possibility of missed opportunities and absence of the unity of goal among the professionals who are preoccupied with their respective areas only. The approach adopted by Sherayzen Law Office is aimed to reduce and eliminate such problems.
So, the next time you search for a Boston international tax attorney, keep these issues in mind while retaining an attorney from Minneapolis or any other city.
Contact Sherayzen Law Office for Help With International Tax Issues
If you have any international tax issues with respect to undeclared foreign assets, international tax compliance or international tax planning, contact an experienced international tax attorney at Sherayzen Law Office for comprehensive legal and tax help.

### International Tax Attorney Austin: Geography & Retainer Choice
Is it is better to retain an international tax attorney in Austin or in Minneapolis if you live in Austin? If you were to search “international tax attorney Austin”, Sherayzen Law Office, PLLC (which is based in Minneapolis) is likely to come out on the first page together with other international tax attorneys in Austin. The question is: should the geographical proximity of an attorney play a role in the retainer decision?
The answer depends on many factors. On the one extreme, if you are looking for a criminal law attorney in an involuntary manslaughter case, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and only an attorney admitted to practice before the court of a local jurisdiction should handle the case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
One the opposite end of the spectrum, if you are searching for international tax attorney Austin because you have undeclared offshore assets, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of practice (i.e. international tax law) will become the overriding factors in retaining an international tax attorney.
What if you have an international tax attorney in Austin, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is an attorney in Austin.
Second, in addition to differences in personal qualities, the experience of the international tax attorney in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the attorney and should override the attorney’s particular geography.
The next time you search for international tax attorney Austin, keep these issues in mind while retaining an attorney from Minneapolis or any other city.
Contact Sherayzen Law Office for Help With International Tax Issues
If you have any international tax issues with respect ot undeclared foreign assets, international tax compliance or international tax planning, contact the experienced international tax firm of Sherayzen Law Office for comprehensive legal and tax help.

### FATCA Online Registration System - FATCA Lawyer Minneapolis
On August 22, 2013, the Internal Revenue Service announced the opening of a new online registration system for financial institutions that need to register with the IRS under the Foreign Account Tax Compliance Act (FATCA).
Financial institutions that must register with the IRS to meet their FATCA obligations can now begin the process of registering by creating an account and providing required information. Financial institutions will also be able to provide required information for their branches of operation and other members of their expanded affiliate groups in which the financial institution is the lead organization.
The registration system, designed to enable secure account management, is a web-based application with around-the-clock availability.
Within a secure environment, the new registration system enables financial institutions to:
•establish online accounts;
•customize home pages to manage accounts;
•designate points of contact to handle registrations;
•oversee member and/or branch information; and
•receive automatic notifications of status changes.
Financial institutions are encouraged to become familiar with the system, create their online accounts and begin submitting their information. Starting in January 2014, financial institutions will be expected to finalize their registration information by logging into their accounts, making any necessary changes and submitting the information as final.
As registrations are finalized and approved in 2014, registering financial institutions will receive a notice of registration acceptance and will be issued a global intermediary identification number.
The IRS will electronically post the first IRS Foreign Financial Institution (FFI) List in June of 2014, and will update the list monthly. To ensure inclusion in the June 2014 IRS FFI List, financial institutions will need to finalize their registrations by April 25, 2014.

### Minneapolis International Tax Attorney: Geography in Retainer Choice
If you were to search “Minneapolis international tax attorney”, Sherayzen Law Office, PLLC (which is based in Minneapolis) is likely to come out on the first page together with other Minneapolis international tax attorneys. The question is: should the geographical proximity of an attorney play a role in the retainer decision?
The answer depends on many factors. On the one extreme, if you are looking for a criminal law attorney in a murder case, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and only an attorney admitted to practice before the court of a local jurisdiction should handle the case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
If you are searching for a Minneapolis international tax attorney because you have undeclared offshore assets, then the pendulum swings to other extreme. Here, the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of practice (i.e. international tax law) will become the overriding factors in retaining an international tax attorney.
If you live in Minneapolis and you find a Minneapolis international tax attorney, then consider two other factors before hiring the attorney. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, have a consultation with your Minneapolis international tax attorney before retaining him.
Second, in addition to differences in personal qualities, the experience of the international tax attorney in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the attorney and should override the attorney’s particular geography.
Of course, the best outcome would be to find the international tax attorney in Minneapolis who you trust and who satisfies both issues above.
Contact Sherayzen Law Office Minneapolis International Tax Attorney for Help With International Tax Issues
If you have any international tax issues with respect to undeclared foreign assets, international tax compliance or international tax planning, contact the experienced international tax firm of Sherayzen Law Office for comprehensive legal and tax help.

### International Tax Attorney Boca Raton vs Minneapolis: Retainer Choice
Is it is better to retain an international tax attorney in Boca Raton or in Minneapolis if you live in Boca Raton? Oftentimes, if you were to search “international tax attorney boca raton”, Sherayzen Law Office, PLLC (which is based in Minneapolis) will come out on the first page as other international tax attorneys in Boca Raton. The question is: should the geographical proximity of an attorney play a role in the retainer decision?
The answer is not a simple one. The experience of the attorney and the area of law in which he practices are likely to be the determining factors, though.
On the one extreme, if you are looking for a criminal law attorney in an involuntary manslaughter case, then you may not have a choice but to find a local attorney. This is because local law and procedure would govern in this case, and only an attorney admitted to practice before the court of a local jurisdiction should handle the case. Of course, even in this case, there are exceptions because, sometimes, the unique qualities of an outside attorney are so desirable by the client that the court may accede in temporarily admitting this outside lawyer to practice just for one case.
One the opposite end of the spectrum, if you are searching for international tax attorney Boca Raton because you have undeclared offshore assets, then the knowledge of local law and procedure are likely to be of very little value. Instead, the experience and knowledge of an attorney in his area of practice (i.e. international tax law) will become the overriding factors in retaining an international tax attorney.
What if you have an international tax attorney in Boca Raton, do you still want to consider an attorney in Minneapolis? The answer is “yes” – for two reasons. First, international tax attorneys differ in their natural ability to identify problems and find solutions, creativity, advocacy and many other factors. Therefore, there is no reason to stay away from a better international tax attorney in Minneapolis even if there is an attorney in Boca Raton.
Second, in addition to differences in personal qualities, the experience of the international tax attorney in the international tax sub-area that you need and the ability to analyze the specific subject matter in the broader context are very important factors in retaining the attorney and should override the attorney’s particular geography.
The next time you search for international tax attorney Boca Raton, keep these issues in mind while retaining an attorney from Minneapolis or any other city.
Contact Sherayzen Law Office for Help With International Tax Issues
If you have any international tax issues with respect to undeclared foreign assets, international tax compliance or international tax planning, contact the experienced international tax firm of Sherayzen Law Office for comprehensive legal and tax help.

### Expatriation Tax: “Covered Expatriates” under Notice 2009-85
As an international tax attorney who constantly deals with expatriates, I am often contacted by individuals who are thinking about renouncing their U.S. citizenship. If you are consideration going down this path, you should understand the very serious legal and tax implications of this strategy. On the tax side, you should be especially aware of the current expatriation tax rules under the Internal Revenue Code (IRC) Sections 877A and 2801, IRS Notice 2009-85 and other relevant IRC sections and regulations.
 Statutory Background
The new IRC Section 877A (and corresponding changes to other relevant IRC sections) was added pursuant to Section 301 of the Heroes Earnings Assistance and Relief Tax Act (HEART) of 2008. HEART also added important IRC Section 2801, which imposes transfer tax on U.S. persons who receive gifts or bequests on or after June 17, 2008; this article does not address Section 2801 provisions. In response to HEART, on November 9, 2009, the IRS issued Notice 2009-85 which explains the application and implementation of Section 877A provisions.
This article will cover some of the fundamental rules under IRS Notice 2009-85 (note that other expatriation tax rules will apply depending upon when a U.S. citizen relinquished his or her citizenship, or when an individual ceased to be a lawful permanent resident of the U.S.). Notice 2009-85 is a highly complex and broad IRS regulation; therefore this article will focus its attention solely on the definition of a “covered expatriate”.
This article is not intended to constitute tax or legal advice. Expatriation can involve many complex tax and legal issues, so you are advised to seek an experienced expatriate international tax attorney in these matters.
 Definition of “Expatriate” Under IRS Notice 2009-85
It is important to understand that the expatriation tax regime imposed by Section 877A applies only to individuals who fall under the definition of “covered expatriates”. Understanding this terms requires definition of each of its part – “expatriate” and “covered”.
IRC Section 877A(g)(2) provides that the term “expatriate” means (1) any U.S. citizen who relinquishes his or her citizenship and (2) any long-term resident of the United States who ceases to be a lawful permanent resident of the United States (within the meaning of section 7701(b)(6), as amended).
Note that “long-term resident” is not equivalent to “permanent resident” and has its own definition. Pursuant to section 877A(g)(5), a long-term resident is an individual who is a lawful permanent resident of the United States in at least 8 taxable years during the period of 15 taxable years ending with the taxable year that includes the expatriation date. Expatriation date is separately defined by Section 877A(g)(3) as the date an individual relinquishes U.S. citizenship or, in the case of a long-term resident of the United States, the date on which the individual ceases to be a lawful permanent resident of the United States within the meaning of section 7701(b)(6).
Let’s deal with each of these events separately. Section 877A(g)(4) foresees four different possibilities of relinquishing U.S. citizenship (whichever is the earliest date will be treated as the date an individual relinquishes his U.S. citizenship):
a) the date the individual renounces his or her U.S. nationality before a diplomatic or consular officer of the United States pursuant to paragraph (5) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(5)), provided the renunciation is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State;
b) the date the individual furnishes to the United States Department of State a signed statement of voluntary relinquishment of U.S. nationality confirming the performance of an act of expatriation specified in paragraphs (1), (2), (3), or (4) of section 349(a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)), provided the voluntary relinquishment is subsequently approved by the issuance to the individual of a certificate of loss of nationality by the United States Department of State;
c) the date the United States Department of State issues to the individual a certificate of loss of nationality;
d) the date a court of the United States cancels a naturalized citizen’s certificate of naturalization.
Definition of “cessation of lawful permanent residency” is even more complex (as many expatriate international tax attorneys and immigration attorneys will readily affirm) and primarily driven by immigration law, in particular Section 7701(b)(6). Pursuant to this section, a long-term resident ceases to be a lawful permanent resident if (A) the individual’s status of having been lawfully accorded the privilege of residing permanently in the United States as an immigrant in accordance with immigration laws has been revoked or has been administratively or judicially determined to have been abandoned, or if (B) the individual (1) commences to be treated as a resident of a foreign country under the provisions of a tax treaty between the United States and the foreign country, (2) does not waive the benefits of the treaty applicable to residents of the foreign country, and (3) notifies the Secretary of such treatment on Forms 8833 and 8854. Again, it is a strong recommendation to contact an expatriate international tax attorney to determine whether your situation fits under the legal definitions provided above.
 “Covered Expatriates” Under IRC Section 877A
We have finally come to the final destination of this article – understanding who is considered to be a “covered expatriate”. Generally, expatriate international tax attorneys would turn to IRC Section 877A(g)(1)(A), which defines three categories of “covered expatriate”. Under this section, the term “covered expatriate” means an expatriate who:
(1) has an average annual net income tax liability for the five preceding taxable years ending before the expatriation date that exceeds a specified amount that is adjusted for inflation ($145,000 in 2009) (the “tax liability test”);
(2) has a net worth of $2 million or more as of the expatriation date (the “net worth test”); or
(3) fails to certify, under penalties of perjury, compliance with all U.S. Federal tax obligations for the five taxable years preceding the taxable year that includes the expatriation date, including, but not limited to, obligations to file income tax, employment tax, gift tax, and information returns, if applicable, and obligations to pay all relevant tax liabilities, interest, and penalties (the “certification test”).
For the purposes of the certification test, this certification must be made on Form 8854 and must be filed by the due date of the taxpayer’s Federal income tax return for the taxable year that includes the day before the expatriation date. See a separate article on www.sherayzenlaw.com for information concerning Form 8854.
Note that the determination as to whether an individual is a covered expatriate is made as of the expatriation date (see above for the definition).
 Definition of “Covered Expatriate” is Complex; Two Major Exceptions Listed
As expected, there are serious complications with respect to determining eligibility under the “tax liability” and “net worth” tests (generally, Section III of IRS Notice 97-19 should be consulted) - you will need to discuss your particular situation with an expatriate international tax attorney to determine whether you fall under any of the three categories.
I will solely  point out the most glaring exceptions to the tax liability test and net worth test. IRC Section 877A(g)(1)(B) provides that an expatriate will not be treated as meeting the tax liability test or the net worth test of section 877(a)(2)(A) or (B) if:
(1) the expatriate became at birth a U.S. citizen and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and has been a U.S. resident for not more than 10 taxable years during the 15 taxable year period ending with the taxable year during which the expatriation date occurs; or
(2) the expatriate relinquishes U.S. citizenship before the age of 18.5 (eighteen and a half) and has been a U.S. resident for not more than 10 taxable years before the date of relinquishment.
 Contact Sherayzen Law Office for Legal Help with Expatriation Issues
If you are considering expatriation as a tax strategy, you need to be aware of the very complex legal and tax issues related to expatriation. This why you need to contact Eugene Sherayzen, an experienced international tax attorney at Sherayzen Law Office; our international tax firm will thoroughly analyze the expatriation option for you, explain to you the consequences of taking such a step, and (if you still wish to proceed with the strategy) guide you through the entire process of expatriation, including completing all necessary tax and legal forms.

### Tax Withholding and Payments to Foreign Persons: Form W-8BEN
Form W-8BEN, (“Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding”) may be used by foreign persons who receive certain types of income to establish that they are non-U.S. persons, or to claim a reduced rate of (or exemption from) withholding as a resident of a foreign country with which the U.S. has a tax treaty.
This article will cover the basics of Form W-8BEN. It is not intended to convey tax or legal advice. US tax rules regarding international taxation can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters.
General Rule: Income Subject to Tax Withholding Under IRC Sections 1441, 1442 and 1446
In general, pursuant to IRC Sections 1441 and 1442, foreign persons are subject to a 30% U.S. tax rate on income received from U.S.-source income consisting of dividends, rents, annuities, royalties, compensation received (or expected) for services performed, premiums, substitute payments in a securities lending transaction, or any other fixed or determinable annual or periodical gains, profits, or income. A payment is considered to have been made to foreign persons whether such payment is made directly to the beneficial owner or indirectly through an intermediary, agent or partnership, for the benefit of the beneficial owner.
It is also important to note that, pursuant to IRC Section 1446 (Withholding Tax on Foreign Partners' Share of Effectively Connected Income), a partnership that conducts trade or business in the United States is required to withhold tax on a foreign partner’s distributive share of the partnership’s “effectively connected income” (ECI). Note that ECI is a term of art in the area of tax withholding law with its own complex definition and important tax consequences to the partnership and its partners.
Form W-8BEN
If certain types of income (such as described above) are received by an individual required to file Form W-8BEN, the form must be filed in order to demonstrate any of the following: (1) for foreign persons to establish that they are not U.S. persons, (2) to claim a reduced rate of, or exemption from, a tax withholding by reason of being a resident of a foreign country with which the United States has an income tax treaty, if applicable, (3) or in order for persons to claim that they are beneficial owners of the income for which Form W-8BEN is being provided or a partner in a partnership subject to IRC section 1446.
With respect to Section 1446, note that submitting Form W-8BEN by a foreign person that is a partner in a partnership may satisfy the requirements for all three Section 1441, 1442 and 1446; but this is not always the case. Sometimes, the documentation requirements for Section 1446 may differ from those of 1441 and 1442 (See Regulations sections 1.1446-1 through 1.1446-6). Furthermore, the owner of a disregarded entity will need to submit the appropriate Form W-8 for the purposes of Section 1446.
Form W-8BEN may also be required to be filed in order for persons to claim an exception from domestic information reporting and backup withholding for certain categories of income not subject to foreign-person withholding, including bank deposit interest, foreign source interest, dividends, rents, or royalties, broker proceeds, short-term (183 days or less) original issue discount (OID), and proceeds from a wager placed by a nonresident alien individual in various types of gambling games. Additionally, Form W-8BEN may be used to establish that income from a notional principal contract is not effectively connected income with a U.S. trade or business.
Who Must File Form W-8BEN
Foreign persons who are the beneficial owners of an amount subject to withholding must submit W-8BEN to the withholding agent or payer (and it must be given when requested by the withholding agent or payer regardless of whether a reduced rate of, or exemption from, withholding is claimed). However, Form W-8BEN should not be submitted by U.S. citizens (even if such citizens reside outside the U.S.), or by nonresident alien individuals claiming exemption from withholding on compensation for independent or dependent personal services performed in the U.S.
Contact Sherayzen Law Office for Help With US Tax Withholding Rules Regarding Payments to Foreign Persons
U.S. tax withholding rules are complex and may lead to various complications in tax compliance and tax planning for businesses and individuals. In order to avoid costly mistakes, contact the experienced Form W-8BEN tax firm of Sherayzen Law Office for help with U.S. tax withholding rules.

### Home Office Expense and Unrecaptured Section 1250 gain
Do you take the home office expense on Schedule C for your small business? While taking the home office expense can help reduce your tax liability, you should be aware of a potential significant downside: unrecaptured Section 1250 gain on depreciation.
This article will explain the basics of unrecaptured Section 1250 gain; it is not intended to convey tax or legal advice. Running a small business can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
Section 1250 Property Defined
The IRS defines Section 1250 property to include, “[A]ll real property that is subject to an allowance for depreciation and that is not and never has been section 1245 property. It includes a leasehold of land or section 1250 property subject to an allowance for depreciation.” (Section 1245 property includes a variety of specified types of property, including tangible and intangible personal property).
Treatment of Unrecaptured Section 1250 Gain
Most taxpayers are aware that when single individuals or married couples sell their primary residence, some or all of the gain may be excluded from taxation (the exclusion is $250,000 for single taxpayers and $500,000 for married couples). Gain that exceeds the exclusion amount is then taxed at the favorable capital gains rates.
However, when taxpayers take the home office expense and depreciate their homes, the typical tax rules no longer apply. This is partly because by taking a depreciation expense on a home, a benefit is received in the form of a lower tax liability; thus it only makes sense that the IRS would want a portion of that amount back when a taxpayer finally sells a home (this is referred to as “recapturing” depreciation).
Unlike the general rule for sales or exchanges of property, if depreciable or amortizable property is disposed of at a gain, taxpayers may have to treat all, or part of, the gain (even if otherwise nontaxable) as ordinary income. Whereas the sale or exchange will allow taxpayers to pay at capital gains rates, dispositions involving unrecaptured Section 1250 gain will be taxed at a maximum of 25%, regardless of a taxpayer’s ordinary income bracket. Note that like typical capital gains transactions, dispositions involving unrecaptured Section 1250 gain will still be reported on Schedule D of Form 1040.
Does it Matter if Depreciation Expense Was Not Taken?
A frequent question arises when taxpayers take the home office expense on their Form 1040 Schedule C. Because of the disadvantage of paying tax on unrecaptured Section 1250 gain, taxpayers wonder whether they can simply take the home office expense but not take depreciation expense on their home, thereby avoiding this tax.
Unfortunately, this is not allowed under the Internal Revenue Code. As with rental real estate, taxpayers are imputed to have depreciated their business assets, regardless of whether depreciation was actually taken. As the IRS notes in Publication 946, “You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater. Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). Depreciation allowable is depreciation you are entitled to deduct. If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable.”

### IRS Issues a Proposed Regulation Regarding Employer-Sponsored Healthcare Plans
The IRS recently issued a proposed rule entitled, “Minimum Value of Eligible Employer-Sponsored Plans and Other Rules Regarding the Health Insurance Premium Tax Credit” (see, 26 CFR Part 1) regarding the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, and related rules and laws (generally, “PPACA”). In the proposed regulation, the IRS has ruled that employer-sponsored healthcare plans will be unable to include various wellness programs in order to meet minimum value (MV) coverage requirements under the PPACA and related rules. In general, large employers (typically 50 full-time employees or more) who do not meet certain minimum coverage standards under the PPACA must pay an excise tax.
Many employers sought to include wellness programs in their plans in order to reduce health care coverage costs. In general, wellness programs are often designed to reduce potential health problems for employees through various means. Certain wellness programs may even require employees to meet an established health standard.
The article will give a basic summary of a proposed rule and the MV calculation. It is not intended to constitute tax or legal advice. The new rules under the PPACA will involve many complex tax and legal issues, so you are advised to seek an experienced attorney if you have questions in these areas. Sherayzen Law Office, PLLC can assist you in all of your tax, business-planning and legal needs, and help you avoid making costly mistakes.
MV Determinations under the Proposed Regulation
In making its proposed rule, the IRS noted:
“Commentators offered differing opinions about how nondiscriminatory wellness program incentives that may affect an employee’s cost sharing should be taken into account for purposes of the MV calculation. Some commentators noted that the rules governing wellness incentives require that they be available to all similarly situated individuals. These commentators suggested that because eligible individuals have the opportunity to reduce their cost-sharing if they choose, a plan’s share of costs should be based on the costs paid by individuals who satisfy the terms of the wellness program. Other commentators expressed concern that, despite the safeguards of the regulations governing wellness incentives, certain individuals inevitably will face barriers to participation and fail to qualify for rewards. These commentators suggested that a plan’s share of costs should be determined without assuming that individuals would qualify for the reduced cost-sharing available under a wellness program.”
The IRS stated that there are several methods for determining MV (under Notice 2012-31 and 45 CFR 156.145(a)): “the MV Calculator, a safe harbor, actuarial certification, and, for small group market plans, a metal level.” According to the proposed rule, employers may determine whether a certain plan provides MV by utilizing an HHS and IRS MV calculator, unless a safe harbor exists. Certain safe harbor plans will be specified in future guidance.
Under 45 CFR 156.145(a) and the proposed rule, “[P]lans with nonstandard features that cannot determine MV using the MV Calculator or a safe harbor” must use the actuarial certification method. Further, it is required that the actuary performing the MV calculation must be a member of the American Academy of Actuaries and perform the analysis in accordance with generally accepted actuarial principles and methodologies, and its related standards.
Exception to the Wellness Program Rule
The IRS proposed rule does provide one exception to the wellness program MV calculations for certain anti-tobacco related programs. Under the proposed regulation, “…[F]or nondiscriminatory wellness programs designed to prevent or reduce tobacco use, MV may be calculated assuming that every eligible individual satisfies the terms of the program relating to prevention or reduction of tobacco use.”

### Forms 3520 and 3520-A and Increased Use of Foreign Trusts
The Internal Revenue Service recently released its Statistics of Income Studies (SOI) reports concerning data for 2010 foreign trusts that have U.S. persons as grantors, transferors, or beneficiaries. The data shows that, despite the various compliance costs associated with reporting requirements, use of foreign trusts by U.S. taxpayers continues to increase.
This article will briefly explain Form 3520 and Form 3520-A, and highlight some of the newly released SOI data relating to such forms. The article is not intended to constitute tax or legal advice. US-International taxation and foreign trusts can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters.
 Form 3520
The purpose of Form 3520 (“Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts”) is for U.S. persons (and executors of estates of U.S. decedents) to report certain transactions with foreign trusts, ownership of foreign trusts (see IRC Sections 671-679), and receipt of certain large gifts or bequests from certain foreign individuals.
The SOI data for Forms 3520 with Gratuitous Transfers for 2010 shows U.S. taxpayers filed 950 returns with transfers for a total value of 1.49 billion dollars. This was an increase in the number of returns from 2006 (752 returns with transfers) and 2002 (429 returns with transfers). The total transferred value for the year of the study, however, decreased from 2002 (2.18 billion) and 2006 (1.64 billion).
Certain countries figure prominently in the SOI data. For Forms 3520 with Gratuitous Transfers for 2010, Mexico led the way with 178 transfers (approximately $236 million in value), followed by Puerto Rico (approximately $57 million in value). Other leading countries include St. Christopher/Nevis, with 58 ($21.68 million), Canada, with 49 ($63.69 million), Isle of Man with 47 ($82.44 million), and United Kingdom and Northern Ireland with 45 (12.78 million).
For Forms 3520 with Non-Grantor Trust Distributions, there were 1,698 total returns with total distributions of 3.165 billion dollars for the 2010 SOI data. This was also an increase from the 2006 data of 1,200 returns with distributions of 2.87 billion, and the 2002 data of 607 returns with distributions of 311 million dollars.
 Form 3520-A
Form 3520-A (“Annual Information Return of Foreign Trust With a U.S. Owner”) must be filed by foreign trusts with a U.S. owner in order to satisfy its annual information reporting requirements under section 6048(b). Form 3520-A provides information about the foreign trust, its U.S. beneficiaries, and any U.S. person who is treated as an owner of any portion of the foreign trust.
For the 2010 SOI data, 7,051 foreign grantor trusts reported total distributions of $3.96 billion, net income of 1.13 billion, and foreign taxes paid of 13.75 million. This is a huge increase from the 2006 data of 740 total returns with distributions of 57.88 million, net income of 6 million, and foreign taxes paid of $149 thousand; and 2002 with 2,550 returns with distributions of $884 million, net income of $358 million, and foreign taxes paid of $4 million. A distribution is defined by Form 3520-A instructions to be, “[A]ny gratuitous transfer of money or other property from a trust, whether or not the trust is treated as owned by another person under the grantor trust rules, and without regard to whether the recipient is designated as a beneficiary by the terms of the trust.”
 Contact Sherayzen Law Office for Help With Forms 3520, 3520-A and Foreign Trust Tax Planning Issues
International tax issues, like foreign trust compliance, are highly complex and result in very costly mistakes and even criminal liability. This is why it is important to consult an experienced Form 3520 foreign trust tax attorney who would be able to analyze the issues involved, identify compliance requirements, complete all of the necessary legal and tax documents, and create a tax plan for moving forward.
 Contact Sherayzen Law Office if you are a beneficiary of a foreign trust, an owner of a foreign trust, or you are thinking about a comprehensive asset protection plan involving foreign trusts. Our experienced international tax firm can assist you with U.S. tax compliance with respect to foreign trusts (including Forms 3520, 3520-A, FinCEN Form 114, (formerly form TD F 90-22.1), Form 8938 and other relevant forms) as well as creation of a comprehensive asset protection plan that will strive to balance tax optimization with asset protection strategies according to your needs.

### Exceptions to Filing Form 8865 Part II
Form 8865 (“Return of U.S. Persons With Respect to Certain Foreign Partnerships”) is an important international tax form which is used to report the information required under section 6038 (reporting with respect to controlled foreign partnerships), section 6038B (reporting of transfers to foreign partnerships), or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests), and is required for certain defined categories of filers. However, as any international tax attorney would affirm, there are certain exceptions to filing Form 8865.
In an earlier article, we covered the exceptions for multiple Category 1 filers and for indirect partners under the constructive ownership rules. This article will briefly explain the Form 8865 exceptions for members of an affiliated group of corporations filing a consolidated return, the exception for certain trusts, and the exception for certain Category 4 filers.
This article is not intended to constitute tax or legal advice. International taxation and foreign partnerships can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters.
Members of an Affiliated Group of Corporations Filing a Consolidated Return
A common parent corporation may file a single Form 8865 on behalf of all of the members of an affiliated group of corporations filing a consolidated return if they qualify as Category 1 or 2 filers. Except for group members who additionally qualify under the constructive owner’s exception, the filed Form 8865 must contain all required information that would have been submitted had each group member filed its own Form 8865.
Exception for Certain Trusts
For trusts involving state and local government employee retirement plans, the filing of Form 8865 is not required.
Exception for Certain Category 4 Filers
For taxpayers that qualify as both Category 3 and 4 filers because they contributed property to a foreign partnership in exchange for a 10% or greater interest in that partnership, there is an exception for reporting under both Category 3 and 4 filing requirements.
For example, assume a taxpayer, who is not a partner in a foreign partnership, acquires a 20% partnership interest by transferring property to the partnership. Because of the transfer and the fact that at least a 10% interest was acquired immediately after the contribution, the taxpayer will qualify as a Category 3 filer. The Category 4 filing requirement will also be met because the taxpayer did not own a 10% or greater direct interest in the partnership and as a result of the acquisition, the person owns a 10% or greater direct interest in the partnership. Under the exception, if the contribution of property was properly reported on Form 8865 pursuant to Category 3 filer requirements, the taxpayer will not be required to also report the 20% interest acquisition in the foreign partnership as a Category 4 filer (the acquisition will still count as a reportable event to determine if a later change in partnership interest will qualify as a reportable event under Category 4).
Contact Sherayzen Law Office for Help With Form 8865
If you have an ownership interest in a foreign partnership, contact Sherayzen Law Office for help. Our experienced international tax firm can assist you with identifying your 8865 filing status, preparation of the entire form with all required information and attachments, conducting of the voluntary disclosure with respect to delinquent Forms 8865, and tax planning with respect to existing and future foreign partnerships.

### Exceptions to Filing Form 8865: Part I
As most international tax attorneys in Minneapolis would point out, Form 8865 (“Return of U.S. Persons With Respect to Certain Foreign Partnerships”) is used to report the information required under section 6038 (reporting with respect to controlled foreign partnerships), section 6038B (reporting of transfers to foreign partnerships), or section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests), and is required for certain defined categories of filers. However, there are certain exceptions to filing Form 8865.
This article will briefly explain the Form 8865 exceptions for multiple Category 1 filers and for indirect partners under the constructive ownership rules (there are more exceptions that will be explained in future articles). This article is not intended to constitute tax or legal advice.
Multiple Category 1 Filers Exception
In general, Category 1 filers must file Form 8865. As the instructions to Form 8865 note, “A Category 1 filer is a U.S. person who controlled the foreign partnership at any time during the partnership's tax year. Control of a partnership is ownership of more than a 50% interest in the partnership.” However, if during a partnership’s tax year more than one U.S. person qualifies as a Category 1 filer, only one of these Category 1 partners will be required to file Form 8865. (A U.S. person with a controlling interest in the losses or deductions of the partnership will not be permitted to be the lone filer of Form 8865 if another U.S. person has a controlling interest in capital or profits; only the latter may file the form). Note that Form 8865 must still be filed by taxpayers under the multiple filers’ exception if they are separately subject to the Category 3 or 4 filing requirements.
When the form is filed by only one U.S. person Category 1 filer, it still must contain all of the information that would be required if each Category 1 filer filed a separate Form 8865, including various required schedules. The Category 1 taxpayer who does not submit Form 8865 because of multiple filers must attach a statement entitled, “Controlled Foreign Partnership Reporting” to that person's income tax return with the following information: (1) A statement that the person qualifies as a Category 1 filer, but is not filing Form 8865 under the “multiple Category 1 filers” exception; (2) the name, address, and identifying number (if applicable) of the qualifying foreign partnership; (3) a statement noting that the filing requirement has been, or will be, satisfied; (4) the name and address of the person submitting Form 8865 for the foreign partnership; and (5) the IRS Service Center where the Form 8865 must be filed, if sent by mail.
Constructive Owners Exception
For Category 1 or 2 filers who do not own a direct interest in a foreign partnership, and who are only required to file because of the constructive ownership rules (please see form instructions and IRS regulations for the specific definition of this complex term), an exception from filing is possible, provided that: (1) Form 8865 is filed by the U.S. person(s) through which the indirect partner constructively owns an interest in the foreign partnership, (2) the U.S. person through which the indirect partner constructively owns an interest in the foreign partnership is also a constructive owner and meets all the requirements of this constructive ownership filing exception, or (3) Form 8865 is filed for the foreign partnership by another Category 1 filer under the “multiple Category 1 filers exception”. To qualify for this exception, the indirect partner must also file a statement entitled “Controlled Foreign Partnership Reporting” with its tax return containing certain specified information (see Form 8865 instructions for more details).
Contact The International Tax Firm of Sherayzen Law Office for Help With Form 8865 Filing
International taxation concerning foreign partnerships is very likely to involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office is highly experienced in Form 8865 matters, whether you need help with respect to annual compliance or offshore voluntary disclosure. Contact Us by telephone or email to schedule a confidential consultation!

### Form 1042-S and Tax Withholdings
IRS Form 1042-S (“Foreign Person’s U.S. Source Income Subject to Withholding”) is used to report various items of income, amounts withheld under Chapter 3 of the Internal Revenue Code, and distributions of effectively connected income by a publicly traded partnership or nominee. The items subject to reporting on Form 1042-S involve amounts paid to foreign persons, including presumed foreign persons, that are subject to withholding, even if no amount was actually deducted and withheld from the payment (such as, because of a treaty or IRC exception), or if any withheld amount was repaid to the payee.
This article will explain the basics of Form 1042-S, especially the amounts subject, and not subject to reporting on the form. (Please also note that the IRS has issued a recent draft version of Form 1042-S that may entail future changes). US laws concerning international taxation can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
What Amounts are Subject to Reporting on Form 1042-S?
According to the IRS, “Amounts subject to withholding are amounts from sources within the United States that constitute (a) fixed or determinable annual or periodical (FDAP) income; (b) certain gains from the disposal of timber, coal, or domestic iron ore with a retained economic interest; and (c) gains relating to contingent payments received from the sale or exchange of patents, copyrights, and similar intangible property. Amounts subject to withholding also include distributions of effectively connected income by a publicly traded partnership.” (See the instructions to Form 1042-S for further details).
The specific amounts subject to Form 1042-S reporting include, among others, the following U.S. source items: interest on deposits, the entire amount of corporate distributions, interest (including the part of a notional principal contract payment that is characterized as interest), rents, royalties, compensation for independent personal services performed in the U.S., compensation for dependent personal services performed in the U.S. (only if the beneficial owner is claiming treaty benefits, however), annuities, pension distributions and other deferred income, most types of gambling winnings, cancellation of indebtedness, effectively connected income (ECI), notional principal contract income, guarantee of indebtedness, and amounts paid to foreign governments, foreign controlled banks of issue, and international organizations (even if they are exempt under section 892 or 895).
What Amounts are Not Subject to Reporting on Form 1042-S?
There are numerous amounts that are not subject to reporting on Form 1042-S. Some of these amounts include the following: Interest and OID from short-term obligations (generally payable within 183 days or less), interest on a registered obligation that is targeted to foreign markets qualifying as portfolio interest under certain circumstances, bearer obligations targeted to foreign markets if a Form W-8 is not required, notional principal contract payments that are not ECI, and accrued interest and OID (generally, interest paid “on obligations sold between interest payment dates and the part of the purchase price of an OID obligation that is sold or exchanged in a transaction other than a redemption”), among others.
When Must Form 1042-S be Filed?
Regardless of Forms 1042-S is filed on paper or electronically, it must be filed with the IRS by March 15th and there is an additional requirement that the submitted Form 1042-S also be furnished to the recipient of the income by that same date.

### Interest Rates for the Third Quarter of 2013
On May 23, 2013, the Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning July 1, 2013, as in the prior quarter. The rates will be:
• three (3) percent for overpayments [two (2) percent in the case of a corporation];
• three (3) percent for underpayments;
• five (5) percent for large corporate underpayments; and
• one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate determined during April 2013 to take effect May 1, 2013, based on daily compounding.

### US Taxpayers with Foreign Assets - June 2013 Tax Deadlines
U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2012, may have a U.S. tax liability and a filing requirement in June of 2013.
June 17, 2013 - Tax Returns to U.S. Citizens and Resident Aliens Living Overseas; May Also Apply to Nonresident Aliens
The first filing requirement deadline is Monday, June 17, 2013. This deadline applies to U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Eligible taxpayers get two additional days because the normal June 15 extended due date falls on Saturday this year. In order to use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies.
Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 17, 2013, depending on sources of income.
Worldwide Income Should Be Reported; Form 8938 and Schedule B
Remember that US federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B to their tax return. Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets.
Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted and what information must be provided.
June 30 (June 28), 2013 – TD F 90-22.1 (FBAR)
Separately, taxpayers with foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1 (also known as “FBAR”). This is not a tax form and is due to the Treasury Department by June 30, 2013 – it is important to emphasize that the form must be RECEIVED by June 30, NOT mailed.
Due to the fact that June 30 falls this year on a Sunday, it means that, realistically, the taxpayers should aim to make sure that the IRS received the 2012 FBARs by June 28.
Contact Sherayzen Law Office for Help With Your International Tax Obligations
If you have foreign accounts or foreign income, contact Sherayzen Law Office to make sure that you are in full compliance with your US tax obligations. Our experienced tax firm can assist you with all types of IRS international tax obligations.

### IRS Serves Summons on FirstCaribbean International Bank's US Wells Fargo Account
The Department of Justice issued a release on April 30, 2013 that a federal court in San Francisco has entered an order authorizing the Internal Revenue Service (IRS) to serve a “John Doe” summons seeking information about U.S. taxpayers who may hold offshore accounts at Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB) through their correspondent account at Wells Fargo N.A. A John Doe summons enables the IRS to obtain information about possible violations of US tax laws by U.S. taxpayers whose identities are unknown. This specific summons directs Wells Fargo to produce records identifying U.S. taxpayers who have accounts at FCIB and other banks that used FCIB’s correspondent account.
The order was signed by Senior District Judge Thelton E. Henderson, and allows the IRS to identify U.S. taxpayers who hold or held interests in financial accounts at FCIB and other financial institutions that used the Wells Fargo correspondent account.
This article will briefly explain the IRS John Doe summons. It is not intended to constitute tax or legal advice
Correspondent Accounts
According to the DOJ, “A correspondent account is a bank deposit account maintained by one bank for another bank. Financial transactions involving U.S. dollars flow through U.S. banks. Therefore, foreign banks that do business in U.S. dollars, but have no office in the U.S., obtain a correspondent account at a U.S. bank in order to engage in such transactions. These transactions leave a trail in the U.S. that the IRS can access through the records of the correspondent bank accounts. These correspondent bank accounts have records of money deposited, money paid out through checks and money moved through the correspondent account by wire transfers.” The IRS can obtain all of this desired information through a John Doe summons issued to the U.S. bank holding the correspondent account.
Canadian Imperial Bank of Commerce’s FirstCaribbean International Bank
FCIB is based in Barbados and has branches in 18 Caribbean countries, according to the declaration of IRS Revenue Agent Cheryl R. Kiger, filed in support of the court petition. These countries include the British Virgin Islands, Dominica, Cayman Islands, Bahamas, and Barbados, among others. FCIB does not have any U.S. branches; however, it does maintain a U.S. correspondent account at Wells Fargo Bank N.A. Wells Fargo, headquartered in San Francisco, CA is the fourth largest bank in the U.S. by assets, and the largest bank when ranked by market capitalization, according to Wikipedia.
Per Agent Kiger’s declaration, the IRS discovered that U.S. taxpayers were using FCIB to help them escape detection of their offshore accounts by the IRS and to not pay U.S. federal income tax on money held in such offshore accounts. According to the DOJ release, after reviewing information submitted by more than 120 FCIB customers who enrolled in the IRS’s Offshore Voluntary Disclosure Program, the IRS determined that many FCIB customers in the John Doe summons class, “[M]ay have been under-reporting income, evading income taxes, or otherwise violating the internal revenue laws of the United States.”
Latest Example of How Offshore Voluntary Disclosure Programs Help IRS Identify Other Non-Compliant US Taxpayers
Since 2009, Sherayzen Law Office has predicted that the IRS Offshore Voluntary Disclosure Programs (now closed) will produce a wealth of information that the IRS will use to identify other targets for investigation and prosecution. We further predicted the more widespread use of John Doe summons. Finally, since the Wegelin bank case began, we have repeatedly advised our clients that the IRS is likely to use the correspondent accounts opened with U.S. banks to identify non-compliant taxpayers with undisclosed foreign accounts.
Over the past four years, we have seen all of our predictions come true, and the latest move by the IRS against the FirstCaribbean International Bank is just the latest example of it.
According to Kathryn Keneally, Assistant Attorney General for the Justice Department’s Tax Division, “The Department of Justice and the IRS are committed to global enforcement to stop the use of foreign bank accounts to evade U.S. taxes. This John Doe summons is a visible indication of how we are using the many tools available to us to pursue this activity wherever it is occurring. Those who are still hiding should get right with their country and their fellow taxpayers before it is too late.” Acting IRS Commissioner Steven T. Miller added, “This summons marks another milestone in international tax enforcement. Our work here shows our resolve to pursue these cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil.”
Contact Sherayzen Law Office for Help With the Voluntary Disclosure of Your Foreign Bank Accounts
If you are a US taxpayer who is using foreign bank accounts to attempt to under-report US income or evade US tax laws, this summons should serve as a warning to you. The IRS will likely increase their use of enforcement mechanisms such as the John Doe summons in the near future, so you are highly advised to seek an experienced attorney in these matters.
For the U.S. taxpayers with have undisclosed financial accounts in FirstCaribbean International Bank, the time to act is now - before the IRS finds them.
This is why it's a good idea to contact Sherayzen Law Office an experienced law firm in Offshore Voluntary Disclosures. Our international tax team can assist you in all of your tax and legal needs concerning undisclosed foreign accounts and income and help you avoid making costly mistakes.

### IRS Will Be Closed Five Extra Days in 2013; Filing and Payment Deadlines
On May 15, 2013, the Internal Revenue Service announced additional details about the closures planned for May 24, June 14, July 5, July 22 and August 30, 2013.
Due to the current budget situation, including the sequester, all IRS operations will be closed on those days. This means that all IRS offices, including all toll-free hotlines, the Taxpayer Advocate Service and the agency’s nearly 400 taxpayer assistance centers nationwide, will be closed on those days. IRS employees will be furloughed without pay. No tax returns will be processed and no compliance-related activities will take place.
Taxpayers needing to contact the IRS about their returns or payments should be sure to take these furlough dates into account. In some instances, this may include taxpayers with returns or payments due soon after a furlough day, such as the June 17 deadline for taxpayers abroad and those making a second-quarter estimated tax payment as well as the September 3 deadline for truckers filing a highway use tax return.
No Impact on Tax-Filing and Tax-Payment Deadlines, but No Confirmation of Receipt
Because none of the furlough days are considered federal holidays, the shutdown will have no impact on any tax-filing deadlines. The IRS will be unable to accept or acknowledge receipt of electronically-filed returns on any day the agency is shut down.
Similarly, tax-payment deadlines are also unaffected. The only tax payment deadlines coinciding with any of the furlough days relate to employment and excise tax deposits made by business taxpayers. These deposits must be made through the Treasury Department’s Electronic Federal Tax Payment System (EFTPS), which will operate as usual.
Impact on Providing Documents to the IRS
IRS states that it will give taxpayers extra time to comply with a request to provide documents to the IRS. This includes administrative summonses, requests for records in connection with a return examination, review or compliance check, or document requests related to a collection matter. No additional time is given to respond to other agencies or the courts.
Where the last day for responding to an IRS request falls on a furlough day, the taxpayer will have until the next business day. If the last day to respond is Friday, May 24, for example, the taxpayer will have until Tuesday, May 28 to comply (Monday, May 27 is Memorial Day).
Some Services Will Continue to Function
Some web-based online tools and phone-based automated services will continue to function on furlough days, while others will be shut down. Available services include Withholding Calculator, Order A Transcript, EITC Assistant, Interactive Tax Assistant, the PTIN system for tax professionals, Tele-Tax and the Online Look-up Tool for those needing to repay the first-time homebuyer credit. Services not available on those days include Where’s My Refund? and the Online Payment Agreement.
Additional Furlough Days Possible
At a later date, the IRS may possibly announce one or two additional furlough days if necessary.

### Fifth Protocol to the Canada-US Income Tax Treaty
The Fifth Protocol to the Canada-US Income Tax Convention (also known as the Canada-US Income Tax Treaty) was signed in 2007 and ratified by the U.S. Senate the following year, making significant changes to the then existing treaty.
This article will briefly explain some of the major Fifth Protocol (“Protocol”) changes to the US-Canada Income Tax Treaty (“Treaty”). It is not intended to constitute tax or legal advice, and it does not cover every change to the Treaty.
Cross-border taxation can involve many complex tax and legal issues, so you are advised to seek an experienced attorney in these matters. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
Treaty Article XI- Withholdings on Interest
One substantial change to the Canada-US Tax treaty was the elimination of withholding tax on cross-border interest payments to unrelated parties. According to the Protocol, “[I]nterest means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtor's profits, and in particular, income from government securities and income from bonds or debentures, including premiums or prizes attaching to such securities, bonds or debentures, as well as income assimilated to income from money lent by the taxation laws of the Contracting State in which the income arises.” It should be noted however that “interest” under this definition does not include dividends.
Taxpayer Migration - Protection Against Double Taxation
Under the previous rule, the US and Canada were allowed to tax residents on all of their capital gains without any provisions made for the fact that a country may have leveled a pre-departure tax on emigrants. The Protocol addressed this concern by allowing such individuals to “[E]lect to be treated for the purposes of taxation in the other Contracting State, in the year that includes that time and all subsequent years, as if the individual had, immediately before that time, sold and repurchased the property for an amount equal to its fair market value at that time.” (See Article 8 of the Protocol).
Mandatory Arbitration
For US and Canadian residents subject to certain unresolved double-taxation issues between US and Canadian revenue authorities within a specified time period, the Protocol changed the existing Treaty to allow taxpayers to require that the revenue authorities of the two countries enter a binding arbitration. While the arbitration procedure is mandatory for revenue authorities once compelled by a taxpayer, the decision of whether to do so is entirely optional for the taxpayer. A taxpayer must have filed a tax return with at least one of the two countries to utilize the election.
 "Limited Liability Companies" (LLCs) and Other Hybrid Entities
LLCs and certain other hybrid entities face different tax treatment in the US and Canada. In general, in the US, such entities are treated as pass-through vehicles, whereas in Canada, they are treated as corporations (please see Department of Finance Canada for more information about Canadian taxation). Prior to the Protocol, a reduced withholding tax rate was not available to such entities because an entity must be taxable as a “resident” in at least one of the two countries in order to benefit from the Treaty. According to the Department of Finance Canada, under the Protocol changes, “Income that the residents of one country earn through a hybrid entity will in certain cases be treated by the other country (the source country) as having been earned by a resident of the residence country. On the other hand, a corollary rule provides that if a hybrid entity's income is not taxed directly in the hands of its investors, it will be treated as not having been earned by a resident.”
Contact Sherayzen Law Office for Help with US-Canada Cross-border Tax Issues
If you have any questions regarding US-Canada tax treaties or you have not filed your Forms 8891, contact the experienced tax firm of Sherayzen Law Office for help.

### Subpart F Active Financing Income Exceptions and Look-Through Rule Extended
The recent American Taxpayer Relief Act of 2012 passed by Congress and signed by the president on January 2, 2013 extended the temporary exceptions for “active financing income” from subpart F foreign personal holding company income, foreign base company services income, and insurance income. The same act also extended the subpart F look-through rule of IRC Section 954(c)(6).
This article will briefly explain the active financing exception to the subpart F rules and the look-through rule of Section 954(c)(6) and detail the extensions of such provisions provided for by the American Taxpayer Relief Act of 2012. The article is not intended to convey tax or legal advice.
IRS Subpart F rules and the IRC sections covering Controlled Foreign Corporations involve many complex tax and legal issues, so it is advisable to seek an experienced attorney in these matters. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
Active Financing Income Exception to Subpart F Rules
IRC Section 954(h) provides for a special exception from IRS subpart F rules for "[I]ncome derived in the active conduct of banking, financing, or similar businesses." In general, a controlled foreign corporation (“CFC”) will be treated as being predominately engaged in the active conduct of banking, financing, or similar businesses if more than 70% of the gross income of the CFC is derived directly from the, “[A]ctive and regular conduct of a lending or finance business from transactions with customers which are not related persons.”
The active financing exception was originally included in the Taxpayer Relief Act of 1997; the same act also modified Passive Foreign Investment Company ("PFIC") rules to eliminate overlap between Subpart F and PFIC provisions as a special one-year exception (President Clinton vetoed this provision under the Line Item Veto Act, but it was reinstated after the US Supreme Court ruled that the Line Item Veto Act was unconstitutional). IRC Section 954(h)(3) was later amended by the American Jobs Creation Act of 2004 (Public Law 108-357) to provide for the temporary exception, and the Tax Increase Prevention and Reconciliation Act of 2005 subsequently extended the exception for tax years ending in 2007 and 2008. The Middle Class Tax Relief Act of 2010 further extended the active financing exception through 2011. Under the new American Taxpayer Relief Act of 2012, the exception was retroactively extended through the end of 2013.
Subpart F Look-Through Rule of IRC Section 954(c)(6)
IRC Section 954(c)(6)(A) (“Look-thru rule for related controlled foreign corporations “) provides that, in general, “For purposes of this subsection, dividends, interest, rents, and royalties received or accrued from a controlled foreign corporation which is a related person shall not be treated as foreign personal holding company income to the extent attributable or properly allocable (determined under rules similar to the rules of subparagraphs (C) and (D) of section 904(d)(3)) to income of the related person which is neither subpart F income nor income treated as effectively connected with the conduct of a trade or business in the United States.” Treatment of other types of equivalent interest is also addressed in the section.
The Look-Through Rule was part of Tax Increase Prevention and Reconciliation Act of 2005 and originally applied to tax years beginning after December 31, 2005, and before January 1, 2009. Certain parts of the original look-through rule were subsequently modified by later acts, and the rule itself was extended through the end of 2011 by the Middle Class Tax Relief Act of 2010. Under the new American Taxpayer Relief Act of 2012, the rule now applies to foreign corporation tax years beginning after December 31, 2005, and before January 1, 2014.
Excerpt: Subpart F Active Financing Income Exceptions and Look-Through Rule 2012 and 2013 extensions

### Should I File FBAR, presentation
Should I File FBAR  from sherayzenlaw

### Foreign Qualified Dividends Presentation
Foreign qualified dividends  from sherayzenlaw

### Filing and Payment Extension for Suffolk County and other Victims of Boston Marathon Explosions
On April 16, 2013, the Internal Revenue Service announced a three-month tax filing and payment extension to Boston area taxpayers and others affected by April 15, 2013 explosions. This relief applies to all individual taxpayers who live in Suffolk County, Mass., including the city of Boston. It also includes victims, their families, first responders, others impacted by this tragedy who live outside Suffolk County and taxpayers whose tax preparers were adversely affected.
“Our hearts go out to the people affected by this tragic event,” said IRS Acting Commissioner Steven T. Miller. “We want victims and others affected by this terrible tragedy to have the time they need to finish their individual tax returns.”
Under the relief announced today, the IRS will issue a notice giving eligible taxpayers until July 15, 2013, to file their 2012 returns and pay any taxes normally due April 15. No filing and payment penalties will be due as long as returns are filed and payments are made by July 15, 2013.
Note, however, by law, interest, currently at the annual rate of 3 percent compounded daily, will still apply to any payments made after the April deadline.
The IRS will automatically provide this extension to anyone living in Suffolk County. If you live in Suffolk County, no further action is necessary by taxpayers to obtain this relief. However, eligible taxpayers living outside Suffolk County can claim this relief by calling 1-866-562-5227 starting Tuesday, April 23, 2013, and identifying themselves to the IRS before filing a return or making a payment. Eligible taxpayers who receive penalty notices from the IRS can also call this number to have these penalties abated.
Eligible taxpayers who need more time to file their returns may receive an additional extension to Oct. 15, 2013, by filing Form 4868 by July 15, 2013.

### Requirements for Timely Filing Tax Returns for U.S. Persons Living Overseas
Are you a U.S. person for living overseas who is required to file U.S. taxes? Then you should be especially aware of U.S. filing deadlines, and the importance of timely filing your tax return under IRC Section 7502. Filing a tax return is often stressful enough for most people living in the U.S. Filing a return while living overseas can be yet an additional burden, particularly for those who do not speak a foreign language fluently, or for those residing in remote areas where access to sufficient postal delivery may be limited. Failure to timely file your tax return can lead to penalties and interest (and further, failure to timely file a refund claim can result in the expiration of such a claim). Hence, if you are a U.S. person living overseas you should ensure that you follow the rules that are outlined in this article.
This article strives to explain the basics of IRC Section 7502 and various revenue rulings clarifying the IRS position regarding timely filing of U.S. tax returns and other documents mailed from foreign countries. It is not intended to constitute tax or legal advice.
International taxation can involve many complex tax and legal issues, so it is highly advisable to seek an experienced attorney in these matters. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
A Brief History of IRC Section 7502 and Other Rules
Under the general rule of Internal Revenue Code Section 7502:
“if any return, claim, statement, or other document required to be filed, or any payment required to be made, within a prescribed period or on or before a prescribed date under authority of any provision of the internal revenue laws is, after such period or such date, delivered by United States mail to the agency, officer, or office with which such return, claim, statement, or other document is required to be filed, or to which such payment is required to be made, the date of the United States postmark stamped on the cover in which such return, claim, statement, or other document, or payment, is mailed shall be deemed to be the date of delivery or the date of payment, as the case may be.”
In other words, generally, if a taxpayer mailed a return or the other specified items before a stated deadline, the mailing date would be treated as the filing date, even though the return or other specified documents were received after the actual deadline (this is also commonly known as the “mailbox rule”).
For U.S. taxpayers living overseas, in Rev. Rul. 80-218 the IRS further clarified, “United States federal tax returns mailed by taxpayers in foreign countries will be accepted as timely filed if they bear an official postmark dated on or before midnight of the last date prescribed for filing, including any extension of time for such filing.” Note that Rev. Rul. 80-218 only addressed federal tax returns, and not the other types of items specified in IRC Section 7502, above.
Obstacles Overseas Taxpayers Face in Timely Filing Their Tax Returns
U.S. taxpayers living overseas have faced many obstacles when mailing various tax documents to the IRS from foreign countries, though. For instance, Pekar v. Commissioner, 113 T.C. 158 (1999), the Tax Court upheld the IRS’ determination that a taxpayer was liable for an addition to tax under IRC Section 6651(a)(1) for failing to file a tax return on or before the date prescribed for filing, despite the fact that the foreign postmark date that appeared on the envelope with the return was the return’s due date. The Tax Court held that Section 7502 did not apply to foreign postmarks, and that “foreign postmarks do not effectively cause the filing date of a document to be the postmark date.” In Action on Decision 2002-04, however, the IRS later filed a motion requesting that the Tax Court modify its opinion, and stated it would not follow the opinion regarding whether the late-filing addition to tax penalty applies.
Because of uncertainty that existed as to what types of private mail delivery services would be viewed as acceptable for filing a federal tax return outside of the U.S., Congress added IRC Section 7502(f). IRS Notice 2004-83 subsequently updated the list of designated private delivery services, including certain international private delivery services.
In Rev. Rul. 2002-23, the IRS additionally addressed some of the unresolved issues mentioned above resulting from Pekar and various revenue rulings. The Service held that it would accept federal tax returns properly meeting the requirements of Rev. Rul. 80-218, and that, “A federal tax return, claim for refund, statement, or other document required or permitted to be filed with the Service or with the United States Tax Court that is given to a designated international delivery service before midnight on the last date prescribed for filing shall be deemed timely filed pursuant to section 7502(a), (d)(1), and (f)(1).”

### Subpart F Income- Traps for the Unwary
Under the IRS “Subpart F” rules (26 USC Part III, Subpart F), certain categories of income of controlled foreign corporations (“CFCs”) must be included in the gross income of specified U.S. shareholders, even though the income may not have been distributed.
In this article, we will explain the basics of Subpart F income. It is not intended to constitute tax or legal advice. Subpart F income is an extremely complex area of international tax law and U.S. taxpayers may face significant tax liabilities if they do not have proper tax planning for their CFCs. It is advisable to seek an experienced attorney. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
Subpart F Income
Subpart F income is defined in Internal Revenue Code Section 952 to include numerous categories of income of a CFC. Specifically, it consists of insurance income (as defined in IRC section 953), IRC section 954 “foreign base company income”, income as determined under IRC section 952(a)(3) (amounts subject to the International Boycott rules of IRC section 999), illegal bribes, kickbacks, or other payments unlawful under the Foreign corrupt Practices Act of 1977, and income derived from any foreign country when IRC section 901(j) applies to such country.
Foreign base company income is comprised of the following items: foreign personal holding company income, foreign base company sales income, foreign base company services income, foreign base company shipping income, and foreign base company oil-related income.
Let’s analyze in slightly more detail one of the most common types of subpart F income for U.S. shareholders of a CFC- foreign personal holding company income.
Foreign Personal Holding Company Income
In general, foreign personal holding company income (FPHCI) includes the following items: dividends (or payments in lieu of dividends), rents, royalties, annuities, interest (and income equivalent to interest); net gains from the sale and exchange of certain properties (including gains from the sale or other disposition of any interest in a partnership or trust); gains from commodities transactions; net currency gains from nonfunctional transactions; and income from notional principal contracts.
Certain specific items are excluded from being treated as FPHCI. For example, dividends and interest received may be excluded if they are received from corporations that are related persons and organized in the same country with a substantial part of assets (more than 50 percent) used in its trade or business in that country. Another set of importance exclusions includes: rents and royalties received from unrelated persons in the ordinary conduct of business of the CFC or from related persons for use of property in country of organization; gains from the sale or exchange of inventory; dealer property; property that gives rise to active rent or royalty income; and property that was used in the CFC's trade or business. In general, exclusions also exist for various insurance and banking business-related activities.
De Minimis Exclusion of Subpart F Income
IRC Section 954 sets forth the de minimis rule for exclusion of Subpart F income. This rule excludes all gross income for the taxable year from being treated as foreign base company income or insurance income if the sum of the CFC’s gross foreign base company income and gross insurance income is less than the lower of 5% of gross income or $1 million. On the other hand, it should be noted that, if the sum of foreign base company income and gross insurance income for the taxable year exceeds 70 percent of gross income, subject to certain provisions, then the entire gross income of the CFC will be treated as foreign base company income or insurance income.
Contact Sherayzen Law Office for Help With Subpart F International Tax Issues
If you own a foreign corporation, you may be subject to Subpart F rules with complex compliance tax issues. These issues are so complex that you should approach them only with an experienced tax professional.
Our international tax firm is highly experienced in dealing with Controlled Foreign Corporations and Subpart F issues. Contact Sherayzen Law Office for professional help with Subpart F tax compliance and tax planning.

### IRS Audit and the Constructive Dividends Trap
Do you own or work for a closely-held corporation? Do you make frequent payments between your small C corporation and your shareholders? Then you should be especially careful about the constructive dividend rules. Under these rules, the IRS can deem certain payments made to or on behalf of its shareholders as dividends, even though they have not been officially declared as dividends. In such cases, both the corporation and the shareholder may face steep additional tax liabilities, as well as significant penalties and interest on the resulting liabilities.
This article will explain the basics of constructive dividends. It is not intended to constitute tax or legal advice.
Corporate taxation can involve many complex tax and legal issues, so it may be advisable to seek an experienced attorney in these matters. Failure to do proper tax planning can result in significant adverse tax consequences. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
Constructive Dividends
In general, a constructive dividend can be any type of economic benefit made to the shareholders by a corporation without an expectation of repayment that represents an undeclared dividend. If the economic benefits were primarily of a personal nature rather than business–related interests to the corporation, they will likely be treated as constructive dividends. Constructive dividends, as with declared dividends, can thus be distributions of cash and/or property as well as other types of payments that provide an economic benefit to the shareholder(s).
Because of the greater potential for self-dealing in closely-held and family-owned small corporations, the IRS is especially vigilant when it comes to possible constructive dividend situations in such entities. Shareholder-owners will often run afoul of tax laws if they attempt to have the corporation make payments for their personal, non-corporate related expenses, of if they try to distribute corporate profits to themselves by having the corporation report illegitimate expenses, rather than by paying a dividend.
Types of Constructive Dividends
There are numerous types of payments or economic benefits to shareholders that can be re-characterized as constructive dividends. If you are a shareholder in a closely-held corporation you should be aware of the possibilities.
One common constructive dividend is unreasonable compensation paid by a corporation to a shareholder-employee. Frequently, members of family-owned corporations will try to shift income by having their corporations pay excessive salaries (compared to the work actually performed) to family members who pay at lower tax rates, thereby reducing corporate net income at the same time. Because of the potential for tax abuse, shareholder-owners of small corporations will need to be able to show that the salaries paid were legitimate. Some factors to consider, among others, will be the nature and complexity of the work performed by the employee, the employee’s qualifications for the job, a comparison of salary paid by the corporation to prevailing salaries for similar jobs, as well as the ratio of dividends paid to salary by the corporation.
Bargain sales or rentals of property by the corporation to its shareholder(s) will also likely be deemed to be constructive dividends, depending upon the circumstances. For example, if a shareholder purchases property at a bargain rate below its true fair market value, a constructive dividend will arise on the amount of difference between what the property was purchased for and its actual value. Thus, if you are making such transactions, you should have a legitimate appraisal of the property and treat the sale at arm’s length in order to decrease the potential for a constructive dividend to be declared.
A constructive dividend can also arise when a corporation makes payments on behalf of its shareholder-employees personal expenses, or if the shareholder-employees use corporate property for personal use. An example of the latter situation may occur when shareholders use a company car or plane for non-corporate reasons without adequate payment to the corporation for personal use.
Constructive dividends may also be deemed by the IRS to be paid when a corporation makes payments to shareholders that are not bona fide loans. The determination of whether a payment was in fact a bona fide loan is a very complex tax issue that involves numerous factors, such as whether interest was actually paid by the shareholder to the corporation, and whether a loan agreement existed.
Proper Tax Planning is Required To Reduce the Probability of Constructive Dividend Classification During IRS Audit
While representing clients in IRS audits, I see that the widespread use of constructive dividends by the IRS. While this is a fairly common audit issue, it is appalling to see that this problem may have been prevented through timely tax planning by the taxpayers or their accountants.
This is why it is important to resolve this issue before the IRS audit begins, even if it means amending already filed tax returns. However, this is a job for an experienced tax attorney; I would strongly advise against doing the tax planning for such complex issues by yourself.
Contact Sherayzen Law Office for Help With Tax Planning
This is why you should contact Sherayzen Law Office before the IRS finds you. Attorney Eugene Sherayzen constantly deals with the IRS, and knows what to look for and where potential problems may arise, and we can use this knowledge to help you.

### Termination of a Partnership
Because partnerships have many different features from corporations, a question is frequently asked concerning partnerships: when do they officially end? While corporations theoretically have an indefinite life and identifying the closure of a corporation may sometimes be regarded as relatively easy, it may not always be as apparent when a partnership has terminated.
This article will explain the basics of partnership termination for U.S. federal tax purposes only (please, consult specific state statutes for relevant partnership termination provisions). Remember that there are numerous exceptions to and modifications of these basic rules on state and federal levels. This article is not intended to constitute tax or legal advice.
Partnerships can involve many complex tax and legal issues, so it may be advisable to seek an experienced attorney in these matters. Failure to do proper tax planning can result in significant adverse tax consequences. Sherayzen Law Office, Ltd. can assist you in all of your partnership tax and legal needs, and help you avoid making costly mistakes.
Termination of a Partnership 
There are many ways in which a partnership can be terminated; this article will focus only on several common situations. First, as should be obvious from the definition of a partnership, a partnership will end when it no longer has at least two partners. This may occur, for instance, when one partner purchases the other partner’s complete interest in a two-person partnership, thus creating a new sole proprietorship.
A partnership may also terminate if none of its partners continues to carry on the partnership’s business. This may occur, for example, because of a partnership liquidation.
The third way a partnership may terminate is if there is a sale or exchange of 50% or more of the total partnership capital and profits interest within a twelve-month period. In such a case, the IRS is likely to treat such situation as a formation of a new partnership. It is important to remember that multiple sales of shares of the same partnership interest with percentages less than 50% will not be aggregated. For example, assume that partner A in an equally-owned four person partnership ABCD sells his partnership share to a new partner, who subsequently sells this 25% share again to yet another new partner. In this case, the original ABCD partnership is likely to be treated as still existing (barring any other circumstance that forces the termination of a partnership). In most cases, a partnership will not be terminated simply because of the admittance of a new partner to the partnership.
Furthermore, the death or liquidation of a partner normally is not likely to terminate a partnership where a partner owns a minority partnership interest (unless, for example, it involves a two-person partnership). While the partnership itself may not be terminated, for the deceased or liquidated partner, the partnership tax year will end at that point. The share of partnership profits or loss will be determined as of the date of death or liquidation for that partner, and will be reported for tax purposes in the year the event occurs.
The examples above state the general law and it is highly important to remember that a partnership agreement may modify the application of this law to specific partnership. While, unless the law expressly permits so, a partnership agreement cannot override the law, it may add to it (for example, a death of a partner can be made a termination event in a partnership agreement even if this partner owned a very small percentage of the partnership interest). Therefore, you should always make sure to consult the existing partnership agreements before arriving to a legal conclusion. In such complex situations, it is highly advisable to retain an experienced attorney.
Partnership Mergers
When two partnerships merge, partnership terminations may also arise, depending upon the circumstances. An interesting situation may occur under federal tax law where the IRS may deem the partnership of any partners who have more than a 50% interest in the newly-formed partnership to be continued. For instance, if partnership AB merges with partnership CD, and the partners of CD own more than a 50% interest in the new resulting partnership, partnership ABCD may be treated as a termination of partnership AB, and continuation of partnership CD.
Contact Sherayzen Law Office for Partnership Legal and Tax Help
If you own a partnership interest and would like to receive a legal and tax advice with respect such ownership, contact the experienced tax firm of Sherayzen Law Office.

### IRS Audit Reconsideration
Have your tax returns been subject to an IRS audit? You should be aware that IRS procedures may allow you to contest the findings through IRS Audit Reconsideration, provided that you meet certain requirements. If the amount is significant or you believe that the IRS was erroneous in its determination, you contact Sherayzen Law Office, PLLC.  Our experienced law firm can assist you with your IRS Audit Reconsideration and help you avoid making costly mistakes.
This article will explain the basics of audit reconsideration. It is not intended to constitute tax or legal advice.
IRS Audit Reconsideration: Reasons the IRS May Reconsider an Audit
There are various reasons for which you may request IRS Audit Reconsideration. For example, if you were not able to appear for your audit, or if you moved during the audit and did not receive correspondence from the IRS, the IRS may grant the request. Additionally, if you believe that you have additional important information to substantiate your case that was not available to you during the audit, you may be allowed to have the IRS reconsider the audit. Further, if you disagree with the assessment from the audit, a request may be granted, depending upon the IRS’ discretion. You are well-advised not to make the determination by yourself about whether you have a sufficient reason for IRS Audit Reconsideration; this is a question for an experienced tax attorney.
Process for Requesting IRS Audit Reconsideration
In general, there are several steps you will need to take if you are requesting IRS Audit Reconsideration. If you are planning upon making the claim that you are presenting new evidence that you did not present before at the audit, you usually should first obtain all the necessary documentation that you will need to substantiate your claim and make sure that the evidence supports the correct tax years in question. You will then need to file a letter explaining your request for reconsideration, along with photocopies (originals will not be returned to you) of the evidence supporting your new claim.
The IRS notes that, provided you meet certain requirements, your IRS Audit Reconsideration request may be granted if: “You submit information that we have not considered previously. You filed a return after the IRS completed a return for you. You believe the IRS made a computational or processing error in assessing your tax. The liability is unpaid or credits are denied.” On the other hand, the IRS usually will not accept IRS Audit Reconsideration request if you signed an agreement agreeing to pay your amount of tax liability (such as a Form 906, Closing Agreement; a Compromise agreement; or an agreement on Form 870-AD with IRS Appeals), if the amount of tax you owe is due to the result of final partnership item adjustments under the Tax Equity Fiscal Responsibility Act (TEFRA), or if the United States Tax Court, or another court, has rendered a final determination on your tax liability.
Once the documentation for the IRS Audit Reconsideration is received by the IRS, the IRS may send you a letter requesting follow-up information regarding your request. The IRS may delay collection activity once your initial letter is received; however, collection activity will resume if you fail to respond to request from the IRS for additional information within 30 calendar days, or if the IRS deems your documentation insufficient to support your claim.
Once the IRS has completed its review of your IRS Audit Reconsideration request, you will be notified as to whether your position was accepted or rejected. If you position was accepted, the IRS may either abate your assessed tax, or partially abate the tax, depending upon the circumstances. If your position is rejected, your assessed tax will stand. If you disagree with the results you may either pay the amount (either in full, or by making other payment arrangements), or by seeking certain other remedies. In future articles, we will explain other options you may have at that point.
Contact Sherayzen Law Office for Help With An IRS Audit
If you are currently being audited or the IRS already rendered its decision and you are looking for a way to challenge it, contact Sherayzen Law Office for professional legal help. Our experienced legal team will thoroughly analyze your case, determine the available options, implement the chosen course of action (including preparation of any tax forms) and rigorously defend your interests during IRS negotiations.

### Sales or Exchanges between a Partner and a Controlled Partnership
In general, when a non-controlling partner makes a transaction with his or her partnership in a non-partner capacity, any resulting gain or loss is likely be recognized, because the transaction is treated as at arm’s length and occurring with a third party. Such transactions may involve sales, loans, rental payments, services provided and other related items to or from the partnership. However, special rules apply when the transaction takes place between a partner who owns more than 50% of the partnership capital or profits (applying both direct and indirect ownership rules) and his or her partnership.
This article will explain the basics of sales or exchanges between partners and controlled partnerships under Internal revenue Code Section 707. It is not intended to constitute tax or legal advice.
Partnership taxation can involve many complex tax and legal issues, so it may be advisable to seek an experienced attorney in these matters. Failure to do proper tax planning can result in significant adverse tax consequences. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs, and help you avoid making costly mistakes.
Disallowed Losses on Sales or Exchanges between a Partner and the Controlled Partnership
If a partner owns (directly or indirectly) more than a 50% of the capital or profits interest of the partnership, under IRS Section 707, losses from a sale or exchange between the partner and the partnership will be disallowed. However, if the partnership eventually sells the property to a third party, any gain realized on the sale may not be recognized to the extent of the disallowed loss. In other words, the disallowed loss may reduce the gain that would otherwise need to have been recognized.
If a sale or exchange takes place between an individual or entity who does not own 50% or more of the capital or profits (directly or indirectly) of a partnership, but is related to a partner, the sale or exchange is likely to be treated as occurring separately between the various partners of a partnership, and the disallowed loss will be determined accordingly. For example, assume partner A in a five-person partnership (with each partner owning 20%) also owns 100% of a corporation. If the corporation has a loss resulting from a transaction with the controlled partnership, the transaction is likely to be treated as if occurring individually between the partners, and 20% of the loss may be disallowed for the corporation (because of partner A’s ownership).
Treatment of Certain Gains Recognized on Sales or Exchanges between a Partner and the Controlled Partnership
Unless an asset is a capital asset to both the seller and purchaser, in a sale or exchange between a partner owning more than a 50% capital or profits interest (directly or indirectly) and a controlled partnership, any gain recognized is likely to be treated as ordinary income. IRS Regulation §1.707-1, transactions between partner and partnership, broadly defines non-capital assets: “[P]roperty other than a capital asset includes (but is not limited to) trade accounts receivable, inventory, stock in trade, and depreciable or real property used in the trade or business.” This can have serious unexpected tax consequences for those taxpayers who do not fully understand the applicable tax laws when making such transactions.
Additionally, if an asset is depreciable property in the hands of a transferee, any gain recognized on a sale of exchange between a partner owning more than a 50% capital or profits interest (directly or indirectly) and a controlled partnership, is also likely to be treated as ordinary income.
Tax Planning is Essential for Controlled Partnership Transactions 
It is very easy to misunderstand or misapply the controlled-partnership transactions. The consequences of such actions may be dire and may lead to an unexpected jump in your tax liability (especially, if the re-classification of gain or disallowance of a loss occurs in the context of an IRS audit).
This is why it is essential to conduct comprehensive tax planning with respect to any controlled-partnership transactions. Sherayzen Law Office can help; Mr. Eugene Sherayzen, an experienced tax attorney will thoroughly analyze your partnership transactions, determine potential tax consequences and propose a comprehensive solution aimed to protect you from over-paying taxes to the IRS.

### Opting-Out of OVDI or OVDP: Escaping Your Accountant’s Mistakes
The rise in the voluntary disclosures of offshore assets caught the accounting profession by surprise. The great majority of the accountants were not trained in international tax matters and learned about the existence of FinCEN Form 114 formerly known as TD F 90-22.1 (commonly known as “FBAR”) from their clients.
However, in their ignorance of the matters involved, these accountants simply treated the FBAR disclosure as a regular accounting matter and herded their clients into the IRS voluntary disclosure programs (like 2009 OVDP, 2011 OVDI and 2012 OVDP) without much consideration of complex legal issues involved, without any attempt to analyze the individual facts of each case, and, often, without the understanding of the terms of these official voluntary disclosure matters.
Unfortunately, a lot of individuals ended up paying outrageous Offshore Penalties and unnecessary legal and accounting fees in these programs. Some of these individuals were not even told by their accountants of the consequences of entering into the 2011 OVDI or 2012 OVDP. Still more participants of these programs were not even told about the modified voluntary disclosure alternative (also known as “noisy disclosure” and “reasonable cause disclosure”).
For the individuals who are currently in the 2011 OVDI and 2012 OVDP programs and who have not signed the Closing Agreements, there is still a chance to see if they can escape the unnecessary penalties.
The escape route is known as the “opt-out” of the program. This route should only be taken after you consulted with an experienced international tax attorney who thoroughly analyzed your case; do NOT try to do it on your own, because there is no turning back – once you are out of the OVDI or OVDP, you cannot re-enter the program later.
Contact Sherayzen Law Office to Discuss Your Opt-Out of OVDI/OVDP Options
This article is intended for educational purposes only and does not constitute legal advice. Make sure that you discuss your opt-out options with an experienced international tax attorney before taking any action.
If you are currently in the OVDI or OVDP programs and you would like to understand the consequences of opting-out of the OVDI or OVDP, contact Sherayzen Law Office NOW.
Our experienced international tax firm will thoroughly analyze your case and describe to you the potential consequences of the opt-out of the OVDI or OVDP.
Call or email our experienced voluntary disclosure team!
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

### FATCA, Form 8938 and TD F 90-22.1 Disclosure: Making Informed Decisions
The past decade brought on a wave of new international tax legislation as well as unprecedented enforcement of older tax laws. Form FinCEN Form 114 (formerly Form TD F 90-22.1) (commonly known as “FBAR”) to new FATCA legislation that led to the creation of Form 8938, the current US tax regime with respect to international obligations of US persons has become so complex that it is almost impossible to navigate it for most taxpayers without the professional help of international tax lawyers.
Increasing Complexity of US Tax Laws Requires International Tax Attorney Involvement
With increased complexity of the international tax landscape, the chance of running afoul some US tax rule has become very, very high. Since international tax laws are usually associated with high non-compliance penalties, the taxpayers need to make an informed decision on how to deal with their prior tax non-compliance.
Nowhere is the urgency and necessity of making informed decisions is so high as when it comes to FBARs and Form 8938, primarily because of draconian penalties associated with failure to file these forms Form 114. The ability to analyze the fact pattern, spot all the issues and identify available options based on experience are crucial in this esoteric area of law and the international tax attorneys experienced in voluntary disclosures should be handling such cases.
Choosing the Right Attorney is a Challenge
Unfortunately, it is precisely in this area that there is a serious obstacle to getting the necessary information to make an informed decision. The obstacle is that there is a tremendously small number of international tax attorneys who practice in this area of law and these professionals are shielded by a mass of inexperienced and unqualified attorneys and especially accountants.
It is virtually impossible for taxpayers to state with certainty who is the right lawyer for their case. A lot of taxpayers immediately fall into the trap of going to their accountants to do a voluntary disclosure. In a prior article, I already explained why this could be present a huge problem for the taxpayers.
Other taxpayers correctly realized that they need a tax attorney to get help with their voluntary disclosure. However, some of these taxpayers often make a mistake of hiring a tax lawyer who is not practicing international tax law.
Some taxpayers fall into the “local” trap where they choose an attorney because he or she is in their state or town, not because the attorney is an international tax attorney or experienced in the area of voluntary disclosures.
You Should Choose an International Tax Lawyer Experienced in Form 8938 (FATCA) and FBAR Voluntary Disclosure
In order to make an informed decision, the taxpayers who have undisclosed foreign assets should contact an international tax attorney who is experienced in the are of voluntary disclosures.
Sherayzen Law Office is an international tax law firm that is highly experienced in the area of voluntary disclosures involving FBARs and Forms 8938. Owner Eugene Sherayzen is an experienced international tax attorney who will thoroughly analyze your case, identify all relevant issues, provide accurate estimates of your FBAR and Form 8938 liability, and propose creative legal voluntary disclosure options.
Contact Sherayzen Law Office for help with FBARs and Form 8938.

### FBAR Disclosure of Offshore Assets: the Importance of Issue Spotting
It is terrifying that so many accountants who take on the legal issue of FBAR disclosure are not trained in issue spotting. It may be the number one of the top reasons why so many voluntary disclosures handled by accountants and even attorneys have gone so wrong.
A lot of tax professionals who are familiar with voluntary disclosures concerning foreign accounts simply concentrate on the bigger issue of FBAR penalties. However, due to this over-simplification of the voluntary disclosure, they ignore the fact that most disclosures of offshore assets involve a lot of related issues that, besides their own importance, may directly influence the FBAR disclosure strategy.
For example, I have seen cases where accountants would begin a voluntary disclosure process with respect to foreign investment accounts that contains foreign mutual funds – the issue that immediately should be spotted by the accountants as potentially involving PFICs. Unfortunately, most accountants are not even aware of the existence of PFICs and their unique place in the Internal Revenue Code. Then, without recognizing this problematic issue, these accountants would herd their clients into the IRS Offshore Voluntary Disclosure Program (OVDP) closed claiming that there was full compliance with the accounts and claiming that these accounts should be excluded from the OVDP Offshore Penalty. The end-result in such cases would often be the rejection of the exclusion based on PFIC increase in tax (i.e. the PFIC distributions were reported but incorrectly calculated – i.e. income tax non-compliance).
Obviously, how the case would turn out would ultimately depend on its particular facts, but this is an example indicate of the trend and why it is so important to engage in issue-spotting.
Contact Sherayzen Law Office for Help with Your Voluntary Disclosure of Offshore Assets
If you have undisclosed foreign assets that should have been disclosed to the IRS on the FBAR, Form 8398 or other information returns, contact Sherayzen Law Office for help.
Our experienced international tax law firm will thoroughly review your case, identify the issues involved in your case, estimate your FBAR penalties, propose a definite action plan on how to deal with your situation and implement this plan.
Call or email our experienced voluntary disclosure team NOW!

### Reducing Your FBAR Penalties
FBAR (FinCEN Form 114 formerly Form TD F 90-22.1) penalties can be absolutely draconian. However, with a help of an experienced international tax attorney, they do not have to be so brutal.
Unfortunately, the IRS, accountants and even many lawyers present an overly simplistic view of the FBAR penalty structure. They start out with the potential criminal penalties and absolutely outrageous willful penalties and they usually end there by arguing that a non-compliant taxpayer should enter into the OVDP program (now closed).
What many tax professionals do not discuss is the immense complexity of the FBAR penalty structure that offers various chances to reduce and, sometimes, even eliminate your FBAR penalties through establishing non-willfulness and various mitigation guidelines.
This is a discussion that a tax professional must have with his client; otherwise, the client will not get the full picture of his case and cannot make an informed decision with respect to his voluntary disclosure options.
Notice that the potential for reduction of the FBAR penalties that exists under the current law is not the same as chimerical schemes that abound the internet. On the contrary, this is a serious discussion of what your potential FBAR penalties may be and what is the likelihood of success.
In some case, mitigation of penalties is a real possibility while, in others, entering the OVDP program may constitute a better choice. The important argument at the core of this essay is that the taxpayer should know about all of the options before the decision to the OVDP is made – i.e. the taxpayer has a chance to make a fully-informed decision, not a fear-driven one.
Contact Sherayzen Law Office to Discuss the FBAR Penalty Structure and Possibilities for Reducing Your FBAR Penalties
If you have undisclosed foreign assets, contact Sherayzen Law Office for legal help with your voluntary disclosure. Our experienced tax law firm will thoroughly review your case, estimate your FBAR penalties, analyze the potential for reduction of these penalties vis-a-vis entrance into the OVDP and present to you the available voluntary disclosure options so that you can make an informed decision.

### Official Treasury Currency Conversion Rates of December 31, 2012
Every year, the U.S. Department of Treasure publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates” or the “FMS rates”). Recently, the Treasury Department published the FMS rates for December 31, 2012. While there are other good reasons for the existence of these rates, the FMS rates for December 31 are especially important for persons who are required to file the FBARs.
The latest (January 2012) FBAR instructions require the use of Treasury’s Financial Management Service rates, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:
In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury's Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
For this reason, the international tax attorneys take their time to compile these rates with all updates. For your convenience, Sherayzen Law Office provides a table of the official Treasury currency conversion rates below (keep in mind, you still need to refer to the official website for any updates).
Country
Currency
Foreign Currency to $1.00
Afghanistan
Afghani
51.8000
Albania
Lek
105.6500
Algeria
Dinar
77.8130
Angola
Kwanza
95.0000
Antigua-Barbuda
East Caribbean Dollar
2.7000
Argentina
Peso
4.9100
Armenia
Dram
406.0000
Australia
Dollar
0.9640
Austria
Euro
0.7590
Azerbaijan
Manat
0.8000
Bahamas
Dollar
1.0000
Bahrain
Dinar
0.3770
Bangladesh
Taka
81.0000
Barbados
Dollar
2.0200
Belarus
Ruble
8550.0000
Belgium
Euro
0.7590
Belize
Dollar
2.0000
Benin
CFA Franc
496.0000
Bermuda
Dollar
1.0000
Bolivia
Boliviano
6.9600
Bosnia-Hercegovina
Marka
1.4840
Botwana
Pula
7.7700
Brazil
Real
2.0470
Brunei
Dollar
1.2220
Bulgaria
Lev
1.4840
Burkina Faso
CFA Franc
496.0000
Burma
Kyat
852.0000
Burundi
Franc
1535.0000
Cambodia (Khmer)
Riel
4103.0000
Cameroon
CFA Franc
496.0000
Canada
Dollar
0.9950
Cape Verde
Escudo
82.6850
Cayman Islands
Dollar
0.8200
Central African Republic
CFA Franc
496.0000
Chad
CFA Franc
496.0000
Chile
Peso
478.3500
China
Renminbi
6.2300
Colombia
Peso
1766.4000
Comoros
Franc
361.3500
Congo
CFA Franc
496.0000
Congo, Dem. Rep
Congolese Franc
920.0000
Costa Rica
Colon
509.7000
Cote D'Ivoire
CFA Franc
496.0000
Croatia
Kuna
5.6300
Cuba
Peso
1.0000
Cyprus
Euro
0.7590
Czech Republic
Koruna
18.6300
Denmark
Krone
5.6600
Djibouti
Franc
177.0000
Dominican Republic
Peso
40.1000
Ecuador
Dolares
1.0000
Egypt
Pound
6.3560
El Salvador
Dolares
1.0000
Equatorial Guinea
CFA Franc
496.0000
Eritrea
Nakfa
15.0000
Estonia
Euro
0.7590
Ethiopia
Birr
18.1800
Euro Zone
Euro
0.7590
Fiji
Dollar
1.7590
Finland
Euro
0.7590
France
Euro
0.7590
Gabon
CFA Franc
496.0000
Gambia
Dalasi
34.0000
Georgia
Lari
1.6600
Germany FRG
Euro
0.7590
Ghana
Cedi
1.9050
Greece
Euro
0.7590
Grenada
East Carribean Dollar
2.7000
Guatemala
Quentzel
7.9020
Guinea
Franc
6970.0000
Guinea Bissau
CFA Franc
496.0000
Guyana
Dollar
202.0000
Haiti
Gourde
42.1500
Honduras
Lempira
19.9100
Hong Kong
Dollar
7.7500
Hungary
Forint
221.9600
Iceland
Krona
128.0100
India
Rupee
54.4500
Indonesia
Rupiah
9700.0000
Iran
Rial
8229.0000
Iraq
Dinar
1166.0000
Ireland
Euro
0.7590
Israel
Shekel
3.7320
Italy
Euro
0.7590
Jamaica
Dollar
92.0000
Japan
Yen
86.1600
Jerusalem
Shekel
3.7320
Jordan
Dinar
0.7080
Kazakhstan
Tenge
150.7000
Kenya
Shilling
86.1000
Korea
Won
1063.2400
Kuwait
Dinar
0.2810
Kyrgyzstan
Som
47.1000
Laos
Kip
7966.0000
Latvia
Lats
0.5290
Lebanon
Pound
1500.0000
Lesotho
South African Rand
8.4850
Liberia
Dollar
49.0000
Libya
Dinar
1.2840
Lithuania
Litas
2.6180
Luxembourg
Euro
0.7590
Macao
Mop
8.0000
Macedonia FYROM
Denar
45.4000
Madagascar
Aria
2267.8200
Malawi
Kwacha
344.0000
Malaysia
Ringgit
3.0570
Mali
CFA Franc
496.0000
Malta
Euro
0.7590
Marshall Islands
Dollar
1.0000
Martinique
Euro
0.7590
Mauritania
Ouguiya
300.0000
Mauritius
Rupee
30.4500
Mexico
New Peso
13.0400
Micronesia
Dollar
1.0000
Moldova
Leu
12.0630
Mongolia
Tugrik
1394.3100
Montenegro
Euro
0.7590
Morocco
Dirham
8.4340
Mozambique
Metical
29.6000
Namibia
Dollar
8.4850
Nepal
Rupee
87.3000
Netherlands
Euro
0.7590
Netherlands Antilles
Guilder
1.7800
New Zealand
Dollar
1.2160
Nicaragua
Cordoba
24.1000
Niger
CFA Franc
496.0000
Nigeria
Naira
156.1000
Norway
Krone
5.5840
Oman
Rial
0.3850
Pakistan
Rupee
97.1800
Palau
Dollar
1.0000
Panama
Balboa
1.0000
Papua New Guinea
Kina
1.9440
Paraguay
Guarani
4245.0000
Peru
Nuevo Sol
2.5500
Philippines
Peso
41.0400
Poland
Zloty
3.1040
Portugal
Euro
0.7590
Qatar
Riyal
3.6400
Romania
Leu
3.3660
Russia
Ruble
30.5230
Rwanda
Franc
630.0300
Sao Tome & Principe
Dobras
18469.0610
Saudi Arabia
Riyal
3.7500
Senegal
CFA Franc
496.0000
Serbia
Dinar
86.1800
Seychelles
Rupee
12.9580
Sierra Leone
Leone
4317.0000
Singapore
Dollar
1.2220
Slovak
Euro
0.7590
Slovenia
Euro
0.7590
Solomon Islands
Dollar
7.3210
South Africa
Rand
8.4850
Spain
Euro
0.7590
Sri Lanka
Rupee
127.5000
St Lucia
East Carribean Dollar
2.7000
Sudan
Pound
5.9000
Suriname
Guilder
3.3500
Swaziland
Lilangeni
8.4850
Sweden
Krona
6.5120
Switzerland
Franc
0.9160
Syria
Pound
63.0000
Taiwan
Dollar
29.0440
Tajikistan
Somoni
4.7600
Tanzania
Shilling
1580.0000
Thailand
Baht
30.5800
Timor-Leste
Dili
1.0000
Togo
CFA Franc
496.0000
Tonga
Pa'anga
1.6570
Trinidad & Tobago
Dollar
6.3500
Tunisia
Dinar
1.5500
Turkey
Lira
1.7860
Turkmenistan
Manat
2.8430
Uganda
Shilling
2686.0000
Ukraine
Hryvnia
8.0400
United Arab Emirates
Dirham
3.6730
United Kingdom
Pound Sterling
0.6180
Uruguay
New Peso
19.0500
Uzbekistan
Som
2014.0000
Vanuatu
Vatu
90.1000
Venezuela
New Bolivar
4.3000
Vietnam
Dong
21000.0000
Western Samoa
Tala
2.2050
Yemen
Rial
214.5000
Zambia
Kwacha
5185.0000
Zimbabwe
Dollar
1.0000
1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM - former Yugoslav Republic of Macedonia.
4. Please, refer to the Treasury’s website for amendments regarding any reportable transactions in January, February, and March of 2013.

### Making a Section 444 Election
The IRS has established various rules regarding required tax years in order to prevent excess deferral of taxes by partnerships, S corporations, and personal service corporations. In certain circumstances, however, under Internal Revenue Code Section 444, partnerships, S corporations, and personal service corporations may elect to use a tax year other than their required tax year, subject to certain limitations. This article will explain the basics of Section 444 elections. It is not intended to constitute tax or legal advice.
Partnership, S Corporation and personal service corporation taxation can involve many complex tax and legal issues, so it may be advisable to seek an experienced attorney in these matters. Sherayzen Law Office, PLLC can assist you in all of your tax and legal needs.
Requirements
In general, a partnership, S corporation, or personal service corporation can make a section 444 election provided that it meets the following requirements: (1) it is not a member of a “tiered structure” (defined below), (2) it has not previously made a section 444 election, and (3) it elects a tax year that meets IRS deferral period requirements.
A tiered structure is defined in 26 C.F.R. § 1.444-2T: “—(1) In general. A partnership, S corporation, or personal service corporation is considered a member of a tiered structure if— (i) The partnership, S corporation, or personal service corporation directly owns any portion of a deferral entity, or (ii) A deferral entity directly owns any portion of the partnership, S corporation, or personal service corporation.”
Determination of the Deferral Period
The deferral period is determined by whether a partnership, S corporation, or personal service corporation is adopting or changing its tax year by making a section 444 election, or whether it is retaining its tax year.
For partnerships, S corporations, or personal service corporations adopting or changing to a tax year other than its required year, the deferral period is the number of months after the end of the new elected tax year to the end of the required tax year.
If a partnership, S corporation, or personal service corporation makes a Section 444 election to retain its tax year, the deferral period must be three months or less, determined by the number of months from the start of the tax year to be retained and the end of the first required tax year.
Making a Section 444 Election
Form 8716 must be filed in order to make a Section 444 election. In general, the form must be filed by the earlier of the due date (not including extensions) of the elected tax year or the 15th day of the 6th month of the tax year for which the Section 444 election will go into effect. Form 8716 should be attached to Form 1065, Form 1120S, or Form 1120 for the first elected tax year. A Section 444 election will remain in effect until terminated.Required Payments
A partnership or an S corporation making a Section 444 election must also file Form 8752, “Required Payment or Refund Under Section 7519” for every year that the election is in effect. If the required payment is greater than $500, the payment must be made when the form is filed. A personal service corporation must distribute required amounts to its employee-owners by December 31st of each elected Section 444 tax year.
Contact Sherayzen Law Office for Help with Section 444 election.
 
IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.

### Do I need an Accountant or Attorney for Form 8938 Offshore Assets Disclosure?
A lot of taxpayers are still confused about whether they need an attorney or an accountant to file delinquent Forms 8938. As I explain below, Form 8938 is an essentially legal disclosure form and its voluntary disclosure should be handled by an experienced international tax attorney.
Form 8938 Requires Legal Disclosure
It is important to understand that Form 8938, more than any other form except the FBAR now Form 114 (formerly TD F 90-22.1), requires a legal disclosure of specified foreign assets. The form does not involve any accounting calculations of tax liability or even knowledge of US GAAP (something that other information tax returns, like Forms 5471 or 8865, may require). The taxpayer simply needs to disclose his ownership of specified offshore assets according to the instructions of Form 8938.
Failure to File Form 8938 Is a Legal Issue
Since Form 8938 is a legal disclosure form, the failure to file the form and the penalties associated with the form constitute a legal problem that should be handled by an international tax attorney, not an accountant.
This is even more the case because the strategy with respect to handling Form 8938 and the explanation of the reasonable cause require advocacy – a critical skill which is a part of an attorney’s basic training, which accountants are not trained in.
Clients need an advocate to deliver their position to the IRS in a clear manner. Clients need an advocate to be able to interpret the law, not simply assume that what the IRS agent is saying is the only true version of the law. Finally, clients need an advocate to defend their interests with skill and persuasion.
Tax attorneys are advocates, in addition to performing calculations. Despite the seeming confusion over the role of the two professions, an attorney’s entire approach is likely to be radically different from that of an accountant simply because attorneys are trained to think and act in a completely different manner.
Contact Sherayzen Law Office for Legal Help with Your Voluntary Disclosure of Specified Foreign Assets
If you have undisclosed offshore assets that should have been disclosed on Form 8938, contact Sherayzen Law Office. Our experienced international tax firm will thoroughly analyze your case, estimate your potential Form 8938 penalties, identify all non-compliance issues, and develop a comprehensive approach to your offshore voluntary disclosure.

### Do I Need an Accountant or Attorney for FBAR Offshore Accounts Disclosure?
For taxpayers with undisclosed offshore accounts and who are looking to do an FBAR voluntary disclosure with the IRS, it is crucially important to understand that FBAR disclosure is a legal issue that should be handled by an international tax attorney.
Confusion Over the Roles of Legal and Accounting Professions in FBAR Disclosures
I receive a large number of calls from people of various backgrounds who are utterly confused over the FBAR disclosure and whether they need an accountant or an attorney to handle it.
The confusion stems from the fact that a lot of accountants, many acting in a good-faith effort to help their clients and others because they are simply ignorant of the nature of the FBAR disclosure, reach beyond the limits of their profession and attempt to advise their clients on how to handle the disclosure. Yet, this advice is often incomplete and may lead their clients in a completely different direction.
The reason why many accountants lead so many disclosures into a wrong direction is because FBAR voluntary disclosure is a legal issue, not an accounting one. In essence, by conducting the voluntary disclosure without the help from tax attorneys, accountants play the role of lawyers without the experience and training of the legal profession.
Why FBAR Disclosure Is a Legal Issue
What is it about the FBAR voluntary disclosure that make it so unique that the accountants should defer to international tax attorneys? A detailed answer would occupy a large amount of space, but I wish to emphasize here five distinct features of the FBAR disclosure.
1. FBAR Is A Legal Disclosure Form
Unlike many other IRS forms, FBAR does not involve an accounting calculation. FBAR is issued under the auspices of the Department of the Treasury and is a legal disclosure form which the taxpayer uses to report his or her foreign financial accounts Legal disclosures are in the province of the legal profession, not an accounting one.
2. FBAR Delinquency May Result In Huge Civil and Criminal Penalties; Attorney-Client Privilege May Be Essential
Failure to file the FBAR timely is likely to have tremendous consequences for the taxpayer. The civil penalties can be overwhelming, and there are significant criminal penalties associated with the FBAR. Therefore, the taxpayers with delinquent FBARs may need to be able to relate the facts of their particular situations freely to their tax advisors. Since an accountant can be forced to testify against the taxpayer by the IRS, the best protection is offered by the Attorney-Client Privilege.
3. FBAR Disclosure Is A Complex Process That Requires Detailed Knowledge of Laws and Regulations
FBAR disclosure is an extremely complex process that involves a detailed knowledge of various laws and regulations. Unfortunately, a lot of accountants fail to recognize that they are only trained in accounting, not law. International tax attorneys who are experienced in the area of voluntary disclosures are much more likely to have a more profound understanding of the laws and regulations involved in conducting voluntary disclosures.
One of the biggest problems with the accountants that I have had an opportunity to observe is that they are not likely to be effective in explaining the consequences of entering into the OVDP to their clients. Rather, their clients often enter into the OVDP without the adequate understanding of their options and what the OVDP process actually implies.
4. FBAR Disclosure Involves A Broad Range of Issues and Complex Solutions
It is rare for the FBARs to be the only issue in a voluntary disclosure. More often, the FBAR delinquency will be tied to other issues and problems, such as PFICs, ownership of foreign entities, rental income and so on.
Therefore, FBAR disclosures involve complex interaction between various international (and sometimes even domestic) tax issues which require complex solutions. The basic training of lawyers involves “issue spotting” (i.e. identification of the issues involved in a case). Moreover, complex problems require complex legal solutions (with an accounting input, but the legal side of FBAR disclosures is the dominant force) – experienced international tax attorneys are likely to be much better at creating solutions aimed at minimizing the risks and maximizing the potential of the favorable outcome than accountants.
5. FBAR Disclosure Requires Advocacy
Finally – and this is a critical factor – attorneys are advocates. Accountants can calculate, but they are not trained in the important skill of advocacy.
In my opinion, the lack of this critical skill is one of the most damaging features of the accountants’ attempt to handle FBAR disclosures. Clients need an advocate to deliver their position to the IRS in a clear manner. Clients need an advocate to be able to interpret the law, not simply assume that what the IRS agent is saying is the only true version of the law. Finally, clients need an advocate to defend their interests with skill and persuasion.
Tax attorneys are advocates, not simply calculators. Despite the seeming confusion over the role of the two professions, an attorney’s entire approach is likely to be radically different from that of an accountant simply because attorneys are trained to think in a completely different manner.
Contact Sherayzen Law Office for Legal Help With Delinquent FBARs
If you have undisclosed offshore accounts and have not filed the FBARs for prior years, contact Sherayzen Law Office for legal help with your voluntary disclosure. Our experienced international tax law firm will thoroughly analyze your case, estimate your FBAR liabilities, propose a comprehensive solution plan and implement it (including preparation of all legal and tax forms). Throughout the entire process, Mr. Sherayzen will rigorously represent your interests during IRS negotiations.

### IRS Auto Depreciation Limits Released for 2013
The IRS recently released Rev. Proc. 2013-21 detailing the updated price inflation adjustment limitations on depreciation deductions and lease inclusion amounts for passenger automobiles first placed in service during calendar year 2013. These adjustments are required under Internal Revenue Code Section 280F. If you need advice relating to these matters, or any other tax or legal issues, please contact Sherayzen Law Office, PLLC.
Relevant Definitions
According to the IRS, “Passenger automobiles are defined in section 280F(d)(5)(A) as any 4-wheeled vehicle which is manufactured primarily for use on public streets, roads, and highways, and which is rated at 6,000 pounds unloaded gross vehicle weight (or, in the case of a truck or van, 6,000 pounds gross vehicle weight) or less. Section 280F(d)(5)(B) provides exceptions from this definition, and allows the Secretary to promulgate regulations to exclude trucks and vans from the definition of passenger automobiles” (Internal Revenue Bulletin: 2003-37).
Limits for Passenger Automobiles (Excluding Trucks and Vans)
The depreciation limitations for passenger automobiles (not including trucks or vans) first placed in service during calendar year 2013, and for which the additional bonus depreciation applies (allowing for 50% “expensing” of the cost of the automobile in the year of purchase), is $11,160 for the first tax year. The amounts for following years are: $5,100 the second tax year, $3,050 for the third year, and $1,875 for each succeeding year. Note that, for this category and for each category that follows below, any personal use of a passenger automobile, truck or van will reduce the maximum depreciation deduction that may be taken by a business.
As will be seen from the deduction amounts listed below, only the first year of depreciation is affected by the adjustments.
For passenger automobiles (excluding trucks and vans) placed in service during calendar year 2013 to which 50% bonus depreciation does not apply, the depreciation is $3,160 for the first tax year. For the following years, the amounts are: $5,100 the second tax year, $3,050 for the third year, and $1,875 for each succeeding year.
Limits for Trucks and Vans
The depreciation limitations for trucks and vans first placed in service during calendar year 2013, and to which the additional 50% bonus depreciation applies, is slightly higher than passenger automobiles, at $11,360 for the first tax year. For later years, the amounts are: $5,400 the second tax year, $3,250 for the third year, and $1,975 for each succeeding year.
The depreciation limitations for trucks and vans first placed in service during calendar year 2013, and to which the additional 50% bonus depreciation does not apply, is $3,360 for the first tax year. For later years, the amounts are: $5,400 the second tax year, $3,250 for the third year, and $1,975 for each succeeding year.
Bonus Depreciation
Rev. Proc. 2013-21 includes various factors as to why bonus depreciation may not apply, including the fact that a taxpayer, “(1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2013 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation.” If a passenger automobile, truck or van is not used at least 50% of the time for business purposes, the vehicle must be depreciated under standard straight-line ADS rules.
The Rev. Proc. also includes updated tables for the dollar amount of income inclusion for passenger automobiles (excluding trucks and vans), and separate tables for trucks and vans with a lease terms beginning calendar year 2013.

### IRS Issue Statistics for CFC Holdings; Importance of Form 5471 Grows
On March 6, 2013, the IRS issued statistics for the tax year 2008 with respect to foreign corporations controlled by U.S. corporations. These statistics emphasize the important growth in controlled foreign corporations (“CFCs”) and Form 5471.
IRS Statistics Published in Statics of Income Bulletin (Winter 2013)
In the tax year 2008, some 83,642 foreign corporations controlled by U.S. multinational corporations held $14.5 trillion in assets and reported receipts of $6.0 trillion. These controlled foreign corporations (CFCs) paid $125.2 billion in income taxes on $662.0 billion of earnings and profits (less deficit) before income taxes (“E&P”). Both CFC assets and receipts increased slightly more than 24 percent from tax year 2006, while “E&P” and foreign taxes income taxes paid increased by nearly 30 percent.
For the tax year 2008, these same CFCs were incorporated in 188 different countries (based on unpublished data). More than 42 percent, or 35,856, of these CFCs were incorporated in Europe. Nearly 91 percent of the European CFCs were located in European Union countries.
Almost 79 percent, or 65,740, of CFCs for Tax Year 2008 were concentrated in three major industrial sectors: (1) services; (2) goods production; and (3) distribution and transportation of goods. These three industrial sectors accounted for 81.2 percent of total receipts ($4.9 trillion), 74.9 percent of E&P (less deficit) before income taxes ($496.0 billion), and 57.5 percent of income taxes ($72.0 billion).
Furthermore, for the tax year 2008, controlled foreign corporations were tax owners of 17,548 foreign disregarded entities (FDEs). These foreign disregarded entities reported $4.9 trillion in assets and $230.1 billion in E&P (less deficit) after taxes.
Statistics Demonstrate the Continuous Growth of CFCs and Importance of Form 5471
The IRS statistics confirmed what is already well-known – with growing globalization, the importance of CFCs is increasing with each year. This further means that Form 5471 is also increasing in its importance for the IRS, which is already stepping up the enforcement of compliance with Form 5471 requirements.
Form 5471 is used by the IRS to satisfy the informational reporting requirements of 26 U.S.C. § 6038 (“Information reporting with respect to certain foreign corporations and partnerships”) and 26 U.S.C. § 6046 (“Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock”). It must be filed by certain U.S. citizens and residents who are officers, directors, or shareholders in specified foreign corporations, if various requirements are met. The penalties can be steep, so compliance with the reporting rules is crucial.
Contact Sherayzen Law Office for Help With Form 5471
If you own foreign corporations, you may need to comply with Form 5471 requirements. This is why you need to contact Sherayzen Law Office to schedule a consultation. Our international tax firm is highly experienced in dealing with Forms 5471 and we can help you comply with its requirements. If you are delinquent in your 5471 compliance, we can also advise you with respect to your voluntary disclosure options.

### Accountants Beware: Offshore Disclosure with Form 8938 is a Legal Issue
In an earlier article, I already explained why the FBAR disclosure is a legal issue. In terms of their lineage, Forms 8938 are very similar to the FBARs. While the FBARs are the creation of Bank Secrecy Act, Form 8938 is a creation of a legislation of a similar nature – FATCA (Foreign Account Tax Compliance Act).
The intent of both laws is similar – to produce legal disclosure of foreign assets by U.S. taxpayers. Notice that I am talking about legal disclosure, not an accounting calculation.
While the penalties associated with failure to file Form 8938 are not as severe as those of the FBAR, they are still substantial and have legal and tax repercussions. Where non-compliance is such that it requires voluntary disclosure, the issues associated with Form 8938 take on a new importance that requires the full protection of the attorney-client privilege and complex legal advocacy.
This is why it is so important for the accountants to avoid committing malpractice and recognize that an offshore disclosure that involves filing delinquent Forms 8938 is a legal issue that should be left to international tax attorneys who are trained and experienced in this area of law.
Contact Sherayzen Law Office for Legal Help with Your Voluntary Disclosure of Offshore Assets
If you have undisclosed offshore assets, contact Sherayzen Law Office . Our experienced international tax law firm will thoroughly analyze your case, estimate your potential FBAR penalties, identify all non-compliance issues, and develop a comprehensive approach to your offshore voluntary disclosure.

### Can I Deduct My Rental Real Estate Losses?
With the uncertain economic environment in the past few years, many individuals who own rental estate property have faced substantial losses. A question that often arises is whether such losses can be deducted, and if so, by how much? This article strives to answer these questions in general and provide a basic understanding of the deductibility of rental real estate losses. It is not intended to provide tax or legal advice. Renting real estate can be a complex area, full of many legal and tax obstacles, so you may wish to seek the advice of a competent, experienced attorney. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.
The General Rule of Passive Activity Losses
In general, passive activity losses and deductions are likely to be limited to offsetting income from only passive activities (similarly, credits from passive activities may only be used to offset taxes on passive activity income). Passive activity losses that are greater than passive activity income will be disallowed in a tax year. However, passive activity losses and credits may be carried forward to the next taxable year.
Passive activities are defined to mean trade or business activities in which an individual does not “materially participate”. According to the IRS, material participation means that a taxpayer is involved with the business operations on a “[r]egular, continuous, and substantial basis.” Certain real estate professionals may meet the material participation requirements.
Exceptions
Generally speaking, rental real estate activities will be treated as passive activities, subject to the limitations stated above, unless certain requirements are met. As noted above, one such exception is for material participation in rental real estate activities.
Another limited exception exists for “active participation” in such activities. In general, active participation means that an individual (or married couple) owned at least 10% of the fair market value of the rental property interests, and made management decisions or arranged for others to provide services in a significant and bona fide manner. According to the IRS, "management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions." Thus, generally, limited partners will not meet the active participation test.
For those who qualify for the “active participation” exception, individuals may offset a maximum of $25,000 per year of passive losses from rental real estate against active and portfolio income. More specifically, $25,000 for single individuals and married couples filing jointly for a tax year, $12,500 for married individuals who lived apart from their spouses for a year filing separately, and $25,000 for a qualifying estate reduced by the special allowance for which a surviving spouse qualified.
Provided the requirements are met, losses may be deducted in full by individuals with a modified adjusted gross income (MAGI) of $100,000 or less ($50,000 or less for married couples filing separately). For incomes greater than MAGI of $100,000, the deduction will be limited to half of the amount greater than $100,000 up to $150,000 of MAGI ($75,000 for married filing separately). For individuals with income greater than MAGI of $150,000, the deduction may not be taken.
Contact Sherayzen Law Office For Advice With Respect to Rental Income and Losses
If you have any questions with respect to rental income or losses, contact the experienced tax law firm of Sherayzen Law Office.
Pursuant to IRS Circular 230, any advice rendered in this communication on U.S. tax issues (i) is not intended or written to be used, and it cannot be used, for the purpose of avoiding penalties imposed by the U.S. Internal Revenue Service, and (ii) may not be used or referred to in promoting, marketing or recommending a partnership or other entity, investment plan or arrangement.

### S Corporation At-Risk Rules
Do you own interest in an S-Corporation (“S-Corp”)? If so, the IRS at-risk rules may apply to you and may limit the loss deductions you will be allowed to take. The IRS at-risk rules may also apply to partnerships, LLCs and closely-held C corporations (subject to certain exceptions), so they may be important to learn if you hold an interest in such entities.
This article will explain the basics of the at-risk rules in the context of S-Corps. It is not intended to provide tax or legal advice. S-Corp taxation can be a very complex area, so you may wish to seek the advice of a competent, experienced attorney. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.
A Taxpayer’s At-Risk Amount
In an S-Corp, the deductibility of a distributed loss may be determined by three separate limitations: (1) The shareholder’s adjusted basis of an interest, or the shareholder's stock plus any loans made by the shareholder to the entity, (2) the at-risk rules, and (3) the passive activity rules. As noted, this article will cover the at-risk rules (the other limitations will be covered in future articles).
Under the Internal Revenue Code Section 465, a taxpayer is considered to be at-risk for an activity with respect to amounts including, “(A) the amount of money and the adjusted basis of other property contributed by the taxpayer to the activity, and (B) amounts borrowed with respect to such activity” to the extent that the taxpayer is, “(A) is personally liable for the repayment of such amounts, or (B) has pledged property, other than property used in such activity, as security for such borrowed amount [to the extent of the net fair market value of the taxpayer's interest in such property].”
According to the IRS, any of the following activities for a trade or business that produce income will subject a taxpayer to the at-risk rules: “Holding, producing, or distributing motion picture films or video tapes. 2. Farming. 3. Leasing section 1245 property, including personal property and certain other tangible property that is depreciable or amortizable… 4. Exploring for, or exploiting, oil and gas. 5. Exploring for, or exploiting, geothermal deposits [for wells started after September 1978]. 6. Any other activity not included in (1) through (5) that is carried on as a trade or business or for the production of income.” Taxpayers will not be considered at-risk for amounts of nonrecourse financing that protects against losses, guarantees, and other related arrangements.
In general, the at-risk rules do not apply to the holding of real property placed in service before 1987 or to the holding of an interest in a pass-through entity acquired before 1987 that holds real property placed in service prior to 1987. Mineral property holdings, however, are not included in this exception.
Separate Activities or One Activity?
In most S-Corps, the business will be engaged in many different types of transactions and activities. Thus, it will often be necessary to determine whether the loss limitation at-risk rules apply to each activity, determined separately. Every shareholder in an S-Corp should receive a schedule stating their profit or loss share of each separate activity.
However, activities that constitute a trade or business must be aggregated into one activity if a shareholder actively participates in the management of the trade or business, or 65% or more of the losses in a partnership or S-Corp are allocable to individuals who actively participate in the management of the trade or business. Additionally, certain leased items, among others, may be treated as one activity.
Contact Sherayzen Law Office for Help With S-Corporation Tax Issues
If you have any tax questions regarding your S-Corp, contact the experienced tax law firm of Sherayzen Law Office.
Pursuant to IRS Circular 230, any advice rendered in this communication on U.S. tax issues (i) is not intended or written to be used, and it cannot be used, for the purpose of avoiding penalties imposed by the U.S. Internal Revenue Service, and (ii) may not be used or referred to in promoting, marketing or recommending a partnership or other entity, investment plan or arrangement.

### Accountants Beware: FBAR Disclosure is a Legal Matter
Paradoxically, one of the obstacles currently facing U.S. taxpayers who wish to file their delinquent FBARs and conduct a voluntary disclosure of their foreign assets are their own accountants – more precisely, the inability of many accountants to understand that FBAR disclosure is a legal matter to a much greater extent than an accounting matter.
Special Nature of the FBAR
FBAR is unlike any other information return issued by the IRS. While there are many reasons for it, I just want to point out the four most important considerations that make FBAR disclosures so radically different from other disclosures. First of all, FBAR is issued under the auspices of the Department of the Treasury, but only in the early 2000s was the enforcement of FBARs transferred to the IRS. This is why FBAR does not constitute a part of a taxpayer’s tax return and should be filed separately to a different address by June 30 of each calendar year. The importance of this distinction is that the FBAR is not a regular tax form involving tax calculations, but a legal disclosure form which the taxpayer uses to report his or her foreign financial accounts.
Second, failure to file the FBAR timely is likely to have tremendous consequences for the taxpayer. The civil penalties can be overwhelming, and there are significant criminal penalties associated with the FBAR.
Third, the FBAR penalty structure is complex and allows for many instances of mitigation and exceptions, depending on the taxpayer’s particular situation and ability of the taxpayer’s representative to recognize this situation. There are very important strategies that may be employed during FBAR disclosures to the benefit of the taxpayers.
Finally, the mode of the offshore assets disclosure (i.e. the official IRS voluntary disclosure program and its alternatives) is closely tied to other international tax issues that must be recognized by the taxpayer’s representative. It is rare for the FBAR issue to come alone; usually, the taxpayer would have other international tax issues such as foreign rental income, PFICs, foreign tax credit, foreign earned income exclusion, ownership of foreign business entities, foreign trusts, foreign gifts, foreign inheritance, et cetera. All of these factors must be carefully considered in assessing the existing FBAR penalties (see point three above) and what penalties the taxpayer is likely to face depending on the mode of the offshore assets disclosure.
Accountants Mistakenly Treat FBAR Disclosure as an Accounting Matter
Unfortunately, most accountants have not learned to distinguish the special nature of the FBARs and the enormous complications associated with offshore assets disclosure. There are many reasons for it. First, the great majority of the accountants are not trained to recognize the international tax issues and has very little, if any, familiarity with international tax issues. Therefore, they fail to understand the very special nature of the FBAR and they treat it as simply another form to fill-out, ignoring the legal nature of the disclosure.
Second, even the accountants who are more familiar with international tax obligations of US taxpayers still fail to recognize the fact that FBARs carry criminal penalties and the taxpayers must be adequately protected while discussing the FBAR matters with their representatives.
Third, many accountants are unaware or simply ignore the complexity of the offshore disclosure involving FBARs. This results in taking the simplest approach of herding their clients into the official IRS offshore voluntary disclosure program, often without adequate explanation of the consequences of such a move to their clients.
Fourth, the accountants are not trained for advocacy. Therefore, instead of analyzing their clients’ particular facts and coming up with solutions for their clients, they simply calculate the penalties and present these calculations to their clients as a fact.
Finally, many taxpayers are used to dealing with tax accountants a lot more than with tax attorneys. Similarly, the accountants are aware of these expectations and they attempt to meet these expectations even at the cost of taking on the tasks about which they have little understand and virtually no training.
FBAR is a Legal Matter and Should Be Resolved By Tax Attorneys
Yet, it is highly important to understand that, by undertaking the task of advising their clients on FBAR disclosures, the accountants may be committing malpractice because FBAR is first and foremost a legal matter, not an accounting one. This is why all FBAR disclosures should be handled by tax attorneys who have the right tools and privileges to help their clients.
Let’s emphasize some of the advantages of legal profession that make attorneys so well-fit for FBAR disclosures.
First, the taxpayers with delinquent FBARs need to be able to relate the facts of their particular situations freely to their tax advisors. Since your accountant can be forced to testify against you by the IRS, the best and only protection is the Attorney-Client Privilege.
Second, FBAR is a legal disclosure document, not a tax document. International tax attorneys should use their experience and judgment in advising their clients on how the FBARs should be completed.
Third – and this is a critical factor – attorneys are experienced advocates who are trained to recognize problems and develop comprehensive ethical solutions aimed to minimize the risk of adverse legal exposure of their clients. This means that an experienced international tax attorney will analyze the facts of the particular case in front of him, identify all non-compliance issues, estimate the potential penalties and look for solutions to the problems of a particular case.
Contact Sherayzen Law Office for Legal Help with Your FBAR Disclosure
If you have undisclosed offshore assets, contact Sherayzen Law Office . Our experienced international tax firm will thoroughly analyze your case, estimate your potential FBAR penalties, identify all non-compliance issues, and develop a comprehensive approach to your offshore voluntary disclosure.

### Deductible Expenses for a Newly-Formed Partnership
Are you planning on starting a partnership for business purposes? Usually, partnerships will incur various costs while forming a partnership. Some of these costs may be deductible or amortizable, others will not. This article will examine the deductibility of the most common costs in the formation of a partnership.
Partnerships often involve complex legal and tax issues, so it may be advisable to obtain legal counsel when forming a partnership. Sherayzen Law Office, Ltd. can assist you in all of your tax and legal needs.
Syndication Costs
Often, the formation of a partnership will involve various costs associated with marketing and selling partnership interests to prospective partners. These fees are termed “syndication” costs. Unfortunately for taxpayers, such costs are neither deductible nor amortizable under Internal Revenue Code Section 709. This will be the case regardless of whether the costs were incurred or actually paid.
Organizational Expenses
Unlike syndication costs, however, certain organization costs connected with forming a partnership may be deductible or amortizable. Under IRC Section 709, organizational costs include expenses that are: “(1) are incident to the creation of the partnership; (2) are chargeable to a capital account; and (3) would be amortized over the life of the partnership if they were incurred for a partnership having a fixed life.” Organizational costs may include certain legal and accounting fees associated with the formation of a partnership.
In general, a partnership may be allowed a $5,000 initial deduction for the organizational costs it incurs in its first year of business. However, if organization costs amount to more than $50,000, the $5,000 deduction will be reduced by any amount that exceeds the $50,000 threshold. Organization costs that are not deductible because of the threshold may be amortizable over a period of not less than 180 months, beginning with the month that the partnership begins operating its business. Note, special rules that are not covered in this article apply to partnerships formed before October 22, 2004.
It is important to also note that not all initial costs a partnership may incur or pay will be treated as organizational costs. Besides syndication costs (covered above), costs associated with acquiring and transferring assets to the new partnership, admitting or removing partners after the initial formation of a partnership, and various other costs may not be treated as organizational costs under these rules.
Startup Costs
Startup Costs are amounts that are paid or incurred after a business is formed, but before business operations actually start. In general, startup costs include pre-operation costs associated with employee training, advertising, promotion and market surveys, and related expenses. Costs associated with investigating the purchase of a partnership interest of a partnership may also be treated as startup costs by partners, provided certain rules are met.
A partnership may deduct $5,000 of startup costs in its initial year of operations. Startup costs that exceed $50,000 will reduce this amount, similar to operating expenses (explained above). A partnership may elect to amortize startup costs that have been reduced by the $50,000 limit over a period of 180 months, beginning with the month the partnership commences its operations. If a business is acquired, the period of amortization will begin the month after the business is purchased.
Contact Sherayzen Law Office for Partnership Organization and Tax Planning
If you are thinking about starting a partnership or your existing partnership is need of a sound tax plan, contact Sherayzen Law Office. Our experienced business and tax law firm will thoroughly analyze your current situation and create a customized plan to move your business toward achieving your business and tax goals.

### Underpayment and Overpayment Interest Rates for the Second Quarter of 2013 
On March 1, 2013, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning April 1, 2013. The rates will be:
	three (3) percent for overpayments [two (2) percent in the case of a corporation];
	three (3) percent for underpayments;
	five (5) percent for large corporate underpayments; and
	one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.
Revenue Ruling 2013-6, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2013-13, dated March 25, 2013.

### Application of Offshore Penalty to Business Ownership Interests
In another essay, I previously discussed the possible inclusion of the business ownership interests in the calculation of the OVDP (2012 Offshore Voluntary Disclosure Program) Offshore Penalty.  In this article, I would like to explore in more depth the application of the Offshore Penalty to ownership of business interests.
OVDP Offshore Penalty
It is a requirement of the OVDP that the taxpayers who enter the program pay the Offshore Penalty. This penalty is imposed in lieu of all other penalties that may apply to the taxpayer’s undisclosed foreign assets and entities, including FBAR and offshore-related information return penalties and tax liabilities for years prior to the voluntary disclosure period. The default penalty rate is 27.5% (in limited cases, the penalty is reduced to 12.5% or 5%) of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the period covered by the voluntary disclosure.
The Offshore Penalty calculation includes business ownership interests related to tax noncompliance. Tax noncompliance includes failure to report income from the assets, as well as failure to pay U.S. tax that was due with respect to the funds used to acquire the asset.
Business Ownership Interests Are Included in the Offshore Penalty; Limited Exceptions
As I previously discussed, the Offshore Penalty is much broader than simply the FBAR penalty. Among other items, the Offshore Penalty encompasses ownership interest in businesses related to income tax non-compliance or acquired by tainted funds (i.e. funds that were subject to U.S. tax but on which no such tax was paid; the definition also includes funds derived from illegal sources such as criminal and terrorist activities).
There are exceptions to this rule, however. Two most prominent exceptions deserve to be emphasized here. First, where a business interest was not obtained by tainted funds and there are no under-reported U.S. tax liabilities, the taxpayer is likely to be able to exclude the business interest from the Offshore Penalty.
Second, the OVDP rules carve out a limited exception for U.S. taxpayers who are foreign residents and quality for the third category of 5% penalty rate. For these taxpayers only, the IRS stated that the offshore penalty will not apply to non-financial assets, such as real property, business interests, or artworks, purchased with funds for which the taxpayer can establish that all applicable taxes have been paid, either in the U.S. or in the country of residence. This exception only applies if the income tax returns filed with the foreign tax authority included the offshore-related taxable income that was not reported on the U.S. tax return.
Obviously, the determination of whether either of these two exceptions (or any other exception) applies in your individual case should only be determined by an international tax attorney experienced in the area of offshore voluntary disclosures.
Major Types of Business Ownership Interests Covered by the Offshore Penalty
The biggest category of business ownership interests covered by the Offshore Penalty includes ownership of foreign entities for which information returns, such as Forms 5471, 8865, 8858, 926 and so on, should have been filed by the non-compliant taxpayer. Most often, this category includes ownership of closely-held foreign corporation, interest in the controlled foreign partnership and contribution of property to a foreign corporation.
Notice that, even if the business entity controlled by the taxpayer is not itself tax non-compliant, but it holds the assets which are non-compliant (usually because they were purchased by using tainted funds), the entire ownership interest in the business entity may be exposed to the Offshore Penalty.
Another type of business interest that is often subject to Offshore Penalty involves business entities that are virtually indistinguishable from its owners. In situations where a business entity is an alter ego or nominee of the taxpayer, the IRS may determine that the Offshore Penalty should be applied to the underlying assets of the entity.
The most spectacular reach of the OVDP, however, is the possibility of involving domestic entities. In spite of having “Offshore” in its name, the Offshore Penalty can actually apply to ownership of U.S. businesses acquired with tainted funds. This is a critically-important consideration for non-compliant U.S. taxpayers who repatriated tainted funds back to the United States and invested them into U.S. businesses.
Contact Sherayzen Law Office for Help With Your Voluntary Disclosure of Offshore and Domestic Business Ownership Interests
Sherayzen Law Office can help you with the disclosure of any of your foreign assets, including Offshore and Domestic business ownership interests. Our international tax law firm is highly experienced in conducting offshore voluntary disclosures of business interests. We will thoroughly analyze your case, assess your tax liability as well as the liability that you would face under the OVDP, determine the available disclosure options and implement the disclosure strategy (including preparation of all legal and tax documents as well as IRS representation).
Contact Sherayzen Law Office to schedule your consultation!

### OVDP Offshore Penalty and Signatory Authority Accounts
The taxpayers who enter into the IRS Offshore Voluntary Disclosure Program (“OVDP”) often have failed to file an FBAR to report an account over which the taxpayer has signature authority. The question arises about whether such accounts should be included in the calculation of the OVDP Offshore Penalty? The answer to this question is – it depends on the circumstances surrounding the signatory authority accounts.
OVDP Offshore Penalty
It is a requirement of the OVDP that the taxpayers who enter the program pay the Offshore Penalty. This penalty is imposed in lieu of all other penalties that may apply to the taxpayer’s undisclosed foreign assets and entities, including FBAR and offshore-related information return penalties and tax liabilities for years prior to the voluntary disclosure period.
The Offshore Penalty is calculated by applying the relevant penalty rate to the penalty base. Penalty Base consists of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the period covered by the voluntary disclosure
General Rule for Signatory Authority Accounts
The critical question at the core of this article is whether the signatory authority accounts should be included in the penalty base.
The main factor that is likely to determine the answer to this question is whether the taxpayer has the beneficial interest in the account.
Generally, where a taxpayer has failed to file an FBAR to report an account over which the taxpayer has merely signature authority but no beneficial interest, the IRS is not going to include this account in the calculation of the Offshore Penalty.
If, however, the IRS determines that the taxpayer has a beneficial interest in the account, then the entire account will be included in the calculation of Offshore Penalty (unless the account is otherwise excluded based on another OVDP rule).
Most Common Factors in Determining Direct and Indirect Beneficial Interest
While many factors may influence the determination of the existence of a beneficial interest, the IRS specifically (but not exclusively) emphases three factors. First, whether the account over which the taxpayer has signature authority is held in the name of a related person, such as a family member or a corporation controlled by the taxpayer. Second, whether the account is held in the name of a foreign corporation or trust for which the taxpayer had a Title 26 reporting obligation. Finally, whether the account was related in some other way to the taxpayer’s tax noncompliance.
If the answer is “yes” to any of these questions, the IRS is likely to determine that the taxpayer has a direct or indirect beneficial interest in the account. If such determination is made, the account will be included in the calculation of the Offshore Penalty (unless the account is otherwise excluded based on another OVDP rule).
Contact Sherayzen Law Office for Help With Your Offshore Voluntary Disclosure
Whether you have a beneficial interest in a signatory account is the issue that should be determined by an international tax attorney.
Sherayzen Law Office can help you with this and any other offshore voluntary disclosure issues. Our international tax firm is highly experienced in conducting offshore voluntary disclosures. We will thoroughly analyze your case, assess your current tax liability as well as the liability that you would face under the OVDP, determine the available disclosure options and implement the appropriate disclosure strategy (including preparation of all legal and tax documents as well as IRS representation).
Therefore, contact Sherayzen Law Office NOW to schedule your consultation!

### 12.5% OVDP Offshore Penalty Category
In an earlier article, I introduced the structure of the OVDP (Offshore Voluntary Disclosure Program) Offshore Penalty. In this essay, I would like to explore one aspect of that structure – the possibility of reducing the Offshore Penalty to 12.5%.
Offshore Penalty
The taxpayers who enter the OVDP must pay the Offshore Penalty. This penalty is imposed in lieu of all other penalties that may apply to the taxpayer’s undisclosed foreign assets and entities, including FBAR and offshore-related information return penalties and tax liabilities for years prior to the voluntary disclosure period.
The default rate of the Offshore Penalty under the OVDP is 27.5%, but, in limited circumstances, it is possible to reduce the penalty to only 12.5% (assuming that the taxpayer does not otherwise qualifies to a lesser penalty rate).
Eligibility Requirements for 12.5% Penalty Rate
The taxpayers may be qualified to a reduced Offshore Penalty rate of 12.5% under the following circumstances. During each of the years covered by the OVDP, the taxpayer’s penalty base (i.e. the highest aggregate balance in foreign bank accounts and the fair market value of assets in undisclosed offshore entities and the fair market value of any foreign assets that were either acquired with improperly untaxed funds or produced improperly untaxed income) must be less than $75,000.
Therefore, there are two basic requirements. First, the highest penalty base must be less than $75,000. Second, this must be the case in each of the years.
Strict compliance is required by the IRS. For example, in a situation where the taxpayer made one deposit in some early year covered by the OVDP and that deposit briefly brought the account balance above $75,000, the taxpayer will not be eligible to the reduced 12.5% Offshore Penalty.
Contact Sherayzen Law Office for Help With Your Offshore Voluntary Disclosure
Whether the 12.5% Offshore Penalty rate applies in your particular situation is a question that can only be answered by an international tax attorney who has thoroughly examined your case.
This is why you should contact Sherayzen Law Office for help NOW.
Our international tax firm is highly experienced in conducting offshore voluntary disclosures. We will thoroughly analyze your case, assess your current FBAR liability as well as the liability that you would face under the OVDP, determine the available disclosure options and implement the appropriate disclosure strategy (including preparation of all legal and tax documents as well as IRS representation).

### Types of Assets Covered by OVDP Offshore Penalty
Before one enters into the 2012 Offshore Voluntary Disclosure Program (“OVDP”), it is highly important to understand what kind of assets are covered by the OVDP Offshore Penalty. In this essay, I intend to broadly outline some of the major types of assets covered by the OVDP Offshore Penalty.
From the outset, it is important to emphasize that this article does not set forth the exclusive list of assets; rather, only some of the types of assets are covered. Also, this article does not represent a legal advice; rather, it is meant only for educational purposes. I strongly recommend retaining an international tax attorney before entering into the OVDP; only your attorney experienced in voluntary disclosures can assess what type of assets are covered by the OVDP Offshore Penalty.
OVDP Offshore Penalty is Broader Than the FBAR Penalty
It comes as a surprise to many of my clients that the OVDP Offshore Penalty is not equivalent to the FBAR penalties in terms of the types of assets covered. The Offshore Penalty is much broader than the FBAR penalty.
The general rule is that the offshore penalty is intended to apply to all of the taxpayer’s offshore holdings that are related in any way to tax non-compliance, regardless of the form of the taxpayer’s ownership or the character of the asset.
This is an extremely broad definition; in fact, it is so broad that it practically incorporates the assumption of willfulness and fraud on the part of the taxpayer who enters the OVDP. This is why it is important for your attorney to advise you on the possibility of other of your foreign assets to be covered in the calculation of the Offshore Penalty.
While there are many types of assets that fall under the general rule above, I would like to concentrate on the fivemajor types of assets that the OVDP Offshore Penalty covers: (1) FBAR assets not otherwise excluded; (2) real estate; (3) art and collectibles; (4) intangible assets; and (5) interest(s) in a U.S. or foreign business.
FBAR Assets Covered by Offshore Penalty
The Offshore Penalty covers all of the financial accounts listed on the FBAR, including bank accounts, securities accounts, precious metals custodial accounts and other assets that should be reported on the FBAR. Unless any of these assets are otherwise excluded under the OVDP rules, they will be used in calculation of your Offshore Penalty.
Real Estate Covered by Offshore Penalty
This type of asset constitutes a major deviation from the FBAR penalties. Under the OVDP rules, the real estate assets related to tax non-compliance are included in the calculation of the Offshore Penalty. It is important to understand that if the real estate was acquired with funds that were subject to U.S. tax but on which no such tax was paid, the offshore penalty would apply regardless of whether the real estate produced any income. Obviously, the rental real estate is also likely to be included in the calculation of the Offshore Penalty if this real estate produced income that should have been disclosed on U.S. tax return and on which U.S. taxes were not paid.
Artwork and Other Similar Assets Covered by Offshore Penalty
The same principal applies to artwork and other similar assets. As long as the artwork was related to income tax non-compliance or was acquired with funds that were subject to U.S. tax but on which no such tax was paid (so-called “tainted funds”), the offshore penalty is likely to be applied to these assets.
Intangible Assets
Intangible Assets constitute another major deviation from the FBAR penalties. The Offshore Penalty is likely to apply where intangible assets, like patents and trademarks, were acquired by tainted funds and/or are related to income tax non-compliance.
Interest in a U.S. or Foreign Business
It is important to remember that the Offshore Penalty applies in lieu of the FBAR penalty as well as other penalties that would be applicable to information returns such as Forms 5471, 8865, 8858, 926 and so on. This is why the Offshore Penalty also applies to ownership of foreign businesses.
What is unique to the OVDP is the application of the Offshore Penalty to the ownership of U.S. businesses acquired with tainted funds. The only justification for such a broad coverage of the Offshore Penalty is that it most likely comes from the aforementioned assumption that the non-compliant taxpayer engaged in fraudulent behavior.
In another article, I will explore how the Offshore Penalty applies to ownership of business interests including possible exceptions to the general rule. For the purposes of this essay, it is important to understand that the Offshore Penalty may be applied to such ownership interests.
Other Assets Maybe Covered Under the General Rule
It is important to emphasize that other assets may be included in the calculation of the Offshore Penalty pursuant to the general rule above (i.e. offshore penalty is intended to apply to all of the taxpayer’s offshore holdings that are related in any way to tax non-compliance, regardless of the form of the taxpayer’s ownership or the character of the asset). It will be up to your attorney to assess which of your assets are subject to the Offshore Penalty.
Broad Coverage of Offshore Penalty Complicates the Entrance of Non-Compliant Taxpayers into the OVDP
Such a broad application of the Offshore Penalty greatly complicates the decision to enter into the OVDP. In some situations (particularly, where the IRS cannot establish willfulness), the taxpayer may be better off taking his chances under the existing FBAR penalty structure and face the individual information return penalties rather than subject themselves to a 27.5% penalty on the highest value of all of his assets (the so-called Modified Voluntary Disclosure or Noisy Disclosure).
Again, this is the decision that can only be taken only after your attorney examines your particular situation and makes the recommendation of not entering into the OVDP.
Contact Sherayzen Law Office for Help With Your Voluntary Disclosure of Offshore Assets
Sherayzen Law Office can help you with the disclosure of any of your foreign assets. Our international tax firm is highly experienced in conducting offshore voluntary disclosures. We will thoroughly analyze your case, assess your current FBAR liability as well as the liablity that you would face under the OVDP, determine the available disclosure options and implement the disclosure strategy (including preparation of all legal and tax documents as well as IRS representation).
Contact Sherayzen Law Office NOW to schedule your consultation!

### FBAR Disclosure: Fighting the Small Accounts Myth
A Minneapolis attorney recently said to me that he has a client who has not filed the FBARs but that client has a number of small accounts and no large accounts; the attorney wanted my opinion on whether it is worth it for smaller clients to go through the trouble of disclosing the accounts to the IRS. My answer was an emphatic YES!
This is exactly the type of myths that I have to battle when I get calls from all around the world from potential clients with smaller accounts. The general impression among these clients is that the IRS will only enforce the FBAR requirement against the “big fish” and there is no need to trouble themselves with voluntary disclosure of FBARs.
Unfortunately, this impression cannot be further from the truth. Tax experts around the country agree that the IRS enforcement of the FBAR requirements has risen to an unprecedented level. The risk of detection, especially once FATCA is fully implemented by the end of the year 2013, has been steadily growing since the 2008 UBS case, fed further by the information disclosed by the participants in the IRS voluntary disclosure programs. As a result, the number of the FBAR prosecutions by the IRS has also risen dramatically.
Given the draconian penalties associated with willful failure to file the FBAR and the high risk of detection, it is imperative for the small accountholders to go through the voluntary disclosure process (either through the 2012 OVDP or its alternatives) before the IRS finds them.
Moreover, for the smaller taxpayers who just found out about the FBAR and who may have a reasonable cause argument, there is an incentive to disclose the FBARs as soon as possible because, with an able attorney experienced in FBAR disclosures, they may be able to dramatically reduce and even eliminate the FBAR penalties.
However, the original non-willfulness can easily grow into willfulness where the taxpayers learn about the existence of the FBAR requirement, consciously disregard it and fail to file the FBARs. At that point, the original innocence of non-willful ignorance is gone, and the taxpayer is likely to face the imposition of much heavier penalties by the IRS.
It is worth noting, moreover, that in these willful cases, the imperative to do voluntary disclosure should be even higher precisely because the IRS is likely to impose unbearably high penalties otherwise. This is why the IRS created the 2012 Offshore Voluntary Disclosure Program so that these taxpayers can bring themselves back into tax compliance without fear of criminal prosecution.
It should be clear to all non-compliant US taxpayers – voluntary disclosure of offshore accounts is almost always better than the IRS finding your non-disclosed account. In my practice, the practice of FBAR voluntary disclosure has always been more beneficial to my clients whether they were located in Minneapolis, New York, San Francisco, Tampa, Canada, Australia, Mexico, Germany, Switzerland or any other country.
Contact Sherayzen Law Office for Help with Delinquent FBARs
If you have undisclosed foreign accounts and have not filed your FBARs, contact Sherayzen Law Office for help. Our experienced FBAR tax firm will thoroughly analyze your case, assess your current FBAR liability, examine your voluntary disclosure options and implement a comprehensive voluntary disclosure strategy striving to achieve the best result for you.

### American Taxpayer Relief Act of 2012: Individual Income Tax Rates for 2013
The American Taxpayer Relief Act of 2012 (the “Act”) was signed into law on January 2, 2013. The Act contains numerous important tax provisions aimed at stabilizing the tax environment and averting the so-called “fiscal cliff.” One of the most important effects of the Act is its impact on the marginal individual income tax rates.
The Act permanently extends the 10%, 25%, 28%, 33%, and 35% individual income tax rates in effect in 2012 except for taxpayers with taxable income above a certain threshold amount. For the taxpayers with taxable income above the threshold amount the marginal tax rate will be 39.6%.
As adjusted for inflation, the following marginal income tax rates will apply to individuals in the tax year 2013:
Filing Single
10% $0 – $8,925
15% $8,925 – $36,250
25% $36,250 – $87,850
28% $87,850 – $183,250
33% $183,250 – $398,350
35% $398,350 – $400,000
39.6% $400,000 and greater
Notice the minuscule range of the 35% tax bracket.
Filing Married Filings Jointly
10% $0 – $17,850
15% $17,850 – $72,500
25% $72,500 – $146,400
28% $146,400 – $223,050
33% $223,050 – $398,350
35% $398,350 – $450,000
39.6% $450,000 and greater
Filing Married Filings Separately
10% $0 – $8,925
15% $8,925 – $36,250
25% $36,250 – $73,200
28% $73,200 – $111,525
33% $111,525 – $199,175
35% $199,175 – $225,000
39.6% $225,000 and greater
Filing Head of Household
10% $0 – $12,750
15% $12,750 – $48,600
25% $48,600 – $125,450
28% $125,450 – $203,150
33% $203,150 – $398,350
35% $398,350 – $425,000
39.6% $425,000 and greater

### OVDP Offshore Penalty Structure: Introduction
The official IRS Offshore Voluntary Disclosure Program (OVDP) constitutes a viable voluntary disclosure option for many taxpayers. However, whether this is the best voluntary disclosure option will, in large part, depend on whether the OVDP penalties are lower than the penalties that a taxpayer would be facing under alternative voluntary disclosure options.
The answer to this critical question depends on your attorney’s ability to properly estimate potential OVDP penalties. In this article, I will focus on introducing the general structure of the Offshore Penalty (note that the income-tax related penalties are not discussed in this article).
OVDP Offshore Penalty
It is a requirement of the OVDP that the taxpayers who enter the program pay the Offshore Penalty. This penalty is imposed in lieu of all other penalties that may apply to the taxpayer’s undisclosed foreign assets and entities, including FBAR and offshore-related information return penalties and tax liabilities for years prior to the voluntary disclosure period.
General Structure of the Offshore Penalty
The Offshore Penalty incorporates a penalty structure which contains three different penalty rates. The default penalty rate is 27.5% of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the period covered by the voluntary disclosure (the “penalty base”).
The default penalty rate applies to all cases except the cases where the two alternative rates apply: 12.5% and 5%. Each of these exceptions has its own set of strict requirements; the 5% penalty rate structure is much more diverse and complex that the 12.5% one, but the IRS will expect strict compliance with all of the terms of these exceptions. In my practice, I often find that the IRS will be pressuring hard to disqualify a taxpayer from alternative penalty rates.
Whether your particular case satisfies the requirements of either or both of the alternative penalty rates is the question that only your attorney can answer. The qualification is highly fact-dependent and will require a very detailed analysis of your situation.
Calculation of the Offshore Penalty
The Offshore Penalty calculation consists of three steps. First, your attorney should determine what assets should be included in the calculation of the Offshore Penalty (i.e. determine the penalty base). Second, your attorney should determine what penalty rate should apply to your assets (i.e. determine what penalty category applies). Finally, after the determinations under the first and second step are made, you attorney should determine the highest account balance (if the asset is a financial account) and the fair market value of other assets, convert the values to US dollars and apply the appropriate penalty rate (i.e. calculation of penalty base and application of the penalty rate).
Contact Sherayzen Law Office for Help With Your Offshore Voluntary Disclosure
Sherayzen Law Office can help you with the disclosure of any of your foreign assets. Our international tax firm is highly experienced in conducting offshore voluntary disclosures. We will thoroughly analyze your case, assess your current tax liability as well as the liability that you would face under the OVDP, determine the available disclosure options and implement the appropriate disclosure strategy (including preparation of all legal and tax documents as well as IRS representation).
Contact Sherayzen Law Office NOW to schedule your consultation!

### FBAR Version That Should Be Used in the OVDP
The Voluntary Disclosure Period for the taxpayers who entered into the now closed IRS Offshore Voluntary Disclosure Program (“OVDP”) encompasses an eight-year period during which the FBAR form may have been modified more than once. The question arises about what version of the FBAR form should be used in the OVDP.
FBAR Background
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 the 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 (also known as the “FBAR”) must be filed with the DOT.
OVDP Guidance on the FBAR Version
The IRS unequivocally stated that, during the OVDP process, the taxpayers should use the most current version Form 114, for filing delinquent FBARs to report foreign accounts maintained in prior years. However, the taxpayers may rely on the FBAR guidance that was applicable for the calendar year that is being reported.
As of February of 2013, the most current version was the one that was revised in January 2012.
Contact Sherayzen Law Office for Help With Your Offshore Voluntary Disclosure
If you have undisclosed foreign accounts and you have not filed the applicable FBARs, contact Sherayzen Law Office for help NOW.
Our international tax firm is highly experienced in conducting offshore voluntary disclosures. We will thoroughly analyze your case, assess your current FBAR liability as well as the liability that you would face under the OVDP, determine the available disclosure options and implement the appropriate disclosure strategy (including preparation of all legal and tax documents as well as IRS representation).

### Request for Extension to Submit Your Voluntary Disclosure Package
In an earlier article, I already described the general process of the Offshore Voluntary Disclosure Program. In that article, I mentioned that you must make a complete submission of your Voluntary Disclosure Package within 90 days of the date of the preliminary acceptance letter from the IRS Criminal Investigation.
What if you cannot make a complete submission by the date specified in this preliminary acceptance letter?
In this case, you or your attorney may request an extension of the deadline to complete your voluntary disclosure submission. With the request for extension, you must submit your name, address, date of birth, and social security number and as much of the Voluntary Disclosure Package documentation as possible. At the very minimum, with the Request for Extension, your attorney should include properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess FBAR penalties.
Requests for up to a 90 day extension must include a statement of those items that are missing, the reasons why they are not included, and the steps taken to secure them.
As of February of 2013, Requests for Extensions must be made in writing and sent to the Austin Campus on or before the date specified in the letter from Criminal Investigation for completing the voluntary disclosure:
Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: Offshore Voluntary Disclosure Program
Contact Sherayzen Law Office for Professional Help with OVDP
If you are already in the OVDP or you are only considering the option of doing so, contact Sherayzen Law Office as soon as possible. Our experienced international tax firm will thoroughly review your case, identify the available options, implement the agreed-upon legal strategy, guide your case through the entire process of the OVDP and rigorously represent your interests during your negotiations with the IRS.

### Switzerland Signs FATCA Implementation Agreement
On February 14, 2013, the U.S. Department of the Treasury announced that it has signed a bilateral agreement with Switzerland to implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA).
Enacted by Congress in 2010, FATCA targets non-compliance by U.S. taxpayers using foreign accounts. The bilateral agreement signed today is the first based on the model published in November of 2012 – the second of two model agreements – and marks another important step in establishing a common approach to combating tax evasion.
Switzerland is one of eight countries that have already signed or initialed an intergovernmental agreement (IGA) which helps to facilitate the effective and efficient implementation of FATCA. In addition to the previously announced countries, Treasury initialed an IGA with Italy on January 24. Treasury is engaged with more than 50 countries and jurisdictions to curtail offshore tax evasion, and more signed agreements are expected to follow in the near future.
The IRS was very pleased: “today’s announcement marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion,” said Acting Secretary of the Treasury Neal S. Wolin. “We are pleased that Switzerland has signed a bilateral agreement with us, and we look forward to quickly concluding agreements based on this model with other jurisdictions.”
It should be remembered that on January 17, 2013, the Treasury Department and the IRS finalized the regulations implementing FATCA. Therefore, it is expected that FATCA world-wide compliance will begin in earnest by the end of the year.
Implementation of FATCA means an immensely higher chance of detection of the non-compliant U.S. taxpayers with undisclosed foreign accounts. It is highly important to conduct voluntary disclosure prior to IRS detection, because an IRS investigation will preclude the possibility of entering in the 2012 Offshore Voluntary Disclosure Program (now closed) and seriously endanger other disclosure options.
Contact Sherayzen Law Office for Help With Voluntary Disclosure of Foreign Accounts
If you have undisclosed offshore accounts, contact Sherayzen Law Office to discuss your voluntary disclosure options. Our experienced international tax law firm will thoroughly analyze your case, assess your current FBAR and Form 8938 liability, identify the voluntary disclosure options available to you and implement the desired disclosure option, including preparation of all legal and tax documents.

### IRS Offshore Voluntary Disclosure Program Process
In an earlier article, I discussed the key requirements of the Offshore Voluntary Disclosure Program (OVDP) now closed. In this essay, I would like to outline the general OVDP administrative process from initial pre-clearance through the execution of the Closing Agreement.
General Description
In order to participate in the OVDP, the taxpayer must first be accepted into the program. The acceptance process consists of the basic pre-clearance and the submission of the Offshore Voluntary Disclosure Letter with Attachments. Once the IRS approves the preliminary acceptance into the OVDP, the next step is to prepare and timely submit the voluntary disclosure package that includes all of the required documentation covering the entire voluntary disclosure period. Then, the IRS will assign an Agent to complete the certification of your tax returns and assess your Offshore penalty. Assuming that the taxpayer agrees to the Offshore penalty and the results of the Agent’s certification, the taxpayer should execute the Closing Agreement with the IRS.
This is a very simplified description of the process; there are numerous other considerations and requirements that must be taken into account. It will be up to your attorney to determine the precise process of your voluntary disclosure.
The following discussion of the process assumes that you retained an attorney to help you with the OVDP process; I also strongly recommend securing an international tax attorney’s help with the OVDP in order to improve the chance of success of your voluntary disclosure.
Pre-Clearance
The OVDP acceptance process begins with securing the pre-clearance from the IRS Criminal Investigation Lead Development Center (CILDC). It is usually secured by your attorney who sends a fax to CILDC with the identifying information (name, date of birth, social security number and address) and executed power of attorney. If each spouse intends to apply for OVDP, the attorney should make a separate request for each spouse.
Generally, CILCD will notify your attorney by fax within thirty days whether or not you are cleared to make an offshore voluntary disclosure. If you are not cleared, this most likely means that the IRS has already launched an investigation of your tax affairs. If you are cleared, you can proceed to the next OVDP step.
Note, pre-clearance does not guarantee your acceptance into the OVDP. You must truthfully, timely, and completely comply with all OVDP process and requirement provisions.
Offshore Voluntary Disclosure Letter and Preliminary Acceptance
If you are deemed cleared for the OVDP, the next step is to prepare and file the Offshore Voluntary Disclosure Letter with all of the required attachments (the “Letter”) within 45 days from receipt of the pre-clearance fax notification.
As of February of 2013, the Letter with attachments should be submitted to the following address:
Internal Revenue Service
Voluntary Disclosure Coordinator
1-D04-100
2970 Market Street
Philadelphia, PA 19104
The IRS Criminal Investigation will review the Letter and notify your attorney by mail or fax whether your offshore voluntary disclosure have been preliminarily accepted or declined. It is intended this process should be completed within 45 days of receipt of a complete Letter, but there is no guarantee that this will occur. In general, however, the IRS is able to render its decision within this time period.
Note that preliminary acceptance into the OVDP is conditioned upon the information provided by the taxpayer being, and remaining, truthful, timely, and complete. Further note that there is a different process for domestic disclosures contemporaneous with the OVDP.
Voluntary Disclosure Package
If the preliminary acceptance is secured, the letter from the IRS Criminal Investigation will instruct your attorney to submit the full voluntary disclosure package to the Austin Campus within 90 days of the date of the letter.
The Voluntary Disclosure Package is the most intense part of your voluntary disclosure in terms of the time it will take to produce the package. The voluntary disclosure submission must be sent in two separate, yet simultaneous, parts.
The first part is to submit a check payable to the Department of Treasury in the total amount of tax, interest, accuracy-related penalty, and, if applicable, the failure to file and failure to pay penalties, for the voluntary disclosure period. The check should be sent along with information identifying the taxpayer name, taxpayer identification number, and years to which the payment relates to the following address. If you cannot pay the total amount of tax, interest, and penalties as described above, submit your attorney should submit a proposed payment arrangement and a completed Collection Information Statement (Form 433-A, Collection Information Statement for Wage Earners and Self-employed Individuals, or Form 433-B, Collection Information Statement for Businesses, as appropriate).
As of February of 2013, the address to which the check must be sent is as follows:
Internal Revenue Service
3651 S. I H 35 Stop 1919 AUSC
Austin, TX 78741
ATTN: Offshore Voluntary Disclosure Program
The second part of the voluntary disclosure submission is the rest of the Voluntary Disclosure Package which should include among other requirements:
1. Copies of previously filed original (and, if applicable, previously filed amended) federal income tax returns for tax years covered by the voluntary disclosure;
2. For taxpayers who began filing timely, original, compliant returns that fully reported previously undisclosed offshore accounts or assets before making the voluntary disclosure for certain years of the offshore disclosure period, copies of the previously filed returns for the compliant years;
3. Complete and accurate amended federal income tax returns (for individuals, Form 1040X, or original Form 1040 if delinquent) for all tax years covered by the voluntary disclosure, with applicable schedules detailing the amount and type of previously unreported income from the offshore account or entity or domestic source (e.g., Schedule B for interest and dividends, Schedule D for capital gains and losses, Schedule E for income from partnerships, S corporations, estates or trusts and, for years after 2010, Form 8938, Statement of Specified Foreign Financial Assets);
4. A completed Foreign Account or Asset Statement for each previously undisclosed foreign account or asset during the voluntary disclosure period;
5. Properly completed and signed Taxpayer Account Summary With Penalty Calculation;
6. For those applicants disclosing offshore financial accounts with an aggregate highest account balance in any year of $500,000 or more, copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure. For those applicants disclosing offshore financial accounts with an aggregate highest account balance of less than $500,000, copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure must be readily available upon request; and
7. Properly completed and signed agreements to extend the period of time to assess tax (including tax penalties) and to assess FBAR penalties.
The above seven items is not a complete list; other forms and statements may also be required to be submitted.
As of February of 2013, the second part of the Voluntary Disclosure Package should be submitted to the following address:
Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: Offshore Voluntary Disclosure Program
Remember, a full and complete submission is required for acceptance into the program.
Assignment of Agent, Additional Requests, Certification
After your attorneys submits both parts of the Voluntary Disclosure Package, your case will be assigned to a civil examiner to complete the certification of your tax returns for accuracy, completeness and correctness. However, do not expect this to be a fast process despite the IRS efforts to expedite the process; depending on how busy the IRS is, it make take months before an agent is assigned to your case. The OVDP operates on a first-come, first-served basis.
During the certification process, it is likely that the examiner will request additional information as needed to process your voluntary disclosure, especially if your disclosure involves PFIC calculations or complex returns. This may delay the process further.
Offshore Penalty Negotiations, Opt-Out and Closing Agreement
After the certification process is completed, your Offshore Penalty will be calculated by the IRS (as approved by a technical specialist) and presented to your attorney.
At this point you will have three options. First, if you disagree, your attorney may attempt to re-negotiate the Offshore Penalty by pointing out any mistakes in the agent’s calculations. Second, if option number one does not work, you should discuss the opt-out option with your attorney. In this article, I will not be discussing this very important and complex subject. Finally, the third option to agree with the Offshore Penalty calculations, pay the Offshore Penalty and sign the Closing Agreement on Final Determination Covering Specific Matters.
Contact Sherayzen Law Office for Help with Your Offshore Voluntary Disclosure
Offshore Voluntary Disclosure Program comes with a very long and complex process. It is too easy to get lost within the process or submit to the calculation of the IRS agents without proper consideration of your alternatives. This is why you need to make sure that you are represented by a tax attorney experienced in this area of law.
If you are already in the OVDP or you are only considering the option of doing so, contact Sherayzen Law Office as soon as possible. Our experienced international tax law firm will thoroughly review your case, identify the available options, implement the agreed-upon legal strategy, guide your case through the entire process of the OVDP and rigorously represent your interests during your negotiations with the IRS.

### No FBAR Penalties – Q&A 17 of the OVDP
There are some taxpayers who should not be using the official IRS Offshore Voluntary Disclosure Program (OVDP) now closed. The IRS expressly singled out one category of such taxpayers in its Q&A 17 of the OVDP Rules.
Q&A 17 only applies to the taxpayers who reported and paid tax on all their taxable income for prior years but did not file FBARs. The key to the application of Q&A 17 is that there should be no underreported tax liabilities by the taxpayer and the taxpayer was not previously contacted regarding an income tax examination or a request for delinquent returns. In such a situation, the IRS is not likely to impose a penalty for the failure to file the delinquent FBARs.
Whether your situation falls within the scope of Q&A 17 should be determined by a tax attorney experienced in the area of voluntary disclosures. If your attorney determines that Q&A 17 applies to your case, you do not need to use the OVDP. Rather, your attorney should file the delinquent FBAR reports according to the FBAR instructions and attach a statement explaining why the reports are filed late.
While Q&A 17 appears to have a clear application, there are plenty of gray-area cases that almost reach the scope of this OVDP provision but still fall short of meeting all of the requirements. In such case, it will be up to the taxpayer’s attorney to determine the proper course of his client's voluntary disclosure.
Contact Sherayzen Law Office for Voluntary Disclosure Help with Undisclosed Offshore Accounts
If you have unreported offshore accounts, contact Sherayzen Law Office for help with your voluntary disclosure options. Our experienced international tax firm will thoroughly review your case, assess your FBAR liability, identify the available voluntary disclosure options and implement the agreed-upon strategy (including preparation of all legal and tax documents).

### No Form 5471 and Form 3520 Penalties – Q&A 18 of the OVDP
In my practice I have encountered situations where a taxpayer has delinquent Form 5471 or Form 3520, but there is no additional tax liability associated with the delinquent forms. In these situations, a natural questions arises on how to best deal with this situation.
One of the options is to follow Q&A 18 of the Offshore Voluntary Disclosure Program (OVDP) Rules. (This program is now discontinued). In very limited circumstances, Q&A 18 allows a small number of eligible taxpayers escape Form 5471 and Form 3520 penalties.
Background Information
Form 5471 is used by the IRS to satisfy the informational reporting requirements of 26 U.S.C. § 6038 (“Information reporting with respect to certain foreign corporations and partnerships”) and 26 U.S.C. § 6046 (“Returns as to organization or reorganization of foreign corporations and as to acquisitions of their stock”). It must be filed by certain U.S. citizens and residents who are officers, directors, or shareholders in specified foreign corporations, if various requirements are met. Failure to file Form 5471 may result in the imposition of steep penalties (see this article for more details).
Form 3520 (Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts) is used by U.S. persons (and executors of estates of U.S. decedents) to report certain transactions with foreign trusts, ownership of foreign trusts under the rules of IRC §§ 671 through 679, and receipt of certain large gifts or bequests from certain foreign persons. Failure to file Form 3520 may result in very heavy penalties.
Q&A 18
Q&A 18 of the OVDP Rules provides a potentially zero-penalty option for non-compliant taxpayers who failed to file tax information returns, such as Form 5471 and Form 3520.
From the outset, it is important to understand that Q&A 18 has a very limited application. It is only relevant in the situation where the taxpayer failed to file Forms 5471 or Forms 3520, but he reported and paid tax on all their taxable income with respect to all transactions related to the foreign corporations or foreign trusts. The IRS is not likely to impose a penalty for the failure to file the delinquent Forms 5471 and 3520 if there are no underreported tax liabilities and the taxpayer has not previously been contacted regarding an income tax examination or a request for delinquent returns.
Whether Q&A 18 applies to your particular situation is a question that should be determined by an international tax attorney experienced in the area of voluntary disclosures. NOTE: IRS OVDI & OVDP Programs are closed. If your attorney determines that this OVDP provision is applicable in your situation, the attorney should file delinquent information returns with the appropriate service center according to the instructions for the form and attach a statement explaining why the information returns are filed late. Note that the Form 5471 should be submitted with an amended return showing no change to income or tax liability. The attorney should further include at the top of the first page of each information return "OVDI - FAQ #18" to indicate that the returns are being submitted under this procedure.
Amended Return Shows Additional Income Unrelated to Form 5471
An interesting question arises in situations where amended tax returns do show additional income, but the income is not in any way related to Form 5471. While your attorney should carefully review the nature and source of the income, it is possible that Q&A 18 will still apply assuming all other requirement of Q&A 18 are met.
Contact Sherayzen Law Office for Voluntary Disclosure Help with Tax Information Returns
It must be remembered that this article is produced for educational purposes only and does not constitute legal advice; only your tax attorney can determine whether Q&A 18 applies to your situation and how to best comply with its requirements.
Note: The OVDP has been discontinued. If you have undisclosed foreign business entities or foreign trusts, contact Sherayzen Law Office for help. Our experienced international tax team will thoroughly review your case, assess your information tax return (Form 5471, 8865, 3520, et cetera) liability, identify the available voluntary disclosure options and implement the agreed-upon strategy (including preparation of all legal and tax documents).

### FATCA at Home: Crackdown on Foreigners' Accounts in U.S. banks
As the IRS engages in negotiations with foreign governments to implement FATCA (Foreign Account Tax Compliance Act) overseas, there is a rising pressure from some countries for reciprocity – the implementation of FATCA-like disclosure of foreign clients’ U.S. accounts to those clients’ home governments.
FATCA Background
FATCA was enacted in 2010 and set to begin taking effect at the end of 2013. FATCA is the mother of many new international tax requirements. One of the most unique features of FATCA (and most relevant for the purposes of this article) is requiring foreign banks to disclose information about the accounts of U.S. persons to the IRS. The goal of this provision is, of course, to expose U.S. persons who are trying to avoid the payment of U.S. taxes through undisclosed offshore accounts.
IRS Engages In Negotiations With Foreign Governments to Implement FATCA
In order to effectively implement FATCA requirements, the Department of the Treasury has to secure the cooperation of foreign governments (especially since disclosure of information required by FATCA may constitute a violation of some countries’ privacy laws). This is why the IRS is engaged in negotiations with a broad range of foreign governments (actually, over 50 foreign jurisdictions) to implement the information reporting and withholding tax provisions of FATCA.
The Department of the Treasury pursues the policy of concluding a series of bilateral tax agreements based on the model treaty developed by the Treasury.
The Treasury Department has already concluded a bilateral agreement with the United Kingdom, Ireland, Denmark and Mexico. Additional jurisdictions with which Treasury is in the process of finalizing an intergovernmental agreement and with which Treasury hopes to conclude negotiations by year end include: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.
Jurisdictions with which Treasury is actively engaged in a dialogue towards concluding an intergovernmental agreement include: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden. Treasury expects to be able to conclude negotiations with several of these jurisdictions by year end.
The jurisdictions with which Treasury is working to explore options for intergovernmental engagement include: Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, Sint Maarten, Slovenia, and South Africa.
Push for Reciprocity from Foreign Governments
As the implementation of FATCA begins, however, the ancient Roman principle of “quid pro quo” seems to have become the theme of the IRS negotiations with foreign governments. It appears that some countries, possibly including France, Germany and China, are demanding reciprocity in the disclosure – i.e. if their banks have to disclose to the IRS the foreign accounts of U.S. persons, then U.S. banks should also disclose U.S. accounts of foreign nationals.
U.S. Positively Responds to Reciprocity Requests
It appears that the general trend in the Obama administration is to agree with the foreign governments and engage in partial or even full reciprocity. The Department of the Treasure spokesman stated that: “the United States is committed to a policy of transparency and equivalence, where appropriate, in furtherance of international cooperation to combat offshore tax evasion."
Actually, according to an October 2012 letter to members of Congress from the Assistant Secretary for Tax Policy, Mark Mazur, the completed FATCA pacts already include commitments "to pursue equivalent levels of reciprocal automatic exchange in the future." Moreover, the United States appears to have already shared some taxpayer information with foreign countries with which it has a tax treaty or a formal information-sharing agreement. The IRS this year started disclosing to some foreign governments information about bank interest payments earned by their citizens with U.S. bank accounts.
Mexican Nationals Maybe Impacted First, but Europeans May Follow Soon
Despite the impression that reciprocity is mainly a demand of the European government, it appears that Mexican nationals may be the first to feel the impact of disclosure, especially since, as mentioned above, the IRS already started disclosing bank interest payments to some foreign governments, including possibly Mexico.
However, while Mexicans may be the first affected by the reciprocity disclosures, it appears that it will be only a matter of time before the European nationals will be affected. This particularly concerns the French and German nationals.

### 2012 OVDP: The Voluntary Disclosure Period
One of the most critical aspects of the 2012 Offshore Voluntary Disclosure Program (2012 OVDP) are the rules pertaining to the voluntary disclosure period – i.e. what years are involved in calculating the Offshore Penalty and for how many years back should the tax returns be amended (with the corresponding consequences for the additional tax due with interest and penalties). These rules have been greatly expanded and elaborated since 2011 OVDI.
The general rule is that the voluntary disclosure period for the applicants to the 2012 OVDP involve the most recent eight tax years for which the due date has already passed. Critically important is to realize that the eight year period does not include current years for which there has not yet been non-compliance. For example, for taxpayers who submit a voluntary disclosure prior to April 15, 2012 (or other 2011 due date under extension), the disclosure must include each of the years 2003 through 2010 in which they have undisclosed foreign accounts and/or undisclosed foreign entities.
For the fiscal-year taxpayers must include fiscal years ending in calendar years 2003 through 2010. For taxpayers who disclose after the due date (or extended due date) for 2011, the disclosure must include 2004 through 2011.
For disclosures made in successive years, any additional years for which the due date has passed must be included, but a corresponding number of years at the beginning of the period will be excluded, so that each disclosure includes an eight year period.
For taxpayers who establish that they began filing timely, original, compliant returns that fully reported previously undisclosed offshore accounts or assets before making the voluntary disclosure, the voluntary disclosure period will begin with the eighth year preceding the most recent year for which the return filing due date has not yet passed, but will not include the compliant years. For example, in hypothetical where a taxpayer who historically filed income tax returns omitting the income from a foreign investment account, but who began reporting that income on his timely, original tax and information reporting returns for 2009 and 2010 without making a voluntary disclosure, and who filed a voluntary disclosure in January 2012, the voluntary disclosure period will be 2003 through 2008.
Understanding the rules of the voluntary disclosure period allows a taxpayer to plan the time of his disclosure according to his circumstances. Of course, such a benefit is only available in cases where there is sufficient time for such planning.
Contact Sherayzen Law Office for Help with 2012 OVDP
If you have undisclosed foreign account or foreign entities and you plan to enter the 2012 OVDP, you should contact Sherayzen Law Office for help with your voluntary disclosure. Our experienced international tax firm will thoroughly analyze your case, assess your FBAR liability as well as other applicable penalties, identify the options available in your case, and work with you every step of the way until your voluntary disclosure is finished.

### 2012 OVDP and Domestic Voluntary Disclosure
Sometimes a taxpayer who enters 2012 OVDP also has undisclosed domestic tax liability and the question arises with respect to how to handle this additional liability.
As was the case with the 2009 OVDP and the 2011 OVDI, the 2012 OVDP is available to taxpayers who have both offshore and domestic issues to disclose. The Voluntary Disclosure Practice requires an accurate and complete disclosure. Consequently, if there are undisclosed income tax liabilities from domestic sources in addition to those related to offshore accounts and assets, they must also be disclosed in the 2012 OVDP.
Therefore, when applying for the 2012 OVDP, the taxpayer should indicate on the Offshore Voluntary Disclosure Letter that he is also making a domestic voluntary disclosure.
However, these domestic tax liabilities are not going to be covered by the same IRS agent who will be in charge of your 2012 OVDP. Rather, such voluntary disclosures will go through the traditional IRS voluntary disclosure program and another agent will be assigned to the case to deal specifically with domestic issues. This further means that there is a separate application process for acceptance into the traditional IRS voluntary disclosure program in addition to applying to the 2012 OVDP.
Contact Sherayzen Law Office for Legal Help with Domestic and Offshore Voluntary Disclosures
If you have undisclosed offshore accounts and foreign income in addition to undisclosed U.S.-source income, contact Sherayzen Law Office for help. Our experienced international tax firm will thoroughly review your case, determine your options with respect to foreign and domestic voluntary disclosures, prepare all of the necessary legal documents and tax forms, and vigorously represent your interests during your negotiations with the IRS.

### Gift and Estate Tax Impact of the American Taxpayer Relief Act of 2012
One of the most dramatic effects of the American Taxpayer Relief Act of 2012 (ATRA) was felt in the area of gift and estate taxes.
Pre-ATRA Situation
In 2012, the estate and gift tax exemptions, indexed for inflation, were set at $5,120,000 each (up from $5,000,000 in 2011). Moreover, in 2012, the surviving spouse could use the unused exemption of a deceased spouse (this is called "portability"). Finally, the gift tax exemption was the same as the estate tax exemption, so taxpayers could make lifetime gifts that fully utilized their exemptions. In some situations, these gifts would shift the gifted assets' future appreciation and income out of the donors' taxable estates. The maximum tax rate for transfers in excess of the exemption was 35 percent.
All of these provisions expired on January 1, 2013. The $5,120,000 exemption was reduced to a $1,000,000 and the maximum tax rate was increased to 55 percent; the portability provision also expired. There was also a problem of the infamous “clawback” with respect to taxpayers who gifted their property using the higher exemption limits in 2012.
ATRA Changes
ATRA corrected the negative impact of the expiration of the 2012 gift and estate tax provisions. It set the permanent exemptions at $5,000,000 with one unexpected surprise – the exemption amount was indexed for inflation. This means that, for 2013, the exemption amount is $5,250,000. The higher exemption amount also renders the clawback provision harmless at this point.
Furthermore, ATRA reinstated the portability provision so that a surviving spouse can still use a deceased spouse's unused exemption (provided that an estate tax return is filed and the portability election is properly made). However, it should be remembered that the portability is not available for a deceased spouse's unused generation-skipping transfer tax exemption.
On the more negative side, ATRA raised the maximum tax rate from the 2012 levels to 40 percent. On the other hand, it is still a lot lower than the 55-percent tax that would have been applicable without ATRA.
With respect to charitable contributions, ATRA reinstated the exclusion from gross income for qualified charitable contributions by taxpayers over age 70 ½ of up to $100,000 distributed from an IRA through December 31, 2013. See this article for more details.
Annual Exclusion and Form 3520 Threshold Amount
For the tax year 2013, the gift tax annual exclusion increased from $13,000 to $14,000 per donee and from $139,000 to $143,000 for gifts made to a non-citizen spouse. The threshold at which gifts receivable from foreign partnerships and corporations become reportable to the IRS also increased from $13,258 to $15,102. The threshold amount for Form 3520 (with respect to value of gifts from foreign individuals and estates) remains at $100,000.
Contact Sherayzen Law Office for Help with Your Estate and Tax Planning
If you are in the process of creating your estate and/or tax plan, contact Sherayzen Law Office for help. Our experienced estate planning tax firm will thoroughly review your case, identify available options and prepare all of the required legal and tax documents to implement your plan.

### Domestic and Offshore Voluntary Disclosure Ineligibility Examples
In an earlier article, I discussed the general Offshore Voluntary Disclosure Program eligibility requirements now closed, particularly those spelled out in the Internal Revenue Manual (IRM). In this essay, I would like to provide certain examples of when a taxpayer’s disclosure fails to meet IRM 9.5.11.9 requirements. Note, these examples are not specific to offshore disclosure, but are also relevant to domestic voluntary disclosure. Finally, it is important to point out that the examples below are not taking into account other OVDP application requirements; rather, they merely describe general compliance situations.
It should be noted that these examples are for illustrative purposes only and cannot be relied upon to determine the voluntary disclosure eligibility in your specific circumstances. Whether you are eligible to participate in the OVDP is a question that must be analyzed by an international tax attorney who is experienced in this area of law.
1. A letter from an attorney stating his client, who wishes to remain anonymous, wants to resolve his tax liability. This is not a voluntary disclosure until the identity of the taxpayer is disclosed and all of the elements of IRM 9.5.11.9 have been met.
2. A disclosure made by a taxpayer who is under grand jury investigation. This is not a voluntary disclosure because the taxpayer is already under criminal investigation. The conclusion would be the same whether or not the taxpayer knew of the grand jury investigation.
3. A disclosure made by a taxpayer, who is not currently under examination or investigation, of omitted gross receipts from a partnership, whose partner is already under investigation for omitted income that was skimmed from the partnership. This is not a voluntary disclosure because the IRS has already initiated an investigation which is directly related to the specific liability of this taxpayer. The conclusion would be the same whether or not the taxpayer knew of the ongoing investigation.
4. A disclosure made by a taxpayer, who is not currently under examination or investigation, of omitted constructive dividends received from a corporation which is currently under examination. This is not a voluntary disclosure because the IRS has already initiated an examination which is directly related to the specific liability of this taxpayer. The conclusion would be the same whether or not the taxpayer knew of the ongoing examination.
5. A disclosure made by a taxpayer after an employee has contacted the IRS regarding the taxpayer’s double set of books. This is not a voluntary disclosure even if no examination or investigation has commenced because the IRS has already been informed by the third party of the specific taxpayer’s noncompliance. The conclusion would be the same whether or not the taxpayer knew of the informant’s contact with the IRS.
Contact Sherayzen Law Office for Legal Help With Your Domestic and Offshore Voluntary Disclosure
If you have undisclosed income and/or offshore accounts, contact Sherayzen Law Office for legal help. Our experienced tax firm will analyze your case, determine your current tax liability (including potential FBAR penalties), identify available voluntary disclosure options, prepare all of the necessary legal and tax documents, and rigorously represent your interests during your negotiations with the IRS.

### Offshore Accounts Disclosure and John Doe Summons
If a taxpayer is about to conduct a voluntary disclosure of his offshore accounts, a question arises about his eligibility to do so in a situation where the IRS already served a “John Doe” summons or made a treaty request seeking information that may identify a taxpayer as holding an undisclosed foreign account or undisclosed foreign entity. The answer is that it depends on the timing of the disclosure.
Background Information
In an earlier article, I discussed the Offshore Voluntary Disclosure Program (OVDP) now closed eligibility requirements. Specifically, I discussed the timeliness eligibility requirement of IRM 9.5.11.9 and how a failure to satisfy this requirement will prevent the taxpayer from conducting a voluntary disclosure.
Under IRM 9.5.11.9, a voluntary disclosure is timely if it is received by the IRS before either of the following events occurs:
(a) the IRS has initiated a civil examination or criminal investigation of the taxpayer, or has notified the taxpayer that it intends to commence such an examination or investigation. Notice, it is not relevant whether the IRS has initiated a civil examination which is not related to undisclosed foreign accounts or undisclosed foreign entities – either of the two, civil examination and criminal investigation, will prevent OVDP participation;
(b) the IRS has received information from a third party (e.g., informant, other governmental agency, or the media) alerting the IRS to the specific taxpayer’s noncompliance;
(c) the IRS has initiated a civil examination or criminal investigation which is directly related to the specific liability of the taxpayer; or
(d) the IRS has acquired information directly related to the specific liability of the taxpayer from a criminal enforcement action (e.g., search warrant, grand jury subpoena).
General Analysis
For the purposes of this essay, John Doe summons and treaty requests most likely fit the situation described in paragraph (b). Hence, the main criteria regarding the taxpayer’s eligibility to conduct voluntary disclosure of his offshore accounts in such situations would be whether the IRS already received information under the John Doe summons, treaty request or other similar action and whether the information is sufficiently specific.
For example, the mere fact that the IRS served a John Doe summons, made a treaty request or has taken similar action does not make every member of the John Doe class or group identified in the treaty request or other action ineligible to participate.
On the other hand, if the IRS or the U.S. Department of Justice already obtained information under a John Doe summons, treaty request or other similar action that provides evidence of a specific taxpayer's noncompliance with the tax laws or FBAR reporting requirements, that particular taxpayer will become ineligible for OVDP and Criminal Investigation's Voluntary Disclosure Practice.
Contact Sherayzen Law Office for Help With Offshore Voluntary Disclosure
Based on the analysis above, it is evident that a taxpayer concerned that a party subject to a John Doe summons, treaty request or similar action will provide information about him to the IRS should apply to make a voluntary disclosure as soon as possible.
This is why you should contact Sherayzen Law Office. Our experienced international tax law firm can help you with the entire voluntary disclosure process, including initial assessment of your FBAR liability, determination of available voluntary disclosure options, preparation of all of the required legal and tax documents, and rigorous representation of your interests during your negotiations with the IRS.

### Phaseout of Deduction of Interest on Education Loans: 2013
In its Revenue Procedure 2013-15, the IRS stated that, for the 2013 taxable year, the $2,500 maximum deduction for interest paid on qualified education loans under IRC § 221 begins to phase out under IRC § 221(b)(2)(B) for taxpayers with modified adjusted gross income in excess of $60,000 ($125,000 for joint returns). It is completely phased out for taxpayers with modified adjusted gross income of $75,000 or more ($155,000 or more for joint returns).

### Offshore Voluntary Disclosure Eligibility Criteria
Generally, unless ineligible under specific rules, U.S. taxpayers who have undisclosed offshore accounts or assets and meet certain requirements are eligible to apply for IRS Criminal Investigation’s Voluntary Disclosure Practice and the OVDP penalty regime. In this article, I will only strive to broadly outline the 2012 OVDP (Offshore Voluntary Disclosure Program) and 2014 OVDP (closed) general eligibility criteria, but the issue of the eligibility should be carefully analyzed in light of your individual circumstances by an international tax attorney experienced in the IRS voluntary disclosure programs.
The Types of Juridical Persons Eligible to Participate in the OVDP
Individual U.S. taxpayers as well as entities (such as corporations, partnerships and trusts) are eligible to make a voluntary disclosure, assuming all other eligibility requirements are met.
Requirements of IRM (Internal Revenue Manual) 9.5.11.9 Must Be Met
In order to participate in the 2012 OVDP, a U.S. taxpayer must meet all requirements of IRM 9.5.11.9. In general, IRM 9.5.11.9 spells out five voluntary disclosure eligibility requirements.
1. Voluntary Disclosure Must Be Truthful
It is the most basic requirement of the voluntary disclosure – an OVDP participant cannot lie to the IRS during the voluntary disclosure. Generally, I try to go over the entire case of my clients in order to make sure that there is not even an appearance of the disclosure being anything less than truthful.
2. Voluntary Disclosure Must Be Complete
You cannot do a partial voluntary disclosure; an OVDP participant must disclosure all of his failings to comply with U.S. tax laws to the IRS. Therefore, the taxpayer who participates in the voluntary disclosure must strive to uncover any past non-compliance committed during the OVDP disclosure period. Unfortunately, such process requires reliance to a certain degree on the memory of the clients about events that may have happened some time ago and such memory may have lost its accuracy. Another major obstacle is the assumption often made by clients that certain facts are not important and they never disclose them, but which later turn out to be critical to the case.
As an attorney, I strive to test every part of my client’s case in order to make sure that there are no hidden issues and the IRS cannot disallow OVDP participation due to incomplete disclosure. Fortunately, the long experience of with numerous clients in this area greatly helps in uncovering the potential problems and allows for a more effective voluntary disclosure process.
3. Voluntary Disclosure Must Be Timely
A voluntary disclosure is timely if it is received by the IRS before either of the following events occurs:
(a) the IRS has initiated a civil examination or criminal investigation of the taxpayer, or has notified the taxpayer that it intends to commence such an examination or investigation. Notice, it is not relevant whether the IRS has initiated a civil examination which is not related to undisclosed foreign accounts or undisclosed foreign entities – either of the two, civil examination and criminal investigation, will prevent OVDP participation;
(b) the IRS has received information from a third party (e.g., informant, other governmental agency, or the media) alerting the IRS to the specific taxpayer’s noncompliance;
(c) the IRS has initiated a civil examination or criminal investigation which is directly related to the specific liability of the taxpayer; or
(d) the IRS has acquired information directly related to the specific liability of the taxpayer from a criminal enforcement action (e.g., search warrant, grand jury subpoena).
This is why time is so crucial in voluntary disclosures – it may make all the difference in what type of penalties you will be facing. This is also why it is so important for the taxpayers who found out about their non-compliance with U.S. tax laws to contact Sherayzen Law Office as soon as possible to discuss the voluntary disclosure options.
4. Cooperation During Voluntary Disclosure
The taxpayer must show a willingness to cooperate (and does in fact cooperate) with the IRS in determining his correct tax liability. Failure to do so will render the taxpayer ineligible to conduct voluntary disclosure.
5. Good-Faith Payment Arrangement
The taxpayer must make good faith arrangements with the IRS to pay in full, the tax, interest, and any penalties determined by the IRS to be applicable. The OVDP terms require the taxpayer to pay the tax, interest, and accuracy-related penalty, and, if applicable the failure to file and failure to pay penalties with their submission. However, it is possible for a taxpayer who is unable to make full payment of these amounts to request the IRS to consider other payment arrangements.
The burden is on the taxpayer to establish inability to pay, to the satisfaction of the IRS, based on full disclosure of all assets and income sources, domestic and offshore, under the taxpayer’s control. Assuming that the IRS determines that the inability to fully pay is genuine, the taxpayer must work out other financial arrangements, acceptable to the IRS, to resolve all outstanding liabilities, in order to be entitled to the penalty relief under the OVDP.
Per Se Ineligibility
Even if the requirements of of IRM 9.5.11.9 are met, there are certain “per se” ineligibility categories of taxpayers which will prevent such taxpayers from participating in the 2012 OVDP:
First, if a taxpayer appeals a foreign tax administrator's decision authorizing the providing of account information to the IRS and fails to serve the notice as required under existing law (see 18 U.S.C. 3506) of any such appeal and/or other documents relating to the appeal on the Attorney General of the United States at the time such notice of appeal or other document is submitted, the taxpayer will be ineligible to participate. This OVDP provision closes one of the 2011 OVDI loopholes that allowed some U.S. taxpayers to appeal certain foreign decisions and not to inform the U.S. Department of Justice about it (as required by law), while maintaining their voluntary disclosure eligibility.
Second, the IRS may announce that certain taxpayer groups that have or had accounts at specific financial institutions will be ineligible due to U.S. government actions in connection with the specific financial institution. Such announcements will provide notice of the prospective date upon which eligibility for specific taxpayer groups will be posted to the IRS website. This possibility builds a tremendous pressure on non-compliant U.S. taxpayers, because there is constant fear that their voluntary disclosure eligibility will be taken away by an IRS action irrespective of the IRM 9.5.11.9 compliance.
Third, the IRS voluntary disclosure practice does not apply to taxpayers with illegal-source income.
Contact Sherayzen Law Office for Help With Your Offshore Voluntary Disclosure
The voluntary disclosure eligibility criteria is complex and it is best to consult an attorney experienced in voluntary disclosures with respect to whether you are eligible to conduct voluntary disclosure under your particular circumstances.
This is why your first step should be to schedule a consultation with a Sherayzen Law Office attorney. Our international tax firm is highly experienced in voluntary disclosures and they can help you with an entire voluntary disclosure process, including initial assessment of your FBAR liability, determination of available voluntary disclosure options, preparation of all of the required legal and tax documents, and rigorous representation of your interests during your negotiations with the IRS.

### Offshore Voluntary Disclosure Program: Advantages and Disadvantages
2012 Offshore Voluntary Disclosure Program (2012 OVDP) now closed may offer tremendous benefits to certain types of taxpayers, but it may not be as beneficial in other circumstances. Whether to enter the 2012 OVDP is a decision that should be made by the taxpayer only after he had an opportunity to discuss this matter in depth with an experienced attorney who specializes in offshore voluntary disclosures. In this article, however, I wish to outline some of the broader considerations with respect to entering into the 2012 OVDP in order to provide some background information to the readers so that they can understand better their attorney’s advice.
Background Information
2012 OVDP was announced by the IRS barely four months after the end of the wildly-successful 2011 OVDI (Offshore Voluntary Disclosure Initiative). However, the actual terms of the program were not announced until much later, June 26, 2012.
2012 OVDP brought in tougher terms than 2011 OVDI (for example, the highest penalty category is 27.5% instead of 25% as it was under 2011 OVDI rules), closed some 2011 OVDI loopholes and created a more complex and detailed set of rules. 2012 rules also clarified many heretofore obscure procedures and contained new features that may benefit certain classes of taxpayers, especially those who owned Canadian retirement accounts.
The basic structure of 2012 OVDP, however, remains largely similar to 2011 OVDI. It still has three penalty levels (27.5%, 12.5% and 5%), highly demanding information disclosure requirements and general rigidness with respect to its terms.
General Cost-Benefit Considerations
There are actually three general analytical steps with respect to benefits and drawbacks of entering into the 2012 OVDP. First, the extent of current liability exposure of the taxpayer outside of the 2012 OVDP. Second, the estimate of the OVDP liability of the taxpayer and comparison of OVDP versus non-OVDP exposure (here, an attorney would also explore the non-tax aspects of the OVDP disclosure such as the comfort level of the taxpayer with the invasive nature of the OVDP requirements). Finally, whether 2012 OVDP is the best route to proceed vis-a-vis alternative voluntary disclosure options.
Since the first and the third steps are outside of the scope of this article, I will concentrate on the calculation of advantages and disadvantages of entering of the 2012 OVDP versus non-OVDP exposure. It should be remembered, however, that this calculation will depend heavily on the individual circumstances of each case.
Primary Advantages of the 2012 OVDP
2012 OVDP enjoys five primary advantages over non-OVDP options. First, it is an official IRS program with a virtual certainty (though, according to the IRS, not a 100% guarantee) of elimination of criminal prosecution.
Second, 2012 OVDP provides a taxpayer with an opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues at the same time. This is the case because OVDP rules assess one single Offshore Penalty with respect to all information returns – Forms 5471, 8865, 926, 3520, FBARs, et cetera. This can highly advantageous for the taxpayer, because, outside of the OVDP, he will have to deal with the penalties associated with each form.
Moreover, paying one single penalty may represent huge savings over paying penalties outside of the OVDP. The IRS provides a hypothetical example where a taxpayer would pay, outside of the 2012 OVDP, $4,543,000 (plus interest) in tax, accuracy-related penalty, and FBAR penalty on a single $1,000,000 account with the undisclosed income of $50,000 per year. This is not even counting the additional penalties and jail time in case the IRS decides to initial a criminal prosecution. On the other hand, in the same example, a taxpayer would pay only $518,000 plus interest under the 2012 OVDP rules (assuming 27.5% offshore penalty category).
Third, 2012 OVDP rules provide for a certain flexibility where the taxpayer’s attorney can look for strategies to lower the Offshore Penalty further if the circumstances of the case allow for such possibility. Therefore, despite its overall rigidness, the OVDP does take some individual circumstances into the account. However, it is important to point out that much of this flexibility is likely to be achieved only securing the agreement of the IRS agent in charge of your case, his manager and the technical analyst – this is a very hard achievement even for an experienced attorney (though, unfortunately, there are a number of cases where the taxpayers’ representatives failed to even try to achieve this goal) and it puts very strict limits on the OVDP flexibility.
Fourth, 2012 OVDP limits the taxpayer’s liability to eight years and the IRS will not look further absent extraordinary circumstances. Outside of the OVDP, the IRS does have an argument that failure to file certain information returns may keep the statute of limitations open to IRS examination with respect to affected tax returns.
Finally, 2012 OVDP provides a definite closure to the case. At the end of the OVDP process, Form 906 (the Closing Agreement) is signed by the taxpayer and the IRS by which both sides agree to the terms of the Agreement and the case is over (absent extraordinary circumstances, such as fraudulent claims by the taxpayer during the voluntary disclosure process).
Primary Disadvantages of the 2012 OVDP
2012 OVDP also has numerous disadvantages. First, this is a very rigid program with numerous requirements. The side-effect is that the OVDP process can be an expensive one for the taxpayer when it comes to legal and accounting fees.
Second, despite having some flexibility with respect to the calculation of penalties, OVDP rules are not likely to be sensitive to major circumstances of a taxpayer’s case, such as non-willfulness of his conduct. While it is never officially stated, the OVDP unofficially incorporate the assumption that the OVDP applicants acted willfully in its Offshore Penalty structure and there is no reasonable cause that can explain their failure to comply with U.S. tax laws. This often leads to a result where innocent taxpayers with smaller cases or taxpayers who live overseas (and for one reason or another do not satisfy the requirements of the 5% penalty category) can be highly penalized under the OVDP structure.
Third, related to the preceding paragraph, the OVDP penalty structure may actually impose a higher penalty on a taxpayer where IRS is not able to establish the willfulness of the taxpayer’s conduct. This is a highly complex calculation that should be made by an attorney, but, generally, the higher the chances of the taxpayer to establish non-willfulness, the less appealing the OVDP penalty structure is likely to be. This is especially true where OVDP Offshore Penalty includes the assets that would not otherwise either be subject to penalty outside of the OVDP or be subject to a much lower penalty.
Fourth, 2012 OVDP has no real appeal structure in place – in most cases, the IRS agent’s decision is final. If you do not like it, the only real recourse is to opt-out with its murky consequences (it may still be an option depending on the individual circumstances of the case, especially when the taxpayer should not have been in the OVDP program in the first place). The only exception is having a full examination of the tax return and an appeal maybe filed with respect to any tax and penalties imposed by the IRS on examination, but the IRS decisions on the terms of the OVDP closing agreement is almost never subject to an appeal. Such dependance on the good will of an IRS agent in charge of the case naturally produces certain anxiety among the OVDP applicants and constitutes a major drawback of entering into the program.
Finally, 2012 OVDP may take a fairly long time to complete (there are still some 2009 OVDP cases open in 2013). The IRS does try to process the cases as soon as possible, but it has few resources and its agents are overwhelmed with the number of cases pending on their desks. On the average, a taxpayer should expect about a fifteen to eighteen-month process between the acceptance into the OVDP and the final resolution of the case.
Contact Sherayzen Law Office for Help with Your Offshore Voluntary Disclosure
This article merely outlines some of the main consideration with respect to the 2012 OVDP. The actual cost-benefit calculation is much more complex and will vary wildly depending on the individual circumstances of each case.
This calculations and the probabilities with respect to each disclosure option should be done by an international tax attorney experienced in the offshore voluntary disclosures.
This is why you should contact Sherayzen Law Office for help with your voluntary disclosure. Our international tax firm is highly experienced in the voluntary disclosure process. We will thoroughly examine the circumstances of your case, assess your penalties under the various disclosure scenarios, prepare all of the required legal documents and tax forms, and rigorously represent your interests during negotiations with the IRS.

### Partnership Property Contribution and Taxable Exchange
Partnerships offer many tax advantages for their partners. One such benefit is that when property is contributed to a partnership in return for a partnership interest, typically no gain or loss will be recognized. This general rule applies both to partnerships already in existence as well as newly-formed partnerships.
However, this is not always the case. This article will cover several common examples of instances in which a taxable exchange may result at some point.
Disguised Sales
Under Internal Revenue Code Section 707(a), in certain circumstances, the IRS will deem a supposed contribution of property to a partnership in exchange for a partnership interest to be a “disguised sale”. A disguised sale occurs when property that has appreciated in value is contributed, and soon after, the partner receives a distribution from the partnership. The IRS will view the distribution received as a payment for the property contributed.
Recently the IRS issued final regulations regarding disguised sales. In general, contributions and distributions made within a two-year period will be deemed to be sales. A disguised sale may also occur when a partner contributes property to a partnership, and the same property is then transferred to another partner either as a distribution, or as a liquidation of the second partner’s interest in the partnership. Additionally, a contribution may be treated as a disguised sale when, either before or after the contribution, different property is distributed to the contributing property within two years.
Under the regulations, however, if a distribution is made to a partner over two years after property is contributed and the distribution is reasonable in light of a variety of factors, the distribution will generally not be deemed to be a disguised sale.
Pre-Contribution Gain (Built-in Gain)
In general, taxable gains may also occur when contributed property that originally had a fair market value different from its basis (“pre-contribution” or “built-in” gain), and within seven years of the contribution date, the property is distributed to a different partner. In such instances, the distribution will be treated as a sale, and the contributing partner will recognize any net pre-contribution gain on the property. Any gain recognized by a contributing partner will increase his or her basis in the partnership interest.
Additionally, when a partnership distributes any property (besides cash) within seven years to a partner who has contributed built-in gain property, gain will be recognized on the lesser of: (1) the remaining net built-in gain of the contributing partner, or (2) any excess of the fair market value of property distributed over the partner’s adjusted basis in the partnership interest before the distribution. Any gain recognized by the partner will increase his or her basis in the partnership interest.
An exception to these general rules may apply where property is distributed back to the partner who originally contributed it. In such instances, the partner will not need to recognize built-in gain. Instead, the general partnership distribution rules will be applicable.
Contact Sherayzen Law Office for Help with Partnership Tax Issues
Partnership formation and operation can involve many complex issues, and it is often a wise idea to seek legal advice. Our experienced tax firm will thoroughly review your case, advise you on the available options and implement the customized tax strategy to your business. Contact Sherayzen Law Office to schedule a consultation to discuss your case.

### IRS Kicks Off 2013 Filing Season for the 2012 Tax Year
On January 30, 2013, the Internal Revenue Service opened the 2013 filing season by announcing a variety of enhanced products and services to help taxpayers prepare and file their tax returns by the April 15 deadline.
The IRS began accepting and processing most individual tax returns on January 30, 2013, after updating forms and completing programming and testing of its processing systems to reflect the American Taxpayer Relief Act (ATRA) that Congress enacted on January 2, 2013. The vast majority of taxpayers can file now, but the IRS is continuing to update its systems for some tax filers. The IRS will begin accepting tax returns from people claiming education credits in mid-February while taxpayers claiming depreciation deductions, energy credits and many business credits will be able to file in late February or early March. A full list of the affected forms is available on IRS.gov.
This year, taxpayers have until Monday, April 15, 2013, to file their 2012 tax returns and pay any tax due. The IRS expects to receive more than 147 million individual tax returns this year, with about 75 percent projected to receive a refund.
Last year for the first time, 80 percent of all individual returns were filed electronically. E-file, when combined with direct deposit, is the fastest way to get a refund. Last year, about three out of four refund filers selected direct deposit.

### Family Partnerships and Income-Splitting
Family partnerships can offer an advantageous method for splitting business income between family members who may be taxed at lower income rate brackets. This can result in substantial tax savings. However, because of the potential for widespread abuse of this device by shifting income to close relatives who may perform little or no actual work for a partnership, the Internal Revenue Code Section 704(e) (with related regulations and case law) place certain limitations upon family partnerships.
Under these limitations, the IRS can determine that the family partnership arrangement is invalid for tax purposes and disallow income-splitting. This article introduces the reader to the concept of a “family partnership” and outlines some of the general rules for determining whether family members will be recognized as valid partners.
Who is a Family Member for Purposes of IRC Section 704(e)?
Under IRC Section 704(e), “family members” include spouses, ancestors, lineal descendants, and any trusts for the primary benefit of such persons. It is important to note that brothers and sisters are not listed in this classification.
How Will a Family Member be Recognized as a Valid Partner?
In general, a family member may only be recognized as a partner of a family partnership if either of two conditions is met.
Under the first condition, if capital is a “material income-producing factor” and the partnership interest (allowing for full ownership and control) was acquired in a bona fide transaction, regardless of whether it was obtained by purchase or gift from another family member, a family member may be treated as a valid partner. Typically, capital will be considered a material income-producing factor if the partnership receives a significant portion of its gross income from utilizing capital resources (such as from investments in plant and equipment, or inventories). However, capital will usually not be treated as material income-producing factor if the partnership receives much of its gross income from service-oriented elements (such as commissions or fees). Additionally, the family member/partner must have a legitimate capital interest in the assets of the firm – a profits interest alone will not be sufficient.
Alternatively, pursuant to various cases interpreting IRC Section 704(e), if capital is not a material income-producing factor, but a family member contributes vital services to the partnership, the family member may be recognized as a legitimate partner of a family partnershp.
Transfer of a Partnership Interest to Children
One of the most common traps associated with income-splitting in family partnerships is the transfer of a partnership interest to the partner’s children. In such cases, the general rule is: where the capital is a material income-producing factor and a partnership interest is transferred, whether by gift or purchase, to children under the age of eighteen, a large portion of a dependent child’s income distribution received from the partnership may be subject to the “Kiddie tax” rules. Thus, unless the child’s income constituted earned income, it may be taxed at his parents’ tax rate. If a child performs legitimate services for the partnership, however, the Kiddie tax rules may be inapplicable.
Contact Sherayzen Law Office for Tax Planning with respect to Family Partnerships
The information contained in this article is general in nature, and does not constitute legal advice. In order to avoid making costly tax mistakes, you may wish to seek the advice of legal counsel.
If you currently have an interest in a family partnership or you would like to create one, contact Sherayzen Law Office, Ltd. Our experienced business tax firm will thoroughly analyze your case, create a customized ethical tax plan that fits your needs and implement this plan (including preparation of any legal and tax documents).

### Offshore Voluntary Disclosure Program: Key Requirements
2012 OVDP (Offshore Voluntary Disclosure Program) (now closed) may present a great opportunity for certain U.S. taxpayers to deal with their current as well prior non-compliance with U.S. tax laws. However, 2012 OVDP is not for everyone; while for certain categories of taxpayers it is the best option, other taxpayers may have additional choices that may make alternative disclosure options more appealing than the entrance into the official voluntary disclosure program – this is the determination that should be made by the taxpayer after a comprehensive overview of his case with an experienced international tax attorney.
In order to make this determination, however, one must understand what are the key requirements of the 2012 OVDP once a taxpayer is accepted into the program (the acceptance requirements are described in another article). In this article, I will strive to provide a broad overview of such requirements, though you will need to consult Sherayzen Law Office for a more detailed explanation of the program and the exact requirements that may apply to your case.
General Understanding of the 2012 OVDP RequirementsThe 2012 Offshore Voluntary Disclosure Program is a fairly rigid and invasive program designed to allow certain types of U.S. taxpayers to voluntarily bring themselves back into compliance with U.S. laws in exchange for lower penalties and general avoidance of criminal prosecution. It is important to emphasize the 2012 OVDP is NOT a full-amnesty program; rather, it offers an alternative penalty system in exchange for voluntary compliance with a number of requirements.
The 2012 OVDP requirements can be broadly divided into five categories: statute of limitations, disclosure filings, cooperation, payment and closing agreement.
Statute of Limitations Extensions
As part of the 2012 OVDP requirements, the taxpayer must agree to extension of statute of limitations for the purposes of assessing additional taxes (including tax penalties) and the FBAR penalties. For this purposes, the taxpayer must supply the properly completed and signed Form 872 (Consent to Extend the Time to Assess Tax) and a Consent to Extend the Time to Assess Civil Penalties Provided By 31 U.S.C. § 5321 for FBAR Violations.
The key reason for the Statute of Limitations extensions is the ability of the IRS to extend its power to assess taxes and penalties to eight years instead of usual three years for the tax returns and six years for the FBARs. This is a key requirement of the 2012 OVDP and it must be communicated to the taxpayer before he submits his application to participate in the 2012 OVDP.
Disclosure Filings
This is the biggest part of the OVDP requirements. The taxpayer must provide:
1. Copies of previously filed original (and, if applicable, previously filed amended) federal income tax returns for tax years covered by the voluntary disclosure;
2. Complete and accurate amended federal income tax returns (for individuals, Form 1040X, or original Form 1040 if delinquent) for all tax years covered by the voluntary disclosure, with applicable schedules detailing the amount and type of previously unreported income from the account or entity (e.g., Schedule B for interest and dividends, Schedule D for capital gains and losses, Schedule E for income from partnerships, S corporations, estates or trusts and, for years after 2010). Starting year 2011, this requirement includes Form 8938, Statement of Specified Foreign Financial Assets. Note that, for the taxpayers who began filing timely, original, compliant returns that fully reported previously undisclosed offshore accounts or assets before making the voluntary disclosure for certain years of the offshore disclosure period, these taxpayers must provide copies of the such previously filed returns for all corresponding years;
3. Complete and accurate original or amended offshore-related information returns and Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”) for tax years covered by the voluntary disclosure. This requirement includes any forms 5471, 8865, 8858, 3520, 926 and so on;
4. Completed Foreign Account or Asset Statement for each previously undisclosed foreign account or asset during the voluntary disclosure period if the information requested in that statement was not already provided in the initial Offshore Voluntary Disclosures Letter. Also, a copy of the completed and signed Offshore Voluntary Disclosures letter and attachments should be included in the disclosure (I am not discussing this part of the OVDP process here because it is outside of the scope of this article);
5. Completed penalty computation worksheet showing the applicant’s determination of the aggregate highest account balance of his/her undisclosed offshore accounts, fair market value of foreign assets, and penalty computation signed by the applicant and the applicant’s representative if the applicant is represented;
6. Copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure (only for the taxpayers who are disclosing offshore financial accounts with an aggregate highest account balance in any year of $500,000 or more). An explanation of any differences between the amounts reported on the account statements and the tax returns should be provided as well. For those applicants disclosing offshore financial accounts with an aggregate highest account balance of less than $500,000, copies of offshore financial account statements reflecting all account activity for each of the tax years covered by your voluntary disclosure must be available upon request;
7. PFIC Statement detailing whether the amended returns involve PFIC issues during the tax years covered by the OVDP period, and if so, whether the taxpayer chooses to elect the alternative to the statutory PFIC computation that resolves PFIC issues on a basis that is consistent with the mark to market (MTM) methodology authorized in IRC § 1296 but does not require complete reconstruction of historical data, and
8. If the taxpayer has a Canadian Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) and wishes to make a late election pursuant to Article XVIII(7) of the U.S. – Canada income tax treaty to defer U.S. tax on RRSP or RRIF earnings, then: (a) a statement requesting an extension of time to make an election; (b) Forms 8891 for all tax years and type of plan covered under the voluntary disclosure; (c) a dated statement signed by the taxpayer under penalties of perjury describing (i) events that led to the failure to make the election, (ii) events that led to the discovery of the failure, and (iii) if the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities;
Cooperation
By entering into the 2012 OVDP program, the taxpayer agrees to cooperate in the voluntary disclosure process, including providing information on offshore financial accounts, institutions and facilitators, and signing agreements to extend the period of time for assessing Title 26 liabilities and FBAR penalties. Cooperation does mean that the taxpayer may provide information against his former business partners, bank advisors and accountants.
This is a very important requirement, because the taxpayer agrees to comply with any IRS requests which may subject his business dealings to a very close examination by the IRS. This is why it is important to examine the taxpayer’s tax affairs and business deadlines as much as possible (and usually the taxpayer’s attorney will have a very limited time to do so at the beginning of the case) prior to applying to the 2012 OVDP.
Payment
By entering the 2012 OVDP, the taxpayer agrees to pay the following penalties (this is added to the additional tax due as a result of the voluntary disclosure):
1. 20% accuracy-related penalties under IRC § 6662(a) on the full amount of the taxpayer’s offshore-related underpayments of tax for all years (this includes any PFIC tax as well);
2. Failure to file penalties under IRC § 6651(a)(1), if applicable;
3. Failure to pay penalties under IRC § 6651(a)(2), if applicable;
4. Interest on the additional tax due and all applicable penalties (note that the abatement of interest and penalty provisions under IRC § 6404 does not apply under the terms of the 2012 OVDP); and
5. Offshore Penalty – in lieu of all other penalties that may apply to the taxpayer’s undisclosed foreign assets and entities, including FBAR and offshore-related information return penalties and tax liabilities for years prior to the voluntary disclosure period, a miscellaneous Title 26 offshore penalty, equal to 27.5% (or in limited cases 12.5% or 5%) of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the period covered by the voluntary disclosure.
A full payment of all tax due, interest, penalties and the Offshore Penalty must be submitted to the IRS with the voluntary disclosure package. However, it is possible to make good faith arrangements with the IRS to pay in parts if the IRS approves the taxpayer’s eligibility for a special arrangement.
Closing Agreement
At the end of the 2012 OVDP process, the IRS agent will prepare Form 906 (Final Determination Covering Specific Matters) which will describe all of the final terms of your voluntary disclosure. Upon signing of the Agreement, the taxpayer agrees to these final terms and the voluntary disclosure process is finished.
Contact Sherayzen Law Office for Help With 2012 Offshore Voluntary Disclosure Program
If you have undisclosed offshore accounts and foreign assets, you should contact Sherayzen Law Office to discuss the option of entering into the 2012 OVDP. Our experienced international tax firm will thoroughly analyze your case, identify the available options and help you determine whether entering 2012 OVDP is the best course of action in your specific case. Once the decision is made, our attorneys will prepare all of the necessary documents and tax forms, guide you through your voluntary disclosure and rigorously represent your interests during your negotiations with the IRS.

### 2012 FBAR is Due on June 30, 2013
One of the most important tax compliance forms for businesses and individuals is the Report of Foreign Bank and Financial Accounts (the “FBAR”), FinCEN Form 114 Formerly TD F 90-22.1. 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, the FBAR must be filed with the DOT.
The FBAR must be filed by June 30 of each relevant year, including this year (2013). Thus, the 2012 FBAR must be received by the DOT by June 30, 2013. This rule is contrary to your regular tax returns where the mailing date determines whether the filing is timely. There are no extensions available – the FBAR must be received by June 30 or it will be considered delinquent.
If the FBAR becomes delinquent, it may be subject to severe penalties.
Contact Sherayzen Law Office for FBAR Assistance
If you have any questions or concerns regarding whether you need to file the FBAR or how to prepare the form, please contact Sherayzen Law Office directly. If you have not previous filed the FBARs and you were required to do so, you may be subject to severe penalties and you may need to do some form of a voluntary disclosure. In such case, you need to contact our experienced international tax attorneys to schedule a consultation as soon as possible. Attorney Eugene Sherayzen will assess your situation, determine your potential FBAR liability, explain the available options, prepare all of the required tax forms and the necessary legal documentation, guide you through this complex process of voluntary disclosure, and vigorously represent your interests during your negotiations with the IRS.

### Failure to Conduct Voluntary Disclosure and Potential Penalties: 2013 Update
Failure to conduct voluntary disclosure may mean heavy penalties for U.S. taxpayers are not in compliance with international tax laws established by U.S. government. In this article, I summarize some of the key penalties that such non-compliant U.S. taxpayers may face once the IRS finds them.
Penalties in General
In general, if the IRS verifies that a taxpayer failed to disclose his offshore financial accounts and foreign entities (and the income from these sources), the taxpayer may be subject to severe civil and criminal penalties. In addition to income-related accuracy related penalties, the IRS may also assess additional fraud-related penalties, FBAR penalties and foreign asset reporting penalties (with interest). Combined, all of these penalties and interest may exceed the actual value of nondisclosed assets and foreign bank accounts. In the worst-case scenario, a criminal prosecution may be initiated against such noncompliant taxpayers.
Finally, the voluntary disclosure process – which would otherwise be a far less painful way to deal with this problem – is automatically unavailable for taxpayers as soon as they are subject to IRS investigation.
Let’s discuss the penalties in more detail.
Accuracy-Related and Failure to File and Pay Penalties
An accuracy-related penalty on underpayments is imposed under IRC § 6662. Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty.
If a taxpayer fails to file the required income tax return, a failure to file (“FTF”) penalty may be imposed pursuant to IRC § 6651(a)(1). The penalty is generally five percent of the balance due, plus an additional five percent for each month or fraction thereof during which the failure continues may be imposed. The total penalty will not exceed 25 percent of the balance due.
If a taxpayer fails to pay the amount of tax shown on the return, a failure to pay (“FTP”) penalty may be imposed pursuant to IRC § 6651(a)(2). The penalty may be half of a percent of the amount of tax shown on the return, plus an additional half of a percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding the total of 25 percent of the balance due.
Fraud Penalties
Fraud penalties may imposed under IRC §§ 6651(f) or 6663. Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that may essentially amount to 75 percent of the unpaid tax.
FBAR Penalties
The most severe civil penalties are likely to come from non-compliance with FinCEN Form 114 formerly Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”) non-compliance. Generally, the civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation (see 31 U.S.C. § 5321(a)(5)). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation. For more detailed discussion of the FBAR civil penalties, I refer you to this article.
Form 8938 Penalties
Form 8938 is a newcomer to the world of tax penalties. The Form was born out of the HIRE and came into existence only starting the tax year 2011. Generally, failure to file Form 8938 carries a penalty of $10,000; however, other additional penalties may be applicable (for more detailed discussion of Form 8938 penalties, please read this article).
Penalties for Failure to File Other Information Returns
In addition to these common penalties, additional penalties may apply depending on the particular circumstances of the non-compliant taxpayer. I will summarize a few key penalties here.
Form 5471
If the taxpayer belongs to one of the four categories of required filers of Form 5471 (Information Return of U.S. Persons with Respect to Certain Foreign Corporations) and he fails to do so, he generally faces a penalty of $10,000 for each return. For a more detailed discussion of Form 5471 penalties, review this article.
Form 8865
Where the taxpayer is required to file Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships) and he fails to do so, the non-compliant taxpayer generally faces a $10,000 per each unfiled return with additional penalties possible. If the taxpayer transferred property to a controlled foreign partnership and he fails to file Form 8865, he faces additional penalties of 10 percent of the value of any transferred property; the penalty is limited to $100,000. Please, review this article for a more detailed discussion of Form 8865 penalties.
Other Common Information Returns
Depending on a taxpayer’s situation, he may face additional penalties for failure to file Forms 926, 3520, 3520-A, 5472 and other forms.
Criminal Prosecution
In the worst-case scenario, a criminal prosecution may be conducted by the IRS. Huge penalties and potential jail time are the possible in case of tax evasion.
Possible criminal charges related to tax returns include tax evasion (26 U.S.C. § 7201), filing a false return (26 U.S.C. § 7206(1)) and failure to file an income tax return (26 U.S.C. § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322 (see this article for discussion of the FBAR criminal penalties)
A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.
Contact Sherayzen Law Office for Help With Offshore Voluntary Disclosure
If you have undisclosed offshore accounts or foreign entities, contact Sherayzen Law Office for help as soon as possible. We are an international tax law firm that specializes in helping U.S. taxpayers in the United States and throughout the world to avoid the nightmare scenario and properly conduct disclosure of offshore assets, foreign bank accounts, foreign entities and unreported foreign income to the IRS.
If you believe that you may not be in full compliance with U.S. tax laws, the worst course of action is to do nothing and wait for the IRS to discover your noncompliance. Once this happens, your options are likely to be severely limited and the penalties a lot higher. Therefore, contact us so that we can help you with your international tax problems. Remember, all calls and e-mails are confidential.

### 2012 OVDP: Principal Purpose of the Program
As 2012 OVDP (Offshore Voluntary Disclosure Program) now closed enters its second tax season, it is important to review once again the reasons behind the existence of the program, what it offers to the IRS and how it may benefit currently non-compliant U.S. taxpayers.
Focus on International Tax Compliance
Since 2003, the IRS has conducted a number of voluntary disclosure programs for U.S. taxpayers with undisclosed foreign accounts or entities and undisclosed income. It is important to emphasize that these programs were not part of the traditional IRS voluntary disclosure program with respect to domestic income. The focus of each offshore voluntary disclosure program is on international tax compliance, particularly Report on Foreign Bank and Financial Accounts (the “FBAR”) and other informational returns such as Forms 5471, 8865, 8868 and so on.
It is important to note that with each new program the rules are becoming more and more stringent as well as complex. The idea behind the tougher terms of each succeeding program is to reward early disclosure and induce taxpayers to enter a voluntary disclosure program as soon as possible.
2012 OVDP
The 2012 OVDP came into existence less than half a year after the tremendous success of the 2011 OVDI (which also came two years after a very profitable 2009 OVDP). It is obvious that the IRS considered the existence of such voluntary disclosure programs a vital part of its international tax compliance efforts.
As expected, 2012 OVDP came in with tougher terms (for example, the highest penalty category is 27.5% instead of 25% as it was under 2011 OVDI rules), closed some 2011 OVDI loopholes and created a more complex and detailed set of rules. However, 2012 OVDP also has some unique features.
The most prominent of these features is that there is no official end to the program – this is the very first time in the history of the voluntary disclosure programs. At the time, the IRS warned that it can end the program at any time, creating a great sense of uncertainty and urgency for the taxpayers who wish to enter the program.
Why the IRS Created the 2012 OVDP
The most obvious reason (and the most repeated one in various articles by commentators) for why the IRS wants a voluntary disclosure program like 2012 OVDP in place is money – these programs brought in billions of dollars to the U.S. treasury. While this is an important reason, I believe that the reasoning behind the 2012 OVDP is much more complex.
In addition to bringing more money to the cash-starved U.S. government and allowing people to become tax-compliant with the understanding that their penalties will be definite and limited, there are two other primary reasons behind the 2012 OVDP and all other similar voluntary disclosure programs. First, the voluntary disclosure programs have a tremendous collateral impact on the overall international tax compliance. The collateral effect is reflected not only in assuring that the persons who go through the voluntary disclosure are likely to continue to comply with U.S .tax laws in the future, but also in the tremendous publicity of the program and the U.S. tax laws.
However, the most curious collateral product of the 2012 OVDP is the fear that induces wider tax compliance and more entrees into the voluntary disclosure program. It seems paradoxical that a voluntary disclosure would create this apprehensive feeling, but it is very logical once you understand that this is not a fear of the 2012 OVDP itself, but the terror of seeing widespread compliance which singles out the non-compliant taxpayers more and more with each new OVDP participant.
The second reason behind the voluntary disclosure programs is information gathering. Each 2012 OVDP participant brings a treasure trove of information about where they keep their money, the level of complicity by foreign banks, the particular foreign and domestic advisors involved in promoting international tax non-compliance, and other valuable information. This information allows the IRS to establish the overall patterns of non-compliance (both geographic and with respect to particular individuals and organizations), identify the next investigation targets and amass evidence for future prosecutions.
IRS is currently sitting on a mountain of data and it is inevitable that this information will be used in the future against non-compliant U.S. taxpayers and their foreign advisors. Already in 2012, we observed aggressive IRS moves in Liechtenstein and Israel as well as engagement of over 50 jurisdictions around the world regarding FATCA compliance. My prediction is that this trend of expanded enforcement into other countries will continue in 2013 and will result in larger number of prosecutions.
What is the Benefit of 2012 OVDP for U.S. Taxpayers
The 2012 OVDP does not only benefit the IRS, but also certain U.S. taxpayers. The benefit is at least three-fold. First, for certain U.S. taxpayers 2012 OVDP is the only way to avoid tremendous penalties and criminal prosecution by the IRS. Equally important is the fact that a taxpayer enters the OVDP program with an ability to calculate(with reasonable degree of certainty) the total cost of resolving all offshore tax issues. However, the decision to enter the OVDP must be made after all of the facts are analyzed and the taxpayer is aware of the consequences of entering the 2012 OVDP.
Second, while generally very rigid, the 2012 OVDP program has a certain degree of flexibility built into its penalty structure. The number of penalty categories and the various rules of the program allow international tax attorneys to determine the best mode of the voluntary disclosure and develop the strategies to implement this particular voluntary disclosure scenario.
Finally, 2012 OVDP allows international tax attorneys to determine the alternative voluntary disclosure ways. For example, Q&A #17 officially supports the long-standing unofficial policy of the IRS that no FBAR penalties are likely if there is additional U.S. tax liability as a result of voluntary disclosure. Moreover, the very fact that 2012 OVDP delineates certain analytical categories places additional tools for strategy development in the hands of the attorneys who seek alternative ways of bringing U.S. taxpayers into full compliance with U.S. tax laws under the existing legal structure outside of the 2012 OVDP.
Contact Sherayzen Law Office for Help with Voluntary Disclosure
If you have undisclosed foreign account or foreign entities, contact Sherayzen Law Office for help with your voluntary disclosure. Our experienced international tax firm will thoroughly analyze your case, assess your FBAR liability as well as other applicable penalties, identify the options available in your case, and work with you every step of the way until your voluntary disclosure is finished. We have helped taxpayers around the world to do various types of voluntary disclosures, including the official Offshore Voluntary Disclosure Programs and Initiatives.

### FBAR Filing: FinCEN’s Third Extension for Certain Signatory Authority Filers
In FinCEN Notice 2012-2, the Financial Crimes Enforcement Network (FinCEN) announced a third extension of time for certain Report of Foreign Bank and Financial Accounts (FBAR) filings in light of ongoing consideration of questions regarding the filing requirement and its application to individuals with signature authority over but no financial interest in certain types of accounts. The new extended deadline is set for June 30, 2014.
This extended filing deadline applies only to the following classes of individuals:
1). An employee or officer of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a “controlled person”). For this purpose, a “controlled person” is a U.S. or foreign entity that is more than 50% owned (directly or indirectly) by an excepted entity.2). An employee or officer of a controlled person of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.3). An employee or officer of an investment advisor registered with the Securities and Exchange Commission who has signature or other authority over and no financial interest in a foreign financial account of persons that are not investment companies registered under the Investment Company Act of 1940.
Notice that categories 1 and 2 do not apply to companies that are not publicly traded or not SEC-registrants.
This extension comes after a series of earlier extensions by FinCEN. On February 14, 2012, FinCEN issued Notice 2012-1 to extend the filing date for FinCEN Form 114 Formerly TD F 90-22.1, FBAR, for certain individuals with signature authority over but no financial interest in one or more foreign financial accounts to June 30, 2013. This Notice was preceded by two earlier extensions: on May 31, 2011, FinCEN issued Notice 2011-1 (revised on June 2, 2011) to extend to June 30, 2012, the due date for filing the FBAR for certain individuals with signature authority over but no financial interest in one or more foreign financial accounts, specifically individuals whose FBAR filing requirements may be affected by the signature authority filing exceptions in 31 CFR § 1010.350(f)(2)(i)-(v). On June 17, 2011, FinCEN issued Notice 2011-2 similarly extending the FBAR filing due date to June 30, 2012, for certain employees or officers of investment advisers registered with the Securities and Exchange Commission who have signature authority over but no financial interest in certain foreign financial accounts.
The extension contained in FinCEN Notice 2012-2 is the third filing extension for individuals with signature authority over but no financial interest in certain types of accounts. It covers not only the reporting of signature authority held by such persons for 2012, but also for all other years for which filing was previously extended to June 30, 2012, under FinCEN Notices 2011-1 and 2011-2.
It is important to note, however, that all other taxpayers who are required to file an FBAR must still do so by June 30, 2013.

### FBAR Attorney
If you are looking for an attorney to help you with your FBAR issues, contact Sherayzen Law Office.
Sherayzen Law Office is an international tax and business law firm that specializes in FBAR compliance among other international tax issues. Our office is located in Minneapolis, but we have clients throughout the United States and overseas.
Helping U.S. taxpayers who have FBAR issues is one of our most important specializations. FinCEN Form 114 formerly Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (commonly known as the “FBAR”), is not the most complex form in the Internal Revenue Code, but it is definitely one of the most severe forms when it comes to penalties. A lot of U.S. taxpayers either do not know about this form, do not realize how important it is, or they already realized that they should have filed the FBAR earlier and do not know how to get out of the vicious cycle of non-compliance.
Our international tax firm is highly experienced in these delinquent FBAR matters, including the voluntary disclosure process. We will analyze your case thoroughly, determine your FBAR liability and identify your voluntary disclosure options. Once you make your choice with respect to your voluntary disclosure option, we will create and implement a customized case strategy, including preparation of all of the necessary tax forms and legal briefs.
Clients of Sherayzen Law Office enjoy the personal attention of Mr. Eugene Sherayzen, the firm’s owner, who will be working with you throughout the process in order to make sure that your case proceeds efficiently. He is easily accessible by phone and email throughout the case.
We believe that each case is unique, especially in such complex matters as FBAR voluntary disclosure. Our international tax law firm will be looking for the unique features in your particular fact pattern to determine the most expeditious and favorable manner to proceed with your case.
One the biggest problems facing U.S. taxpayers in finding the right FBAR representation at this point is the tendency among some accounting firms and even law firms to disregard the special circumstances of a case and automatically channel their clients into the 2012 OVDP (Offshore Voluntary Disclosure Program) at the highest penalty rates with the idea that they will figure out later what the strategy of the case will be and whether the taxpayer needs to opt-out of the program.
We believe that this is an incorrect approach which completely disregards the individual circumstances of each taxpayer and may subject them to an unnecessarily high penalties and additional legal and accounting fees. Each case should be thoroughly analyzed at the beginning of the process before the taxpayers enters the 2012 OVDP, not in the middle or even at the end of the voluntary disclosure.
Contact Sherayzen Law Office for Help with FBARs
If you have any undisclosed foreign financial accounts, contact Sherayzen Law Office as soon as possible for an individual, comprehensive, creative and ethical approach to your voluntary disclosure process.

### FBAR Lawyers Minneapolis
Sherayzen Law Office is a premier international law firm that specializes in FBAR compliance among other international tax issues. The firm is headquartered in Minneapolis, but it serves clients throughout the United States and overseas.
FinCEN Form 114 formerly Form TD F 90-22.1, the Report of Foreign Bank and Financial Accounts (commonly known as the “FBAR”), is not the most complex form in the Internal Revenue Code, but it is definitely one of the most severe forms when it comes to penalties. A lot of U.S. taxpayers either do not know about this form, do not realize how important it is, or they already realized that they should have filed the FBAR earlier and do not know how to get out of the vicious cycle of non-compliance.
Helping these taxpayers is our specialty. Our international tax firm is highly specialized and experienced in the FBAR matters, including FBAR voluntary disclosure. We will analyze your case thoroughly, determine what your FBAR liability is (because this is not a straightforward matter and there are a lot of factors that influence your potential FBAR penalties) and identify your voluntary disclosure options.
Once you have made your choice with respect to your voluntary disclosure, we will proceed with implementing your customized case strategy. Attorney Eugene Sherayzen will personally be working with you throughout the case; we will prepare all of the required documentation (including any tax forms and the necessary legal briefs), submit all documentation to the IRS and rigorously represent your interests before the IRS throughout the voluntary disclosure process.
Contact Sherayzen Law Office for Help with FBARs
If you have any undisclosed foreign financial accounts, contact Sherayzen Law Office as soon as possible. The earlier you contact us, the sooner we can schedule a consultation to review your case. It is highly important that you contact Sherayzen Law Office before the IRS begins its investigation of your undisclosed accounts, because such investigations may preclude the availability of some of the voluntary disclosure options.

### IRS FY 2012 Performance Results
The IRS released the statement describing its performance in the Fiscal Year 2012. The general results continued last year’s trend.
In the enforcement area, audits of individuals topped 1 million for the sixth year in a row, with a 1.03% coverage rate out of all tax returns filed. Audits in the upper income ranges remained substantially higher than other categories.
With respect to businesses, the IRS increased examinations across all categories of business returns by more than 12% in FY 2012, with the largest increases coming in audits of flow-through entities, which include partnerships and Subchapter S corporations. The examination rate exceeded 20% for the largest corporations.
IRS enforcement was highly profitable for the U.S. government, especially in the area of voluntary disclosures (such as 2009 OVDP, 2011 OVDI and 2012 OVDP). The IRS collected more than $50 billion in enforcement revenue in FY 2012, the third year in a row topping that figure. However, the 2012 numbers were lower than 2010 and 2011, which were unusual years with enforcement dollars helped by large numbers of offshore tax cases coming in. More than 38,000 disclosures of offshore accounts have been made to date through the IRS’ offshore voluntary disclosure programs. In addition, the economic slowdown contributed to lower enforcement figures, as most enforcement dollars collected resulted from audits of returns for years during the slowdown.
In terms of staffing, however, the IRS again suffered from the cuts to its budget by the Congress, despite extensive evidence that investment in IRS enforcement brings disproportionate amount of income to U.S. government. After a nearly flat budget in FY 2011, the IRS’ FY 2012 budget was reduced by $305 million. This reduction affected the level of staffing available to deliver service and enforcement programs. Overall full-time staffing has declined by more than 8% over the last two years, and staffing for key enforcement occupations fell nearly 6% in the past year.
One exception to the staffing problems has been identify theft. In FY 2012, the IRS more than doubled the number of staff dedicated to preventing refund fraud and assisting taxpayers victimized by identity theft, with more than 3,000 employees working in this area. As a result of these increased efforts, the IRS in FY 2012 was able to prevent the issuance of more than 3 million fraudulent refunds worth more than $20 billion, an increase from approximately 1.8 million refunds worth about $14 billion the previous year.
On the service side, the IRS saw continued strong growth in electronic filing by individuals, as the e-filing rate in FY 2012 exceeded 80% for the first time. Taxpayer interest in online interactions continued to increase as well, with web page visits on IRS.gov up nearly 17% to 372 million.
One of the most surprising trends has been the steady increase in criminal investigations and the growth in the conviction rate. The number of criminal investigations for tax and tax-related matters has gone up from the low of 1,269 investigation in 2009 to 1,846 in 2012 – a whopping 45% increase. During the same time, the conviction rate went up from 87.2% in 2009 to 93.0% in 2012. This means that the IRS is not only radically increasing the number of criminal investigations, but also it is more successful in its prosecution efforts.
Overall, 2012 appears to have been a successful year for the IRS, especially with respect to international tax enforcement.

### IRS Provides Penalty Relief to Farmers and Fishermen
On January 18, 2013, the IRS announced that it will issue guidance in the near future to provide relief from the estimated tax penalty for farmers and fishermen unable to file and pay their 2012 taxes by the March 1 deadline due to the delayed start for filing tax returns.
The delay stems from this month’s enactment of the American Taxpayer Relief Act (ATRA). The ATRA affected several tax forms that are often filed by farmers and fishermen, including the Form 4562, Depreciation and Amortization (Including Information on Listed Property). These forms will require extensive programming and testing of IRS systems, which will delay the IRS’s ability to accept and process these forms. The IRS is providing this relief because delays in the agency’s ability to accept and process these forms may affect the ability of many farmers and fishermen to file and pay their taxes by the March 1 deadline. The relief applies to all farmers and fishermen, not only those who must file late released forms.
Normally, farmers and fishermen who choose not to make quarterly estimated tax payments are not subject to a penalty if they file their returns and pay the full amount of tax due by March 1. Under the guidance to be issued, farmers or fishermen who miss the March 1 deadline will not be subject to the penalty if they file and pay by April 15, 2013. A taxpayer qualifies as a farmer or fisherman for tax-year 2012 if at least two-thirds of the taxpayer’s total gross income was from farming or fishing in either 2011 or 2012.
Farmers and fishermen requesting this penalty waiver must attach Form 2210-F to their tax return. The form can be submitted electronically or on paper. The taxpayer’s name and identifying number should be entered at the top of the form, the waiver box (Part I, Box A) should be checked, and the rest of the form should be left blank.

### FBAR Criminal Enforcement: Liechtenstein and Israel
The voluntary disclosure programs provided the IRS with an enormous amount of information regarding countries, banks and individuals involved in US taxpayers’ non-compliance with U.S. tax laws. With so much information, it was reasonable to expect that the IRS would not be satisfied with solely prosecuting Swiss banks. Year 2012 confirmed these expectations; building up on FATCA and the information provided in voluntary disclosures, the IRS made aggressive moves far beyond Switzerland, initiating negotiations about and, in many cases, concluding bilateral FATCA treaties with over 50 different countries. Among these enforcement efforts, two countries stand out as most likely candidates for future prosecutions – Liechtenstein and Israel.
Banks in Liechtenstein and Israel Are Targets in U.S. Probes
In May of 2012, the IRS issued a request to Liechtensteinische Landesbank AG (LLB) to disclose information regarding accounts of at least $500,000 owned by U.S. taxpayers. The request covers all years 2004 through present time. The bank already sent out the letters to its U.S. clients describing their intention to comply with the request. It should be noted that Liechtenstein has been under tremendous pressure not only from the United States, but also France and Germany to wind down its secrecy laws.
At the same time, the IRS became very concerned about the money flow between Switzerland and Israel. It appeared that some taxpayers decided to exit Switzerland in light of the USB and Wegelin case and moved all of their accounts to Israel. The IRS caught up with this trend and decided to pursue these taxpayers in Israel.
The focus is on three Israeli banks – Bank Leumi Le-Israel, Bank Hapoalim and Mizrahi-Tefahot Bank. It appears that these banks are cooperating even ahead of the 2013 deadline and U.S. taxpayers with undisclosed accounts in these banks are well-advised to assume that their accounts will be disclosed to the IRS sooner rather than later (especially given the close relationship between Israel and the United States).
Voluntary Disclosure for Non-Compliant U.S. Taxpayers in Liechtenstein and Israel
It appears that U.S. taxpayers with undisclosed accounts in Liechtenstein and Israel are in a race against time and they are losing to the IRS. Therefore, at this point, it is absolutely essential for these taxpayers to consider their voluntary disclosure options as soon as possible. Otherwise, they run a tremendous risk of being discovered by the IRS and subject to severe criminal and civil penalties.
2012 OVDP voluntary disclosure, Reasonable Cause (Modified) voluntary disclosure and FAQ #17 and #18 (absence of additional U.S. tax liability) disclosure are options that may be open to such taxpayers. All of these options must be thoroughly analyzed by an international tax attorney who is familiar with these issues.
Contact Sherayzen Law Office for Help With Voluntary Disclosure of Foreign Accounts and Foreign Income
If you have any undisclosed foreign accounts and/or foreign income, contact Sherayzen Law Office. Our experienced international tax firm will thoroughly review your case, advise you on the available voluntary disclosure options, prepare your voluntary disclosure documentation (including tax returns and offshore information returns such as Forms 5471, 8865, 926, 3520, FBARs and others), guide you throughout the voluntary disclosure process and vigorously represent your interests during your negotiations with the IRS.

### Tax-Free Transfers to Charity Renewed For Certain IRA Owners
On January 16, 2013, the IRS confirmed that certain owners of individual retirement arrangements (IRAs) have a limited time to make tax-free transfers to eligible charities and have them count for tax-year 2012.
Pursuant to the American Taxpayer Relief Act of 2012, Congress extended for 2012 and 2013 the tax provision authorizing qualified charitable distributions (QCDs). Under this provision, an otherwise taxable distribution from an IRS, owned by a person who has at least 70.5 years or older, can exclude from gross income up to $100,000 of QCDs paid directly to an eligible charitable organization. The eligible IRA owners have until Thursday, January 31, 2013, to make a direct transfer, or alternatively, if they received IRA distributions during December 2012, to contribute, in cash, part or all of the amounts received to an eligible charity.
The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on Schedule A. Transferred amounts are not taxable and no deduction is available for the transfer.
It is iimportant to note that QCDs are counted in determining whether the IRA owner has met his or her IRA required minimum distributions for the year.
For tax year 2012 only, IRA owners can choose to report QCDs made in January 2013 as if they occurred in 2012. In addition, IRA owners who received IRA distributions during December 2012 can contribute, in cash, part or all of the amounts distributed to eligible charities during January 2013 and have them count as 2012 QCDs.
QCDs are reported on Form 1040 Line 15. The full amount of the QCD is shown on Line 15a. Do not enter any of these amounts on Line 15b but write “QCD” next to that line.

### Optional Safe Harbor Method for Claiming Home Office Deduction for 2013
On January 15, 2013, the IRS today announced a simplified option for claiming home office deduction (i.e. deduction for the business use of a home). The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.
Background Information
Internal Revenue Code (IRC) Section 280A generally deals with the tax treatment of home office expenses. Generally, IRC Section 280A(a) disallows any deduction for expenses related to a dwelling unit that is used as a residence by the taxpayer during the taxable year. However, Provisions 280A(c)(1) through (4) allow a deduction for expenses related to certain business or rental use of a dwelling unit, subject to the deduction limitation in § 280A(c)(5).
Section 280A(c)(1) permits a taxpayer to deduct expenses that are allocable to a portion of the dwelling unit that is exclusively used on a regular basis (A) as the taxpayer’s principal place of business for any trade or business, (B) as a place to meet with the taxpayer’s patients, clients, or customers in the normal course of the taxpayer’s trade or business, or (C) in the case of a separate structure that is not attached to the dwelling unit, in connection with the taxpayer’s trade or business.
Section 280A(c)(2) permits a taxpayer to deduct expenses that are allocable to space within the dwelling unit used on a regular basis for the storage of inventory or product samples held for use in the taxpayer’s trade or business of selling products at retail or wholesale, if the dwelling unit is the sole fixed location of the trade or business.
Section 280A(c)(3) permits a taxpayer to deduct expenses that are attributable to the rental of the dwelling unit or a portion of the dwelling unit.
Section 280A(c)(4) permits a taxpayer to deduct expenses that are allocable to the portion of the dwelling unit used on a regular basis in the taxpayer’s trade or business of providing day care for children, for individuals who have attained age 65, or for individuals who are physically or mentally incapable of caring for themselves.
Optional Safe Harbor Method
After recognizing that Section 280A(c)(1) imposes a substantial compliance burden on taxpayers (and, perhaps, with the desire to cut its own enforcement costs), the IRS decided to provide for the very first time a new method of calculating home office deductions – the optional safe harbor method.
Under this safe harbor method, taxpayers determine their allowable deduction for business use of a residence by multiplying a prescribed rate (currently set at $5 per square foot) by the square footage of the portion of the taxpayer’s residence that is used for business purposes (“allowable square footage”). The allowable square footage is the portion of a home used in a “qualified business use” of the home, but not to exceed 300 square feet.
“Qualified Business Use” is a term of art. Under the Rev. Proc. 2013-13, this term means (1) business use that satisfies the requirements of § 280A(c)(1), (2) business storage use that satisfies the requirements of § 280A(c)(2), or (3) day care services use that satisfies the requirements of § 280A(c)(4) (see above).
The safe harbor method provided by this revenue procedure does not apply to an employee with a home office if the employee receives advances, allowances, or reimbursements for expenses related to the qualified business use of the employee’s home under a reimbursement or other expense allowance arrangement (as defined in § 1.62-2) with his or her employer.
Note that the current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.
Advantages and Disadvantages of the New Optional Safe Harbor Method
The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions. Taxpayers claiming the optional deduction will complete a significantly simplified form.
The new option does not affect business expenses unrelated to the home (such as advertising, supplies and wages paid to employees). Such expenses are still fully deductible.
The down side of the new option is that the homeowners cannot depreciate the portion of their home used in a trade or business. However, they can still claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method.
A taxpayer using the safe harbor method for a taxable year cannot deduct any depreciation (including any additional first-year depreciation) or § 179 expense for the portion of the home that is used in a qualified business use of the home for that taxable year. The depreciation deduction allowable for that portion of the home for that taxable year is deemed to be zero.
Switching the Methods
The election of whether to use safe harbor method is made on a annual basis. Therefore, in one year, a taxpayer may use the safe harbor method, while the next year he can choose to calculate and substantiate actual expenses for purposes of § 280A. A change from using the safe harbor method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the IRS consent.
It is important to remember that an election for any taxable year, once made, is irrevocable
More complications arise if the taxpayer depreciates his home subsequent (or even prior to) electing to use the safe harbor method.
Safe Harbor Method Available in 2013
The new simplified option is available starting the tax year 2013.

### Itemized Deductions Limitation in 2013
The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).
In reality this is not a new law; this is basically a re-birth of the famous “Pease limitation” that was the part of the Omnibus Budget Reconciliation Act of 1990. This limitation was later phased out during the era of Bush tax cuts and completely eliminated for the year 2010. Subsequently, additional legislation extended the elimination of the Pease limitation from 2010 through 2012. Now, as part of the New Year’s compromise, the American Taxpayer Relief Act of 2012 reinstated the provision with an upgrade; the provision is codified as 26 USC §68.
In order to understand how the provision works, it is important to emphasize that the idea is to limit the impact of certain itemized deductions, but not to completely eliminate the tax advantages of such deductions.
Types of Itemized Deductions Affected by the Limitation
Armed with this understanding, let’s look at the details of the Pease limitation. First, the provision mostly applies to the following types of itemized deductions: charitable contributions, mortgage interest, state/local/property taxes and miscellaneous itemized deductions. However, the statute expressly excludes medical expense deductions, the investment interest deduction, casualty, theft, or gambling loss deductions (see 26 USC §68(c)).
Limitation and Thresholds
For the tax year 2013, 26 USC §68 starts to limit the itemized deductions once the AGI exceeds $250,000 for individuals and $300,000 for joint filers (these are the items indexed for inflation). The limitation will consist of the less of (a) 3% of the adjusted gross income above the threshold amount, or (b) 80% of the amount of the itemized deductions otherwise allowable for the taxable year.
For example, in a hypothetical where a an individual earns $300,000 in 2013 and his itemized deductions consist of mortgage interest and property tax deductions of $50,000, the individual’s itemized deductions will be reduced by $ 1,500.
Based on the information in our hypothetical (and disregarding any other facts and factors), here are the calculations:
(a) $300,000 AGI - $250,000 (threshold for 2013) = $50,000; 3% x $50,000 = $1,500;
(b) 80% x $50,000 of itemized deductions = $40,000.
Since $1,500 is less than $40,000, this is the amount that should be used to reduce the taxpayer’s itemized deductions.
Contact Sherayzen Law Office for Tax Planning Help Regarding Pease Limitation
If you are potentially facing the limitation of your itemized deductions, it is possible that you are overlooking tax alternatives that may mitigate the impact of Pease Limitation. If you wish to explore such alternatives as part of your overall tax plan, contact the experienced tax firm of Sherayzen Law Office.

### FBAR Criminal Prosecution and Smaller Banks: The Case of Wegelin
On January 3, 2013, Wegelin & Co., the oldest Swiss private bank announced that it will close down following its guilty plea to criminal charges of conspiracy to help wealthy U.S. taxpayers evade taxes through secret financial accounts. The guilty plea and the closure of one of the most prestigious European banks that served its clients since the year 1741 constitute big victories for the U.S. authorities. It surely will inspire additional movement of non-compliant U.S. taxpayers into the 2012 OVDP (Offshore Voluntary Disclosure Program) as well as ensure more widespread compliance with the FBAR, Form 8938 and other numerous international tax forms required by the IRS.
However, in addition to its significance to U.S. tax compliance, the Wegelin case also has other interesting features that may point to future trends in the IRS international tax enforcement. In this article, I will outline these trends and explore their potential implications for U.S. tax enforcement.
Jurisdiction to Prosecute Foreign Banks: Minimal Contact Will Suffice
In order to criminally charge a foreign bank, U.S. tax authorities need to establish some connection between the United States and the foreign bank. It appears that after the Wegelin case, proving U.S. exposure will not a be a significant problem for the IRS.
The main reason for Wegelin’s bold defiant behavior (Wegelin specifically advertised itself as a safe, tax-free alternative to U.S. taxpayers who were fleeing UBS after criminal prosecution charges were filed against UBS in 2008) was its deep belief that it cannot be criminally prosecuted in the United States because U.S. tax authorities have no jurisdiction over it. Unlike UBS, Wegelin had virtually no physical presence in the United States, no operating divisions and no branch offices in the United States.
However, Wegelin miscalculated. The IRS discovered that Wegelin did have presence in the United States because it “directly accessed” the U.S. banking system through a correspondent account that it held at UBS AG ("UBS") in Stamford, Connecticut. The Justice Department successfully argued that this one correspondent account was sufficient to give the United States government the jurisdiction to criminally charge Wegelin.
Hence, one of the biggest consequences of the Wegelin case is that it will not be difficult for the U.S. tax authorities to establish jurisdiction to criminally charge foreign banks even with very insignificant presence in the United States.
Size Matters: Increased Risk for Smaller Banks
The other important lesson of the Wegelin case is that it appears that the IRS is more likely to aggressively pursue smaller banks than the bigger banks the demise of which can cause systemic instability in the world economy.
The collapse of Wegelin stands in stark contrast to the survival of its bigger Swiss rival, UBS. UBS offered pretty much the same services to U.S. taxpayers as Wegelin involving vastly larger number of U.S. persons and amounts of money (at the very least, 20 billion dollars versus Wegelin’s 1.2 billion dollars). The IRS did file criminal charges against UBS, but UBS entered into a deferred prosecution agreement and charges were dropped eighteen months later.
It could be that some of the aggressiveness of the U.S. government came precisely from Wegelin’s defiant stance. In order to reinforce its recent victory in the UBS case, the IRS had to adopt a more assertive stand. However, it did not necessarily have to end in Wegelin’s demise.
Some commentators argued that Wegelin was already a shadow of its former self at the time of its closure, because it aggressively sold-off all of its non-US related assets. Therefore, it may be argued that it is premature to draw general conclusions from the Wegelin’s case about the risks facing small foreign banks who find themselves indicted by the U.S. government. On the other hand, the very fact that Wegelin decided that it would be better for the bank to sell off its assets rather than fight the IRS and the fact that the U.S. government was not concerned about this decision do point to a conclusion that the Wegelin case may be demonstrative of the general vulnerability of smaller banks in such situations.
Unresolved Issues: Client Information and Sold-Off Practice
One of the most important issues, however, is still unresolved in the Wegelin case and makes it worthwhile to observe to its end. The issue is: will the bank disclose the names of its U.S. clients to the IRS?
Typically, disclosure of the names of U.S. taxpayers constitutes a key request by the IRS in such major investigations. Therefore, it does not seem likely that the IRS will simply leave this issue without at least attempting to obtain the names of non-compliant U.S. taxpayers as part of the final deal.
The other unresolved issue is whether a strategy similar to Wegelin’s sale of its non-US accounts to the Austrian Bank Raiffeisen just before the indictment is going to challenged by the IRS if the sale does involve U.S. clients and maybe even if it does not (especially where the bank is left without any assets). It is not known if we are going to get an answer at this time, but it is likely that this issue will show up again in a future case.
Contact Sherayzen Law Office for Help With Voluntary Disclosure of Foreign Financial Accounts
If you have undisclosed offshore accounts (whether in the hard-hit Switzerland or any other country) ,contact Sherayzen Law Office to explore the voluntary disclosure options available in your case. Our experienced voluntary disclosure firm will thoroughly review your case, explore available options, propose a definite plan for moving forward, prepare all of the necessary legal documents and tax forms, and guide you though the entire case while rigorously representing your interests in your negotiations with the IRS.

### Annual Inflation Adjustments for 2013: Overview
On January 11, 2013, the IRS announced annual inflation adjustments for the tax year 2013, including the tax rate schedules, and other tax changes from the recently passed American Taxpayer Relief Act of 2012.
Changes in Tax Brackets; Adjustment to Standard Deduction and Personal Exemption
Starting tax year 2013, a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates — 10, 15, 25, 28, 33 and 35 percent — remain the same as in prior years, though the taxable income thresholds for each of the marginal rate have changed (see this article).
For the tax year 2013, the standard deduction increased to $6,100 for individuals and $12,200 for married couples filing jointly. This is up from the 2012 numbers of $5,950 for individuals and $11,900 for married couples filing jointly.
Note that the American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).
For the tax 2013, the personal exemption rose to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly). It phases out completely at $372,500 ($422,500 for married couples filing jointly.)
Alternative Minimum Tax Changes
The Alternative Minimum Tax (“AMT”) exemption amount for tax year 2013 is $51,900 ($80,800 for married couples filing jointly as set by the American Taxpayer Relief Act of 2012. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).
One of the most important changes introduced by the American Taxpayer Relief Act of 2012 was the permanent “fix” of the AMT by indexing future exemption amounts for inflation.
Earned Income Tax Credit
For the year 2013, the maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly with 3 or more qualifying children, up from a total of $5,891 for tax year 2012.
Other Inflation Adjustments
There are a number of other inflation adjustments published by the IRS. This essay merely attempts to clarify those which are most common. More details are contained in IRS Revenue Ruling 2013-15.

### Overview of the New Investment Tax
The enactment of the Health Care and Education Reconciliation Act of 2010 (the “Act”) has profound implications for U.S. investors. The Act imposes a new tax on investment income of certain individuals, estates and trusts. The focus of this article is on the new tax on individuals and how it operates.
IRC Section 1411: Imposition of 3.8% Tax
Section 1402(a) of the Act added section 1411 to a new chapter 2A of subtitle A (Income Taxes) of the Internal Revenue Code effective for taxable years beginning after December 31, 2012. IRC Section 1411 imposes a 3.8 percent tax on the investment income of certain individuals, estates, and to some trusts.
It is important to note that the new tax is not deductible against any other income taxes.
Who is Affected by the New 3.8% Tax?
As mentioned above, the tax applies to certain individuals, annuities, estates, and to some trusts. It is widely expected that the 3.8% tax applies only to those who are considered to be high-wage earners (at least, at the time the new tax was enacted, because the American Taxpayer Relief Act of 2012 seems to re-define who the high-wage earners are) who earn above certain thresholds and have investment income.
The tax does not apply to a nonresident alien and some other types of trusts (this is a complex subject that may be addressed in another article). If an nonresident alien is married to a U.S. citizen or resident and has made, or is planning to make, an election under IRC section 6013(g) to be treated as a resident alien for purposes of filing as Married Filing Jointly, the proposed regulations provide these couples with special rules and a corresponding IRC section 6013(g) election for the NIIT.
How Does the 3.8% Tax Work?
The application of the new tax can be quite complex, especially where the issues of subpart F and PFIC (Passive Foreign Investment Company) income are involved in the calculation of required thresholds. Generally, however, section 1411(a)(1) imposes a tax on the lesser of (A) the individual’s net investment income for such taxable year, or (B) the excess (if any) of (i) the individual’s modified adjusted gross income for such taxable year, over (ii) the threshold amount).
The threshold amounts are provided in Section 1411(b) and depend on the individual’s filing status (all amounts refer to modified adjusted gross income (“MAGI”)):
Single: $200,000
Married Filing Jointly: $250,000
Married Filing Separately: $125,00
Head of Household: $200,000
Qualifying Widow(er) with dependent child $250,000
Basically, this provision of Section 1411(a)(1) means that, in order for a taxpayer to be subject to the 3.8% tax, he has to have net investment income and MAGI above the thresholds listed above. The tax will be imposed either on the excess of income above MAGI or net investment income, whichever is less.
What Type of Income is Subject to the new 3.8% Tax?
Generally, any net investment income is potentially subject to the 3.8% tax. This includes net income from: interest, dividends, capital gains, rental and royalty income, non-qualified annuities and other income NOT derived in the ordinary course of trade or business (as specified in Section 1411(c)(2)). In order to arrive at the net income, the taxpayer may subtract from the gross investment income any allowable allocable deductions.
Also certain capital gains (that are not otherwise offset by capital losses),are taken into account in computing net investment income. Here is the list of common example: gains from the sale of stocks, bonds, mutual funds, capital gain distributions from mutual funds, gains from the sale of investment real estate (including gain from the sale of a second home that is not a primary residence). Even gains from the sale of interests in partnerships and S corporations (to the extent that the taxpayer was a passive owner) are potentially included.
It is important to note that income from businesses involved in trading of financial instruments or commodities and businesses that are passive activities to the taxpayer are considered investment income.
On the other hand, certain income is excluded from the definition of investment income. Here is the list of most common exclusions: wages, unemployment compensation; operating income from a nonpassive business, Social Security Benefits, alimony, tax-exempt interest, self-employment income, Alaska Permanent Fund Dividends and distributions from certain Qualified Plans
The rules regarding determining whether your income is subject to the investment tax are complex, especially when it comes to businesses. You should contact a tax attorney to determine if your income should be subject to the 3.8% tax.
Where Should the 3.8% Be Reported by Individual Taxpayers?
The new tax should be reported on Form 1040 and paid with the rest of the tax when Form 1040 is filed.
It is also important to note that the new tax should be included in the estimated tax payments. Failure to do so may result in underpayment penalties.
Contact Sherayzen Law Office for Help with the New Investment Tax
If you are not sure whether you are facing the new investment tax or whether you wish to know if there is any tax planning available for dealing with the new investment tax in your particular situation, contact Sherayzen Law Office. Our experienced tax firm will thoroughly review your situation, determine whether the new investment tax applies to you and analyze alternative tax structures that would minimize the impact of the new tax in your particular situation.

### Tax Withholding Update: Social Security and Medicare Tax for 2013
Following the passage of the American Taxpayer Relief Act of 2012, the IRS issued Notice 1036 with respect to withholding tables for the year 2013, which includes the 2013 Percentage Method Tables for Income Tax Withholding.
Under the notice, the IRS requires the employers to implement the 2013 withholding tables as soon as possible, but not later than February 15, 2013. However, the use the 2012 withholding tables is permitted until employers implement the 2013 withholding tables; in such case, the employers should make an adjustment in a subsequent pay period to correct any under-withholding of social security tax by March 31, 2013.
One of the biggest news, of course, is the increase of the employee tax rate for social security to 6.2%. Previously, the employee tax rate for social security was 4.2%. The employer’s tax rate for social security remains unchanged at 6.2%. The social security wage base limit increases to $113,700. The Medicare tax rate is 1.45% each for the employee and employer, unchanged from 2012. There is no wage base limit for Medicare tax.
The second big news is that the withholding taxes will go up with Additional Medicare Tax for certain high-income wage earners. As described in an earlier article, starting January 1, 2013, Additional Hospital Insurance Tax (Additional Medicare Tax) of 0.9% will be imposed on employees who earn wages above certain thresholds. For the withholding purposes, the IRS requests that an additional 0.9% tax is withheld on wages paid to an employee in excess of $200,000 in a calendar year. The employer is required to begin withholding Additional Medicare Tax in the pay period in which he pays wages in excess of $200,000 to an employee and he should continue to withhold the Additional Medicare Tax each pay period until the end of the calendar year.
Note that Additional Medicare Tax is only imposed on the employee; there is no employer share of Additional Medicare Tax.

### IRS Plans January 30, 2013 as Tax Season Opening Date For 1040 Filers
Following the January tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), the IRS announced on January 9, 2013, that it plans to open the 2013 filing season and begin processing individual income tax returns on January 30, 2013.
The IRS will begin accepting tax returns on that date after updating forms and completing programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted on January 2, 2013. This should cover the great majority of the filers.
The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.
“We have worked hard to open tax season as soon as possible,” IRS Acting Commissioner Steven T. Miller said. “This date ensures we have the time we need to update and test our processing systems.”
The IRS will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit.

### Indirect Ownership of Foreign Entities for Form 5471 Purposes
Every now and then, I encounter foreign business structures built on the incorrect belief that only direct ownership matters for U.S. tax reporting purposes in general and Form 5471 purposes in particular. In this essay, I broadly address the question of Form 5471 reporting with respect to indirect ownership of a foreign company (I am not discussing the major issue of “constructive ownership” in this essay).
Form 5471 Reporting Requirements
In an earlier article I already discussed the purpose of Form 5471 and the general reporting requirements this form entails, but I will briefly address these issues here.
Form 5471 is used by certain categories of U.S. taxpayers to report their ownership of foreign corporations. Generally, the form is designed to address the reporting requirements of IRC (Internal Revenue Code) Sections 6038 and 6046.
Under these IRC provisions, four general categories of U.S. taxpayers must file Form 5471 together with their U.S. tax returns: (1) U.S. taxpayers considered as U.S. shareholders (generally, U.S. taxpayers who own 10% or more of a foreign corporation) (these are category 3 filers), (2) U.S. persons who are directors and/or officers of a foreign corporation in which there are U.S. shareholders which meet the requirements of Form 5471 (these are category 2 filers), (3) U.S. persons who had control of a foreign corporation for an uninterrupted period of 30 days (these are category 4 filers); and (4) U.S. shareholders who owned a stock in a foreign corporation that is considered to be a Controlled Foreign Corporation for an uninterrupted period of 30 days and who owned that stock on the last day of the year (these are category 5 filers). Note, that Category 1 was repealed by Congress in section 413(c)(26) of the American Jobs Creation Act of 2004.
What truly adds to the complexity of the application of these four categories are the specific definitions of virtually every word in the description of these four categories which may differ from category to category. For example, “US taxpayer”, “US person”, “control”, “owned” – these are some of the words that are separately defined in the IRS regulations with respect to each category above.
Therefore, for a non-attorney, it is extremely dangerous to rely on these general definitions. Rather, the determination of whether Form 5471 requirement applies to you should be made by an international tax attorney.
Ownership Has Broad Definition for Form 5471 Purposes
As mentioned above, word “owned” has a number of diverse and special meanings for Form 5471 purposes. Generally, it includes not only the direct ownership of a stock, but also indirect ownership and constructive ownership. The concepts of “indirect ownership” and “constructive ownership” are described in separate complex IRS regulations.
The upshot of this discussion is that “ownership” is defined very broadly under the IRS regulations related to Form 5471, and one should not rely on direct ownership in determining whether Form 5471 needs to be filed.
Indirect Ownership for Form 5471 Purposes: IRC Section 958
We now came to the main purpose of this article – discussion of “indirect ownership” for Form 5471 purposes. Form 5471 Instructions as well as IRS regulations generally refer to IRC Section 958 for the definition of indirect ownership.
This provision sets forth the rules for determining stock ownership, including direct, indirect and constructive ownership of a stock. For the purposes of our discussion, we concentrate on Section 958(a)(2) which describes the rules for stock ownership through foreign entities. It states as follows:
“(2) Stock ownership through foreign entities: For purposes of subparagraph (B) of paragraph (1), stock owned, directly or indirectly, by or for a foreign corporation, foreign partnership, or foreign trust or foreign estate (within the meaning of section 7701(a)(31)) shall be considered as being owned proportionately by its shareholders, partners, or beneficiaries. Stock considered to be owned by a person by reason of the application of the preceding sentence shall, for purposes of applying such sentence, be treated as actually owned by such person.”
Thus, it becomes clear that, generally, a U.S. shareholder of a foreign company is likely to be considered a shareholder of other foreign companies owned by this foreign company. For example, where foreign corporation A owns 25% of foreign corporation B, a 45% shareholder of Company A is likely to be deemed as a 11.25% owner of company B. Obviously, this is a very general example and there are various facts and circumstances that may change this simplified calculation. Again, you should retain an international tax attorney to determine your ownership of foreign companies under IRC Section 958.
Implications for Form 5471 Reporting and Tax Planning Strategies
The most obvious result of IRC Section 958 are additional Forms 5471 that need to be timely filed with the U.S. shareholder’s US tax return. It is now easy to see why I would encounter in my practice a situation where a client would comply with Form 5471 requirements for the purposes of some of his companies and fail to do so with respect to the others because either he or his accountant simply did not understand the implications of Section 958 indirect ownership rules.
Section 958 also has a major influence on a U.S. person’s tax plan. Where such person and his tax advisor ignore the relevant implications of IRC Section 958, they are engaging in a potentially disastrous course of action. Beyond the penalties associated with the failure to file Form 5471 timely (as well as other potential penalties stemming from other U.S. international tax forms that may need to be filed), the effect of the entire tax structure could be nullified and potentially expose U.S. taxpayer to additional US taxes.
Contact Sherayzen Law Office for Help With Form 5471 and Tax Planning
If you or your business own companies overseas, contact Sherayzen Law Office for help with U.S. tax compliance, including Form 5471, as well as creating a comprehensible tax plan that would allow you to avoid over-payment of U.S. taxes while remaining in compliance with the Internal Revenue Code.

### 2013 IRS Changes to Lockbox Addresses
The Treasury Department’s Financial Management Service (FMS) and the IRS are in the process of streamlining the lockbox network. Effective December 31, 2012, the IRS will close lockbox operations located in the Atlanta (State of Georgia) and St. Louis (State of Missouri) areas. Moreover, other P.O. box address closings affect addressed in Hartford, Connecticut and Charlotte, North Carolina. These changes will affect individual taxpayers in nine states and business taxpayers in 26 states.
Effective January 1, 2013, individual and business taxpayers living or located in affected states will send payments to new lockbox sites.
P.O. Boxes Closed on December 31, 2012
The P.O. Boxes for the following lockbox sites will close effective December 31, 2012. To avoid any delays with mail, check your office materials and discard anything referring to these P.O. boxes. If you are an accountant or a tax attorney, make sure that your office discards of the following addresses.
St. Louis, MO – closing 12/31/12
P. O. Box 970007
P.O. Box 970009
P. O. Box 970010
P. O. Box 970019
P. O. Box 970026
Atlanta, GA – closing 12/31/12
P. O. Box 105877
P. O. Box 105659
P. O. Box 105703
P. O. Box 105094
P. O. Box 105092
P. O. Box 105279
P. O Box 105421
P. O. Box 105401
P. O. Box 105900
P. O. Box 105093
P. O. Box 105073
P. O Box 105571
Charlotte, NC- – closing 12/31/12
P. O. Box 1210
P. O. Box 1212
P. O. Box 1213
P. O. Box 1269
P. O. Box 1236
P. O. Box 70503
P. O. Box 660002
P. O. Box 660169
Hartford, CT - – closing 12/31/12
P. O. Box 37001
P. O. Box 37002
2013 New Address for Individual Taxpayers Living in Certain States
Starting January 1, 2013, if you or your individual client live in Alabama, Georgia, Kentucky, North Carolina, South Carolina, Tennessee, Missouri, New Jersey, and Virginia, then the following address changes will affect you:
Forms 1040, 1040A, 1040EZ should be mailed to:
P. O. Box 1000
Louisville, KY
40293-1000
Forms 1040ES should be mailed to:
P. O. Box 1100
Louisville, KY
40293-1100
Forms 4868 should be mailed to:
P. O. Box 1300
Louisville, KY
40293-1300
2013 New Address for Business Taxpayers Living in Certain States
Starting January 1, 2013, if your business or your business clients are located in Alabama, Alaska, Arizona, Arkansas, California, Colorado, Hawaii, Idaho, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Utah, Washington, Wyoming then the following address changes will affect your business and your business clients:
Forms 940 should be mailed to:
P. O. Box 37940
Hartford, CT 06176-7940
Forms 941 should be mailed to:
P. O Box 37941
Hartford, CT 06176-7941
Forms 943 should be mailed to:
P. O. Box 37943
Hartford, CT 06176-7943
Forms 944 should be mailed to:
P. O. Box 37944
Hartford, CT 06176-7944
Forms 945 should be mailed to:
P. O. Box 37945
Hartford,CT 06176-7945

### Automatic 5471 Penalties Submitted With Form 1120
In an earlier article, I discussed various penalties generally associated with late or inaccurate filing of Form 5471 (this form is required under IRC Section 6038(a) to provide information with respect to certain US shareholders of foreign corporations). These penalties are generally subject to “reasonable cause” exception and are not imposed in every case.
Since 2009, however, this is not the case. Starting January 1, 2009, the IRS automatically assesses a $10,000 penalty (under IRC Section 6038(b)(1)) for each late filed Form 5471 if the related Form 1120 is not filed timely. Note, the automatic assessment of penalty results in this case even if there is no tax due.
Furthermore, IRC Section 6038(c) provides for a 10% reduction of the foreign taxes available for credit under IRC Sections 901, 902 and 960. Per IRC Section 6038(c)(3), this reduction to the foreign taxes can be applied in addition to the monetary penalty. It is important to realize that the automatic assessment of the $10,000 penalty does not preclude a later assessment under IRC Section 6038(c).
In addition, the IRS will also assess the penalty for the failure to file income tax returns (i.e. Form 1120) under IRC Section 6651(a)(1). The penalty is 5% of the tax required to be shown on the income tax return for each month (or fraction thereof) during which such failure continues. The amount of the penalty shall not exceed 25%. No penalty is applicable under IRC Section 6651(a)(1) if no underpayment of tax is shown on the return.
There is an interesting procedural twist with respect to automatic assessment of penalties – the IRS does not want you to include the reasonable cause statement together with Form 5471 filed late together with Form 1120. Rather, the IRS Service Centers will first send the taxpayer a Notice to Respond and the taxpayer can respond with a reasonable cause statement.
Whether or not to follow this procedural suggestion will depend on the individual case and such decision should be made by your tax attorney.
Of course, the situation is radically different if Form 1120 has already been timely filed. In this case, the taxpayer must file Form 1120X with the late Form 5471 and he should include his reasonable cause statement.
Contact Sherayzen Law Office For Help with Form 5471 Penalties
If you have not filed your Form 5471 yet or if you are facing a penalty for the already filed Form 5471, contact Sherayzen Law Office for legal help. Our experienced international tax firm will thoroughly analyze your case, present options for proceeding forward, prepare all of the required documentation and tax forms, and rigorously represent your interests during your negotiations with the IRS.

### Additional Medicare Tax: Introduction
Starting January 1, 2013, Additional Hospital Insurance Tax (Additional Medicare Tax) will come to life as a result of section 9015 of the Patient Protection and Affordable Care Act (PPACA) (as amended).
In essence, PPACA increased the existing Medicare tax for high-income earners. Currently, the Medicare tax rate is a flat 2.9% tax on all wage and self-employment income. Starting January 1, 2013, the flat 2.9% Medicare tax is likely to continue to apply to wages under the threshold amount (see below). However, PPACA imposes Additional Medicare Tax on wages, compensation and self-employment income above a certain threshold amount received after December 31, 2012. The tax rate is 0.9 percent.
The threshold amount depends on your filing status as indicated below:
Married filing jointly $250,000
Married filing separately $125,000
Single $200,000
Head of household (with qualifying person) $200,000
Qualifying widow(er) with dependent child $200,000
It is important to remember that Health Care and Education Reconciliation Act of 2010 further expands the Medicare tax by imposing a 3.8% Medicare tax on investment income – the so-called “unearned income Medicare contribution tax”. The details of this tax increase are discussed in another article.

### Tax Year 2012 Income Tax Brackets for Individuals
The 2012 tax season is nearing. As calendar year 2012 is drawing to its end, the time for any tax planning is getting shorter and shorter. In order to do the tax planning properly, it is essential to know what tax bracket you are likely to be in and whether you can lower this bracket.
For the year 2012, the following tax brackets apply:
Filing Single
10% $0 – $8,700
15% $8,701 – $35,350
25% $35,351 – $85,650
28% $85,651 – $178,650
33% $178,651 – $388,350
35% Over $388,350
Filing Married Filings Jointly
10% $0 – $17,400
15% $17,401 – $70,700
25% $70,701 – $142,700
28% $142,701 – $217,450
33% $217,451 – $388,350
35% Over $388,350
Filing Married Filings Separately
10% $0 – $8,700
15% $8,701 – $35,350
25% $35,351 – $71,350
28% $71,351 - $108,725
33% $108,726 - $194,175
35% $194,176 or more
Filing Head of Household
10% $0 – $12,400
15% $12,401 – $47,350
25% $47,351 – $122,300
28% $122,301 – $198,050
33% $198,051 – $388,350
35% Over $388,350

### Retiring in Panama - Tax Traps for U.S. taxpayers
In recent years, a new retirement trend emerged among U.S. citizens - retirement abroad in relatively peaceful countries of Latin America. Panama appears to be one of the preferred destinations. Retirement is a process, though, and it takes time to set up properly. Therefore, U.S. citizens typically start their preparation for retirement abroad in their 50s, before they actually retire. In this article, I wish to discuss some of the most prominent U.S. tax issues that these potential retirees may face.
Typical Retirement Process
At lot of U.S. citizens who make the decision to retire in Panama start the process by retaining a local attorney to acquire land. They open up an account in Panama to finance the deal. Then, they sign a contract with a construction company to build a house. At that point, most Panamanian lawyers typically advise to organize a Panamanian corporation and put the house into the corporation for the purported reasons of liability and privacy. The house construction is then financed by the owner’s funds through new Panamanian corporate accounts. After the house is built, the lawyers will then attempt to obtain an exoneration of the property from Panamanian taxation for a fixed number of years allowed by law.
Throughout the process, the U.S. citizens are advised by Panamanian tax advisors that there are no tax consequences for structuring the retirement home purchase and construction through a corporation.
Tax Problems with this Process
Despite the apparent innocence of this project, there are potentially large problems with it if the U.S. tax citizens are not independently advised of the U.S. tax consequences of structuring their retirement in this manner.
Let’s take this scenario apart and focus on the three most common problems here. First, the opening of the bank accounts. If the aggregate balance on these accounts exceeds $10,000, then the Report on Foreign Bank and Financial Accounts must be filed by U.S. taxpayers. Failure to do so may bring tremendous IRS penalties, civil and criminal.
The interesting point here is that, in calculation of the aggregate $10,000 balance, a U.S. taxpayer should take into account the corporate accounts over which he has signature authority if owns more than 50% of the corporation (directly or constructively).
Second, organizing a Panamanian corporation owned by U.S. taxpayers may bring forth another highly-complicated U.S. tax compliance feature – Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations. Depending on the asset valuation (under US GAAP) and some other features of the corporation, Form 5471 can become a truly monstrous compliance requirement for this seemingly simple transaction of buying a retirement house through a corporation. Failure to file Form 5471 can lead to substantial penalties depending on circumstances.
Third, there is a new Form 8938 that requires U.S. taxpayers to disclose information with respect to specified foreign assets as long as these assets exceed a certain threshold. The Form has its own penalty structure.
The truly tragic aspect of this scenario is that a large number of Panamanian attorneys are completely oblivious to these U.S. tax reporting requirements as well as the penalties associated with them. Therefore, they fail to advise their U.S. clients about these IRS requirements and that the clients should consult a U.S. tax attorney experienced in these matters.
This is why it is highly important that you consult with a U.S.-based international tax attorney regarding U.S. tax consequences of your particular foreign retirement plan.
Contact Sherayzen Law Office to Learn About U.S. Tax Consequences of Your Foreign Asset Ownership and Retirement
The above article does not summarize all of the tax forms that should be filed in such situations, but merely points out the most prominent ones.  The exact U.S. tax compliance requirements will also depend on your particular situation.
If you are a U.S. citizen who is planning to retire in Panama or you wish own a property or do business there, contact Sherayzen Law Office. Our experienced international tax firm will analyze your situation in depth and offer professional legal advice with respect to your particular situation.

### Dormant Foreign Corporation
Certain categories of US shareholders of a foreign corporation are required to file Form 5471 with the IRS. Form 5471, however, is one of the most complex forms in the Internal Revenue Code and the compliance costs for such a corporation can be very high. Such costs can be especially disproportionate for an inactive corporation that does not do any business but merely exists.
In order to alleviate the compliance costs in these cases, the IRS allows certain foreign corporations, that satisfy the required criteria for being considered as “dormant foreign corporations”, to make a limited filing that does not include a detailed financial statements and supporting schedules. IRS Revenue Procedure (Rev. Proc.) 92-70 (1992-2 C.B. 435) details the requirements for the classification of dormant foreign corporation.
Under the Rev. Proc. 92-70, eight conditions must be met in order for a foreign corporation to be considered dormant:
(1) the foreign corporation conducted no business and owned no stock in any other corporation other than another dormant foreign corporation;
(2) no shares of the foreign corporation (other than directors' qualifying shares) were sold, exchanged, redeemed, or otherwise transferred, nor was the foreign corporation a party to a reorganization;
(3) no assets of the foreign corporation were sold, exchanged, or otherwise transferred, except for de minimis transfers described in (4) and (5) below;
( 4) the foreign corporation received or accrued no more than $5,000 of gross income or gross receipts;
(5) the foreign corporation paid or accrued no more than $5,000 of expenses;
(6) the value of the foreign corporation's assets as determined pursuant to U.S. generally accepted accounting principles (but not reduced by any mortgages or other liabilities) did not exceed $100,000;
(7) no distributions were made by the foreign corporation; and
(8) the foreign corporation either had no current or accumulated earnings and profits or had only de minimis changes in its beginning and ending accumulated earnings and profits balances by reason of income or expenses specified in (4) or (5) above.
If all eight conditions are met, the filer only needs to fill-out and complete the first page of Form 5471 (which includes: filer information, such as name and address, Items A through C, and tax year; corporate information, such as the dormant corporation's annual accounting period (below the title of the form) and Items 1a, 1b, 1c, and 1d), and label the top margin of the first page of Form 5471 with this exact phrase "Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporations."
The form should be filed in the manner described in “When and Where To File on page 1 of the Instructions for Form 5471". For the tax year 2011, this means that it should be attached to and filed together with your income tax return by the relevant due date.
Contact Sherayzen Law Office for Help With U.S. Tax Compliance Regarding U.S. Ownership of a Foreign Corporation
If you own shares in a foreign corporation, contact Sherayzen Law Office for help with U.S. tax compliance. Our experienced international tax firm will thoroughly review the facts of your case, identify your U.S. tax compliance requirements, and complete the required forms and filings (including Form 5471).
If you only now became aware of your potential Form 5471 filing requirements and you have not filed the form with the IRS previously, our tax firm will assist you with finding the right type of voluntary disclosure and vigorously represent your interests during IRS negotiations.

### IRS Revenue Procedure 92-70 (1992-2 C.B. 435)
SECTION I. PURPOSE
This revenue procedure provides a summary filing procedure for filing Form 5471 with respect to dormant foreign corporations described in section 3 below. Persons complying with this revenue procedure satisfy their Form 5471 filing obligations under sections 6038(a)(1), 6038(a)( 4), and 6046(a)(3) with respect to dormant foreign corporations and will not be subject to penalties related to the failure to timely file a complete Form 5471 and to timely furnish information requested thereon.
SEC. 2. BACKGROUND
.01 Section 6038(a)(l) imposes information reporting requirements on any United States person who controls a foreign corporation. Pursuant to section 6038(a)(4), the information reporting requirements prescribed in section 6038 (a)( 1) also are imposed on any United States person who is treated as a United States shareholder of any foreign corporation that is treated as a controlled foreign corporation for any purpose under subpart F.
.02 Section 6046(a)(3) imposes reporting requirements on each person who is treated as a United States shareholder of a controlled foreign corporation under section 953(c).
.03 Section 1.6038-2 of the Income Tax Regulations requires a United States person controlling a foreign corporation to file an annual information return on Form 5471 specifying certain identifying information, stock, shareholder, earnings and profits, and financial information about the foreign corporation, as well as transactions between the foreign corporation, the filer, certain other shareholders, and entities related to the filer or the foreign corporation.
.04 Section 1.6038-2(j)(1) of the regulations allows two or more U.S. persons who are required to furnish information with respect to the same foreign corporation and for the same period to satisfy this obligation by filing a joint return. Pursuant to section 1.6038-2(j)(2) of the regulations, a U.S. person required to furnish information solely by reason of stock ownership attribution from another U.S. person is excepted from furnishing information if he does not directly own an interest in the corporation and all such required information otherwise is furnished by the person from whom the ownership is attributed. Section 1.6038-2(j)(3) of the regulations requires any U.S. person relying on section 1.6038-2(j)(1) or (2) to file a statement with his income tax return indicating that his filing liability will be satisfied by another return, identifying that return, and identifying the place of return filing.
.05 Section 1.6046-1(e)(1) of the regulations allows two or more U.S. persons who are required by section 1.6046-l(c) of the regulations to file a return with respect to the same corporation to satisfy this obligation by filing a joint return. Under section 1.6046-l(e)(4)(iii) of the regulations, a U.S. person required to file a return under section 1.6046-1(c) is excepted from this filing requirement if he is required to file solely by reason of stock ownership attribution from another U.S. person, he does not directly own an interest in the foreign corporation, and the information required by section 1.6046-1(c) is otherwise furnished by the U.S. person from whom the ownership is attributed. Pursuant to section 1.6046-1(e)(5) of the regulations, any U.S. person required by section 1.6046-1(c) to furnish information regarding a foreign corporation may, if such information is furnished by another person having an equal or greater stock interest (measured in terms of value of such stock) in such corporation, satisfy such requirement by filing a statement with his return on Form 5471 indicating that such liability has been satisfied and identifying the return in which such information was included .
.06 Section 6038(b)(l) imposes monetary penalties for a failure to timely furnish any information required by section 6038(a)(l) with respect to a foreign corporation (including entities treated as controlled foreign corporations under sections 957 and 953). Additional penalty amounts may apply under section 6038(b)(2) where the failure to furnish information continues for more than 90 days after notification by the Secretary.
.07 Section 6038(c) mandates a reduction in certain foreign tax credits for a failure to timely furnish information required by section 6038(a)(l) absent a showing of reasonable cause for the delay. Additional credit reductions may apply where such failures continue for more than 90 days after notice by the Secretary.
.08 Section 6679 imposes monetary penalties for a failure to timely file a return or to provide information specified in any return required by section 6046 absent a showing of reasonable cause for the failure.
. 09 Criminal penalties (fines and imprisonment) are imposed by section 7203 for a willful failure to file a return, including an information return required by section 6038 or 6046.
SEC. 3. SCOPE
This revenue procedure applies to persons required under section 6038(a)(1), 6038(a)(4) or 6046(a)(3) to file a Form 5471 with respect to a foreign corporation that is a dormant foreign corporation. For purposes of this revenue procedure, a foreign corporation is a dormant foreign corporation if, at all times during the foreign corporation's annual accounting period (within the meaning of section 6038(e)(2)):
(1) the foreign corporation conducted no business and owned no stock in any other corporation other than another dormant foreign corporation;
(2) no shares of the foreign corporation (other than directors' qualifying shares) were sold, exchanged, redeemed, or otherwise transferred, nor was the foreign corporation a party to a reorganization;
(3) no assets of the foreign corporation were sold, exchanged, or otherwise transferred, except for de minimis transfers described in (4) and (5) below;
(4) the foreign corporation received or accrued no more than $5,000 of gross income or gross receipts;
(5) the foreign corporation paid or accrued no more than $5,000 of expenses;
(6) the value of the foreign corporation's assets as determined pursuant to U.S. generally accepted accounting principles (but not reduced by any mortgages or other liabilities) did not exceed $100,000;
(7) no distributions were made by the foreign corporation; and
(8) the foreign corporation either had no current or accumulated earnings and profits or had only de minimis changes in its beginning and ending accumulated earnings and profits balances by reason of income or expenses specified in (4) or (5) above.
SEC. 4. GENERAL PROCEDURE
.01 In lieu of filing a complete Form 5471 for each dormant foreign corporation, the filer may use the summary filing procedure described in this section. A filer may not use this summary filing procedure to report an interest in a foreign corporation that was a dormant foreign corporation in a prior year but that does not meet the requirements of section 3 above in the current filing year.
.02 To elect the summary filing procedure, the filer must attach and file Page One of the Form 5471 (the summary return) for each dormant foreign corporation with its regularly filed income tax return. The filer also must file a copy of each summary return with the Internal Revenue Service Center, Philadelphia, PA, along with the filer's other Forms 5471 (if any). The top margin of each summary return must be labeled "Filed Pursuant to Rev. Proc. 92-70 for Dormant Foreign Corporations."
.03 The summary return must be completed for the following filer items: the filer's name and address, identifying number, filing category, stock ownership percentage, and tax year.
.04 The summary return must be completed for the following corporate items: the dormant foreign corporation's annual accounting period (within the meaning of section 6038(e)(2)), name and address, employer identification number (if any), country of incorporation, and date of incorporation.
.05 By using the summary filing procedure, the filer agrees that it will provide any information required by sections 6038 and 6046, the regulations thereunder, or on Form 5471 and not specified in sections 4.03 or 4.04, within 90 days of being asked to do so on audit.
SEC. 5. RELIEF
.01 Persons complying with the summary filing procedure described in section 4 satisfy their Form 5471 filing obligations arising under sections 6038(a)(1), 6038(a)(4), and 6046(a)(3) as to the specified dormant foreign corporations. Accordingly, sections 6038(b)(1), 6038(c), 6679, and 7203 will not apply to a filer properly employing the procedure. However, penalties and foreign tax credit reductions under sections 6038(b)(2) and 6038(c)(1) can be imposed (pursuant to sections 1.6038-2(k)(l)(ii) and l.6038-2(k)(2)(iv) of the regulations) for a failure to timely furnish information under section 4.05 of this revenue procedure.
.02 To the extent that a Form 5471 filing by a filer could satisfy the filing obligation of another person (the "other person") under section 1.6038-2(j) of the regulations, such other person may use the provisions of section 1.6038-2(j) if the other person satisfies the requirements of section 1.6038-2(j)(3) and the filer complies with this revenue procedure and attaches a statement providing the name, address, identifying number, and corporate status of the other person. If the provisions of section 1.6038-2(j) are used as provided in this section 5.02, the other person on whose behalf the Form is filed satisfies his Form 5471 filing obligations arising under sections 6038(a)(1) and 6038(a)(4) as to the specified dormant foreign corporations and is not liable for penalties as specified in section 5.01 above.
.03 Persons described in section 6046(a)(3) are treated, for purposes of this revenue procedure, as described in section 1.6046-1(c)(1) of the regulations. Therefore, to the extent that a Form 5471 filing by a filer could satisfy the filing obligation of another person (the "other person") under section 1.6046-1(e) of the regulations, such other person may use the provisions of section 1.6046-1(e) if the other person satisfies the filing requirement of section 1.6046-1(e)(5) (if applicable) and the filer complies with this revenue procedure and attaches a statement providing the name, address, identifying number, and corporate status of the other person. If the provisions of section 1.6046-l(e) are used as provided in this section 5.03, the other person on whose behalf the Form is filed satisfies his Form 5471 filing obligations arising under section 6046(a)(3) as to the specified dormant foreign corporations and is not liable for penalties as specified in section 5.01 above.
.04 The relief afforded by this revenue procedure relates solely to a filer's information reporting obligations and does not affect a filer's liability for tax on income distributed or deemed distributed from a dormant foreign corporation. Thus, for example, de minimis amounts of subpart F income derived by a controlled foreign corporation that qualifies as a dormant foreign corporation under section 3 above are taxable to the corporation's United States shareholders to the extent provided in sections 951 and 952 and should be reported on each shareholder's federal income tax return.
SEC. 6. EFFECTIVE DATE
This revenue procedure is effective for Forms 5471 required to be filed (including extensions) on or after September 15, 1992.

### First Quarter of 2013 Underpayment and Overpayment Interest Rates
On November 30, 2012, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning January 1, 2013. The rates will be:
	three (3) percent for overpayments [two (2) percent in the case of a corporation];
	three (3) percent for underpayments;
	five (5) percent for large corporate underpayments; and
	one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### Committee on Foreign Investment in the United States: General Overview
In 1988, the United States Congress enacted the Exon–Florio Amendment to authorize the executive branch’s review foreign investment within the United States. The amendment was passed into law under the Omnibus Trade and Competitiveness Act of 1988 and amended Section 721 of Defense Production Act of 1950. Generally, pursuant to this provision the President of the United States may block any foreign investments that may pose a threat to national security.
As a direct result of this law, President Reagan delegated the process of reviewing foreign investments to the Committee on Foreign Investment in the United States (commonly known under its acronym “CFIUS”).
CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person (“covered transactions”), in order to determine the effect of such transactions on the national security of the United States. As mentioned above, CFIUS operates pursuant to section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (FINSA) (section 721) and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800.
CFIUS review consists of a fairly complicated process, which has been the subject of significant reforms over the past several years (including numerous improvements in internal CFIUS procedures, enactment of FINSA in July 2007, amendment of Executive Order 11858 in January 2008, revision of the CFIUS regulations in November 2008, and publication of guidance on CFIUS’s national security considerations in December 2008).
CFIUS review can result from a voluntary notification by a domestic firm that is being acquired by a foreign firm or it can result from CFIUS’ own initiative. CFIUS reviews begin with a 30-day decision to authorize a transaction or begin a statutory investigation. If the latter is chosen, the committee has another 45 days to decide whether to permit the acquisition or order divestment.
While, most transactions submitted to CFIUS were approved without the statutory investigation, others were investigated by CFIUS. In some cases, CFIUS investigation had a material impact on proposed acquisitions.

### U.S. Engaging with More than 50 Jurisdictions to Curtail Offshore Tax Evasion
The U.S. Department of the Treasury recently announced that it is engaged with more than 50 countries and jurisdictions around the world to improve international tax compliance and implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target noncompliance by U.S. taxpayers using foreign accounts. Treasury’s engagement with this broad coalition of foreign governments to efficiently and effectively implement FATCA marks an important milestone in establishing a common intergovernmental approach to combating tax evasion.
Model Intergovernmental Agreement and Most Recent Developments
This year, the Treasury Department published a model intergovernmental agreement for implementing FATCA and announced the development of a second model agreement. These models serve as the basis for concluding bilateral agreements with interested jurisdictions.
The Treasury Department has already concluded a bilateral agreement with the United Kingdom. Additional jurisdictions with which Treasury is in the process of finalizing an intergovernmental agreement and with which Treasury hopes to conclude negotiations by year end include: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.
Jurisdictions with which Treasury is actively engaged in a dialogue towards concluding an intergovernmental agreement include: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden. Treasury expects to be able to conclude negotiations with several of these jurisdictions by year end.
The jurisdictions with which Treasury is working to explore options for intergovernmental engagement include: Bermuda, Brazil, the British Virgin Islands, Chile, the Czech Republic, Gibraltar, India, Lebanon, Luxembourg, Romania, Russia, Seychelles, Saint Maarten, Slovenia, and South Africa.
Aggressive Effort by the United States to Assure International Compliance with U.S. Tax Laws
All of these moves by the Treasury Department with respect to FATCA implementation agreements is part of a broader effort to assure international compliance with U.S. tax laws. FATCA has already gave birth to a powerful compliance weapon that must be filed by U.S. taxpayers in the United States – namely, Form 8938. In combination with other information returns, such as FBARs, Form 5471, Form 8865, Form 926, Form 3520 and others, FATCA hopes to achieve universal tax compliance among U.S. taxpayers who are engaging in international activities.
Contact Sherayzen Law Office for Help with Disclosure of Foreign Accounts and Foreign Income
If you have undisclosed offshore accounts and you have not reported your foreign income, contact Sherayzen Law Office for legal help. Our experienced voluntary disclosure firm will thoroughly review your case, advise you on the available disclosure options, prepare your voluntary disclosure documentation (including tax returns and offshore information returns such as Forms 5471, 8865, 926, 3520, FBARs and others) and vigorously represent your interests during the entire disclosure process.

### 2013 Standard Mileage Rates
On November 21, 2012, the Internal Revenue Service issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 56.5 cents per mile for business miles driven
• 24 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations
The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

### IRS Increases Criminal Prosecutions for Willful Failure to File FBARs: U.S. v. Jacques Wajsfelner
In U.S. v. Jacques Wajsfelner, the IRS’s criminal prosecution of the defendant for willful failure to file FBARs was completed when the defendant, Mr. Jacques Wajsfelner, decided to plead guilty. Mr. Wajsfelner pled guilty to willful failure to file the FBAR in Manhattan federal court and he now faces civil penalties of $2.84 million and restitution of $419,940. Under advisory guidelines, he faces 30 months to 37 months in prison at sentencing scheduled for December 20, 2012.
Basic Facts
Mr. Wajsfelner, an 83-year old Holocaust survivor, fled the Nazis as a teenager and became a U.S. citizen, working in real estate and advertisement in New York and Boston. He admitted that he held an account in his own name at Credit Suisse in 1995. In 2006, his advisor helped him open an account in the name of Ample Lion Ltd. At the end of 2007, the account held almost $5.7 million. In 2008, as Credit Suisse started to wind down its U.S. cross-border banking business, Mr. Wajsfelner opened an account with Wegelin and transferred the money from Credit Suisse to the new account. In the later years, the value on this account went down to only $4 million.
In addition to moving money among two accounts, Mr. Wajsfelner also made a huge error of not telling the truth to the IRS about the account, Ample Lion Ltd. (A Hong Kong corporation), and his advisor (Beda Singenberger’s corporation Sinco Treuhand AG) during an interview conducted by the IRS after the investigation commenced. As part of his plea agreement, the IRS agreed not to prosecute him for these statements.
In the end, Mr. Wajsfelner plead guilty to knowing and willful failure to file the FBARs from 2006 through 2011 with the IRS.
Additional Considerations
It is possible that the misleading and untruthful statements to the IRS alone may have been the cause for Mr. Wajsfelner to plead guilty. However, there was another highly unfavorable fact – moving the money between the accounts would have been considered as circumstantial evidence of conspiracy to conceal the money from U.S. government. Also, Mr. Wajsfelner maintained very close contact with the account and directed various transactions to and from the accounts.
Another important consideration is to understand that this is a case of pure willful failure to file the FBARs; there was no associated pleading with respect to tax evasion. This is a very important because it shows that the IRS is willing to prosecute FBAR cases criminally even without tax evasion charges.
US v. Jacques Wajsfelner is Part of a Wave of Prosecutions
U.S. v. Jacques Wajsfelner is not an isolated case or limited only to specific facts of Mr. Wajsfelner.
In addition to Mr. Wajsfelner, the IRS also indicted his former Swiss adviser, Beda Singenberger, on a charge of conspiring to help more than 60 U.S. taxpayers hide $184 million from the Internal Revenue Service in offshore accounts. Wegelin, the 270-year-old Swiss bank, was also indicted February 2, 2012, on charges of helping U.S. taxpayers hide money from the IRS. Also, Credit Suisse said in July of 2011 that it was a target of a U.S. criminal probe. On July 21, 2011, seven of Credit Suisse’s bankers were indicted on charges of helping U.S. clients evade taxes through secret accounts.
In fact, since 2009, U.S. prosecutors have criminally charged about fifty U.S. taxpayers and more than twenty offshore bankers, lawyers and advisers.
FBAR Criminal Prosecutions Will Increase Due to Voluntary Disclosure Programs
It is critically important for non-compliant U.S. taxpayers to understand that, instead of subsiding, this wave of IRS criminal prosecutions regarding the FBARs will only increase.
The primary reason for this growth of FBAR prosecutions are the voluntary disclosure programs, like 2009 OVDP, 2011 OVDI AND 2012 OVDP (now closed). For many years now, the IRS has been collecting detailed information from the participating taxpayers regarding their advisors, banks and other U.S. taxpayers. This mountain of information allows the IRS to identify high-risk banks, advisors as well as specific taxpayers who are likely to be non-compliant with U.S. tax rules. The end-product of this analysis are targeted investigation and, ultimately, criminal prosecutions of non-compliant U.S. taxpayers and their advisors.
Contact Sherayzen Law Office for Legal Help With FBARs
If you have undisclosed foreign financial accounts that should have been reported to the IRS, contact Sherayzen Law Office as soon as possible. Our experienced tax firm will analyze the facts of your case, identify you potential FBAR liability and propose a specific course of action to deal with your specific situation. Sherayzen Law Office will guide you though your entire voluntary disclosure, including the preparation of all of the necessary tax documents and rigorous IRS representation.

### Underpayment and Overpayment Interest Rates for the Fourth Quarter of 2012
The underpayment and overpayment interest rates will remain the same for the calendar quarter beginning October 1, 2012. The rates will be:
three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### Foreign Earned Income Exclusion: 2013
If a qualified individual meets certain requirements of I.R.C. §911, he may exclude part or all of his foreign earned income from taxable gross income for the U.S. income tax purposes. This income may still be subject to U.S. Social Security taxes.
The IRS recently announced that the maximum foreign income exclusion amount for 2013 will be increased to $97,600 (currently, in 2012, it is $95,100).
Remember, if your overseas earnings are above $97,600 for the tax year 2013, then you may be subject to U.S. income taxation on the excess amount. For example, if you earned $105,000 in 2011, then you will have to pay U.S. income taxes on $ 7,400.
It is also important to note, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion). For most U.S. expatriates, this means that the tax bracket is likely to start at 25% or higher. If you are self-employed, however, your situation may differ from this description.
Furthermore, it is worth noting that additional amount of earnings may also be excluded under the foreign housing exclusion.
Contact Sherayzen Law Office For Foreign Earned Income Exclusion Legal Help
If you are a U.S. taxpayer living abroad or you are planning to accept a job overseas, contact us to discuss your tax situation. Our experienced tax firm will guide you through the complex maze of U.S. tax reporting requirements, help you make sure that you are in full compliance with U.S. tax laws, and help you take advantage of the relevant provisions of the Internal Revenue Code to make sure that you do not over-pay your taxes in the United States.

### United Kingdom Signs Bilateral Agreement to Combat Offshore Tax Evasion and Implement FATCA
On September 14, 2012, the U.S. Department of the Treasury announced that it has signed a bilateral agreement with the United Kingdom to implement the information reporting and withholding tax provisions commonly known as the Foreign Account Tax Compliance Act (FATCA). Enacted by Congress in 2010, these provisions target non-compliance by U.S. taxpayers using foreign accounts. The bilateral agreement signed this week is based on the model published in July of this year and developed in consultation with France, Germany, Italy, Spain, and the United Kingdom and marks an important step in establishing a common approach to combatting tax evasion based on the automatic exchange of information.
“Today’s announcement marks a significant step forward in our efforts to work collaboratively to combat offshore tax evasion,” said Treasury Assistant Secretary for Tax Policy Mark Mazur. “We are pleased that the United Kingdom, one of our closest allies, is the first jurisdiction to sign a bilateral agreement with us and we look forward to quickly concluding agreements based on this model with other jurisdictions.”
The Treasury Department is in communication with several other governments who have expressed interest in concluding a similar bilateral agreement to implement FATCA and expects to sign additional bilateral agreements in the near future.
Contact Sherayzen Law Office for Help With Disclosing Offshore Financial Accounts
If you have undisclosed foreign bank and financial accounts, contact Sherayzen Law Office for legal help. Our experienced international tax firm will examine your case, suggest the proper course of action, prepare all of the documentation necessary for your voluntary disclosure and defend your interests during negotiations with the IRS.

### September 17, 2012 Deadline for Estimated Tax Payments and Certain Business Entity Filings
This year, the usual September deadline for estimated tax payments for the the third-quarter (June 1-August 31) of 2012 moves to September 17 due to the fact that the usual date for the estimated tax payments (September 15) falls on Saturday. This requirements applies individuals who are either not paying their income tax through withholding or will not pay enough income tax through withholding.
September 17 deadline also applies to the 2012 third-quarter estimated tax payments of a corporation.
Furthermore, if a C-Corporation, S-Corporation or a Partnership obtained an automatic six-month (in case of a corporation) or an automatic five-month (in case of a partnership) extension for filing of their income tax returns (Forms 1120, 1120-S and 1065 (with K-1)), these entities must file these extended income tax returns by September 17, 2012.
It is important no note that the September 17 deadline applies only to taxpayers whose tax year is the calendar year. If a taxpayer uses a fiscal year as its tax year, then different dates for the deadlines may apply.
If you have any questions about how to file these forms, please, contact Sherayzen Law Office for help.

### 2012 OVDP Offers Alternative PFIC Calculation Method
If your client’s offshore voluntary disclosure involves PFIC (Passive Foreign Investment Company) income, you should be aware that the 2012 OVDP now closed (Offshore Voluntary Disclosure Program) offers an alternative PFIC calculation method. In this article, I intend to outline broad contours of the alternative method and put it in a broader context of voluntary disclosure.
From the outset, I want to emphasize that the calculation of PFIC increase in tax is an extremely complex matter and should be conducted only by international tax professionals; therefore, this article is likely to be more of interest to international tax attorneys and accountants rather than the taxpayers themselves.
When Alternative OVDP PFIC Method Is Usually Elected
Whether to elect an alternative OVDP Method of PFIC calculation is a matter that should be decided by your international tax attorney in charge of your voluntary disclosure case. However, there are four common situations when taxpayers usually (but not always) choose the OVDP method.
First, for obvious reasons, if a PFIC election was already timely made (QEF or Market-to-Market (MTM)) in the past, the OVDP method is usually avoided.
Second, where a lack of historical information on the cost basis and holding period of many PFIC investments makes it difficult for taxpayers to prepare statutory PFIC computations and for the IRS to verify them. This is a very common reason for choosing OVDP method, especially in situations where PFICs were inherited by U.S. taxpayers.
Third, where the OVDP method is more financially beneficial than the statutory § 1291 method. Unfortunately, it is usually not easy to identify whether the OVDP or the statutory method is going to be advantageous; preliminary PFIC calculations will need to be conducted on both methods before a recommendation can be made to a client.
Finally, the fourth type of situations when people choose OVDP over § 1291 method are those where the default statutory PFIC method is so difficult and time-consuming to calculate that the clients simply opt for the OVDP method because it will save them more money in legal and accounting fees than whatever advantage a default statutory method would bring.
I once spoke with an attorney who always recommended OVDP method over § 1291, because the default method is too difficult to calculate. I believe this is an exaggeration and I would caution tax professionals from making such unfounded judgments. I have had situations where the default method was superior over the MTM method, OVDP or otherwise, based on the way the transactions were structured or the violent shifts in the value of PFICs. Therefore, one should always study the special circumstances of a client before laying out the options to the client and making the final recommendation.
OVDP Alternative MTM Method
Once your client selects the OVDP Alternative Method, it is important that you follow the rules of the method. In essence, the OVDP Method utilizes the mark-to-market methodology authorized in Internal Revenue Code § 1296 but without the requirement for complete reconstruction of historical data (which, in situations where are several legitimate places to start, may offer room for planning).
There are other differences between the traditional MTM and OVDP MTM methods. For example, a rate of 7% of the tax computed for PFIC investments marked to market in the first year of the OVDP application will be added to the tax for that year, in lieu of the PFIC interest charges. Also, a tax rate of 20% will be applied to the MTM gain(s), MTM net gain(s) and gains from all PFIC dispositions during the voluntary disclosure period under the OVDP, in lieu of the rate contained in IRC § 1291(a)(1)(B) for the amount allocable to the current year and IRC §1291(c)(2) for the deferred tax amount(s) allocable to any other taxable year.
With respect to limiting losses, the OVDP MTM method does follow the unreversed inclusions rule with very detailed instructions on the post-voluntary disclosure treatment of losses. I will not get into details in this article, but tax professionals should diligently study these instructions.
Once the OVDP Alternative method is selected, it will apply to all of your client’s PFIC investments. The initial MTM computation of gain or loss under this methodology will be for the first year of the OVDP application, but could be made after that year depending on when the first PFIC investment was made.
Election Of the OVDP MTM Method Will Have Tax Consequences On the Post-Disclosure Period
It is important to emphasize that the OVDP MTM method will have tax consequences on your client’s post-OVDP tax situation. For example, any unreversed inclusions at the end of the voluntary disclosure period will be reduced to zero and the MTM method will be applied to all subsequent years in accordance with IRC § 1296 as if the taxpayer had acquired the PFIC stock on the last day of the last year of the voluntary disclosure period at its MTM value and made an IRC § 1296 election for the first year beginning after the voluntary disclosure period.
Other important tax consequences must also be explained to your clients.
Contact Sherayzen Law Office for Help With PFICs In a Voluntary Disclosure Context
This article offers only a very broad outline of the OVDP MTM method and it should not be relied upon in your PFIC calculations. My only intent in this article was to alert the tax professionals to the existence and general contours of the OVDP Alternative PFIC Method. Whether to use it and how to use it requires deep understanding of the various PFIC calculation methods in conjunction with planning for various voluntary disclosure options.
If you or your clients are facing PFIC issues in a voluntary disclosure context, contact Sherayzen Law Office for help. Our experienced international tax firm will thoroughly analyze your client’s situation, propose various voluntary disclosure options, explain how these options affect your PFIC calculation method, and complete all of the required calculations and tax forms.

### FBAR Criminal Penalties
Potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to:
A prison term of up to 10 years
Criminal penalties of up to $500,000
or both
When it comes to penalties, FinCEN Form 114 formerly Form TD F 90-22.1, Report on Foreign Bank and Financial Accounts (commonly known as FBAR), is one of the most severe forms ever issued by the U.S. Department of the Treasury.
In addition to a rich arsenal of civil penalties, the FBAR is also armed with criminal penalties that U.S. taxpayers may face in cases of willful non-compliance with the FBAR regulations.  The two most common cases for criminal prosecution are willful failure to file an FBAR and willful filing a false FBAR, especially when combined with potential tax evasion.
The authority for the severe criminal penalties can be found in 31 U.S.C. § 5322.  This means that, potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to a prison term of up to 10 years, criminal penalties of up to $500,000 or both potentially, a person who willfully fails to file an FBAR or files a false FBAR may be subject to a prison term of up to 10 years, criminal penalties of up to $500,000 or both.
With the mountain of information that the IRS recently accumulated as a result of the 2009 OVDP, 2011 OVDI and, now, 2012 OVDP voluntary disclosure programs, one should expect a dramatic rise in FBAR enforcement. This, of course, means that we are likely to witness the equivalent rise in FBAR audits and criminal prosecutions.
Contact Sherayzen Law Office for FBAR Help
If you have undisclosed foreign accounts and you are subject to the FBAR requirements, contact Sherayzen Law Office immediately.  Our experienced international tax firm will thoroughly review your case, analyze the available options in a responsible and creative way, create a case plan, draft and complete the necessary legal and tax documents and forms, and rigorously represent your case before the IRS.
Don't Face The IRS Alone! call now! 952-500-8159

### IRS Audit of Offshore Accounts and Other Foreign Assets: Potential Penalties
Failure to do timely voluntary disclosure may expose non-compliant U.S. taxpayers with foreign bank and financial accounts to tremendous amount of audit penalties. In this article, I will describe these penalties which may apply to non-compliant U.S. taxpayers during an IRS audit (remember, the application of these penalties in your particular case will depend on your particular circumstances; this article merely provides an overview of potential penalties that generally exist).
FBAR Civil Penalties
The civil penalty for willfully failing to file the Form 114 (formerly TD F 90-22.1) (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”) can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation. Please, visit our Voluntary Disclosure and FBAR Center for more detailed information.
Form 8938 Penalties
Closely related to the FBAR is Form 8938. This is a new form that is required to be filed beginning with the 2011 tax year by certain taxpayers (see this article for more information). While Form 8938 is the IRS equivalent of the FBAR required to be filed by the U.S. Department of the Treasury, it has it own penalty structure.
Failure to file Form 8938 as required by I.R.C. §6038D is $10,000 per each information return. An additional $10,000 penalty is added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
Form 3520 Penalties
These penalties are relevant only to the taxpayers who are required to file Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, pursuant to IRC §§ 6048 and 6039F. The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.
Form 3520-A Penalties
These penalties are relevant only to the taxpayers who must report ownership interests in foreign trusts, by United States persons with various interests in and powers over those trusts under IRC § 6048(b). A penalty for failing to file each Form 3520-A, Information Return of Foreign Trust With a U.S. Owner, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.
Form 5471 Penalties
Certain categories of U.S. persons who are officers, directors or shareholders in certain foreign corporations (including International Business Corporations) are required to report information under IRC §§ 6035, 6038 and 6046 (see this article for more information).
A penalty for failing to file each Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.
Form 5472 Penalties
Taxpayers may be required to report transactions between a 25 percent foreign-owned domestic corporation or a foreign corporation engaged in a trade or business in the United States and a related party as required by IRC §§ 6038A and 6038C.
A penalty for failing to file Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business, is $10,000 per form. An additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.
Form 926 Penalties
Taxpayers are required to report transfers of property to foreign corporations and other information under IRC § 6038B. A penalty for failing to file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.
Form 8865 Penalties
United States persons with certain interests in foreign partnerships are required to report interests in and transactions of the foreign partnerships, transfers of property to the foreign partnerships, and acquisitions, dispositions and changes in foreign partnership interests under IRC §§ 6038, 6038B, and 6046A.
A penalty for failing to file Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, is $10,000 per each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return. Furthermore, there is a penalty of ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.
Civil Fraud Penalties
Pursuant to IRC §§ 6651(f) or 6663, where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.
Failure to File Penalty: IRC § 6651(a)(1)
Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.
Failure to Pay Tax Due Penalty: IRC § 6651(a)(2)
If a taxpayer fails to pay the amount of tax shown on the return, he may be liable for a penalty of 0.5 percent of the amount of tax shown on the return, plus an additional 0.5 percent for each additional month or fraction thereof that the amount remains unpaid. The penalty is capped at 25 percent.
Accuracy-Related Penalty: IRC § 6662
An accuracy-related penalty on underpayments may be imposed by the IRS. Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty.
Other Civil Penalties
Other penalties may be applicable depending on a situation.
Potential Criminal Penalties
In addition to civil penalties, the non-compliant taxpayers also face various potential criminal penalties.
FBAR Criminal Penalties
FBAR penalties are not limited to civil penalties, but also expose non-compliant taxpayers to criminal penalties. Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.
Criminal Penalties Related to Tax Returns
Possible criminal charges related to tax returns include tax evasion (26 U.S.C. § 7201), filing a false return (26 U.S.C. § 7206(1)) and failure to file an income tax return (26 U.S.C. § 7203).
A person convicted of tax evasion is subject to a prison term of up to five years and a fine of up to $250,000. Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000.
Contact Sherayzen Law Office for Help With IRS Audits Involving Offshore Assets 
If you have undisclosed foreign assets and foreign income and you are subject to IRS audit, contact Sherayzen Law Office immediately. An experienced international tax attorney will thoroughly review your case, create a case plan, complete the required forms, and offer rigorous ethical IRS representation.

### 2012 OVDP vs. 2011 OVDI: Five Key Differences
On June 26, 2012, the IRS published the instructions for the 2012 Offshore Voluntary Disclosure Program (“OVDP”). The program was originally announced on January 9, 2012, but there were no instructions with respect to the program aside from modifications in the 2011 penalty structure and general references to the 2011 OVDI.
The new 2012 OVDP shares many similarities with 2011 OVDI, but there are specific differences with further implications that go far beyond its appearances.
There are five key differences between the programs that I would like to emphasize here:
1. The highest penalty is increased from 25% under the OVDI to 27.5% under the OVDP;
2. Unlike 2011 OVDI and every other previous voluntary disclosure program, 2012 OVDP is open for an indefinite period of time. This means that it can potentially be closed next week or it may be open far beyond 2012 and other years – the IRS has complete control over the exact expiration time of the OVDP.
3. The IRS may change the terms of the OVDP at any time. While the IRS did amend the 2011 OVDI instructions several times, these amendments (with the exception of June regulations) usually were for the purposes of clarification of the existing terms. It appears that, under 2012 OVDP, the fundamental rules of the program maybe changed at any time (it is debatable whether such changes would have any retroactive impact with respect to persons who already entered the program).
4. The eligibility terms have been modified for certain types of taxpayers. Two changes in particular must be highlighted under FAQ 21 of the 2012 OVDP instructions. First, a taxpayer in ineligible to participate in the 2012 OVDP if the taxpayer (i) appeals a foreign tax administrator’s decision authorizing the supply of account information to the IRS, (ii) does not serve the notice of account information to the IRS and (iii) fails to properly serve (as required under 18 U.S.C. 3506 ) on the Attorney General of the United States the notice of any such appeal and/or other documents relating to the appeal at the time such notice of appeal or other document is submitted.
The second eligibility modification concerns certain groups of taxpayer singled out by the IRS. In essence, a taxpayer is ineligible to participate in the 2012 OVDP if he has or had accounts at specified foreign financial institutions which were subject to U.S. government actions. The IRS may announce such taxpayer groups ineligible at any time; such announcements will be posted on the 2012 OVDP page.
This provision should be of special importance to taxpayers who maintain accounts with high-risk institutions.
5. In conjunction with the OVDP instructions, the IRS also published a new procedure for certain non-resident taxpayers (including dual citizens) seeking to establish a de minimis, low-risk exception to FBAR penalties. While seemingly benign, the new procedure does pose dilemmas for the taxpayers who are not eligible to take advantage of the new procedure and seek to do a modified voluntary disclosure (also known as “noisy voluntary disclosure”). I will explore this subject later in a separate article.
There are other differences between the 2012 OVDP and 2011 OVDI, but they are less pronounced. In order to find out exactly how these differences may affect your case, contact Sherayzen Law Office direct.
Contact Sherayzen Law Office for Professional Help with 2012 OVDP
If you have undisclosed offshore accounts and/or income, contact Sherayzen Law Office immediately. Our experienced voluntary disclosure tax firm will conduct a thorough analysis of your case, explore all options available to you, help you draft all of the required tax documents, amend your tax returns, and offer rigorous professional representation of your interests in IRS negotiations.

### IRS Says Offshore Voluntary Disclosures Bring in More Than $5 Billion
The IRS announced on June 26, 2012, that its offshore voluntary disclosure programs have exceeded the $5 billion mark. "We continue to make strong progress in our international compliance efforts that help ensure honest taxpayers are not footing the bill for those hiding assets offshore," said IRS Commissioner Doug Shulman. "People are finding it tougher and tougher to keep their assets hidden in offshore accounts."
Shulman said the IRS offshore voluntary disclosure programs have so far resulted in the collection of more than $5 billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the first two programs. In addition, another 1,500 disclosures have been made under the new program announced in January.
For non-compliant U.S. taxpayers, it is important to understand that the IRS placed a major focus on international tax compliance. The voluntary disclosure programs form a part of a wider effort by the IRS to stop offshore tax evasion and ensure tax compliance. Other aspects of this push toward international compliance by the IRS include beefed up enforcement, criminal prosecution and implementation of third-party reporting through the Foreign Account Tax Compliance Act (FATCA). The new Form 8938, with its penalty structure, is a more profound and wider IRS equivalent of the famous FBAR form issued by the Department of the Treasury.
Contact Sherayzen Law Office for Legal Help With Voluntary Disclosure
If you have undisclosed foreign accounts and foreign income, contact Sherayzen Law Office immediately for legal help. Our experienced international tax firm will walk you through the process, analyze the facts of your case, provide you with voluntary disclosure options, and offer rigorous IRS representation.

### Taxability of Grants and Fellowship Amounts 
With the cost of higher education sky-rocketing, it may make financial sense for students and families to consider grants and fellowships.  But what about the tax consequences of receiving a grant or fellowship payment? Are grants and fellowship taxable?
The question depends upon whether the individual is a degree candidate.  A degree candidate can exclude from taxation grants and fellowships that pay for tuition and course-related fees, books, supplies and equipment necessary for courses (candidates must first meet the degree test under IRS rules).  Non-degree students, however, must report the entire amount of grants and fellowships as income received.
There are some limitations as well for degree candidates.  Degree candidates may not exclude any portion of a grant and/or fellowship received for purposes not described above, including room, board or similar expenses.  Additionally, in general, amounts received for grants or tuition reductions that pay for teaching, research or other services, required as a condition for receiving such amounts, may not be excluded from income.  This will be the case even if all degree candidates in a particular program are required to perform such services.
Finally, federal grants received by a candidate in return for the individual performing future work with the federal government, generally may not be excluded (however, there may be limited, specific exceptions under certain programs).

### 2011 Form TD F 90-22.1 (FBAR) is Due on June 30, 2012
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 form) must be filed with the DOT.
The FBAR must be filed by June 30 of each relevant year, including this year (2012). Thus, 2011 FBAR must be received by the DOT on June 30, 2012.  This rule is contrary to your regular tax returns where the mailing date determines whether the filing is timely.  There are no extensions available – the FBAR must be received by June 30 or it will be considered delinquent.
If the FBAR becomes delinquent, it may be subject to severe penalties.
Contact Sherayzen Law Office for FBAR Assistance
If you have any questions or concerns regarding whether you need to file the FBAR or how to prepare the form, please contact Sherayzen Law Office directly.  If you have not previous filed the FBARs and you were required to do so, contact our experienced international tax firm to schedule a consultation now.  We will assess your situation, determine your potential FBAR liability, explain the available options and guide you through this complex process of voluntary disclosure.

### Estimated Tax Payments are due on June 15, 2012
Estimated tax payments for the second quarter (April 1 -  May 31) of 2012 are due on June 15, 2012. The estimated tax payments should be made using Form 1040-ES. Note, if the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if it is made on the next business day.

### IRS 2013 Budget Proposal Emphasizes International Tax Enforcement
Every year, the President has to submit a budget request to U.S. Congress for federal agencies, including the Internal Revenue Service. In February of 2012, the IRS posted the following information regarding its budget.
Administration’s fiscal year (FY) 2013 budget request for the Internal Revenue Service is approximately $12.8 billion, a $944.5 million increase (8%) over the FY 2012 enacted level.
A significant portion of the increase from FY 2012 represents the Administration’s request to restore lost revenue resulting from reductions in IRS funding made over the past two years. This request is designed to provide the resources necessary to administer and enforce the current tax code, implement recent changes to the law to update the Code and serve the American taxpayer in a timely manner.
In FY 2011, the IRS collected $2.415 trillion in taxes, representing 92 percent of federal government receipts. The IRS processed more than 144.7 million individual returns during the 2011 filing season and issued almost 110 million refunds totaling $345 billion.
The IRS consistently achieves a high return on investment for its activities while running a fiscally disciplined operation. In FY 2013, the IRS expects to identify nearly $71 million in cost savings from increased use of electronic return filing, reductions in non-case related travel and streamlining operations.
Enforcement Program
IRS Enforcement Program is projected to receive the lion’s share of the increase. The FY 2013 budget includes $403 million in new IRS enforcement activities, which are expected to raise $1.48 billion in revenue annually at full performance, once new hires are fully trained and develop broader experience by FY 2015. This is a 4.3-to-1 return on investment. The return on investment is even greater when factoring in the deterrence value of these investments and other IRS enforcement programs, which is conservatively estimated to be at least three times the direct revenue impact.
The enforcement budget also includes $200 million in additional examination and collection programs that will generate more than $1.1 billion in additional annual enforcement revenue by FY 2015. Investments such as these in IRS enforcement programs are especially important to further the IRS’ mission of improving tax compliance.
International Tax Compliance Emphasized by the IRS
International tax compliance is specifically emphasized by the IRS. The IRS will continue to address offshore tax evasion by individuals through a combined “carrot and stick” approach – special offshore voluntary disclosure program and increased examinations and prosecutions.
International tax compliance will also concern domestic businesses operating abroad and foreign businesses owned by U.S. taxpayers. In order to ensure business entity compliance, the IRS will provide additional international technical specialists to increase coverage of complex international transactions.
Contact Sherayzen Law Office for Tax Help with International Tax Compliance Issues
If you have any issues regarding international tax compliance with U.S. laws and regulations, contact Sherayzen Law Office. Our experienced international tax firm will review the facts of your case, analyze the available options, propose a concrete plan of action with respect to your U.S. tax compliance issues, and implement this plan (including drafting and completing the necessary tax documents and forms).

### IRS Announces More Flexible Offer-in-Compromise Terms
The IRS announced today that it is expanding its "Fresh Start" initiative to provide for more flexible terms to its Offer in Compromise (OIC) program.  In general, an OIC is an agreement between a taxpayer and the IRS, settling the taxpayer’s tax liabilities for less than the full amount due (subject to compliance with the terms of the OIC).  The IRS noted that it will alter its focus on the financial analysis used to determine which taxpayers qualify for an OIC, as well as enable certain taxpayers to resolve their tax problems in as few as two years, as compared to four or five years in previous years.
Other announced changes for certain taxpayers include: 1) Revising the calculation for the taxpayer’s future income, 2) Allowing taxpayers to repay their student loans, 3) Allowing taxpayers to pay state and local delinquent taxes, and 4) Expanding the Allowable Living Expense allowance category and amount.
OIC's generally will not accepted if the IRS believes, after examining a taxpayer's income and assets to make a determination of the taxpayer’s reasonable collection potential, that the liability can be paid in full as a lump sum or a through installment payments.  Under the new "Fresh Start" changes, however, when the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months (down from four years), and two years of future income for offers paid in six to 24 months (down from five years.)
Under the new program, all OIC's must be fully paid within 24 months of the date of acceptance of the offer. (Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, have been revised to reflect the changes).
Business seeking to make a business OIC will also likely benefit from revisions to the program narrowing the parameters and clarifying when a dissipated asset will be included in the calculation of reasonable collection potential. Additionally, in general, calculation of reasonable collection potential will not include equity in income producing assets for on-going businesses.
Contact Sherayzen Law Office for Making a Business Offer in Compromise
Making an Offer in Compromise can be a potentially complex process for both individuals and businesses.  If you find yourself or your business in this situation, contact Sherayzen Law Office for legal help.

### Underpayment and Overpayment Interest Rates for the Third Quarter of 2012
On May 22, 2012, the IRS announced that the interest rates will remain the same for the calendar quarter beginning July 1, 2012.  The rates will be:
	three (3) percent for overpayments [two (2) percent in the case of a corporation];
	three (3) percent for underpayments;
	five (5) percent for large corporate underpayments; and
	one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.
Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.  The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.  The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### Search Warrants and IRS Summons Powers in Tax Crimes Cases
In a previous article, we explained the basics of criminal tax investigations. In this article, we will examine further two investigatory methods available to the IRS.
Search Warrants
IRS Special Agents may request for a search warrant in certain cases. In order for a search warrant to be granted, IRS Counsel generally must first approve of the warrant request. The agent must also demonstrate to a federal judge or magistrate that evidence of a tax crime will be found on the premises of the taxpayer during the search, and the warrant must describe with specificity the place that will be searched, and any documents or items that will be seized. An agent must also show that probable cause exists that a taxpayer has committed a tax crime for the search warrant to be valid under the Fourth Amendment to the US Constitution.
Search Warrants are generally limited to significant criminal tax cases, such as cases involving large sums of taxes owed, and substantial fraud.
Summons Powers
IRS agents also have broad summons powers, available in both criminal and civil cases, under Internal Revenue Code Section 7602. IRS agents, however, may not conduct unnecessary investigations (IRC Section 7605). When important documents in a tax crime case are held by third parties, IRS agents may also summon third parties in order to obtain testimony about such documents, but taxpayers are usually supposed to receive notice of the summons (IRC Section 7609).
Contact Sherayzen Law Office for Help With IRS Investigations
If you are facing a criminal investigation by the IRS, contact Sherayzen Law Office for legal help. Attorney Eugene Sherayzen will review the facts of the case, outline an aggressive ethical defense strategy, and rigorously represent your interests during the IRS investigation.

### Form 8938 Threshold Requirements
Starting tax year 2011, the IRS imposed a new tax reporting requirement on individual taxpayers who hold specified foreign financial assets with an aggregate value exceeding a relevant threshold. In its instructions to Form 8938, the IRS lists five main categories of taxpayers and assigns distinct reportable threshold to each category. Let’s explore each category.1. Unmarried Taxpayers Living in the United States
If the taxpayer is not married and lives in the United States, then the applicable reporting threshold is satisfied if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year, or more than $75,000 at any time during that tax year.
2. Married Taxpayers Filing a Joint Income Tax Return and Living in the United States
If the taxpayer is married and files joint income tax return with his spouse, then the reporting threshold is satisfied if the value of his specified foreign financial assets is either more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the tax year.
3. Married Taxpayers Filing Separate Income Tax Returns and Living in the United States
If the taxpayer is married and lives in the United States, but files a separate income tax return from his spouse, then the reporting threshold is satisfied if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Therefore, this category is very similar to that of the unmarried taxpayer who resides in the United States.
4. Married Taxpayers Living Abroad and Filing a Joint Income Tax return
If the taxpayer has a tax home is abroad (a special test applies to determine whether this is the case), satisfies the presence abroad test, and files a joint tax return with his spouse, then the reporting threshold is satisfied if the value of all specified foreign financial assets that you or your spouse owns is either more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the tax year.
5. Married Taxpayers Living Abroad and Filing Any Return Other Than Joint Tax Return
If the taxpayer has a tax home is abroad, satisfies the presence abroad test, and does not file a joint income tax return (instead he files a different type of tax return such as married filing separately or unmarried), then the reporting threshold is satisfied if the value of all specified foreign financial assets is either more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the tax year.
Presence Abroad Tests
There are two “presence abroad” tests for the purposes of categories 4 and 5 above.
First, the presence abroad test is satisfied if the taxpayer is a U.S. citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period of an entire tax year.
Second, the presence abroad test is satisfied if the taxpayer is a U.S. citizen or residence who is present in a foreign country or countries at least 330 full days during any period of twelve consecutive months that needs in the tax year being reported.
Contact Sherayzen Law Office For Help With IRS Form 8938
The reporting requirements under Form 8938 can be very complex. Moreover, in case of prior non-compliance with the FBAR or other reporting requirements (Form 5471, 8865, 8891, et cetera), filing of Form 8938 should often be done in conjunction with a voluntary disclosure process in order to reduce or avoid additional tax penalties.
For legal advice with respect to Form 8938, determination whether its requirements apply to you, help with completing the form properly, and coordination of the Form 8938 filing with other U.S. tax compliance as part of the voluntary disclosure process, contact Sherayzen Law Office. Our experienced tax compliance firm will help you resolve any issues related to Form 8938 and guide you toward proper compliance with its requirements.

### Final Regulations and Guidance Issued on Reporting Interest Paid to Nonresident Aliens under FATCA
The Foreign Account Tax Compliance Act (FATCA), was enacted in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act, and mandates new reporting requirements, and amends existing IRC Sections.  Recently, the IRS issued final regulations and guidance regarding the reporting interest paid to nonresident aliens by certain financial institutions, as well as revenue procedure specifying foreign countries with which the U.S. has a information exchange agreement.  Nonresident aliens should be especially aware of these new rules, as many individuals will likely be affected by these rules.
TD 9584 (Guidance on Reporting Interest Paid to Nonresident Aliens), effective April 19, 2012, has the final regulations concerning the reporting requirements for commercial banks, savings institutions, credit unions, securities brokerages, and insurance companies that pay interest on deposits.
In general, beginning with interest payments made on, or after, January 1, 2013, covered financial institutions will be required to report deposit interest paid to certain nonresident alien individuals.  The IRS may then exchange information relating to tax enforcement with the officials of foreign countries.  Under the new Treas. Reg. §§ 1.6049-4(b)(5) and 1.6049-8(a), interest paid to nonresident aliens must be reported if the amount in aggregate is $10 or more.
The IRS views this ability to share such information as important to its goal of gathering information from other jurisdictions about US taxpayers who may be evading US tax by hiding assets offshore.  Additionally, the IRS enacted the new reporting requirements to limit US taxpayers with US deposit accounts from falsely claiming to be nonresident aliens in order to avoid paying US taxes on interest they receive from deposits.

### Taxation of Prizes and Awards
A lot of taxpayers are still unaware that awards and prizes may be potentially subject to U.S. federal income taxation.
In general, prizes and awards (other than certain types of fellowship grants and scholarships) should be included in gross income and subject to federal taxation.
Awards for religious, charitable, scientific, educational, artistic, literary or civic achievement are excluded from gross income only if the award is transferred unused by the payor to a governmental unit or a tax-exempt organization (charitable, religious, or educational) designed by the recipient.
The recipient of the award must be selected for the contest or proceeding without any of his action (or any action on his behalf).  Moreover, the recipient cannot be required to render substantial future services as a condition to receiving the prize or award.
Employee achievement awards are excludable from gross income only to the extent that the cost of the award is deductible by the employer.  It is important the awards do not represent disguised compensation.  The amounts subject to exclusion from gross income cannot be more than $400 for non-qualified awards and $1,600 for qualified awards (see IRC Sections 74 and 274(j) for further details).

### Taxation of Restricted Stock Units
Restricted Stock Units (RSUs) have become prominent in the news recently as a result of the Facebook IPO. Many of Facebook's employees received RSUs in addition to their wages, and will soon be paying a heavy tax bill. Facebook has estimated that its employees' total tax liability will be approximately $4 Billion dollars. In fact, many startup companies, especially tech companies, are turning towards RSUs to reward their employees. Therefore, if you are an employee of such a company, you may want to read about the basics of RSUs, and how they are taxed in this article.
RSUs
In general, RSUs differ from traditional stock options in that RSUs are only transferred when the certain conditions are met, and the shares have vested. Whereas stock options may be taxed when a holder exercises or sells the options, RSUs are taxable (as explained below) once they vest. This means of course, that employees may face a significant tax once the RSUs vest, even if they haven't actually sold a single share of the stock.
Taxation of RSUs
Once RSUs initially vest, the shares are not eligible to be treated as capital gains under the Internal Revenue Code. Instead, RSUs are treated as compensation, to be taxed as ordinary income. Additionally, no section 83(b) election will be available.
The amount of ordinary income to be reported is the fair market value price of the stock as of the vesting date times the numbers of shares vested, minus the original purchase or exercise price, if any. Additionally, because of the treatment of the vesting of RSUs as compensation income, withholding taxes may also apply. For US employees, this means that Federal and any applicable state taxes, as well as Social Security and Medicare taxes, will be withheld (special rules may apply for non-US taxpayers, depending upon foreign taxation regimes).
Once a shareholder does sell the stock after the vesting date, capital gain or loss treatment will then be available. The capital gain or loss will be the difference between the fair market price on the date of vesting and the final sales price of the stock.
RSUs and US Employees of Foreign Subsidiaries
US taxpayers working abroad for foreign subsidiaries of U.S.-based multinational companies face special obstacles. Unfortunately, in the past, despite having large compliance departments, some companies failed to fully comply with the RSU reporting requirements regarding U.S. taxpayers employed by these companies’ foreign subsidiaries.
This may result in placing additional burden on these employees, including going back and amending their prior tax returns to properly reflect the tax liability that resulted from RSUs. Therefore, employees in this situation should be especially concerned regarding the proper treatment of RSUs by their employer.
Contact Sherayzen Law Office for Questions Regarding RSUs
If you have any questions about the taxation of RSUs, or other stock option plans, or if you seek to minimize your taxation through proper tax planning, you should contact Sherayzen Law Office today.

### IRS Investigation of Tax Crimes
This article will explain the basics of criminal tax investigations. It is extremely important if you find yourself under such an investigation, or believe that the potential for a criminal investigation exists in your case, that you obtain an experienced attorney to represent you.
Internal Revenue Code (IRC) Section 7608(b) grants the right to the criminal investigators of the IRS' Intelligence Division to investigate tax crimes. There are various means by which the IRS may decide to begin a criminal investigation, including audits that indicate potential fraud, informant's tips, or other credible reports, such as newspaper articles about fraudulent behavior. An IRS agent will begin to collect more information at this point as part of the procedures of the Internal Revenue Manual in order to establish a "firm indication of fraud." Once such an indication can be demonstrated, the taxpayer's civil audit will be suspended, and referred to the Criminal Investigation Division (CID).
The Criminal Investigation Division (CID) of the IRS is empowered under IRC Sections 7622 and 7602 to examine records, books and other supporting documents regarding information contained in tax returns, to take testimony and to administer oaths.
Taxpayers and their representatives will not be informed of the reasons for the suspension once their case is referred to the CID. It is thus crucial that taxpayers be careful regarding any statements they may make to an IRS agent, as the potential exists for such information to be used against them in a criminal proceeding.
After a case is referred to the CID, it will be reviewed by the CID Chief. The Chief will then assign a Special Agent to investigate if it is felt that the case clearly indicates possible fraud. The Special Agent, accompanied by another agent serving as a witness, may then contact the taxpayer, without prior notice. The agent is required to give the taxpayer a Miranda-type warning. An agent may also, in certain circumstances, obtain a search warrant, as well as the summons power under IRC Section 7602.
If an agent determines after the investigation that a prosecution should be in order, the case will then be forwarded to the IRS attorneys. Under the criminal standard of proof, it must be demonstrated that the evidence against the taxpayer is sufficient to prove guilt beyond a reasonable doubt, and that it is a reasonable probability that the taxpayer will be convicted of the crimes alleged.
Once the case is transferred, the taxpayer will then usually have the opportunity to present any defenses at a special conference with the IRS. If the IRS counsel agrees that the taxpayer should be prosecuted after the evidence and arguments presented at the conference, the case will then be referred to the Tax Division of the Department of Justice for review. If the DOJ attorney decides that the taxpayer should be prosecuted, the case may be then transferred to the U.S. Attorney (the DOJ attorney may also give the U.S. Attorney discretion of whether to prosecute, or not, in certain cases). The U.S. attorney may in some circumstances receive the case with an authorization for a grand jury investigation to be conducted.
As can be seen from the information above, criminal tax investigations are a serious matter. There are numerous potential pitfalls that may arise at any step of a tax investigation that may lead a taxpayer to ultimately wind up being convicted for a tax crime.
The taxpayers are advised to obtain experienced tax attorneys to represent them if they believe, at any point in their civil investigation that the potential for a criminal investigation exists.
Contact Sherayzen Law Office for Legal Advice Regarding Criminal Tax Matters
If you believe that you may be subject to a criminal IRS investigation, contact Sherayzen Law Office. Our experienced tax law firm will analyze the facts of your case, offer defense options and rigorously represent your interests during the IRS investigation and any court proceedings.

### Deductibility of Meals on Schedule C: General Overview
Virtually every business incurs some type of meal-related expenses. A question arises as to whether such meals are deductible and to what extent. This article provides a general overview of this topic; remember, though, that the deductibility of meals is highly fact-dependent and this article only provides an educational background to this issue, NOT a legal advice.
General Rule
Generally, expenses incurred with respect to the entertainment-related meals are not deductible, unless the taxpayer is able to establish that the expense is directly related to the active conduct of a business or trade.
However, if a meal expense directly precedes or follows a bona fide business discussion (including a convention meeting), then it is deductible if it is established that the expense was associated with the active conduct of a trade or business. The taxpayers needs to be able to establish that this is the case.
Restrictions on the General Rule
The Internal Revenue Code (IRC) places two broad restrictions on the general rule. First, if neither the taxpayer nor the taxpayer’s employee is present at the meal, then, generally, meal expenses are not deductible.
Second, a meals deduction is not allowed where the expense is lavish or extravagant under the circumstances. This topic has been the subject of controversy for some time now as large corporations have engaged in entertaining their important guests in a manner that the IRS may sometime classify as “lavish.”
It is important to point out that these restriction would not apply to certain exceptions to the general rule.
Exceptions to the General Rule
IRC Section 274(e) specifically provides that some exceptions are not subject to the general rule described above and are deductible as ordinary and necessary expenses (as long as they are properly substantiated). The exceptions are:
a. Food and beverages furnished on the business premises primarily to the taxpayer’s employees;
b. Expenses for services, goods, and facilities that are treated as compensation or wages for withholding tax purposes. If the recipient is a specified individual, then the employer’s deduction cannot exceed the amount of compensation reported. IRC Section 274(e)(2)(B) defines who is a “specified individual”; here, it is sufficient to state that it generally means an officer, director, ten-percent shareholder or a related person;
c. Reimbursed expenses: “expenses paid or incurred by the taxpayer, in connection with the performance by him of services for another person (whether or not such other person is his employer), under a reimbursement or other expense allowance arrangement with such other person”. IRC Section 274(e)(3). However, this exception applies only if: (1) services are performed for an employer and the employer has not treated such expenses as wages subject to withholding; or (2) where the services are performed for a person other than an employer and the taxpayer accounts to such person;
d. Expenses for recreational, social, or similar activities (including facilities therefor) primarily for the benefit of employees (other than employees who are highly compensated employees (within the meaning of section 414(q)). See IRC Section 274(e)(4) for further details on treatment of shareholders. The most common example of this exception are company picnics;
e. Expenses incurred by a taxpayer which are directly related to business meetings of his employees, stockholders, agents, or directors. IRC Section 274(e)(5);
f. Expenses directly related and necessary to attendance at a business meeting or convention of any organization described in section 501(c)(6) (relating to business leagues, chambers of commerce, real estate boards, and boards of trade) and exempt from taxation under section 501(a). IRC Section 274(e)(6);
g. Expenses for goods, services, and facilities made available by the taxpayer to the general public. IRC Section 274(e)(7);
h. Expenses for goods or services (including the use of facilities) which are sold by the taxpayer in a bona fide transaction for an adequate and full consideration in money or money's worth. IRC Section 274(e)(8); and
i. Expenses paid or incurred by the taxpayer for goods, services, and facilities furnished to non-employees as entertainment, amusement, or recreation to the extent that the expenses are includible in the gross income of a recipient and reported on a Form 1099-MISC by the taxpayer.
It is very important to note that exceptions a, e, and f maybe subject to the “50-Percent Limitation” rule.
50-Percent Limitation Rule
Generally, a taxpayer can only deduct 50 percent of the allowable meal and entertainment expenses, including such expenses incurred in the course of travel. The process in calculating the 50-percent limitation involves, first, the calculation of the allowable deductions through the process of exclusion of non-allowable deductions (e.g. lavish portion of the meal) and addition of related expenses (e.g. taxes, tips, room rental, and parking fees) and, then, the 50-percent rule applies. Note that the allowable deductions for transportation costs to and form a business meal are not reduced.
The 50-percent rule maybe subject to various statutory modifications based on profession or the nature of activity. For example, the transportation workers may deduct 80 percent. There are also complications with respect to a leasing company and independent contractors.
Exceptions to the 50-Percent Limitation Rule
The 50-Percent Limitation rule is riddled with exceptions.
First, exceptions b, c, d, g, h and i described above (see Exceptions to General Rule section) are not subject to the 50-Percent Limitation rule.
Second, the food expenses classified as de minimis fringe benefits and excludable from the recipient’s gross income are also not subject to the 50-Percent limitation rule.
Third, there are somewhat complicated exceptions related to the tickets to a sporting events.
Fourth, employee’s meal expenses incurred while moving are not subject to the 50-Percent Limitations rule if they are reimbursed by the employer and includible in the employee’s gross income.
There are various other exceptions to the 50-Percent Limitations rule such as food and beverages provided to employees on certain vessels, oil or gas platforms, drilling rigs, and so on.
Conclusion
This article provides a general review of the rules regarding deductibility of meal on Schedule C. However, this is only an educational article and it does NOT offer a tax or legal advice. You should see a tax professional regarding your specific facts.

### Non-Deductible Taxes: General Summary
The Internal Revenue Code (IRC) permits individual and business taxpayers to deduct various types of taxes imposed by some tax authorities. However, some types of taxes are not deductible under the IRC.
Here is a brief summary of most common non-deductible taxes:
1. Generally, federal income taxes, including social security and railroad retirement taxes paid by employees, are not deductible either as taxes or as business businesses. This also include one-half of the self-employment tax imposed by the IRC Section 1401;
2. Federal war profits and excess profits taxes;
3. Estate, inheritance, legacy, succession, and gift taxes;
4. Income, war profits and excess profits taxes imposed by a foreign government (or even a U.S. possession) if the taxpayer decides to take a foreign tax credit for these taxes;
5. Taxes on real property that must be treated as imposed on another taxpayer because of the apportionment between buyer and seller;
6. Certain fees and taxes under the Patient Protection and Affordable Care Act (P.L. 111-148). For example, annual fee imposed on drug manufacturers and importers for U.S. branded prescription drug sales after 2010; the 2.3 percent excise tax imposed on manufacturers, producers and importers of certain medical devices after 2012; and the annual fee imposed on certain health insurance providers after 2013 are all non-deductible taxes; and
7. Certain other taxes, such as certain additions to taxes imposed on public charities, private foundations, qualified pension plans, REITs (real estate investment trusts), stock compensation of insiders in expatriated corporations, golden parachute payments, greenmail, and other taxes.
Contact Sherayzen Law Office for Tax Planning Advice
If you need a tax advice regarding structuring your business transactions in a tax-responsible way or if you need an advice regarding deductibility of your taxes, contact Sherayzen Law Office. Our experienced tax firm will analyze your situation and propose various tax plans that will strive to reduce the risk of unfavorable treatment of your business transactions under the IRC.

### Controlled Foreign Corporations: Subpart F History through 1962
The purpose of the article is to provide a brief historical overview of the circumstances leading up to the enactment of the famous “Subpart F” rules through the year 1962.
Subpart F of Subtitle A, Chapter 1, Subchapter N, Part III of the Internal Revenue Code (IRC Sections 951-965) was first enacted by the U.S. Congress in 1962 in response to the general perception that the then current tax rules as applicable to foreign corporations provided a major tax loophole for U.S. taxpayers to defer the U.S. tax on their foreign-source income as long as this income was earned by foreign corporations.
Prior to Subpart F, the general Code rules allowed U.S. taxpayers to avoid any U.S. tax on the earnings of a foreign corporation owned by these U.S. taxpayers, at least until those earnings were actually distributed or until the disposition of the stock of the foreign corporation. Thus, a U.S. taxpayer could potentially defer U.S. taxation for an indefinite period of time on all profits earned by the foreign corporation by retaining the earnings in the foreign corporation (or, using the earnings in a way other than a taxable distribution, such as a loan or a lease of property).
This situation was also combined with the favorable tax gain rules on the disposition of stock in a corporation. This allowed a U.S. shareholder to pay only a capital gains rate on income earned by a foreign corporation (rather than taxed as ordinary income) through a disposition of appreciated stock in a foreign corporation (if the foreign corporation retained its earnings).
In fact, the only effective limitation on this freedom were the special rules regarding personal holding company taxation. The personal holding company provisions were enacted by Congress in 1934 (these rules are repealed as of this writing) to limit, through imposition of a penalty tax at the corporate level, the practice of transferring passive assets to a corporation, thereby avoiding the high individual income tax rates.
The personal holding company rules, however, originally applied only to U.S. companies and were not effective in a situation where a U.S. person would transfer passive assets to a foreign corporation (because the foreign corporation would be outside the U.S. jurisdiction). This loophole was immediately recognized and utilized with the effect that U.S. passive assets not only escaped the U.S. individual income tax but also U.S. corporate taxes.
In 1937, Congress acted against this loophole by enacting foreign personal holding company (FPHC) rules. There was a key difference between the FPHC and regular personal holding company rules – the regular rules imposed a penalty tax at the corporate level, whereas the foreign rules taxed certain U.S. shareholders directly on the undistributed foreign personal holding company income of such corporations.
Despite the appearances, however, the FPHC mechanism contained significant flaws. First, the rules applied only in special circumstances where more than 50% of a foreign corporation was owned by five or fewer individuals and where more than 50% (60% initially) of the corporation’s gross income was in the form of foreign personal holding company FPHC income. Second, FPHC rules applied only to passive types of income, but not where a foreign corporation also had substantial business income. Third, the FPHC provisions did not apply to US corporations with wholly-owned subsidiaries.
Due to the inadequacy of the FPHC regime and the evidence of significant outflow of U.S. capital overseas in the form of foreign investment (combined with favorable tax treatment of certain countries encouraging this trend), the Kennedy Administration presented to Congress a proposal to enact subpart F rules.
In 1961, the Administration grouped the tax problems associated with improper foreign investment into two categories – tax deferral and tax haven deferral. The first category included tax offenses of U.S. corporation such as using foreign subsidiaries to indefinitely postpone U.S. taxation of foreign income of a foreign subsidiary by reinvesting the foreign earnings in other foreign investments or by establishing a parent-subsidiary loan mechanism (under the then current rules, this arrangement would allow U.S. parent company to obtain foreign subsidiary’s case without triggering U.S. taxation). The second category involved an arrangement where a U.S. corporation would organized a foreign subsidiary in a tax-haven country (at that time, Switzerland, Bahamas or Panama) in order to receive passive income virtually tax-free or set up a base company for sales of products throughout the world without any income being subject to U.S. taxes. The latter problem was exacerbated by various parent-subsidiary mechanisms such as transfer pricing, fee shifting, and so on.
The recommendations of the Kennedy Administration were far-reaching and would virtually eliminate tax deferral practices by taxing U.S. companies (as well as individual shareholders of a closely held corporations) on their current share of the undistributed profits realized in a given year by subsidiary corporations in the developed countries. The original proposal also strived to eliminate the possible tax haven mechanisms throughout the world, including underdeveloped countries.
The Congress, however, was not prepared to go this far in 1962. The subpart F rules that were enacted that year fell short of the Administration’s proposal. The rules contained various exceptions and were not as effective in stopping tax deferral.
It should be noted, however, that numerous changes were enacted by Congress since 1962 with the main effect of widening the effect of the subpart F rules.
In a subsequent article, I will discuss the 1962 rules and how these were amended since then.

### Foreign Qualified Dividend Income
In U.S. tax law, classification of income plays a very important role in determining your tax liability. One of the most important classifications is whether you have qualified dividend income eligible reduced tax rates applicable to certain capital gains – in most case, this means 15% tax rate.
As with almost every issue in U.S. law, the qualified dividend classification is complicated if you receive foreign dividends. In this article, I will discuss the IRS rules on determining whether your foreign dividends may be considered “qualified dividend income”.
Qualified Dividend Income
The concept of “qualified dividend income” comes from the Jobs and Growth Tax Relief Reconciliation Act of 2003 (P.L. 108-27, 117 Stat. 752), which was enacted on May 28, 2003.
Prior to the Act, section 1(h)(1) of the Internal Revenue Code (the “IRC”) generally provided that a taxpayer’s “net capital gain” for any taxable year will be subject to a maximum tax rate of 15 percent (or 5 percent in the case of certain taxpayers). The new 2003 Act added section 1(h)(11), which provides that net capital gain for purposes of section 1(h) means net capital gain (determined without regard to section 1(h)(11)) increased by “qualified dividend income.”
The law clearly defines this concept of qualified dividend income in Section 1(h)(11)(B)(I). Qualified dividend income means dividends received during the taxable year from domestic corporations and “qualified foreign corporations.”.
Qualified Foreign Corporation
IRC Section 1(h)(11)(C)(i) defines the concept of qualified foreign corporation as (subject to certain exceptions) any foreign corporation that is either (i) incorporated in a possession of the United States, or (ii) eligible for benefits of a comprehensive income tax treaty with the United States that the Secretary determines is satisfactory for purposes of this provision and that includes an exchange of information program (the so-called “treaty test”).
A foreign corporation that does not satisfy either of these two tests is treated as a qualified foreign corporation with respect to any dividend paid by such corporation if the stock with respect to which such dividend is paid is readily tradable on an established securities market in the United States. Section 1(h)(11)(C)(ii) (see Notice 2003-71, 2003-2 C.B. 922, for the definition, for taxable years beginning on or after January 1, 2003, of “readily tradable on an established securities market in the United States”).
It is important to remember that a dividend from a qualified foreign corporation is also subject to the various limitations in section 1(h)(11). For example, a shareholder receiving a dividend from a qualified foreign corporation must satisfy the holding period requirements of section 1(h)(11)(B)(iii).
Interaction Between PFICs and Section 1(h)(11)
The current law is clear that a qualified foreign corporation does not include any foreign corporation that for the taxable year of the corporation in which the dividend was paid, or the preceding taxable year, is a passive foreign investment company (“PFIC”) as defined in section 1297. See IRC section 1(h)(11)(C)(iii).
Thus, PFIC dividends are not eligible for IRC Section 1(h)(11) favorable treatment. Rather, they will be treated according to the complex PFIC rules described elsewhere in the IRC.
The Treaty Test – Key Threshold
As stated above, subject to certain limitations and exceptions, foreign dividends are likely to be treated as qualified dividend income if a foreign corporation is eligible under the “treaty test”.
A treaty test is passed if the treaty is on the list of the U.S. income tax treaties that met the IRC requirements. The IRS published the first list of such treaties on October 20, 2003 (IRS Notice 2003-69, 2003-2 C.B. 851). Since then, the list has been periodically.
The most recent notice is IRS Notice 2011-64. The new additions since 2006 have been the treaty with Bulgaria (which entered into force on December 15, 2008) and the treaty with Malta (which entered into force on November 23, 2010).
Three U.S. income tax treaties do not meet the requirements of section 1(h)(11)(C)(i)(II). They are the U.S.-U.S.S.R. income tax treaty (which was signed on June 20, 1973, and currently applies to certain former Soviet Republics), and the tax treaties with Bermuda and the Netherlands Antilles.
There are also other requirements under the treaty test. As stated above, in order to be treated as a qualified foreign corporation under the treaty test, a foreign corporation must be eligible for benefits of one of the approved U.S. income tax treaties. Accordingly, the foreign corporation must be a resident within the meaning of such term under the relevant treaty and must satisfy any other requirements of that treaty, including the requirements under any applicable limitation on benefits provision. For purposes of determining whether it satisfies these requirements, a foreign corporation is treated as though it were claiming treaty benefits, even if it does not derive income from sources within the United States. See H.R. Conf. Rep. No. 108-126, at 42 (2003) (stating that a company will be treated as eligible for treaty benefits if it “would qualify” for benefits under the treaty).
Effective Date
It is always important to check the effective dates for each of the treaty for determining when the eligibility for the preferential IRC Section 1(h)(11) arises.
As of the time of this article, IRS Notice 2011-64 is effective with respect to Bulgaria for dividends paid on or after December 15, 2008; Malta – on or after November 23, 2010; Bangladesh – August 7, 2006; Barbados – December 20, 2004; Sri Lanka – July 12, 2004; all other US income tax treaties listed in the Notice – after December 31, 2002.
List of Eligible Treaties
For the reader’s convenience, I listed below all of the U.S. Income Tax Treaties that satisfied the requirements of the IRC Section 1(h)(11)(C)(i)(II) as described in the Appendix to the IRS Notice 2011-64.
Australia
Austria
Bangladesh
Barbados
Belgium
Bulgaria
Canada
China
Cyprus
Czech Republic
Denmark
Egypt
Estonia
Finland
France
Germany
Greece
Hungary
Iceland
India
Indonesia
Ireland
Israel
Italy
Jamaica
Japan
Kazakhstan
Korea
Latvia
Lithuania
Luxembourg
Malta
Mexico
Morocco
Netherlands
New Zealand
Norway
Pakistan
Philippines
Poland
Portugal
Romania
Russian Federation
Slovak Republic
Slovenia
South Africa
Spain
Sri Lanka
Sweden
Switzerland
Thailand
Trinidad and Tobago
Tunisia
Turkey
Ukraine
United Kingdom
Venezuela
Contact Sherayzen Law Office for International Tax Planning
If you have any questions regarding international tax planning, contact Sherayzen Law Office.
Our experienced international tax firm will thoroughly analyze the facts of your case and create an ethical efficient tax plan applicable to your fact situation under the Internal Revenue Code.

### AMT Exemption Amounts for the Tax Year 2011
The Alternative Minimum Tax (the “AMT”) attempts to ensure that anyone who benefits from certain tax advantages pays at least a minimum amount of tax. Congress created the AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax. The AMT provides an alternative set of rules for calculating your income tax. In general, these rules should determine the minimum amount of tax that someone with your income should be required to pay. If your regular tax falls below this minimum, you have to make up the difference by paying alternative minimum tax.
Unfortunately, because the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.
You may have to pay the AMT if your taxable income for regular tax purposes, plus any adjustments and preference items that apply to you, are more than the AMT exemption amount. Congress sets the AMT exemption amounts are by law for each filing status.
For tax year 2011, Congress raised the AMT exemption amounts to the following levels:
$74,450 for a married couple filing a joint return and qualifying widows and widowers;
$48,450 for singles and heads of household;
$37,225 for a married person filing separately.
Moreover, the minimum AMT exemption amount for a child whose unearned income is taxed at the parents' tax rate has increased to $6,800 for 2011.
Contact Sherayzen Law Office for Tax Planning Advice
If you are potentially facing the AMT, contact Sherayzen Law Office for tax planning advice. Our experienced tax firm will review the facts of your case and identify the available strategies to make sure that you do not overpay federal taxes.

### IRS Announces Procedures Adjusted for APA and Certain Competent Authority Requests 
The Internal Revenue Service, Deputy Commissioner (International), Large Business and International Division ("LB&I"), announced certain organizational and administrative changes and transitional procedures in connection with the creation of the Advance Pricing and Mutual Agreement ("APMA") program.
Prior to February 26, 2012, the Advance Pricing Agreement ("APA") program was part of the Office of the Associate Chief Counsel (International), and the functions of the U.S. Competent Authority were generally exercised by the office of the Director, Competent Authority & International Coordination within the LB&I Division of the IRS. Effective February 26, 2012, the APA program and those Competent Authority functions (including mutual agreement procedures) related to transfer pricing and other allocation issues, as well as determinations of permanent establishment status, are realigned and consolidated into APMA, a single program within LB&I.
The Director of APMA reports to the Director, Transfer Pricing Operations. Other Competent Authority functions are the responsibility of a new LB&I Treaty Assistance and Interpretation team in the office of the Assistant Deputy Commissioner (International), LB&I.
Pursuant to this realignment, the administration of requests for Competent Authority assistance is shared by two separate units within LB&I. Requests for APAs or regarding other transfer pricing, permanent establishment and allocation issues are addressed by APMA. Competent Authority requests regarding non-allocation issues are addressed by the LB&I Treaty Assistance and Interpretation team.
The IRS intends to revise the existing published guidance with respect to requests for APAs and Competent Authority assistance. Before issuing such updated guidance, the IRS will seek public comment.
Pending issuance of such guidance, taxpayers should continue to follow and rely on Rev. Proc. 2006-9, 2006-1 C.B. 278, as modified by Rev. Proc. 2008-31, 2008-1 C.B. 1133 with respect to requests for APAs and Rev. Proc. 2006-54, 2006-2 C.B. 1035 with respect to requests for Competent Authority assistance, except as follows:
1. References to the APA program should be understood to refer to APMA.
2. For determinations regarding limitation on benefits, the user fee under Rev. Proc. 2006-54, §14.02 is $27,500, effective for requests received after Feb. 4, 2012. See Rev. Proc. 2012-1 (Appendix A), 2012-1 I.R.B. 1.
3. Taxpayers should send APA requests and requests for Competent Authority assistance to the following address:
Deputy Commissioner (International)
Large Business and International Division
Internal Revenue Service
1111 Constitution Avenue, N.W.
Routing: MA2-209
Washington, D.C. 20224
Attention: Katina Cooper

### Official Treasury Currency Conversion Rates of December 31, 2011
The U.S. Department of Treasure recently published its official currency conversion rates for December 31, 2011 (they are called “Treasury’s Financial Management Service rates”). These rates are important for many reasons, but one reason especially stands out for persons who are required to file the FBARs.
The latest (January 2012) FBAR instructions require the use of Treasury’s Financial Management Service rates, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:
In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury's Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
For this reason, the international tax attorneys take their time to compile these rates with all updates. For your convenience, Sherayzen Law Office provides a table of the official Treasury currency conversion rates below (keep in mind, you still need to refer to the official website for any updates).
Country
Currency
Foreign Currency to $1.00
Afghanistan
Afghani
48.2000
Albania
Lek
105.3700
Algeria
Dinar
75.0360
Angola
Kwanza
95.0000
Antigua-Barbuda
East Caribbean Dollar
2.7000
Argentina
Peso
4.2880
Armenia
Dram
380.0000
Australia
Dollar
0.9840
Austria
Euro
0.7650
Azerbaijan
Manat
0.8000
Bahamas
Dollar
1.0000
Bahrain
Dinar
0.3770
Bangladesh
Taka
79.0000
Barbados
Dollar
2.0200
Belarus
Ruble
8300.0000
Belgium
Euro
0.7650
Belize
Dollar
2.0000
Benin
CFA Franc
501.7300
Bermuda
Dollar
1.0000
Bolivia
Boliviano
6.8600
Bosnia-Hercegovina
Marka
1.4960
Botwana
Pula
7.4850
Brazil
Real
1.8500
Brunei
Dollar
1.2920
Bulgaria
Lev
1.4960
Burkina Faso
CFA Franc
501.7300
Burma
Kyat
450.0000
Burundi
Franc
1300.0000
Cambodia (Khmer)
Riel
4103.0000
Cameroon
CFA Franc
501.7300
Canada
Dollar
1.0180
Cape Verde
Escudo
85.5520
Cayman Islands
Dollar
0.8200
Central African Republic
CFA Franc
501.7300
Chad
CFA Franc
501.7300
Chile
Peso
519.4500
China
Renminbi
6.3360
Colombia
Peso
1923.5000
Comoros
Franc
361.3500
Congo
CFA Franc
[refer to FMS website]
Costa Rica
Colon
501.2000
Cote D'Ivoire
CFA Franc
501.7300
Croatia
Kuna
5.6500
Cuba
Peso
1.0000
Cyprus
Euro
0.7650
Czech Republic
Koruna
19.2610
Democratic Republic of Congo
Congolese Franc
900.0000
Denmark
Krone
5.6860
Djibouti
Franc
177.0000
Dominican Republic
Peso
38.3700
East Timor
Dili
1.0000
Ecuador
Dolares
1.0000
Egypt
Pound
6.0160
El Salvador
Dolares
1.0000
Equatorial Guinea
CFA Franc
501.7300
Eritrea
Nakfa
15.0000
Estonia
Kroon
11.6970
Ethiopia
Birr
17.2100
Euro Zone
EURO
0.7650
Fiji
Dollar
1.7850
Finland
Euro
0.7650
France
Euro
0.7650
Gabon
CFA Franc
501.7300
Gambia
Dalasi
30.0000
Georgia
Lari
1.6600
Germany FRG
Euro
0.7650
Ghana
Cedi
1.6370
Greece
Euro
0.7650
Grenada
East Carribean Dollar
2.7000
Guatemala
Quentzel
7.8240
Guinea
Franc
7118.0000
Guinea Bissau
CFA Franc
501.7300
Guyana
Dollar
202.0000
Haiti
Gourde
38.5000
Honduras
Lempira
18.9580
Hong Kong
Dollar
7.7760
Hungary
Forint
234.3600
Iceland
Krona
122.2700
India
Rupee
52.2500
Indonesia
Rupiah
9060.0000
Iran
Rial
8229.0000
Iraq
Dinar
1170.0000
Ireland
Euro
0.7650
Israel
Shekel
3.7730
Italy
Euro
0.7650
Jamaica
Dollar
86.1000
Japan
Yen
78.0000
Jordan
Dinar
0.7080
Kazakhstan
Tenge
148.0000
Kenya
Shilling
83.5500
Korea
Won
1150.1500
Kuwait
Dinar
0.2780
Kyrgyzstan
Som
46.5000
Laos
Kip
8001.0000
Latvia
Lats
0.5320
Lebanon
Pound
1500.0000
Lesotho
South African Rand
8.1420
Liberia
Dollar
49.0000
Libya
Dinar
1.1420
Lithuania
Litas
2.6410
Luxembourg
Euro
0.7650
Macao
Mop
8.0000
Macedonia FYROM
Denar
46.4000
Madagascar
Aria
2162.1400
Malawi
Kwacha
168.0000
Malaysia
Ringgit
3.1550
Mali
CFA Franc
501.7300
Malta
Euro
0.7650
Marshall Islands
Dollar
1.0000
Martinique
Euro
0.7650
Mauritania
Ouguiya
290.0000
Mauritius
Rupee
29.2000
Mexico
New Peso
13.7850
Micronesia
Dollar
1.0000
Moldova
Leu
11.6820
Mongolia
Tugrik
1377.5000
Montenegro
Euro
0.7650
Morocco
Dirham
8.4840
Mozambique
Metical
29.9500
Namibia
Dollar
8.1420
Nepal
Rupee
84.0500
Netherlands
Euro
0.7650
Netherlands Antilles
Guilder
1.7800
New Zealand
Dollar
1.2910
Nicaragua
Cordoba
22.9800
Niger
CFA Franc
501.7300
Nigeria
Naira
163.6500
Norway
Krone
5.9370
Oman
Rial
0.3850
Pakistan
Rupee
89.1600
Palau
Dollar
1.0000
Panama
Balboa
1.0000
Papua New Guinea
Kina
2.0620
Paraguay
Guarani
4360.0000
Peru
Inti
0.0000
Peru
Nuevo Sol
2.6900
Philippines
Peso
43.4700
Poland
Zloty
3.3880
Portugal
Euro
0.7650
Qatar
Riyal
3.6400
Romania
Leu
3.2800
Russia
Ruble
31.1710
Rwanda
Franc
601.1500
Sao Tome & Principe
Dobras
18790.5880
Saudi Arabia
Riyal
3.7500
Senegal
CFA Franc
501.7300
Serbia
Dinar
78.8500
Seychelles
Rupee
13.3560
Sierra Leone
Leone
4381.0000
Singapore
Dollar
1.2900
Slovak
Euro
0.7650
Slovenia
Euro
0.7650
Solomon Islands
Dollar
6.8970
South Africa
Rand
8.1420
Spain
Euro
0.7650
Sri Lanka
Rupee
113.8500
St Lucia
East Carribean Dollar
2.7000
Sudan
Pound
2.9000
Suriname
Guilder
3.3500
Swaziland
Lilangeni
8.1420
Sweden
Krona
6.8490
Switzerland
Franc
0.9350
Syria
Pound
55.0000
Taiwan
Dollar
30.2730
Tajikistan
Somoni
4.7580
Tanzania
Shilling
1585.0000
Thailand
Baht
31.2900
Togo
CFA Franc
501.7300
Tonga
Pa'anga
1.6170
Trinidad & Tobago
Dollar
6.3700
Tunisia
Dinar
1.4850
Turkey
Lira
1.8840
Turkmenistan
Manat
2.8430
Uganda
Shilling
2465.0000
Ukraine
Hryvnia
8.0220
United Arab Emirates
Dirham
3.6730
United Kingdom
Pound Sterling
0.6370
Uruguay
New Peso
19.8000
Uzbekistan
Som
1802.0000
Vanuatu
Vatu
92.1000
Venezuela
New Bolivar
4.3000
Vietnam
Dong
21000.0000
Western Samoa
Tala
2.2440
Yemen
Rial
218.0000
Yugoslavia
Dinar
[please refer to FMS site]
Zambia
Kwacha
5120.0000
Zimbabwe
Dollar
1.0000
1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM - former Yugoslav Republic of Macedonia.
4. Please, refer to the Treasury’s website for amendments regarding any reportable transactions in January, February, and March of 2012.

### IRS Form W-9, FATCA and FBAR Compliance
The Foreign Account Tax Compliance Act (“FATCA”) produced a major catalyst for the usage of Form W-9 by the banks in order to identify whether their clients are U.S. taxpayers. This article explores the connection between the IRS Form W-9, FATCA and FBAR compliance.
IRS Form W-9
The essence of the IRS Form W-9 is to allow a person, who is required to file an information return with the IRS, to obtain a U.S. taxpayer’s correct taxpayer identification number (TIN) in order to report the required transactions (for example, income paid to the taxpayer).
The taxpayer should use Form W-9 to provide his correct TIN to the person requesting it (the “requester”) and, where applicable, to certify that the taxpayer’s TIN is correct, that the taxpayer is not subject to backup withholding, and so on.
Form W-9 should be used only by U.S. persons.
FATCA and Form W-9
The recent developments in U.S. tax compliance laws and regulations, especially the enactment of FATCA, forced many overseas banks to identify which of their customers are U.S. taxpayers and report certain information about these taxpayers to the IRS.
This is why there has been a huge surge of Forms W-9 sent out by foreign banks to U.S. persons. In some countries, the foreign banks’ usage of Forms W-9 has been especially widespread. Among these countries are Switzerland, France, Germany and even India.
Where a U.S. taxpayer fails to supply Forms W-9, the foreign banks usually force the closure of a foreign bank account with all of its potentially negative consequences. Moreover, intentional failure by a U.S. taxpayer to supply Forms W-9 may be used by the IRS against such taxpayer as circumstantial evidence of willful failure to file the FBARs.
FBAR Compliance and Form W-9
It is important to recognize the direct link between Form W-9 and FBAR compliance. The exposure of non-compliance with Report of Foreign Bank and Financial Accounts (“FBAR”) is the true reason behind the IRS strategies to force foreign banks to send out Forms W-9 to their U.S. customers.
Receipt of Forms W-9 from a foreign bank by U.S. taxpayers who are not in compliance with the FBAR filings is a watershed event for such taxpayers (many of whom may not have even heard of the FBARs in the past). This is when the U.S. taxpayers should immediately contact an international tax attorney in order to conduct a voluntary disclosure of their foreign accounts (obviously, it is even better to do it independently of the receipt of Form W-9, but the form adds special urgency to such a disclosure).
Form W-9 and Offshore Voluntary Disclosure Program 2012
It should be recognized that receipt of Form W-9 by itself (i.e. without any IRS investigation or examination) does not prevent the eligibility to enter into a voluntary disclosure program.
In most situations, the 2012 Offshore Voluntary Disclosure Program (“OVDP”) now closed, which was announced by the IRS on January 9, 2012, would still be available even after a taxpayer receives Form W-9. On the other hand, if the taxpayer provides the required information on Form W-9 to a foreign bank and the IRS begins an investigation of this taxpayer (after receiving the relevant information from the bank), then the taxpayer is likely to be precluded from participating in the OVDP.Contact Sherayzen Law Office For Help With Voluntary Disclosure of Foreign Accounts
If you received Form W-9 and you have not been in compliance with the FBAR requirements, you should contact Sherayzen Law Office immediately for professional legal assistance. Our experienced voluntary disclosure firm will analyze the facts of your case, determine the extent of your FBAR (and any other U.S. tax compliance) liability, advise you on the available options, implement the best option of your choice (including filing of all necessary tax forms and amending prior tax returns), and provide rigorous IRS representation.

### IRS Form 944 Basics
General Obligations To Deposit Payroll and Income Tax Withholdings
Under federal law, employers must withhold Social Security, Medicare and Federal income taxes from their employees’ paychecks and deposit them with the federal government (together with the employer’s own payroll tax contributions). In addition to the deposit requirements, the employers are also obligated to file Form 941 every quarter to report the withholdings and make up for any deficiencies in deposits (or receive a refund).
Who Must File Form 944 – the Notice Requirement
Forms 941 can be a burdensome requirement for some very small employers. While computer software has alleviated some of the problems, it has not solved them.
Therefore, the IRS designed Form 944 to assist the smallest employers, which are defined as employers whose annual liability for social security, Medicare, and Federal income tax withholding is $1,000, or less. If the IRS notifies (and this is a crucial point) such an employer that the form is to be filed, the employer may file and pay such taxes only once a year, instead of every quarter.
Notice, the “notification” requirements. If the IRS does not notify you about Form 944, you must file Form 941 each quarter. It is also appropriate to note here the exceptions for agricultural and household employers who follow their own set of rules.
If, for some reason, you do not with to file Form 944, you will need to specifically contact the IRS and make such request. After the IRS notifies you about the changes in your reporting requirements, you can start filing Forms 941. Again, until you receive an IRS notice about the change in your Form 944 filing requirements, you must file Form 944.
Form 944 Reporting Requirements
If you are required to file Form 944, you should report all the following items: wages paid, tips received by employees; federal income tax withheld; both employer's and the employee's share of social security and Medicare taxes; any current year's adjustments to social security for fractions of cents, sick pay, tips, or group-term life insurance; and any credits for COBRA premium assistance payments.
Form 944 Deadline
If you are required to file Form 944, you must file it only once a year. In most situations, it should be filed by January 31 after the end of the calendar year for which you are filing Form 944. Certain extensions are available if timely full payments of deposits were made by January 31.
Complications
Various complications may arise if you are a new owner or you sell (transfer) your business. You will need to contact a tax attorney to discuss how this affects your requirement to file Forms 941 and 944.
Another set of complications may arise if your Form 944 does not match your W3 amount. Usually, this means that there has been a mistake in reporting either on Form 944 or W3.
Finally, it should be remembered that Form 944 is only one requirement for employers. There are other reporting requirements that may apply to you. You should contact a tax attorney to discuss your federal tax responsibilities as an employer.
Penalties
If you fail to comply with Form 944 requirements, various penalties and interest may apply as required by law.
Contact Sherayzen Law Office With Any Questions about Form 944
If you have any questions with respect to Form 944 or if you failed to file Form 944, contact Sherayzen Law Office for professional legal help. Our experienced tax firm will analyze your situation, help you become compliant with all of your federal tax obligations, and provide rigorous representation of your interests during your negotiations with the IRS.

### New FBAR Form: January 2012
In January of 2012, the IRS issued a new version of the Treasury FinCEN Form 114 formerly Form TD F 90-22.1, popularly known as the “FBAR” (the Report on Foreign Bank and Financial Accounts).
This is a third revision of the FBAR in less than one year.  In March of 2011, the IRS made substantial changes to the FBAR instructions after adopting the final regulations concerning the form.  Then, in November of 2011, the IRS revised the form again to reflect certain changes, particularly concerning amendment of a previously filed FBAR.
The latest revision mostly concerns the contact information if you have any questions about the FBARs – a new telephone number and an email address.
Keep in mind that the 2011 FBARs should be filed separately from your tax returns, and they are due on June 30, 2012. This means that the IRS must receive an FBAR on that date; the usual “mailbox rule” (i.e. if the package is mailed on the due date, then it is timely) does not apply to FBARs.
Only the latest version of the FBAR must be used to report your foreign bank and financial accounts.  As of March 5, 2012, the January of 2012 version is the latest version.
Contact Sherayzen Law Office For the FBAR Issues
If you have any questions about the FBARs or you wish to determine whether this requirement applies to your case, you need to contact Sherayzen Law Office.  Our experienced international tax firm will thoroughly analyze the facts of your case and determine whether an FBAR requirement applies to you and what needs to be reported on the FBAR.
You should also contact Sherayzen Law Office to discuss your case if you were required to file the FBARs for the past years but you have not done so. The FBAR has one of the most severe penalty structures in the entire Internal Revenue Code, and it is important to secure the professional help of Sherayzen Law Office to properly deal with this issue.

### Mortgage Debt Forgiveness: Key Points
Under the current U.S. tax law, canceled debt is normally taxable to you, but there are exceptions. One of those exceptions came into existence under the Mortgage Forgiveness Debt Relief Act of 2007.
Under this law, married homeowners whose mortgage debt is partly or entirely forgiven during tax years 2007 through 2012 may exclude up to $2 million of debt forgiven on their principal residence. The limit is $1 million for a married person filing a separate return.
The exclusion applies to both, debt reduced through mortgage restructuring and mortgage debt forgiven in a foreclosure.
Not just any type of debt is entitled to the exclusion. In order to qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion. If, however, the proceeds of refinanced debt were used for other purposes (for example, to pay off credit card debt), then such proceeds do not qualify for the exclusion.
Other examples of debt that does not qualify for the exclusion include debt forgiven on second homes, rental property, business property, credit cards or car loans. In some cases, however, other tax relief provisions (e.g. insolvency) may be applicable.
If your debt is reduced or eliminated you should normally receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.
In order to claim the special exclusion, you should fill out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

### Second Quarter of 2012 Underpayment and Overpayment Interest Rates
On February 23, 2012, the IRS announced that the underpayment and overpayment interest rates will remain the same for the calendar quarter beginning April 1, 2012. The rates will be:
	three (3) percent for overpayments (two (2) percent in the case of a corporation)
	three (3) percent for underpayments
	five (5) percent for large corporate underpayments
	one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### Payroll Tax Cut Extended to the End of 2012 and Revised Form 941
On February 23, 2012, the Internal Revenue Service released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.
The IRS needed to revise Form 941 due to the Middle Class Tax Relief and Job Creation Act of 2012 (enacted on February 22, 2012). Under the new law, the social security tax cut was continued until the end of 2012. This means that employees will continue to receive larger paychecks for the rest of this year based on a lower social security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate in effect prior to 2011. This reduced rate, originally in effect for all of 2011, was extended through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011 (enacted in December of 2011).
The new law also repeals the two-percent recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now repealed recapture tax does not apply.
Self-employed individuals will also benefit from a comparable rate reduction in the social security portion of the self-employment tax from 12.4 percent to 10.4 percent.
For the tax year 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.
Revised Form 941 Will Need to Be Filed By Employers
The revised Form 941 is already available and will have to be filed by employers for every quarter of 2012. Failure to file Form 941 may lead to significant penalties.
Contact Sherayzen Law Office to Deal With Form 941 Penalties
If you are facing Form 941 penalties, contact Sherayzen Law Office NOW. Our experienced tax firm will rigorously and skillfully represent your interests in the IRS negotiations with respect to any Form 941 penalties.

### Form W-2 Penalties
A W-2 is required to be filed by every employer who is engaged in a trade or business paying remuneration (including noncash payments) of $600 or more for a year in which services are performed by an employee.  A W-2 must be filed for each employee for whom income, Social Security, or Medicare tax was withheld, or income tax would have been withheld if the employee had claimed no more than one withholding allowance (or had not claimed exemption from withholding on Form W-4, Employee's Withholding Allowance Certificate).
This article will explain some of the various penalties that may apply for failure to comply with IRS rules and regulations for Form W-2.  Use of a third-party payroll service provider or reporting agent usually will not exonerate employers from ensuring that the form is properly and timely filed.
Failure to File Correct Information Returns by the Due Date
A penalty may apply under IRC Section 6721 (failure to file correct information returns) if an employer does any of the following: fails to file timely, fails to include all information required to be shown on Form W-2, includes incorrect information on Form W-2, files paper forms when e-filing is required, reports an incorrect TIN, fails to report a TIN, or fails to file paper Forms W-2 that are machine readable.  An employer may show reasonable cause in order to prevent the imposition of the penalty.
The amount of the penalty is based upon when the employer files the correct Form W-2:
1)  For forms correctly filed within 30 days (by March 30 if the due date is February 28), the penalty is $30 per form; the maximum penalty is $250,000 per year ($75,000 for small businesses).
2)  For forms correctly filed more than 30 days after the due date but by August 1, 2013, the penalty is $60 per form; the maximum penalty is $500,000 per year ($200,000 for small businesses).
3)  For forms filed after August 1, 2013, or for required Forms W-2 that have not been filed; the penalty is $100 per Form W-2; the maximum penalty is $1,500,000 per year ($500,000 for small businesses).
4)  If an employer does not file corrections, and does not meet any of the exceptions to the penalty (explained below), the penalty is $100 per information return; the maximum penalty is $1,500,000 per year.
Exceptions to the Penalty for Failure to File Correct Information Returns
Depending upon the circumstances, the penalty may not apply if an employer can demonstrate that any failure was due to reasonable cause, and not due to willful neglect. In general, a filer must be able to show that the failure was either due to an event beyond its control, or due to substantial mitigating factors; additionally, an employer must show that proper steps were taken to avoid the failure and that it acted responsibly.
The IRS or SSA may also not consider an inconsequential error or omission to be a failure to include correct information.  Errors or omissions concerning the following items, however, are never considered to be inconsequential: A TIN, a payee's surname, and any money amounts.
Intentional Disregard of Filing Requirements
A penalty of at least $250 per form, with no maximum penalty, will apply in cases in which any failure to file a correct Form W-2 is due to intentional disregard of the filing of correct information requirements.
Failure to Furnish Correct Payee Statements
Under IRC Section 6672 (Failure to furnish correct payee statements), a penalty may apply if an employer fails to provide correct payee statements (Forms W-2) to employees, and is unable to show reasonable cause.  The penalty may apply for any of the following:  An employer fails to provide the statement by January 31, 2013, fails to include all information required to be shown on the statement, or includes incorrect information on the statement.
The amount of the penalty is based on when the employer furnishes the correct payee statement. This additional penalty is applied in the same manner, and with the same amounts, as the penalty for failure to file correct information returns by the due date under IRC Section 6721 (explained above).
Exceptions to the Penalty for Failure to Furnish Correct Payee Statements
A  employer may be able to demonstrate reasonable cause to prevent the imposition of this penalty.  Also, inconsequential errors or omissions are not considered to be a failure to include correct information.   The following items are not considered to be inconsequential errors or omissions: Dollar amounts, a significant item in a payee's address, and the appropriate form for the information provided, (such as whether the form provided constitutes an acceptable substitute for the official IRS form).
Intentional Disregard of Payee Statement Requirements
A penalty of $250 per W-2 will apply, with no maximum penalty, for any failure to provide a correct payee statement (Form W-2) to an employee due to intentional disregard of the requirements to furnish a correct payee statement.
Civil Damages for Fraudulent Filing of Forms W-2
If an employer willfully files a fraudulent Form W-2 for payments that are claimed to be made to another person, that person may be able to sue for damages.  The IRS estimates this may cost $5,000, or more.
Contact Sherayzen Law Office for Legal Help With Form W-2 Penalties
If you an employer facing Form W-2, Form W-3, Form 941, Form 940 and other employment-tax penalties, contact Sherayzen Law Office for professional legal IRS representation.  Our experienced tax firm will vigorously represent your interests, creatively explore various defense theories, prepare any necessary tax forms and strive to secure the best resolution possible under the facts of your case.

### IRS Classification of Foreign Entities: “Per Se” Foreign Corporations
For the U.S. tax compliance purposes, it is very important to properly classify foreign business entities, because there are special IRS requirements associated with ownership of foreign business entities. For instance, a list of various tax forms is tied to particular classification (for example, certain U.S. taxpayers are required to file Form 5471 with respect to foreign corporations; a similar requirement (form 8865) would apply to certain filers with respect to a foreign partnership) and esoteric tax reporting requirements may need to be disclosed on your personal tax returns (such as subpart F income in case of Controlled Foreign Corporation).
The process of a foreign entity classification can be very complex.  In this article, however, I would like to discuss a shortcut available in certain situations  –“per se foreign corporations”. This term means the IRS decided to treat certain business entities as a foreign corporation irrespective of the taxpayer’s position.  For practical purposes, this means that, if your entity is on the list of the “per se corporations”, then it is a foreign corporation, there is no need to explore the issue further and “check-the-box” rules will not apply
Where to Look For the IRS List of Per Se Corporations
Once you are able to determine that you are dealing with a foreign entity and this entity is a business entity, you should check with the Treasury Regulation to see if this business entity is part of the long list of entities that the IRS considers as foreign corporations.  The list is detailed in Treas. Reg. §301.7701-2(b)(8).
List of Per Se Corporations
Treas. Reg. §301.7701-2(b)(8) classifies the following foreign entities as corporations (keep in mind that this may not be the most up-to-date list and you will need to check with the relevant updates of this regulation):
American Samoa, Corporation
Argentina, Sociedad Anonima
Australia, Public Limited Company
Austria, Aktiengesellschaft
Barbados, Limited Company
Belgium, Societe Anonyme
Belize, Public Limited Company
Bolivia, Sociedad Anonima
Brazil, Sociedade Anonima
Bulgaria, Aktsionerno Druzhestvo.
Canada, Corporation and Company
Chile, Sociedad Anonima
People's Republic of China, Gufen Youxian Gongsi
Republic of China (Taiwan), Ku-fen Yu-hsien Kung-szu
Colombia, Sociedad Anonima
Costa Rica, Sociedad Anonima
Cyprus, Public Limited Company
Czech Republic, Akciova Spolecnost
Denmark, Aktieselskab
Ecuador, Sociedad Anonima or Compania Anonima
Egypt, Sharikat Al-Mossahamah
El Salvador, Sociedad Anonima
Estonia, Aktsiaselts
European Economic Area/European Union, Societas Europaea
Finland, Julkinen Osakeyhtio/Publikt Aktiebolag
France, Societe Anonyme
Germany, Aktiengesellschaft
Greece, Anonymos Etairia
Guam, Corporation
Guatemala, Sociedad Anonima
Guyana, Public Limited Company
Honduras, Sociedad Anonima
Hong Kong, Public Limited Company
Hungary, Reszvenytarsasag
Iceland, Hlutafelag
India, Public Limited Company
Indonesia, Perseroan Terbuka
Ireland, Public Limited Company
Israel, Public Limited Company
Italy, Societa per Azioni
Jamaica, Public Limited Company
Japan, Kabushiki Kaisha
Kazakstan, Ashyk Aktsionerlik Kogham
Republic of Korea, Chusik Hoesa
Latvia, Akciju Sabiedriba
Liberia, Corporation
Liechtenstein, Aktiengesellschaft
Lithuania, Akcine Bendroves
Luxembourg, Societe Anonyme
Malaysia, Berhad
Malta, Public Limited Company
Mexico, Sociedad Anonima
Morocco, Societe Anonyme
Netherlands, Naamloze Vennootschap
New Zealand, Limited Company
Nicaragua, Compania Anonima
Nigeria, Public Limited Company
Northern Mariana Islands, Corporation
Norway, Allment Aksjeselskap
Pakistan, Public Limited Company
Panama, Sociedad Anonima
Paraguay, Sociedad Anonima
Peru, Sociedad Anonima
Philippines, Stock Corporation
Poland, Spolka Akcyjna
Portugal, Sociedade Anonima
Puerto Rico, Corporation
Romania, Societate pe Actiuni
Russia, Otkrytoye Aktsionernoy Obshchestvo
Saudi Arabia, Sharikat Al-Mossahamah
Singapore, Public Limited Company
Slovak Republic, Akciova Spolocnost
Slovenia, Delniska Druzba
South Africa, Public Limited Company
Spain, Sociedad Anonima
Surinam, Naamloze Vennootschap
Sweden, Publika Aktiebolag
Switzerland, Aktiengesellschaft
Thailand, Borisat Chamkad (Mahachon)
Trinidad and Tobago, Limited Company
Tunisia, Societe Anonyme
Turkey, Anonim Sirket
Ukraine, Aktsionerne Tovaristvo Vidkritogo Tipu
United Kingdom, Public Limited Company
United States Virgin Islands, Corporation
Uruguay, Sociedad Anonima
Venezuela, Sociedad Anonima or Compania Anonima
 
Exceptions, Inclusions and Complications With Respect To the List of Per Se Foreign Corporations
In addition to the list of entities above, the regulations also provide various inclusions, exceptions, and complications.  For example, a Nova Scotia Unlimited Liability Company (or any other company or corporation all of whose owners have unlimited liability pursuant to federal or provincial law) will not be treated as a corporation. The same applies to Sendirian Berhad of Malaysia and some companies in India.
On the other hand, the IRS regards the whole family of “Sociedad Anonima” entities are considered corporations, disregarding their variable capital provisions (such as, “Sociedad Anonima de Capital Variable”).
The regulations further clarify the scope of terms such as “public companies” and “limited companies”.  With regard to Cyprus, Hong Kong, and Jamaica, the term “Public Limited Company” includes any Limited Company that is not defined as a private company under the corporate laws of those jurisdictions.  In all other cases, where the term Public Limited Company is not defined, that term shall include any Limited Company defined as a public company under the corporate laws of the relevant jurisdiction.
Furthermore, with respect to limited companies, a Limited Company includes companies limited by shares and companies limited by guarantee.
What if the company is named in a different but means the same thing as in the usual name? The regulations specifically state that “different linguistic renderings of the name of an entity listed in paragraph (b)(8)(i) of this section shall be disregarded”.  Treas. Reg. §301.7701-2(b)(8)(v).  For example, an entity formed under the laws of Switzerland as a Societe Anonyme will be a corporation and treated in the same manner as an Aktiengesellschaft.
Finally, very important complications may arise where a business entity is formed under the laws of more than one jurisdiction.  Detailed complex rules will determine whether such an entity should be treated as a corporation for U.S. tax purposes, in some cases over-ruling the classification patterns described in this essay.  This is a topic for a future article, though.
Contact Sherayzen Law Office for Legal Help With Foreign Business Entity Classifications
Classification of a foreign business entity for U.S. tax purposes is a very complex process.  This article only describes one of many variations and it does NOT constitute legal advice; only an international tax attorney looking at the specific circumstances of your case may determine how your foreign business entity should be classified.
If you have a foreign business entity and you are not sure how you should classify it and what will be the U.S. tax compliance consequences of such classification, contact Sherayzen Law Office. Our experienced international tax firm will analyze your business entity in detail,  help you find the correct classification (or adopt a classification that is likely to withstand an IRS challenge), and identify the necessary IRS tax reporting requirements.

### Will You be Subject to the AMT in the Tax Year 2012?
The Alternative Minimum Tax (AMT) is an additional tax that certain individuals must pay on top of their regular tax liability.  When the original "minimum tax" was enacted in 1969, its purpose was to limit the ability of high-income earners from paying little or no tax by using certain tax breaks.  Tax breaks that may trigger the AMT include various itemized deductions, accelerated depreciation, and incentive stock option benefits, among others.
Unfortunately, as many taxpayers have learned in the past few decades, the AMT can hit even middle-class individuals and those who do not take many tax breaks.  This problem is further exacerbated by the effects of inflation.
What about Tax Year 2012?
Congress has generally enacted a "fix" or "patch" to prevent non-high-earners from being subject to the AMT in past years.  Unfortunately, as it currently stands, Congress has not acted yet for the tax year 2012 Since this is an election year and the government is looking for more ways to increase revenues, there is doubt as to whether the Congress will actually adopt such a “fix”.  If it does not, tens of millions of additional taxpayers may face a much higher tax bill because of the AMT.  The Congressional Budget Office (CBO) has estimated that the average tax increase for such taxpayers will be $3,900, and some may pay over $8,000 in additional taxes.
If you believe you may be one of the many people subject to the AMT for tax year 2012, you may want to consult with an experienced tax attorney in order to minimize your potential tax liability.
Contract Sherayzen Law Office for AMT Tax Planning
If you believe that you are facing the AMT in the tax year 2012, contact Sherayzen Law Office.  Our experienced tax attorneys will analyze your situation and advise you on how shield yourself from over-taxation with proper tax planning pursuant to the Internal Revenue Code provisions.

### Form 941 Penalties
In a previous article, we covered some of the basics of Form 941. In this article, we will explore some of the major penalties that may apply for failure to comply with the requirements of Form 941. These penalties may be severe and, in certain circumstances, may even lead to criminal charges.
Failure to File Penalty
The IRS may apply a failure to file penalty for any month, or part of a month, for which a required return is not filed (disregarding extensions). The penalty is 5% of the unpaid tax due on such return, with the maximum penalty typically 25% of the tax owed.
Failure to Pay Penalty
The IRS may also apply a failure to pay penalty for any month, or part of a month, for which the tax due is paid late. This penalty is 0.5% per month of the amount of the tax. In certain circumstances, individual filers may be able to qualify for a reduced penalty of 0.25% per month, if an installment agreement is in effect. The maximum amount of the failure to pay penalty is also 25% of the tax owed.
Interaction between the Failure-to-File and Failure-to-Pay Penalties; Reasonable Cause Defense 
If both of the above-mentioned penalties apply to a given month, then the failure to file penalty will be reduced by the amount of the failure to pay penalty. It is important to note that a “reasonable cause” defense is applicable to these penalties – i.e. if the employer’s attorney is able to demonstrate, in writing, that the failure to file or to pay was due to a reasonable cause, then such penalties will be abated by the IRS.
Interest
Interest may also be charged, in addition to any applicable penalties. Interest begins to accrue from the date due of the tax owed on any unpaid amount.
Penalty Rates for Amounts not Properly or Timely Deposited
In general, penalties may also apply if a filer does not make required timely deposits, or if the amounts deposited are less than required. If a filer is able to establish a reasonable cause defense and demonstrates that the failure to comply with the requirements was not due to willfully neglect, then the IRS will not impose the penalties. In certain other circumstances, the IRS may also agree to waive penalties.
For amounts that are not timely or properly deposited, the following penalty rates will apply:
2% - Deposits 1 to 5 days late.
5% - Deposits 6 to 15 days late.
10% - Deposits 16 or more days late.
10%- Amounts paid within 10 days of the date of the first IRS notice requesting the tax due.
10% - Deposits paid directly to the IRS, or paid with a tax return.
15% - Amounts unpaid more than 10 days after the date of the first IRS notice requesting the tax due, or the day on which an IRS
notice and demand for immediate payment was received by afiler, whichever is earlier.
Late deposit penalty amounts are calculated from the due date of the tax liability, and are determined using calendar days.
Trust Fund Penalty
If income, Social Security, or Medicare taxes that are required to be withheld are not withheld or paid, a filer may be personally liable for the Trust Fund Penalty. Important note: use of a third-party payroll service provider or other type of agent will not relieve a required filer of the responsibility of ensuring that deposits are timely and properly deposited, and that returns are filed.
The Trust Fund Penalty is the full amount of the unpaid trust fund tax. The penalty may be imposed on any person determined by the IRS to be responsible for collecting, accounting for, and paying over required taxes, and who acted willfully in not doing so, and the penalty may apply to individuals personally if such unpaid taxes cannot be collected from the employer or business directly.
Criminal Penalties
Those who fail to comply with the bank deposit requirements for the special trust account for the U.S. Government may also be charged with criminal penalties. We will cover the criminal penalties in more detail in future articles.
Averages Failure to Deposit (FTD) Penalty
The IRS may also assess an "averaged" failure to deposit (FTD) penalty of 2% to 10% for filers who are scheduled to make monthly deposits, and who do not properly complete Part 2 of Form 941 when a tax liability listed on Form 941, line 10, equals or exceeds $2,500. The IRS may also assess an "averaged" FTD penalty of 2% to 10% for scheduled semi-weekly depositors who show a tax liability on Form 941, line 10, equaling or exceeding $2,500, and who fail to complete Schedule B of Form 941, fail to attach a properly completed Schedule B of Form 941, or improperly complete Schedule B of Form 941.
The averaged FTD penalty is calculated by distributing a total tax liability listed on Form 941, line 10, equally throughout the tax period. As such, deposits and payments may not be counted as timely because the actual dates of tax liabilities may not be accurately determinable.
Contact Sherayzen Law Office for Legal Help With Negotiating Form 941 Penalties
If you are facing Form 941 penalties, contact Sherayzen Law Office NOW. While the exact options available to you will depend on your particular fact pattern, our experienced tax firm will rigorously represent your interests in IRS negotiations and strive to reduce such penalties, exploring all viable legal options.

### Treasury and the IRS Issue Proposed Regulations for FATCA Implementation
On February 8, 2012, the U.S. Treasury Department and the Internal Revenue Service issued proposed regulations for the next major phase of implementing the Foreign Account Tax Compliance Act (FATCA).
FATCA and FFI Reporting under Proposed Regulations
FATCA was enacted by the U.S. Congress in 2010 as part the Hiring Incentives to Restore Employment (HIRE) Act. This law specifically targets non-compliance by U.S. taxpayers using foreign accounts.
FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest.
The proposed regulations lay out a step-by-step process for U.S. account identification, information reporting, and withholding requirements for FFIs, other foreign entities, and U.S. withholding agents.
The proposed regulations implement FATCA’s obligations in stages to minimize burdens and costs consistent with achieving the Congress’ compliance objectives. The rules and implementation schedule are also adjusted to allow time for resolving local law limitations to which some FFIs may be subject.
In order to avoid being withheld upon under FATCA, a participating FFI will have to enter into an agreement with the IRS to:
a) Identify U.S. accounts,
b) Report certain information to the IRS regarding U.S. accounts,
c) Verify its compliance with its obligations pursuant to the agreement, and
d) Ensure that a 30-percent tax on certain payments of U.S. source income is withheld when paid to non-participating FFIs and account holders who are unwilling to provide the required information.
Registration will take place through an online system which will become available by January 1, 2013. FFIs that do not register and enter into an agreement with the IRS will be subject to withholding on certain types of payments relating to U.S. investments.
Effect of FATCA Regulations on Non-Disclosure of Foreign Accounts
Once implemented, the regulations will mark a major breakthrough in IRS efforts to identify U.S. taxpayer non-compliance through offshore holdings. In essence, the FFIs reporting will supply the IRS with continuous and accurate information that will allow them to identify failure to by the US taxpayers to disclose foreign financial accounts.
Armed with this information, one can expect the IRS to acquire new tremendous enforcement tools throughout the world. It is very likely that the IRS will be able to substantially increase its investigations of non-compliant U.S. taxpayers as well as successfully prosecute them.
Immediate Effect of FATCA: Urgency in Voluntary Disclosures
Thus, the ultimate effect of FATCA will be felt on the number of voluntary disclosures. At this point, a large number of currently non-compliant U.S. taxpayers are in high danger of being discovered and prosecuted by the IRS within relatively near future.
Since voluntary disclosure is not generally available in case of IRS investigation and/or prosecution, it appears that the need for these taxpayers to engage in voluntary disclosure is becoming increasingly urgent. Combined with other creation of FATCA – Form 8938 – I expect to see a large number of voluntary disclosures in 2012.
Contact Sherayzen Law Office for Help With Offshore Voluntary Disclosure
If you currently have undisclosed foreign bank and financial accounts or unreported foreign income, contact Sherayzen Law Office. Our experienced voluntary disclosure firm will help you identify the extent of your tax reporting requirements, analyze your potential tax liabilities, describe available voluntary disclosure options, and guide you throughout your voluntary disclosure, including completing the required documentation, setting forth your legal case, and rigorous IRS representation.

### CPT (Carriage Paid To)
The purpose of this article is provide a general background to one of the most important terms in international contract drafting, Incoterms 2010 CPT.
General Provisions of CPT
CPT (Carriage Paid To) means that the seller delivers the goods to the carrier of another person nominated by the seller at an agreed place and that the seller must contract and pay the costs of carriage necessary to bring the goods to the named place of destination.  This means that the seller fulfils his obligation to deliver at the point when he hands the goods over to the carrier, not when the goods reach the place of destination.
The most important issue here is to understand that the risk and costs are transferred at different places. The risk passes to the buyer at the point of delivery to the carrier, whereas the costs are covered by the seller up to the agreed place of destination.  This is why It is crucial for the parties to identify as precisely as possible in the contract both the place of deliver and the place of destination.
What if several carriers are used for the carriage to the agreed destination point and the parties failed to agree on a specific point of delivery?  The default position under the Incoterms rules is that the risk passes when the goods have been delivered to the first carrier at the place that the seller chooses (i.e. buyer has no control).   In order to override the default rule, the parties must specify in their contract the stage or place at which the risk should pass to the buyer.
Also, note that if the seller incurs costs under his contract of carriage related to unloading at the named place of destination, the seller cannot recover such costs form the buyer (unless otherwise agreed between the parties).
Seller’s Export Clearance Obligations
CPT requires the seller to clear the goods for export, but not import (including any import duty or paperwork).  The export clearance obligation means that the seller will have to obtain, at his own risk and expense, any export license and carry out all custom formalities necessary for the export of the goods as well as for their transport through any country prior to the point of delivery.
Seller is Obligated to Procure the Carriage Contract, but Not Insurance
While the seller is obligated to procure a contract for the carriage of the goods from the agreed point of delivery to the named place of destination at his own expense, no such obligation for the insurance contract exists.  The seller is not obligated to make a contract of insurance, but the seller must provide the buyer, at the buyer’s request (as well as the buyer’s risk and expense) with information that the buyer needs for obtaining insurance.
Other Seller’s Obligations
In addition to the obligations above, Incoterms 2010 spell out other obligations of the seller under the CPT, such as: delivery obligations, allocation of costs, notices to the buyers, delivery documents, packaging, assistance with information, et cetera.
Let’s look now at the buyer’s obligations.
Buyer’s Obligation to Pay
The buyer’s first and foremost obligation is to pay the price of the goods as provided in the contract of sale.
Buyer’s Import Clearance Obligations
One of the other principal obligations of the buyer is to obtain, at its own risk and expense, any import license or other official authorization and carry out all customs formalities for the import of the goods.
The buyer must also ensure that everything is done in order for the goods to pass through any third country after they have been shipped from the seller’s country.  The chief exception is if such obligation is for the seller’s account under the contract of carriage.
Other Buyer’s Obligations
In addition to the obligation’s above, Incoterms 2010 set forth other important obligations of the buyer under the CPT, including: taking delivery, inspection of goods, notices to the seller, assistance with information and other obligations.   Some of these obligations may have important consequences with respect to the allocation of costs and transfer of risk under the CPT.
Contact Sherayzen Law Office NOW for Help with International Contracts
Obviously, the article above only gives some broad background information on CPT and should not be relied upon to make a legal determination in your particular situation.  Rather, if you are about to engage in a transaction involving an international delivery of goods, contact Sherayzen Law Office for legal help.  Our experienced international contract firm can assist you at every stage of your contract: negotiation, drafting and enforcement. We will provide a rigorous representation of your interests, protect your contractual rights, and strive to ensure that the contemplated transaction goes as smoothly as planned.

### Taxation of Oil & Gas Royalty Interests
The recent oil boom in regions such as the Bakken Oil Field has created millionaires overnight based upon royalty interests in oil and gas leases of investors. While fortunes can be made from such payments, it is important to understand that there may be various potential risks involved, as well as numerous taxes. This article will generally discuss three common types of royalty interests, and taxation of payments received from such interests.
Oil and Gas Interests Royalties
There are generally three main types of royalties received for oil and gas interests: standard royalty interests, overriding royalty interests, and working interests
Standard Royalty Interests
A standard royalty interest (also called a “landowner’s royalty”) entitles an owner of mineral rights (a lessor in a lease) to an agreed-upon part of the total oil and gas production attributable to the lease, minus reasonable production costs of the producer (the lessee in a lease). Royalties are usually expressed as a percentage or a fraction of the total production of the well.
Drilling and producing oil and gas wells entail certain types of costs. Unless stated otherwise in a lease, exploration, marketing and production costs are generally paid by the production company, whereas post-production costs may be shared by the landowner with the production company. Depending upon the terms of the lease, certain post-production costs incurred that add value to the oil and gas drilled at the wellhead prior to the place of sale (such as various treatment, compression, processing and transportation costs) may be deducted by the lessee when calculating the royalty payment amount. Additionally, royalty interest payments may be subject to various federal, state and county taxes (which will be detailed later).
Overriding Royalty Interests
Another type of royalty is the overriding royalty interest. A holder of such interest is entitled to a share of the production revenues from a well, free of production and monthly operating costs. Like a standard royalty interest, overriding royalty interests are subject to taxes and post-production costs. Unlike standard royalty interests, holders of overriding royalty interests do not own the underground minerals, and they will not have any ownership rights once well production ends. Overriding royalty interests can be both assigned from holders of a working interest (defined below), as well as created by a leaseholder who retains an override after assigning a leasehold to a working interest owner.
Working Interests
A working interest is the interest obtained by a lessee under an oil and gas lease. Under this interest, holders fully participate in production revenues based upon the percentage of working interest that is owned along with other investors. Unlike royalty interests, holders of working interests fully participate in the profits generated from successful wells. However, owners of working interest are generally directly liable for payment of the applicable share of drilling costs, and other associated costs, such as operating, leasing and exploration costs. Working interest holders generally do not own the underground minerals. Working interests may offer significant tax advantages.
Taxation of Royalties
Landowners must pay taxes on royalties received from production companies, in addition to numerous other potential taxes. Under the Federal income tax, royalties are considered to be ordinary income. However, royalty owners may generally deduct up to 15% of their income received from mineral interests through depletion allowances.
Most states in which oil and gas are produced also levy a severance tax on such production. These taxes are deducted from royalties received, and are calculated based upon either the value of the production, or the production volume, depending upon the state’s tax laws. Additionally, many counties also levy annual ad valorem taxes based upon the value of oil and gas wells in production.
Contact Sherayzen Law Office for Tax Help With Oil and Gas Royalty Interests
This article is intended to give a brief summary of these issues, and should not be construed as legal or tax advice. Federal, state and local taxation planning and reporting often necessitates an experienced understanding of complex regulations, statutes, and case law, and penalties for failure to comply can be substantial. If you have further questions regarding your own tax circumstances, Sherayzen Law Office offers professional advice for all of your tax needs. Email Eugene@SherayzenLaw.com or call (952) 500-8159 for a consultation today.

### Criminal Tax Evasion
This article provides some general background to IRC Section 7201 criminal tax evasion charges and describes Section 7201 principal criminal penalties.   As you will see, the penalties are severe, and you should immediately seek the advice of a tax attorney if you have any doubts as to whether you are complying with the law and IRS rules.
Legal Test under IRC Section 7201
IRC Section 7201 deals with criminal tax evasion charges.  In Sansone v. United States, 380 U.S. 343, 354 (1965), the United States Supreme Court stated that two different charges can be brought pursuant to Section 7201: (1) the offense of willfully attempting to evade or defeat the assessment of a tax, and (2) the offense of willfully attempting to evade or defeat the payment of a tax.
The legal test that the government must satisfy consists of three elements:(1) that a tax deficiency existed, (2) an affirmative act of tax evasion, or an attempt to evade taxes, and (3), willfulness. The government is required to prove each of three elements beyond a reasonable doubt – the standard of proof in criminal cases – in order to show a violation of this section. By contrast, in a typical civil case, the standard of proof is only a preponderance of the evidence.
In general, the courts have held that filing a false return may demonstrate an attempt to evade the assessment of a tax, but it is not necessary for an individual to have filed a false return in order to show an attempt of tax evasion.  Certain courts have also held that it is not required for the government to prove the exact amount of tax due in order to show tax evasion.
Each of the elements necessary to prove a violation may involve complex factual matters and/or legal arguments, so you may be well advised to seek an experienced tax attorney if you find yourself in such a case.
Penalties under IRC Section 7201
Under IRC Section 7201, "Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution."
Thus, the criminal penalties under Section 7201 may consist of two parts.  First and foremost, imprisonment of up to five years (this charge may have its complications when combined wiht other penalties – therefore, the particular facts of your case will determine whether you potentially face more than five years in prison).  Second, the monetary penalty of up to $100,000 if the defendant is an individual or up to $500,000 if the defendant is a corporation.  The statute allows for the combination of both types of penalties in a single case.
Contact Sherayzen Law Office for Legal Help in Dealing with Section 7201 Charges
If you are or may potentially be in a situations where the U.S. government may charge you with criminal tax evasion offenses, contact Sherayzen Law Office for legal help.  Our experienced tax firm will analyze your case, help you determine whether you may potentially face criminal charges (if you not yet charged), determine the probability of a successful criminal prosecution by the U.S. government, build a creative ethical defense (while considering other possibilities to turn this into a civil case), and rigorously represent your interests in court and during negotiations with the U.S. Department of Justice or IRS.

### Form 941 Filing Requirements
With the Federal government searching for much-needed revenues, it is very likely that the IRS will be watching much more closely for unpaid payroll taxes, as it has been in recent years.  This article will explain the purpose of Form 941 and when it needs to be filed.  In a future article, we will cover the penalties related to this form, which can be severe.
Purpose of Form 941
Employers are required under Federal law to withhold necessary amounts of federal income tax as well as Social Security and Medicare taxes from their employees' paychecks, and to pay any portion of the employer's liability for Social Security and Medicare taxes (this portion is not withheld from employees).  Whenever an employer pays wages, the required amounts must be withheld. In addition to the items mentioned above, in general, Form 941 needs to be filed to report tips received by employees, current quarter's adjustments to Social Security and Medicare taxes (for fractions of cents, sick pay, tips, and group-term life insurance), and credit for COBRA premium assistance payments.
Certain exceptions may apply to the filing requirements.  For instance, seasonal employers may not need to file Form 941 for certain quarters if they have not paid wages during that time.  (Line 19 of the form should be checked, however, for every quarter that such employers do file, in order to properly notify the IRS of this exception).  Employers of household and farm employees also usually do not need to file the form (instead, Form 943 "Employer's Annual Federal Tax Return for Agricultural Employees" may need to be filed for farm employees).
When Form 941 Must be Filed
In general, Form 941 should first be filed in the quarter for which an employer has initially paid wages subject to Social Security, Medicare and/or Federal income tax withholding.  Form 941 is required to be filed by the last day of the month following the end of the quarter.
Specifically, Form 941 is due April 30th for quarters ending March 31 (i.e. quarters that consist of January, February, and March), July 31st for quarters ending June 30th (i.e. quarters including April, May, and June), October 31st  for quarters ending September 30th (quarters including July, August, and September), and January 31st for quarters ending December 31st (quarters including  October, November, and December).  In other words, employers must generally report wages paid during a quarter by the required due dates.  (If a due date falls on a Saturday, Sunday, or legal holiday, employers may file on the next business day).  If timely deposits have been made in full payment of required taxes owed for a quarter, an employer has 10 more days after the due dates listed above to file Form 941.
For forms received after the due date, the IRS will treat Form 941 as being filed when the form is actually received, unless certain conditions are met (such as a Form 941 postmarked by the US Postal Service on or before the due date in a properly addressed envelope with sufficient postage, or one sent by an IRS-designated private delivery service on or before the due date).
Once the initial Form 941 is filed by an employer, the form must be then filed for every following quarter (subject to certain exceptions, including those explained above).
Contact Sherayzen Law Office for Legal Help With Form 941
If your business has not filed the required Forms 941 or you have not paid the payroll taxes to the IRS, contact Sherayzen Law Office for help.  Our experienced tax firm will work hard to protect your business against the IRS and will strive to achieve the most beneficial resolution of your case possible.   Attorney Sherayzen will also help you if you facing criminal charges due to your non-payment of taxes.

### IRS Power to Reallocate Income, Deductions, and Other Items under IRC Section 482
Some taxpayers may be tempted, especially in situations involving related parties, to arbitrarily shift the source of income or allocation of deductions, in order to avoid or lessen taxes.  Congress, however, enacted IRC Section 482 to give the IRS wide power to prevent such actions.  This article will give a brief overview of some aspects of this complex area of U.S. tax system.
IRS Authority under IRC Section 482
In general, IRC Section 482 gives the IRS the ability to distribute, apportion, or allocate gross income, deductions, credits or allowances between certain organizations if they are controlled or owned by the same taxpayers, and it is determined that such action is necessary to prevent tax evasion, or to clearly reflect such organizations' income.  The IRS has broad authority under this section (and the definition of "control" is similarly interpreted broadly); taxpayers, on the other hand, are generally not able to use this section to reallocate income, deductions or other items on their own.
IRS authority under this section to make such determinations is generally granted whenever taxpayers report different income, deductions, or other related items than they would have had if the taxpayers made an arm's-length transaction with organizations that were not controlled or owned by them.  Various methods are available to the IRS to determine the proper arm's-length price.
In the context of international taxation, one of the purposes of this section is to prevent taxpayers from improperly shifting income to controlled organizations in countries with lower tax rates (or conversely, transferring deductions to controlled organizations in high tax rate countries).
Penalties under IRC Section 482
Severe penalties may apply under IRC Section 482.  IRC 6662(e)(1)(B) imposes transfer pricing penalties on any underpayment attributable to a "substantial valuation misstatement" pertaining to transfer pricing. There are two types of transfer pricing penalties under this particular provision: (A) the transactional penalty, which applies when the price reported for any property or services is 200% or more (or 50% or less) of the amount determined to be the proper price, and (B) the net adjustment penalty, which applies when the net IRC 482 adjustment (i.e. the reallocation of profit determined by the IRS) exceeds the lesser of $5 million or 10% of a taxpayer’s gross receipts.  An accuracy-related penalty of 20% may be applied in such circumstances.  Further, under IRC Section 6662(h), a 40% penalty for "gross misstatements" (as defined in the provision) may be applied.
Contact Sherayzen Law Office for Legal Advice on Business Transactions and Structure
The powers of the IRS under IRS Section 482 are broad and the penalties can be substantial.  Therefore, it is important to contact a business tax attorney to plan the business transactions and business structure ahead of time, identifying the problem areas and accurately evaluating the risk of potential IRS actions.
This is why you should contact the experienced business tax firm of Sherayzen Law Office for legal help with analyzing your business structure and planning your business transactions.

### Voluntary Disclosure of Foreign Accounts and Foreign Assets in 2012
This article offers an important strategic perspective on the foreign financial accounts disclosure in the year 2012. In particular, it appears that, this year, U.S. taxpayers who have not fully disclosed their foreign financial accounts and foreign assets should make the urgent decision to bring their tax affairs into full compliance.
Three Trends Greatly Enhanced IRS Ability to Identify and Prosecute Non-Compliance
In 2012, waiting with the voluntary disclosure of previously unreported foreign financial accounts is just too dangerous for any U.S. taxpayer to afford. This is the result of three converging trends in U.S. tax enforcement.
First, as a result of the 2009 and 2011 offshore voluntary disclosure programs, the IRS is currently sitting on top of a gigantic mountain of information about the financial institutions, wealth-management advisors, and individual taxpayers involved in the U.S. tax non-compliance. Once processed, this information should allow the IRS to effectively identify and target the main sources of noncompliance, including common countries, financial institutions, and individuals (including U.S. taxpayers). Therefore, the risk of discovery – whether intentional or accidental – has risen tremendously for U.S. taxpayers who either willfully or non-willfully failed to disclosure their reportable foreign assets and foreign income.
Second, the new reporting requirements force U.S. taxpayers to disclose assets that previously may have escaped the IRS disclosure. The first and foremost of these new requirements is Form 8938, which should allow the IRS to collect the information that previously was not required to be collected as well as effectively connect various tax reporting requirements, allowing the IRS to assess the scope of potential non-compliance with relative ease.
Moreover, in addition to Form 8938, a stricter interpretation as well as expansion of other existing forms allows the IRS to upgrade the reach of other reporting requirements. Form 8621 is the best-known example of this trend. Form 8621 is used to report PFIC (Passive Foreign Investment Company) income; soon, the U.S. taxpayers will be required to file a new version of Form 8621 to report their PFIC holdings even if they do not have PFIC income.
Finally, the third trend is the ever expanding IRS statute of limitations. The IRS has been given (or it interpreted the law in such a way) an increasing power to look back farther and deeper into older U.S. tax returns. FATCA (Foreign Account Tax Compliance Act) further enhanced this ability. At this point, failure to file any of the major disclosure forms, such as Forms 5471, 8865, 8938 and so on, is likely to prevent the IRS Statute of Limitations from running, keeping a tax return open potentially forever.
Impact of These Trends on Taxpayer Compliance Strategies
These three trends have a tremendous impact on the tax compliance strategies of U.S. taxpayers. First, as a result of the extended Statute of Limitations, the U.S. taxpayers cannot now just contend themselves with making sure that they are in full compliance in the current year – they need to make sure that they were compliant in all years potentially open to the IRS audit.
This means that the “quiet disclosure” practice (where taxpayers are attempting to amend their tax returns and comply with current reporting requirements without providing any explanation to the IRS) employed by so many accountants in the past can be more damaging than helpful at this point. While I have always been in disagreement with this strategy, it appears that the current enhanced abilities of the IRS to identify and prosecute non-compliance make this strategy downright dangerous for most non-compliant taxpayers.
Second, with the issuance of new Form 8938, the taxpayers’ ability to maneuver around the foreign asset reporting requirements is greatly reduced. Moreover, it appears that Form 8938 forces the previously non-compliant (whether willful or non-willful) taxpayers into a situation where they have to choose between further exacerbating their non-compliance with potentially grave consequences or complete disclosure of all of the assets that they previous did not or could not report.
Third, there is now an added urgency to the voluntary disclosure to non-compliant taxpayers. From one side, the aforementioned obligation to comply with Form 8938 and other forms during this tax season places strict deadlines for conducting voluntary disclosure (even with extensions). From the other side, for the taxpayers who have unreported assets in countries and institutions that were exposed during the 2009 and 2011 offshore voluntary disclosure programs, this is a race against time. As soon as the IRS is able to process the gigantic pile of data that they have accumulated as a result of those programs, these taxpayers are at heightened risk of discovery. It is well-known that, once the IRS launches an investigation against a particular taxpayer, this taxpayer will not be able to take advantage of any existing voluntary disclosure options.
Cumulative Effect: 2012 is the Year of Voluntary Disclosures
The cumulative effect of all of these trends and strategies is likely to be a heavy pressure on the U.S. taxpayers to conduct some form of voluntary disclosure of previously-unreported foreign assets. Therefore, it is very likely that year 2012 will continue to build on the previous years’ pattern of increasing number of disclosures – perhaps, the numbers will climb even higher than in 2011.
Contact Sherayzen Law Office for Help With 2012 Offshore Voluntary Disclosure
If you have any unreported foreign accounts, foreign assets or foreign income, contact Sherayzen Law Office. Our experienced voluntary disclosure firm will assist you during every stage of your disclosure – analysis of your legal situation and your risk exposure, choosing the right disclosure based on your fact pattern, preparation of all necessary documents (including tax returns, FBARs, business ownership disclosure (5471, 8865, 8858), PFIC, foreign trust distribution, foreign inheritance, and other forms), management of proper filing of the disclosure, creative ethical approach to establishing the legal foundation of your case, and rigorous advocacy of your interests during IRS negotiations.

### Form 5472 Penalties
In a previous article, we covered the basics of the IRS Form 5472. In this article we will explain the penalties that may apply for failure to comply with the form's requirements.
Main Failure to File and Failure to Maintain Records Penalties
If a corporation fails to timely file the required Form 5472, a $10,000 penalty may be assessed. Furthermore, a reporting corporation that files a substantially incomplete Form 5472 will be deemed as having failed to file Form 5472, and penalties may apply.
An interesting twist in Form 5472 penalties is that, in addition to failure to file penalties, the IRS imposes substantial record-keeping penalties. A $10,000 penalty may be assessed for failure to maintain records, as required under IRS regulation Section 1.6038A-3. Under this regulation, "a reporting corporation must keep the permanent books of account or records... that are sufficient to establish the correctness of the federal income tax return of the corporation, including information, documents, or records (“records”) to the extent they may be relevant to determine the correct U.S. tax treatment of transactions with related parties."
It is also important to note that, for the purposes of Form 5472 penalties, each member of a group of corporations filing a consolidated information return is treated as a separate reporting corporation, and each member is potentially subject to a separate $10,000 penalty, as well as being jointly and severally liable.
Additional Failure to File Penalties
If the IRS issues a failure to file notification, and the failure continues for more than 90 days after such notification, an additional penalty of $10,000 may apply. This penalty applies with respect to each related party for which a failure occurs for each 30-day period (or part of a 30-day period) during which the failure continues after the 90-day period end.
Criminal Penalties
Under IRC Sections 7203 (Willful failure to file return, supply information, or pay tax), 7206 (Fraud and False Statements), and 7207 (Fraudulent returns, statements, or other documents), criminal penalties may potentially apply for failure to submit necessary information, or for filing false or fraudulent information.
Contact Sherayzen Law Office for Legal Help With Form 5472 Reporting Requirements
Complying with Form 5472 requirements and dealing with Form 5472 penalties usually requires professional review. Contact Sherayzen Law Office for tax assistance with Form 5472; our experienced international tax firm will determine whether you need to file Form 5472, explain how to comply with the form’s requirement, complete the form for you, and handle any necessary IRS negotiations.

### Classification Conversion of A Tax-Exempt Organization: 501(c)(6) and 501(c)(3) Organizations
In a previous article, I already discussed some of the major differences between 501(c)(3) and 501(c)(6) organizations. However, this discussion was limited to characteristics of these organizations as opposed to dynamic developments that these organizations may experience during their existence. While most of these organizations tend to be stable once a particular type of tax-exempt organization is formed, this is not always the case. Sometimes, after a number of years in existence, an organization may modify its goals or its founders suddenly realize that they are limited in their practical options. For example, one large limitation of a 501(c)(6) organization is the inability of donors to deduct donations as charitable contributions on their tax returns. Conversely, members of a 501(c)(3) organization may desire to convert into another type of tax-exempt organization because of the substantial limitations on lobbying placed on such organizations.
At that point, a Board of Directors of such an organization may start to wonder about whether it is possible to convert the status of an organization, how to do it and whether there are any viable alternatives.  In this article, I will examine the possibility of converting a non-profit organization’s tax-exempt classification, focusing on 501(c)(3) and 501(c)(6) classifications.
General Conversion Process
First, in order to attempt the conversion from one classification to another, a tax-exempt organization will need to change its organizational documents (such as the Articles of Incorporation and the corporation’s Bylaws) to reflect the primary purpose of the new type of tax-exempt organization being sought and to comply with the requirements of such organizations. Usually, the Bylaws or the Articles of Incorporation govern the exact process of approval of the amendment of these important organizational documents. Frequently, these documents will say that a Board of Directors’ resolution is sufficient, but, often, an approval of the majority of members maybe required. If the organizational documents are silent on the amendment process, your state’s statute would need to be consulted on the amendment process.
Amending the documents is usually not enough. Changing the primary purpose of an organization may also entail eliminating, or at least substantially reducing, any prohibited or limited activities under the new desired classification. For instance, if you seek to convert a 501(c)(6) organization into a new 501(c)(3) organization, then, after changing the original organizational documents (and following any necessary rules in doing so) to comply with applicable 501(c)(3) requirements, will also need to limit substantial lobbying activities and any other activities that are prohibited or limited under 501(c)(3) rules. Usually, these activities require a wholesale overview of the organization’s activities by an attorney in order to determine what types of practices need to be modified and how.
Finally, in order to convert, a new form will need to filed with the IRS requesting the grant of the new tax-exempt status, demonstrating compliance with the relevant regulations. For example, in case of conversion to 501(c)(3), Form 1023 will need to filed, demonstrating compliance with IRS 501(c)(3) rules. This, in turn, will require paying an application fee as well as providing any applicable required verification documents. There is no guarantee that the IRS will recognize the new tax-exempt status being sought. This is why it is important for the application to be well drafted, demonstrating adherence to the relevant law and regulations.
Alternatives to Conversion
The motivations for seeking alternatives to full conversion from one classification to another are numerous. Nevertheless, the most popular reason for avoiding such conversion and seeking an alternative is the fact that an outright change in classification of an entity may significantly limit the ability of such organization to achieve their goals.
It is not easy to discuss alternatives to conversion, because the particular circumstances of an organization will determine what alternatives are available and whether they are more desirable than the process of conversion.
Yet, one can identify two general trends (which may or may not apply to a particular organization), which I will state here in their ideal form. First, some organizations attempt to create a hybrid organization which contains completely separate components – one that strictly follows the rules of a 501(c)(3) and another that adheres to the 501(c)(6) rules. This alternative will require separate application forms and fees, but it may give the most flexibility to the Board of Directors (assuming the IRS grants the requested status).
On the other hand, as a second alternative, a lot of organizations opt to create a new organization altogether in order to avoid legal complications. The idea here is that the members of the Board of the old corporation will form the majority of the members of the Board of the new corporation. Beware, while this alternative may solve one type of legal complications, it may actually bring a host of others.
Conclusion
Conversion from one tax-exempt classification to another can be very complex and usually requires an in-depth knowledge of the Internal Revenue Code, IRS regulations and case law. Therefore, you will need to consult an experienced attorney familiar with both business and tax aspects of these issue.
If you have any questions concerning tax-exempt classifications of non-profit corporations, contact Sherayzen Law Office for legal help. Our experienced tax firm can assist you in resolving any problems in this area of law.

### Offshore Voluntary Disclosure Program 2012: Impact of Form 8938
The announcement by the IRS of the opening of the new Offshore Voluntary Disclosure Program (OVDP) on January 9, 2012 (now closed) came as a surprise to most tax practitioners, especially since the 2011 OVDI just ended on September 9, 2011. Yet, if one analyzes the number of new developments in international tax compliance over the past several years, then the surprise of the announcement of a new offshore voluntary disclosure program is greatly reduced.
One of these latest developments is the new Form 8938, which was born out of the passage of FATCA (Foreign Account Tax Compliance Act). In this article, I will analyze some of the key aspects of the interaction between Form 8938 and OVDP 2012.
Link between OVDP 2012 and Form 8938
In an earlier article, I already described the main features of the OVDP 2012. In announcing the OVDP 2012, IRS cited several reasons for announcing the new voluntary disclosure program for U.S. taxpayers with offshore assets, particularly the success of the previous programs and the mountain of information gathered by the IRS which would allow it to investigate (and ultimately penalize and/or prosecute) additional non-compliant U.S. taxpayers as well as Swiss bankers. Some international tax attorneys elaborated on the IRS motivation as well as added some of their own reasoning.
Yet, among all of these reasons, most international tax attorneys completely omitted even mentioning the new Form 8938. Yet, in my opinion, Form 8938 is likely to play a very important role in driving additional U.S. taxpayers toward OVDP 2012.
Form 8938's Impact on Foreign Asset Disclosure Structure
The main reason for Form 8938's potentially profound impact on OVDP 2012 participation lies in the nature of Form 8938.
As I explained in an earlier article, Form 8938 is a fundamental tool for the IRS to identify the scope of international tax non-compliance of a given U.S. taxpayer. It is very important to understand the reason why Form 8938 is so useful for the IRS. It is not only because Form 8938 now requires a taxpayer to disclose more information, but, rather, because Form 8938 connects various parts of a taxpayer’s international tax compliance including the information that escaped disclosure on other forms earlier. This summary, in turn, allows the IRS to identify the overall scope of a taxpayer’s noncompliance in an efficient manner. Moreover, compliance with Form 8938 may lay the foundation for an IRS investigation of whether the taxpayer has been in compliance previously.
Compliance With Form 8938 May Force Taxpayers to Enter a Voluntary Disclosure Program
This ability by the IRS to discern whether the areas of actual or potential non-compliance in current as well as prior years puts previously non-compliant taxpayers in a highly uncomfortable position.
For example, suppose that taxpayer T was previously non-compliant with respect to reporting his foreign bank accounts because he did not know anything about the FBAR. Since Form 8938 is filed together with the tax return, T will have to go through a voluntary disclosure of some type because failure to file Form 8938 at this point is likely to turn his previous non-willful non-compliance into a willful one.
Similarly, suppose T was did not report his ownership of a business entity because he classified the entity as a partnership (assuming at this point that it is not a “controlled partnership”) instead of as a corporation. Prior to Form 8938, it was unlikely that the IRS would challenge this classification because the partnership ownership was never disclosed. However, with Form 8938, T will have to disclose his partnership ownership drawing IRS attention to the classification issue. T will have to consult Sherayzen Law Office in order to figure out what is the best course of action to deal with this dilemma.
Thus, as the examples above demonstrate, Form 8938 is likely to have a profound impact on the number and depth of voluntary disclosures as taxpayers are forced to re-evaluate their tax compliance strategies.
It is important to emphasize that the impact of Form 8938 on your particular situation should be analyzed separately by an international tax attorney. This article can only provide a very general background, because the exact strategies, including the optional enrollment into OVDP 2012, will differ from situation to situation.
Contact Sherayzen Law Office for Legal Help With U.S. Tax Compliance Issues
If you have any questions with respect to Form 8938, OVDP 2012, and any other international tax compliance issues, contact Sherayzen Law Office. Our experienced international tax firm will guide you through the complex web of international tax requirements, identify potential problem areas, create a plan of action to deal with these problems, and implement a plan while providing zealous ethical IRS representation.

### Choosing The Right Offshore Voluntary Disclosure Attorney
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### Impact of Form 8938 on the International Tax Compliance Structure
The new IRS Form 8938 is not just another tax form that a taxpayer needs to file. Its reach and impact on taxpayer compliance and IRS ability to verify it are far more profound.
Yet, while the addition of Form 8938 to the long list of international tax compliance forms has created a burst of interest among various international tax attorneys (as evidenced in their writings), a very important assessment of the impact of Form 8938 on the rest of the IRS international tax compliance structure appears to be missing in these writings. It is this crucial strategic aspect of the new Form that I wish to address in this article.
Pre-8938 Structure of the IRS International Tax Compliance Requirements
In order to assess the impact of the IRS Form 8938 on the rest of the international tax compliance requirements, it is necessary to briefly explore the pre-8938 (or pre-FATCA (Foreign Account Tax Compliance Act) international tax compliance structure.
Prior to Form 8938, the IRS has already imposed a tremendous variety of reporting requirements on U.S. taxpayers with economic ties to the overseas. First and foremost, the FBAR (the Report on Foreign Bank and Financial Accounts) already forced the disclosure of the foreign bank and financial accounts which are either owned by the U.S. taxpayers or over which these taxpayers have signatory or other authority. Moreover, the FBAR disclosure is tied to the taxpayers’ tax returns through Section III of Schedule B.
From the business side, the IRS required the taxpayers to file a relevant tax form if to report partial or full ownership of a business entity (or if the taxpayer were a director or officer of such entity), including a disregarded business entity. The most prominent examples are Forms 5471, 8865, and 8858. On top of that, Form 3520 and 3520-A address foreign trust ownership and income issues.
Then, there are numerous other reporting requirements addressing such diverse issues as foreign gifts and inheritances, PFIC (Passive Foreign Investment Company) income, Controlled Foreign Corporations, and so on.
In essence, the IRS managed to cover huge areas of international economic activity with various forms and regulations. Moreover, in the past decade, all of these forms were supported by a radical, almost atrocious, increase in penalties in case of non-compliance.
Main Enforcement Problem With Pre-8938 Structure
If the IRS had all of these tools before FATCA, why did the IRS then need any additional forms?
A careful analysis reveals that, despite the presence of the multitude of various forms, it is still not easy to spot a taxpayer’s non-compliance or address all of the non-compliance issues in a given situation for one important reasons – these forms are not connected. Prior to FATCA, there was no form that would allow the IRS to immediately assess the extent of a taxpayer’s non-compliance.
Moreover, despite the number of various tax compliance forms, a lot of information still escaped the IRS. For example, suppose that T (a U.S. taxpayer) owns 15 percent of a business entity B in a country X; other owners are not U.S. taxpayers under any definition. Let us further suppose that business entity B possesses characteristics of a corporation and of a partnership. Assuming all other conditions are met, if B is a foreign corporation, then T would have to file Form 5471. However, if B is a partnership (and assuming all other conditions are met), T would not have to file Form 8865. T was able to classify it as a partnership for U.S. tax purposes, therefore, he needs to file neither Form 5471 nor 8865, leaving the IRS with no information (again, assuming this information would not fall under any other reporting requirement) of T’s foreign business ownership.
Form 8938 is a “Catch-All” Form That Fixes Enforcement Problem for the IRS
This is where Form 8938 comes in. In an example above, the Form 8938 may potentially force T to disclose the ownership information that did not need to be disclosed on Form 8865. If T is particularly unlucky, the IRS may decide to challenge his classification of the business entity, require him to file Form 5471 and impose non-compliance penalties under Form 5471.
This is just one possible scenario. In fact, Form 8938's reach is far more ambitious – it is the catch-all form that the IRS desired so much. The Form is directly tied to Forms 3520, 3520-A, 5471, 8621, 8865 and 8891. Moreover, it forces the taxpayers to re-state their foreign bank and financial accounts that should be reported on the FBAR, thereby allowing the IRS to identify with ease if a taxpayer has not complied with the FBAR requirements. Then, it imposes additional reporting requirements that may potentially expose any other taxpayer non-compliance (as in example above).
If that were not enough, failure to file Form 8938 will render the filing of a tax return incomplete, keeping the Statute of Limitations open until the Form is actually filed.
Impact of Form 8938: Breeding Ground for IRS Audits
Thus, Form 8938 is not just another tax compliance form. Rather, it is a fundamental, crucially-important tool which the IRS needs in order to effectively identify potential taxpayer non-compliance.
Hence, the most likely consequence of Form 8938 will the commencement of numerous IRS audits and investigations (which will also feed on the mountain of information obtained by the IRS through various voluntary disclosure programs) of the potentially non-compliant taxpayers. I also expect that the IRS ability to identify and challenge problematic classifications will be increased manifold.
Contact Sherayzen Law Office for Help With Form 8938
If you need help with Form 8938 or you are worried about your tax compliance exposure in light of Form 8938 or any other form, contact Sherayzen Law Office. Our experienced international tax firm will guide you through the complex web of international tax requirements, identify potential problem areas, create a plan of action to deal with these problems, and implement the plan while providing zealous ethical IRS representation.

### Form 5472: Basic Information
The focus of this article is to provide some basic information on the IRS Form 5472, an Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business.
The purpose of Form 5472 is to provide information required by the IRS when "reportable transactions" occur during the tax year of a "reporting corporation", with a foreign or domestic related party. In general, “reportable transactions” are defined to mean certain types of transactions listed in part IV of the form (such as sales, rents, royalties, interest), for which either monetary consideration was the sole consideration paid or received during the reporting corporation’s tax year, or if any part of the consideration paid or received was either not monetary consideration, or was less than full consideration.
“Reporting companies” that generally are required to file Form 5472 include both: 25% foreign-owned U.S. corporations and foreign corporations engaged in a trade or business within the United States.  Broadly speaking, the 25% ownership requirement is meant to apply to a foreign person who owns either directly or indirectly 25% of a US corporation, but not to multiple foreign persons owning only 25% in the aggregate.  However, the related party rules apply to determining ownership.  In certain situations, filing of Form 5472 may not be necessary if applicable exceptions are met.
For those required to file, Form 5472 must be filed with the reporting corporation's tax return.  The IRS may consider a substantially incomplete Form 5472 to constitute a failure to file the Form.  For each foreign or domestic related party with which a reporting corporation had a reportable transaction during its tax year, a separate Form 5472 must be filed.  The IRS recently issued temporary and proposed regulations with the intent to remove a requirement under existing regulations mandating duplicate filing of the form.
Contact Sherayzen Law Office for Legal Help With Form 5472
If you have any legal or tax questions about Form 5472, contact Sherayzen Law Office for professional help.  Our experienced international tax firm will help you determine your 5472 filing requirements as well as assist you in properly completing the form.

### Enterprise Value Tax Proposal
As the United States government has increasingly searched for needed revenues, and some members of Congress have called for higher taxes on hedge fund managers and various other new tax proposals have been suggested.  One such proposal is the "Enterprise Value Tax", which passed in the House of Representatives in 2010 (as part of “H.R. 4213, the "American Jobs and Closing Tax Loopholes Act”),  and was included in the "American Jobs Act" of 2011, recently submitted to Congress late last year.
While there has been various demands for Congress to address the "carried interest"  tax advantages that private-equity, venture-capital, and certain hedge fund managers enjoy, the proposed Enterprise Value Tax (EVT) takes a slightly different form.  While some have argued that such a tax is necessary for raising revenues, critics have objected that the proposal leads to onerous taxes that will impede investment and entrepreneurship.
Under the EVT (proposed IRC Section 710), investment management partnerships (such as private equity, venture capital, hedge fund firms, or certain real estate investment groups) would be taxed at ordinary income rates, rather than at capital gains rates, for the net proceeds from sales of "investment services partnership interest".  In general, an investment services partnership interest is defined to be any interest (direct or indirect) in an investment partnership, acquired or held by a person who in the conduct of an active trade or business provides a substantial quantity certain services (such as managing, purchasing, selling, and advising, among others) related to "specified assets" held by the partnership.  Specified assets include items such as partnership interests, securities and real estate holdings.
In other words, unlike the standard capital gains tax rates applicable to almost all other sales of assets  of a business, under the EVT, sales by partnerships targeted by this proposal would be taxed at ordinary income rates.
Will the EVT, or some variation of it, eventually be part of the Internal Revenue Code?  Only time will tell.  But anyone subject to these new requirements may want be on the alert for that possibility.

### Differences between 501(c)(3) and 501(c)(6) Organizations
Are you thinking of creating a tax-exempt organization under federal income tax law? Tax-exempt organizations can provide extraordinary benefits to their members and society, but forming such organizations may entail significant knowledge of the law, as well as the ability to pay expensive application fees.
In this article I will briefly explain the basic differences between two common types of tax-exempt organizations, 501(c)(3) and 501(c)(6).
General Rules of Tax-Exempt Organizations
In general, net earnings may not inure to the benefit of individuals or private shareholders under either a 501(c)(3) or a 501(c)(6). Form 990 (Return of Organization Exempt From Income Tax) is the standard annual return required to be filed (and other forms, such as Form 990-EZ may be filed, depending upon size or characteristics of the organization).
In order to be granted tax-exempt federal income status, organizations must demonstrate when applying to the IRS that they meet various applicable tests. The rest of this article will explore some of the basic differences between 501(c)(3)'s and 501(c)(6)'s when it comes to these rules, such as the general purpose, and common interest requirements, as well as the advantages and disadvantages such organizations may have when it comes to tax deductions and influencing legislation through lobbying.
General Purpose – 501(c)(6)
Typically, a 501(c)(6) organization must demonstrate that improvement of business
conditions is the general purpose of the organization (this information should be included with the application form). The improvement of business conditions should relate to one or more "lines of business", rather than the performance of "particular services" for individual persons. A line of business commonly refers to either a certain geographic area's entire industr, or to all of its components of an industry, but would not include a group comprised of businesses that market a particular brand within an industry. Performance of particular services such as advertising that carries the name of members, interest-free loans, assigning exclusive franchise areas, operation of a real estate multiple listing system, or operation of a credit reporting agency, are examples of what would not be sufficient to show an improvement in business conditions.
General Purpose – 501(c)(3)
In contrast, 501(c)(3)'s include entities organized for charitable, educational, religious, literary, scientific, or other limited (such as amateur athletic organizations, or prevention of cruelty to children or animals) purposes.
Common Interest – 501(c)(6)
A 501(c)(6) organization must be able to show in the application documents that a common business interest of the community, or the conditions of a particular trade, will be advanced. Some examples as noted by the IRS of a common business interest would be: promotion of higher business standards and better business methods and encouragement of uniformity and cooperation by a retail merchants association; education of the public in the use of credit; establishment and maintenance of the integrity of a local commercial market; and encouragement of the use of goods and services of an entire industry. Some examples of membership associations include chambers of commerce, real estate boards, boards of trade, or professional sports leagues. Form 1024 is filed to apply for tax-exempt status for such organizations.
Common Interest – 501(c)(3)
Unlike a 501(c)(6), owners of a 501(c)(3) generally do not need to share a common interest. Form 1023 is filed to apply for tax-exempt status for such 501(c)(3) organizations.
Tax Deductions for Donations – 501(c)(6)
Contributions to 501(c)(6) organizations are not deductible as charitable contributions on a donor's federal income tax return. However, donations may be deductible provided that they are ordinary and necessary trade or business expenses in the conduct of the taxpayer's business.
Tax Deductions for Donations – 501(c)(3)
In contrast to 501(c)(6) organizations, taxpayers may deduct gifts, cash, or other items as charitable deductions to 501(c)(3) organizations on their federal income tax returns.
Lobbying – 501(c)(6)
501(c)(6) organizations are allowed to engage in substantial lobbying activities in order to attempt to influence legislation. However, 501(c)(6) organizations may need to disclose to their members the percentage of annual dues paid related to lobbying.
Lobbying – 501(c)(3)
In contrast, lobbying activities are significantly limited for 501(c)(3) organizations. If it is determined that an organization engages in a substantial part of its activities in lobbying, it may risk the loss of its tax-exempt status. An organization will be considered to be attempting to influence legislation, “[I]f it contacts, or urges the public to contact, members or employees of a legislative body for the purpose of proposing, supporting, or opposing legislation, or if the organization advocates the adoption or rejection of legislation."
Depending upon the facts, it may be possible for a tax-exempt organization to have a separate components (such as entity having separate 501(c)(3) and 501(c)(6) components) in order maximize allowable lobbying, or other, activities. But both components would need to go through separate application processes in order for this to occur.
In future articles, we will cover the possibility of converting a tax-exempt organization into a different type of tax-exempt entity. However, this process, like the application process can be complex, and an experienced attorney is often necessary.
Contact Sherayzen Law Office for Tax and Business Questions About 501(c) Organizations
Due to the complexity of the topic, this article only provides a very general background to the differences about these two common types of 501(c) organizations, and it should not be relied upon to make a decision in your particular situation. If you have any further questions with respect to 501(c) organizations, please contact Sherayzen Law Office for legal and tax help.

### IRS Tax Gaps Estimates Show Taxpayers owe $385 Billion in 2006 Taxes
The Internal Revenue Service recently released new "tax gap" estimates for tax year 2006, showing that taxpayers owe $385 Billion (an increase of about 1/3 over the tax gap from tax year 2001).  The tax gap is defined as the amount of tax liability owed by taxpayers that is not timely paid.
The tax gap is divided into three components: non-filing, underreporting and underpayment.  Most of the increase in the tax gap from tax years 2001-2006 occurred in underreporting and underpayment; in the non-filing segment, the numbers were largely unchanged.
Underreporting in 2006, as in 2001, was the largest contributing factor to the tax gap, increasing to $376 billion (and $67 billion on corporate income taxes) from $285 billion five years earlier.  Underpayment of tax in 2006 increased to $46 billion, up from $33 billion in 2001.  Non-filing accounted for $28 billion in 2006, up a billion from five years before.
Despite the increase in the tax gap over the five years, the voluntary compliance rate (the percentage of total tax revenues paid on a timely basis) stayed almost statistically unchanged, at around 83%.
The 2006 gross tax gap (the amount that was not timely paid), was estimated at $450 billion, an increase from $345 billion in 2001.  The 2006 net tax gap, (the amount of tax that was never paid), was $385 billion, up from $290 billion from five years earlier.

### IRS Declares New 2012 Offshore Voluntary Disclosure Program
On January 9, 2012, the Internal Revenue Service announced that it opens another offshore voluntary disclosure program - 2012 Offshore Voluntary Disclosure Program or 2012 OVDP - to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.
The IRS opened the 2012 OVDP following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced. Program was closed in 2018.
“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”
The 2012 OVDP is similar to the 2011 OVDI program in many ways, but with a few key differences. First, unlike the last year, there is no set deadline for people to apply. Second, while the 2012 OVDP penalty structure is mostly similar to the OVDI program, the taxpayers in the highest penalty category will suffer from a hike in the penalty rate – the new penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011. Third, participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. Fourth, as under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.
The important details of the 2012 OVDP are still going to be announced by the IRS later.  It is important to emphasize, however, that the terms of the 2012 OVDP could change at any time going forward. For example, the IRS may increase penalties in the 2012 OVDP for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.
The IRS also stated that it is currently developing procedures by which dual citizen taxpayers, who may be delinquent in filing but owe no U.S. tax, may come into compliance with U.S. tax law.
“As we’ve said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”
This offshore effort comes as Shulman also announced today the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program. That number will grow as the IRS processes the 2011 cases.
In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures. Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new 2012 OVDP program.
Contact Sherayzen Law Office for Legal Help With Your Voluntary Disclosure
If you are currently not in compliance with U.S. tax laws, contact Sherayzen Law Office for legal help. Our experienced international tax firm will explore all of the available options, advise you on the best course of action, draft all of the required documentation, provide IRS representation, and conduct the necessary disclosure to bring your affairs tax affairs into full compliance with U.S. tax system.

### Social Security Wage Base Increase in Tax Year 2012
In November of 2011, the Social Security Administration announced that the wage base (also known as “contribution and benefit base”) used for computing the social security tax is increased to $110,100 in the tax year 2012.  The wage base is used to compute the maximum amount of income subject to the Social Security taxes.
This is the first increase since 2009.  From 2009 through 2011, the wage base was $106,800.
Similarly, the earnings needed to earn one Social Security credit also slightly increased to $1,130 in 2012 (in 2011, it was $1,120).

### IRS Extends the 2011 Tax Return Filing Deadline to April 17, 2012
On January 4, 2012, the Internal Revenue Service announced that the taxpayers will have until  April 17, 2012 (Tuesday) to file their 2011 tax returns and pay any tax due.  This is because April 15, 2012, falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16, 2012.  Since, according to federal law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do, all taxpayers will have two extra days this year to file their 2011 tax returns.  Note, however, that taxpayers requesting an extension will have until October 15, 2012, to file their 2011 tax returns; there is no change in the filing date here.
The IRS will begin accepting e-file and Free File returns on January 17, 2012. Additional details about e-file and Free File will be announced later this month.

### Limitations to the Non-Recognition Rules for Asset Transfers to Foreign Corporations
Are you thinking of transferring appreciated property to a foreign corporation in order to utilize the corporate "non-recognition" rules, and to possibly avoid further US taxes? You should be aware that while in certain circumstances it is feasible to transfer such property in order to properly run a business, there are many limitations placed upon the ability of US persons to do so when transfers to foreign corporations are involved. This article will briefly explain these limitations under section 367, and its subsections.
The Corporate Non-Recognition Rules
Under the IRS non-recognition rules, C corporations can generally avoid taxation on certain transfers of appreciated property when a corporation is formed (IRC section 351), reorganized (IRC sections 354, 355, or IRC 361), or liquidated (IRC section 332). These rules thus constitute an exception to the general corporate tax rule that sales or exchanges of property by taxpayers is a taxable event.
However, the corporate non-recognition rules are limited under IRC Section 367 when property is transferred by or to foreign corporations.
IRC Section 367
IRC Section 367 was enacted in order to prevent US taxpayers from avoiding US taxes by transferring assets to controlled foreign corporations when such an entity is formed, reorganized, or liquidated under the corporate non-recognition provisions. The section specifies that a foreign entity will not be considered to be a "corporation" for the purposes of IRC Sections 332, 351, 354, 356, and 361.
The following paragraphs will briefly describe some of the subsections of section 367.
IRC Section 367(a)
Section 367(a) limits the ability of US persons to transfer appreciated property (such as stock, assets, or certain other property) to foreign corporations in a corporate reorganization to avoid US taxes, and then sell the appreciated property outside of the U.S. tax jurisdiction. Unless a transferor qualifies for an exception, section 367(a) generally treats an exchange of certain property (under sections 351, 354, 356 or 361) by a U.S. person to a foreign corporation as a taxable exchange. These exchanges are commonly termed as "outbound transfers".
The IRC generally grants an exception to outbound transfers of assets (other than stock) if the assets are to be used in the active conduct of a trade or business outside the United States.
IRC Section 367(b)
IRC section 367(b) is primarily intended to monitor the earnings and profits of a controlled foreign corporation. The subsection IRC provides that, "[I]n the case of any exchange described in IRC sections 332, 351, 354, 355, 356 or 361 in connection with which there is no transfer of property described in IRC section 367(a)(1), a foreign corporation shall be considered to be a corporation except to the extent provided in regulations prescribed by the Secretary which are necessary or appropriate to prevent the avoidance of Federal income taxes". Additionally, there are proposed regulations under this section addressing the carryover of earnings and profits and taxes.
IRC Section 367(d)
Outbound transfers of intangible assets are covered under subsection 367(d), and not the more general subsection 367(a). Under this subsection, if a U.S. person transfers an intangible asset to a foreign corporation (in an exchange described in IRC section 351 or 361), the tax effect is to treat the intangible asset as having been exchanged for contingent (royalty) payments. The contingent payments (for a period of no more than 20 years) must be commensurate with the income attributable to the intangible transferred.
US persons subject to this subsection must report the exchange in accordance with IRC section 6038B, or be subject to penalties, as well as an extended statute of limitations under IRC section 6501(c)(8).
IRC Section 367(e)
Under Section 367(e), if a US corporation distributes the stock of a foreign corporation to a foreign person in a distribution described in IRC section 355 ("Distribution of stock and securities of a controlled corporation"), gain on the distribution will be taxable to the distributing corporation under IRC section 367(e)(1); however, the distribution of the stock of a domestic corporation by a US corporation to a foreign person under section 355 would not generally be taxable under IRC Section 367(e). The tax liability of the foreign person is unaffected by this section.
Furthermore, under IRC section 367(e)(2), if a U.S. corporation is liquidated into a foreign parent corporation under IRC section 332, the U.S. corporation will be treated as if it sold its assets in a taxable transaction (i.e. IRC section 337(a) and (b)(1) will not be applicable), except as provided by regulations.
Additional Related Reporting Requirements
It is important to remember that IRC Section 367 requires various IRS reporting requirements, collectively known as “367 Notices”. Moreover, certain outbound transfers by U.S. persons may require the filing of Form 926. Other IRS reporting requirements may apply depending on your particular fact pattern.
Contact Sherayzen Law Office for Legal Help With Transferring of Appreciated Property to Foreign Corporations
This article provides only a very general overview of the IRC Section 367; however, the subject matter is much more complex and depends on constantly changing IRS regulations. Therefore, this article does not offer legal advice and should NOT be relied upon in determining your particular tax situation.
If you (or the entities that you control or partially-own) are planning on transferring tangible and intangible property to a foreign entity, contact Sherayzen Law Office for professional legal assistance in this obscure and highly complicated international tax matter. Our experienced international tax firm will guide you through the complex web of international tax rules in order to best structure your international business and tax transactions as well as help you comply with the numerous relevant IRS reporting requirements.

### Current Basic Estate and Gift Tax Rules
With the new year upon us, it's a good time to review the federal estate and gift tax rules in order to utilize them to their maximum effect. Taxpayers should also be aware that certain beneficial gift and estate tax laws may expire at the end of this year and revert back to the pre-Economic Growth and Tax Relief Reconciliation Act of 2001 laws if Congress does not extend them, so taxpayers may also want to consider this when making decisions. This article will briefly explain some of the most basic current federal estate and gift tax rules, and highlight some of the laws that may sunset at the end of 2012.
Unified Federal Estate and Gift Tax Exemption
The unified federal estate and gift tax exemption for estates of individuals who die in 2012, or who make gifts this year is $5.12 million per spouse. For 2011, the unified federal estate and gift tax exemption was $5 million per spouse.
If Congress does not extend the unified gift and estate tax exemption, it will automatically be reduced to $1 million beginning 2013. Taxpayers who may be subject to gift and estate taxes at such levels should thus take heed.
Federal Estate and Gift Tax Rates
Currently, both the estate and gift tax rates are a flat 35%. If Congress does not extend these rates, the estate tax rates will begin at 41%, and reach a maximum of 60% in certain cases (55% top rate plus a 5% surcharge on estates over a statutory amount), and the gift tax will have a maximum 55% rate. The Generation-Skipping Transfer (GST) tax rate will also revert to a 55% rate (up from the current 35% rate).
Portable Exemptions
Under current tax law, surviving spouses of married individuals who die in 2011 or 2012 may use federal estate and gift tax exemptions that their spouses did not take during their lives. However, the ability of taxpayers to use portable exemptions will also sunset at the end of this year if Congress does not extend them. Thus, taxpayers who may be facing estate and/or gift taxes may want to keep this in mind when planning if such unfortunate events occur.
Contact Sherayzen Law Office For Help With Your Estate and Tax Planning 
Obviously, this article only provides a very small amount of some of the basic gift and estate tax rules currently in place. It does not offer any type of legal advice and should not be relied upon in determining your particular tax position. Please contact our experienced tax office for legal help with your estate and tax planning.

### Last Estimated Tax Payments for the Tax Year 2011 are Due on January 17, 2012
Estimated tax payments for the fourth-quarter of 2011 are due on January 17, 2012. The estimated tax payments should be made using Form 1040-ES. Note, if the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if it is made on the next business day.
This is the last chance to make the payment of estimated taxes for the tax year 2011.

### Baindurashvili v. Helpful Hands Transportation, Inc., No. A11-60, Unpub. (Minn. Ct. App. 11/21/2011) (A case recently won by Sherayzen Law Office)
This is a copy of the Minnesota Court of Appeals unpublished opinion in the case recently won by Mr. Eugene Sherayzen, the owner of Sherayzen Law Office, on November 21, 2011.
 
This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2010).
STATE OF MINNESOTA
IN COURT OF APPEALS
A11-60
Avtandil Baindurashvili,
Respondent,
Vyacheslav Kirkov,
Respondent,
vs.
Helpful Hands Transportation, Inc.,
Relator,
Department of Employment and Economic Development,
Respondent.
Filed November 21, 2011
Reversed and remanded
Kalitowski, Judge
Department of Employment and Economic Development
File Nos. 25886858-3, 26006922-4
Avtandil Baindurashvili, Crystal, Minnesota (pro se respondent)
Vyacheslav Kirkov, Burnsville, Minnesota (pro se respondent)
Eugene A. Sherayzen, Minneapolis, Minnesota (for relator)
Lee B. Nelson, Amy R. Lawler, Department of Employment and Economic Development, St. Paul, Minnesota (for respondent Department of Employment and Economic Development)
Considered and decided by Stoneburner, Presiding Judge; Kalitowski, Judge; and
Peterson, Judge.
U N P U B L I S H E D   O P I N I O N
KALITOWSKI, Judge
In this certiorari appeal, relator transportation company challenges the determination by an unemployment-law judge (ULJ) that respondents, drivers who transported patients for relator, were employees rather than independent contractors and accordingly were eligible for benefits under the unemployment-benefits laws.  Relator argues:  (1) the ULJ’s findings do not support a determination that respondents were employees; (2) the ULJ erred by failing to follow the structural framework set forth in Minn. R. 3315.0555 (2009); and (3) the ULJ’s decision was arbitrary and capricious.  Because the ULJ made findings that are inconsistent with a determination of employee status and failed to follow the analytic structure of Minn. R. 3315.0555, we reverse and remand.
D E C I S I O N
Respondents Avtandil Baindurashvili and Vyacheslav Kirkov worked as drivers for  relator Helpful Hands Transportation, Inc. (Helpful Hands) from 2003 and 2007, respectively, until June 2010.  Helpful Hands contracts with insurance companies to provide nonemergency medical transportation and hires drivers to transport patients. Prior to 2009, Helpful Hands classified drivers as employees.  In April 2009, Helpful Hands began to treat drivers as independent contractors.
Baindurashvili and Kirkov applied for unemployment benefits after their separations from Helpful Hands.  Respondent Department of Employment and Economic Development (DEED) conducted an audit and determined that the drivers were employees for purposes of unemployment-benefits law.  Helpful Hands appealed the determinations and the matters were consolidated for a telephone hearing before the ULJ. The ULJ determined that Baindurashvili and Kirkov were employees of Helpful Hands.
Employers must contribute to the unemployment trust fund based on wages paid to employees.  See Minn. Stat. § 268.035, subd. 25 (2010).  But payments to independent contractors do not constitute wages under Minnesota unemployment law.  Nicollet Hotel
 Co. v. Christgau, 230 Minn. 67, 68, 40 N.W.2d 622, 622-23 (1950).
Whether an individual is an employee or an independent contractor is a mixed question of law and fact.  Nelson v. Levy, 796 N.W.2d 336, 339 (Minn. App. 2011).  This court reviews a ULJ’s factual findings in the light most favorable to the decision and will not disturb them if sustained by substantial evidence.   Skarhus v. Davanni’s Inc., 721 N.W.2d 340, 344 (Minn. App. 2006).   Questions of law are reviewed de novo.  Ywswf v. Teleplan Wireless Servs., Inc., 726 N.W.2d 525, 529 (Minn. App. 2007).
Five factors are used to determine whether a worker is an employee or an independent contractor:  “(1) The right to control the means and manner of performance; (2) the mode of payment; (3) the furnishing of material or tools; (4) the control of the premises where the work is done; and (5) the right of the employer to discharge.”  Guhlke v. Roberts Truck Lines, 268 Minn. 141, 143, 128 N.W.2d 324, 326 (1964) (codified at Minn. R. 3315.0555, subp. 1).  Of these five factors, the two most important are “the right or the lack of the right to control the means and manner of performance,” and the right or the lack of the right “to discharge the worker without incurring liability.”  Minn. R. 3315.0555, subp. 1.   Subpart 3 sets forth  criteria to be considered when evaluating whether the right to control the means and manner of performance exists.  Minn. R. 3315.0555, subp. 3.  Subpart 2  provides additional factors that may be considered if analysis of the five essential factors is inconclusive.  Minn. R. 3315.0555, subp. 2.
Helpful Hands argues that the ULJ’s findings of fact as to the issue of control are contradictory and  inconsistent with his  ultimate conclusion  that the drivers are employees.  We agree.  The ULJ found,
A  driver, usually the driver in the most convenient location who is available, is contacted the day the service is needed and asked if he is able and willing to accept the assignment. If the driver declines, another driver is contacted. . . . [Helpful Hands] does not dictate how a driver does his job or what  route is driven and it does not require drivers to work specific hours.
The ULJ concluded, “ultimately there is little if any control to be had over how the actual transport is conducted.”  These findings suggest that Helpful Hands did not retain the right to control the drivers’ means and manner of performance and tend to support
independent-contractor status.
The ULJ did make other findings of fact that weigh in favor of employee status. But if the ULJ determined that other factors in the  Minn. R. 3315.0555 analysis outweighed these findings on the issue of control, explanation was necessary.  Because the ULJ failed to set forth  such  analysis, we are unable to review  the decision to determine whether it is supported by substantial evidence.   See Minn. Stat. § 268.105, subd. 7(d) (2010) (providing that this court may reverse or modify the decision of a ULJ if a party has been prejudiced by findings, inferences, conclusions or decisions that are unsupported by substantial evidence in view of the entire record as submitted).
We do not suggest that all factual findings relating to the factors in Minn. R. 3315.0555 must support the final determination of worker status.  Indeed, the various factors may  tend to support either determination and may be inconsistent with one another.  See St. Croix Sensory, Inc. v. Dep’t of Emp’t & Econ. Dev., 785 N.W.2d 796, 800-04 (Minn. App. 2010) (finding that some factors indicated control and an employment relationship, while others indicated a lack of control and an independentcontractor relationship, and holding that on the totality of the circumstances the workers were independent contractors).   But there must be a logical link between the findings on the important factor of the right to control the means and manner of performance and the ultimate conclusion.
Helpful Hands next argues that the ULJ failed to follow the analytic framework set forth in Minn. R. 3315.0555.  We agree.  The ULJ determined that analysis of two of the essential factors—the right to control the means and manner of performance and the right to discharge without incurring liability—was inconclusive but did not make a finding as to whether analysis of all five essential factors was inconclusive before addressing the additional factors.  See Minn. R. 3315.0555, subp. 1 (providing that if the five essential factors of subpart 1 are inconclusive, the additional factors of subpart 2 should be considered).  The ULJ also considered certain subpart 3 criteria as stand-alone factors and thus did not properly weigh them in his analysis of control of the means and manner of performance.  See id. at subp. 3 (setting forth “criteria for determining if the employer has control over the method of performing or executing services”).
Finally, Helpful Hands contends that the ULJ’s decision is arbitrary and capricious because the ULJ relied on a factor—the importance of the worker to the company—that is not included in Minn. R. 3315.0555.  We disagree.  An agency ruling is arbitrary and capricious if the agency relied on factors not intended by the legislature.   Citizens Advocating Responsible Dev. v. Kandiyohi Cnty. Bd. of Comm’rs, 713 N.W.2d 817, 832 (Minn. 2006).  The ULJ’s discussion of the importance of the drivers to Helpful Hands’s business informed the ULJ’s analysis of whether the workers’ activity was performed in the course of the employer’s business.  Minn. R. 3315.0555, subp. 2H includes whether services are performed in the course of the employer’s business as an additional factor in the worker-status analysis, and provides,  “services  which  are a part or process of the employer’s trade or business are generally performed by individuals in employment. . . . Process refers to those services which directly carry out the fundamental purposes for which the organization, trade, or business exists . . . .”  The ULJ’s consideration of the importance of the drivers to the company did not depart from the rule and was  not arbitrary and capricious.
In conclusion, we reverse and remand for findings of fact and conclusions of law consistent with this opinion in such proceedings as the ULJ deems appropriate.
Reversed and remanded.

### Eugene Sherayzen, Esq. Wins a Minnesota Court of Appeals Case
On November 21, 2011, the Minnesota Court of Appeals ruled in favor of Helpful Hands Transportation, Inc. (HHT) – the client of Sherayzen Law Office – and reversed the unemployment law judge’s (ULJ) determination that HHT’s workers should be classified as employees. Judge Kalitowski wrote the opinion.  Two respondents were listed as “pro se”, but the opinion of the ULJ was defended by Minnesota Attorney General’s Office on behalf of the Department of Employment and Economic Security (DEED). Mr. Eugene Sherayzen represented our client throughout the case.
At the center of the issue was whether the ULJ erred in its determination that HHT’s workers were employees.  Mr. Sherayzen’s chief arguments were: (1) the ULJ’s factual findings are inconsistent with his legal conclusion, and (2) the ULJ failed to follow the analytical framework of Minnesota Rule 3315.0555.   The Court of Appeals agreed with both arguments and reversed the decision.
A copy of the court opinion will be posted on our website later.
Contact Sherayzen Law Office For Appellate Litigation
If you have a case that you wish to appeal to the Minnesota Office of Administrative Appeals, Minnesota Court of Appeals or Minnesota Supreme Court, contact Sherayzen Law Office.  Our experienced appellate tax firm will assist you in filing the case, constructing efficacious legal arguments, drafting compelling legal briefs,  and zealously representing your interests in applicable courts.

### Form 8938 Penalties
As discussed in an earlier article, Form 8938 is used by specified individuals to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount.
Similarly to most international tax forms issued by the IRS, Form 8938 has its own system of penalties. What makes Form 8938 penalties stand out are the scope of coverage, the severity of penalties, and the effect on the IRS statute of limitations.
A. Scope of Form 8938
Form 8938 is much more intrusive than the now-famous FBARs. While the threshold amount for filing the FBAR is much lower (only $10,000), the type of information requested by Form 8938 is much broader. The FBARs only require disclosure of foreign bank and financial accounts.
Form 8938, however, requires the disclosure not only of the interest held in foreign bank and financial accounts (which may also be somewhat different from the FBAR definition), but also of the interest held in foreign entities and “other foreign financial assets” – the definition of which includes an array of varies types of swaps, contracts, and stocks.
Moreover, Form 8938 directly ties assets disclosed on Forms 3520, 3520-A, 5471, 8621, 8865 and 8891 to the assets that need to be reported on Form 8938 (pursuant to the “duplication” rule, the taxpayers do not need to report on Form 8938 the assets already reported the five aforementioned forms). Therefore, Form 8938 makes it much easier for the IRS to to uncover potential issues with the other six forms (all of which have their own applicable penalty standards).
A word of caution: even if a specified foreign financial asset is reported on any of the six forms listed above, the taxpayer must still include the value of the asset in determining whether the aggregate value of the taxpayer’s specified foreign financial assets is more then the reporting threshold that applies to the taxpayer.
Finally, the IRS can use Form 8938 to analyze if the taxpayer was supposed to file the FBAR and failed to do so (or failed to do so correctly).
Thus, it becomes obvious that Form 8938, which popularly known as a “Son of FBAR”, far excels its father-FBAR in enhancing the IRS capacity to gather additional taxpayer data, use this data for deeper analysis of the taxpayer non-compliance, and imposing civil and criminal penalties on non-compliant taxpayers.
B. Form 8938 Penalties
Form 8938 has a severe penalty system.
1. Failure-to-File Penalty
If the taxpayer is required to file Form 8938, but fails to file a complete and correct Form 8938 by the due date (including extensions), he may be subject to a penalty of $10,000.
If the IRS discovers non-compliance and mails the corresponding notice to the taxpayer, but the taxpayer still does not file Form 8938 within 90 days after the mailing of the notice, additional penalties of $10,000 may be imposed for each 30-day period (or part of a period) of non-compliance after the expiration of the 90-day period. This additional penalty is currently capped at $50,000.
What about the situations where the taxpayer believes that the assets in question are below the threshold amount but the IRS asks the information about the assets in any case? In this case, if the taxpayer fails to respond to the IRS inquiry, the IRS has the power to presume that the taxpayer owns specified foreign financial assets with a value of more than the reporting threshold (even if it is not so in reality). Hence, the IRS can impose failure to file penalties if Form 8938 is not filed.
Common to other forms, Form 8938 instructions provide for the reasonable cause exception. However, to avoid the penalties, the taxpayer must affirmatively show the facts that support a reasonable cause claim. The IRS does not consider the potential imposition of civil and criminal penalties by a foreign jurisdiction as a reasonable cause.
Keep in mind that the married taxpayers who file a joint income tax return have a joint and several liability for all IRS penalties.
2. Accuracy-Related Penalty
While Form 8938 is a purely reporting requirement, it contains a provision related to enhancing the accuracy-related penalties. If the taxpayer underpays his tax as a result of a transaction involving an undisclosed specified foreign financial asset, the IRS may impose a penalty of 40% of the underpayment.
For example, if the taxpayer does not report a foreign pension on Form 8938 and he receives a taxable distribution from the pension plan that he did not report on his income tax return, the taxpayer will be subject to the 40% penalty on the underpayment.
The same would be true with respect to any specified foreign financial asset, including ownership of shares in a foreign corporation or an interest in a foreign partnership.
3. Civil Fraud Penalty
If the taxpayer commits civil fraud which results in non-payment of penalties and involves Form 8938, the taxpayer will be subject to the civil fraud penalty of 75% of the underpayment due to fraud.
4. Criminal Penalties
In addition to civil penalties, the IRS may initiate a criminal prosecution of (and impose criminal penalties on) the taxpayers who fail to file Form 8938, fail to report an asset on Form 8938 or have an underpayment of tax.
C. Form 8938 Effect on the Statute of Limitations
Similar to other FATCA provisions (with respect to Forms 5471, 8621, 8865, et cetera), the IRS greatly extended the statute of limitations for the purposes of Form 8938. Unlike the other forms, however, Form 8938 contains a singular provision without a precedent.
The IRS sets forth this general rule in its instructions: the failure to file Form 8938 or the failure to report a required specified foreign financial asset keeps the statute of limitations open for all or a portion of the taxpayer’s income tax return. Once the correct Form 8938 is filed, the statute of limitations is subject to the common three-year rule (i.e. the IRS has three years to audit the taxpayer’s tax return and assess additional tax and penalties), subject to the aforementioned singular provision.
This provision states that, if the taxpayer does not include in his gross income an amount relating to one or more specified foreign financial assets and this amount is more than $5,000, then the statute of limitations is extend to six years after the taxpayer files a complete tax return that contains Form 8938.
Furthermore, for the purpose of the six-year extended statute of limitations provision, “specified foreign financial assets” include any such asset regardless of: (i) the reporting threshold that applies to the taxpayer, or (ii) whether this asset is excepted from reporting because it was reported on certain other forms (such as Form 5471, 8621, 8865, et cetera).
These provisions constitute an incredible increase in the IRS power to extend the statute of limitations and assess additional tax and penalties on the taxpayers.
Contact Sherayzen Law Office For Legal Help With Form 8938
Given the severe penalties that accompany Form 8938, it is very important that you properly comply with the Form’s requirements. Therefore, if you need to file Form 8938, contact Sherayzen Law Office for legal help. Our experienced international tax compliance firm will guide you through the complex web of the U.S. international tax reporting requirements and assist you in bringing your tax affairs in full compliance with the U.S. tax system.

### New Version of the FBAR Form
In November of 2011, the U.S. Department of the Treasury issued a new version of Form TD F 90-22.1, now known as FinCen Form 114 commonly known as FBAR. All filers must now use this form in order to report their foreign bank and financial accounts.
The main difference between the previous (March 2011) version and the current (November 2011) version is the simplified process of amending the FBARs. However, you can still use the more thorough method described in the FBAR FAQ.
If you are filing the FBARs for previous years (perhaps as part of the voluntary disclosure), you should use the latest FBAR form. While it used to be Ok to use the 2008 version to file FBARs for the prior years, it is becoming doubtful whether the IRS would accept this version at this point. It is highly recommended that the taxpayers use only the latest version of the FBAR.
Any United States 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. Failure to comply with the FBAR requirements carries a very high penalty. Please, visit our Voluntary Disclosure and FBAR Center for details.
Contact Sherayzen Law Office to Comply with FBAR Requirements
If you need any legal help with FBARs, contact Sherayzen Law Office by telephone or email. Our experienced international tax firm will help you resolve all of your FBAR questions and help you comply with all of the FBAR requirements.

### Tax Effect of a Complete Liquidation of a Corporation on Its Shareholders
The tax effects to shareholders of liquidating a corporation are largely governed by IRC Sections 331, 332 (liquidations of subsidiaries) and 338 (dealing with certain stock purchases treated as asset acquisitions). This article will examine only the general tax rule found in Section 331 (keep in mind that there are numerous exceptions and variations depending on your particular tax situation).
In the case of distributions in a complete liquidation of a corporation, IRC Section 331(a) provides that amounts (or assets) received by shareholders shall be treated as "full payment in exchange for the stock". In other words, these amounts (or assets) are deemed as a sale or exchange of assets distributed in return for stock. Therefore, the shareholders will need to recognize gain or loss on the difference between the fair market value of the asset distributed to them and the adjusted basis of the stock that they surrendered.
IRC Section 1101 is the general rule for the amount of gain or loss to be recognized. Pursuant to that section, if the stock is a capital asset to the shareholder, then a capital gain or loss will result. Similar to the general tax rules in a sale or exchange, the basis of the property distributed to shareholders in a complete liquidation will be the fair market value of the property on the date of distribution.
It is very important that the transaction is properly documented. The shareholders are responsible for providing evidence of the adjusted basis of the stock. However, if such evidence is not provided, then the IRS may treat the stock as having a zero basis, and the entire fair market value amount of the liquidation proceeds will thus constitute the gain to be recognized by the shareholder.
Contact Sherayzen Law Office For Legal Help With Corporate Tax Transactions
This article covers only some general information with respect to the tax effect of a complete liquidation of a corporation on its shareholders; the article does not offer any legal advice and it should not be relied upon to determine the tax obligations in your particular situation.
If you have any questions or concerns regarding U.S. corporate taxation laws and regulations, contact Sherayzen Law Office for legal help. Our experienced corporate tax firm will guide you through even the most complex corporate transactions and help you properly document such transactions as required by the Internal Revenue Code as well as relevant business laws and regulations.

### Form 8938: Who Must File The Frankenstein Son of FBAR ?
In an earlier article, I discussed in general that the IRS imposed a new tax reporting requirement on individual taxpayers who hold specified foreign financial assets with an aggregate value exceeding a relevant threshold.   Such taxpayers will need to report those assets on the new IRS Form 8938, which must be attached to the taxpayer’s annual income tax return.
In this article, I would like to address the issue of who (i.e. what type of individuals taxpayers) must generally file Form 8938.  I will not address Form 8938 obligations of the specified domestic entities (see below), but it is anticipated that the IRS will soon issue the applicable regulations.
General Test for Filing Form 8938
In order for the requirement to file Form 8938 to arise, a three-prong test must be satisfied:
1. The taxpayer must be a “specified individual”;
2. The specified individual must own (or hold an interest in) “specified foreign financial assets”; and
3. The value of those assets must exceed the applicable reporting threshold.
If the taxpayer meets all of the above three prongs of the test, then he must file Form 8938 together with his annual income tax return.  Let’s explore each of the prongs in more detail.
A.  Definition of Specified Individual
A taxpayer is considered as “specified individual” if he or she is a:
1). U.S. citizen,
2). Resident alien of the United States for any part of the tax year (note, however, that special regulations apply to this category with respect to the determination of the holding period),
3). Nonresident alien who makes an election to be treated as a resident alien for purposes of filing a joint income tax return; and
4). Nonresident alien who is a bona fide resident of American Samoa or Puerto Rico.
It is important to emphasize that the “resident alien” category includes not only the “green card” holders, but also those who meet the substantial presence test.  Even more important, the IRS will consider such taxpayers as resident aliens even if they elect to be taxed as a resident of a foreign country pursuant to provisions of a U.S. income tax treaty.
In fact, by implementing Form 8938 provisions, the IRS has tremendously expanded its reach not only with respect to the types of foreign financial assets that need to be reported, but also who must report them.
Specified Domestic Entities
Under the current instructions to Form 8938, only individuals are required to file the Form until the IRS issues new regulations that will required U.S. entities to file the Form as well.  It is expected that the IRS will do it fairly soon.  At this point, however, this article will only address Form 8938 requirement for individuals, NOT specified business entities.
B.    Definition of Specified Foreign Financial Assets
A specified individual is required to report an interest in a foreign specified asset.  Due to its varied nature, this requirement can quickly become very complex.  I will not address all of the issues in depth in this article, but rather offer a general simplification of the main categories of what assets should be disclosed on Form 8938 and what it means (in an over-simplified statement rather than an in-depth explanation) to “have an interest” in such assets.
According to the IRS instructions to Form 8938, the “specified foreign financial assets” include any of the following:
1.  Any financial account maintained by a foreign financial institution
First, the definition of “specified foreign financial assets” includes any financial account maintained by a foreign financial institution.  Generally, a financial account is any depository or custodial account maintained by a foreign financial institution.  The definition of the “financial institution” is very broad, and, interestingly enough, includes financial institutions organized under the laws of a U.S. possession (American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands).   The IRS instructions specifically list the following investment vehicles as “foreign financial institutions”: foreign mutual funds, foreign hedge funds, and foreign private equity funds.
In many ways, this first category is reminiscent of the traditional FBAR requirements, but there are important differences which are outside of the scope of this article.
2. Other foreign financial assets
Second, the definition of “specified foreign financial assets” includes other foreign financial assets, which, in turn, include assets that are held for investment and not held in an account maintained by a financial institution.   Such assets include stocks or securities issue by anyone who is not a U.S. person, any interest in a foreign entity, and any financial instrument or contract that has an issuer or counterparty that is other than a U.S. person.
This is an incredible expansion of reporting requirements far beyond the FBAR and even existing foreign business ownership forms such as 5471, 8865 and 8858.  Under Form 8938, the taxpayers will need to report: stock issued by a foreign corporation; a capital or profit interest in a foreign partnership; a note, bond, debenture, or other form of indebtedness issued by a foreign person; an interest in a foreign trust or foreign estate; an interest rate swap, currency swap; basis swap; interest rate cap, interest rate floor, commodity swap; equity swap, equity index swap, credit default swap, or similar agreement with a foreign counterparty; an option or other derivative instrument with respect to any currency or commodity that is entered into with a foreign counterparty or issuer; and other assets held for investment (a very broad category with a specific definition).
3. Interest in a Foreign Entity
Finally, the “specified foreign financial assets” include any interest in a foreign entity.  Importantly, this includes interest in any specified financial assets owned by a disregarded entity (which the taxpayer owns).
4. Having/Holding an interest in a specified foreign financial asset
Once it is determined that a taxpayers deals with a specified foreign financial asset, it is important to analyze whether, pursuant to the IRS regulations, the taxpayer “holds an interest” in those assets. For the purposes of Form 8938, “holding an interest in a specified financial asset” is a legal term which is defined with some degree of specificity (and sometimes ambiguity) by the IRS.
Generally, the IRS states that the taxpayer holds an interest in a specified financial asset if “any income, gains, losses, deductions, credits, gross proceeds, or distributions from holding or disposing of the asset are or would be required to be reported, included, or otherwise reflected on the [taxpayer’s] tax return.” (see instructions to Form 8938).
In additional to this general rule, the IRS provides a whole host of specific rules which address the situation where the general rule does not apply but the IRS still considers the taxpayers as “holding an interest” in specified foreign financial assets.  I already addressed the disregarded entities above, and there are rules about reporting jointly-owned assets, assets held in financial accounts, kiddie tax (Form 8814), interests held by business entities, grantor trusts, interests in foreign estates and foreign trusts, and so on.
Moreover, there are at least four additional exceptions from the general rule listed by the IRS.  Pursuant to these exceptions, certain specified foreign financial assets need NOT be reported on Form 8938.  These exceptions may be highly relevant to a taxpayer’s particular situation and will be covered in a later article on our website.
Taxpayers are advised to contact Sherayzen Law Office to discuss their particular fact pattern in order to determine whether they own any specified foreign financial assets and whether any exceptions apply.
C.    Reporting Thresholds for Individuals
Once it is determined that the taxpayer is a specified individual who owns specified foreign financial assets, the last step is to determine whether the value of these assets satisfies the applicable reporting threshold – i.e. whether the aggregate value of the specified foreign financial assets exceeds the reporting threshold for your particular category of taxpayers.
In its instructions to Form 8938, the IRS lists four main categories of taxpayers and assigns distinct reportable threshold to each category.  Let’s explore each category.
1. Unmarried Taxpayers Living in the United States
If the taxpayer is not married and lives in the United States, then the applicable reporting threshold is satisfied if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year, or more than $75,000 at any time during that tax year.
2. Married Taxpayers Filing a Joint Income Tax Return and Living in the United States
If the taxpayer is married and files joint income tax return with his spouse, then the reporting threshold is satisfied if the value of his specified foreign financial assets is either more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the tax year.
3. Married Taxpayers Filing Separate Income Tax Returns and Living in the United States
If the taxpayer is married and lives in the United States, but files a separate income tax return from his spouse, then the reporting threshold is satisfied if the total value of his specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year.  Therefore, this category is very similar to that of the unmarried taxpayer who resides in the United States.
4. Married Taxpayers Living Abroad and Filing a Joint Income Tax return
If the taxpayer lives abroad (a special test applies to determine whether this is the case) and files a joint tax return with his spouse, then the reporting threshold is satisfied if the value of all specified foreign financial assets that you or your spouse owns is either more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the tax year.
5. Married Taxpayers Living Abroad and Filing Any Return Other Than Joint Tax Return
If the taxpayer lives abroad and does not file a joint income tax return (instead he files a different type of tax return such as married filing separately or unmarried), then the reporting threshold is satisfied if the value of all specified foreign financial assets is either more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the tax year.
6. Determining the Total Value of the Specified Foreign Financial Assets
While this article does not deal with the complex issue of how to determine the total value of the specified foreign financial assets (this topic will be the subject of a later article), I wish to emphasize here that these rules can be fairly detailed and apply to specific situations.
For example, if any specified foreign financial asset is denominated in a foreign currency during the tax year, the value of the asset must be determined in the foreign currency and converted to U.S. dollars using the U.S. Treasury Department’s Financial Management Service foreign currency exchange rates.  However, if no such rate is available, then you must use another publicly available exchange rate for purchasing U.S. dollars and disclose it on Form 8938.
Other rules deal with valuation of joint interests (including with someone other than a spouse), valuation of assets with no positive value, figuring out the maximum value of the assets during the tax year (including assets with no positive value), currency conversion date determination, et cetera.
Contact Sherayzen Law Office For Help With IRS Form 8938
The reporting requirements under Form 8938 can be incredibly complex.  Obviously, this article provides only some general information with respect to Form 8938, and my hope is that it will provide sufficient background to the readers to raise the awareness that Form 8938 requirements may apply to them.  However, the article cannot be relied upon to determine the tax obligations for your particular fact pattern since it does NOT offer legal advice.
For legal advice with respect to Form 8938, determination whether its requirements apply to you, and help with drafting the form properly, contact Sherayzen Law Office.  Our experienced tax compliance firm will help you resolve any issues related to Form 8938 and guide you toward proper compliance with its requirements.

### Basic Individual Tax Reporting Requirements for U.S. Citizens Residing Outside of the United States
If you are a U.S. citizen or a dual citizen of the United States and another country (or countries) the IRS expects you to comply with certain individual tax reporting requirements even you reside outside of the United States. The purpose of this article is to outline some of the most important of these reporting requirements; it should be noted, however, that this article simply provides a broad background information and does not cover all of the requirements that may be applicable to in your situation – you are advised to consult Sherayzen Law Office for a detailed analysis of your particular tax reporting requirements.
A. Tax Return Filing Requirements
The United States has a very complex tax system which is somewhat unique in the world. One of the most singular features of this tax system is the taxation of the worldwide income of its citizens. As a United States citizen, you must file a federal income tax return for any tax year in which your gross income is equal to or greater than the applicable exemption amount and standard deduction. I wish to emphasize here that “gross income” means worldwide income. For example, if you earned $1,000 in the United States and $50,000 outside of the United States, you must file a U.S. tax return (however, if you meet all of its requirements, you may be able to take the foreign earned income exclusion). With exceptions which may or may not apply to your case, you have to report the worldwide income irrespective of what type of income you are receiving – rental, bank interest, dividends, et cetera. Note, however, that certain tax treaties may apply and modify your particular tax reporting requirements.
B. Form TD F 90-22.1: FBAR (Report on Foreign Bank and Financial Accounts)
As a United States citizen, you may be required to report your interest in certain foreign financial accounts on FinCEN Form 114 formerly Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). The form should be filed separately from your tax return by June 30 of each relevant calendar year. Visit our Voluntary Disclosure and FBAR Center for more information.
It is important to emphasize that the combination of failure to file the FBAR with failure to pay U.S. tax can radically complicate your legal situation as the FBAR penalties are more likely to be imposed in this scenario. These FBAR penalties are likely to be much higher than your average failure to file penalty.
Please schedule a consultation with Sherayzen Law Office an experienced FBAR tax firm in order to deal with this situation properly.
C. Individual Reporting With Respect to Foreign Business Ownership: Forms 5471, 8865, et cetera.
In some situations, you may be required to file additional forms with respect to foreign business ownership. The most common of these forms are 5471, 8865, 8858, and so on. These are highly complex forms which are usually filed with your tax return.
D. Reporting of Foreign Gifts, Inheritance, and Trust Income: Form 3520
In some situations, you may be required to file Form 3520 in order to report qualifying foreign gifts, inheritance, and trust income.
Keep in mind, additional requirements may apply with respect to domestic gifts, inheritance and trust distributions.
E. Passive Foreign Investment Company Income: Form 8621
In some situations, you may be required to file Form 8621 in order to properly report what is known as “passive foreign investment company” or PFIC income. Despite its deceivingly simple format, this form may require extremely complex accounting calculations and legal determinations. A separate penalty structure applies to Form 8621.
F. New Reporting Requirements of Foreign Financial Assets: Form 8938
A new law (FATCA) requires U.S. taxpayers who have an interest in certain specified foreign financial assets with an aggregate value exceeding the specified threshold amount to report those assets to the IRS. Taxpayers who are required to report must submit Form 8938 with their tax return. See our earlier article with respect to Notice 2011-55 for additional information about this reporting requirement under IRC section 6038D.
This form carries its own elaborate penalty structure which may even affect your ability to take foreign tax credit.
H. Other Reporting Requirements
Obviously, it is beyond the scope of this article to list every tax reporting requirements that may apply to your case. This article merely attempts to sketch some of the most important tax filing requirements that you may need to comply with. There are may be other forms that may apply to your particular situation; you will need to consult Sherayzen Law Office for a particular analysis of your fact pattern.
G. Penalties
1. Penalties and Interest imposed for failure to file income tax returns or to pay tax
Failure to file the income tax return and/or pay tax due may result in substantial IRS penalties unless you show that the failure is due to reasonable cause and not due to willful neglect. Main penalties are listed in Internal Revenue Code (IRC) Section 6651 and include failure to file and failure to pay tax (both of which are limited to 25 percent of your total tax deficiency).
In addition to penalties, pursuant to IRC Sections 6621 and 6622, the IRS will also require you to pay the interest on the tax liability according to underpayment rate (compounded daily) published on a quarterly basis.
2. Reasonable Cause Considerations
Whether a failure to file or failure to pay is due to reasonable cause is based on a consideration of the facts and circumstances. Reasonable cause relief is generally granted by the IRS when you demonstrate that you exercised ordinary business care and prudence in meeting your tax obligations but nevertheless failed to meet them. In determining whether you exercised ordinary business care and prudence, the IRS will consider all available information.
This is why it is important to have an experienced tax attorney advocating your position and presenting the arguments to the IRS. While it is not a guarantee that the IRS will actually abate the penalties, your chances of success are likely to be higher than if you were to present your case without professional assistance.
3. Possible additional penalties that may apply in particular cases
In addition to the failure to file and failure to pay penalties, in some situations, you could be subject to other civil penalties, including the accuracy-related penalty, fraud penalty, and certain information reporting penalties.
Moreover, you may be subject to additional penalties for failure to accurately file other informational reports such as 3520, 8865, 5471, 8621, 8938 and other forms. These penalties can be extremely severe and such cases must be reviewed by a tax professional before presenting the argument to the IRS. FBAR penalties especially stand out due to their potentially draconian severity. For example, the civil penalty for willfully failing to file an FBAR can be up to the greater of $100,000 or 50 percent of the total balance of the foreign account at the time of the violation. See 31 U.S.C. § 5321(a)(5). Since the penalty can be imposed for each year of non-compliance, the FBAR penalties can greatly exceed the current balance on an account.
Finally, criminal penalties may be imposed in extreme cases.
You should visit our Voluntary Disclosure and FBAR Center in order to learn more about the tax reporting requirements as well as the various penalty structures that may apply to you.
Contact Sherayzen Law Office To Determine Your IRS Reporting Requirements
This article merely provides a general background information on U.S. tax reporting requirements and is NOT meant to be treated as a legal advice. If you are U.S. citizen or a dual citizen and you live abroad (or have exposure to international taxes), contact Sherayzen Law Office for legal help with U.S. international tax compliance. Our experienced tax compliance firm will guide you through the complex web of international tax reporting requirements and help you bring your tax affairs into full compliance with U.S. tax laws and regulations.

### Payroll Tax Cut Temporarily Extended into 2012
The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extended the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through February 29, 2012. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits.
The IRS warned employers that they should implement the new payroll tax rate as soon as possible in 2012 but not later than January 31, 2012.  If however any extra Social Security tax is withheld in January of 2012, the employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2012.
Workers do not need to do anything else; employers and payroll companies should handle the withholding changes.
Recapture Provision
The Act also includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year  amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).
This additional recapture tax is an add-on to income tax liability that the employee would otherwise pay for 2012 and is not subject to reduction by credits or deductions.  The recapture tax would be payable in 2013 when the employee files his or her income tax return for the 2012 tax year. This may change, however, since there is a possibility of a full-year extension of the payroll tax cut being discussed for 2012.
IRS May Issue Additional Guidance
The IRS will closely monitor the situation in case future legislation changes the recapture provision.  The IRS also promises to issue additional guidance as needed to implement the provisions of this new two-month extension, including revised employment tax forms and instructions and information for employees who may be subject to the new “recapture” provision.
For most employers, the quarterly employment tax return for the quarter ending March 31, 2012 is due on April 30, 2012.

### Beneficial Owners, Treaty Shopping and the OECD Model Tax Convention
Recently, the Organization for Economic Co-operation and Development (OECD) Committee on Fiscal Affairs asked for public comments concerning the interpretation of the term "beneficial owner" in the OECD Model Tax Convention. Since the OECD Model Tax Convention functions as a template for many nations negotiating bilateral tax treaties, any changes or clarifications to the model convention are important for international tax law purposes. Clarifications could potentially affect US taxpayers claiming tax treaty benefits.
This article will briefly explain the concept of a "beneficial owner", its relation to "treaty shopping", and the problems with the term as currently interpreted in the OECD Model Tax Convention.
Beneficial Owner
The term "beneficial owner" appears in Articles 10, 11, and 12 (relating to dividend, interest, and royalty payments, respectively) of the OECD Model Tax Convention. The concept is intended to allow only those who are the true, beneficial owners (and who receive such items of income) to claim exemptions from, or reduced rates of, withholding taxes in bilateral tax treaties between nations. Thus, the term is meant to prevent taxpayers from setting up conduits or similar entities to receive such income and to claim treaty benefits by "treaty shopping". In general, agents, nominees, or conduit companies do not qualify as beneficial owners under the OECD Model Tax Convention.
Treaty Shopping
The term, “treaty shopping” usually occurs in situations in which individuals or corporations reside in one country, earn income from another (source) country, and yet have some other type of entity in a third country that enables them to attempt to benefit from a tax treaty between the source-of-income country and the third country. An example might be a foreign company located in one country (which owns a US company) creating an entity in a third country to receive dividends from the US company, and then claiming that the dividends are not subject to US withholding taxes because of a tax treaty between the US and the third country.
In light of this term, it becomes clear how the beneficial owner definition attempts to limit treaty shopping.
Problems with the Current Beneficial Owner Terminology
The current OECD terminology has been problematic in that it does not specify how the term beneficial owner is intended to be interpreted in the vast array of international laws. In some jurisdictions and tax courts (especially in countries following the common law), the term has been interpreted in a much different way than in others. This has lead to much confusion as well as risk of the same type of income not being subject to tax in some jurisdictions while being subject to double-taxation in others. The OECD request for comments has the goal of remedying this problem by clarifying the meaning of the term and providing further guidance.
The comment period ended July 15, 2011, and the OECD Committee on Fiscal Affairs' Working Party met a few months ago to begin review of the comments.
Contact Sherayzen Law Office For Help With International Tax Treaties
If you have questions with respect to how a particular tax treaty applies to your situation, contact Sherayzen Law Office for legal help. Our experienced tax firm will assist you in assessing the potential impact of a tax treaty on your particular tax position.

### Expanded Tax Credit for Hiring Unemployed Veterans
On November 21, 2011, the VOW to Hire Heroes Act of 2011 was signed into law.    The new law provides an expanded work opportunity tax credit to businesses that hire eligible unemployed veterans and for the first time also makes part of the credit available to tax-exempt organizations. Businesses can claim the credit as part of the general business credit and tax-exempt organizations can claim it against their payroll tax liability. The credit is available for eligible unemployed veterans who begin work on or after November 22, 2011, and before January 1, 2013.
Also included in this new law is the Veterans Retraining Assistance Program (VRAP) for unemployed Veterans. The Department of Veteran Affairs (VA) and the Department of Labor (DoL) are working together to roll out this new program on July 1, 2012.  Specific eligibility requirements apply.  Moreover, the program is only limited to 45,000 participants for the 2012 fiscal year (and to 54,000 participants between October 1, 2012 and March 31, 2014).

### Filing Deadline Extended to March 30, 2012, for Some Tax-Exempt Organizations 
On December 16, 2011, the IRS announced that certain tax-exempt organizations with January and February filing due dates will have until March 30, 2012, to file their annual returns.
The IRS is granting this extension of time to file because the part of the e-file system that processes electronically filed returns of tax-exempt organizations will be off-line during January and February. The agency stressed that the rest of the e-file system will continue to operate normally and urged all individuals and businesses to choose the accuracy, speed and convenience of electronic filing.
In general, the extension applies to tax-exempt organizations whose normal filing deadline is either January 17 or February 15, 2012. Ordinarily, these deadlines would apply to organizations with a fiscal year that ended on August 31 or September 30, 2011, respectively. The extension also applies to organizations that already obtained an initial three-month filing extension and now have an extended filing deadline that falls on January 17 or February 15, 2012. The majority of tax-exempt organizations will be unaffected by this extension because they operate on a calendar-year basis and have a May 15 filing deadline.
The extension applies to affected organizations filing Forms 990, 990-EZ, 990-PF, or 1120-POL. Form 990-N filers will not be affected. No form needs to be filed to get the March 30 extension.
In order to avoid receiving a late filing penalty notice, a reasonable cause statement should be attached to the tax return. If organizations receive late-filing penalty notices, they should contact the IRS so that these penalties can be abated. The IRS encouraged these organizations to consider either e-filing early — before the end of December — or waiting until March to file electronically.

### Making the Section 338(g) Election when Purchasing a Target Corporation's Stock
This article will explain Internal Revenue Code Section 338(g), which allows corporations, that buy a certain percentage of a target corporation's stock and meet certain requirements, to make an election to treat the acquisition as an asset purchase instead of a stock purchase. In the right circumstances, a Section 338(g) election can be a very useful tool for tax purposes; however there are certain drawbacks, so you should consult an experienced tax attorney to determine whether the election would be a sound decision for your corporation.
Requirements for Section 338(g) Election
In general, in order to make an Section 338(g) election, the purchasing corporation must acquire through a "qualified stock purchase" 80% or more of the total voting power and 80% or more of the total value of the stock of the target corporation within a 12-month period. Preferred stocks are not counted for either purpose.
The election may only be made in taxable stock sales, and the purchaser must be a C corporation. Thus, individuals, partnerships and similar entities are not eligible to make the election. A corporation may purchase a foreign corporation and make the election; however, there are many complex international tax issues that may arise (such as the Subpart F rules).
Once the election is made, the target corporation is deemed as having sold all of its assets in a single transaction; it will be treated as a new corporation which purchased all of the assets of and is unrelated (for most purposes) to the old target corporation. The new (target) corporation also assumes any liabilities of the old target corporation.
Treatment of Basis of Stock & Assets
Normally, when a corporation purchases the net assets of a target company in a taxable stock sale, the purchaser will take a carryover basis in the acquired assets. However, by electing Section 338(g), purchasers will be allowed to take a stepped-up basis at the fair market value purchase price (as well as taking the stock at the FMV price), and the transaction will be deemed for the purposes of the section, as an asset sale. The election is made unilaterally by the purchasing corporation.
Main Advantages and Disadvantages of the Election
The primary advantage of a Section 338(g) election is that by treating the purchase as an asset sale, the purchaser is likely to be able to deduct depreciation and amortization expenses associated with the assets and intangibles; other tax credits may also apply.
The primary disadvantage, however, is that the deemed asset sale may trigger a taxable gain for the acquiring corporation. Conversely, the target corporation's shareholders will be treated as having sold their shares, and thus will have a taxable gain or loss on the sale of their stock.
Thus, an acquiring corporation must consider whether making the election is worthwhile from a tax perspective. Generally, usable tax credits or Net Operating Losses of the target corporation will be necessary in order to consider making the election.
Contact Sherayzen Law Office for Tax Planning Help With Business Acquisitions
If you are planning to acquire another business and would like to explore the tax consequences of such purchase (or explore alternative structuring of such purchase), contact Sherayzen Law Office. Our tax firm has extensive knowledge of corporate tax law and we will use our reliable experience to help you achieve your acquisition goals in a tax-sensitive way.

### Voluntary Disclosure News: IRS Offers a Deal to 11 Swiss Banks
According to Reuters and Sonntags Zeitung, U.S. officials are offering eleven Swiss banks (including Credit Suisse, Julius Baer, Basler Kantonalbank and HSBC Switzerland) a deal that allows them to avoid criminal prosecution in exchange for revealing details of their U.S. offshore business to the U.S. government.
Allegedly, in exchange to dropping the criminal prosecution, the banks would have to pay a hefty fine and agree to assist IRS in tax evasion cases. This means that the Swiss banks will have to deliver all information on their U.S. offshore business (via Bern) to the United States.
Allegedly, as part of an agreement, the banks would hand over to the IRS: the correspondence between a bank and its U.S. clients (including notes from telephone conversations and meetings), internal notes about U.S. client business from all relevant business units, correspondence between the banks and third parties (such as wealth managers) concerning U.S. persons, U.S. funds that were transferred to third parties, and documents about the U.S. business model. The banks would also have to supply the names of the bankers who conducted offshore business, though criminal cases against individuals would not be pursued.
An interesting point in this agreement is that, purportedly, the IRS agreed that the names of the U.S. clients would be blacked out.
While the Swiss banks used to have an iron-clad reputation for protecting their account holders’ identities, it is no longer the case. Since the UBS deal in 2009 (when the Swiss parliament approved a deal forcing USB to reveal details of about 4,450 U.S. citizens), the IRS set an important precedent. Whatever the outcome of the negotiations, it is likely that further damage will be done to the Swiss bank secrecy laws.
Finally, it is important to point out that the information about this deal is still murky and simply based on a source of a Swiss newspaper. The exact details (if the deal is actually agreed to) will likely come out early next year.
Contact Sherayzen Law Office for Voluntary Disclosure of Swiss Bank and Financial Accounts
It is very important for U.S. taxpayers to engage in voluntary disclosure of their unreported foreign bank and financial accounts in order to reduce their civil and criminal penalties. The combination of the deal with Swiss banks and the new Form 8938 makes it extremely dangerous for U.S. persons to continue to delay the disclosure of their foreign assets (where required to do so by law).
If you have foreign bank and financial accounts, whether in Switzerland or elsewhere outside of the United States, contact Sherayzen Law Office to explore your voluntary disclosure options. Our experienced voluntary disclosure firm will help you choose the right disclosure for you, draft and prepare all of the necessary documentation, guide you through the complex regulations of voluntary disclosure, and provide zealous ethical advocacy of your interests while negotiating with the IRS.

### IRS Releases Guidance on Foreign Financial Asset Reporting (Form 8938)
On December 15, 2011, the Internal Revenue Service stated that it will soon release the final version of a new information reporting form that taxpayers will use starting this coming tax filing season to report specified foreign financial assets for tax year 2011.  Form 8938 (Statement of Specified Foreign Financial Assets) will be filed by taxpayers with specific types and amounts of foreign financial assets or foreign accounts. It is important for taxpayers to determine whether they are subject to this new requirement because the IRS imposes significant penalties for failing to comply.
The Form 8938 filing requirement was enacted in 2010 as part of FATCA to improve tax compliance by U.S. taxpayers with offshore financial accounts.  The scope and the depth of the Form is even more profound that the FBARs.
Individuals who may have to file Form 8938 are U.S. citizens and residents, nonresidents who elect to file a joint income tax return and certain nonresidents who live in a U.S. territory. Form 8938 is required when the total value of specified foreign assets exceeds certain thresholds.
Form 8938 is not required of individuals who do not have an income tax return filing requirement.
The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR (Report of Foreign Bank and Financial Accounts).
Failure to file Form 8938 when required may result in severe penalties – $10,000 with an additional penalty up to $50,000 for continued failure to file after IRS notification.  Moreover, a 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.  Other penalties may apply.
Finally, a special statute of limitation rules apply to Form 8938.
Contact Sherayzen Law Office For Tax Help with the IRS Form 8938
If you need any help with respect to understanding Form 8938 or to see whether you need to file this Form, contact Sherayzen Law Office Ltd.  Our experienced international tax firm will explain to you the requirements of Form 8938 and help you comply with its requirements.

### Form 1065 Penalties
IRS Form 1065 (U.S. Return of Partnership Income) is an information return used to report the income, gains, losses, deductions, credits, and related items from the operation of partnerships.
Partnerships generally do not pay taxes because they are pass-through entities. Instead, profits or losses, and related items, are reported by partners (typically based upon their partnership interests) on their individual tax returns. Despite the fact that income taxes are not owed by partnerships, the form must still be filed for those required to do so, and there are various penalties that may be imposed, for various reasons, by the IRS.
This article covers the penalties that may apply for failures to comply with Form 1065 requirements. The penalties may be steep in certain circumstances, so taxpayers subject to filing Form 1065 should be aware of them.
Failure to File Penalty
A penalty will be assessed against a partnership that is required to file a partnership return if it either fails to file the return by the due date (including extensions) or if it files a return that does not report all required information, unless such failure is due to reasonable cause. If a partnership plans to demonstrate reasonable cause, it must attach an explanation to the partnership return.
The late filing penalty is $195 for each month (or part of a month) for a maximum of 12 months that the failure continues multiplied by the total number of individuals who were partners during any part of the partnership's tax year for which the return is due.
Failure To Timely Furnish Information
A $100 penalty (for each Schedule K-1 form for which a failure occurs) may be imposed for failure to furnish a Schedule K-1 to a partner when due and for each failure to include all required information (or the inclusion of incorrect information) on a Schedule K-1. A maximum penalty of $1.5 million for all such failures during a calendar year, may be imposed.
If the requirement to report accurate information is intentionally disregarded, the penalty for each failure is increased to the greater of $250 or 10% of the aggregate amount of items required to be reported. In such cases, the $1.5 million maximum penalty does not apply.
Trust Fund Recovery Penalty
A trust fund recovery penalty for Form 1065 may be imposed on all persons who are responsible for collecting, accounting for, and paying over various trust fund taxes (including certain excise, income, social security, and Medicare taxes), and who acted willfully in failing to collect, withhold, and/or pay such taxes (the IRS may determine who is responsible for such requirements). Such taxes are typically reported on various forms, including Form 720 (Quarterly Federal Excise Tax Return), Form 941 (Employer's Quarterly Federal Tax Return), Form 944 (Employer's Annual Federal Tax Return), and Form 945 (Annual Return of Withheld Federal Income Tax), among others.
The trust fund recovery penalty for Form 1065 is equal to the unpaid trust fund tax.
Contact Sherayzen Law Office For Legal Help in Dealing with Form 1065 Penalties
If you are facing Form 1065 penalties or wish to find out how to properly comply with the IRS requirements to avoid such penalties, contact Sherayzen Law Office for legal help with Form 1065. Our experienced partnership tax firm will guide you through the complex web of partnership tax requirements as well as provide vigorous ethical IRS representation if necessary.

### FBAR: Reporting Foreign PayPal Accounts
Whether an account is reportable for FBAR purposes can sometimes be a relatively complicated question. It is true that it is easy to see that foreign bank and investment accounts should be reported on the FBAR as long as all other requirements are met. It is also well-established that a gold bullion account is reportable for FBAR purposes.
What about foreign PayPal accounts? This question has arisen in the past with some of my clients. On the other one hand, PayPal describes itself as a payment system; on the other hand, the account holder does own the funds within the account – i.e. the account holder has a present-interest value on the account that can be easily withdrawn from the account.
This is why the IRS considers a foreign PayPal account as a reportable account for the FBAR purposes. In fact, whenever I asked the IRS this question with respect to my clients, this determination has been confirmed by the IRS.
Contact Sherayzen Law Office For Help With FBAR Issues
If you have any questions with respect to the FBAR, you want to find out whether you have reportable accounts, or you wish to file your delinquent FBARs and you do not know how to approach it correctly, contact Sherayzen Law Office for legal assistance. Our experienced FBAR tax firm will help you deal with all of your FBAR issues in a professional, efficient, and effective manner.

### Estate Planning: Crummey Trusts
Are you interested in reducing the amount of possible estate taxes you may have to pay? Do you desire to avoid paying gift taxes, but have concerns about gifting your children or grandchild large sums of money when they are perhaps too young to handle it responsibly? Then a Crummey Trust may be the answer for you. This article will explain the basics of Crummey Trusts and how they are usually used in estate and gift tax planning.
Gift and Estate Taxes
Typically, taxpayers who believe that they may eventually be subject to estate taxes will make lifetime gifts to their children or grandchildren. Currently, each taxpayer may give no greater than $13,000 per year per recipient, under the annual gift exclusion, and this amount will generally be excluded from gift and estate taxes. (This amount is often adjusted by the IRS for inflation). The lifetime gift tax exemption for 2011 is $5 Million.
However, the problem with outright gifts of large amounts of money to young children is obvious to many parents. Once the money is gifted, it can be difficult to control how it will be spent. Thus, often taxpayers will want a better way to reduce their estate taxes, without giving up control of how the money given will be used.
The Problem with Standard Trusts
Because of the drawbacks listed above, taxpayers may desire instead to use a standard trust. A typical trust may help reduce estate taxes, and at the same time, if set up properly, will place limitations upon how and when the money is distributed to any beneficiaries.
The problem with common trusts, however, is that the annual gift tax exclusion is only available for present interests (e.g., gifts, because they allow a recipient unfettered control of the money), and gifts made to a trust will not usually meet this legal definition because they often constitute future interests under the conditions of the trust.
The Crummey Trusts
A possible way around this predicament then is to use a “Crummey Trust”. A Crummey Trust, named for the taxpayers who first created it, allows individuals to set conditions on how and when money transferred to the trust will be distributed to beneficiaries, and at the same time gives taxpayers the ability to take the annual gift tax exclusion. A Crummey Trust also has the advantage that it can be created for multiple beneficiaries.
Under a Crummey Trust, beneficiaries to the trust are given a window period granting them the right to withdraw money from the trust as soon as the money is deposited (typically within 30 days). The right to immediate withdrawal only applies to the current amount of money gifted to the trust ($13,000 or less (following the number as adjusted by the IRS), per recipient and per year), and not any other sum of money accumulated in the trust. Under the legal case involving the original Crummey Trust, the court determined that the right to immediately withdraw the money constituted a present interest, and therefore was valid for purposes of the annual gift tax exclusion.
Thus, for the Crummey Trust purposes, it is a legal requirement that the right of withdrawal exists. If the money is not immediately withdrawn, it then remains with the trust's funds, subject to its applicable conditions.
Taxpayers often have concerns under Crummey Trusts that young beneficiaries will decide to immediately take out the money, thus destroying the basic advantages of this type of trust. However, this potential problem is often addressed by pointing out the practical aspects of estates and by notifying beneficiaries that, if any of the money is immediately withdrawn, then that beneficiary will not receive any more money or inheritance – in a large estate, these amounts will likely far exceed the one-time $13,000 withdrawal.
The Crummey Trust can thus be a powerful tool to reduce your estate taxes, avoid gift taxes, and help fund your children's or grandchildren's future dreams and plans.
Contact Sherayzen Law Office for Proper Estate and Gift Tax Planning
This article can only provide a broad overview of the highly complex topic of Crummey Trusts; therefore, it should not be relied upon to determine whether this type of trusts is the best option in your particular case. For a sound legal advice with respect to estate and gift tax planning, contact Sherayzen Law Office to create the right plan for you.

### Form 1120S Penalties and Interest
Form 1120S (US Income Tax Return for an S Corporation) is used to report the income, gains, losses, deductions, credits, and related items, for any tax year covered, of a domestic corporation or other entity that elects to be treated as an S corporation by filing Form 2553. If the IRS accepts the election, Form 1120S must be filed as long as the election remains in effect.
This article will examine the penalties and interest that may be applied for failure to comply with the rules and regulations concerning the filing of Form 1120S when required. The penalties can be severe in some instances, so taxpayers subject to the requirements of the form should take notice of them.
There are numerous penalty and interest provisions that apply to the requirements of Form 1120S.
Late Filing of a Return
A penalty may be imposed if a return is filed after the applicable due date (including extensions), or if the return does not report all of the required information required, unless the failure to comply is due to reasonable cause.
For returns on which no tax liability is owed, the late filing penalty as of the time of this writing is $195 for each month (or part of a month), up to 12 months that the return is late or does not include the necessary information, multiplied by the total number of persons who were shareholders in the corporation for the tax year (during any part of the corporation's tax year) in which the return is due. If a tax is due, this same penalty mechanism will be applied, plus a 5% penalty on the unpaid tax for each month (or part of a month) that the return is late. The maximum penalty will be capped at 25% of the unpaid tax. The minimum penalty for a return that is due, and more than 60 days late, is the lesser of the tax owed or $135.
Taxpayers who claim that the failure to timely file was due to reasonable cause must include an attached explanation with the return.
Late Payment of Tax
In general, a corporation that has a tax liability, but does not pay the tax when due, may be penalized ½ of 1% of the unpaid tax for each month (or part of a month) that the tax is unpaid. The late payment penalty is capped at a maximum of 25% of the unpaid tax. As with the failure to file penalty, taxpayers may be able to prevent or limit the imposition of the late payment penalty, provided that reasonable cause can be demonstrated.
Failure to Timely Furnish Information
A $100 penalty may be imposed for each failure to furnish a Schedule K-1 to a shareholder when due and/or for each failure to include on Schedule K-1 all required and accurate information. The penalty is applied to each Schedule K-1 for which a failure occurs. If a taxpayer intentionally disregards the requirement to report correct information, the penalty for each failure is increased to the greater of $250 or 10% of the aggregate amount of items required to be reported.
A reasonable cause exception is also available for this penalty.
Trust Fund Recovery Penalty
A trust fund recovery penalty may be imposed on all persons, including S-corporations, who are responsible for collecting, accounting for, and paying over various trust fund taxes (including certain excise, income, social security, and Medicare taxes) and who acted willfully in failing to collect, withhold, and/or pay such taxes (the IRS may determine who is responsible for such requirements). Such taxes are typically reported on various forms, including Form 720 (Quarterly Federal Excise Tax Return), Form 941 (Employer's Quarterly Federal Tax Return), Form 944 (Employer's Annual Federal Tax Return), and Form 945 (Annual Return of Withheld Federal Income Tax), among others.
The trust fund recovery penalty imposed is equal to the full amount of the unpaid trust fund tax.
Other Potential Penalties 
Penalties can also be imposed for Form 1120S purposes under IRC sections 6662 (Imposition of accuracy-related penalty on underpayments), 6662A (Imposition of accuracy-related penalty on understatements with respect to reportable transactions), and 6663 (Imposition of fraud penalty).
Interest
In addition to the penalties described above, interest can be charged for failure to comply with various Form 1120S requirements.
Interest will be charged on taxes that are paid late even if a taxpayer is granted an extension of time to file. Interest can also charged on penalties imposed as a result of failure to file, fraud, negligence, substantial valuation misstatements, substantial tax understatements, and reportable transaction understatements from the due date (including extensions) to the date of actual payment. See IRC section 6621 and regulations for the applicable interest rates charged relating to such penalties.
Contact Sherayzen Law Office For Legal Help With 1120S Penalties
Whether you are facing substantial 1120S penalties, looking for proper tax planning to avoid such penalties, or just need assistance to comply with 1120S tax requirements, please contact Sherayzen Law Office.  Our experienced tax firm will guide you through the complex maze of the corporate tax law, provide rigorous IRS representation in disputing the penalties, and help you create and implement a creative ethical tax plan.

### Tax Consequences of Converting a Rental Property into a Primary Residence
Do you own a residential rental property that you plan to convert into your primary residence? Are you wondering if by doing so, you could still qualify for the capital gains exclusion on sales of a primary residence, when you do eventually sell? This article will examine these questions, and will explain some of the basic tax rules involved in turning a rental property into a primary residence.
The Capital Gains Exclusion for Sale of a Primary Residence- General Rules
In general, under Internal Revenue Code (IRC) section 121, taxpayers who reside in a primary residence, and who have both owned and lived (or used as a primary residence) in a home for at least two years within a five year period may qualify for the full capital gains exclusion of $500,000 on a joint filed tax return ($250,000 per spouse). However, taxpayers must not have already claimed this exemption within the past two years. Typically, each spouse of a married couple must meet both requirements in order to get the full exclusion. Certain exceptions may be available if the requirements are not met, depending upon the taxpayer's circumstances. You will need to consult a tax attorney on this issue.
In converting a residential rental property into a primary residence, it should be noted that any depreciation taken while the property was a rental will not qualify for the capital gains exclusion, and will instead be subject to depreciation recapture. Depreciation deducted before May 6, 1997 will reduce the adjusted basis of a rental property, whereas depreciation deducted after that date will be taxed as a capital gain.
Non-qualified use of a Rental Property
In 2008, Congress amended IRC section 121, with the Housing and Economic Recovery Act, to add a limitation of the capital gains exclusion due to "nonqualified" use of a converted rental-to-primary residence. "Qualified" use is defined as any use of the property as a primary residence. "Non-qualified" use is defined as any use of the property other than as a primary residence, such as as a second home, a vacation property, a rental or investment property, or use of the property in a trade or business.
In general, the effect of the change is to limit the amount of capital gains exclusion to an allocation formula dependent upon non-qualified and qualified use of the property. For example, if the property is held for ten years and then sold, and for six of those years it was used as non-qualifying property, then 6/10 of the capital gain, would not be excluded. However, subject to certain exceptions, non-qualified use prior to January 1, 2009 will be ignored for purposes of the section
Contact Sherayzen Law Office For Tax Planning With Respect to Rental-Primary Residence Tax Planning
Taking advantage of the IRC section 121 capital gains exclusion may require detailed knowledge of the relevant tax rules and careful tax planning. Obviously, this article only provides some general background information for education purposes and should NOT be relied upon as a legal advice. Rather, you should contact Sherayzen Law Office to set up a consultation to discuss your particular fact situation. Our experienced tax firm will help you determine whether you may be able to take advantage of the IRC section 121 and how to do it.

### Obtaining Private Letter Rulings
At certain times, tax planning may involve taking a position on a tax return that is uncertain, or even controversial. If the position involves a potentially large liability, taxpayers may be left with the undesirable choices of either taking a risk in reporting the position or deciding not to and paying a much larger tax.
Thankfully, in some instances, the IRS allows for a way to receive clarification on a specific tax position for individual taxpayers, called Private Letter Rulings. The basic mechanism of obtaining a Private Letter Ruling is the essence of this essay.
Private Letter Rulings are issued by the National Office of the IRS upon request by individual taxpayers. Basically, Private Letter Rulings state how a specified tax position will be treated by the IRS if it is taken on a tax return. Hence, this process is one of the best ways to ensure proper, safe tax planning on otherwise potentially risky positions. The IRS will only issue letter rulings based upon actual transactions (even if they have not been completed yet); mere hypothetical scenarios will not qualify. While the IRS is not legally bound by letter rulings, in general, it has honored the determinations made to specific taxpayers.
A Private Letter Ruling that is issued to an individual taxpayer must be attached to the tax return filed for the year that the position in question is reported. In certain circumstances, the IRS may issue subsequent determinations to other taxpayers, based upon almost the same set of facts, that seem to contradict the earlier letter ruling. Generally, in such cases, the new ruling will not be applied retroactively to the original taxpayer who requested a letter ruling.
Furthermore, the IRS is required to make Private Letter Rulings available for the general public, with identifying individual details removed. In most cases, a Private Letter Ruling only applies to the individual taxpayer who request it. For the purposes of avoiding accuracy-related penalties, however, Private Letter Rulings issued after 1984 may be used as substantial authority by other non-requesting taxpayers.
Because a letter ruling represents the current IRS view of a tax issue, letter rulings may be superseded by new case law. Keep in mind, however, that there are limitations with respect to the IRS revocation or modification of a letter ruling sent to an individual taxpayer.
Of course, as most things in life, the benefits of a Private Letter Ruling come with certain costs. There is a fairly steep fee charged by the IRS for making a request. In addition, the legal fees involved in obtaining a Private Letter Ruling are often comparable to an administrative appeal or an arbitration case (depending on the complexity of your case). Also, there are certain prescribed areas of the law that the IRS will not rule on for Private Letter Purposes. The same applies to requests that involve only issues of fact. In fact, the complexity of obtaining the Private Ruling is such that your best course of action is to retain a tax attorney if you seek to minimize your potential tax liability and audit risk by requesting a letter ruling.
Contact Sherayzen Law Office For Help In Obtaining a Private Letter Ruling
Obtaining a Private Letter Ruling usually involves complex issues, and this articles only provides a very general background information that should not be relied upon in making the determination of your specific situation. Rather, if you would like to consider obtaining a Private Letter Ruling from the IRS, you should contact Sherayzen Law Office for legal help. Our experienced tax firm will help you determine whether your case qualifies for a Private Letter Ruling, whether this is the best course of action available, and provide rigorous, ethical and affordable IRS representation.

### IRS Announces 2012 Standard Mileage Rates
On December 9, 2011, the Internal Revenue Service issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
	55.5 cents per mile for business miles driven;
	23 cents per mile driven for medical or moving purposes;
	14 cents per mile driven in service of charitable organizations.
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.
The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study.
Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.
These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical or charitable expense are in Rev. Proc. 2010-51.
Notice 2012-01 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

### Alternative Minimum Tax Foreign Tax Credit
US persons are taxed on their worldwide income, but are allowed a foreign tax credit (FTC) for foreign taxes paid. In most cases, the FTC gives taxpayers a dollar-for-dollar credit against their US tax liability.
However, the FTC may be limited for Alternative Minimum Tax (AMT) purposes in order to ensure that a taxpayer's US liability is only reduced on foreign-source income. This article will briefly examine some of the basic elements of the Alternative Minimum Tax Foreign Tax Credit (AMTFTC).
Alternative Minimum Tax Foreign Tax Credit Calculation
The AMT for individuals in calculated on Form 6251. Taxpayers who need to determine whether they will have an AMTFTC, will first need to calculate their foreign tax credit for their regular tax. Once this is done, line 34 of the form should be filled in, and if the amount on this line is greater than or equal to the amount on line 31 (see IRS instructions for specifics), then a zero would be entered on line 35 (the AMT line), and the instructions should be reviewed to determine whether the form will need to be attached to the tax return. If the AMT is not owed, line 32 of the form will still need to be filled in, in order to determine whether a taxpayer has an AMTFTC carryback or carryforward.
If the AMT is owed, the FTC may be limited by IRS rules. In general, for purposes of calculating the AMTFTC limitation, foreign-source AMT income (AMTI) is divided by total AMTI. This amount is then multiplied by the tentative minimum tax (and not the regular tax). This calculation must be determined for each separate basket type of income (i.e. general and passive income). FTCs that are not used because of the AMTFTC may be carried forward.
Taxpayers may elect to use regular foreign-source income in the numerator of this equation, provided that it does not exceed total AMTI.
Contact Sherayzen Law Office For Tax Help With Determining AMT, FTC and AMTFTC
Determing your Foreign Tax Credit and Alternative Minumum Tax can involve complex issues and this article only attempts to provide a very general background information that should not be relied upon in making the determination of your specific situation. Rather, you should contact Sherayzen Law Office for legal help with this issue. Our tax firm will help you determine your AMT, FTC and AMTFTC for the relevant tax years as well as provide sound tax planning for the future.

### FBAR Electronic Filing
On July 18, 2011, the Financial Crimes Enforcement Network (FinCEN) announced that it has developed an electronic filing system that will accept Form 114 formerly Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (commonly known as “FBAR”).  Once the FBAR is filed electronically, the filers will receive an acknowledgment of each report filed.
At this point, the system can only accept one digital signature per FBAR.  This means that, in order to take advantage of e-filing, each spouse must file a separate FBAR.
E-filing does not render paper FBAR forms obsolete.  In fact, until further notice is provided by FinCEN, paper FBARs will still be accepted.
Contact Sherayzen Law Office to Determine Whether You Need to File an FBAR
Failure to file a required FBAR may result in heavy penalties and extensive legal expenses.  Therefore, contact Sherayzen Law Office to schedule a consultation with our experienced international tax firm to determine whether you are required to file an FBAR.

### Post-OVDI Voluntary Disclosure of Foreign Bank and Financial Accounts
Since the enrollment into the 2011 Offshore Voluntary Disclosure Initiative (“OVDI”) closed on September 9, 2011, I have been asked repeatedly by new and prospective clients about their post-OVDI options – i.e. is there a voluntary disclosure option for clients who were not able to enroll into the program by the September 9 deadline?
The answer is – Yes! The IRS traditional voluntary disclosure is now an option for clients who wish to come forward with the voluntary disclosure of their foreign assets and foreign income.
Historic Relationship Between Traditional Voluntary Disclosure and Amnesty Initiatives
In order to understand this option, it is important to understand the relationship between the OVDI and the IRS traditional voluntary disclosure. The traditional voluntary disclosure has existed for a very long time, much earlier than the 2011 OVDI or the 2009 Offshore Voluntary Disclosure Program (“OVDP”) or the 2004 Last Chance Compliance Initiative (“LCCI”) or even the very first 2003 Offshore Voluntary Compliance Initiative (“OVCI”).
The four offshore amnesty programs I just mentioned really represent a special type of the voluntary disclosure program that offers advantages to certain individuals who otherwise would be subject to much higher penalties under the traditional voluntary disclosure program. Every time one of the amnesty initiatives. It is important to emphasize, however, that, as the time goes, the advantages for some categories of taxpayers diminish with each subsequent amnesty initiative (while new categories of taxpayers are given additional incentives).
For example, the OVDI offered more penalty categories for the purposes of the offshore penalty calculation (i.e. FBAR penalties) than OVDP. On the other hand, the way OVDI calculates its penalty made the program less advantageous than OVDP for some categories of taxpayers.
Thus, every time there is an amnesty initiative, the traditional voluntary disclosure takes a back seat and limits itself mostly to the domestic voluntary disclosure.
OVDI and Traditional Voluntary Dislcosure
The same story occurred in 2011. Once the OVDI initiative was announced on February 8, 2011, the traditional voluntary disclosure stopped accepting applications involving offshore accounts. Rather, it limited itself to the voluntary disclosures involving U.S.-source income. After a short transitional period of time, all voluntary disclosures involving foreign income were diverted solely to the OVDI program. The updates of June 2, 2011, clarified many such changes, including the opt-out options.
Post-OVDI Voluntary Disclosure
When the OVDI program closed on September 9, 2011, the IRS Traditional Voluntary Disclosure was reinstated to its full size and started to accept the voluntary disclosure applications. However, it is yet to be seen just how much the procedures of the traditional voluntary disclosure have been impacted by the OVDI. At this point, it is clear that the streamlining of applications and the processing structure that existed under the OVDI are impacting the current procedures of the Traditional Voluntary Disclosure program.
On the other hand, substantively, it is also clear that the pre-OVDI FBAR penalty structure has been reinstated with its differentiation between willful and non-willful violations.
Contact Sherayzen Law Office To Conduct Voluntary Disclosure of Foreign Assets and Foreign Income
If you would like to enroll into the IRS Traditional Voluntary Disclosure program or if you would like to consult an attorney about it, contact Sherayzen Law Office by email eugene@sherayzenlaw.com or telephone (952) 500-8159. Our firm’s core tax compliance practice is to help people like you to properly conduct voluntary disclosures.
Our international tax firm is experienced in these matters and will guide you through every stage of this complex process, from initial acceptance into the program (pre-clearance) to strategy development, document submission (amendment of tax returns, FBAR drafting, and other documents), aggressive ethical advocacy, and penalty negotiation with the IRS.
The IRS has professionals working on its side and so should you. Contact Sherayzen Law Office for experienced and professional legal representation!

### Foreign Rental Property Tax Depreciation
Do you own, or are you thinking of owning, foreign rental property?  While investing in foreign rental property may have many advantages and can be a potentially lucrative enterprise, you should be aware that, among other aspects, the IRS treats rental properties located outside of the United States differently than rental properties in the United States with respect to the depreciation deduction.  This article explains some of the basic differences in the depreciation treatment of such properties.
Depreciating US Residential Rental Property
The IRS defines "residential rental property" to include rental buildings or structures for which 80% or more of the gross rental income for the tax year is from dwelling units.
In general, for residential rental property located within the United States, taxpayers must depreciate the property using the straight-line method over 27.5 years.   Furthermore, the mid-month convention for residential rental property should be used.  In the first year that depreciation is claimed for residential rental property, it can be claimed only for the number of months the property is in use as a rental.
Depreciating Foreign Residential Rental Property
The IRS rules for depreciating residential rental property located outside the United States, however, are different.  Under IRC section 168(g)(1)(A), "any tangible property which during the taxable year is used predominantly outside the United States" must use the alternative depreciation system.  When using the alternative depreciation method specified in the Internal Revenue Code, foreign rental properties must be depreciated over a much longer 40 year period.  This means that the depreciation that may be deducted for a foreign rental property will smaller than if the same property (at the same purchase price, disregarding currency fluctuations) were located within the United States.
Contact Sherayzen Law Office For Legal Help With Rental Properties
There are other potentially complex issues relating to foreign and US residential rental properties that are beyond the scope of this general explanation, as this article only attempts to provide background information that should not be relied upon in making the determination of your specific situation. Rather, you should contact Sherayzen Law Office for legal help with this issue. Our experienced international tax firm will guide you through the complex web of rules concerning your U.S. and international tax needs.

### Form 8865 Penalties
IRS Form 8865 ("Return of U.S. Persons with Respect to Certain Foreign partnerships") is used to report information required under IRC section 6038 (reporting with respect to controlled foreign partnerships), IRC section 6038B (reporting of transfers to foreign partnerships), and IRC section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests) for those taxpayers who are required to file.
In a previous article, I broadly described the four categories of filers who are required to file the form. This article will examine the penalties that may be imposed for failure to comply with the IRS requirements.
Penalties
A. Failure to Timely Submit all Required Information Concerning Category 1 and 2 Filers 
Form 8865 must be filed along with an income tax (or partnership or exempt organization) return by the due date, including extensions, of the return. For persons who must file Form 8865, but who are not required to file an income tax (or other applicable) return, the form must be submitted to the IRS at the time and location that such a return would have been filed, if the person had been required to do so.
A $10,000 penalty may be imposed (for each tax year) of each foreign partnership for a failure to furnish all of the necessary information by the required time. Further, if the information is not filed within 90 days after the IRS has mailed a notice of the failure to a U.S. person, another $10,000 penalty per foreign partnership may be charged for each 30-day period (or fraction thereof), during which the failure continues after that 90-day period has expired. This additional penalty is limited to a maximum of $50,000 for each failure.
Additionally, any person who fails to furnish all of the necessary information within the required time period will be subject to a reduction of 10% of the foreign taxes credit under IRC sections 901, 902, and 960. Furthermore, an additional 5% reduction will result for each 3-month period (or fraction thereof), after the 90 day time period, in which the IRS mailed the notice of the failure, has expired. IRC section 6038(c)(2) limits the amount of this penalty.
The above-mentioned penalties have a much broader application. They may also apply to any person who does not meet the "constructive owners" exception (contact an international tax attorney for details with respect to this issue) but who files Form 8865 stating that the exception is met. Likewise, where another person files under the "multiple Category 1 filers exception" (see below) for the taxpayer who is required to file Form 8865 and the filer fails to accurately complete the Form and applicable schedules, the same drastic penalties may apply to the taxpayer (even though the actual filer, and not the taxpayer, is at fault).
Generally, the "multiple Category 1 filers exception" provides that, if during the tax year of a partnership more than one U.S. person qualifies as a Category 1 filer, only one of the Category 1 partners may be required to file Form 8865
Finally, the criminal penalties under IRC sections 7203, 7206, and 7207, may also be applied to the above-mentioned groups for failure to file or for filing false or fraudulent information. You will need to consult an international tax attorney to determine whether criminal penalties may potentially apply in your situation.
B. Failure to File Required Information Concerning Category 3 Filers
The penalties for the Category 3 filer (see this article for definition) may be truly draconian. Where a Category 3 filer fails to properly report a contribution to a foreign partnership that is required to be reported under section 6038B and applicable regulations, the filer may be subject to a penalty equal to 10% of the fair market value of the property at the time of the contribution. In addition to the penalty, the person must treat the contributed property as having been sold at the fair market value at the time of transfer, and recognize gain on the disposition for tax purposes. Unless the failure resulted because of intentional disregard, this penalty may be limited to a $100,000.
C. Failure to File Required Information Concerning Category 4 Filers
Any person who fails to accurately report all of the required information under section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests) may be subject to a $10,000 penalty.
If the failure to report continues for more than 90 days after the IRS mails a notice of the failure, an additional $10,000 penalty will apply for each 30-day period (or fraction thereof) that the person fails to correct the failure, after the 90-day period has expired. This additional penalty will be limited to $50,000.
D. Failure to Report Treaty-Based Return Positions
Persons who are claiming a treaty-based position that an existing treaty between the US and another nation either overrides or modifies any IRC provision, or reduces, or possibly reduces, a tax incurred at any time, must file Form 8833 ("Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b)"). Failure to file this form for a treaty-based position may result in a $1,000 penalty Under IRC section 6712. For C corporations, the penalty is $10,000.
Correcting Form 8865
Because of the severity of the penalties that may apply for an erroneous or incomplete Form 8865, individuals should be aware of the procedures available for correcting the form, if necessary. If an incorrect or incomplete form has been filed, a corrected form should be filed with an amended tax return (stating "corrected" at the top of the form), and a sheet attached specifying and explaining the corrections.
Contact Sherayzen Law Office For Legal Advice In Dealing With Form 8865 Penalties
Form 8865 penalties can be extremely large, and, in certain circumstances, disastrous to your personal and financial life. Therefore, if you believe that you are potentially facing a Form 8865 penalty, contact Sherayzen Law Office immediately for a legal advice. Our experienced international tax compliance firm will vigorously and professionally defend your interests, represent you in all of your IRS dealings, and strive to achieve the most favorable outcome while dealing with this highly complex and stressful situation in an expeditious manner.

### Form 8865: Categories of Required Filers
For taxpayers who are required to file IRS Form 8865 ("Return of U.S. Persons with Respect to Certain Foreign partnerships") is used to report required information under IRC section 6038 (reporting with respect to controlled foreign partnerships), IRC section 6038B (reporting of transfers to foreign partnerships), and IRC section 6046A (reporting of acquisitions, dispositions, and changes in foreign partnership interests). For purposes of these requirements, a "foreign partnership" is defined to be a partnership that is not created or organized in the United States or under the law of the United States or of any state.
Since the penalties for the failure to accurately file Form 8865 can be severe, it is important to recognize who is required to file the Form. This article examines which taxpayers are generally required to file the Form, and explores the four categories of filers who must report the required information.
Who Must File Form 8865
U.S. persons who meet one or more of the four categories of filers (explained below) must complete and file Form 8865. It is important to remember that the Form may require the taxpayer to file additional schedules and other information (the additional filing information will usually depend upon the taxpayer’s filing category). You should consult an international tax attorney on what information should be disclosed on Form 8865, including additional schedules and attachments.
Four Categories of Filers
Category 1 Filers
A category 1 filer is a U.S. person who controls a foreign partnership at any time during the partnership's tax year. "Control" of a partnership is defined to be ownership of more than a 50% interest in the partnership. Under IRS rules, a 50% interest in a partnership is an interest equal to 50% of the capital, 50% of the profits, or 50% of the deductions or losses. Additionally, for purposes of determining a 50% interest, highly complex IRS indirect and constructive ownership rules may apply.
The various partnership control interest rules mean that it is possible to have multiple Category 1 filer in a foreign partnership.
Category 2 Filers
A category 2 filer is a U.S. person, who at any time during the foreign partnership's tax-year, owned a 10% or greater interest in the partnership while the partnership was controlled by U.S. persons each owning at least 10% interests. A 10% interest in a partnership is an interest equal to 10% of the capital, 10% of the profits, or 10% of the deductions or losses. In addition, indirect and constructive ownership rules also apply to determining whether there is a 10% interest.
An interesting exception may apply where a partnership has a category 1 filer at any time during a tax year. You will need to consult an international tax attorney on whether such exception applies in your case and what are the consequences.
Category 3 Filers
A Category 3 filer is defined to be a U.S. person, who in exchange for an interest in the partnership, contributed property during that person's tax year to a foreign partnership (an IRC section 721 transfer), if that person meets one of two requirements: 1) The taxpayer either owned, directly or constructively, at least a 10% interest in the foreign partnership immediately after the transfer, or 2) The value of the property contributed, when added to the value of any other property contributed to the partnership by such person (or related persons under IRS rules), during the 12-month period ending on the date of transfer, exceeded $100,000.
Additionally, U.S. persons who previously transferred appreciated property to the partnership (and were required to report that contribution under section 6038B) will qualify as category 3 filers if the foreign partnership disposed of such property while the U.S. person remained a direct or indirect partner in the partnership.
Furthermore, if a domestic (US) partnership contributes property to a foreign partnership, the domestic partnership's partners are deemed to have transferred a proportionate share of the contributed property to the foreign partnership. The domestic partners, however, are not likely to be required to report the transfer provided that the domestic partnership files Form 8865 and properly reports all the required information with respect to the contribution.
Category 4 Filers
A Category 4 filer is a U.S. person who has a reportable event under IRC section 6046A during that person's tax year. Under section 6046A, there are three categories of reportable events: acquisitions, changes in proportional interests, and dispositions.
A. Acquisitions
A U.S. person who acquires a foreign partnership interest has a reportable event if: 1) That person did not previously own a 10% or greater direct interest in the partnership and as a result of the acquisition, the person now owns a 10% or greater direct interest in the partnership (for example, from 8% to 10%). For purposes of this rule, an acquisition includes an increase in a person's "direct proportional interest" (defined below); or 2) Compared to the person's direct interest when the person last had a reportable event, after the acquisition, the person's direct interest has now increased by at least 10% (for example, from a 13% interest to a 23% interest).
B. Changes in a Proportional Interest
A partner's proportional interest in a foreign partnership can change as a result of changes in other partners' interests. Some examples include when another partner withdraws from a partnership, or by operation of the partnership agreement (i.e., a partnership agreement may state that a partner's interest in profits will change on a set date or when the partnership has earned a specified amount of profits, thus changing the proportional interest in the partnership).
C. Dispositions
A U.S. person who disposes of a foreign partnership interest has a reportable event if: 1) The person previously owned a 10% or greater direct interest in the partnership before a disposition, and as a result of the disposition, the person now owns less than a 10% direct interest (for example, from 10% to 9%). (A disposition also includes a decrease in a person's direct proportional interest for purposes of this rule); or 2) Compared to the person's direct interest when the person last had a reportable event, after the disposition the person's direct interest has now decreased by at least 10% (for example, from a 22% interest to a 12% interest).Exemptions
While this is outside of the scope of this essay, I want to mention that there are certain exemptions from Form 8865 filing requirements may be applicable depending upon the facts of a US person's case. You need to consult an international tax attorney to determine whether your situation is compatible with any of the exemption categories.Contact Sherayzen Law Office for Legal Help With Form 8865
The filing of Form 8865 involves complex legal and tax issues, and this article only attempts to provide a very general background information that should not be relied upon in making the determination of your specific situation. Rather, you should contact Sherayzen Law Office for legal help with this issue. Our experienced international tax firm will help you determine whether you need to file Form 8865, and help you to properly draft and file the Form. We can also help you with any voluntary disclosure matters involving Form 8865.

### Limited Liability Limited Partnerships
A Limited Liability Limited Partnership (LLLP) is a relatively recent modification of a traditional limited partnership, and about half of the states in the U.S. have adopted statutes for their formation. In this article, I will highlight some of the most prominent features of the LLLPs.
As I already mentioned above, LLLPs are a modification of limited partnerships. By definition, limited partnerships consist of one or more general partners, and one or more limited partners. In a standard limited partnership, the general partners have joint and several liability for the debts and obligations of the limited partnership, whereas limited partners will not have such liability for these debts and obligations beyond any amount of their capital contributions.
In contrast, in an LLLP, general partners will also have limited liability for the debts and obligations of the limited partnership that arise during the time that the LLLP form is elected. Thus, general partners in an LLLP may have significantly less liability, and are not likely to be personally liable for the debts and obligations of the partnership; rather, the liability of a general partner is limited to the amount of his capital contribution.
Despite the differences in the liability, LLLPs are usually managed in a manner similar to the LPs – in an LLLP, general partners usually manage the partnership, while limited partners only have a financial interest. Similarly, tax-wise, an LLLP election has no effect on the pass-through taxation aspects of a partnership.
As noted above, only about half the states allow for an LLLP form; therefore, you need to check your local statutes to see if you have an option to make such an election. In practice, LLLPs are often formed by converting existing limited partnerships into such a form (in order to take advantage of the benefits of an LLLP).
Contact Sherayzen Law Office NOW For Legal and Tax Help With Partnerships
Forming partnerships, LLPs, LLLPs, and other similar business entities involve complex issues, and often legal issues arise that necessitate experienced planning beyond merely the formation of an entity. This article only attempts to provide a general background information that should not be relied upon in making the determination of your specific situation. Please contact Sherayzen Law Office for legal help with this issue. Our experienced business firm will guide you through the complex web of rules concerning business partnerships and their various forms (general, LPs, LLLPs, et cetera).

### Underpayment and Overpayment Interest Rates for the First Quarter of 2012 
On November 29, 2011, the Internal Revenue Service announced that underpayment and overpayment interest rates will remain the same for the calendar quarter beginning January 1, 2012. The rates will be:
	three (3) percent for overpayments (two (2) percent in the case of a corporation)
	three (3) percent for underpayments
	five (5) percent for large corporate underpayments
	one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.
The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.
Interest factors for daily compound interest for annual rates of 0.5 percent are published in Appendix A of Revenue Ruling 2011-32. Interest factors for daily compound interest for annual rates of 2 percent, 3 percent and 5 percent are published in Tables 7, 9, 11, and 15 of Rev. Proc. 95-17, 1995-1 C.B. 561, 563, 565, and 569.

### Form 8938 New Foreign Asset Reporting Requirements: Introduction
In its continuous efforts to combat tax evasion, the IRS imposed a brand-new foreign asset reporting requirements on U.S. persons.  For the very first time, starting tax year 2011 (with certain exceptions), certain individuals must file the new Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount.
This threshold amount differs depending on the particular situation of a U.S. person – whether an individual lives in the United States, is married and filing a joint income tax return, et cetera.
The “specified foreign financial assets” include any financial account maintained by foreign financial institution and certain investment assets such as stock, securities or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty who is not a U.S. person.
Based on this description alone, it becomes obvious that the new Form is likely to impose a higher reporting burden than the famous FBARs.   Note that Form 8938 does not replace the FBAR reporting requirements – i.e. the FBARs must still be filed by June 30 (former FBAR due date) of a relevant year in addition to Form 8938.
Unlike the FBAR, Form 8938 is attached to the filer’s annual tax return and must be filed by the due date (including extensions) for that return.  An annual return includes the following forms: Form 1040, Form 1120, Form 1065, Form 1120-F, Form 1120-S, and Form 1040NR (of a nonresident alien who is a bona fide resident of Puerto Rico or American Samoa).
Note that Form 8938 imposes new failure-to-file and accuracy-related penalties, which are very severe and may be combined with other penalties.  Moreover, failure to file an accurate Form 8938 may extend the statute of limitations for all or a part of your income tax return until three years after the date on which you file Form 8938.
Note that, pursuant to Notice 2011-55, the IRS provides for a transitional rule for the year 2011 which may defer your obligation to file Form 8938 until the tax year 2012 as long as you satisfy all of the three requirements of the transitional rule.
Contact Sherayzen Law Office For Legal Help With Form 8938
This article highlights a few features of the new Form 8938 and it should not be relied upon in determining whether you are obligated to file Form 8938.  Form 8938 is fairly complex and you need professional help to determine how to comply with the Form’s requirements.
If you have any questions with respect to Form 8938, please contact Sherayzen Law Office.  Our experienced international tax firm will help you determine whether you must file Form 8938 and help you draft and file the form with your tax return in order to avoid the heavy IRS penalties for non-compliance.

### Limited Liability Partnerships (LLPs)
The term limited liability partnership ("LLP") is often used in public discourse- often erroneously. What exactly is an LLP, and what are its features compared to a traditional, general partnership? This article will attempt to answer that question and provide you with some basic understanding of LLPs.
Please note that this article is intended to only cover the general aspects of LLPs- the majority of states currently allow for the LLP form, and state laws vary widely, so applicable state laws for specifics relating to your particular situation will need to be consulted.
Advantages of an LLP
In general, an LLP is a type of partnership in which some or all partners may have limited liability, meaning that partners are not liable for damages resulting from negligence, fraud, malpractice or similar misconduct committed by another partner. This is an essential difference between LLPs and general (unlimited) partnerships. This feature thus provides an important advantage that the corporate form provides for shareholders.
It should be noted, partners in an LLP are still personally liable for any negligence, fraud, malpractice or similar misconduct that they themselves commit.
Another advantage of an LLP is that LLP profits are distributed among the partners for taxation purposes under pass-through rules, and thus are not subject to double-taxation.
Finally, an advantage of LLPs compared to LLCs is that in states that impose franchise taxes on operations, LLPs will not have to pay such taxes, whereas LLCs may have to, depending upon state law.
Remember, whether an LLP is an advantageous form of business for you will depend on your particular circumstances. What appears to be an advantage in one situation may actually become a disadvantage in another. Therefore, you need to consult with a business and tax attorney before deciding whether an LLP is the most convenient form for your particular business.
Certain Aspects of LLPs
LLPs are often utilized by service providers, such as physicians, attorneys, architects, accountants and similar professionals. Articles of LLP must be filed with the Secretary of State of applicable states that allow for LLP formation.
When an LLP is formed, states either require the firm's name to include the term "limited liability partnership" or "registered limited liability partnership", or applicable abbreviations, in order to properly inform the public as to its business form.
Some Aspects of Various LLP Statutes
As noted above, statutes differ widely, and should be examined for your particular situation.
Despite the general LLP limited liability rule, certain states may scale back this feature to some degree. For example, in some states, LLP partners may still be jointly and severally liable for matters relating to contractual liability of the LLP.
In general, some states provide for transformation of an unlimited partnership into an LLP. A number of states also allow for only majority- and not unanimous consent- of partners of a general partnerships to become an LLP.
Contact Sherayzen Law Office NOW for Legal and Tax Help For Your Business
The formation of partnerships, limited liability partnerships and other business and tax matters can involve complex issues and knowledge of applicable state and Federal laws, and this article only attempts to provide a very general background information that should not be relied upon in making the determination of your specific situation. Rather, you should contact Sherayzen Law Office for legal help with this issue. Our experienced business and tax firm will guide you through the complex web of rules concerning partnership, LLP, LLC, corporate formation and taxation matters.

### Cash and Property Contributions to Partnerships and Their Affect on a Partnership Interest
A partnership is defined to mean the relationship between two or more persons to carry on a trade or business, with each person contributing money, property, labor, or skill, and each expecting to share in profits and losses.  This article will provide a broad overview of some of the tax consequences of cash and property contributions to a partnership (whether upon formation or additional contributions later), the basis of partnership interests received by partners, the basis of contributed property to the partnership, and some other helpful information.
Basis of a Partner's Interest
The basis of a partnership interest is the cash contributed by a partner, increased by the adjusted basis of any property contributed by a partner. In general, no gain or loss will be recognized when property is contributed by a partner in exchange for an interest in a partnership; however, in certain circumstances (explained further in this article), a partner must recognize gain, and if so, this gain is included in the basis of his or her partnership interest.
Special rules apply to a partner’s contribution to the partnership in the form of assumption of a partnership’s liabilities.
Basis of Contributed Property to the Partnership (Transferred Basis)
For the partnership, the basis of contributed property (for the purpose of determining depreciation, depletion, gain, or loss for the property) will be the same as the partner's adjusted basis for the property as of the date it was contributed, increased by any gain that must be recognized by the partner.
Contribution of Property- Top Three Exceptions to General Recognition Rules
As mentioned above, usually no gain or loss will be recognized by either a partner or partnership when property is contributed to a partnership in exchange for an interest in the partnership. This general rule applies to both situations where a partnership is being formed and already existing partnerships.
However, there are some exceptions to this rule, three of which are explained below.
1) Property Subject to a Liability
If a partner contributes property that is subject to a liability, or if a partner's liabilities are assumed by the partnership, that partner's basis interest will usually be reduced (but never below zero) by the amount of the liability assumed by the other partners. The partner's basis should be reduced because the assumption of the liability is treated as a distribution of cash to that partner; the other partners' assumption of the liability is likely to be treated as a cash contribution by them to the partnership.
In most circumstances, a partner must recognize gain when property is contributed which is subject to a liability, and the resulting decrease in the partner's individual liability exceeds the partner's partnership basis.
2) Partnership Would be an Investment Company if Incorporated
Gain will be recognized when property is contributed in exchange for a partnership interest if the partnership would be treated as an investment company, if it were incorporated .
A partnership will usually be treated as an investment company if over 80% of the value of its assets is held for investment, and it consists of certain readily marketable items, such as money, stocks and other equity interests, real estate investment trusts, and interests in regulated investment companies. Whether a partnership will be treated as an investment company or not, is typically determined immediately after the contribution of property.
3) Partnership Capital in Exchange for Services Rendered
In most circumstances, if a partner receives a partnership interest in exchange for services rendered, that partner must recognize compensation income.
Partnership's Holding Period for Contributed Property
Usually, the partnership's holding period for contributed property includes the partner's holding period.
Partner's Holding Period for Partnership Interest
A partner's holding period for a partnership interest usually includes the holding period of the property contributed (if the property was a capital asset or Section 1231 asset to the contributing partner).
Treatment of Built-In Gain/Loss to the Partnership
In general, if a partner contributes (non-depreciable) property, and the partnership eventually sells or exchanges the property and recognizes gain or loss, the built-in gain or loss must be allocated to the contributing partner. (If the property is depreciable, detailed rules apply to allocation procedures).
Partner's Basis Increases/Decreases
A partner's basis will usually increase by any additional contributions by a partner to a partnership (including an increased share of, or assumption of, a partnership's liabilities), a partner's distributive share of taxable and nontaxable partnership income, and in general, a partner's distributive share of the excess of the deductions for depletion over the basis of depletable property.
In general, a partner's basis will decrease (but not below zero) by any money (including a decreased share of partnership liabilities, or an assumption of the partner's individual liabilities by the partnership) and adjusted basis of property distributed by a partnership to a partner, a partner's distributive share of partnership losses, and a partner's distributive share of nondeductible partnership expenses that are not capital expenditures (including a partner's share of any section 179 expenses).
Contact Sherayzen Law Office For Legal and Tax Help Regarding Partnerships
The contribution of property to partnerships and various partnership-partner taxation matters can involve complex issues, and this article only attempts to provide a very general background information that should not be relied upon in forming a partnership, contributing property to the partnership or any other specific taxation aspects. Rather, you should contact Sherayzen Law Office for legal help with this issue. Our experienced business tax firm will guide you through the complex web of rules concerning U.S. partnership formation and taxation matters and help you with your specific needs.

### Case Note: Weller v. Commissioner of Internal Revenue
This brief case note describes one of the recent cases of the U.S. tax court.  This description is not a legal advice and may not be relied upon as such.
On September 20, 2011, the tax court ruled in favor of the taxpayer and found that he engaged in his business activities for profit (see Weller v. Comm’r, T.C.M. 2011-224 (T.C. 09/20/11)).
The main issue in this case was whether the taxpayer engaged in his glider plane-related activities during the years in issue with the objective of making a profit within the meaning of section 183.  After being laid off from Boeing in 2002, the taxpayer decided to start a business where he would off high-performance glider training.  On August 1, 2003, petitioner formed Northwest Eagle Soaring, L.L.C. (“Northwest”), in Washington. Northwest provides private glider flight instruction and glider plane rides. The taxpayer did not prepare a business plan for Northwest.
The taxpayer is licensed by the Federal Aviation Administration (FAA) as a Certified Flight Instructor Airplane, Certified Flight Instructor Instruments, and Certified Flight Instructor Glider. Petitioner performed flight instruction for the Boeing Employees Soaring Club.
In late 2003, the taxpayer used money he inherited to complete his purchase of a DG-1000 high-performance glider plane for $180,000, and he placed it in service on November 22, 2003. Northwest conducts its activities primarily on weekends from March through November. Glider flights are restricted to times of good visibility. For business promotion, Northwest maintains a Web site, distributes marketing flyers to locations such as airports and aviation-related businesses, and advertises in a flying publication. The taxpayer  maintained flight logs for the glider activities as required by the FAA.
In 2004, the taxpayer focused his time on the Northwest activities and did not have other employment.  For the years 2005-2007, he worked for other companies, but still deducted unreimbursed employee expenses related to Northwest.
The IRS audited the tax returns for the years 2005-2007 and found that the taxpayer did not have a profit-making objective (i.e. that his Northwest activities were just a hobby).
The tax court disagreed. After finding that the taxpayer’s subjective intent to make profit is the focus of the test, the court looked in detail at the factors provided by the IRS regulations to determine such intent (Section 1.183-2(b)).   There were nine relevant factors: (1) The manner in which the taxpayer carried on the activity; (2) the expertise of the taxpayer or his advisers; (3) the time and effort expended by the taxpayer in carrying on the activity; (4) the expectation that the assets used in the activity may appreciate in value; (5) the success of the taxpayer in carrying on other activities for profit; (6) the taxpayer's history of income or losses with respect to the activity; (7) the amount of occasional profits, if any, that are earned from the activity; (8) the financial status of the taxpayer; and (9) whether elements of personal pleasure or recreation are involved in the activity.
Upon careful application of the facts to these nine factors, the court found that the taxpayer engaged in the glider activities with the primary purpose and intent of realizing an economic profit independent of tax savings during the years in issue.
Contact Sherayzen Law Office For Tax Court Representation
If you disagree with the IRS determination in your case and wish to challenge it the Tax Court, contact Sherayzen Law Office for diligent, zealous, and affordable tax court representation.

### U.S. Taxation of Foreign Persons: General Overview
Unlike U.S. citizens, U.S. resident aliens and domestic corporation which are taxed under the Internal Revenue Code on their worldwide income, the IRS applies a special tax regime to foreign persons. The general rule (subject to numerous exceptions) is that foreign persons are only taxed on their U.S.-source income of specified types and income effectively connected (or treated as “effectively connected”) with a trade or business conducted by such foreign persons within the United States.
For example, generally, capital gains which are not effectively connected with a U.S. trade or business are not subject to U.S. income tax. Be careful, though, because even this seemingly simple rule contains conceptions. The most common exception can be found in IRC Section 871(a)(2). Pursuant to this provision, net capital gains from U.S. sources are taxable to nonresident alien individuals who are present in the United States for 183 days or more during a taxable year even if the gains are not effectively connected with the conduct of a U.S. trade or business.
One can distinguish three main categories of income which is relevant to determining the taxation of foreign persons – effectively connected income, fixed and determinable annual or periodical income, and U.S. source capital gains. Each of these three categories follows specified rules and contains numerous exceptions. Moreover, often, these provisions have to be coordinated with the other provisions in the IRC.
Contact Sherayzen Law Office to Understand Your U.S. Tax Liability
The taxation of foreign persons is a very complex tax question, and this article only attempts to provide a very general background information that should not be relied upon in making the determination of your U.S. tax liability. Rather, you should contact Sherayzen Law Office for legal help with this issue. Our experienced tax firm will guide you through the complex web of rules concerning U.S. taxation of foreign persons, and help you determine your U.S. tax liability.

### Non-recognition Transactions Involving Foreign Corporations: Top Three Reporting Requirements
When we are talking about nonrecognition transactions, we generally mean mergers, spinoffs, and contributions of capital. When such transactions involve foreign corporations, U.S. tax laws impose a number of reporting requirements.
In this brief essay, I will generally discuss the top three reporting requirements for U.S. persons who are involved in nonrecognition transactions involving foreign corporations.
First, IRC Section 6038B and corresponding IRS regulations require that certain information be reported to the IRS on Form 926 for outbound transfers. This means that Form 926 may be required where a U.S. person transfers (or is deemed to transfer) property, including cash, to a foreign corporations. In some case, a similar requirement applies when a foreign corporation is transferred in a IRC Section 355 transaction, such as a spinoff, to certain other foreign or domestic persons (there are also special rules involving transfers to foreign partnerships). Also, keep in mind that a transfer of intangible property to a foreign corporation may also result in additional filing requirements. Other transfers, such as indirect stock transfer, may create a deemed transfer to a foreign corporation.
The second group of requirements is centered around the tax-free transfer of the stock of a domestic corporation to a foreign corporation. IRC Section 367(a) and attendant regulations required the transferred U.S. target to give notice.
The third group of requirements concerns foreign corporations that participate in certain tax-free inbound and foreign-to-foreign reorganization. Pursuant to IRC Section 367(b), the IRS regulations required notice to be filed with the IRS with respect to such reorganizations.
Contact Sherayzen Law Office For Legal Advice Regarding Non-Recognition Transactions Involving Foreign Corporations
This brief essay only provides some of the contours of the reporting requirements regarding non-recognitions transactions involving foreign corporations; it should not be relied upon in determining your IRS reporting requirements.
Rather, if you have any questions with respect to your reporting requirements involving such transactions with respect to foreign corporations, you should contact Sherayzen Law Office. Our experienced international tax firm will assist you in identifying your IRS reporting requirements and help you comply with them.

### Who Must File Form 8858
If a U.S. person owns or is considered to be the owner of a Foreign Disregarded Entity (“FDE”), then he must file Form 8858. In general, there are three different groups of persons who may be required to file the Form.
1. Direct “Tax Owners” of FDE
The instructions to Form 8858 define a “tax owner” as a “person that is treated as owning assets and liabilities of the FDE for the purposes of U.S. income tax law.” Thus, this group of filers includes U.S. persons who are direct owners of FDEs for U.S. tax purposes. For example, a natural person A owns 100% of FDE; therefore, A is required to file Form 8858.
2. Category 4 and 5 Filers of Form 5471 With Respect to a CFC That Owns the FDE
The second group of filers includes U.S. persons that are either category 4 or 5 filers of Form 5471 with respect to a controlled foreign corporation (“CFC”) if the CFC is the tax owner of the FDE.
3. Category 1 and 2 Filers of Form 8865 With Respect to CFP That Owns the FDE
Finally, the third group of filers includes U.S. persons that are either Category 1 or 2 filers of Form 8865 with respect to a controlled foreign partnership (“CFP”) if the CFP is the tax owner of the FDE.
Multiple Filers Exception
In some cases, a multiple filers exception may apply in order to avoid unnecessary filing of the same information. This exception works in conjunction with Forms 5471 and 8865 instructions for multiple filers of same information.
Contact Sherayzen Law Office To Determine Whether You Must File Form 8858
This article contains only general background information and should not be relied upon to determine whether you are required to file Form 8858.
If you are unsure about whether you must file Form 8858, contact Sherayzen Law Office for legal advice. Our experienced international tax firm will help you comply with your U.S. tax reporting obligations, including the determination of whether you are required to file Form 8858.

### Foreign Disregarded Entities: Form 8858 Introduction
In my international tax practice, I have encountered frequent examples where business owners fail to comply with the U.S. tax reporting requirements with respect to a “foreign disregarded entity” (“FDE”). Therefore, in this essay, I will try to make some very broad observations with respect to the entity and Form 8858.
FDE is a business entity that is a foreign corporation under local law, but, is, or has elected under the “check-the-box” rules of Treas. Regs. §301.7701-3 to be disregarded as, an entity separate from its owner for U.S. federal income tax purposes.
If a U.S. person owns or is considered to be the owner of an FDE, then he must file Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities, with respect to such FDE. The ownership may be a direct, indirect, or constructive; the IRS provides certain guidelines in order to determine whether an indirect or constructive ownership of an FDE exists.
One of the most dangerous aspects of Form 8858 is that it may need to be filed in conjunction with Forms 8865 or 5471. Failure to properly file Form 8858 is likely to render Forms 8865 or 5471 incomplete, resulting in significant penalties being imposed.
While Form 8858 is used in part to compute the taxable income or E&P (earnings and profits) of the FDE, the Form also serves an important function for the IRS – an audit guideline for the IRS examiners. This becomes most obvious by looking at the Schedule G questions, which appear to focus on potential audit issues.
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This very short legal note is intended only to point out some very broad contours with respect to FDEs, Form 8858 and its purposes. The subject matter is extremely complex and should be only approached with the help of an international tax attorney.
If you have any questions with respect to Form 8858 compliance, contact Sherayzen Law Office by phone or email. Our experienced international tax firm will guide you through the complex maze of the IRS regulations with respect to Form 8858 and help you comply with its complex tax accounting and reporting requirements.

### Child Tax Credit and Foreign Earned Income Exclusion
The U.S. government allows eligible parents to take a tax credit for up to $1,000 per qualifying child. In addition to various issues with respect to what constitutes a “qualifying child”, there are various complications with respect to the eligibility of the parents.
In this short essay, I will concentrate solely on the interaction of the parents’ income eligibility for the child tax credit and the foreign earned income exclusion.
General Income Limitations
Generally, in order to take full advantage of the child tax credit, the parents’ adjusted gross income (AGI) should be below a certain amount. The AGI amount will depend on your filing status as follows:
Married filing jointly – $110,000.
Single, head of household, or qualifying widow(er) – $75,000.
Married filing separately – $55,000.
If your AGI is above the relevant threshold, then you must reduce your child tax credit at the rate of $50 per each $1,000 of income above the threshold
Foreign Earned Income Exclusion and Income Limitation Calculation
Under I.R.C. §911, if certain conditions are met, Foreign Earned Income Exclusion allows a qualified individual to exclude as much as $92,900 (for tax year 2011) of his foreign earned income from taxable gross income. This means that, if eligible, you may reduce your AGI by as much as $92,900.
What happens then to the income limitation calculations for the purposes of the child tax credit?
Generally, in order to avoid giving U.S. taxpayers who work abroad an unfair advantage, the IRS requires you to follow the modified AGI rules in determining your income for the child tax credit phase out purposes. Under the modified AGI rules, you should add the amount excluded on lines 45 and/or 50 of Form 2555 to your regular AGI.  This means that you are adding the excluded amount back to your AGI to determine your eligibility for the child tax credit.
Thus, the Foreign Earned Income Exclusion is not likely to have any affect on your AGI calculations for the purposes of determining whether your income is above the child tax credit threshold and how much.
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If you have any questions with respect to how Foreign Earned Income Exclusion works, contact Sherayzen Law Office at Eugene@SherayzenLaw.com. Our experienced international tax firm will guide you through the complex maze of the interaction of various sections of the U.S. tax law with the Foreign Earned Income Exclusion.

### IRS Form 1120 Schedule UTP Filing Requirements
The IRS recently announced that Schedule UTP must be filed with Forms 1120, 1120-F, 1120-L or 1120-PC, if an entity meets certain requirements. UTP stands for “Uncertain Tax Positions”, and the purpose of the schedule is for corporate taxpayers to provide concise disclosure of uncertain tax issues relating to the reporting of reserves in their audited financial statements.
Filing Requirements
Schedule UTP will affect more and more corporate taxpayers through a gradual phase-in period. For tax years 2010-2011, corporations that file Forms 1120, 1120-F (foreign companies), 1120-L (life insurance companies) or 1120-PC (property and casualty insurance companies), have uncertain tax positions and possess total assets exceeding $100 million, must file Schedule UTP. For Form 1120-F filers, worldwide assets are used to determine whether a corporation must also file Schedule UTP.
Beginning with the tax year 2012, the total asset threshold will be reduced to $50 million. Starting in tax year 2014, the threshold will be further reduced to $10 million. Currently, tax positions taken before 2010 need not be reported on Schedule UTP.
The IRS has stated that these requirements may also be extended to additional entities, such as tax-exempt organizations, real estate investment trusts, regulated investment companies, and pass-through entities (S corporations, partnerships, and limited liability companies).
While Schedule UTP requires the reporting of U.S. Federal income tax positions, reporting of uncertain foreign or state tax positions is not required.
Reporting of a tax position is required on Schedule once a reserve for a tax position has been recorded on the financial statements, and a position is taken on the Federal tax returns.
Reporting Reserves
Schedule UTP requires reporting of uncertain Federal income tax positions for which a corporation or related party has recorded a reserve in its audited financial statements under applicable financial accounting standards (corporations, however, only report their own tax positions on the schedule, and not the tax positions of a related party). Reserves may include, for example, reported contingent legal liabilities, reductions of an Income Tax Refund Receivable, or increases in a liability for Income Taxes Payable.
Additionally, a corporation must report tax positions taken for which no reserve was established because of an expectation of litigation. If no reserve was established for income tax, Schedule UTP will also be required if a corporation or related party determines that there is less than a 50% chance that the IRS will settle, and it is “more likely than not” that the corporation will prevail in litigation.
However, corporations are not required to report in instances where no reserve was created because the tax position was sufficiently certain, or where applicable financial accounting standards determined that the item was immaterial.
Major Tax Positions
Corporations filing Schedule UTP must also identify “major tax positions” (MTP’s). MTP’s, including transfer pricing positions, which exceed greater than or equal to 10% of the overall tax liability (calculated by dividing the amount of the MTP by the sum of all tax positions, excluding positions expected to be litigated) must be reported.
Purpose of Schedule UTP
Schedule UTP is intended to provide the IRS with a concise disclosure of the uncertain tax issues taken by a corporate taxpayer. The description should be limited to no more than a few sentences and should state the relevant facts involved. Further, Schedule UTP instructions specify that the brief description should not include legal analysis of the tax position taken.
The IRS will treat an entity as having filed Form 8275 (Disclosure Statement) or Form 8275-R by filing a complete and accurately disclosed tax position on Schedule UTP; additionally the Internal Revenue Code (IRC) section 6662(i) disclosure requirements will be satisfied with proper disclosure on the schedule.
Penalties
Schedule UTP instructions currently do not specify a penalty structure. However, the IRS has noted that in instances where it appears that corporations are non-compliant with Schedule UTP requirements, it will bring an appropriate enforcement action.
In the upcoming years, it is clear that Schedule UTP will need to be filed by an increasing number of corporations, raising compliance costs and the complexity of tax planning and preparation. Corporations that have, or expect to have total assets of $10 Million or more (and possibly tax-exempt organizations, depending upon future IRS interpretations), should prepare in advance for complying with this new form. Sherayzen Law Office can help you plan for this eventuality.
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This article is intended to give a brief summary of these issues, and should not be construed as legal or tax advice. Corporate compliance and tax planning necessitates an experienced understanding of complex regulations, IRC statutes, and case law, and IRS penalties for failure to comply can be substantial. If you have further questions regarding your own tax circumstances, Sherayzen Law Office offers professional advice for all of your corporate, cross-border, international, and other tax needs. Call or email for a consultation today.

### IRS Form 8938 and Revised Form 8621 Filing Requirements Under Notice 2011-55
The IRS recently released Notice 2011-55, partially suspending certain Foreign Account Tax Compliance Act (“FATCA") information reporting requirements until Form 8938, (Statement of Specified Foreign Financial Assets), and a revised Form 8621, (Return by a Shareholder of a Passive Foreign Investment Company or a Qualified Electing Fund) are released.
It is important to note that while the reporting requirements of Forms 8938 and revised Form 8621 have been partially suspended, they have not been excused for taxpayers. Thus, taxpayers should be aware that until the new forms are issued, tax preparation may be necessary in order to be in compliance and avoid severe penalties.
FATCA Reporting Requirements
Congress enacted FATCA as part of the Hiring Incentives to Restore Employment Act ("HIRE" Act). Included in FATCA is the additional information reporting requirements of IRC Sections 6038(D) and 1298(f).
Under 6038(D), taxpayers who hold more than $50,000 in the aggregate in any financial account maintained by a foreign financial institution, or in any foreign stock, interest in a foreign entity (including a foreign trust, or financial instrument with a foreign counterpart that is not held in a custodial account of a financial institution) are subject to file a Form 8938 with their annual return.
IRC Code Section 1298(f) requires a U.S. person who is a shareholder in a passive foreign investment company (“PFIC”) to file an annual report, Form 8621. Notice 2011-55 states that the IRS will be issuing a revised Form 8621. Once the revised form is issued, individuals must retroactively file the revised Form 8621 for tax years beginning after the date of the HIRE Act (March 18, 2010).
The IRS is planning on also issuing further regulations regarding these reporting requirements.
Notice 2011-55
IRS Notice 2011-55 provides that the IRC 6038D Form 8938 reporting requirements are suspended until the form is released. Additionally, as noted above, for U.S. shareholders of PFIC's who were not previously required to file Form 8621 under the current requirements before the enactment of Section 1298(f), reporting requirements are suspended (but not excused) until the revised Form 8621 is released. Taxpayers who are already required to file Form 8621 under the current instructions must continue to file the form.
When the IRS issues the revised forms, taxpayers who must file will be required to attach the appropriate forms to their next information return or tax return, completed for the suspended tax year. Failure to file (or to properly file) Form 8938 and/or Form 8621 for the suspended tax year may result in the extension of the statute of limitations under section 6501(c)(8), and penalties may also be applied.
A Form 8938 or revised Form 8621 filed for a suspended tax year with a timely filed information or tax return will generally be treated as having been filed in the date that the income tax or information return for the suspended tax year was filed.
Subject to certain exceptions, the statute of limitations for assessment of tax will not expire until three years after Form 8938 and/or revised Form 8621 is received by the IRS.
FBAR Requirements Not Affected
The IRS stated in Notice 2011-55 that the filing requirements of FinCEN Form 114 formerly Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts; “FBAR”) are not suspended under the notice.
Contact Sherayzen Law Office For Experienced Legal Help
This article is intended to give a brief summary of these issues, and should not be construed as legal or tax advice. Tax planning and reporting often necessitates an experienced understanding of complex regulations, statutes, and case law, and penalties for failure to comply can be substantial. If you have further questions regarding your own tax circumstances, Sherayzen Law Office offers professional advice for all of your Federal, international, cross-border, and state tax needs. Call or email for a consultation today.

### What is SEP IRA?
A Simplified Employee Pension (“SEP”) is a written plan that allows you to make contributions toward your own retirement as well as your employees’ retirement while avoiding the complexity of various qualified plans. Under a SEP, you make contributions to a traditional IRA set up by or for each eligible employee.
It is important to note that SEP-IRA is owned and controlled by the employee, and you make contributions to the financial instituation where the SEP-IRA is maintained.
At a minimum, SEP-IRAs are set up for each employee that is considered to be eligible under the IRS regulations. “Excludable” employees can be excluded from coverage under a SEP.
There are three basic steps in setting up a SEP. First, you must execute a formal written agreement to provide benefits to all eligible employees. Second, you must give each eligible employee certain information about the SEP. Finally, a SEP-IRA must be set up by or for each eligible employee.
While there are special rules determining the contribution limit for self-employed individuals, generally, a contribution to a common-law employee’s SEP-IRA cannot exceed the lesser of 25% of the employee’s compensation or $49,000 (for the tax year 2011).
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If you have any questions with respect to SEP-IRA and how it functions, contact Sherayzen Law Office for additional legal help.

### Pension Plan Limitations for 2012
Due to the cost of living adjustments, many of the pension plan limitations will change for 2012, but others will remain the same.
Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Commissioner annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
The following is the description of most of the changes:
Effective January 1, 2012, the limitation on the annual benefit under a defined benefit plan under section 415(b)(1)(A) is increased from $195,000 to $200,000.
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $16,500 to $17,000.
The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.
The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2012 from $49,000 to $50,000.
The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $16,500 to $17,000.
The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $245,000 to $250,000.
The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $160,000 to $165,000.
The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $985,000 to $1,015,000, while the dollar amount used to determine the lengthening of the 5 year distribution period is increased from $195,000 to $200,000.
The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $110,000 to $115,000.
The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $5,500. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over remains unchanged at $2,500.
The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $360,000 to $375,000.
The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $16,500 to $17,000.
The compensation amounts under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation purposes is increased from $95,000 to $100,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $195,000 to $205,000.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $34,000 to $34,500; the limitation under Section 25B(b)(1)(B) is increased from $36,500 to $37,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $56,500 to $57,500.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $25,500 to $25,875; the limitation under Section 25B(b)(1)(B) is increased from $27,375 to $28,125; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $42,375 to $43,125.
The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $17,000 to $17,250; the limitation under Section 25B(b)(1)(B) is increased from $18,250 to $18,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), is increased from $28,250 to $28,750.
The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $90,000 to $92,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $56,000 to $58,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $169,000 to $173,000.
The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $169,000 to $173,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $107,000 to $110,000.
The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under section 430(c)(2)(D) has been made is increased from $1,014,000 to $1,039,000.
The following is the highlight of the items that remain unchanged:
The catch-up contribution limit for those aged 50 and over remains unchanged at $5,500.
The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $550.
The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $11,500.
The deductible amount under § 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,000.
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If you have any questions with respect to the pension plans, contact Sherayzen Law Office. Our experienced tax firm will guide you through the complex web of various pension plans.

### Incoterms 2010 FCA
In a previous essay, I already explained the importance of Incoterms to drafting of international contracts and discussed one of the Incoterms 2010 (EXW). In this article, I will provide a brief overview of another and more common Incoterms 2010 – FCA.
FCA (Free Carrier) means that the seller delivers (the Incoterms 2010 rules specify exactly when such even occurs) the goods to the carrier or another person designated by buyer at the seller’s premises or another named location. If FCA is used, the seller’s obligations are expanded to clearing the export license (where necessary) and otherwise comply with the customs requirements for exports in addition to providing the goods conforming with the contract specifications. There is no such requirements for securing an import license; rather, this is still the buyer’s obligation.
The buyer still makes the contracts of carriage and insurance under FCA. However, there are exceptions to this rule whether based on the buyer’s request or commercial practice. Furthermore, the buyer is not obligated to the seller to make such contract of insurance. If the buyer wishes to obtain the contract of insurance, the seller is obligated to supply the information necessary for the buyer to secure the contract of insurance.
There are fairly complex rules surrounding FCA with respect to the transfer of risk under FCA. Generally, the seller bears all risks of loss and damage up to the point of delivery of goods as specified by the Incoterms 2010 rules. However, there are important exceptions that may modify the main rule and force one of the parties (usually buyer) to bear the burden of risk from an earlier point.
Unlike EXW, the allocation of costs to the seller now explicitly includes all costs related to the customs formalities related to the export of the goods (inlcuding taxes, duties, and other export-related charges). The buyer’s obligation to pay costs is also expanded in certain circumstances, including the failure to provide certain notices to the seller. Likewise, there are specific exceptions to these rules.
It is also important to note here that Incoterms 2010 provide a number of specific requirements with respect to the notices that should be given by the parties to each other, packaging of goods, checking the goods, pre-shipment inspection, security-related information, and other numerous rules.
Whether you are a buyer or a seller, you are well-advised to consult an international contract attorney before you use any of the Incoterms 2010. The description of FCA provided in this essay is fairly basic and for general information only. It should not be relied upon in drafting the contract.
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If you are about to engage in a transaction involving an international delivery of goods, contact Sherayzen Law Office for legal help. Our experienced international contract firm can assist you at every stage of your contract: negotiation, drafting and enforcement. We will provide a rigorous representation of your interests, protect your contractual rights, and strive to ensure that the contemplated transaction goes as smoothly as planned.

### Incoterms 2010: EXW
Incoterms (the ICC rules on the use of domestic and international trade terms) constitute a critical part of an international sales contract.  Their most important contribution to the contract consist of a clear delineation of the parties’ respective obligations, thereby reducing the risk of misunderstanding and litigation.  Moreover, Incoterms are regularly updated and, therefore, incorporate the recent developments in global trade.  The latest update occurred in 2010 and, today, Incoterms 2010 constitute an invaluable part of an international trade attorney’s vocabulary.
In this essay, I want to provide a very brief overview of one of the most unfamiliar Incoterms 2010 – EXW.
EXW (Ex Works) means that the seller delivers the goods to the buyer when the seller places the goods at the disposal of the buyer on the seller’s premises (or at another specific named location).  The seller does not need to load the goods on any collecting transport.  It also does not need to clear the goods for export.
If EXW is used, the buyer bears all costs and risks when it takes the goods from the agreed point (usually, the seller’s premises).
In other words, among all of the Incoterms 2010, the seller has minimum obligations if EXW is used.
While EXW may appeal to the seller, one should use this Incoterm very carefully.  In addition to the fact that it is not easy to get the buyer to agree to EXW, there are certain disadvantages to using EXW.  For example, the obligation of the buyer to supply to seller the information regarding exports is very limited even though the seller may actually need this information for tax or export control compliance purposes.
Moreover, Incoterms do spell out certain conditions that may actually broaden the seller’s obligations. For example, the seller is obligated to supply the buyer with certain information necessary for security-clearance purposes.
Thus, despite all of its apparent simplicity, EXW should be used only where the situation warrants its use.  It is well advised that a non-professional should not engage in using Incoterms, such as EXW.  Rather, such decisions should be left to an international contract attorney who will have a better understanding of when to utilize EXW.
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### Foreign Earned Income Exclusion: 2011
Under I.R.C. §911, if certain conditions are met, a qualified individual can exclude his foreign earned income from taxable gross income for the U.S. income tax purposes. This income may still be subject to U.S. Social Security taxes.
The income exclusion amount for 2011 has increased to $92,900 (in 2010, it was $91,500).
Remember, if your overseas earnings are above $92,900 for the tax year 2011, then you will be subject to U.S. income taxation on the excess amount. For example, if you earned $105,000 in 2011, then you will have to pay U.S. income taxes on $ 12,100.
It is also important to note, despite the income tax exclusion, your tax bracket will still be the same as if you were taxed on the whole amount (i.e. as if you had not claimed the foreign earned income exclusion). For most expats, this means that the tax bracket is likely to start at 25% or higher. If you are self-employed, however, your situation may differ from this description.
Contact Sherayzen Law Office For Foreign Earned Income Exclusion Legal Help
If you are a U.S. taxpayer living abroad or you are planning to accept a job overseas, contact us to discuss your tax situation. Our experienced tax firm will guide you through the complex maze of U.S. tax reporting requirements, help you make sure that you are in full compliance with U.S. tax laws, and help you take advantage of the relevant provisions of the Internal Revenue Code to reduce your tax burden.

### IRS Increases Deductions and Exclusions for the Tax Year 2012
The Internal Revenue Service recently announced that for tax year 2012, personal exemptions and standard deductions will increase, and tax bracket thresholds will rise because of inflationary effects. This article will explain some of these changes.
Personal Exemptions, Standard Deductions and Tax Bracket Changes
The increased amount of each personal and dependent exemption will be $3,800 (up $100 from 2011). The updated standard deduction will be $11,900 for married couples filing joint returns (up $300), $5,950 for single individuals and married individuals filing separately (up $150), and $8,700 for heads of household (up $200).
Tax-bracket thresholds will also increase for each filing status. For married couples filing a joint return, the 25% taxable income threshold will begin at $70,700, up from $69,000 for tax year 2011.
401(k) Contribution Changes
The IRS also announced that the maximum 401(k) contribution amount will increase by $500 to $17,000.
Foreign Earned Income Deduction
The IRS stated that the maximum foreign earned income deduction will increase by $2,200 to $95,100 for tax year 2012.
Estate and Gift Tax Exclusions
The basic estate tax exclusion will increase to $5,120,000 (up from $5,000,000 for calendar year 2011) for the estate of any decedent dying during calendar year 2012. Further, the aggregate decrease in value of an estate’s property cannot exceed $1,040,000 (an increase of $1,020,000 for 2011) for executors electing the special use valuation method for qualified real property.
The annual gift exclusion will stay at $13,000.
Conclusion
This article is intended to give a brief summary of these issues, and should not be construed as legal or tax advice. Please consult IRS materials independently for further verification. If you have further questions regarding your own tax circumstances, Sherayzen Law Office offers professional advice for all of your US and international, and estate planning tax needs. Call our office (952) 500-8159 or email Eugene@SherayzenLaw.com for a consultation today.

### Form 5471: General Overview of the Required Information
The individuals who fall within the four categories of U.S. persons who are required to file Form 5471 find out very fast just how incredibly complex this Form is. In addition to various problems associated with GAAP compliance, tax year adjustments, understanding very complex corporate tax and accounting rules (as well as the difference between them), and the logistical concerns with respect to obtaining the information, the sheer volume and variety of the information that Form 5471 requires the files to supply makes the Form one of the most difficult compliance requirements in the Internal Revenue Code.
In this essay, I intend to provide a very general overview of the information that needs to be disclosed on Form 5471.1. General Information
Form 5471 generally requires you to disclose your personal information (such as Social Security Number, address, tax year, and so on), corporate information (name of the corporation, when organized, its business and so on), as well as on whose behalf Form 5471 is being filed.
Despite its apparent innocence, there are at least two pernicious issues in this seemingly basic section. First, there are detailed rules on whose behalf Form 5471 may be filed.
Second, the Form requires you to state your ownership share of the corporation at the end of the year. Sounds simple? Not so fast – there are specific attribution rules which may increase your share ownership in the corporation. Failure to apply those rules may result in choosing incorrect filing category and, ultimately, IRS penalties for non-compliance.2. Category of Filers
There are generally four categories of filers who are required to file Form 5471 (there used to be five, but the first category was repealed by Congress).
From the outset, Form 5471 requires you to choose the category of filers that apply to you. This is not a simple process as each category has specific requirements. Moreover, you may (and most taxpayers actually do) fit into more than one category. If this is the case, then you may have to file additional schedules that require more disclosures to the IRS.
3. Stock of the Foreign Corporation
In this Schedule A of Form 5471, you are required to describe the stock of the corporation – number and class of stocks. Usually, this is one of the most benign sections of Form 5471. Nevertheless, some of my clients have had problems with Schedule A because they never properly documented all of the classes of stocks and their attributes. This resulted in substantial delays and proactive business planning.
4. U.S. Shareholders of the Foreign Corporation
In Schedule B, you will need to provide the name of each shareholder according to Form 5471 instructions. For each listed shareholder, you will need to provide the name, address, identifying number (for example, social security number), number of shares held (at the beginning and the end of the annual accounting period), and the class of shares. Moreover, for each shareholder, you will need to supply the pro rata share of Subpart F income (which, in itself, is a complex matter).
5. Schedule C: Income Statement
Schedule C is one of the most important and time-consuming parts of Form 5471. The complications are numerous.
First, the Income Statement should be prepared and reported on the Form in accordance with U.S. GAAP. If the foreign company used GAAP to prepare the original statements, the task is not very hard. If, however, the foreign company did not initially use GAAP, the conversion of financial statements to the GAAP standard can be incredibly complex, especially in a foreign context.
Second, the Income Statement should be reported in the Functional Currency and US dollars. The currency translation issues (especially according to GAAP) may become very difficult.
Third, the Net Income part of the Income Statement on Form 5471 presents its separate challenges with its separation of net income from current income per books according to the GAAP standard.
Finally, you need to make sure that the Income Statement corresponds to the Balance Sheet, especially given all of the currency translation issues.
Remember, various items on the income statement must be supported by attached schedules.
6. Schedule E: Taxes
The first common challenge in this section is to correctly identify the taxes that need to be reported. The second common issue is that you need to consult the instructions to make sure that the currency translation rate is correctly identified and presented on the form. I have seen even experienced international tax accountants make mistakes in this area.
7. Schedule F: Balance Sheet
Schedule F may be the most difficult part of Form 5471 (although schedules H and I are very close in this dubious contest).
The problems are so numerous that I will not even attempt to list them in this essay. Rather, I want to point out several common themes that you are likely to deal with in preparing Form 5471.
First, the Balance Sheet should be prepared according to GAAP and all amounts should be reported in U.S. dollars.
Do not be surprised if this means using as many as three or four different currency translation rates according to GAAP. The end result will be that your Balance Sheet does not appear to balance out, forcing you to engage in highly complex accounting.
Second, there will be a shortage of available space to properly reflect all of the Balance Sheet issues.
Third, Retained Earnings may become your best friend and your worst enemy. In the hands of a sophisticated tax professional (accountant or attorney), Retained Earnings may be used to resolve outstanding issues. A novice, however, may spend long hours trying to figure out how to use Retained Earnings and still fail in this task.
Finally, remember that certain items on the Balance Sheet must be supported by attached statements.
8. Schedule G Questions
There are various types of questions listed in Schedule G. In some situations, they may easily be answered, whereas other situations will require a more detailed analysis.
9. Schedule H: Current Earnings and Profits
You should be prepared to spend a significant amount of time on this section. This is another highly complex part of Form 5471. Earnings and Profits is an esoteric part of accounting which has a complex relationship with taxation. When it comes to Form 5471, the foreign context and GAAP rules greatly exacerbate the difficulty of the issues involved.
At the end of Schedule H, you will need to translate the amounts into US dollars and provide the translation rate.
10. Schedule I: Subpart F Income
Another challenging section of Form 5471. Treaties have been written on Subpart F income. I will just mention here that this is a highly complex section on which you should prepared to spend some time.
11. Schedule J: Accumulated Earnings and Profits
Although this part of Form 5471 maybe time-consuming, it is not very complex. One common difficulty that I have encountered in my practice is a practical one – lack of properly prepared records. If the foreign corporation has not been subject to 5471 requirements in the prior years or not for all years of its existence, it may not have the records to calculate the accumulated earnings and profits. This may result a “snowball” effect that it is more and more difficult to comply with Schedule J requirements unless one goes back many years to calculated the accumulated Earnings and Profits.
12. Schedule M
This form only applies in the context of a controlled foreign corporation (CFC). This is another time-consuming part of Form 5471 which concentrates on the transactions between the CFC and the shareholders and other related persons. It may take awhile before you figure out just what exactly should go on this form, especially if there are outstanding loans from and/or to shareholders.
13. Schedules O: Parts I and II
This part of Form 5471 allows the IRS to keep track of any corporate re-organizations, acquisition and disposition of the corporation’s stock, and other organization and asset related matters. Relatively speaking, this is not a complex part of the Form, but it has its own issues that may arise during its preparation.
Conclusion: Contact Sherayzen Law Office NOW for Help With Drafting Form 5471
Based on the very general overview of 5471 requirements, it becomes clear that you should not attempt to complete Form 5471 on your own. Nor should you expect any help from the IRS. There is not a single department that you can call to have your questions answered. Form 5471 specialists are limited to examiners to whom you will not have direct telephone access.
Therefore, if you fall within one of the categories of taxpayers who are required to file Form 5471, please contact Sherayzen Law Office. Our experienced international tax firm will help you prepare the necessary documentation, complete Form 5471 and file it on your behalf. If you have not filed your Forms 5471 for prior years, we will help you deal with this situation and guide you through the IRS voluntary disclosure process.

### Incoterms 2010: Most Prominent New Features
The new Incoterms 2010 replace and update a number of various features of Incoterms 2000. The new rules took effect on January 1, 2011. The following is a very brief description of some of the most prominent changes.
1. Reduced Number of Incoterms
The number of Incoterms rules has been reduced from 13 to 11.  This reduction resulted from replacing four Incoterms 2000 rules with just two (see below).
2. New Incoterm Rules: DAT and DAP
Two new Incoterms rules – DAT and DAP – have replaced the Incoterms 2000 rules DAF, DES, DEQ and DDU
Under both new rules, DAT (Delivered at Terminal) and DAP (Delivered at Place), delivery occurs at a named destination.  In DAT,  at the buyer’s disposal unloaded from the arriving vehicle (as under the former DEQ rule); in DAP, also at the buyer’s disposal, but ready for unloading (as under the former DAF, DES and DDU rules).
The new rules makes DES and DEQ superfluous.  First, the named terminal in DAT may be a port, and, hence, DAT can be used in cases were DEQ once was.  Second, the arriving “vehicle” under DAP may be a ship and the named place of designation may be a port.  Therefore, DAP can be used in place where DES once was.
These new rules, like their predecessors, are “delivered”, with the seller bearing all the costs (with the exception of import clearance, where applicable) and risks involved in bringing the goods to the named place of destination.
3.    New Classification of the Incoterms 2010 rules
The eleven Incoterms 2010 rules are divided into two distinct classes.
a).  Rules of Any Mode(s) of Transport
The first class contains rules for any mode or modes of transport.  These are:
EXW – EX WORKS
FCA – FREE CARRIER
CPT – CARRIAGE PAID TO
CIP – CARRIAGE AND INSURANCE PAID TO
DAT – DELIVERED AT TERMINAL
DAP – DELIVERED AT PLACE
DDP – DELIVERED DUTY PAID
The first class rules can be used irrespective of the mode of transport selected and irrespective of whether one or more than one mode of transport is employed.  They can be used even when there is no maritime transport at all. It is important to remember, however, that these rules can be used in cases where a ship is used for part of the carriage.
b).  Rules for Sea and Inland Waterway transport
The second class contains only rules for sea and inland waterway transport.  These are:
FAS – FREE ALONGSIDE SHIP
FOB – FREE ON BOARD
CFR – COST AND FREIGHT
CIF – COST INSURANCE AND FREIGHT
In the second class of Incoterms 2010 rules, the point of delivery and the place to which the goods are carried to the buyer are both ports (hence the label “sea and inland waterway” rules). Under the FOB, CFR, and CIF, all mention of the ship’s rail as the point of delivery has been omitted in preference for the goods being delivered when they are “on board” the vessel. This more closely reflects modern commercial reality and avoids the rather dated image of the risk swinging to and fro across an imaginary perpendicular line.
3     Rules for domestic and international trade
Incoterms rules have traditionally been used in international sale contracts where goods pass across national borders. In various areas of the world, however, trade blocs, like the European Union, have made border formalities between different countries less significant. Consequently, the subtitle of the Incoterms 2010 rules formally recognizes that they are available for application to both international and domestic sale contracts. Therefore, the Incoterms 2010 rules clearly state in a number of places that the obligation to comply with export/import formalities exists only where applicable.
4     Guidance Notes
A “Guidance Note”has now been attached to each Incoterms 2010 rule. The Guidance Notes explain the fundamentals of each Incoterms rule, such as when it should be used, when risk passes, and how costs are allocated between seller and buyer. Remember – the Guidance Notes are not part of the actual Incoterms 2010 rules, but are intended to help the user accurately and efficiently steer towards the appropriate Incoterms rule for a particular transaction.
5    Electronic communication
Incoterms 2010 seeks to stand in line with the developments in the international commercial reality.  Articles A1/B1 of the Incoterms 2010 rules now give electronic means of communication the same effect as paper communication, as long as the parties so agree or where customary. This formulation facilitates the evolution of new electronic procedures throughout the lifetime of the Incoterms 2010 rules.
6      Insurance
The new Incoterms emphasizes the importance of the insurance coverage by moving the relevant provisions of carriage and insurance from more generic articles A10/B10 (Incoterms 2000) to articles A3/B3 (which deal directly with contracts of carriage and insurance). Furthermore, the language in articles A3/B3 relating to insurance has been altered with a view to clarifying the parties’ obligations in this regard.
7     Security-Related Clearances
In the modern world, the security concerns are ubiquitous.  Therefore, Incoterms 2010 rules have allocated obligations between the buyer and seller to obtain or to render assistance in obtaining security-related clearances, such as chain-of-custody information, in articles A2/B2 and A10/B10 of various Incoterm rules.
8     Terminal Handling Charges
Under Incoterms rules CPT, CIP, CFR, CIF, DAT, DAP, and DDP, the seller must make arrangements for the carriage of the goods to the agreed destination. Usually, while the freight is nominally paid by the seller, it is actually paid for by the buyer as freight costs are normally included by the seller in the total selling price.
Sometimes, the carriage costs will include the costs of handling and moving the goods within port or container terminal facilities and the carrier or terminal operator may well charge these costs to the buyer who receives the goods. In such cases, the buyer will want to avoid paying for the same service twice: once to the seller as part of the total selling price and once independently to the carrier or the terminal operator. The Incoterms 2010 rules seek to avoid this happening by clearly allocating such costs in articles A6/B6 of the relevant Incoterms rules.
9     String sales
String sales may arise in situation where there is a sale of commodities (as opposed to the sale of manufactured goods).  In these cases, the cargo sold several times during transit “down a string”. When this happens, a seller in the middle of the string does not “ship” the goods because these have already been shipped by the first seller in the string. Rather, the seller in the middle of the string performs its obligations towards its buyer by “procuring” goods that have been shipped. Incoterms 2010 rules clarify this situation and specifically state the obligation of the seller to “procure goods shipped” as an alternative to the obligation to ship goods in the relevant Incoterms rules.
Contact Sherayzen Law Office for Legal Help with International Contracts
If you are selling and/or buying goods overseas, you should contact Sherayzen Law Office immediately to get legal help in negotiating and drafting your international contacts.  Our experienced international contract firm will guide you every step of the way in the complex process of international trade, including tax consequences of your international business transactions.

### Minnesota Department of Revenue Launches New e-Services System
On October 3, 2011, the Minnesota Department of Revenue announced the launch of its new e-Services online system. This new system is replacing e-File Minnesota and will offer a wider variety of services to 400,000 business taxpayers. The new system was the product of at least four years of diligent work by the Department.
The new E-Services not only provides the ability for business taxpayers to file and pay their taxes, it also allows taxpayers to update their contact information, register new accounts, and send the department secured messages. In addition, business taxpayers will have the ability to view all account information in one location. They can now view their payment history, returns they have filed and all correspondence sent to them by the Department of Revenue.
The functionality being added provides more security flexibility to the business taxpayer. Businesses can create unique user ID’s and passwords which grant online access to tax practitioners and accounts they partner with.
Finally, e-Services will also allow self-service activities 24 hours a day, seven days a week. Business taxpayers now have the ability to handle their tax needs online when it is convenient for them.
The transition to the new system will begin on October 17, 2011 and is currently projected to finish by mid-January of 2012. During the transition, groups of taxpayers will be added each Monday, until all 400,000 business taxpayers have access to e-Services.

### IRS Proposed Regulations Require Tax Preparers to File Form 8867 with 2012 EITC Claims
On October 6, 2011, The Internal Revenue Service announced that it is issuing proposed regulations that would require paid tax return preparers, beginning in 2012, to file a due diligence checklist, Form 8867, with any federal return claiming the Earned Income Tax Credit (EITC). It is the same form that is currently required to be completed and retained in a preparer’s records.
The due diligence requirement, enacted by Congress over a decade ago, was designed to reduce errors on returns claiming the EITC, most of which are prepared by tax professionals.
The EITC benefits low-and moderate-income workers and working families and the tax benefit varies by income, family size and filing status. The EITC is a refundable tax credit – taxpayers can get it even if they owe no tax. For 2011 tax returns, the maximum credit will be $5,751.

### Tax Return Extension Deadline for Most Filers: October 17, 2011 and Some Exceptions
October 17, 2011 is the deadline for most of those individual taxpayers who filed Form 4868 to request a six-month extension on filing of their tax returns. Traditionally, October 15 would have been the deadline, but it falls on Saturday this year. Therefore, the IRS extended the deadline until October 17, 2011.
Note that this deadline of October 17, 2011, includes U.S. taxpayers living abroad, even though their tax filing deadline is automatically extended to June 15. It is also important to emphasize that the extension to file your federal tax return does not in any way affect the obligation to file the FBARs by June 30, 2011.
Some taxpayers, however, are not subject to October 17, 2011 deadline this year. The two most prominent exceptions are qualified military personnel and victims of Hurricane Irene. Victims of Hurricane Irene will have until October 31, 2011 to file their tax returns. The new deadline primarily concerns residents of certain counties in Connecticut, Massachusetts, North Carolina, New Hampshire, New Jersey, New York, Pennsylvania, Puerto Rico, Texas, and Vermont.
It is important to emphasize that an extension of time to file is not equivalent to an extension of time to pay. It is generally true that, under the relevant Treasury regulations and IRS Notice 93-22, individual taxpayers still can file a valid Form 4868 and obtain an automatic extension without paying the properly estimated tax in full – this means, of course, that no late filing penalty is likely to be assessed. However, the taxpayers will still owe interest on any past due tax amount and may be subject to a late payment penalty if payment is not made by the regular due date of the return.

### IRS Form 5471 and US Persons Who Own Shares in Foreign Corporations
Do you own 10% or more of the shares in a foreign corporation?  Then you may be required to file IRS Form 5471 (“Information Return of U.S. Persons With Respect to Certain Foreign Corporations”).
IRS Form 5471
Form 5471 is a required informational return for certain categories of filers (there are four different categories of U.S. persons who are required to file this form), and is utilized to satisfy the reporting requirements of IRC Sections 6038 and 6046, and applicable regulations. Form 5471 applies to specified US citizens and residents who are shareholders, officers, or directors in certain foreign corporations.  In general, US taxpayers who own 10% or more of the total value or voting percentage of foreign corporations are required to file the form.
The form itself is very complex and requires reporting of significant amounts of corporate information in the accompanying schedules.  Moreover, this reporting usually must meet GAAP requirements.
Contact Sherayzen Law Office NOW for Legal and Accounting Help with Form 5471
This article is intended to give a brief look at some of the important issues surrounding Form 5471, and it should not be construed as legal or tax advice.  If you have further questions regarding the filing of Form 5471 as it pertains to your own tax and accounting circumstance, Sherayzen Law Office offers professional advice in all of your tax and international tax needs.  Call (952) 500-8159 to discuss your tax situation with an experienced international business tax lawyer.

### Benefits of Participating in VCSP
On September 21, 2011, the Internal Revenue Service launched a new program, the Voluntary Classification Settlement Program (“VCSP”) that will enable many employers to resolve past worker classification issues and achieve certainty under the tax law at a low cost by voluntarily reclassifying their workers.
The main benefit of the new program is that it will allow employers the opportunity to get into compliance by making a minimal payment covering past payroll tax obligations rather than waiting for an IRS audit.  This is part of a larger “Fresh Start” initiative at the IRS to help taxpayers and businesses address their tax responsibilities.
“This settlement program provides certainty and relief to employers in an important area,” said IRS Commissioner Doug Shulman. “This is part of a wider effort to help taxpayers and businesses to help give them a fresh start with their tax obligations.”
In essence, employers accepted into the program will pay an amount effectively equaling just over one percent of the wages paid to the reclassified workers for the past year. No interest or penalties will be due, and the employers will not be audited on payroll taxes related to these workers for prior years. Participating employers will, for the first three years under the program, be subject to a special six-year statute of limitations, rather than the usual three years that generally applies to payroll taxes.
Contact Sherayzen Law Office NOW to Obtain VCSP Representation
If you wish to participate in the VCSP, you should contact Sherayzen Law Office immediately.  Our experienced tax firm will rigorously represent your interests during the entire process of the Voluntary Classification Settlement Program and strive to achieve the most satisfactory and efficient resolution of your case.

### IRS Issues Guidance on Tax Treatment of Cell Phones
On September 14, 2011, the Internal Revenue Service issued guidance designed to clarify the tax treatment of employer-provided cell phones.
The guidance relates to Section 2043 of the Small Business Jobs Act of 2010, Pub.L.No. 111-240 (enacted last fall) that removed cell phones from the definition of listed property, a category under tax law that normally requires additional recordkeeping by taxpayers.
Generally, a fringe benefit provided by an employer to an employee is presumed to be income to the employee unless it is specifically excluded from gross income by another section of the Code. (See Income Tax Regulations § 1.61-21(a)).
Pursuant to Notice 2011-72, the employer- provided cell phones are treated as an excludible fringe benefit. The Notice further provides that when an employer provides an employee with a cell phone primarily for noncompensatory business reasons, the business and personal use of the cell phone is generally nontaxable to the employee. The IRS will not require recordkeeping of business use in order to receive this tax-free treatment.
Simultaneously with the Notice, the IRS announced in a memo to its examiners a similar administrative approach that applies with respect to arrangements common to small businesses that provide cash allowances and reimbursements for work-related use of personally-owned cell phones. Under this approach, employers that require employees, primarily for noncompensatory business reasons, to use their personal cell phones for business purposes may treat reimbursements of the employees' expenses for reasonable cell phone coverage as nontaxable. This treatment does not apply to reimbursements of unusual or excessive expenses or to reimbursements made as a substitute for a portion of the employee's regular wages.
Under the guidance issued today, where employers provide cell phones to their employees or where employers reimburse employees for business use of their personal cell phones, tax-free treatment is available without burdensome recordkeeping requirements. The guidance does not apply to the provision of cell phones or reimbursement for cell-phone use that is not primarily business related, as such arrangements are generally taxable.
Contact Sherayzen Law Office NOW for Legal Help Regarding Your Business Tax Issues!
If you have any questions or concerns regarding this or any other business tax issues, contact Sherayzen Law Office. Our experienced tax firm will guide you through the complex issues of business taxation, help you deal with current business transactions, as well as create a comprehensive business tax plan that allows you to take advantage of the existing Tax Code’s provision and engage in proactive tax planning.

### Investing in Gold and Other Precious Metals: Tax Pitfalls
With the price of commodities sky-rocketing in the past decade, many individuals have made substantial gains by directly investing in physical gold and other precious metals, especially in popular investment vehicles such as gold Exchange Traded Funds (ETF’s). However, there may be a downside for unsuspecting investors when it comes to paying taxes on those gains.
The general rule in the US is that gains on the direct sale or exchange of precious metals are taxed at the “collectible” rate (currently 28%), and not the more favorable capital gains rates that other common investments, such as most stocks, receive. The IRS has further specified that gold ETF’s are also taxed at this higher rate (however, certain exceptions may apply). In comparison, capital gains on the sale of precious metal mining companies on most listed stock exchanges, however, are taxed at the more favorable rates.
There are many other aspects of taxation that are too complex to detail for the purposes of a brief explanatory article. Additionally, various expenses associated with investing in physical metals may be deductible, depending upon your circumstances.
If You Plan to Sell Your Gold and Other Precious Metals Investments, Contact Sherayzen Law Office for Tax Advice!
With proper tax planning, it is possible to substantially limit the amount of taxes you will pay when you sell your physical gold or other precious metals. Sherayzen Law Office has the experience you need to answer all of your tax and international tax questions. Call (952) 500-8159 for a consultation today.
This article is intended to give a brief summary of these issues, and should not be construed as legal or tax advice.

### Foreign Tax Credit: General Overview
US tax residents and citizens are taxed based upon their worldwide income. This can often result in individuals being subject to double taxation. To provide relief from this problem, the Foreign Tax Credit (FTC) provisions were enacted. There are two types of FTC’s, the direct credit and the indirect credit.
Direct Foreign Tax Credit
In general, IRC Section 901 allows for direct credit for foreign taxes paid by US taxpayers. In general, taxpayers must have directly incurred the taxes paid in order to qualify for the credit. US income tax liability is reduced on a dollar-for-dollar basis under this credit.
Indirect Foreign Tax Credit
If a US corporation conducts operations through a foreign subsidiary, the direct FTC is not allowed for foreign taxes paid by the subsidiary. Instead, for US corporate taxpayers with 10% or more US shareholders that receive actual or constructive dividends from foreign corporation that have paid foreign income taxes, an indirect FTC may be taken. The indirect FTC is determined based upon a specified computation. US corporations that elect the FTC for deem- paid for foreign taxes must “gross up”, or add to income, any dividend income by the amount of deem-paid taxes under IRC Section 78.
Contact Sherayzen Law Office NOW for the FTC Legal Help
This article is intended to give a very brief summary of these issues, and should not be construed as legal or tax advice. Reporting foreign-earned income often necessitates an experienced understanding of complex regulations, IRC statutes, and case law, and IRS penalties for failure to comply can be substantial. If you have further questions regarding your own tax circumstances, Sherayzen Law Office offers professional advice for all of your cross-border, international, and other tax needs. Call now at (952) 500-8159 for a consultation today.

### US-Canada Tax Treaty: Beware of Income Exemption Traps
Are you a US taxpayer earning income in Canada? Do you rely upon the US-Canada tax treaty (officially known as, The Convention with Respect to Taxes on Income and on Capital, U.S.-Can., Sept. 26, 1980, T.I.A.S. No. 11,087) exemptions to claim deductions or limit reporting of income for US tax purposes?
If so, then you need to be aware that the tax treaty between the US and Canada does not always provide protections for US taxpayers- even if the treaty specifically states so. A recent example is the Jamieson v. Commissioner case.
In Jamieson v. Commissioner, 08-1253, the taxpayers were US citizens living, and earning income, in Canada in 2003. After paying their Canadian taxes, they claimed the foreign tax credit on their US tax returns, resulting in a net liability. They did not compute any AMT liability under the provisions of Internal Revenue Code (IRC) Section 55, taking the position that the Article XXIV of The US-Canada Treaty, limiting double taxation, precluded such a liability.
However, the IRS argued that under IRC Section 59(a)(2), enacted as part of the Tax Reform Act of 1986, which reduced the foreign tax for AMT purposes to 90% of a taxpayer's AMT liability, an AMT liability existed. (Section 59(a)(2) was repealed in relevant part by the American Jobs Creation Act of 2004).
The US Tax Court ruled for the IRS. A Federal District Appeals Court affirmed, determining that Section 59(a)(2) superseded the US-Canadian Tax Treaty. The court held that the US Supreme Court case Whitney v. Robertson “last-in-time” rule governed in the case, in examining conflicts between treaties and statutes. The rule provides that when an inconsistency exists, whichever enactments came later in time will prevail over earlier ones.
Thus, the court determined that Section 59(a)(2) superseded the treaty, and was thus the last expression of the sovereign will. Furthermore, the court cited a DC Court of Appeals case in which it was determined that the IRS Technical and Miscellaneous Revenue Act of 1988, specifying that Section 59(a)(2) and other applicable sections was intended by Congress to supersede any conflicting treaty provisions.
This article is intended to give a brief summary of these issues, and should not be construed as legal or tax advice. Reporting foreign-earned income often necessitates an experienced understanding of complex regulations, IRC statutes, and case law, especially since the IRS penalties for failure to comply can be substantial.
If you have further questions regarding your own tax circumstances, Sherayzen Law Office offers professional advice for all of your cross-border, international, and other tax needs. Call (952) 500-8159 for a consultation today.

### Eligibility for Voluntary Classification Settlement Program
As discussed in an earlier article, I already explained the essence of a new Voluntary Classification Settlement Program (“VCSP”) announced by the IRS earlier this week. I then explored the application process. In this essay, I would like to explore the general eligibility requirements for the VCSP.
Generally, the VCSP is available for to many businesses, tax-exempt organizations and government entities that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.
In order to be eligible for the VCSP, a taxpayer must meet three requirements.
First, the applicant must have consistently treated its workers in the past as nonemployees.
Second, the applicant must have filed all required Forms 1099 for the workers for the previous three years.
Finally, the third requirement is that the applicant cannot currently be under audit by the IRS, the Department of Labor, or any other state agency concerning the classification of these workers. Note that a taxpayer who was previously audited by the IRS or the Department of Labor concerning the classification of the workers will only be eligible if the taxpayer has complied with the results of that audit.
Contact Sherayzen Law Office NOW to Obtain VCSP Representation
If you wish to participate in the VCSP, you should contact Sherayzen Law Office immediately. Our experienced tax firm will rigorously represent your interests during the entire process of the Voluntary Classification Settlement Program and strive to achieve the most satisfactory and efficient resolution of your case.

### Application Process for Voluntary Classification Settlement Program
As was discussed in an earlier article, the IRS announced a new Voluntary Classification Settlement Program that offers concrete benefits to participating employers. Among the chief benefits are substantially lower payment by employers of the potentially overdue taxes (without any interests and penalties) and a relatively simple way of resolving this potentially grave problem. Additional benefits also include limited audit protection.
Eligible taxpayers who wish to participate in the VCSP must submit an application for participation in the program. Along with the application, the employer should provide to the IRS the name of its tax attorney (or an authorized representative) with a valid Power of Attorney (Form 2848). The IRS will contact the attorney to complete the process once it has reviewed the application and verified the taxpayer’s eligibility. Taxpayers whose application has been accepted will enter into a closing agreement with the IRS to finalize the terms of the VCSP and will simultaneously make full and complete payment of any amount due under the closing agreement.
It is important to emphasize that the IRS retains discretion whether to accept a taxpayer’s application for the VCSP. This is why it is important for the taxpayer to retain a competent tax attorney to represent him, even if this is an out-of-state attorney.
Contact Sherayzen Law Office for VCSP Representation
If you wish to participate in the VCSP, you should contact Sherayzen Law Office immediately. Our experienced tax firm will guide you through the entire process of Voluntary Classification Settlement Program and strive to achieve the most satisfactory and efficient resolution of your case.

### Voluntary Classification Settlement Program
On September 21, 2011, the IRS announced and explained its new Voluntary Classification Settlement Program (VCSP) that provides partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers as employees (see Announcement 2011-64). In essence, eligible employers may voluntary elect to participate in the VCSP in order to limit federal employment tax liability for the past non-employee treatment of workers who should have been classified as employees.
In order to participate in the program, the taxpayer must meet certain eligibility requirements, apply to participate in VCSP, and enter into a closing agreement with the IRS.
Background Information
Whether a worker is performing services as an employee or as an independent contractor depends upon the facts and circumstances and is generally determined under the common law test of whether the service recipient has the right to direct and control the worker as to how to perform the services. In some factual situations, the determination of the proper worker classification status under the common law may not be clear.
For taxpayers already under the IRS examination, the current CSP may be available to resolve federal employment tax issues related to worker misclassification, if certain criteria are met. The examination CSP permits the prospective reclassification of workers as employees, with reduced federal employment tax liabilities for past nonemployee treatment. The CSP allows business and tax examiners to resolve the worker classification issues as early in the administrative process as possible, thereby reducing taxpayer burden and providing efficiencies for both the taxpayer and the government.
In order to facilitate voluntary resolution of worker classification issues and achieve the resulting benefits of increased tax compliance and certainty for taxpayers, workers and the government, the IRS has determined that it would be beneficial to provide taxpayers with a program that allows for voluntary reclassification of workers as employees outside of the examination context and without the need to go through normal administrative correction procedures applicable to employment taxes.
Effect of VCSP
A taxpayer who participates in the VCSP will agree to prospectively treat the class of workers as employees for the future tax periods. Additionally, a taxpayer participating in the VCSP will agree to extend the period of limitations on assessment of employment taxes for three years for the first, second and third calendar years beginning after the date on which the taxpayer has agreed under the VCSP closing agreement to begin treating the workers as employees.
In exchange, the taxpayer will pay ten (10) percent of the employment tax liability that may have been due on compensation paid to the workers for the most recent tax year, determined under the reduced rates of section 3509 of the Internal Revenue Code. Moreover, the taxpayer will not be liable for any interest and penalties on the liability; and will not be subject to an employment tax audit with respect to the worker classification of the workers for prior years.
Contact Sherayzen Law Office NOW to Resolve Your Employment Tax Issues
If you wish to find out whether you are eligible to participate in the VCSP and whether this is the best option for you, you should contact Sherayzen Law Office immediately. Our experienced tax attorneys will guide you through the complex process of Voluntary Classification Settlement Program and strive to achieve the most satisfactory and efficient resolution of your case.

### OVDI: IRS Shows Continued Progress on International Tax Non-Compliance
The Internal Revenue Service has achieved significant success in combating international tax non-compliance. The total number of voluntary disclosures up to 30,000 since 2009. In all, 12,000 new applications came in from the 2011 offshore program that closed last week.
The IRS also announced today it has collected $2.2 billion so far from people who participated in the 2009 program, reflecting closures of about 80 percent of the cases from the initial offshore program. On top of that, the IRS has collected an additional $500 million in taxes and interest as down payments for the 2011 program — a figure that will increase because it doesn’t yet include penalties.
IRS Increases Pressure on U.S. Taxpayers
“By any measure, we are in the middle of an unprecedented period for our global international tax enforcement efforts,” said IRS Commissioner Doug Shulman. “We have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.”
Global tax enforcement is a top priority at the IRS, and Shulman noted progress on multiple fronts, including ground-breaking international tax agreements and increased cooperation with other governments. In addition, the IRS and Justice Department have increased efforts involving criminal investigation of international tax evasion.
The combination of efforts helped support the 2011 Offshore Voluntary Disclosure Initiative (OVDI), which ended on September 9. The 2011 effort followed the strong response to the 2009 Offshore Voluntary Disclosure Program (OVDP) that ended on Oct. 15, 2009.
Number of Disclosures
The 2009 program led to about 15,000 voluntary disclosures and another 3,000 applicants who came in after the deadline, but were allowed to participate in the 2011 initiative. Beyond that, the 2011 program has generated an additional 12,000 voluntary disclosures, with some additional applications still being counted. All together from these efforts, taxpayers came forward and made 30,000 voluntary disclosures.
“My goal all along was to get people back into the U.S. tax system,” Shulman said. “Not only are we bringing people back into the U.S. tax system, we are bringing revenue into the U.S. Treasury and turning the tide against offshore tax evasion.”
In new figures announced today from the 2009 offshore program, the IRS has $2.2 billion in hand from taxes, interest and penalties representing about 80 percent of the 2009 cases that have closed. These cases come from every corner of the world, with bank accounts covering 140 countries.
The IRS is starting to work through the 2011 applications. The $500 million in payments so far from the 2011 program brings the total collected through the offshore programs to $2.7 billion.
Criminal prosecutions
People hiding assets offshore have received jail sentences running for months or years, and they have been ordered to pay hundreds of thousands and even millions of dollars. UBS. UBS AG, Switzerland's largest bank, agreed in 2009 to pay $780 million in fines, penalties, interest and restitution as part of a deferred prosecution agreement with the U.S. government. The two disclosure programs provided the IRS with a wealth of information on various banks and advisors assisting people with offshore tax evasion, and the IRS will use this information to continue its international enforcement efforts.
Contact Sherayzen Law Office to Resolve Your International Tax Issues
If you have not filed your FBARs and/or have unreported foreign-source income, please contact Sherayzen Law Office NOW! Our experienced international tax firm will help you resolve your international tax compliance issue and guide you through the complex process of the IRS voluntary disclosure.

### Estimated Tax Payments are due on September 15, 2011
Estimated tax payments for the third-quarter (June 1-August 31) of 2011 are due on September 15, 2010. The estimated tax payments should be made using Form 1040-ES. Note, if the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if it is made on the next business day.

### Non-Resident Indians Face High Exposure to the FBAR Reporting Requirements
Non-Resident Indian (NRI) is an Indian citizen who has migrated to another country, a person of Indian origin who is born outside India, or a person of Indian origin who resides permanently outside India. A large number of the NRIs left India as a result of a job offer, for example as a software engineer or an IT consultant.
In spite of leaving their country, most NRIs maintain close ties with their homeland and their families. There is a trend among NRIs to purchase rural and semi-rural non-income producing land in India as a retirement investment. A minority of the NRIs also rent out their homes and apartments.
As a result of all of this personal and economic activity, the NRIs have a constant source of foreign income, which is usually deposited either in an NRO bank account. In order to purchase real property in India or help their families, NRIs often open and maintain NRE accounts as well.
Unfortunately, most of the NRIs residing in the United States are completely unaware that these NRO, NRE, and other bank and financial accounts must be reported on FBAR (the Report on Foreign Bank and Financial Accounts).
This problem is further exacerbated by the fact that a lot of NRIs think that paying taxes in India means that you do not need to report their Indian income in the United States. As a result of this misunderstanding, a lot of NRIs end up in a situation where they are in violation of both FBAR and income tax requirements.
This is an extremely dangerous combination which may result in the imposition of substantial FBAR penalties as well as additional income tax penalties. In the worse case scenarios, where the IRS finds that the violation is willful, a criminal prosecution may be initiated.
Contact Sherayzen Law Office NOW For FBAR Help
If you an NRI who has not disclosed his bank and financial accounts in India, contact Sherayzen Law Office as soon as possible. Eugene Sherayzen is an experienced voluntary disclosure attorney who will guide you through the complex and dangerous maze of U.S. tax compliance laws and regulations, and help you find the right solution to your FBAR problems.

### One-Week Filing Extension to Taxpayers Whose Preparers Were Affected by Hurricane Irene
On September 1, 2011, the Internal Revenue Service announced that it is granting taxpayers whose preparers were affected by Hurricane Irene until September 22, 2011 to file returns normally due September 15.  The taxpayer’s preparer must be located in an area that was under an evacuation order or a severe weather warning because of Hurricane Irene, even if the preparer is located outside of the federally declared disaster areas.
This relief, which primarily applies to corporations, partnerships and trusts that previously obtained a tax filing extension, is available to taxpayers regardless of their location.
It is important to note that this relief does not apply to any tax payment requirements.

### OVDI Deadline Extended until September 9, 2011
Due to the potential impact of Hurricane Irene, the IRS has extended the due date for offshore voluntary disclosure initiative requests until September 9, 2011. For those taxpayers who have not yet submitted their request and any documents, the following actions are necessary by September 9, 2011:
Identifying information must be submitted to the Criminal Investigation office. This includes name, address, date of birth, and social security number and as much of the other information requested in the Offshore Voluntary Disclosures Letter as possible. This information must be sent to:
Offshore Voluntary Disclosure Coordinator
600 Arch Street, Room 6404
Philadelphia, PA 19106
Send a request for a 90-day extension for submitting the complete voluntary disclosure package of information to the Austin campus. This request must be sent to:
Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
ATTN: 2011 Offshore Voluntary Disclosure Initiative
Contact Sherayzen Law Office NOW to Discuss Your Legal Situation
If you are wondering about whether OVDI is the program for you and how to take advantage of it, contact Sherayzen Law Office as soon as possible to discuss your case. Our experienced voluntary disclosure tax firm will guide you through the complex maze of the U.S. tax compliance laws and regulations and help you find the solution that fits best your situation.

### Underpayment and Overpayment Interest Rates for the Fourth Quarter of 2011
On August 18, 2011, the Internal Revenue Service announced that interest rates will decrease for the calendar quarter beginning October 1, 2011. The rates will be:
	three (3) percent for overpayments (two (2) percent in the case of a corporation);
	three (3) percent for underpayments;
	five (5) percent for large corporate underpayments; and
	zero and one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.
Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and tax underpayments. These rates determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Rev. Rul. 2011-18. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. Pursuant to I.R.C. section 6621(c), the rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. See section 301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.
Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent and 6 percent are published in Tables 8, 11, 13, and 17 of Rev. Proc. 95-17, 1995-1 C.B. 556, 562, 567, and 571. Interest factors for daily compound interest for an annual rate of 0.5 percent are published in Appendix A of Revenue Ruling 2010-31, 2010-52 IRB 898, 899. 3.
Contact Sherayzen Law Office
If you have any questions with respect to IRS interest rates and any other tax-related concerns, you should contact our experienced tax firm to discuss your case.

### Post-OVDI Options: What to Do If You Cannot Make the OVDI Deadline
Introduction:  OVDI Deadline is August 31, 2011
On February 8, 2011, the Internal Revenue Service initiated  2011 Offshore Voluntary Disclosure Initiative (OVDI), a special voluntary disclosure initiative, designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes.  While this program is not available (or even desirable) for everyone, the OVDI program offered many taxpayers a way to bring themselves back into compliance with U.S. tax laws.
The program is only available, however, for taxpayers who apply to be accepted into the program prior to August 31, 2011.  It is then possible to get an extension to file the documents, even though there is no guarantee that the extension will be granted, especially for late filers.
Voluntary Disclosure After OVDI
So, what can you do if you cannot make the OVDI deadline?  Is any type of voluntary disclosure precluded if you cannot apply for the OVDI by August 31?
The answer is no.  Other types of voluntary disclosure will be available after August 31, 2011.  It is important to emphasize, however, that the OVDI provides a degree of stability and certainty of FBAR penalties that are unlikely to be matched by other voluntary disclosure options.
Traditional IRS Voluntary Disclosure 
The chief post-OVDI voluntary disclosure program will be Traditional IRS Voluntary Disclosure.  While it will not offer the same certainty of the FBAR penalties as OVDI currently does with its tiered penalty structure, the Traditional Voluntary Disclosure will be particularly useful for taxpayers who potentially face criminal charges and willful penalties.
Doing Nothing Is Dangerous
It is important to emphasize that, whether or not you will be able to take advantage of the OVDI program, the most dangerous option for you is to do nothing. Taxpayers, who hide this offshore assets and do not come forward, are much likely to face far higher penalty scenarios as well as the possibility of criminal prosecution.
Contact Sherayzen Law Office NOW To Solve Your Tax Issues
Sherayzen Law Office can help you resolve all of your tax compliance issues.  Our experienced voluntary disclosure tax firm will guide you through the voluntary disclosure process and vigorously advocate your position, vying for the best outcome possible in your case.  E-mail or call us NOW!

### OVDI Deadline: August 31, 2011
This is a reminder that the  2011 Offshore Voluntary Disclosure Initiative (OVDI) will expire on August 31, 2011. The 2011 OVDI was announced on February 8, 2011, and follows the 2009 Offshore Disclosure Program (OVDP). The 2011 initiative offers clear benefits to certain taxpayers who currently face far higher penalties along with potential criminal charges if their hidden offshore assets are detected by the IRS.  Whether your case falls within this category of taxpayers should be determined by an international tax attorney who is familiar with the FBAR penalty structure.
Those taxpayers who have not disclosed their foreign accounts and income are unlikely to sustain this for much longer without violating additional tax reporting requirements.  This is because the new foreign account reporting requirements are being phased in over the next few years, making it ever tougher to hide income offshore.  Moreover, the IRS continues its focus on banks and bankers worldwide that assist U.S. taxpayers with hiding assets overseas, putting the pressure on the foreign financial institutions to report noncompliant taxpayers.
The 2011 OVDI program is designed to bring taxpayers back into compliance with the U.S. tax system.  Under the initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties in certain narrow circumstances.  It is likely that your foreign assets, such as rental real estate the income from which has not been disclosed or which was purchased with illegal funds, will be included in the 25-percent penalty calculation.
Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties. All original and amended tax returns must be filed by the deadline.
If a taxpayer is interested in going through the 2011 OVDI, he must hurry.  He has to be accepted into the program before he can take advantage of it.  Therefore, these last few weeks left before the August 31, 2011 deadline is the last opportunity to apply to the program.
Contact Sherayzen Law Office NOW to Discuss Your Voluntary Disclosure Case
If you have undisclosed foreign financial accounts and have not reported your foreign income to the IRS, call Sherayzen Law Office immediately to discuss your case.  Our experienced voluntary disclosure tax firm will determine whether the 2011 OVDI program fits well your particular case, discuss with you the alternatives, and guide you through this highly complex voluntary disclosure process.
Remember, it does not matter whether you are located in another state or outside of the United States – we can help!

### Recent Developments in Transfer Pricing
The IRS is currently examining new procedures and policies regarding transfer pricing audits. Recently, the IRS developed a "Transfer Pricing Practice" within its Large and Mid-Size Business (LMSB) operating division, and last August, the IRS realigned its Large Business & International (LB&I) operating division to handle international tax matters more effectively. The Service intends to employ experienced international transfer pricing examiners, Advanced Pricing Agreement Program staff, attorneys, economists, and other experts within the Transfer Pricing Practice to better identify emerging issues and handle such cases in an efficient manner.
The IRS is currently using a pilot program to test the Transfer Pricing Practice until official procedures and policies are developed. According to Michael Danilack, Deputy Commissioner LB&I, in a recent speech, the official practice is expected to be implemented in the very near future. Cases are being selected under the pilot program for broad, strategic impact and likelihood of success in order to identify key issues.
It should also be noted that the IRS recently decided not to appeal a loss in an important transfer pricing Tax Court case, Veritas v. Commissioner, involving the transfer of intellectual property to a wholly-owned foreign subsidiary under a cost-sharing agreement. The Tax Court ruled against the IRS, holding that Symantec Corp. (the acquirer of Veritas Software Corp.) owed no tax, penalties or interest. Although the IRS did not appeal, it did issue an Action on Decision stating that the court’s factual findings and legal assertions were erroneous. Furthermore, IRS Commissioner Doug Shulman gave a speech shortly afterward saying that the adverse decision would not limit the IRS’ intent to challenge other transfer pricing issues in the future, should they arise.
Additionally, in Congress, the House Ways and Means Committee recently scheduled a rare hearing on transfer pricing, and intends to examine the issues this year.
Contact Sherayzen Law Office NOW for Legal Advice on Transfer Pricing Agreements
This article is intended to give a brief summary of these issues, and should not be construed as legal or tax advice. If you have further questions regarding these matters as it pertains to your own tax circumstances, Sherayzen Law Office offers professional advice in all of your tax and international tax needs. Call (952) 500-8159 to discuss your tax situation with an experienced business tax lawyer.

### 2010 Form 8939 is Due on November 15, 2011
On August 5, 2011, the Internal Revenue Service issued guidance on the treatment of basis for certain estates of decedents who died in 2010. The guidance assists executors who are making the choice to opt out of the estate tax and have the carryover basis rules apply. Form 8939, the basis allocation form required to be filed by executors opting out of the estate tax, is due on November 15, 2011.
Under the guidance issued today, an executor must file Form 8939, Allocation of Increase in Basis for Property Acquired from a Decedent, to opt out of the estate tax and have the new carryover basis rules apply. The IRS expects to issue Form 8939 and the related instructions early this fall.
Under the Economic Growth and Tax Relief Reconciliation Act of 2001, the estate tax was repealed for persons who died in 2010. However, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 reinstated the estate tax for persons who died in 2010. This recent law allows executors of the estates of decedents who died in 2010 to opt out of the estate tax, and instead elect to be governed by the repealed carry-over basis provisions of the 2001 Act. This choice is to be made by filing Form 8939.

### IRS Reorganizes Transfer Pricing Compliance Programs and International Coordination
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
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
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
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
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!

### Reporting Foreign Gifts and Inheritance to the IRS: Form 3520
While gifts and bequests from nonresident aliens are usually not taxable, they must be reported to the IRS if they are above a certain threshold.  Generally, U.S. persons who receive the aggregate amount of $100,000 or more in gifts and/or bequests from nonresident aliens or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) during a tax year must report those amounts on Form 3520.  The same reporting requirement applies to U.S. persons who receive a gift of more than $14,165 from foreign corporations (or foreign persons related to such foreign corporations or foreign partnerships).
Failure to file Form 3520 (and even late filing of the form) may result in substantial penalties, unless the taxpayer may demonstrate that failure to comply was due to a reasonable cause and not willful neglect.
It should be noted that U.S. person must also use Form 3520 to report distributions from a foreign trust during the relevant tax year.  Remember, while gifts and bequests are not taxable, the distributions from a foreign trust are generally taxed as income by the U.S. government.
Furthermore, one should remember that receiving a foreign inheritance or a gift may trigger other U.S. tax reporting requirements.  The most prominent of these requirements is the Report on Foreign Bank and Financial Accounts (FBAR). Generally, 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.
For example, if a taxpayer receives an inheritance of $120,000 in 2011 which is then deposited into the taxpayer’s checking account in India, this taxpayer must file both forms 3520 and FBAR.  The likely due date for Form 3520 would be April 15, 2012 whereas the FBAR must be received by the Department of Treasury by June 30, 2012. (Note: Form 3520 and FBAR are both now due in April as of 2017.)
Finally, a note of caution: requirements under Form 3520 may become complex fairly fast.  For example, the exact date of inheritance or gift may be in dispute.  Also, it is possible that some gifts should be reported in a certain way only.  Even the calculation of $100,000 per year may be subject to various interpretations.  Therefore, a help of an international tax attorney should be secured by the taxpayer in order to determine what international tax reporting requirements apply.
Contact Sherayzen Law Office for International Tax Help
If you believe that you may be subject to Form 3520 reporting requirement, contact Sherayzen Law Office now to resolve this situation.  Our experienced international tax firm will guide you through the complex international tax reporting requirements, including voluntary disclosure issues.
Remember, it does not matter whether you are located in another state or outside of the United States – we can help!

### FBAR Deadline Extension for Signature Authority Only – IRS Notice 2011-54
On June 16, 2011, the Internal Revenue Service issued IRS Notice 2011-54, granting additional relief to persons with signature or other authority over, but no financial interest in, a foreign financial account held during calendar year 2009 or earlier calendar years.
Previous, IRS Notices 2009-62 and 2010-23 already extended this deadline until June 30, 2010: “Persons with signature authority over, but no financial interest in, a foreign financial account for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts.” (IRS Notice 2010-23).
Notice 2011-54 further states that:
Persons having signature authority over, but no financial interest in, a foreign financial account in 2009 or earlier calendar years for which the reporting deadline was extended by Notice 2009-62 or Notice 2010-23 will now have until November 1, 2011, to file FBARs with respect to those accounts. The deadline for reporting signature authority over, or a financial interest in, foreign financial accounts for the 2010 calendar year remains June 30, 2011.
Thus, IRS Notice 2011-54 extends the FBAR filing deadline from June 30, 2011 until November 1, 2011 for all persons with signature authority over, but no financial interest in, a foreign financial account in 2009 or earlier calendar years.
Be careful, though – the deadline for the 2010 FBAR remains June 30, 2011.
Also, note that the relief granted by FinCEN Notices 2011-1 and 2011-2 is not affected by IRS Notice 2011-54.
Contact Sherayzen Law Office NOW For FBAR Help
If you believe that you may be subject to FBAR requirements, contact Sherayzen Law Office as soon as possible. Our experienced international tax firm will guide you through the complex maze of FBAR 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!

### FBAR Extension for Certain Individuals: FinCEN Notices 2011-1 and 2011-2
On May 31, 2011, and June 17, 2011, in FinCEN Notices 2011-1 and 2011-2, the Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) announced that a small subset of individuals, who are required to file the Report of Foreign Bank and Financial Accounts (FBAR), will receive a one-year extension beyond the recent filing date of June 30, 2011.
FinCEN Notices 2011-1 and 2011-2 concern only individuals with signature authority and apply to the following narrow categories of filers:
1). An employee or officer of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a “controlled person”).2). An employee or officer of a controlled person of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.3). An employee or officer of an investment advisor registered with the Securities and Exchange Commission who has signature or other authority over and no financial interest in a foreign financial account of persons that are not investment companies registered under the Investment Company Act of 1940.
Notice that categories 1 and 2 do not apply to companies that are not publicly traded or not SEC-registrants.
The new extended filing deadline for the categories of individuals above is June 30, 2012. The deadline applies to FBARs for 2010, 2009 and earlier years.
Unless another relief notice applies, all other U.S. persons required to file an FBAR this year are required to meet the June 30, 2011 filing date. Unlike with federal income tax returns, extensions of time to file are not available.
Contact Sherayzen Law Office for FBAR Guidance
If you have any questions with respect to FinCEN Notices 2011-1 and 2011-2 or if you are looking for FBAR guidance, contact Sherayzen Law Office NOW! Eugene Sherayzen an experienced tax attorney will explain to you the current FBAR requirements and devise the appropriate FBAR compliance strategy for you.

### Gold Bullion Foreign Accounts and FBAR
A frequent question in my practice is whether a foreign account holding gold bullion is required to be reported on FinCEN Form 114 formerly Form TD F 90-22.1, usually referred to as “FBAR” (Report on Foreign Bank and Financial Accounts).
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. FBAR is due April 15th or October 15th (for the previous calendar year). There is an automatic extension if the FBAR is not filed by the April 15th deadline, unlike Federal and some State returns that must be filed by extension. For federal returns the extension is Form 4868. The FBAR rules are enforced by the Internal Revenue Service.  You can read more about the general FBAR requirements here.
Whether gold buillion is required to be reported on the FBAR involves a general issue of whether FBAR definition of “financial account” covers foreign accounts that hold only non-monetary assets.  The answer is yes – an account with a financial institution that is located in a foreign country is a financial account for FBAR purposes whether the account holds cash or non-monetary assets.
Therefore, most taxpayers must reports foreign accounts that hold gold bullion on the FBAR.
Contact Sherayzen Law Office For FBAR Help
If you have any questions with respect to FBARs or you just found out that you should have filed the FBARs for the past years and you wish to go through a voluntary disclosure, contact Sherayzen Law Office as soon as possible.  Our experienced international tax firm can help you deal with any FBAR-related issues.
Remember, it does not matter whether you are located in another state or outside of the United States – we can help!

### Mr. Sherayzen is a new Vice-Chair of the International Business Law Section of the MSBA 
On June 28, 2011, Mr. Eugene Sherayzen, Esq. was elected to be the new vice-chairman of the International Business Law Section of the Minnesota State Bar Association.

### Foreign Investment in Real Property Tax Act
The IRS generally taxes U.S. taxpayers on all income, from any source derived.  Foreign taxpayers, on the other hand, will usually only pay U.S. taxes on income sourced in the U.S.  However, under The Foreign Investment in Real Property Tax Act ("FIRPTA"), the IRS treats gain on the disposition of certain U.S. property and interests as if it were "effectively connected" with the conduct of a U.S. trade or business, and thus subject to U.S. tax, even if foreign individuals or businesses are not actually engaged in a U.S. trade or business.  (In general, effectively connected income consists of both U.S.-source income and certain types of foreign source income earned by non-resident aliens and foreign corporations engaged in the conduct of a trade or business within the U.S).
Penalties for failure to comply with the IRS provisions can be substantial, so taxpayers and purchasing agents should be aware of these rules if they are involved in such transactions.
The FIRPTA Withholding Tax
The FIRPTA income tax withholding provisions (IRC Section 1445 and related sections) require purchasers or agents acquiring U.S. real property interests ("USRPI)" from foreign persons to withhold 10 percent of the amount realized on the disposition, subject to certain exemptions.  In general, a USRPI is any direct interest in parcels of real property located in the U.S., and any interests in a U.S. corporation (such as shares, but not including solely a creditor interest).
The IRS defines “disposition” for this provision to include disposition for any purpose of the Internal Revenue Code, including but not limited to: sales or exchanges, liquidations, redemptions, gifts, transfers, and similar transactions.  "Foreign" persons are broadly defined by the IRS, and include nonresident alien individuals, foreign corporations, partnerships, trusts, estates, and foreign branches of U.S. financial institutions if the foreign branch is a qualified intermediary.  The "amount realized" generally means the sales or contract price of the property (see IRS rules for more detail).
Upon advance request, the IRS has the authority reduce the 10 percent withholding tax to an amount that will cover the estimated tax liability due, if it is determined that the collection of the amount due under applicable IRS provisions will not be jeopardized by the reduction.
Note that special rules apply for distributions of USPRIs by foreign corporations, partnerships, trusts, or estates, and by certain domestic corporations to foreign shareholders.
Penalties
In general, various penalties may be imposed under the applicable FIRPTA provisions.  Penalties apply for failure to file the required Form 8288 when due and for failure to pay the withholding when due.  Additionally, any tax required to be withheld under Section 1445 may be collected, plus interest on the unpaid amount, if the taxpayer fails to do so.  Further, a criminal penalty of $10,000 or five years in prison may be imposed under Section 7202 for willful failure to collect and pay over the required tax.  Corporate officers or other responsible persons may face separate penalties under Section 6672.
Contact Sherayzen Law Office
This article is intended to give a brief summary of some of the issues concerning, and should not be construed as legal or tax advice.  If you have further questions regarding these matters as it pertains to your own tax circumstances, Sherayzen Law Office offers professional advice in all of your tax and international tax needs.  Call (952) 500-8159 to discuss your tax situation with an experienced business tax lawyer.

### Will Capital Gains Move Me Into a Higher Tax Bracket?
A frequently asked tax question is whether capital gains may push a taxpayer into a higher tax bracket. This article will examine some of the tax possibilities with respect to this question.
Background
In general, capital gains are subject to the 0% or 15% capital gain rate. Generally, for 2010, if all of a taxpayer's taxable income is within either the 10% or 15% tax brackets (and all of the net capital gains are eligible for the 10% or 15% rates), then a taxpayer's capital gains will qualify for the 0% rate.
In order to calculate tax liability on Schedule D or on the IRS capital gains worksheet, taxable income is reduced by net capital gains and qualified dividends (other than 28% rate gain and unrecaptured Section 1250 gain), leaving ordinary income as a result. In general, capital gains (and qualified dividends) will be tax free to the extent they "fill in" the difference between ordinary income and the top-end of a taxpayer's filing status. (See examples below).  For tax year 2010, the top-end of the 15% bracket is taxable income of $34,000 for single taxpayers and married filing separately, $45,550 for heads of household, and $68,000 for married filing jointly. Thus, taxpayers will qualify for the 0% rate if none of their taxable income exceeds the top-end of their applicable filing status.
Examples
Please, note that the examples below are for illustrative purpose only and may not apply to your specific fact situation.
1). Taxpayers qualify for the 0% rate
Married filing-jointly taxpayers have ordinary income of $50,000 and net capital gain of $15,000 as their only other source of income. Because the top-end of the 15% bracket for their filing status is taxable income up to $68,000 and their ordinary income added together with their capital gain does not exceed that top-end threshold, the entire $15,000 capital gain will qualify for the 0% rate.
2). Taxpayers qualify for 0% rate on part of their capital gains, and pay at the 15% rate on the rest
Married filing jointly taxpayers have ordinary income of $60,000 and net capital gain of $20,000 as their only other source of income. Because the top-end of the 15% bracket for their filing status is taxable income up to $68,000 and their ordinary income added with their capital gain exceeds the top-end of that threshold, part of their capital gain must be paid at the 15% rate. Specifically, subtracting their ordinary income of $60,000 from the top-end of their filing status bracket of $68,000 leaves $8,000 of capital gains that can qualify for tax free rate. The remainder of their capital gain will be taxed at 15%.
3). Taxpayers do not qualify for the 0% rate
Married filing jointly taxpayers have ordinary income of $75,000 and net capital gain of $5,000 as their only other source of income. Because their ordinary income exceeds the top-end of the 15% bracket for their filing status ($68,000), none of their capital gain will qualify for the special 0% rate. Instead the entire capital gain will be taxed at the 15% rate.
Note that these are the general rules relating to capital gains and tax brackets, but other rules and factors may apply under applicable circumstances. For example, if Section 1250 unrecaptured gain property or capital gains taxed at the 28% rates are involved, the general rules will not apply. Also, deductions and various phaseouts may still be limited even if the taxpayer qualifies for the 0% rate. Additionally, there may be state capital gains tax rates that apply even if the federal rate is 0%.
Therefore, do not try to rely on your own opinion to resolve your capital gains tax questions. Rather, you should review your specific situation with a tax attorney who will help you deal with these complex tax issues.
Contact Sherayzen Law Office to Get Capital Gains Tax Help
Do you have further questions regarding your capital gains and tax liabilities? Contact Sherayzen Law Office at (952) 500-8159 to discuss your tax situation with an experienced tax attorney.

### FBAR (Report on Foreign Bank and Financial Accounts) is due on June 30, 2011
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 form) must be filed with the DOT.
The FBAR must be filed by June 30 of each relevant year, including this year (2011).  Notice - this year's FBAR must be received by the DOT on June 30, 2011.  This rule is contrary to your regular tax returns where the mailing date determines whether the filing is timely.  There are no extensions available - the FBAR must be received by June 30 or it will be considered delinquent.
If you have any questions or concerns regarding whether you need to file the FBAR or how to prepare the form, please contact Sherayzen Law Office directly.  Our experienced international tax firm will guide you through this complex tax issue.

### Estimated Tax Payments are due on June 15, 2011
Estimated tax payments for the second quarter (April 1 -  May 31) of 2011 are due on June 15, 2011. The estimated tax payments should be made using Form 1040-ES. Note, if the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if it is made on the next business day.

### LLC Membership Interest Purchase Agreement: Basic Structure
This article deals with a situation where a person wishes to purchase a membership interest in the LLC and the agreement has been reached by all parties (i.e. the negotiations are over and there is an agreement with respect to main substantive issues, such as price, timing, assets, et cetera). In particular, I will focus on what an LLC Membership Interest Purchase Agreement (hereinafter “Agreement”) must contain (i.e. the minimum basic structure of the contract) in order to adequately protect the buyer, while providing necessary assurances to the seller.
A. Recitals
Almost every business contract should contain recitals stating who the parties are and what are their intentions with respect to this Agreement.
B. Definition of Terms and Rules of Interpretation
In order to avoid ambiguity, the relevant terms of the contract should be defined. For example, you can state: “ ‘Indemnified Buyer Liabilities’ has the meaning specified in Article V of the Agreement” or “ ‘Membership Interest’ shall mean all of the economic, financial, and governance rights and interests of a member of the Company.” I suggest that the description of parties should be restated in this section of the Agreement, even if the parties are already described in the recitals.
C. Description of the Purchase Price and the Interest Sold
This is one of the most crucial parts of the Agreement. Here, you describe the terms of sale: the purchase price, the interest sold, how the sale will proceed, and the closing terms. Do not forget to indicate the documents that should be presented at the closing, the location and time of the closing, and the form of payment. I also usually include an additional paragraph to describe the effect of the sale.
D. Seller’s Representations and Warranties
This is the article of the Agreement that provides main protections for the buyer. The seller’s representations and warranties vary greatly from contract to contract. At the very least, however, the buyer should make sure that the seller guarantees clear title of its interest, lack of conflict with other seller’s obligations, good standing of the LLC, the company’s compliance with laws, no pending litigation, and intellectual property protection. These protections should be clearly and comprehensively described in the Agreement.
Again, there are many more protections available. I just described the minimum basic that must be in the Agreement.
E. Buyer’s Representations and Warranties
This is the article of the Agreement that provides main protection for the sellers. Many issues are negotiable here, but, at the very minimum, the seller should make sure that the buyer guarantees: the payment and protection of the seller from post-sale litigation. Again, these protections should be clearly and comprehensively described in the Agreement.
F. Indemnification
Indemnification is a complex part of the Agreement. The main idea behind indemnification provisions is to provide relief for the buyer (the seller may also enclose indemnification provisions for limited purposes) in case a problem arises due to the seller’s breach of its obligations, representations, and warranties under the Agreement, misstatement of material fact and failure to adequately disclosure required information. The provision itself is highly complex and involves many other issues, such as litigation, insurance, subrogation, and so on.
G. Consent to Transfer
In order to avoid unnecessary conflicts, it is crucially important to coordinate this Purchase Agreement with other existing documents and contracts. The most frequent issue – the limitations on transfer of a Membership Interest imposed by other organization documents, such as Member Control Agreement or LLC Operating Agreement. Often, these documents require a unanimous consent of other Members to the transfer. This is why the documentation of such consent is indispensable. This is precisely what “Consent to Transfer” provisions are designed to do.
H. General Provisions
“General” does not mean “not important”. On the contrary, general provisions often contain crucial provisions such as: amendment of the Agreement, notification process, consent to jurisdiction and venue, governing law, denial of waivers, and so on. These provisions are significant not only to the operation of the Agreement, but also to dispute management and economics of subsequent litigation. This is why these provisions should be drafted with care.
Contact Sherayzen Law Office for Experienced and Aggressive Legal Representation
This article describes only the basic general structure of an LLC Membership Interest Purchase Agreement. In reality, drafting and negotiating of this type of agreements can be a very complex process that should only be handled by a contract attorney. This is why you should contact Sherayzen Law Office. Our experienced contract firm will represent you during the negotiations, draft the necessary contract provisions, assure adequate documentation and due diligence during closing, and protect your interests throughout this whole process.

### Underpayment and Overpayment Interest Rates for the Third Quarter of 2011
On May 16, 2011, the Internal Revenue Service announced that interest rates for the calendar quarter beginning July 1, 2011, will remain the same as in the previous quarter. The rates will be:
	four (4) percent for overpayments (three (3) percent in the case of a corporation);
	four (4) percent for underpayments;
	six (6) percent for large corporate underpayments; and
	one and one-half (1.5) percent for the portion of a corporate overpayment exceeding $10,000.
Section 6621 of the Internal Revenue Code establishes the rates for interest on tax overpayments and tax underpayments. These rates determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Rev. Rul. 2011-12. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. Pursuant to I.R.C. section 6621(c), the rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. See section 301.6621-3 of the Regulations on Procedure and Administration for the definition of a large corporate underpayment and for the rules for determining the applicable date.
The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly interest rates to be used for overpayments and underpayments of tax under section 6621, the Internal Revenue Service will use the federal short-term rate based on daily compounding because that rate is most consistent with section 6621 which, pursuant to section 6622, is subject to daily compounding.
Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent and 6 percent are published in Tables 8, 11, 13, and 17 of Rev. Proc. 95-17, 1995-1 C.B. 556, 562, 567, and 571. Interest factors for daily compound interest for an annual rate of 0.5 percent are published in Appendix A of Revenue Ruling 2010-31, 2010-52 IRB 898, 899. 3.
Contact Sherayzen Law Office
If you have any questions with respect to IRS interest rates and any other tax-related concerns, you should contact our experienced tax firm to discuss your case.

### FBAR: Exclusion of Personal and Homeowner’s Lines of Credit
Often, I receive specific questions from my clients with respect to whether certain types of accounts should be reported on the Report of Foreign Bank and Financial Accounts (“FBAR”). Recently, one of my clients wanted to know whether he needs to report his personal and homeowner’s lines of credits on the FBAR.
A little disclaimer before I deal with the main subject of this essay. In this legal note, I do not discuss the situations where you loaned the money to someone else. This essay focus strictly on the money loaned to you.
Generally, whether the money loaned to you should be reported on the FBAR is a highly fact-dependent situation. Most such loans are not reported on the FBAR, because these loans are not considered assets. However, if a loan can be considered as an asset because of the way it is structured or because it is a part of a larger financial arrangement, the loan needs to be reported on the FBAR. You should discuss this situation with an international tax attorney who specializes in FBARs.
The situation with respect to personal and homeowner’s lines of credit, however, is much clearer. The IRS does not regard these lines of credit as assets and does not require you to disclose them on the FBAR. While this is a general rule, you should call us to discuss your specific situation in order to make sure that nothing in your situation makes these lines of credit reportable.
Contact Sherayzen Law Office to Get FBAR Help
If you have any questions with respect to FBAR or voluntary disclosure, Sherayzen Law Office can help. Our international tax firm has guided our clients throughout the United States through voluntary disclosure and FBAR reporting, making sure that the rights of our clients are protected and they pay only fair taxes and penalties.

### Official Treasury Currency Conversion Rates of December 31, 2010
Every quarter the U.S. Department of Treasury publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates). While there are many uses for these rates, the current (March 2011 revision) FBAR instructions require their use, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:
In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury's Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.
Here is the table of the official Treasury currency conversion rates:
Country
Currency
Foreign Currency to $1.00
Afghanistan
Afghani
44.5000
Albania
Lek
106.3600
Algeria
Dinar
73.1500
Angola
Kwanza
90.0000
Antigua-Barbuda
East Caribbean Dollar
2.7000
Argentina
Peso
3.9800
Armenia
Dram
360.0000
Australia
Dollar
1.0400
Austria
Euro
0.7700
Azerbaijan
Manat
0.8200
Bahamas
Dollar
1.0000
Bahrain
Dinar
0.3800
Bangladesh
Taka
69.0000
Barbados
Dollar
2.0200
Belarus
Ruble
3010.0000
Belgium
Euro
0.7700
Belize
Dollar
2.0000
Benin
CFA Franc
503.3000
Bermuda
Dollar
1.0000
Bolivia
Boliviano
6.9600
Bosnia-Hercegovina
Marka
1.5000
Botwana
Pula
6.7500
Brazil
Real
1.7200
Brunei
Dollar
1.3200
Bulgaria
Lev
1.5000
Burkina Faso
CFA Franc
503.3000
Burma
Kyat
450.0000
Burundi
Franc
1243.0000
Cambodia (Khmer)
Riel
4239.0000
Cameroon
CFA Franc
503.3000
Canada
Dollar
1.0200
Cape Verde
Escudo
81.6700
Cayman Islands
Dollar
0.8200
Central African Republic
CFA Franc
503.3000
Chad
CFA Franc
503.3000
Chile
Peso
486.7000
China
Renminbi
6.6700
Colombia
Peso
1920.0000
Comoros
Franc
361.3500
Congo
CFA Franc
503.3000
Costa Rica
Colon
501.9500
Cote D’Ivoire
CFA Franc
503.3000
Croatia
Kuna
5.5900
Cuba
Peso
0.9300
Cyprus
Euro
0.7700
Czech Republic
Koruna
18.6400
Democratic Republic of Congo
Congolese Franc
900.0000
Denmark
Krone
5.7200
Djibouti
Franc
177.0000
Dominican Republic
Peso
37.0500
East Timor
Dili
1.0000
Ecuador
Dolares
1.0000
Egypt
Pound
5.7900
El Salvador
Dolares
1.0000
Equatorial Guinea
CFA Franc
503.3000
Eritrea
Nakfa
15.0000
Estonia
Kroon
12.0000
Ethiopia
Birr
16.4900
Euro Zone
EURO
0.7700
Fiji
Dollar
1.8200
Finland
Euro
0.7700
France
Euro
0.7700
Gabon
CFA Franc
503.3000
Gambia
Dalasi
28.0000
Georgia
Lari
1.7600
Germany FRG
Euro
0.7700
Ghana
Cedi
1.4500
Greece
Euro
0.7700
Grenada
East Carribean Dollar
2.7000
Guatemala
Quentzel
8.0000
Guinea
Franc
6078.0000
Guinea Bissau
CFA Franc
503.3000
Guyana
Dollar
201.0000
Haiti
Gourde
38.5000
Honduras
Lempira
18.9000
Hong Kong
Dollar
7.7700
Hungary
Forint
217.1200
Iceland
Krona
117.0700
India
Rupee
45.7000
Indonesia
Rupiah
8900.0000
Iran
Rial
8229.0000
Iraq
Dinar
1166.5000
Ireland
Euro
0.7700
Israel
Shekel
3.6800
Italy
Euro
0.7700
Jamaica
Dollar
85.8000
Japan
Yen
83.8300
Jordan
Dinar
0.7100
Kazakhstan
Tenge
147.5000
Kenya
Shilling
80.9000
Korea
Won
1160.1500
Kuwait
Dinar
0.2800
Kyrgyzstan
Som
46.8000
Laos
Kip
8031.0000
Latvia
Lats
0.5400
Lebanon
Pound
1500.0000
Lesotho
South African Rand
7.0700
Liberia
Dollar
49.0000
Libya
Dinar
1.2500
Lithuania
Litas
2.6500
Luxembourg
Euro
0.7700
Macao
Mop
8.0000
Macedonia FYROM
Denar
45.8000
Madagascar
Aria
2010.6100
Malawi
Kwacha
151.0000
Malaysia
Ringgit
3.1700
Mali
CFA Franc
503.3000
Malta
Euro
0.7700
Marshall Islands
Dollar
1.0000
Martinique
Euro
0.7700
Mauritania
Ouguiya
290.0000
Mauritius
Rupee
30.3000
Mexico
New Peso
12.5000
Micronesia
Dollar
1.0000
Moldova
Leu
12.1700
Mongolia
Tugrik
1262.4500
Montenegro
Euro
0.7700
Morocco
Dirham
8.5000
Mozambique
Metical
35.7100
Namibia
Dollar
7.0700
Nepal
Rupee
72.9500
Netherlands
Euro
0.7700
Netherlands Antilles
Guilder
1.7800
New Zealand
Dollar
1.3400
Nicaragua
Cordoba
21.7900
Niger
CFA Franc
503.3000
Nigeria
Naira
150.6000
Norway
Krone
6.2000
Oman
Rial
0.3900
Pakistan
Rupee
85.7000
Palau
Dollar
1.0000
Panama
Balboa
1.0000
Papua New Guinea
Kina
2.4800
Paraguay
Guarani
4700.0000
Peru
Inti
0.0000
Peru
Nuevo Sol
2.8300
Philippines
Peso
44.1000
Poland
Zloty
3.1100
Portugal
Euro
0.7700
Qatar
Riyal
3.6400
Romania
Leu
3.2900
Russia
Ruble
31.4000
Rwanda
Franc
592.0200
Sao Tome & Principe
Dobras
18526.1191
Saudi Arabia
Riyal
3.7500
Senegal
CFA Franc
503.3000
Serbia
Dinar
0.7700
Seychelles
Rupee
12.1000
Sierra Leone
Leone
4146.0000
Singapore
Dollar
1.3200
Slovak
Euro
0.7700
Slovenia
Euro
0.7700
Solomon Islands
Dollar
7.4000
South Africa
Rand
7.0700
Spain
Euro
0.7700
Sri Lanka
Rupee
111.3500
St Lucia
East Carribean Dollar
2.7000
Sudan
Pound
2.3700
Suriname
Guilder
2.8000
Swaziland
Lilangeni
7.0700
Sweden
Krona
7.0400
Switzerland
Franc
1.0000
Syria
Pound
46.4500
Taiwan
Dollar
30.5000
Tajikistan
Somoni
4.4000
Tanzania
Shilling
1483.0000
Thailand
Baht
30.1800
Togo
CFA Franc
503.3000
Tonga
Pa’anga
1.7700
Trinidad & Tobago
Dollar
6.3200
Tunisia
Dinar
1.4500
Turkey
Lira
1.5100
Turkmenistan
Manat
2.8400
Uganda
Shilling
2313.0000
Ukraine
Hryvnia
7.8900
United Arab Emirates
Dirham
3.6700
United Kingdom
Pound Sterling
0.6400
Uruguay
New Peso
19.9000
Uzbekistan
Som
1645.0000
Vanuatu
Vatu
92.5900
Venezuela
New Bolivar
2.6000
Vietnam
Dong
19500.0000
Western Samoa
Tala
2.2300
Yemen
Rial
214.0000
Yugoslavia
Dinar
0.7700
Zambia
Kwacha
4925.0000
Zimbabwe
Dollar
1.0000
1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM - former Yugoslav Republic of Macedonia.

### Non-Resident Alien Spouse and Joint U.S. Tax Return
This article will cover the options that are available for married couples where one spouse is a non-resident alien and the other is a U.S. citizen. A nonresident alien is an alien who has not passed the green card test or the "substantial presence test" under IRS rules. For the purposes of this article, a "married couple" will refer solely to this specific situation.
Election to File Joint Return
Although a non-resident alien who does not have U.S. source income is generally not required to file a U.S. tax return, in some instances it may be beneficial for a non-resident alien married to a U.S. citizen to do so. If the married couple meets certain criteria, they may elect to file a joint return.
The criteria is as follows: A married couple may elect to treat the non-resident alien as a U.S. resident, if the couple is married at the end of the taxable year. This also includes instances in which one of the spouses is a non-resident alien at the beginning of the year, but becomes a resident alien at the end of the year, and the other spouse is a non-resident alien at the end of the year.
Reason for Electing to File a Joint Return
There are numerous reasons why a non-resident alien in a married couple may elect to file a joint return. For instance, the non-resident alien may have U.S. source income, in which case U.S. taxes will likely be owed in any event. Thus, filing a joint return may result in less taxes paid, depending on tax brackets, type of income and applicable deductions.
It may also make sense in certain circumstances for a non-resident alien who does not have U.S. source income to file a joint return. Additionally, a non-resident alien filing a joint return may be allowed to claim possible credits on foreign income taxes paid, such as the Foreign Tax Credit.
Note however, in certain circumstances, the non-resident alien spouse of the married couple filing the joint return may still be treated as a non-resident alien (such as for the tax purposes of IRC Chapter 3 Withholding, Social Security, or Medicare).
Applicable Rules
Married couples must file a joint return in the year they first elect to treat the non-resident alien as a resident alien for tax purposes. Both spouses will be considered to be residents for tax purposes for all years that the election is in effect. While a joint income return must be filed for the year the election is made, a joint or separate return may be filed in later years.
By electing to file the joint return, both spouses must report all worldwide income on the return. In general, neither spouse will be able to claim tax treaty benefits as a resident of a foreign country in the years in which the election is made, although this will depend upon the specifics of each treaty.
Making The Election
Married couples may make the election by attaching a statement, signed by both spouses, to the joint return for the first tax year that the election is made. (See specific IRS requirements for more details). Married couples may also make the election by filing a amended Form 1040X joint tax return (however, any tax returns filed after the tax year of the amended return must also be amended).
Ending or Suspending the Election
Once the election is made, it will apply to all subsequent tax years, unless it is ended or suspended. An election may be ended by various means, such as the death of either spouse, legal separation, revocation by either spouse, or inadequate records (See Publication 519, U.S. Tax Guide for Aliens, for more details). Once the election is ended, neither spouse may make the election in subsequent tax years.
An election is suspended if neither spouse is a US citizen or resident alien at any time during a later tax year. Married couples may resume the election however if the required criteria are eventually met again in subsequent tax years.
Contact Sherayzen Law Office
This article is intended to give you a brief summary of these issues. If you have further questions regarding these matters as it pertains to your own tax circumstances, Sherayzen Law Office offers professional advice in all of your tax and international tax needs. Call now at (952) 500-8159 to discuss your tax situation with an experienced international tax attorney.

### FATCA: Increased Foreign Asset Disclosure Requirements for U.S. Persons
The Foreign Accounts Tax Compliance Act (FATCA) was enacted as part of the Hiring Incentives to Restore Employment Act of 2010 (“HIRE Act” or “Act”). In addition to specific requirements and a withholding tax, FATCA imposed a new foreign asset disclosure requirements on U.S. persons.
This article will give a general summary about FATCA disclosure requirements, penalties and its statute of limitations
Disclosure Requirements
In general, under IRC section 6038D, disclosure is required if the aggregate value of all "specified foreign financial assets" as defined in the statute, exceeds $50,000 (compare this threshold to the FBAR requirement of $10,000). This information must be attached to the current year tax returns. The provision of FATCA is effective as of tax year 2011.
Covered individuals or entities must disclose the maximum value of the asset(s) during the year, as well as other pertinent information regarding the account, stock, financial instrument, contract, interest, or related items. It should be noted that FATCA disclosure is likely to be broader than the reporting requirements under the FBAR.
Penalties
IRC section 6038D imposes a penalty of $10,000 on U.S. persons (i.e., individuals, corporations, partnerships, trusts or LLC’s) who do not meet the required disclosure requirement. If the required disclosure information is not provided within 90 days of notice and demand by the IRS, penalties will increase by $10,000 each 30 days following the notification, up to a maximum penalty of $50,000. A reasonable cause exception to the penalty may apply in certain circumstances. An international tax attorney should determine whether exception applies to your particular situation.
Furthermore, FATCA amended IRC section 6662 (substantial understatement penalty provision) to double the penalty on any underpayment attributable to an undisclosed foreign financial asset (which means any asset that should have been reported under IRC sections 6038, 6038B, 6038D, 6046A, or 6048) to a draconian 40% penalty. This provision is effective for tax years beginning after the enactment of the Act on March 18, 2010 – i.e. tax year 2011.
State of Limitations Provisions
In addition to other provisions expanding the powers of the IRS under FATCA, the Act also has an increased statute of limitations for an IRS audit. Under Section 513 of the Act, the statute of limitations is extended to six years after a return is filed when a taxpayer makes an omission of income attributable to one or more assets required to be reported under section 6038D in excess of $5,000. This is an extension of the general statute of limitations of three years from the filing of a return.
The Section 513 statute of limitations applies to returns filed after March 18, 2010. The extended statute of limitations may also apply to returns filed on or before this date if the general statute of limitation period (under IRC section 6501) has not yet expired.
Contact Sherayzen Law Office to Help You
Do you have questions relating to FATCA reporting issues, or concerns that you may be neglecting to report information that can lead to substantial penalties? Sherayzen Law Office is here to assist you with all of your U.S. tax compliance tax issues. Contact us by email: eugene@sherayzenlaw.com to discuss your tax situation with an experienced international tax lawyer.

### Tax Attorney Minneapolis | Keeping Tax Records After Filing Your Tax Return
Once in a while, I get a question from my clients on how long and what type of records they need to keep after they file their tax returns.  Generally, you should keep any and all documents that may have an impact on your federal tax return. For example, it is a good idea to keep bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks, proofs of payment, and any other records to support deductions or credits you claim on your return.
If you are self-employed, you are probably likely to keep a much larger pile of documents than other individual clients.  The documents should generally include all revenue records, expense records, depreciation records, and so on.  You should consult a tax professional on what type of records you should keep and how long.
Most individual taxpayers will need to keep their tax records for at least three years.  Some documents –  such as those related to a home purchase or sale, stock transactions, business property records – should be preserved for a longer period of time.
Generally, I advise my clients to err on the side of keeping the documents.
If you have any questions on whether you should keep a given documents, you should consult your accountant or a tax attorney.

###  Tax Lawyers Minnesota | April 18, 2011 Filing Deadline
This is a reminder to the individual taxpayers that they have until the April 18, 2011, to file their 2010 tax returns. Taxpayers have an extra weekend to file this year because of a District of Columbia holiday on April 15.
If you cannot meet the April 18 deadline, file an extension (Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return).  Remember, however, that the six-month extension is to file a return only; it is not an extension to pay taxes due (see this article on the extension of filing deadline for individuals).
Also, remember that April 18, 2011, is the deadline for your first estimated tax payment this year (if you are supposed to pay any estimated taxes).

### Dealing with Undisclosed Foreign Income and Foreign Bank and Financial Accounts
The purpose of this article is to provide you with a simple three-step plan on how to deal with a situation where you have not disclosed foreign income and foreign assets, including bank and financial accounts, to the IRS.
1. Call Sherayzen Law Office to Schedule a Confidential and Attorney-Client Privileged Consultation
The first step is to contact Sherayzen Law Office to set up a consultation. We offer three types of consultations to clients all over the world: in-person, over the phone, and online Skype video conference. Most of out-of-state clients agree to a phone consultation; most oversees clients (Australia, Bangladesh, Kuwait, Spain, United Kingdom, et cetera) prefer Skype video conferences; and a few others fly to Minneapolis for an in-person meeting. On the other hand, the vast majority of our Minnesota and Wisconsin clients opt for in-person consultation.
In scheduling consultations, we will try to be as flexible as possible to accommodate your agenda and sense of urgency.
When you call, briefly state your legal and tax issues, set up the exact time for the consultation, and agree on the mode of payment. Our experienced tax firm will guide you in what kind of documents and information you need to prepare for the consultation and how the consultation will be conducted.
Remember, you are calling a law office and everything you say to a lawyer is confidential!
2. Collect Documents to Assess the Extent of Non-Disclosure
The next step is to immediately gather as many of the required documents as possible. Usually, these documents only need to be sufficient to approximate the amount of undisclosed foreign income and the structure of undisclosed foreign assets. “Structure” here means what type of property you own overseas: bank accounts, retirement accounts (such as RRSP in Canada or a Superannuation Bond account in Australia), investment accounts, CDs (or GICs in Canada), real estate, business interests, and so on. You should be prepared to estimate the current balance on your foreign bank and financial accounts.
If you do not have all the documents by the time of the consultation, it is not a problem for consultation purposes. The consultation is conducted to: (i) identify the relevant legal issues and risks (including potential penalties), (ii) understand what solutions are applicable to your problems, and (iii) explore the options you have to achieve a speedy and least-painful resolution. Later, after the Retainer Agreement is executed, we will provide you with a detailed list of documents needed to work on your case. For the consultation purposes, just get what you can.
3. Conduct Efficient Consultation and Retain Sherayzen Law Office to Conduct the Case
In order to make the consultation as useful and efficient as possible, it is best to let the experienced tax attorney set the agenda. Usually, a consultation will begin with background exploration. Then, it will shift the consultation to specific fact gathering. Once the facts are solidified into a logical consistent framework, the attorney will draw legal conclusions and assess risks and penalties which may apply to your case. The consultation will usually end with the lawyer describing your options for the resolution of the case, recommending a particular route, and estimating the overall costs and length of the case. Prior to the end of the consultation, the attorney will also explain to you how you can retain Sherayzen Law Office to resolve your voluntary disclosure case.
Conclusion
This small article describes a three-step action plan on how to deal with a potentially disastrous situation of failure to disclose foreign income and foreign bank and financial accounts. Unsurprisingly, the plan centers around retaining the services of an international tax attorney, because the issues involved in these cases are usually extremely complex and should be handled by a tax lawyer.
There is one more issue that needs to be emphasized here – the urgency of the matter. It is highly important that you voluntarily disclose your foreign assets, income, and bank and financial accounts, before IRS commences an investigation against you. Otherwise, the voluntary disclosure option usually would not be available to you.
Call Sherayzen Law Office to avoid the worst-case scenario and let our experienced voluntary disclosure tax firm to help you!

### Extension of Time to File Federal Tax Return for Individuals: Form 4868
If an individual taxpayer cannot file his tax return by the due date of the return, the IRS allows most of such taxpayers to request an automatic six-month extension of time to file the return.
In order to do so, the taxpayer should file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by the return due date. Generally, for the 2010 tax return, taxpayers who wish to take advantage of the extension will need to file Form 4868 on or before April 18, 2011 (the main exception is where a taxpayer operates based on fiscal year).
The most difficult part of filing-out Form 4868 is the requirement to show the “full amount properly estimated as tax” for such taxpayer for the relevant tax year. A taxpayer is deemed to have complied with the requirement when he makes a bona fide and reasonable estimate of his tax liability based on the information available to him at the time he makes his request for an extension.
Failure to properly estimate one’s tax liability may lead to the invalidation of the extension. This means that the return will be considered a regular delinquent return. Such determination, in turn, is likely to result in the imposition of failure to file and failure to pay penalties from the statutory due date. I emphasize that the penalties may be imposed from the original statutory due date where Form 4868 is invalidated.
It is important to emphasize that an extension of time to file is not equivalent to an extension of time to pay. It is generally true that, under the relevant Treasury regulations and IRS Notice 93-22, individual taxpayers still can file a valid Form 4868 and obtain an automatic extension without paying the properly estimated tax in full – this means, of course, that no late filing penalty is likely to be assessed. However, the taxpayers will still owe interest on any past due tax amount and may be subject to a late payment penalty if payment is not made by the regular due date of the return.
It is also important to note that other extension provisions, in addition to the regular Form 4868 automatic six-month extension, may apply, especially for taxpayers who live outside of the United States or who are part of the U.S. military, either on duty outside the United States or hospitalized as a result of injury. More exceptions are made for taxpayers who live in declared disaster areas.
Contact Sherayzen Law Office to Get Tax Help
Sherayzen Law Office can help you resolve your tax problems. Contact us NOW to speak with an experienced tax attorney!

### Preparing Individual Tax Returns: Top Five Errors
Before filing your tax return, you should review it to make sure it is correct and complete.  Here are the five most common errors on an individual tax return:
1.  Incorrect or missing Social Security numbers.
2.  Incorrect tax entered based on taxable income and filing status.
3.  Withholding and/or estimated tax payments entered on the wrong line.
4.  Math errors in addition and subtraction.
5.  Computation errors in figuring out the taxable income, tax credits, standard deduction for age sixty-five or over or blind.
These are just few of the most common errors on a tax return – there are many more possible.  The strong possibility of committing these errors make is imperative to review the entire tax return prior to filing it with the IRS.   Remember, any errors on a tax return may result in processing delays and hold up any refund you may be entitled to.

### Tax Treaties
Tax treaties are bilateral agreements between two countries that generally provide relief from taxation for individuals who are covered. The U.S. has tax treaties with more than 50 different countries. The U.S. has a formulated a Model Income Tax Treaty to assist in negotiations of future tax treaties. In general, treaties will grant one country primary taxing rights to items of income, and the other country will be required to give a credit for taxes paid.
Primary taxing rights typically depend on either the residency of taxpayers, or the presence of a permanent establishment in a treaty country. A permanent establishment generally is defined to be a branch, factory, office, workshop, mining site, warehouse, or other fixed places of business.
Under most tax treaties, residents (and sometimes, citizens or nationals) of foreign countries will be exempt from U.S. taxes on certain items of income, and taxed at a reduced rate on other specified items. For example, many U.S. tax treaties reduce the withholding tax rate on interest and dividends, and other certain kinds of investment income. The rates and items of taxation vary according to the terms of each treaty. If there is no tax treaty between the U.S. and another country, or a treaty does not cover a certain type of income, a resident (national or citizen, if applicable) of a country will be subject to U.S. taxes.
Under these same tax treaties, though U.S. residents or citizens are subject to U.S. income tax on their worldwide income, they will be exempt from tax, or taxed at a lower rate, in general on certain items of income sourced from another country subject to the tax treaty. Many treaties utilize savings clauses to prevent U.S. residents or citizens from using provisions of a treaty to avoid paying taxes on U.S. source income.
Do you have questions concerning international tax issues? Contact Sherayzen Law Office at (952) 500-8159 to discuss your tax situation with an experienced tax attorney.

### Sourcing of Income
The sourcing of income has very important tax consequences for U.S. and foreign taxpayers.  The IRS taxes U.S. taxpayers on all income, from any source derived; however, U.S. taxpayers will be relieved of double taxation and may utilize the foreign tax credit in many circumstances involving non-purely domestic taxation. Foreign taxpayers, on the other hand, will usually only pay U.S. taxes on income sourced in the U.S. Thus, the source of income rules are critical to determining where a taxpayer will pay applicable taxes. This article will examine both income sourced inside the U.S. and foreign-source income.
Income Source Determination
In order to determine the sourcing of income, income realized is first placed into certain categories (such as interest, dividends, rent, sale of property, etc.). At times, an item of income may overlap into more than one possible category, in which case, specific IRS rules will likely clarify the proper classification. Once income is categorized, income source rules will then be applied in order to ascertain whether the income is U.S. or foreign-source. As a rule of thumb, income will be either U.S. or foreign-source depending upon where property is located, or where the income was realized, however there are many exceptions to this principle.
Income Source Examples
In this section, common income categories such as dividends, interest, personal services income, rents and royalties, and sales or exchanges of property, and their income sourcing rules will be briefly explained (other common income source rules not detailed here apply to software income, and transportation and communications income).
Dividends
Generally speaking, dividends received from U.S. (domestic) corporations are considered to be U.S.-source income. The fact that a domestic corporation may be distributing dividends derived from overseas operations usually will not matter for these purposes.
Conversely, dividends paid by a foreign corporation will generally be deemed foreign-source income. An important exception to this rule occurs in situations where a foreign corporation earns 25% or more of its gross income from income effectively connected with a U.S. trade or business for the three years immediately preceding the year of the dividend payment. In this case, that percentage of the dividend will be treated as U.S.-source income.
Interest
Interest income received from domestic corporations, the U.S. government and state governments, and non-corporate U.S. residents (among others) are deemed U.S.-source income.
There are some exceptions to this rule. For example, income will is deemed to be foreign-source if interest is received from a U.S. corporation which, over the prior three-year period, earned 80% or more of its active business income from foreign sources.
Personal services income
Personal services income includes such items as salaries, wages, fees, commissions. The location of where the services are performed will usually determine whether the personal services income is U.S. or foreign-source.
There are some exceptions to this general rule, including a limited commercial traveler exception for short business trips and de minimus amounts.
Rents and Royalties
For income received from the use of tangible property, the location of the property will determine its income sourcing. Other factors, such as where the property was manufactured, are not considered.
For income received for the use of intangible property (e.g. patents, copyrights, goodwill, etc.), in general, the location of where the property was used will determine its income sourcing.
Sale or Exchange of property
In general, the source of income relating to disposition of real property will depend upon the location of the property.
Broadly speaking, the sale of personal property (i.e, stocks, securities, equipment, inventory, intangible assets) will depend upon the residence of the seller. However, there are various exceptions to this rule. For example, if a item of purchased inventory is sold, the location of the sale will determine its income source.
Tax Treaty versus Regular Sourcing of Income Rules
Under certain circumstances, the sourcing source of an item of income or deduction could be changed by the provisions of a treaty. However, taxpayers claiming this benefit will need to file their tax return along with Form 8833.
Contact Sherayzen Law Office
This is a general overview of the taxation rules relating to sourcing of income. There are many other complex issues that may apply, depending upon the circumstances. Do you have questions concerning taxes relating to your international transactions or income? Sherayzen Law Office can assist you with these matters. Call (952) 500-8159 to set up a consultation today.

### Mortgage Debt Forgiveness Tax Relief: Basic Facts
Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence during tax years 2007 through 2012. The limit is $1 million for a married person filing a separate return. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
In order to qualify for the tax relief, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
However, proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion. Debt forgiven on second homes, rental property, business property, credit cards or car loans also does not qualify for the tax relief provision.
If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed. You should examine the Form 1099-C carefully and notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.
If you qualify for tax relief, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
Note that other tax relief provisions – such as insolvency – may be applicable.

### Alternative Minimum Tax: Basic Facts for Tax Year 2010
Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the Alternative Minimum Tax AMT in 1969, targeting higher-income taxpayers who could claim so many deductions they owed little or no income tax. The AMT provides an alternative set of rules for calculating a taxpayer’s income tax. In general, these rules should determine the minimum amount of tax that someone with a certain amount of income should be required to pay. If a taxpayer’s regular tax falls below this minimum, he has to make up the difference by paying alternative minimum tax.
A taxpayer may have to pay the AMT if his taxable income for regular tax purposes (plus any adjustments and preference items that apply to him) are more than the AMT exemption amount.  The AMT exemption amounts are set by law for each filing status. For tax year 2010, Congress raised the AMT exemption amounts to the following levels:
$72,450 for a married couple filing a joint return and qualifying widows and  widowers;
$47,450 for singles and heads of household;
$36,225 for a married person filing separately.
The minimum AMT exemption amount for a child whose unearned income is taxed at the parents'  tax rate has increased to $6,700 for 2010.

### Tax Lawyers Minneapolis | IRS Increases Interest Rates for the Second Quarter of 2011
The Internal Revenue Service announced that the interest rates for the calendar quarter beginning April 1, 2011, will increase by one percentage point.  Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis.  For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. With respect to corporations, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points.  The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points.The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
Hence, the rates will be as follows:
Overpayment
3% - for corporations
4% – individuals
1.5% for the portion of corporate overpayment exceeding $10,000.
Underpayment
4% generally
6% for large corporate underpayments

### 2011 Offshore Voluntary Disclosure Initiative vs. Statute of Limitations
As I already described in an earlier article, the IRS instituted a new voluntary disclosure program, called 2011 Offshore Voluntary Disclosure Initiative (“OVDI”). One of the most problematic areas under OVDI is the length of the examination period.
Agreeing to assessment of taxes and penalties for all voluntary disclosure years is part of the resolution offered by the IRS for resolving offshore voluntary disclosures. The OVDI disclosure period is 2003 through 2010 – eight years in total.
This contrasts greatly with the general three-year statute of limitations for IRS examination. Therefore, a tax attorney should consider all options prior to engaging in OVDI in order to avoid subjecting his client to unnecessary penalties.
One of the major factors in electing quiet disclosure versus OVDI is considering whether one or more of the numerous exceptions to the general IRS statute of limitations may apply. For example, if the IRS can prove a substantial omission of gross income, the statute of limitations is likely to be expanded to six years. Moreover, if there was a failure to file certain information returns, such as Form 3520 or Form 5471, the statute of limitations will not have begun to run. If the IRS can prove fraud, there is no statute of limitations for assessing tax. In addition, the statute of limitations for asserting FBAR penalties is six years from the date of the violation, which would be the date that an unfiled FBAR was due to have been filed. See 31 U.S.C. § 5321(b)(1).
Obviously, other factors should be considered before the decision to engage into OVDI is made. The chief factor would of course be the likelihood of criminal prosecution if the taxpayer fails to make use of OVDI. Engaging in voluntary disclosure pursuant to OVDI virtually eliminates possibility of criminal prosecution.
These factors aside, though, close analysis of the IRS statute of limitations is one of the most important considerations of whether to engage in OVDI.
Contact Sherayzen Law Office NOW!
Sherayzen Law Office can help. Our international tax firm has guided our clients throughout the United States through a voluntary disclosure process, making sure that the rights of our clients are protected and they pay only fair taxes and penalties.

### IRS Begins Processing Tax Forms Affected by Late Tax Changes
Today, the IRS announced that it has started processing individual tax returns affected by legislation enacted in December.  On Monday, IRS systems began to accept and process both e-file and paper tax returns claiming itemized deductions on Form 1040, Schedule A, as well as deductions for state and local sales tax, higher education tuition and fees and educator expenses. 
Earlier, in 2010, the IRS announced it would delay processing of some tax returns in order to update processing systems to accommodate the late tax law changes. These tax law provisions were extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which became law on December 17, 2010. 
Due to the expected increase in tax return volumes being transmitted this week, the IRS cautioned a small number of taxpayers may experience a brief delay in receiving their e-file acknowledgment, which is normally provided within 24-48 hours.
Business taxpayers who use the 1040 series can file now as well. However, the February 14 start date does not apply to non-1040 business tax forms affected by the recent tax law changes. The IRS will announce a specific date in the near future when it can begin processing those impacted business tax forms.

### Failure to Conduct Voluntary Disclosure: Possible Penalties
The IRS just instituted a new voluntary disclosure program for taxpayers (now closed) who have offshore accounts or assets and who failed to properly report them to the IRS and pay appropriate U.S. taxes. It is called 2011 Offshore Voluntary Disclosure Initiative (“2011 OVDI”). While 2011 OVDI is not available for everyone and some particular circumstances of a case may determine whether it is advisable to go through this program, this new voluntary disclosure program offers a great chance for taxpayers to bring their tax affairs in order and virtually eliminate the possibility of criminal prosecution.
However, what may happen if a taxpayer who should have voluntarily disclosed his offshore income and assets, but fails to do so through 2011 OVDI and the IRS discovers the noncompliance through later examination? This article addresses the common types of penalties that a taxpayer may be subject to in cases where IRS identifies noncompliance with U.S. tax laws before the taxpayer goes through the voluntary disclosure process.
Penalties in General
In general, if the IRS finds out that a taxpayer is not in compliance with U.S. tax laws and fails to voluntarily disclose his offshore assets and foreign bank accounts, the taxpayer may be subject to severe civil and criminal penalties. In additional to accuracy related penalties, the fraud-related penalties, FBAR penalties, and foreign asset reporting penalties (with interest) may be imposed. Combined, all of these penalties and interest may exceed the actual value of nondisclosed assets and foreign bank accounts. In the worst-case scenario, a criminal prosecution may be launched against the noncompliant taxpayers.
Finally, the voluntary disclosure process – which would otherwise be a far less painful way to deal with this problem – is automatically unavailable for taxpayers as soon as they are under civil examination of the IRS.
Let’s discuss the penalties in detail.
Accuracy-Related and Failure to File and Pay Penalties 
An accuracy-related penalty on underpayments is imposed under IRC § 6662. Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty.
If a taxpayer fails to file the required income tax return, a failure to file (“FTF”) penalty may be imposed pursuant to IRC § 6651(a)(1). The penalty is generally five percent of the balance due, plus an additional five percent for each month or fraction thereof during which the failure continues may be imposed. The total penalty will not exceed 25 percent of the balance due.
If a taxpayer fails to pay the amount of tax shown on the return, a failure to pay (“FTP”) penalty may be imposed pursuant to IRC § 6651(a)(2). The penalty may be half of a percent of the amount of tax shown on the return, plus an additional half of a percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding the total of 25 percent of the balance due.
Fraud Penalties
Fraud penalties may imposed under IRC §§ 6651(f) or 6663. Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that may essentially amount to 75 percent of the unpaid tax.
FBAR Penalties
Read this article discussing the penalties that may be imposed as a result of a taxpayers failure to file the FinCEN Form 114 formerly Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, commonly known as an “FBAR”).
Other Penalties
Depending on a particular fact pattern, additional penalties may be imposed for failure to file Form 926, 3520, 3520-A, 5471, 5472, and 8865.
Criminal Prosecution
In the worst-case scenario, a criminal prosecution may be launched by the IRS. Huge penalties and potential jail time are the possible in case of tax evasion.
Contact Us to Let Us Help You
Sherayzen Law Office can help. We are a tax firm based in Minnesota who has helped taxpayers throughout the United States to disclose offshore assets, foreign bank accounts and unreported foreign income to the IRS, avoiding the nightmare scenarios for our clients.
For many taxpayers, 2011 OVDI is a chance to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. A voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues.
If you believe that you may not be in full compliance with U.S. tax laws, the worst course of action is to do nothing and wait for the IRS to discover your noncompliance. Once this happens, your options are likely to be severely limited and the penalties a lot higher. Therefore, call or e-mail us NOW to let us help you with your tax problems. Remember, all calls and e-mails are confidential and attorney-client privileged.

### 2011 Offshore Voluntary Disclosure Initiative
On February 8, 2011, the Internal Revenue Service announced that a new special voluntary disclosure initiative, designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes, will be available through August 31, 2011.
The IRS decision to open a second special disclosure initiative follows continuing interest from taxpayers with foreign accounts. The first special voluntary disclosure program closed with 15,000 voluntary disclosures on October 15, 2009. Since that time, more than 3,000 taxpayers have come forward to the IRS with bank accounts from around the world. These taxpayers will also be eligible to take advantage of the special provisions of the new initiative.
The new initiative is called the 2011 Offshore Voluntary Disclosure Initiative (OVDI) and includes several changes from the 2009 Offshore Voluntary Disclosure Program (OVDP). The overall penalty structure for 2011 is higher, meaning that people who did not come in through the 2009 voluntary disclosure program will not be rewarded for waiting. However, the 2011 initiative does add new features.
For the 2011 initiative, there is a new penalty framework that requires individuals to pay a penalty of 25 percent of the amount in the foreign bank accounts in the year with the highest aggregate account balance covering the 2003 to 2010 time period. Some taxpayers will be eligible for 5 or 12.5 percent penalties. Participants also must pay back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.
The IRS also created a new penalty category of 12.5 percent for treating smaller offshore accounts. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the 2011 initiative will qualify for this lower rate.
The IRS is also making other modifications to the 2011 disclosure initiative.
Taxpayers participating in the new initiative must file all original and amended tax returns and include payment for taxes, interest and accuracy-related penalties by the August 31, 2011, deadline.
For the eligible taxpayers, the 2011 initiative offers clear benefits to encourage taxpayers to come in now rather than risk IRS detection. Taxpayers hiding assets offshore who do not come forward will face far higher penalty scenarios as well as the possibility of criminal prosecution.
Contact Sherayzen Law Office at (952) 500-8159!
Sherayzen Law Office can help you.  Our experienced voluntary disclosure tax firm will guide you through the voluntary disclosure process and vigorously advocate your position, vying for the best outcome possible in your case.  E-mail or call us NOW!

### Taxable vs. Non-Taxable Income
Generally, most income you receive is considered taxable.  However, the tax code is riddled with various exceptions where certain types of income are partially taxed or not taxed at all.
For instance, here is a non-exclusive list of common examples of types of income usually excluded from taxable income:
	Adoption Expense Reimbursements for qualifying expenses
	Child support payments
	Gifts, bequests and inheritances
	Workers' compensation benefits
	Meals and Lodging for the convenience of your employer
	Compensatory Damages awarded for physical injury or physical sickness
	Welfare Benefits
	Cash Rebates from a dealer or manufacturer
The most complicated situations arise where may or may not be included in your taxable income are, depending on your situation.  Life insurance is a good example. If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. On the other hand, life insurance proceeds, which were paid to you because of the insured person’s death, are not taxable unless the policy was turned over to you for a price.
Scholarships and Fellowship Grants also possess this dual nature. If you are a candidate for a degree, you can exclude amounts you receive as a qualified scholarship or fellowship; but, the money used for room and board do not qualify.
Remember, even a non-cash income usually should be included in the taxable income. The most common example of this is bartering.  Bartering is basically an exchange of property or services between the parties.  The fair market value of goods and services exchanged is fully taxable and must be included as income of both parties.
Usually, the rest of the common types of income – such as wages, salaries, tips and unemployment compensation – are fully taxable and must be included in your income unless it is specifically excluded by law.
Contact Us
Determining what types of income should be included in or excluded from your taxable income can be a complicated, highly fact-dependent process.  Sherayzen Law Office can help you determine whether your income is taxable.  Contact us NOW to discuss your case with an experienced Minneapolis tax attorney.

### Medical and Dental Expenses Deduction
It may be possible for you to be able to deduct medical and dental care expenses incurred in the tax year 2010.  This deduction, however, is available only if you itemize your deductions on Schedule A (Form 1040).
This deduction is allowed only for expenses primarily paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription (except insulin).
The deduction is allowed only by the amount by which your total medical care expenses for the year exceed 7.5 percent of your adjusted gross income. You can do this calculation on Form 1040, Schedule A in computing the amount deductible.   The deduction is further reduced by any reimbursement (from the employer or insurance company). It makes no difference if you receive the reimbursement or if it is paid directly to the doctor or hospital.
The good news is that you may include qualified medical expenses you pay for yourself, your spouse, and your dependents, including a person you claim as a dependent under a multiple support agreement. If either parent claims a child as a dependent under the rules for divorced or separated parents, each parent may deduct the medical expenses he or she actually pays for the child.  Furthermore, you can also deduct medical expenses you paid for someone who would have qualified as your dependent except that the person didn't meet the gross income or joint return test.
You may also deduct transportation costs primarily for and essential to medical care that qualify as medical expenses. The actual fare for a taxi, bus, train, or ambulance may be deducted. If you use your car for medical transportation, you can deduct actual out-of-pocket expenses such as gas and oil, or you can deduct the standard mileage rate for medical expenses. With either method you may include tolls and parking fees.
Finally, distributions from Health Savings Accounts and withdrawals from Flexible Spending Arrangements may be tax free if you pay qualified medical expenses.
If you have any questions with respect to your tax return, contact Sherayzen Law Office NOW and discuss your case with an experienced Minneapolis tax attorney!

### What is Closing Agreement
Closing agreements constitute an important part of tax representation and tax planning.  A “closing agreement” is a final agreement between the IRS and the taxpayer on a specific issue or liability. Closing agreements are entered into pursuant to IRC Section 7121.
Usually, closing agreements may be entered into when it is beneficial to permanently and conclusively close a pending matter.  However, a taxpayer may use other good reasons for this type of an agreement to convince the IRS.  In both cases, however, it should be demonstrated that the agreement will not prejudice the government’s interests.
If a transaction is eligible for a letter ruling, the taxpayer may request a closing agreement with or in lieu of a letter ruling.  Sometimes, it is the IRS that may impose closing agreement as a condition for the issuance of a letter ruling.
Sherayzen Law Office offers full IRS representation, including handling your case through a private letter ruling request and entering into a closing agreement, where appropriate.
If you have a case pending before the IRS or you are unsure about the tax consequences of a business transaction, call NOW to discuss your case with an experienced Minneapolis tax lawyer!

### Understanding Citations of Treasury Regulations
Understanding how to cite Treasury Regulations is crucial to being able to find the regulations relevant to a tax case.  This is why I devote this brief essay to explaining the location and basics of citation of Treasury Regulations.
Treasury Regulations are located in Title 26 of the Code of Federal Regulations (“C.F.R.”).  This corresponds to title 26 of the United States Code.
The overall form of citation is as follows: C.F.R. part number, a decimal point, a Code section number, a dash, and a number of further subdivisions.  The “C.F.R. part number” basically indicates the general nature of the regulations – i.e. to what area is the regulation related.  The numbers are assigned to areas in the following way: “1" relates to income tax, “20" relates to estate tax, “25" relates to gift tax; “31" relates to employment tax (withholding), “301" relates to administration and procedure, and “601" relates to the Commissioner’s rules.
Let’s look at a specific example and try to decipher what it says at according to the general form described above: Treas. Reg. § 1.162-1.  “Treas. Reg.” is a common form of abbreviation of “Treasury Regulations”; “1" is a C.F.R. part number which tells the reader that this regulation relates to the income tax;  “162" is a Code section number which specifically discusses the deduction of business expenses; “ dash 1" indicates a citation to the first subdivision of the regulation.  In sum, Treas. Reg. § 1.162-1 refers directly to a first subdivision of the regulation with respect to business expense deduction from income tax.
The ability to quickly read, understand, and find a relevant treasury regulation is just one of the many skills that an experienced tax attorney needs to have.

### Business Lawyers Minneapolis: Preparing for Initial Consultation II
In previous article, I discussed what type of information you should bring to your Minneapolis business attorney. In this essay, I shift the focus toward the second part of the preparation which is about what type of questions you need to ask your business lawyer.
Usually, the questions that you want your Minneapolis business lawyer to answer should, at the very least, cover the following four areas:
1.    Cost and Billing
The most common and important issue is the cost of the case as well as the manner in which you will be billed.  Unless this is a flat-fee case, you should not expect your business attorney to give you a precise amount of money you will need to spend on your case.  Usually, a Minneapolis business lawyer will give you an estimate, which, in the end, may or may not correspond to the actual cost of the case.
In terms of the manner of billing, you are likely to billed per hour in most business litigation and large business transaction matters. Small contracts and certain common-place business services are often subject to a flat fee with an additional hourly fee charged in case of further modifications as requested by a client.
2.     Time
The next area you should discuss with your Minneapolis business attorney is how long the case will need to be conducted.   The estimates here are likely to vary significantly.   While it is often fairly easy to predict when an employment contract will be finished, it is much harder to estimate an amount of time a business litigation case may take (especially if an extensive motion practice is anticipated).
3.    Participation
Ask your Minneapolis business lawyer about who will handle your case – i.e. whether the attorney will handle it personally or turn it over to his associates.  When you are dealing with a large law firm, you run the risk that the attorney with whom you are having the initial consultation will not be the one handling your case, especially if you are a small business or an individual.  Due to common division of labor in large law firms, it is very likely that the case will be turned over to inexperienced associates whose work will be only reviewed by the attorney who conducted the initial consultation.
If, however, you are hiring a small firm or a solo practitioner, you are very likely to avoid this problem and your case will be handled from the beginning through the end by your experienced business lawyer who is probably an owner of the law firm and personally responsible for the case.
4.     Percentage of Practice
The last question is how much time per month, on the average, your Minneapolis business attorney devotes to his business practice.  At a minimum, your business lawyer should devote about 25% of his practice to business law.
Conclusion
While these four questions do not represent a complete list of questions you should ask your business attorney, they are likely to provide that minimum background necessary for the review of a retainer agreement with your Minneapolis business lawyer.
Sherayzen Law Office can help you with your business issues, whether you want to establish a new business, create a legal structure for an existing one, draft an employment contract or an Independent Contractor Agreement, engage in complex business planning, litigate a business dispute, and so on.
Contact Sherayzen Law Office to discuss your business case with an experienced business attorney!

### Business Lawyers Minneapolis: Preparing for Initial Consultation I
Preparing for the initial consultation with your Minneapolis business lawyer usually involves at least two steps. First, gathering the information you need to supply to your business attorney. Second, preparing the questions you want to ask your business lawyer. This essay deals with the first part of the preparation.
It is important to understand that your Minneapolis business lawyer will initially have to rely almost exclusively on the information that you supply to him. Moreover, failure to supply the necessary information during initial consultation may lead to significant delays in your case and increase your legal expenses. This is why it is very important to come prepared to the initial interview.
The first step is to ask your Minneapolis business lawyer about what you should bring with you. While Minneapolis business lawyers commonly recommend that you should bring all documents that are related to your case, I usually list specific documents which are customary in a given business situation.
“Everything related to the case” usually includes all documents, statements, e-mails, letters, corporate business documents, et cetera. Sometimes, this would mean divulging sensitive financial and personal information. You should not feel uncomfortable in doing so, because a lawyer will guard all of this information. Client confidentiality is the cornerstone of Sherayzen Law Office’s practice. We jealously guard all client information that a client supplied to us in confidence.
The second step is for you to review what documents you actually have against the list of the documents requested by your attorney. It is possible that you may lack some documents. The purpose of this step is to identity the missing information.
The third step is to try to obtain the missing information before meeting with your business attorney. If this is not possible, then let your attorney know during the consultation what information you are missing and whether you will be able to find it after the meeting.
Once you go through these three steps, the first part of the your preparation for the initial business consultation is finished. I will discuss the second part of your preparation in the next article.
Remember, Sherayzen Law Office can help you with your business issues, whether they are concerned your business license, administrative appeals, litigation, business organization or business planning.
Contact Sherayzen Law Office to discuss your business case with an experienced business attorney!

### Expatriation to Avoid U.S. Taxes
Although there is a general misconception that U.S. citizens can relinquish their citizenship in order to escape high U.S. taxes, most of the time this is not true. If you are contemplating such a move, it is essential to understand the basic rules relating to expatriation for purposes of tax avoidance, as the taxes and fines can be costly. Under IRS rules, U.S. citizens who renounce their citizenship, as well as long-term lawful permanent residents (also know as “green card” holders), can still be taxed on their worldwide income provided that statutory exceptions are not met.
Expatriation Tax Rules Explained
U.S. citizens and resident aliens generally must pay income taxes on worldwide income, regardless of where individuals live. Under the Internal Revenue Code (IRC) Sections 877 and 877A, U.S. citizens who renounce their citizenship within ten-years of earning U.S.-source income are still subject to U.S. taxes on such income if citizenship was relinquished for tax avoidance purposes.
In addition, pursuant to IRC Section 877(a)(1), nonresident aliens (generally defined to be individuals who are not citizens or residents of the U.S.) who, within a ten-year period immediately preceding the close of the taxable year, lost U.S, citizenship may also be subject to taxes on their U.S.-source income if the purpose of their expatriation was to avoid U.S. taxes. It is presumed that tax avoidance was the purpose if any of the following criteria are met:
1) the average annual net income tax (as defined in IRC section 38(c)(1)) of such individual for the period of 5 taxable years ending before the date of the loss of United States citizenship is greater than $124,000 (subject to adjustments)
2) the net worth of the individual as of such date is $2,000,000 or more, or
3) such individual fails to certify under penalty of perjury that he has met the relevant requirements of IRC for the 5 preceding taxable years or fails to submit such evidence of such compliance as the Secretary may require.
The tax provisions of IRC Section 877 also apply to long-term lawful permanent residents who cease to be taxed as U.S. residents. A long-term permanent resident is defined to be any individual (other than a citizen of the United States ) who is a lawful permanent resident of the United States in a least 8 taxable years during the 15-years ending with the taxable year in which an individual ceases to be a lawful permanent resident of the U.S. However, generally, an individual shall not be treated as a lawful permanent resident for any taxable year, if such individual is treated as a resident of a foreign country for the taxable year under an income tax treaty between the U.S. and the other country, and does not waive the benefits of such treaty.
Additionally, there are exceptions for certain individuals with dual citizenship, or who are minors.
Form 8854 
Individuals will continue to be treated for tax purposes as U.S. citizens or residents until Form 8854 (expatriation notification form) and other required information is filed. There are different rules noted in the form depending upon the date of expatriation. In certain specified cases, Form 8854 must also be filed on an annual basis.
There is a potential $10,000 fine for failure to file the form, if required.
Conclusion
This is a general overview of the taxation rules relating to individuals who expatriate in order to avoid U.S. taxes. There are many other complex issues that may apply, depending upon the circumstances. Are you facing taxes or possible fines relating to expatriation issues? Sherayzen Law Office can assist you with these matters. Call us to set up a consultation with an experienced international tax attorney today!

### Minnesota Contract Litigation Lawyers | Truth in Repairs Act Highlights
Minnesota’s “Truth in Repairs Act” (Minn. Stat. §325F.56 through §325F.65) spells out the rights and obligations of repair shops and their customers for repairs costing more than $100 and less than $7,500.
Here are some basic highlights of your rights as a customer:
a). You have the right to receive a written estimate for repair work, if you request one.
b). Generally, once you receive this estimate, the repair shop may not charge more than ten percent above the estimated cost. If the customer is told about an additional charge before the estimate is issued, however, a shop may impose an additional charge for disassembly, diagnosis and reassembly of the item in order to make the estimate.
c). The shop is required to provide you with an invoice if the repairs cost more than $50, and/or the work is done under a manufacturer’s warranty, service contract or an insurance policy. Special statutory requirements apply with respect to what the invoice should contain.
d). The shop cannot perform any unnecessary or unauthorized repairs. If, after repairs are begun, a shop determines that additional work needs to be done, the shop may exceed the price of the written estimate, but only after it has informed you and provided you with a revised estimate. In this case, if you authorize the additional work, the shop may not charge more than ten percent above the revised estimate.
e). Prior to commencement of the repairs, you have the right to ask for and receive replaced parts, unless those parts are under warranty or other restrictions. In that case, they must be returned by the shop to the manufacturer, distributor or other person. You may pay an additional charge for retrieving parts because the shop usually can sell them. Even if you are not allowed to keep the old parts, you should have an opportunity to examine them for up to five days after the repair.
f). A shop may impose a towing, minimum, or other service charge for making a call at a place other than the shop. However, upon the request of the customer, the shop shall inform the customer before making a service call that a service charge will be imposed and the basis on which the charge will be calculated.
It is very important to keep proper written records. If a dispute arises between you and the repair shop, these records are likely to be an indispensable proof of what the parties agreed to and what provision, if any, of the agreement was violated.
If you have any questions with respect to the Minnesota’s “Truth in Repair Act”, contact an experienced Minnesota contract litigation lawyer at Sherayzen Law Office.

### Making Work Pay Credit  
Making Work Pay Tax Credit is a refundable tax credit of available to many taxpayers in the tax year 2010.  The credit is up to $400 for individuals and up to $800 for married taxpayers filing joint returns.  Taxpayers who file Form 1040 and 1040A must use Schedule M to figure out their Making Work Pay Tax Credit (in particular, whether they have already received the full credit in their paychecks).  Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.
There is an income limitation on claiming the tax credit.  If a taxpayer’s modified adjusted gross income is or exceeds $95,000 (for individuals) or $190,000 (if married filing jointly), then he is not eligible to take the credit.
Additional limitations also exist.  In particular, the credit is not available for a taxpayer: who is claimed as a dependent on someone else’s tax return, has not a valid social security number, or who is a nonresident alien.
Contact Sherayzen Law Office to discuss your case with an experienced Minneapolis tax attorney!

### Getting Prior Year Tax Information from the IRS
If you need to obtain certain prior year tax return information, it is possible to a copy of the actual processed return from the IRS.  Often, however, the information you need may be contained in a tax transcript, which can also be obtained directly from the IRS.
Tax Return Transcript versus Tax Account Transcript
There are two types of tax transcripts: tax return transcript and tax account transcript.
A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules.  It does not, however, reflect any changes made after the return was filed.
On the other hand, a tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed.   However, a tax account transcript reveals only the most basic data, such as marital status, type of return filed, adjusted gross income and taxable income, is included in the transcript.
Obtaining Transcripts
There are three ways to order either type of transcripts: on the phone (800-908-9946), online (the IRS website), and by mail.  If you choose to obtain your tax transcript by mail, you need to figure out which form you need to file.
1. 1040, 1040A, 1040EZ tax return transcript: you will need to complete and mail Form 4506T-EZ.
2. Business Forms and Other Individual Forms: you will need to complete and mail Form  Form 4506T, Request for Transcript of Tax Return.
If you order online or by phone, you should receive your tax return transcript within 5 to 10 days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript if you order by mail using Form 4506T or Form 4506T-EZ.
The IRS does not charge a fee for transcripts, which are presently available for the current tax year as well as the past three tax years.
Obtaining Actual Copy of a Previously-Processed Tax Return
If you need an actual copy of a previously processed tax return, it will cost $57 for each tax year that you order.  You need to complete and mail (to appropriate address) Form 4506, Request for Copy of Tax Return. Copies are generally available for the current year as well as the past six years. The general wait period is about 60 days.
Contact Us
If you have any tax questions, contact Sherayzen Law Office to discuss your case with an experienced Minneapolis tax attorney.

### IRS to Start Processing Delayed Returns on February 14, 2011
On January 20, 2011, the IRS announced that it plans to start process tax returns, which were delayed as a result of the last month’s tax law changes, on February 14, 2011.  It should be remembered that the taxpayers can begin preparing their tax returns immediately because many software providers are ready now to accept these returns.
Beginning February 14, 2011, the IRS will start processing both paper and e-filed returns claiming itemized deductions on Schedule A, the higher education tuition and fees deduction on Form 8917 and the educator expenses deduction.
Taxpayers using commercial software can check with their providers for specific instructions. Those who use a paid tax preparer should check with their preparer, who also may be holding returns until the updates are complete.
Most other returns, including those claiming the Earned Income Tax Credit (EITC), education tax credits, child tax credit and other popular tax breaks, can be filed as normal, immediately.
Contact Us
If you have any questions with respect to your 2010 tax return, call Sherayzen Law Office to discuss your tax case with an experienced Minneapolis tax lawyer.

### Trademark Attorney Minneapolis | Cease and Desist Letter: Minimum Format
Most trademark lawyers in Minneapolis recommend that a cease and desist letter regarding trademark violation should contain, at the very minimum, the following components:
1. Trademark Owner’s Identity 
The cease and desist notice should identify who is the trademark owner. If the letter is being drafted by a trademark owner’s representative, then representative should identify in the letter himself and his relation to the trademark owner.
2. Trademark
The letter should state clearly the trademark that the owner believes is being violated. If the trademark is formally registered with the United States Patent and Trademark Office or a relevant state or foreign government authority, then provide the registration number in the letter. It is a good idea to attach a copy of the registration certificate to the letter.
3. Notice of Violation
The letter should explicitly state that the recipient violated the trademark owner’s rights. One of the primary purpose of a cease and desist letter is to give notice, and, usually, the best way to do so is to state it clearly.
4. Description of Violation
The cease and desist notice should explain how the recipient violated the trademark owner’s rights. Usually, a general statement briefly describing the nature of the violation is sufficient. There is no reason to provide a detailed violation of the account for two reasons. First, it is not a good idea to divulge too much information to the other side. Second, a overly-detailed account of violation may actually weaken the trademark owner’s case by stating facts which the other side can prove to be wrong.
Nevertheless, in some situations, describing a violation in an attached trademark complaint may be highly beneficial to the trademark owner’s case, demonstrating the seriousness of his intentions and his confidence in the case. This strategy should be discussed with a trademark attorney in Minneapolis.
5. Description of the Trademark’s Strength
If there are favorable facts that augment the perceived strength of the owner’s trademark, then it may be beneficial to briefly state them in the letter. This is especially true if this a descriptive trademark that acquired distinctiveness through a long period of use and promotion. Again, a trademark lawyer should determine how to pursue this strategy.
6. Trademark Owner’s Demands
The cease and desist letter should set the demands of the trademark owner. Demands may vary greatly depending on the circumstances of a case, but there are some fairly common ones, such as:
a) Cease and desist all illegal activity;
b) Promise in writing not to violate the trademark in the future; and
c) Destruction of infringing materials.
7. Deadline
The cease and desist notice should state the deadline for a written response to the letter. The deadline should give the recipient a fair chance to comply with the trademark owner’s demands. Usually, Minneapolis trademark lawyers use a period between seven and thirty days.
Conclusion
The above-mentioned components merely constitute a basic skeleton of a cease and desist letter. Putting the “meat on those bones”, however, is an art rather than a science: more components can be added, certain arguments may be emphasized, others ignored, wording must be selected very carefully keeping in mind a highly probable litigation in the near future, and countless number of other considerations should be taken into account. Remember, a cease and desist letter is more about advocacy and negotiation, rather than simply giving notice.
This is why you should retain a Minneapolis trademark attorney to write a cease and desist letter for you. Sherayzen Law Office can help! We can draft a proper cease and desist letter, help negotiate a settlement, and litigate the case for you.
Call us NOW to discuss your trademark case with an experienced trademark attorney!

### Higher Education Tax Credits
This is an education tax credit update from a Minneapolis tax lawyer.  American Opportunity Tax Credit and the Lifetime Learning Tax Credit are two federal tax credits designed to help eligible taxpayers offset their higher education expenses.
To qualify for either credit, a taxpayer must pay postsecondary tuition and fees for himself, spouse or dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit.
Only one of the credits is available in a single tax year per each student.  This means that, in a given tax year, a taxpayer cannot claim both credits for the same student’s college expenses.  If a taxpayer pays college expenses for two or more students in the same year, then he can choose to take credits on a per-student, per-year basis. For example, the taxpayer can claim the American Opportunity Credit for a sophomore daughter and the Lifetime Learning Credit for a senior son.
Let’s look closer at some of the key facts about American Opportunity Tax Credit and Lifetime Learning Tax Credit.
The American Opportunity Credit
The credit is available for students enrolled in a post-secondary education program in pursuit of an undergraduate degree or other recognized educational credential, but only for the first four years.  The student must be enrolled at least half time for at least one academic period. Qualified expenses include tuition and fees, coursed related books supplies and equipment.
The credit can be up to $2,500 per eligible student. The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.   Moreover the credit is refundable; this means that a taxpayer may be able to receive up to $1,000 in refund even if he owes no taxes.
Lifetime Learning Credit 
Unlike the American Opportunity Credit, the Lifetime Learning Tax Credit is available for all years of postsecondary education and for courses to acquire or improve job skills. This also means that the student does not need to be studying in pursuit of a degree or other recognized education credential.  Qualified expenses include tuition and fees, course related books, supplies and equipment.
The credit can be up to $2,000 per eligible student. The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.  This tax credit, however, is not refundable and is limited to the amount of tax a taxpayer must pay on his return.
If you have questions with respect to any tax credits, contract us NOW to discuss your case with an experienced Minneapolis tax attorney.

### Trademark Attorney in Minnesota: Cease and Desist Letter and Trademark Enforcement
Prior to engaging in expensive trademark litigation, it is common for Minnesota trademark lawyers to send the violating parties a notice of infringement, demanding that the violators comply with certain demands of the trademark owner and threatening lawsuit otherwise.  This notice is usually called “cease and desist letter”, because it demands that the violator: ceases his trademark infringing activities and promises to desist from future trademark infringement.
Cease and Desist Letter is a very useful pre-litigation tool.  Three factors are usually cited by trademark lawyers in Minnesota to support the usefulness of a cease and desist notice.  First, the letter provides notice to the recipient that he is in violation of the sender’s trademark violations.  This means that, if the recipient persists in his illegal activity, his actions are very likely to be regarded as “intentional”, opening up a host of new legal claims and larger penalties.  Moreover, the trademark owner can subsequently argue that he has done everything he could to end this case amiably and it was the violator who did not want to stop his illegal acts. Second, the letter gives the recipient a chance to stop his infringing activities without paying the costs of an expensive trial and, ultimately, paying a hefty penalty.  Third, the letter is also a chance for the trademark owner to enforce his rights without going through an expensive trial with (depending on the facts of the case) less than certain outcome.   Fourth, the recipient of the letter (unless he is sure of his innocence and wants to go straight to trial) is likely to feel compelled to produce some sort of response to the letter.  This response may be a good way for the trademark owner to assess the strength of the other side’s case.
The format of a cease and desist letter may vary wildly in substance as well as style. In fact, while a certain minimum format is commonly used, the content and style of writing a cease and desist letter depends greatly on the circumstances of a case and is more of an art, than science.
Sherayzen Law Office can help you enforce your trademark rights.  We can help you draft “Cease and Desist Notice”, negotiate the settlement with the party, and litigate your case in court.
Call us NOW to discuss your case with an experienced trademark attorney!

### Business Lawyer: Essential Characteristics of Closely Held Corporations
Most small business lawyers in St. Paul deal with closely held corporations. In order to understand this form of business entity, it is useful to explore the essential characteristics shared by the predominant majority of closely held corporations. The purpose of this article is to provide a general overview of the four most common characteristics of a closely held corporation.
1. No Public Ownership of Stock
This characteristic is present in almost every closely held corporation. Lack of “public ownership of stock” usually means that the stock of a closely held corporation has never been sold in a public offering (as this term is used in connection with Securities and Exchange Act of 1933 and similar state statutes). It may also mean that the stock of a closely held corporation is not listed on any stock exchanges or otherwise regularly traded. The corollary of this characteristic is that it is often very difficult to determine the value of a closely held corporation’s stock.
2. Closely Controlled by Few Shareholders
It is very common for a closely held corporation to be controlled by one individual, a single family, or a small group of shareholders. This characteristic also holds true even where a large percentage (yet less than controlling share) of a corporation’s stock is owned by a public shareholder, while the controlling number of shares is in the hands of an individual or a private group of shareholders. In such atypical cases, closely held corporations are often being singled out for special tax treatment. The converse of this reality is that the present of a public shareholder may reduce substantially many of the tax problems (for example, in the are of the tax on accumulated earnings).
3. Management by Owners
In a closely held corporation, the shareholders and the operating executives are often the same individuals. Moreover, in many cases, the stock held by these individuals is not merely an investment, but rather the principal source of income.
4. Restricted Ownership
Closely held corporations are also often “closed” corporations. This means it is often difficult for an outsider to obtain stock in a closely held corporation, and it is difficult for a current shareholder to sell stock except to other shareholders or the corporation itself. Very often, this situation arises intentionally as part of the legal structure of the corporation as defined by the Shareholder agreements.
Conclusion
As one see, usually a closely held corporation is generally a corporation that is owned, controlled and managed by a few private shareholders; the stock of such corporation is neither traded frequently nor listed on any of stock exchanges. These are obviously only the most common characteristics. There plenty of variations which may also be classified as “closely held corporations”, but even these variations usually share most of these common characteristics.

### Small Business Health Care Tax Credit
This is a Small Business Health Care Tax Credit update from a tax attorney in Minneapolis.
Generally, the Small Business Health Care Tax Credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
The credit can be claimed by small businesses during the tax years starting 2010 through 2013 and for any two years after that.   The maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations. Beginning in 2014, the maximum tax credit will increase to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible tax-exempt organizations.
The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 or more FTEs or that pay average wages of $50,000 or more per year. Since the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part-time workers may qualify even if they employ more than 25 individuals.
Eligible small businesses should first use Form 8941 to figure the credit and then include the amount of the credit as part of the general business credit on its income tax return.
If you have any questions with respect to eligibility or calculation of your small business health care tax credit, contact Sherayzen Law Office to discuss your case with an experienced Minneapolis business tax attorney!

### Reduce Your Self Employment Tax with a New Health Insurance Deduction
Due to the enactment of the Small Business Jobs Act of 2010, self-employed taxpayers who pay their own health insurance costs can now reduce their net earnings from self-employment by these costs. Previously, the self-employed health insurance deduction was allowed only for income tax purposes. For tax year 2010, however, self-employed taxpayers can also reduce their net earnings from self employment subject to self-employment taxes on Schedule SE by the amount of self-employed health insurance deduction claimed on line 29 on Form 1040.
Taxpayers can claim the self-employed health insurance deduction if the insurance plan is established under their business and if any of the following are true:
a) They were self-employed and had a net profit for the year,
b) They used one of the optional methods to figure net earnings from self-employment on Schedule SE, or
c) They received wages from an S corporation in which the taxpayer was a more-than-2-percent shareholder.
Contact Mr. Sherayzen at Sherayzen Law Office Minneapolis tax lawyer who can help you properly plan your tax strategy to take advantage of the Internal Revenue Code.
Contact Us Now!

### Tax Lawyers St Paul: Tax Filing Deadline Extended to April 18, 2011
On January 4, 2011, IRS extended the tax filing and tax payment deadline for individual taxpayers until April 18, 2011.  The extension is made due to the Emancipation Day, a holiday observed in the District of Columbia, which falls this year on Friday, April 15, 2011.
Taxpayers who request an extension will have until October 17, 2011, to file their 2010 tax returns.
This year, the IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.
The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties. IRS Commissioner Doug Shulman stated earlier that the IRS “will continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts.”
Sherayzen Law Office is an experienced tax law firm that has helped numerous clients in Minnesota and across the United States to bring their affairs, including proper reporting of foreign financial accounts, into full compliance with the U.S. tax laws.
Contact Sherayzen Law Office NOW to discuss your case with an experienced St Paul tax lawyer!

### Tax Attorney St Paul | Who Must Wait to File 2010 Tax Return
While for most taxpayers, the 2011 tax filing season starts on schedule. Due to tax law changes enacted by Congress in December, however, some taxpayers need to wait until mid –  to late February of 2011 to file their 2010 tax returns in order to give the IRS time to reprogram its processing systems.  This is mostly due to the renewal of the three tax provisions that expired at the end of 2009 and were renewed by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 on December 17, 2010.
The IRS will announce a specific date in the near future when it can start processing tax returns impacted by the recent tax law changes. Meanwhile, the affected taxpayers should not submit their returns until IRS systems are ready to process the new tax law changes; however, the affected taxpayers  can start working on their tax returns. For taxpayers who must wait before filing, the delay affects both paper filers and electronic filers.
The most common types of taxpayers who may need to wait to file their tax returns include:
1. 	Taxpayers Claiming Itemized Deductions on Schedule A 
Due to the tax law changes, anyone who itemizes and files a Schedule A will need to wait to file until mid- to late February. Itemized deductions include mortgage interest, charitable deductions, medical and dental expenses as well as state and local taxes. In addition, itemized deductions include the state and local general sales tax deduction that was also extended and which primarily benefits people living in areas without state and local income taxes.
2. 	Taxpayers Claiming the Higher Education Tuition and Fees Deduction 
This is primarily concerns those taxpayers who claim their deduction on Form 8917.  The deduction, which covers up to $4,000 of tuition and fees paid to a post-secondary institution, can be claimed by parents and students.
Note, however, that this delay does not concern those taxpayers who claim other education credits, including the American Opportunity Tax Credit extended last month and the Lifetime Learning Credit.
3. 	Taxpayers Claiming the Educator Expense Deduction
This deduction is for kindergarten through grade 12 educators with out-of-pocket classroom expenses of up to $250. The educator expense deduction is claimed on Form 1040, Line 23 and Form 1040A, Line 16.
Sherayzen Law Office can help you deal with and take advantage of the recent tax law changes.  Call or e-mail Sherayzen Law Office to discuss your case with an experienced St Paul tax attorney!

### Tax Filing Deadline Extended to April 18, 2011
On January 4, 2011, IRS extended the tax filing and tax payment deadline for individual taxpayers until April 18, 2011.  The extension is made due to the Emancipation Day, a holiday observed in the District of Columbia, which falls this year on Friday, April 15, 2011.
Taxpayers who request an extension will have until October 17, 2011, to file their 2010 tax returns.
This year, the IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.
The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties. IRS Commissioner Doug Shulman stated earlier that the IRS “will continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts.”
Sherayzen Law Office is an experienced tax law firm that has helped numerous clients in Minnesota and across the United States to bring their affairs, including proper reporting of foreign financial accounts, into full compliance with the U.S. tax laws.
Contact Sherayzen Law Office NOW to discuss your case with an experienced Minneapolis tax attorney!

### Tax Lawyers Minneapolis | 7 Reasons To File Tax Return Even if You Do Not Have to Do It
In some case, you may want to file a tax return even though you do not have to.  Here are the top seven reasons for this course of action for the tax year 2010.
1. Tax Refund.  If federal income tax was withheld from your paycheck, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax, you may be entitled to a tax refund.  You will only be able to get it if you file a tax return.
2. Making Work Pay Tax Credit. You may be able to take this credit if you had earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
3. Earned Income Tax Credit (“EITC”).  You may qualify for EITC if you worked, but did not earn a lot of money. Remember, EITC is a refundable tax credit; this means you could qualify for a tax refund.
4. Additional Child Tax Credit.  This is also a refundable tax credit.  It  may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
5. American Opportunity Tax Credit.  The maximum credit per student is $2,500 and the first four years of post-secondary education qualify.
6. First-Time Homebuyer Tax Credit.  In order too qualify for the credit, you must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010. The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. If you bought a home as your principle residence in 2010, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
7. Health Coverage Tax Credit.  Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit.  The credit is worth 80% of monthly health insurance premiums when you file your 2010 tax return.
If you have questions with respect to whether you should file your tax return, contact Sherayzen Law Office NOW and discuss your case with an experienced Minneapolis tax attorney!

### Contract Lawyers: Top Legal Fee Issues
Legal fees usually constitute a top concern for potential clients who wish to retain a St. Paul contract attorney.  In this essay, I would like to point out the top three legal fee issues that are usually associated with retaining a contract lawyer in St. Paul, Minnesota.
1. Payment Structure
There are three main models of payment that St. Paul contract lawyers use: hourly fee, contingency fee, and flat fee. The most common payment structure is hourly fee. This arrangement occurs where a contract attorney is paid based on how much time he spends on a case. If you're paying your St. Paul contract lawyer by the hour, the agreement should set out the hourly rates of the business attorney and anyone else in this attorney’s office who might work on the case.
The contingency fee is relatively rare in a contract litigation setting, and virtually non-existent in the contract drafting and negotiations. This payment structure is characterized by payment to a contract lawyer of a mutually-agreed percentage of recovery (or contract amount) at the end of a case.
In a flat-fee arrangement, you pay an agreed-upon amount of money for a project Flat-fee payment is often used by St. Paul contract lawyers only in certain contract drafting situations. Usually, these situations are characterized by predominance of one party over another (for example, in employment context) or there has been an established consensus among parties (for example, in partnership agreement context). Flat fee, however, is less used where contract negotiation is required, and this payment structure is almost non-existent in contract litigation context (unless, a very large retainer is involved). Generally, flat fees are disliked by St. Paul contract attorneys due to its inflexibility. On the other hands, I have seen how a combination of a flat fee payment structure with hourly fees appeals to many clients while it reduces the inflexibility inherent in a simple flat-fee context.
Finally, as I just hinted above, it is possible to merge various payment structures to create a fee arrangement most agreeable to the parties.
2. Timing of Payment
Where hourly-fee arrangement is used, St. Paul contract lawyers usually bill their clients on a monthly basis. In a flat-fee arrangement, a contract attorney would prefer to receive at least half of the payment before he begins to work on a project. In any case, a retainer is usually required by St. Paul contract attorneys.
3. Retainer Fee
Most contract lawyers in St. Paul 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 contract lawyer’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 a St. Paul contract attorney asks his client to pay in advance. In this scenario, the 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).
Conclusion
Obviously, the three issues discussed above do not cover all of the issues associated with legal fees when you are hiring St. Paul contract lawyers. These three issues, however, are likely to provide the necessary background for you to understand the basics of the legal fee arrangements with your St. Paul contract attorney.
One of the key areas of our practice at Sherayzen Law Office is contract law. We are highly experienced in the matters of contract drafting, negotiation, and litigation. We also regularly offer our contract review and consultation services to our clients throughout Minnesota.
Contact Sherayzen Law Office NOW to discuss your contract with an experienced contract lawyer!

### Tax Lawyers Minneapolis: Preparing for Initial Consultation II (for Individuals)
In previous article, I discussed the first part of preparation for an initial consultation with Minneapolis tax lawyers; the first part was mainly concerned with what type of information you should bring to your Minneapolis tax attorney. In this essay, I shift the focus toward the second part of the preparation which is about what type of questions you need to ask your tax lawyer.
Usually, the questions that you want your tax attorney to answer should, at the very least, cover the following four areas:
1.	Cost and Billing
One of most important areas that you need to cover is the cost of the case as well as the manner in which you will be billed.  Unless this is a flat-fee case, you should not expect your attorney to give you a precise amount of money you will need to spend on your case.  Usually, your tax lawyer will give you an estimate, which, in the end, may or may not correspond to the actual cost of the case.  I usually provide a fairly conservative estimate and it is rare for my clients to pay above the estimate; usually, it occurs where a client fails to fully disclose the circumstances of the case or otherwise causes a significant delay in the proceedings of the case.
In terms of the manner of billing, you are likely to billed per hour in most tax litigation and voluntary disclosure matters.  Regular tax returns, especially for returning clients whose circumstances have not changed in any significant way, are usually subject to a flat fee.
2. 	Time
The next area you should question your Minneapolis tax attorney about is how long the case will need to be conducted.   The estimates here are likely to vary significantly.   While it is fairly easy to predict when a tax return will be finished, it is much harder to estimate an amount of time a voluntary disclosure process may take (especially if more issues come up during the disclosure process).
3.	Participation
Ask your Minneapolis tax lawyer about who will handle your case – i.e. whether the attorney will handle it personally or turn it over to his associates.  When you are dealing with a large law firm, you run the risk that the attorney with whom you are having the initial consultation will not be the one handling your case, especially if you are a small business or an individual.  Due to common division of labor in large law firms, it is very likely that the case will be turned over to inexperienced associates whose work will be only reviewed by the attorney who conducted the initial consultation.
If, however, you are hiring a small firm or a solo practitioner, you are very likely to avoid this problem and your case will be handled from the beginning through the end by your experienced tax lawyer who is probably an owner of the law firm and personally responsible for the case.
4. 	Percentage of Practice
Ask your Minneapolis tax lawyer about how much time per month, on the average, he devotes to his tax practice.  At the very minimum, your tax attorney should devote about 25% of his practice to tax law.  If, however, the attorney has specialized associates (for example, someone who is a lawyer and a CPA), then he can have a lower percentage devoted to tax law because he may work closely with his experienced and specialized associate.
Conclusion
While these four questions do not represent a complete list of questions you should ask your tax attorney, they are likely to provide that minimum background necessary for the review of a retainer agreement with your Minneapolis tax lawyer.
Sherayzen Law Office can help you with your tax issues, whether you want to check your tax return, negotiate with the IRS, or engage in complex tax planning.
Contact Sherayzen Law Office NOW to discuss your tax case with an experienced Minneapolis tax attorney!

### Tax Lawyers Minneapolis: Preparing for Initial Consultation I (for Individuals)
A little disclaimer first: this article is concerned only with individuals contacting Minneapolis tax lawyers for a consultation. I will discuss preparation of business owners for an initial tax consultation in another article.
There are two sides to your preparation for the initial consultation with your Minneapolis tax lawyer. First, the information you need to supply to your tax attorney. Second, the questions you want to ask your tax lawyer. This essay deals with the first part of the preparation.
It is important to understand that your Minneapolis tax attorney will initially have to rely almost exclusively on the information that you supply to him. Moreover, failure to supply the necessary information during initial consultation may lead to significant delays in your case and increase your legal expenses. This is why it is very important to come prepared to the initial interview.
Below, you will find a number of suggestions about how to prepare for the initial consultation with your Minneapolis tax attorney. These suggestions come from my personal experience when I had to advice my clients on what to bring with them to the interview in order to maximize the efficiency of the case and my ability to provide sound tax advice.
The first step is to ask your tax attorney about what you should bring with you. The most common response is that you should bring all documents that are related to your case. Usually, however, I would list specific documents which are customary in a given tax situation. Unfortunately, I have found that a lot of clients, for various reasons, are not willing to bring many of these documents but only what they think a Minneapolis tax lawyer needs. Later on, this usually leads to repetitive documentary requests by a tax attorney from his clients.
“Everything related to the case” usually includes all official documents, accounting documents, e-mails, letters, corporate tax documents, et cetera. Sometimes, this would mean divulging sensitive financial information. For example, if you have foreign bank accounts and you are retaining your attorney to help resolve an FBAR issue, then these bank accounts will need to be submitted to your tax lawyer as well.
The next step is for you to review what documents you actually have. The exact list of documents may differ depending on your particular situation; however, here is a non-exclusive list of the most usual documents you need to bring to your tax attorney:
a) Tax returns: copies of your tax returns, usually going back three tax years. Your tax attorney, however, may advise you to bring tax returns for the past six years in certain situation;
b) Supporting documentation for tax returns (including deductions and credits): usually, you do not have to provide it for the initial interview unless this is relevant to your case (for example, you are contacting a tax attorney to file a tax return);
c) Housing documents: this issue usually comes up with respect to claiming first-time homebuyer tax credit or for tax planning purposes.
d) IRS correspondence: all relevant IRS correspondence should be provided to your tax lawyer;
e) Your correspondence: letters, e-mails, faxes, et cetera if they are relevant to your case;
f) Business/Investment documentation: I discuss preparation for a business-related tax consultation in another article, but it is important to mention here that if your individual tax issue is related to your business or investment activities, then you should bring relevant business documents (incorporation documents, business structure documentation, business tax I.D. number, et cetera);
g) Any other documents relevant to your case: if there is anything else that you think is relevant to your case, then bring it with you. I once had a client who brought carton boxes with unique ID numbers on them.
The third step is to find out what information you are missing. Compare the information you obtained from the second step with the list of documents your attorney provided and what you think is relevant to the case. Identify the documents that are missing and try to obtain the missing information before meeting with your tax attorney. If this is not possible, then let your attorney know during the consultation what information you are missing and whether you will be able to find it after the meeting.
Once you go through these three steps, the first part of the your preparation for the initial tax consultation is finished. I will discuss the second part of your preparation in the next article.
Remember, Sherayzen Law Office can help you with your tax issues, whether you want to check your tax return, negotiate with the IRS, or engage in complex tax planning.
Contact Sherayzen Law Office NOW to discuss your tax case with an experienced tax attorney!

### Estate Planning Lawyers Minneapolis | Latest Estate and Gift Tax Cuts
Prior to the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”) and after abolishment of the estate tax for decedents dying in 2010, the estate tax was scheduled to return in the tax year 2011 with a maximum tax rate of 55% and a $1 million exclusion. 
Under the Act, however, the maximum estate tax rate for decedents dying on or after January 1, 2011, is 35% and an applicable exclusion amount is $5 million ($10 million for married couples) for decedents dying on or after January 1, 2011, and on or before December 31, 2012. The Act also reinstates the stepped-up basis regime for assets included in the estate.
Similarly, the maximum gift tax rate will be 35% for the tax years 2011 and 2012  with a maximum applicable exclusion amount of $5 million. It is important to note that for gifts made after December 31, 2009, and before January 1, 2011, the gift tax is computed based on a top tax rate of 35% and a maximum applicable exclusion amount of $1 million. 
Note that the Act includes additional provisions on the estate and gift taxes.  For example, estates of decedents who died after December 31, 2009 but before January 1, 2011, may elect to apply the 35% rate and stepped-up basis regime instead of the carryover basis regime otherwise applicable for 2010. The Act further includes a “portability” provision which would allow a surviving spouse to take advantage of the unused portion of the estate tax exclusion of his or her predeceased spouse, thereby providing the surviving spouse with a larger exclusion amount.

### Tax Lawyers Minneapolis | 2011 Reduction in Social Security Payroll Taxes
One of the most important provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”), which was signed into law on December 17, 2010, deals with Social Security tax reduction for employees.
The Act reduces the employee’s share of Social Security tax from 6.2% to 4.2% for wages earned in 2011 up to $106,800. The employer’s share of Social Security tax remains at 6.2%. The Act makes no changes to the Medicare portion of payroll taxes, which remains at 1.45% for each of the employee and employer on all wage income.
Individuals who are self-employed will also benefit from the Act’s Social Security tax reduction. Self-employed individuals would pay Social Security tax at a 10.4% rate on self-employment income up to $106,800. However, self-employed individuals would continue to calculate their deduction for employment taxes without regard to the temporary rate reduction.
If you have tax questions or need tax representation, contact Sherayzen Law Office to discuss your case with an experienced Minneapolis tax lawyer.

### Tax Lawyers Minneapolis | Wash-Sales: General Rules
Do you frequently trade stocks or purchase options? Then you should be aware of the wash-sales rules. In some extreme circumstances, the wash-sales rules can have drastic negative effects on your taxes, so they are well worth knowing.
A wash-sale occurs when stock, securities, or options are sold for a loss, and within a 61-day period (30-days before or after the sale), "substantially identical" stock, securities, or options (termed here, "replacement stock") are purchased. The loss is not deductible under the wash-sales rules. Instead, the loss is added to the basis of the replacement stock. Wash-sales do not apply to gains.
The wash-sales rules apply to investors and traders, but not to dealers in stocks or securities, or losses sustained in the ordinary course of business. In general, "substantially identical" refers to stocks or securities of the same company (i.e. shares of Apple stock is not "substantially identical" to Microsoft for purposes of the wash-sales tax rules).
For year-end tax planning purposes, taxpayers should be aware that the wash-sale 61-day rule applies even if duration is spread over two years. Thus, stock sold for a loss in 2010 will not be deductible for tax year 2010 if the replacement stock from the same company is purchased within the 61-day window. Also, for tax planning purposes, keep in mind that the holding period of the replacement stock will include the holding period of the original shares. Thus, if a taxpayer sold shares that were held for more than a year ("long-term" for tax purposes), and then purchased replacement stock within the wash-sales window, the replacement shares will also be considered to be long-term, even if they are eventually sold in less than a year.
Example of the Wash-Sale Rule
A taxpayer buys shares of Widget Company for $20,000. The stock declines to $10,000, and the taxpayer decides to sell the shares for a loss. However, good news is reported from Widget Company after the shares are sold, so the taxpayer decides to buy Widget shares for $12,000 five days after the sale, believing that the shares will increase substantially this time. Because the new shares are purchased within the wash-sale rule time period, the $10,000 loss will not be deductible. Instead the $10,000 will be added to the cost of the new shares, meaning the new shares will have a basis of $22,000 (and thus, the original loss will be deducted when the new shares are sold).
Do you have tax problems or questions relating to your investments? Then give Sherayzen Law Office a call to discuss your tax situation with an experienced Minneapolis tax lawyer!

### Partnership Tax Lawyers St Paul | Partnerships: Required Taxable Year
Under the U.S. tax laws, partnership income and expenses flow through to each partner in a partnership, at a partnership's tax year-end.  Generally, the tax year of a partnership must conform to the tax years of its partners. In some situations, however, a partner, or multiple partners, and  the partnership itself may have different tax years, there is a potential for income deferral.
While legitimate income deferral is allowed under the U.S. tax laws, the IRS has rules in place to prevent excessive deferral of partnership income. These rules are explained briefly below in three successive steps. A partnership must apply each rule in chronological order, and the first tax year that meets all of the criteria in a specific rule will be the required tax year for the partnership (subject to certain exceptions allowed by the IRS).
Three-Step Analysis
1) Majority partners' tax year
In general, if one partner owns more than 50% of the partnership capital and profits, then that partner's taxable year will apply to the partnership. Similarly, if a group of partners have the same taxable year and own more than 50% of the partnership capital and profits, then that shared taxable year will also apply to the partnership. Majority interest is generally determined on the first day of the partnership.
2) Principal partners' tax year
If step 1 does not yield a majority interest tax year, then the tax year the principal partners who own more than a 5% interest of capital or partnership profits, will be used if they all have the same tax year.
3) Year with smallest amount of income deferred
If steps 1 and 2 do not yield a result, then the "least aggregate deferral rule" is used to determine the weighted-average deferral of partnership income by testing the tax year-ends of the partners. The tax year required to be selected under the test will be whichever tax year-end is calculated to yield the least amount of deferral of partnership income.
Example of the Three-Step Analysis 
To illustrate, assume that Adam and Bob are equal partners, each owning a 50% share. Adam's tax year ends August 31, while Bob uses the calendar year, December 31. Step 1 would determine that there is no majority interest because neither partner owns more than 50%, and Step 2 would show that neither partners have the same tax year (even though they are both considered to be principal partners owning more than 5%). Thus, the least aggregate deferral rule would be applied in this case.
Under the least aggregate deferral rule, to determine the weighted-average product, begin by counting forward from the end of one partner's tax year to the end of the other partner's tax year-end, and then vice versa. For example, counting forward from the end of Adam's tax year (August 31) to the end of Bob's (December 31) is four months. Then, the number of months is multiplied by the partnership percentage interest, to determine a weighted-average product. Multiplying four by the partnership interest of 0.5 equals a product of two (the aggregate deferral). Counting forward from the end of Bob's tax year to the end of Adam's, determines that eight months will be deferred. Multiplying eight by .50 equals a product of four. Since the product of two under Adam's August 31 tax year is less than the product of four under Bob's December 31 tax year, Adam's tax year-end will also be the tax year-end for the partnership itself.
Conclusion
Described above are the basic rules for determining the required tax year for partnerships. In some cases, it may be possible to be granted an exception from the general rules. These options however often depend upon persuading the IRS of the necessity of adopting a different tax year than would be available under the standard rules. Often, complex legal rules and case law are involved, so it is advisable to seek legal counsel. Furthermore , individual partners may need specific guidance relating to partnership taxation scenarios. Sherayzen Law Office can assist you with these matters.
Call us today to set up a consultation!

### S Corporations: Excessive Passive Income Penalty and Built-in Gains Tax
Corporations that make valid election to be taxed under Subchapter S (“S corporation”) are treated as pass-through entities.  This means that the S corporation’s gains, losses, income and expenses are passed onto shareholders who will pay the applicable federal income taxes; the S corporation itself does not pay any taxes (as opposed to a regular corporation taxed under Subchapter C (“C corporation”)). However, there are two fairly common circumstances in which an S corporation may have to pay taxes: the excessive passive income penalty and the Built-in-Gains tax (Note that for the few S corporations that utilize the Last-In-First-Out ("LIFO") inventory accounting method, and also previously operated as a C corporations before electing to become S corporations, a LIFO Recapture Tax may be applied in certain situations).
Excessive Passive Income Tax and Penalty
There are situations where S corporations may have previously operated as C corporations before their conversion. In some circumstances, after conversion, the S corporation still retains profits that it made as a C corporation. These profits are called "Accumulated Earnings and Profits" (“AEP”).  Since an S corporation does not usually pay taxes at a corporate level, one can see that a C corporation would be able to avoid taxes at the corporate level on AEP by simply converting to an S corporation. In order to prevent C corporations from taking advantage of these status conversions, Congress imposed a steep penalty (or tax) on an S corporation’s AEP.  Moreover, in some situations, an S corporation status may even be terminated.
Here is a general summary of the AEP tax. If an S corporation has AEP and "net passive income" exceeding 25% of its gross receipts in a taxable year, an excessive passive income penalty is imposed at the highest corporate tax rate on the lesser of taxable income or excess net passive income. Passive investment income consists of gross receipts from dividends (with certain exceptions), interest, capital gains, royalties, rents, and other related sources of income.
Furthermore, S corporation status is automatically terminated if an S corporation is penalized with the excessive passive income tax for three years in a row.
Built-in Gains Tax
In general, if an S corporation, that operated as a C corporation prior to its conversion, sells or distributes assets that it held during the time in which the entity was a C corporation for an amount above the adjusted basis, the resulting recognized gain ("Built-in Gains") will be taxed at the highest corporate tax rate. The Built-in Gains will be taxable if recognized at any time within ten years after the effective date of an entity's S corporation election. For purposes of the Built-in Gains tax, assets held during the entity's existence as a C corporation and distributed after conversion to the S corporation’s shareholders for an amount above the adjusted basis will be treated as if these assets were sold.
As with the excessive passive income penalty, the Built-in-Gains tax is designed to prevent a C corporation from avoiding taxes by converting to an S corporation status and then selling or distributing appreciated assets. This is because for C corporation, recognized gain on sales of appreciated assets would be taxed at the corporate tax rate, whereas for an (traditional, non-converted) S corporation, the gain would be passed to the shareholders (likely on a pro rata basis), who will pay the tax based on their individual income tax rates, which may be lower than the C corporation’s tax rates.
The calculation of the Built-in-Gains tax is fairly complex, with a computation involving a determination of net gains, Net Operating Losses and loss carry forwards from years the entity operated as a C corporation, general business credit carryovers from C corporation years and the special fuel tax credit, as well as other items. Furthermore, due to accounting complications, converting from a C corporation to an S corporation may result in some unanticipated items, such as accounts receivable, being treated as Built-in-Gain and subject to tax.
Conclusion
Are you thinking about converting a C corporation to an S corporation, and concerned about possible taxes that your business may face if doing so? Are you looking for legal tax strategies to best structure a conversion, or to handle transactions with an already converted S corporation in order to limit your company's taxes? Give Sherayzen Law Office a call to discuss your tax situation with an experienced Minnesota business tax lawyer.

### Alternative Minimum Tax for 2010 and 2011
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”) was singed into law on December 17, 2010.  One of the most important tax provisions in the Act deals with the alternative minimum (“AMT”) tax patch.
Under the Act, the AMT exemption amounts for the tax year 2010 will be $72,450 for married individuals filing jointly and $47,450 for unmarried individuals. The AMT exemption amounts for 2011 will be $74,450 for married individuals filing jointly and $48,450 for unmarried individuals. Many nonrefundable personal credits will be allowed to offset the AMT Remember, all exemption amounts will be subject to phase-outs for higher incomes.
Tax attorneys throughout the country, including Minneapolis tax lawyers and St. Paul tax lawyers, highly anticipated the AMT patch which would prevent millions of U.S. taxpayers from paying higher taxes.  One should remember that the AMT initially was enacted as a way to make sure that the higher-income taxpayers pay their fair share into the federal budget.  As time passes, however, AMT is constantly threatening to engulf more and more middle-class taxpayers.
If you think you may be subject to the AMT and would like to consult with respect to what are your options under the Internal Revenue Code, call or e-mail Sherayzen Law Office NOW!

### Minnesota LLC Formation V:  Member Control Agreement
Member Control Agreement can be the most important governance document in the process of the LLC Formation because it may provide the LLC members with maximum governance flexibility, including overruling some provisions of the Minnesota Limited Liability Company Act.
In fact, a Member Control Agreement may completely reorganize the governance structure of an LLC away form the Act’s default corporate model.  Instead, the members of the LLC may choose to adopt a partnership-like governance model which may greatly facilitate the conduct of business, especially where there are few LLC members.
One of the least-known aspects of a Member Control Agreement is that a person, who is neither a member nor a party to a contribution agreement, may nevertheless be a party to a Member Control Agreement.  This provision may provide a new level of flexibility by incorporating in the Agreement persons who may have financial rights under the Agreement even though they do not possess the usual membership rights (such as voting).
Typically, a Member Control Agreement can regulate a wide range of ownership and management issues, including: transfer of membership interest; contributions of capital, property or services during and after the formation of an LLC, management and governance structure of an LLC, tax elections, distributions of cash and other assets, allocation of profit and loss, establishment and maintenance of bank accounts, books and records; access to books and records, valuation of membership interests, employment of members, dissolution and winding up of the LLC, et cetera. A Member Control Agreement may even re-determine the rights of dissenting members as provided in Minn. Stat. §322B.383 and Minn. Stat. §322B.386. Even this non-exclusive list of issues already emphasizes the significance of the Member Control Agreement to the operation of the LLC.
Precisely due to this significance, special requirements are imposed by the Act on the execution of a Member Control Agreement. In order to be valid, a Member Control Agreement must scrupulously follow the requirements of Minn. Stat. §322B.37.  Even then, the Agreement can only be enforced “by persons who are parties to it and is binding upon and enforceable against only those persons and other persons having knowledge of the existence of the member control agreement.” Minn. Stat. §322B.37, Subd. 3(a). Finally, special recordkeeping requirements are demanded by the Act, including filing of the Member Control Agreement with the required records of an LLC.  The records themselves must note that the members’ interests are governed by a Member Control Agreement.
Thus, a Member Control Agreement may provide a great business opportunity by allowing maximum flexibility in the governance structure of an LLC.  This opportunity, however, must be handled with care and knowledge of a legal professional; otherwise, it may turn into a litigation nightmare.  Therefore, you should retain a Minnesota business lawyer to advise you and ultimately draft the Agreement.
Sherayzen Law Office is an experienced business law firm with one of its primary concentrations in advising and creating business governance documents.  We can advise you with respect to whether you need a Member Control Agreement, help you negotiate the necessary provision, draft the Agreement, make sure it is properly executed, and establish the right recordkeeping procedures to comply with Minn. Stat. §322B.37.

### Tax Rates on Capital Gains and Qualified Dividends through 2012
Pursuant to the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”), which was singed into law on December 17, 2010, the tax cuts on capital gains and qualified dividends have been extended through the tax year 2012.
Generally, long-term capital gains of individuals will be taxed at a maximum rate of 15% through the tax year 2012.  The same is true for the qualified dividends received by individuals; this means that these dividends will be taxed at the same rates as long-term capital gains through the tax year 2012 (rather than being taxed as part of a taxpayer’s ordinary income at the relevant tax bracket).

### Tax Lawyers Minneapolis | Tax Rates for Individual Taxpayers through 2012
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”) was singed into law on December 17, 2010. Prior to the Act, the previous tax cuts were scheduled to expire and the marginal federal income tax rates for individuals were scheduled to return to 15%, 28%, 31%, 36% and 39.6%.  Under the Act, however, the marginal federal income tax rates for individuals will remain at the 10%, 15%, 25%, 28%, 33% and 35% graduated rates through the tax year 2012.
Keep in mind that the Act does not in any way alter the taxes that were enacted as part of the recent health care reform, such as 0.9% tax on wage income and 3.8% tax on investment income for higher-income individuals.  These taxes will be imposed in 2013.

### Attorney Tax Minneapolis | Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010
On December 17, 2010, the President signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”).  The new law preserves the 2001 and 2003 tax cuts through the year 2012, reduces the estate tax to 35 percent and allows a $5 million individual exemption, cuts the  Social Security payroll taxes by 2 percentage points, and renews the alternative minimum tax patch for the tax years 2010 and 2011.  Additional provisions of the Act are devoted to renewing other tax incentives (such as the research and development credit and a 100% exclusion on gain from the sale of small business stock) that either already expired in the tax year 2009 or were scheduled to expire in the tax year 2010.
Look for more detailed explanation of the specific provisions of the Act on this website throughout this week!

### Business Lawyers Minneapolis: Legal Fee Issues
When you are about to hire a business lawyer in Minneapolis, you need to discuss the following top three legal fee issues:
1. Payment Structure
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 business lawyer compensation in Minneapolis because it is fairly simple and, yet, flexible – the business attorney is paid only based on the time he spends on the case. If you are paying your business lawyer by the hour, the agreement should set out the hourly rates of the business attorney and anyone else in this attorney’s office who might work on the case.
A contingency fee, where a Minneapolis business attorney takes a percentage of the amount the client wins at the end of the case, is very rarely used by business attorneys in Minneapolis. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the business 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 business 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 per job/case. For example, you pay $5,000 to your business attorney to organize your corporation with all of the corresponding corporate documents. While a flat fee arrangement is possible in a small project, it is generally disliked by business 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 business attorney’s fees is maintained.
Remember,out-of-pocket expenses (e.g. long-distance calls, mailing costs, photocopying fees, lodging, etc.) and litigation costs (such as court filing fees) are usually billed to you in addition to your business lawyer’s fees.
2. Retainer
Most business 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 the lawyer’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 a business attorney asks his client to pay in advance. In this scenario, the 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).
3. Timing of Billing
Usually, business 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.
Conclusion
Generally, before you sign the fee agreement, business lawyers in Minneapolis will discuss with you many more topics than what is covered in this article. The three issues explained here, however, are crucial to your understanding of how the business relationship with your Minneapolis business attorney will work. Before you sign the fee agreement with your business lawyer in Minneapolis, you should ask at least these three questions and make sure that the answers are complete and to your satisfaction.

### Time Limitations on Bringing a Contract Lawsuit and How Laches May Apply
In previous articles I have discussed a few broad methods for getting out of contract in Minnesota, as well as how an opposing party may be able to stop you from claiming a right under contract by invoking equitable estoppel. This article is closely related with those topics and deals with the timing of claiming a right under contract, and how unreasonable delay can bar an otherwise valid legal claim.
Statute of Limitations and How the Doctrine of Laches Works
It is generally understood that a legal action (or the right to sue someone) is governed by a statute of limitations. For a civil case based on something such as breach of contract, a statute of limitations establishes a time limit for suing someone starting from the time when the right to assert a claim first arose (e.g. when the person harmed first discovered or could have discovered that they were harmed) . The applicable statute of limitations for breach of contract in Minnesota is Minn. Stat. Section 541.05, subd. 1(1) (2010). Section 541.05 provides for a six year statute of limitations for action upon a contract or other obligation, express or implied, unless another limitation is expressly prescribed.
This seems simple enough, but other laws, such as the State Uniform Commercial Code may modify this limit, and the doctrine of laches can confuse things further. Note also that the common law doctrine Quod nullum tempus occurrit regi (or “No time runs against the King) can exempt some government entities from statutes of limitations and/or the application of the doctrine of laches. That is why it is essential to retain an experienced Minnesota contract attorney as soon as possible after your contract issue arises.
As alluded to above, in addition to the statute of limitations, the doctrine of laches plays an important part in determining whether a civil lawsuit was brought in a timely fashion. Laches is an equitable doctrine intended to prevent a party who has not been diligent in asserting a known legal right from recovering at the expense of another party who has been prejudiced by the delay. An example of a situation where laches may apply is where a party waits for essential witnesses that could support an opposing party’s claims or defenses to die before asserting a legal right. However, for the doctrine of laches to be applied in such a case, the prejudice to the party claiming laches must be the result of unreasonable delay. If the essential witnesses died before there is unreasonable delay, the death of those witnesses alone, even if it greatly prejudiced a party, does not mean that laches is applicable.
It is also essential to understand that laches is not an available defense in a contract action where only strict legal rights are in controversy. In those types of cases, only the applicable statute of limitations will bar a claim. This means that if your case depends only upon application of law to the language of the contract, then laches is likely not applicable.
However, if there is more at issue than strict legal rights under a contract and you are seeking equitable relief in addition to laches, then Minnesota law provides that the doctrine of laches may bar the lawsuit, even if the statute of limitations would not! While it may seem strange that a lawsuit brought within the time allowed by the statute of limitations can be untimely, this makes sense if you keep in mind that a delay in asserting the known legal right can be so unreasonable and can so adversely affect a party that it would be inequitable to allow the lawsuit to proceed.
Nevertheless, a couple important issues should be kept in mind. First, claiming only laches will not likely be successful in a contract case. A party must assert that there are other events that occurred that give rise to equitable relief (e.g. estoppel, fraud, duress, etc.) or laches itself is likely to be of little help. Second, laches concerns the question of whether a party has been unreasonable in asserting a known legal right, a broader category than a mere legal claim. To illustrate this, imagine two parties enter a contract where Company A promises to pay Company B in multiple payments for work Company B has done for Company A. Company B also has the right to notify Company A in writing and request Company A to pay in full (i.e. “call the loan” or require Company A to “purchase the loan”). Company A sets up a payment process through a third party that fails, but through no fault of Company A. The third party notifies only Company B of the problem on two occasions. Company B does nothing and waits seven years before realizing during an audit that it has not been paid. Company B then notifies Company A and requests payment in full (including years of accumulated interest) and then sues when Company A refuses. Company A asserts laches (among other equitable claims) and Company B contends that it sued Company A immediately after the refusal to pay in full, thus there was no unreasonable delay in bringing the lawsuit and laches cannot apply. However, the legal right to which laches applies is not the lawsuit (or legal claim), but rather the contract right to require the Company A pay in full after written notice (the legal right). There is no question that Company B delayed in asking Company A to purchase the loan. A court may take this under consideration and allow Company A to use laches as a defense.
Finally, Minnesota courts consider the following factors when deciding whether the doctrine of laches applies to a particular case:
1) Availability of the defense as determined by the nature of the action;
2) Reasons for delay;
3) Prejudice; and
4) Policy considerations.
The court may: find that your case involves a special situation where the doctrine of laches specifically does not apply; accept that there were legitimate reasons for delay; determine that the resulting prejudice was not severe enough support claiming laches; and/or take into account broad policy considerations that may suggest that laches is not appropriate in your case. Additionally, laches is an affirmative defense to a legal claim by another party. This means that the party claiming laches will bear the burden of showing facts and arguments that fulfill the elements of equitable estoppel in that particular jurisdiction. Contract litigation in Minnesota can be complex and you should retain a contract lawyer as soon as possible.
Conclusion
As always, issues such as complicated contract litigation and asserting laches as a defense to another party’s claim involve important legal considerations. It is also important that the consequences of particular actions should be evaluated appropriately. These issues should be analyzed by a skilled contract attorney who will be able to conduct proper legal analysis based on the particular facts of your case. Sherayzen Law Office can help you analyze your case, evaluate your options, and provide specialized advice on how to proceed with your contract litigation.
Call the professional tax law firm of Sherayzen Law Office, Ltd. at (952) 500-8159 to discuss your case with our contract litigation attorney!

### Contract Litigation Lawyers Minneapolis: Equitable Estoppel in Contract Lawsuits
As noted in a previous article, I occasionally have clients who are looking for a way to get out of their contractual obligations. I mentioned five broad methods for getting out of contract: 1) exit provisions in the contract; 2) validity of the contract; 3) contract construction; 4) excuse for non-performance; and 5) breach. If your contract dispute cannot be resolved and proceeds to litigation, irrespective of whether you are the plaintiff or the defendant, the opposing party may attempt to stop you from claiming a right under the contract. They may in fact attempt to claim that your argument under one of the five methods above is not relevant, even if true. One way they can argue this is through equitable estoppel.
What is Equitable Estoppel?
Very generally, estoppel can prevent a claimant from asserting a legal claim against someone else if the claim contradicts what that person has said or done previously. Equitable estoppel is generally used as a defense in contract actions and prevents one party from using false language or conduct (a misrepresentation) to induce another party to act in a certain way that ends up hurting that person. Essentially, equitable estoppel prevents gaining an unfair advantage through dishonest conduct. It is very important to note that equitable estoppel is an affirmative defense to a legal claim by another party. This means that the party raising the issue of equitable estoppel will bear the burden of showing facts and arguments that fulfill the elements of equitable estoppel in that particular jurisdiction. This and other complexities of contract litigation are why it is crucial to retain a Minnesota contract lawyer as soon as possible.
Equitable Estoppel in Minnesota
In Minnesota, the prevailing law requires that a party claiming the affirmative defense of equitable estoppel must prove the following elements: 1) there must be conduct, acts, language, or silence amounting to a representation or a concealment of material facts; 2) these facts must be known to the party estopped (i.e. the party accused of unfair conduct) at the time of the conduct, or at least the circumstances must be such that knowledge of them is necessarily imputed to him; 3) the truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when such conduct was done, and at the time when it was acted upon by him; 4) the conduct must be done with the intention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon; 5) the conduct must be relied upon by the other party, and in reliance he must be led to act upon it; and 6) he must in fact act upon it in such a manner as to change his position for the worse – in other words, he must suffer a loss if he were compelled to surrender or forego or alter what he has done by reason of the first party being permitted to repudiate his conduct and to assert rights inconsistent with it. Lunning v. Land O’Lakes, 303 N.W.2d 452, 457 (Minn. 1980). Different jurisdictions may vary in the elements they require to show that equitable estoppel is warranted.
It is also vital for clients and attorneys to understand that estoppel depends heavily on the unique details of each case and therefore is ordinarily a fact question for a jury to decide. This means that if one party claims equitable estoppel, the other party usually may not be able to resolve the lawsuit by asking the judge for summary judgment in their favor.
Summary judgment is a form of asking the judge to resolve the case at the beginning of the litigation. Summary judgment may be granted by a judge, prior to trial, when the judge can determine that there are no genuine issues of material fact and one party deserves to prevail without proceeding to the jury. Summary judgment is usually not appropriate in cases where one party is claiming the benefit of equitable estoppel because as explained above, it depends heavily on questions of fact such as: what unfair acts or misrepresentation allegedly happened; whether either party had knowledge of the truth regarding the misrepresentation; whether the party accused of acting unfairly meant for the misrepresentation to be relied upon; whether the party claiming equitable estoppel actually relied on the conduct; et cetera.
The reality that equitable estoppel claims are generally not resolved through summary judgments may or may not be beneficial to your particular case. It is crucial that you have a knowledgeable contract litigation attorney who can analyze the legal issues and determine whether there are any valid issues of equitable estoppel in your case.
Conclusion
Issues of claiming any affirmative defense in contract litigation, especially equitable estoppel, are complicated. Whether you wish to use equitable estoppel as a defense, or you suspect that the other party may wish to assert the defense against you, there are important legal considerations to be made and consequences to be assessed. These issues should be analyzed by a skilled Minnesota contract litigation attorney who will be able to conduct proper legal analysis based on the particular facts of your case. Sherayzen Law Office can help you analyze your case, evaluate your options for moving forward, and can provide specialized advise on how to proceed with your contract litigation.

### Selecting a Trademark: Trademark Strength
Selecting a trademark is a creative and legally important process. There are many issues that must be factored into the trademark selection process. One of the most important factors is the strength of the trademark; this is significant because the protection of your trademark against future infringement will depend on how strong the courts will consider your trademark to be.
There are four general types of trademarks: fanciful/arbitrary, suggestive, descriptive, and generic (which are really not marks at all).
1. Fanciful or Arbitrary Marks
The most common definition of a “fanciful mark” is the mark or design that has been created for the sole purpose of functioning as a mark. These are basically words that are new or previously unknown to an average consumer. EXXON is an example of a fanciful mark.
An “arbitrary mark” is a normal word or design used in an uncommon way or context. For example, APPLE is an arbitrary mark for computer-maker.
Keep in mind that fanciful marks can also be designs, not only words. For example, the STAGECOACH design of Wells Fargo is fanciful design mark.
Fanciful and arbitrary marks are considered to be highly distinctive and strong. This means that the marks are highly protected by the U.S. laws against the infringement by competitors. In fact, this is the most protected category of trademarks.
2. Suggestive Marks
Suggestive marks are those marks which subtly suggest the qualities which are desirable in a product or service, but which do not literally describe attributes or qualities of the goods or services with which these marks are associated. For example, GREYHOUND suggest speed which is a desirable quality in bus transportation.
Suggestive marks is the second strongest category of trademarks after fanciful and arbitrary marks. It is still highly protected by U.S. law and can be a trademark as soon as it is used.
3. Descriptive Marks
Unlike suggestive marks, the descriptive marks describe (not merely suggest) the qualities of the products or services in connection with which they are used. A commonly-cited test for recognition of descriptive marks is whether the mark immediately conveys the idea, ingredients or characteristics of goods or services in connection with which the mark is used. For example, VISION CENTER for optical clinics or AUTO PAGE for automatic dialing service.
Descriptive marks constitute a much weaker category of trademarks. In fact, unless a descriptive mark acquires what is known as “secondary meaning” through some period of use, sales, or advertising, it may not be protectable at all.
4. Generic Marks
The generic mark is not really a mark, but merely a term which is or becomes the generic name for the product or service in connection with which it is used. It is basically a common name for a product (or service) produced (or offered) by many companies, such as: automobile or cat food. The courts also found that “urgent care” is a generic term for medical services and “cellophane” is a generic term for a clear plastic wrap.
Notice that some terms which were not originally generic may become so over some period of time. For example, “aspirin” became generic over time.
Conclusion
Generally, the more distinctive the mark is, the more protectable it is likely to be. Therefore, from a legal standpoint, the stronger marks are those that are original and unlikely to infringe the rights of others.
Sherayzen Law Office can help you select and research the trademark for your business, evaluate your mark’s strength and file trademark registration applications with the USPTO as well as relevant state authorities. Call (952) 500-8159 to discuss your trademark with an experienced trademark lawyer!

### Voluntary Disclosure Program: Possible Renewal With Modifications
On December 9, 2010, in his prepared remarks before the “23rd Annual Institute on Current Issues in International Taxation IRS” (in Washington, D.C.), Commissioner Doug Shulman hinted that the IRS is considering whether to renew the Voluntary Disclosure Program. The new Voluntary Disclosure Program would have tougher penalties that the original Program that ended in October of 2009, but it would still offer a way for U.S. taxpayers to comply with the U.S. tax laws while avoiding the worst consequences of tax noncompliance.
Here is a relevant excerpt from Commissioner Shuman’s speech:
“Given its success, we are seriously considering another special offshore Voluntary Disclosure program. However, there will be some fundamental differences. Taxpayers will not get the same deal as those who came in under the original program. To be fair to those who came in before the deadline, the penalty – and thus the financial cost to participate – will increase. Let me say too that we expect to make the terms of any new program available to those who have already come in after October 2009 when that program expired. Stay tuned for more details as they become available.”
Voluntary disclosure is usually the best way to bring your tax affair in full compliance with the U.S. tax laws. Moreover, voluntary disclosure process often reveals nonconformity with other U.S. tax compliance requirements, such as FBARs, Form 5471, Form 8865, Canadian RRSP disclosure, et cetera.
Sherayzen Law Office has helped the taxpayers throughout the United States to voluntarily disclose their income and assets, negotiate their tax obligations, and bring their tax affairs in full compliance with U.S. tax laws. At the same time, we have helped our clients to resolve such issues as delinquent FBARs, Form 5471/8865 filings, foreign trust income disclosure, Canadian RRSP reporting, and other relevant tax compliance issues. We will guide you every step of the way, draft the necessary documents and negotiate with the IRS.
Call NOW (952) 500-8159 to discuss your tax issues with an experienced tax attorney! Remember, your consultation is confidential and protected by the attorney-client privilege.

### Contract Lawyer Minneapolis |Minnesota LLC Formation IV: Bylaws or Operating Agreement
In the first part of this series, I mentioned that LLC Bylaws or Operating Agreement (as Bylaws were called in the original version of the Minnesota Limited Liability Company Act) is one of the essential documents and an integral part of LLC formation in Minnesota.
Bylaws may be adopted by the organizers or the first Board of Governors. Remember, though, that the power of the Board in this respect is usually subject to the power of the LLC members to adopt, amend or repeal any Bylaws.
An LLC may adopt Bylaws provisions to establish the management of the LLC, including the regulation of the internal affairs. Bylaws provisions, however, should not be inconsistent with Minnesota law or the Articles of Organization.
The Bylaws typically regulate such matters as: the election and compensation of the governors, Member meetings, Board meetings, notice procedures, voting rights and procedures, election and authority of the managers, removal of the managers, compensation issues, recordkeeping, establishment of the fiscal year, and other management-related issues. A buy-sell agreement may be included in the Bylaws, but this agreement needs to be written in conformity with the rest of the Bylaws.
Thus, the Bylaws cover a broad range of issues and are indispensable to proper management of the business. It is important to remember, however, that, where the LLC is expected to be governed and managed by its members, the members should consider executing a Member Control Agreement. The Member Control Agreement is much broader than the Bylaws and may provide a much greater degree of flexibility necessary in many member-managed LLCs.
Sherayzen Law Office has developed a great degree of concentration and experience in drafting business governance documents. We have consulted start-up and already established clients in Minnesota and throughout the United States with respect to governance documents. We have wide-ranging experience in drafting Bylaws, Member Control Agreements, as well as combination of these two documents known as “Member Control and Operating Agreement”.

### Business Lawyer Minneapolis |Registering Assumed Name in Minnesota
If you are required to register an assumed name for your business (to learn about who is required to register an assumed name, click here), it is important to follow through with all of the registration requirements. There are three basic step to registering an assumed name in Minnesota.
1. Fill-out Certificate of Assumed Name
Fill-out the Certificate of Assumed Name. The form is readily available online at the Secretary of State’s website. Filling-out the Certificate is usually not complicated; you need to provide the following information:
a) Exact (assumed) business name. The Secretary of State will not accept a name that duplicates either a registered name of a business entity (corporation, limited liability company or partnership) or a trademark already on file. Only one name per form is allowed;
b) Complete address of the principal place of business. A Minnesota address is preferable, but an out-of-state address may also be acceptable. P.O. Box is not acceptable;
c) Names and addresses of all persons conducting business under the Assumed Name. If such a person is a business entity, then provide a full legal name of the entity and the registered office address; and
d) Signature, date, printed name and title of one of the persons who are conducting business under the Assumed Name. An Authorized Agent may also sign the form as long as the Agent identifies himself as such (including the fact that he is authorized to sign the form). A contact information with respect to the form should also be included.
2. File the Certificate of Assumed Name with Filing Fee
The second step is to file the Certificate of Assumed Name with the Office of the Minnesota Secretary of State. A filing fee of $25 (in the year 2010) should be enclosed with the Certificate. The check should be made payable to the “MN Secretary of State”.
3. Publish Legal Notice
Once the Certificate of Assumed Name is filed with the Secretary of State, you must publish the Certificate or Amended Certificate of Assumed Name with a qualified newspaper for two consecutive issues in the county where the principal place of business is located. The newspaper should provide with detailed instructions on how to proceed with the publication. After the publication, the newspaper will return an affidavit of publication which should be retained in your business file.
Failure to publish may render the filing of the Certificate invalid.
Amendment of the Certificate
The Certificate of Amended Assumed Name form must be filed within sixty (60) days with the Secretary of State after any change in the assumed name, business or owner’s address, and ownership has occurred. The Amended Certificate must be published as described above.
Term and Renewal
A Certificate of Assumed Name is valid for ten (10) years from the date of filing with the Secretary of State. A renewal form should be mailed to the business address on file six months prior to expiration. There is filing fee of $25 (current as of the year 2010) to file a renewal.
Conclusion
Registering an Assumed Name in Minnesota usually is not difficult. It is important, however, to actually do it and follow through with all of the requirements, including the legal notice publication. If you have any questions with respect to registering your business name, contact Sherayzen Law Office to speak with an experienced business lawyer in Minneapolis.

### St Paul International Tax Lawyer: Hiring Questions
When you are about to hire a St Paul international tax lawyer to help you with an international tax issue, there are three fundamental questions that you need to ask him.
Hiring St Paul International Tax Lawyer Question #1:  How Will I Be Billed?
Generally, a St Paul international tax lawyer will bill you on an hourly basis, particularly in a tax litigation setting. He will provide you with a general estimate of your future expenses, which, understandably, will vary with the progress of the case. In a tax preparation or sometimes even in a simple tax planning case, a St Paul international tax lawyer may also offer a flat fee option. Where there are complex international tax planning issues involved, however, most St Paul international tax lawyers are likely to charge on an hourly basis. Similarly, while working on international tax compliance issues (Form 3520, 5471, 8891, et cetera) or preparing a tax return (including foreign tax credit and earned foreign income exclusion), St Paul international tax lawyers tend to rely on the hourly fee arrangements.
The more important issue with regard to this question is the manner in which you will be billed. Here, the practice varies among international tax lawyers in St Paul, Minnesota. Some St Paul international tax lawyers may require you to provide a large retainer which is later deposited in a client trust account; the withdrawals from the account are made in conjunction with the work completed and as spelled out in the retainer agreement between the lawyer and the client. If the retainer is later depleted, your St Paul international tax lawyer may ask you to replenish it. Other St Paul international tax lawyers will require a smaller retainer and will then bill you on a monthly basis. If the latter option is proposed by your St Paul international tax lawyer, you should ask for a sufficient time period (usually 10-14 days) to pay your bill. A mix of these options is also available. You will find that St. Paul international tax lawyers, especially solo practitioners, are rather flexible in their choice of the payment mode, but, once the fee agreement is signed, they will be firm in insisting that you comply with the terms of the agreement.
Hiring St Paul International Tax Lawyer Question #2: What percentage of the practice is devoted to the international tax law?
The purpose of this question is two-fold. First, you will figure out whether this St Paul international tax lawyer likes handling cases in your area of law. If a tax lawyer devotes more than 50% of his practice to international tax law, you know that he likes this area of law and will be enthusiastic about your case. This means that, in addition to his general due diligence obligations, this St Paul international tax lawyer will have a professional interest in your case. Second, generally, a St Paul international tax lawyer who devotes 50% or more of his practice to international tax law is likely to have good experience in this area.
Hiring St Paul International Tax Lawyer Question #3: will this St Paul international tax lawyer devote his personal attention to your case?
This question is very important, because you need to make sure that your lawyer personally works on your case. This becomes one of the biggest problems with hiring most mid-size and large law firms, because in those firms, the partner with whom you signed the agreement will generally delegate a large percentage (sometimes virtually all) of his responsibilities to his associates, who are generally less experienced in the area than the partner. In this case, you should insist that the St Paul international tax lawyer who signed the retainer agreement with you devotes his personal attention to your case and delegates only marginal matters to his associates. Generally, solo practitioners or small international firms do not have similar problems.
The other important issue involved in this question is whether your St Paul international tax lawyer is generally responsive to your calls and keeps you up-to-date with respect to the progress of your case. Most international tax lawyers are very busy people; yet, you must insist that you should be able to communicate with them. In my practice, I devote a great deal of energy and time to make sure that my clients do not feel neglected and have the latest information about their case available to them. For example, my firm has a rule of returning most calls before the end of the day.
Contact Sherayzen Law Office for Professional Legal Help With Your International Tax Issues

### Minnesota Certificate of Assumed Name: Who Must File
Over the years, as a business lawyer in St. Paul, I have had questions from my clients about whether they are supposed to register their assumed name with the Minnesota Secretary of State. In this short essay, I briefly address this issue.
Generally, pursuant to Minn. Stat. §333.01, Subd. 1, any individual, corporation, limited partnership or limited liability company that conducts business in Minnesota under a name other than their full legal name, must register its Assumed Name with the Office of Minnesota Secretary of State along with a required filing fee.
Here are three most common situations where Minnesota law requires you to file the Certificate of Assumed Name:
1. Any person conducting business under a name which is not his or her true full name (first and last name) must file. For example: Robert Stuart has a plumbing business and operates under the name of “Stuart Plumbing”. In this case, he has to file the Certificate of Assumed Name with the Office of Minnesota Secretary of State. If, on the other hand, in the same situation, Mr. Stuart operates under the name of “Robert Stuart Plumbing”, then he may not need to file the Certificate (absent other circumstances).
2. A corporation, limited partnership or limited liability company conducting business under a name other than the legal name, must file. For example, a company called “Versatile Minneapolis Business Advising and Consulting Services, Inc.” would have to file a Certificate of Assumed Name with the Secretary of State if the company decides to operated under the name of “Versatile Minneapolis Advising Services, Inc.”
3. A partnership must file if the name of the partnership does not include the true full name of each partner.
In addition to the Certificate filing requirements, there are publication of legal notice requirements that must be followed.
Sherayzen Law Office can help you determine whether you need to file a Certificate of Assumed Name (or choose to create a business entity under the name in question), draft the Certificate, and help you comply with all procedures necessary to register your Assumed Name.

### Minnesota LLC Formation III:  Articles of Organization
In the first two parts of the series, I have mentioned more than once that the Articles of Organization is the key document for LLC formation.
LLC is formed by filing the Articles of Organization with the Office of the Minnesota Secretary of State. The Articles become effective on filing and payment of the $160 (current as of the year 2010) filing fee. Once the Articles are filed and the fee is paid, it is presumed that all conditions precedent have been complied with and the LLC has been organized. The Office of the Secretary of State would then issue a Certificate of Organization to the LLC.
Office of the Minnesota Secretary of State offers a standard fill-in Articles of Organization form which sets out the required elements that must be included in the Articles. What is important to understand is that the Articles may include other elements in addition to what is included in the standard form. I will discuss here the required as well as some of the most important additional provisions that may be included in the Articles by a Minnesota business lawyer.
Required Provisions
Pursuant to Minn. Stat. §322B.115 Subd. 1, the following provisions must be included in the Articles of Organization:
a). Name of the LLC (see specific name requirements in the second part of this series);
b). Address of the Registered Office of the LLC. Note that Minnesota Secretary of State will only accept a Minnesota address. The address should include: street address (or rural route and rural route box number), city, state, and zip code. P.O. Box will not be accepted;
c). Name of the LLC’s Registered Agent (if any);
d). Name and address of each organizer; and
e). A statement of the period of existence for the limited liability company if the LLC is not to have perpetual existence.
Optional Provisions
Minn. Stat. §322B.115 contains a lengthy list of additional provisions that can be modified by and included in the Articles of Organization. Note, that all of these provisions may also be modified by the Member Control Agreement, but only some of the additional powers and rights may be modified in the Bylaws.
The most common provisions included by Minnesota business lawyers in the Articles of Organization are: provision for approval of the transfer of governance rights, denial of cumulative voting, denial of preemptive rights, written action without a meeting, limitations on the liability of governors, and a general statement of purposes and powers. Often, a provision stating that the LLC shall have perpetual existence is included in the Articles. It is not necessary, though, to list in the Articles the powers already granted to an LLC by the Minnesota Limited Liability Company Act
It is also important to point out that the Articles of Organization may contain these additional provisions as long as they are not inconsistent with law.
Conclusion
Sherayzen Law Office can help you determine which additional provisions need to be included in the Articles of Organization, draft the Articles and properly file them with the Minnesota Secretary of State.

### Minnesota LLC Formation II: LLC Organization Process
In the previous article, I already discussed some of the essential documents that are necessary for formation of a Limited Liability Company (“LLC”) in Minnesota. In this article, I would like to explore the basic mechanics of LLC formation.
Who can form an LLC?
One or more natural persons at least 18 years of age may act as organizer(s) and form an LLC. Note that an organizer does not have to become a member, but an LLC must have one or more members.
How LLC is formed?
LLC is formed by filing the Articles of Organization with the Office of the Minnesota Secretary of State. The Articles become effective on filing and payment of the $160 (current as of the year 2010) filing fee. Once the Articles are filed and the fee is paid, it is presumed that all conditions precedent have been complied with and the LLC has been organized. The Office of the Secretary of State would then issue a Certificate of Organization to the LLC.
LLC Name Requirements 
The name of an LLC must be in the English language or in any other language expressed in English letters (or characters) and contain the words “limited liability company” or the abbreviation “LLC”. The name itself must be distinguishable from names of other business entities (such as LLCs, partnerships, corporations, et cetera) as determined by the Minnesota Secretary of State. Notice that the name of the LLC cannot contain the words “corporation” or “incorporated”.
Post-Filing Role of Organizers
Where the initial Articles of Organization do not name a board of governors, the organizers may elect the first board of governor or may act as governors until the governors are elected. Often, these issues would be addressed in the Bylaws or Member Control Agreement.
After the Articles of Organization are filed, the most immediate task of the organizers is to complete the organization of the LLC. The following actions are often taken: adoption of Bylaws and/or Member Control Agreement, amendment of the Articles, election of governors, authorization of certain transactions (for example, execution of commercial lease agreements), establishment of the fiscal year, and making of appropriate tax elections.
Contributions to the LLC
Pursuant to the Minnesota Limited Liability Company Act, any form of contribution to the LLC (money, real estate ownership transfer, rendering services, et cetera) is only valid if authorized by the board of governors or otherwise pursuant to a Member Control Agreement. Contributions to the LLC must be reflected in required records. A Minnesota business attorney must be consulted on this important issue.
Amendment of the Articles of Organization
It is important to know that an LLC may amend its Articles of Organization at any time to include or modify any provision that is required or permitted to appear in the Articles or to add any provision not required to be included in the Articles.
The mechanics of the Amendment depend on whether any contribution to the LLC has already been made. If no contribution to the LLC is reflected in its required records, the Articles may be amended by either the organizers or the board of governors. On the other hand, where a contribution has been already registered in the required records, any amendment to the Articles has be to approved by the members of the LLC.
Once an amendment has been adopted, Amended Articles of Organization have to be prepared and filed with the Minnesota Secretary of State. Remember that, in addition to the LLC’s name and the exact text of the amendment, the Amended Articles have to contain a statement that the Amendment has been adopted pursuant to the relevant provision of the Minnesota Limited Liability Company Act.
Conclusion
Despite the deceptive simplicity of the process, forming an LLC may generate its own significant legal problems. Therefore, I strongly advise anyone who wishes to form an LLC to consult a Minnesota business lawyer.
Sherayzen Law Office can help you draft and properly file the Articles of Organization with the Minnesota Secretary of State, guide you through the post-filing organization process (including making contributions to the LLC), and prepare the necessary organization documents, such as Bylaws and Member Control Agreement.
Call NOW to discuss your case with an experienced business lawyer!

### Tax Lawyer Minneapolis | Common Tax Penalties and Interest: The Basics
Penalties and interest may be impose
d by the IRS relating to various tax underpayments. Taxpayers should understand some of the basic tax penalties detailed in this article (many of which can be quite sever) in order to avoid such penalties if possible, and to perhaps mitigate any imposed penalties.
Accuracy-Related Penalties
An accuracy-related penalty of 20% of a tax underpayment may be imposed by the IRS if the underpayment is attributable to one or more of the following: (1) negligence or disregard of the rules and regulations; (2) any substantial understatement of income tax; (3) any substantial valuation overstatement; (4) any substantial overstatement of pension liabilities;  and/or
(5) any substantial gift or estate tax valuation understatement.
Late-Filing Penalty
If a taxpayer files a late tax return, unless he/she can demonstrate "reasonable cause" to the IRS for not filing on time, a late filing penalty of 5% of the net tax due for each month the return is due, up to five months (25% maximum) can be imposed.  In addition, there is a minimum
penalty, equal to the lesser of $135 or the net amount required to be shown on the tax return, for returns that are more than 60 days late (including extensions).
The late filing penalty does not apply if a return is filed late but no taxes are owed.
Failure to Pay Penalty
In general, if a taxpayer is late in paying taxes owed, the IRS can impose a failure to pay penalty of 0.5% (0.5 of 1%) upon the net amount of tax due and unpaid by the due date.  The penalty begins on April 16th, and stops accruing when the IRS receives the payment amount.  The maximum penalty that can be imposed is 25%.
Combined Penalties
Taxpayers may also be subject to combined penalties, with special rules.  For example, if both late-filing and late-payment penalties are imposed on a taxpayer, a combined penalty of 5% per month will be applied for the duration in which both penalties apply at the same time (maximum penalty of 25%).  The combined penalty is made up of a reduced late-filing penalty (4.5% instead of the standard 5%) added to the 0.5% late-payment penalty.  After the maximum 25% penalty is met, the late-filing portion of the penalty ends, but the late-payment portion will continue at 0.5% up to a maximum of 22.5%.
Other penalties may also be imposed in addition to the combined penalty.
Civil Fraud Penalties
If the IRS can establish by clear and convincing evidence that a taxpayer has fraudulently underreported income, it can impose a penalty equal to 75% of the entire amount underreported.  After such determination, the burden of proof rests upon the taxpayer to establish that fraud did not constitute the entire underreported amount.  Fraud is defined to be an intentional wrongdoing by the taxpayer with the specific intent to evade a tax known or believed to be owing.
Furthermore, if the IRS determines that a taxpayer fraudulently failed to file a tax return, a penalty equal to 15% of the net tax due for every month that a return is due and not filed, up to five months (for a maximum of 75%) can be imposed.
Interest on Tax Underpayments
In addition to the various penalties, interest on tax underpayments may also be imposed.  For individual taxpayers, the interest rate is equal to the short-term Federal rate plus 3%.  Interest is compounded daily in most cases, and begins to accrue from the due date of the return.

### Minnesota LLC Formation I: Essential Documents
It is conventional wisdom that forming a Limited Liability Company (“LLC”) in Minnesota is not hard. Furthermore, a lot of people believe that, in order to form an LLC, the only (and the easiest) thing to do is to file the Articles of Organizations – a one-page fill-in form prepared by the Secretary of State – and that is it. I have seen dozens of examples where entrepreneurs would file the Article of Organization believing they are completely protected and they do not to pursue anything further, saving money on a legal advice.
In fact, however, the issue is much more complex. Even assuming that the LLC is the correct entity form for the business in question (a discussion which requires substantial legal analysis and is a topic for another article), organizing an LLC is process which has its owns legal complexities and requires proper documentation in order to achieve the results that most organizers are striving for – limited liability and protection of one’s business interests. A business owner who is negligent in organizing an LLC is likely to pay a hefty penalty in the future, including a possibility of losing his business altogether.
This article begins a series of articles that I am writing on the topic of LLC formation in Minnesota. It is important to point out this series merely provides a general educational background on this topic and you should consult a Minnesota business lawyer regarding your specific legal situation.
In this essay, I would like to outline the minimum essential documentation one needs for the purposes of organizing an LLC. This is a suggestive list of documents that most Twin Cities business lawyers adopt. Notice, this article does not discuss the process of LLC formation (which is the topic of another article, later in this series).
1. Articles of Organization
The LLC is formed by filing the Articles of Organization with the Minnesota Secretary of State. The Articles become effective on filing and payment of the $160 (current as of the year 2010) filing fee. The Office of the Secretary of State would then issue a Certificate of Organization to the LLC.
It is important to understand that the one-page, fill-in form provided by the Secretary of State Office is not the only possible form. In fact, this form merely incorporates the minimum required provisions in order to form the LLC. The Articles may incorporate a lot more information, stating the rules on various issues such as cumulative voting, preemptive rights, a governor’s liability, et cetera. It is important to consult your business attorney in deciding what the Articles of Organization should include.
2. Bylaws (or Operating Agreement)
In most cases, it is important for the LLC to adopt Bylaws (also known as “Operating Agreement”). Bylaws may contain provisions relating to the management of the LLC, as long as these provisions are not inconsistent with Minnesota law and/or the Articles of Organization.
3. Member Control Agreement
As long as specific requirements are satisfied, Minnesota law allows the organizers of the LLC to adopt a Member Control Agreement. The most crucial aspects of this Agreement are that it permits the organizers to adopt a different governance structure for the LLC and over-rule many default provisions of the Minnesota Limited Liability Company Act, including on such crucial issues as: terms and conditions for transfer of membership interests, voting quorum, valuation of membership interests, and so on.
The recent trend among Minneapolis business lawyers and St. Paul business lawyers is to combine the Bylaws and the Member Control Agreement into one “Member Control and Operating Agreement”.
Conclusion
LLC formation can be a complex process, which deserves a lot more consideration than merely filling out a simple form with minimum formation requirements. Your specific situation may require filing an expended Articles of Organization. Then, in order for the new LLC to operate, you need to describe how it will be managed in the Bylaws. Moreover, the Minnesota Limited Liability Company Act contains many default provisions which may interfere with proper functioning of your business. Therefore, a Member Control Agreement may be necessary for greater flexibility in and proper management of your business.
It is crucially important to consult a Minnesota business lawyer while forming the LLC. Only a business attorney will be able to properly analyze your situation, help you file correct Articles of Organization, and draft the necessary Bylaws and/or Member Control Agreement.
Sherayzen Law Office can help you navigate these complex issues of entity choice and LLC formation as well as draft all of the necessary paperwork, including customized Bylaws and Member Control Agreements.
Call Sherayzen Law Office NOW to discuss your business formation issues with an experienced business lawyer!

### IRS Announces 2011 Standard Mileage Rates
On December 3, 2010, Internal Revenue Service issued the 2011 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on January 1, 2011, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
a) 51 cents per mile for business miles driven
b) 19 cents per mile driven for medical or moving purposes
c) 14 cents per mile driven in service of charitable organizations
A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously. Taxpayers also have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

### Minneapolis Tax Lawyer | Tax Consequences of Selling a Structured Settlement
Are your structured settlement payments taxable?
For federal income tax purposes, it is not relevant whether a plaintiff receives proceeds from a judgment or settlement. No matter how the result is reached, amounts received are characterized either as income, or are specifically excluded from income. Section 104 of the Internal Revenue Code generally excludes from gross income: amounts received as personal injury damage awards (to the extent that the damages are compensatory and not punitive); amounts received through accident or health insurance for personal injury or sickness; and amounts received as pension, annuity, or for personal injuries or sickness resulting from active service in the armed forces of any country. Punitive damages are almost always included in gross income. Essentially, judgments resulting from personal injury lawsuits and the like are meant to make a plaintiff whole and compensate them for something that they lost that was not income (e.g. loss of an arm), therefore any amount received in compensation of such an injury also must not be income.
If your settlement payments are not covered by Section 104, you need to determine if your structured settlement payments must be included in your income by considering the item that the settlement replaces. Business injury or non-personal injury judgments are generally regarded as gross income. Here are a few examples of judgments usually included in gross income: interest on any award; compensation for lost wages or lost profits in most cases; punitive damages (in most cases); pension rights (if you did not contribute to the plan); damages for patent or copyright infringement, breach of contract, or interference with business operations; and back pay and damages for emotional distress received to satisfy a claim under Title VII of the Civil Rights Act of 1964.
Structured periodic payments for business injury judgments or settlements should generally be included as income to the extent that the payments fit under the definition above. With respect to the personal injury plaintiffs, Section 104 explicitly excludes from gross income periodic payments that are otherwise excluded from gross income. Portions of periodic payments specifically labeled as interest may not be excluded from gross income. If properly structured, personal injury settlement payments can be tax free generally irrespective of the number of years the payments continue.
A note of caution, the analysis above is very general and simplistic, even with respect to the examples provided above. You should consult your tax attorney to determine whether your settlement should be included in gross income pursuant to Section 104.
What happens if you sell your right to structured settlement payments for a lump sum?
The information above is very important to an original beneficiary of a structured settlement who may be interested in selling their right to receive structured settlement payments. This is because Section 104 still controls characterization of any lump sum payment received in return for transferring the right to structured settlement payments. The end result is that any lump sum payment you receive from selling your structured settlement payments is likely to have the same tax treatment as the payments under the structured settlement.
Therefore, if the current structured settlement payments you receive are tax free, then the money you receive from selling your payments are likely to be tax free. Conversely, if the current structured settlement payments you receive are are likely to be included in your income, then the money you receive from selling your right to payments are also likely to be included in your income.
Again, the exact determination of whether the proceeds from the sale of a structured settlement need to be included in the gross income should be made by a tax attorney. Only a tax professional is likely to have the expertise necessary to take into account all factors of your particular tax situation and conduct correct legal analysis.
Are there tax consequences for the company purchasing the right to your structured settlement payments?
Section 5891 of the Internal Revenue Code was added in 2002 to protect structured settlement payees/recipients that decide to sell the right to their structured settlement payments. Section 5891 requires the sale of structured settlement payments must be approved by a qualified court order in accordance with the relevant state statute. In Minnesota, the applicable state statute is Minn. Stat. §549.31 (2010).
Section 549.31 requires among other things that: the transfer is not unlawful; the transferee discloses certain facts to the payee in writing; the payee has established that the transfer is in the best interests of the payee and the payee's dependents; the payee has received independent professional advice regarding the legal, tax, and financial implications of the transfer; the transferee has given written notice of the transferee’s name, address, and taxpayer identification number to the annuity issuer and the structured settlement obligor and has filed a copy of the notice with the court or responsible administrative authority; and that the transfer agreement provides that any disputes between the parties will be governed, interpreted, construed, and enforced in accordance with the laws of Minnesota and that the domicile state of the payee is the proper place of venue to bring any cause of action arising out of a breach of the agreement. The transfer agreement must also provide that the parties agree to the jurisdiction of any court of competent jurisdiction located in Minnesota.
If a sale of the right to payment under a structured settlement does not comply with Section 5891, then Section 5891 imposes on any person who acquires directly or indirectly structured settlement payment rights in a structured settlement factoring transaction a 40-percent excise tax.
Conclusion
Tax consequences of selling a structured settlement should be analyzed by a tax professional who will be able to conduct proper legal analysis based on the particular facts of your case. Sherayzen Law Office can help you analyze your case and provide an independent advice on the legal and tax consequences of the sale.  Call us to discuss your case with an experienced Minneapolis tax lawyer!

### Business Tax Lawyers | Certain End-of-Year Tax Deadlines and Reminders (2010)
The following are some upcoming tax deadlines and reminders for the December of 2010. (This list may not include all applicable tax deadlines for your situation, and does not constitute tax advice; please, consult Sherayzen Law Office for more information and assistance with your tax planning needs.)
Selected General Deadline Reminders for Individuals: December 31, 2010
Traditional IRA to Roth IRA Conversion. Last date for taxpayers to convert a traditional IRA to a Roth IRA for the tax year 2010 (provided a taxpayer meets the other applicable criteria).
Keogh plan deadline. Keogh plans must be established by the last date of the year (December 31, for calendar year basis taxpayers) in order for contributions to be deductible for the tax year 2010.
Capital Gains and Losses. Capital gains and losses for individual taxpayers are determined by the last trading date of the tax year. This is the case even though the settlement date (the date the shares-sold are actually exchanged and cash is received by the broker) may be several days later. Thus, even though the settlement date may occur in early 2011 for shares sold on the last trading date of 2010, the capital gains and/or losses will be established in 2010.
Short Sale Gains (But not Losses). Gains on shares sold short are also determined by trading date because of an IRS ruling treating the transaction as a constructive sale. Thus, shares sold short for gain on the last trading date of 2010 will be treated as capital gains for the tax year 2010, even though actual delivery of the shares may occur in 2011. Note, however, that for losses on shares sold short, the losses are not deductible until the shares are actually delivered to a broker. Taxpayers should plan accordingly if a loss is anticipated.
Marital Status. Taxpayers should note in general that marital status as of the last date of the year will determine the status for the entire tax year 2010.
General Tax Calendar Deadlines and Information (From IRS Publication 509)
December 10:  Employees who work for tips. If you received $20 or more in tips during November, report them to your employer. You can use Form 4070.
December 15: Corporations. Deposit the fourth installment of estimated income tax for 2010. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.
Selected Tax Deadlines for Employers Based on Monthly Deposit Rule
Social security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in November by December 15, 2010.
Non-payroll withholding. If the monthly deposit rule applies, deposit the tax for payments in November by December 15, 2010.
Employer's Tax Deadlines: Payroll Due Dates for Deposit of Taxes for 2010 Under the Semiweekly Rule
Nov 24-26:
Dec 1
Nov 27-30:
Dec 3
Dec 1-3:
Dec 8
Dec 4-7:
Dec 10
Dec 8-10:
Dec 15
Dec 11-14:
Dec 17
Dec 15-17:
Dec 22
Dec 18-21:
Dec 27
Dec 22-24:
Dec 29
Dec 25-28:
Jan 3
Dec 29-31:
Jan 5
Excise Tax Deadlines
December 10: Communications and air transportation taxes under the alternative method. Deposit the tax included in amounts billed or tickets sold during the first 15 days of November.
December 14: Regular method taxes. Deposit the tax for the last 15 days of November.
December 28: Communications and air transportation taxes under the alternative method. Deposit the tax included in amounts billed or tickets sold during the last 15 days of November.
December 29: Regular method taxes. Deposit the tax for the first 15 days of December.
Have more questions about tax deadlines, or need help in planning for your year-end tax decisions? Call Sherayzen Law Office to discuss your tax situation with an experienced tax lawyer!

### Depreciation Deductions: Passenger Cars & Light Trucks, Vans and SUVs
Assuming that a taxpayer does not use the IRS standard mileage deduction, for qualifying vehicles used for business purposes and placed in service in 2009 or 2010, taxpayers may deduct various costs including depreciation, registration fees, insurance, and many others under the actual expense method.  This article will examine depreciation deductions for certain categories of vehicles.
Passenger Cars
For purposes of calculating depreciation, a car is defined to be any four-wheeled vehicle for use on public roadways, with a gross vehicle weight of 6,000 pounds or less (subject to certain exceptions).  Under the American Recovery and Reinvestment Act of 2009, taxpayers may generally take bonus depreciation of $8,000 for newly purchased cars placed in service for business use in 2009 (Congress has extended the bonus depreciation for 2010, as well).  Taxpayers may take an additional $2,960 maximum depreciation deduction for 2009 ($3,060 for cars purchased and placed in service in 2010).  The 2009 depreciation rates for subsequent years are as follows: $4,800 for the second year; $2,850 for the third year; and $1,775 for each tax year thereafter.  Depreciation limits are periodically adjusted for inflation.
Note that the above depreciation amounts assume 100% business use.  Depreciation amounts must be reduced proportionately by any personal use percentage that is less than 100% business use and more than 50%.  If business use is less than 50%, straight-line depreciation must be used (also reduced proportionately by personal use percentages) and the bonus depreciation amount is not available.  Bonus depreciation is also not available for purchases of used cars.
Light Trucks, Vans and SUVs
A light truck, van or SUV that has a gross vehicle weight of 6,000 pounds or less may also qualify for certain depreciation deductions.  As with passenger cars, an $8,000 bonus depreciation allowance is available for newly purchased vehicles in this category placed in service in 2009 or 2010.  For 100% business use, taxpayers may generally take an additional $3,060 maximum depreciation deduction for 2009 ($3,160 for 2010).  2009 Depreciation rates for vehicles in this category for subsequent years are as follows: $4,900 for the second tax year; $2,950 for the third tax year; and $1,775 for each tax year thereafter.
As with passenger cars, depreciation amounts must be reduced proportionately by any personal use percentage that is less than 100% business use and more than 50%.  If business use is less than 50%, straight-line depreciation must be used (also reduced proportionately by personal use percentages) and the bonus depreciation amount is not available.  Bonus depreciation is also not available for purchases of used vehicles in this category.
Do you have questions about maximizing your tax savings on newly purchased business vehicles or equipment?  Sherayzen Law Office can assist you with your tax needs.
Call NOW  to discuss your case with an experienced tax attorney!

### Business Tax Planning Lawyers: When to Schedule a Review with Your Business Tax Lawyer
While the exact schedule of your business tax planning reviews may often depend on the exact nature of your business, I want to point out in this article certain events which should trigger a review of your tax strategies by a Minnesota business tax lawyer.
A. Business Formation
A review of your business tax strategies should be scheduled during business formation or at least within several months of your company’s existence. Unfortunately, a lot of business owners neglect obtaining the advice of a business tax attorney during the first year of the existence of their businesses. The anxiety over what the future might bring and the desire to cut costs are usually proffered as the explanation of this tendency.
Yet, this is a mistaken view. In reality, it often leads to a completely opposite result: more money is being spent inefficiently, higher tax costs are incurred, and there is a higher likelihood of creating huge legal and tax liabilities down the road. A company may even go out of business due to its neglect of legal and tax planning.
One of the main functions of a business tax lawyer is to structure business transactions in such a way as to fully comply with U.S. tax laws (and the laws of other relevant tax jurisdictions where appropriate) while making sure that full advantage is taken of these laws to reduce and even eliminate business tax waste. For example, where appropriate, a business tax attorney may advise to hasten a purchase order in order to reduce tax liability in this tax year. If the purchase is being made in a foreign country, this business tax lawyer may advise that the contract is signed in that foreign country in order to offset foreign income that the company received from the sales of its product in that country. This may further favorably impact the situation with respect to the foreign tax credit.
B. One Month Prior to the End of a Fiscal Year
The next tax planning session should be scheduled about a month prior to the end of each fiscal year. By this time, sufficient economic data about the performance of the business should be collected by the company’s accountant. This will allow your business tax lawyer to review the assumptions about income and expenses that were made at the beginning of the fiscal year. Based on this review, the business tax attorney may revise the tax planning strategies and give advice on what to do during this last month of the fiscal year to make sure that full advantage is taken of the Internal Revenue Code provisions.
C. Business Tax Filing 
In order to maximize its benefits, business tax filing should consist of three steps. First, the accountant prepares a tax return for the business. If you use your tax attorney to prepare the tax return, then you can skip this step. Second, prior to filing the tax return, submit it for a review to your business tax lawyer. Following this step may bring two important benefits: a.) you get a “second opinion” on the tax return, and b.) the tax lawyer may modify the tax return in order to harmonize it with the rest of the business and tax planning strategies (which may sacrifice short-term benefits in order to achieve your company’s long-term business goals or reduce overall long-term tax liability). Finally, the third step is to use the already filed tax return in conjunction with the economic analysis and projections for the next fiscal year in order to formulate a new business tax plan. This new tax plan will later be reviewed at the end of the year as indicated in Section “B” above.
Thus, in reality, your business tax planning strategies should be reviewed at least twice a year by your tax attorney: while filing the tax return and at the end of the year. This holds true unless there is a material change of your company’s circumstances.
D. Material Change of Circumstances
Every time an event occurs that may materially modify the tax situation of your business, it is necessary to immediately contact your business tax lawyer to review the tax situation and tax strategies of the business. Moreover, it is important to remember that such situations are likely to give rise to additional tax compliance and legal liability issues which may be identified only by a tax professional.
E. Conclusion
Business tax planning should become a natural and routine practice of your overall business planning. In the long run, the benefits of tax planning are likely to far outweigh whatever immediate legal expenses your business may incur, not to mention the protection it offers against future legal liability. At the very least, two reviews of your business tax strategies should be scheduled during a fiscal year: when you file your business taxes and about a month before the end of the year. If an event occurs that may materially change the tax situation of your company, then an emergency tax and legal liability session with your business tax lawyer should be scheduled.
Sherayzen Law Office can help you throughout this process. We can help you properly analyze your business tax situation, identify the problems and opportunities, and adopt the right business and tax strategies to take full advantage of the U.S. tax laws while reducing potential future liabilities.
Call to discuss your tax situation with Mr. Sherayzen an experienced business tax lawyer!

### Office of Administrative Hearings:  Sources of Procedure and Procedural Rights
If you appealed your business license denial and your case is pending effectively in the Office of Administrative Hearings, it is essential to understand the procedural rules of this administrative court as well as your procedural rights. This means that you and/or your attorney must have a good understanding of the sources of the administrative rules and procedural rights.
There are five main sources of the administrative procedure, including procedural rights, for the cases pending in the Office of Administrative Hearings. First, the Due Process Clause of the U.S. and Minnesota constitutions. Due process rights must be afforded to parties irrespective of whether they are explicitly mentioned in a relevant statute. The two most important rights include: a right to notice and a right to a hearing. A deep understanding of the due process clause may be required to mount an effective defense against the state’s claims or to support your arguments for approval of your business license application.
Second, Minnesota Administrative Procedure Act can be found in Chapter 14 of the Minnesota Annotated Statutes. It constitutes is an important source of the procedural rules for Minnesota state agencies, and, among other things, sets up the procedures for an agency’s rulemaking and applicant petitioning.
The most direct source of the OAH procedures are the rules of the Office of Administrative Hearings(OAH). The Rules can be found in Chapter 1400 of the Minnesota Administrative Rules. Knowledge of the rules is crucial for effective pre-hearing practice as well as the conduct of the actual hearing.
Fourth, a specific statute or an agency’s procedural rules may provide for the specific procedural rules and even substantive requirements.
Finally, where an agency or the OAH has not promulgated a rule to govern unanticipated circumstances, the administrative law judge is likely to rely on the Minnesota Rules of Civil Procedure. In fact, the OAH rules specifically mention the Rules of Civil Procedure as a guide for an administrative law judge in situations where the administrative rules are silent.
I have already detailed elsewhere (click here) the great importance of timely hiring an attorney to represent you in case of a business denial appeal. Here, I will just reiterate that hiring a business lawyer knowledgeable in the OAH rules and procedures is likely to save you nerves, time, money, and even determine the outcome of your case.
Sherayzen Law Office can help you every step of the way in your business license denial appeal case. We will make the utmost use of the pre-hearing process and will provide a vigorous and creative defense of your interests during the hearing.
Call NOW to schedule the consultation!

### Section 179 Deduction for SUVs and Certain Other Vehicles
Section 179 of the Internal Revenue Code allows taxpayers to purchase certain types of vehicles for business purposes and write off the cost.  Specifically, taxpayers may expense up to $25,000 of the cost of any "heavy" SUV, pickup or van placed into service during the tax year, and used for over 50% for business purposes.  Both new and used vehicles may qualify for the deduction.
A heavy vehicle for the purpose of the statute is generally any 4-wheeled vehicle with a gross vehicle weight above 6,000 pounds and not more than 14,000 pounds.  Certain other specified vehicles are not subject to the $25,000 limit.  For qualifying heavy vehicles, taxpayers may take regular depreciation (20% for the first year) in addition to the $25,000 write-off.  However any percentage of non-business use below 100% must be reduced accordingly by the same percentage.
Call NOW to get help with your business tax return!

### Sherayzen Law Office Offers Skype-Enabled Video Conferences
Using Technology to Improve Delivery of Legal Services
At Sherayzen Law Office, we are always thinking about how to use new technology to improve the delivery of legal services to our clients. For this reason, we have been investing in the acquisition of new technologies and finding better ways to use the existing ones.
Starting October 1, 2010, Sherayzen Law Office announced that it will offer Skype-enabled video conferences to its clients throughout the United States. We foresaw that the benefits of such conferences to our clients are enormous because such conferences constitute a low-cost communication tool which is one of the closest approximations to a regular meeting. Due to this almost “face-to-face” effect, the online video conferences allows for an immediate build-up of trust between our attorneys and our clients which is commonly associated with in-person consultations.
How to Set-Up a Video Conference
Setting up a Skype-enabled video conference is easy. First, you either contact Sherayzen Law Office by phone or e-mail to schedule the consultation. Second, you pay online an invoice emailed by Sherayzen Law Office through the Paypal system. This is it! The consultation will be held at the time convenient for you.
International Business and Tax Services as well as Federal Tax Services Can Be Delivered By Out-of-State Attorneys
There is a mistaken view that your attorney always has to be in your town to help you with any legal issues. In reality, the issue is much more complex. Most states allow out-of-state attorneys to deliver international business and contract services as well as federal tax services to clients in their states. Virtually all states, however, severely restrict (often prohibit) an attorney’s ability to help his clients with respect to state-regulated issues and especially litigation matters.
Sherayzen Law Office offers its international contract and business services as well as federal and international tax services to its clients throughout the United States and the world. In fact, on November 18, 2010, Sherayzen Law Office announced that it will expand its Skype-enabled video conferences to its clients throughout the world. This provides our clients with an opportunity to obtain high-quality legal services at reasonable prices.
Call or e-mail us NOW  to set-up a Skype-enabled video conference with an experienced lawyer to discuss your international business, contract or tax issues!

### International Tax Lawyers | Passive Foreign Investment Company
Congress enacted the Passive Foreign Investment Company provisions (PFIC) as part of the Tax Reform Act of 1986 in order to deter U.S. investors from deferring or avoiding payment of U.S. taxes by investing in offshore entities. The PFIC rules are structured to provide a disincentive for U.S. investors to defer investment income taxes by owning passive investments in foreign companies that do not regularly distribute their earnings. If it is determined that a U.S. investor is a PFIC shareholder, there can be severe tax implications for the taxpayer.
U.S. taxpayers who are shareholders of PFIC are likely to pay a significant additional tax on realized gains from sales of PFIC shares, and on PFIC dividends that meet the definition of "excess distributions" (an “excess distribution” applies to gains or distributions that exceeds 125% of the average distributions for the previous three years, or less if applicable). In both cases, the tax is applied at the taxpayer's ordinary income tax rate, regardless of whether capital gains rates would typically apply. Further, an interest charge may be imposed, to offset the years of tax deferral in holding the offshore investment. As an additional disincentive, PFIC shares may not receive a stepped-up cost basis at the shareholder's death.
Definition of a PFIC and Two-Part Test
In general, a foreign corporation that is determined to be neither a "controlled foreign corporation" (CFC) as defined in IRC section 957, nor a "foreign personal holding company" (FPHC) as defined in IRC section 552, will be determined to be a PFIC if it includes at least one U.S. shareholder and meets either one of the two tests found in IRC section 1297. If at least 75% or more of its gross income is passive income (based upon investments as opposed to operating income), or if at least 50% of the average percentage of its assets are investments that produce, or are held for the production of passive income, the foreign corporation will meet the definition of a PFIC. Passive income generally includes interest, dividends, rents, capital gains, and similar items. There is no requirement of ownership of a certain minimum percentage of shares, as there is with CFCs or FPHCs. Thus, if the test is met, PFIC status will apply, even if a shareholder owns a minimal percentage of shares with no ability to influence the business decisions of the company.
The PFIC rules apply to each U.S. person (the precise definition of who constitutes U.S. person is beyond the scope of this article, but it may become an issue in many situations) regarding who a shareholder of a PFIC is. PFIC rules, however, do not apply to foreign shareholders or the foreign corporation itself. PFICs may include different types of entities such as various investment vehicles and foreign-based mutual funds.
Two options are commonly suggested by the U.S. tax lawyers to the shareholders in order to avoid PFIC taxation burden: Qualified Election Fund and Mark-to-Market. Both of these options, however, have their own peculiar characteristics and impose different types of tax obligations on the shareholders.
Qualified Electing Fund
In general, U.S. shareholders who own shares either directly or indirectly in a PFIC may be able to avoid the burdensome standard PFIC taxation provisions by electing to treat the PFIC as a Qualified Electing Fund (QEF) on Form 8621. Shareholders making this annual election are taxed on their pro rata share of the PFIC's ordinary earnings as ordinary income, and their pro rata share of the net capital gains as long-term capital gain. A shareholder's basis in the stock of a QEF is increased by the earnings included in gross income and decreased by a distribution from the QEF to the extent of previously taxed amounts. Finally, U.S. shareholders interested in making this election must also be able to obtain the required information from the PFIC.
While treating a PFIC as a QEF may be beneficial in that it allows taxpayers to opt out of the standard PFIC tax and interest rules, it also forces shareholders to pay taxes currently on undistributed income earned by a foreign corporation. Thus, QEF may be of limited use to taxpayers who lack adequate liquidity to pay taxes. Another important point about a QEF is that, due to the complexity of the rules and possible additional tax amounts, if the decision is made to elect QEF treatment of PFIC, it may be advisable to elect a QEF in the first year of holding an offshore investment.
Mark-to-Market
Another option for U.S. shareholders of a PFIC (who do not elect to treat a PFIC as a QEF), is to elect the mark-to-market method. This election is only available if the shares are considered "marketable stock". Marketable stock is regularly traded stock with an ascertainable value on recognized exchanges as defined in the IRC regulations. If the shareholder elects to mark the stock to market, he will annually report, as ordinary income, the amount equal to any excess of the fair market value (FMV) of the PFIC stock as of the close of the taxable year over the adjusted basis of the shares (i.e. as if the shares had actually been sold at FMV). If the adjusted basis of the PFIC shares exceeds its FMV as of the close of the taxable year, the shareholder may generally deduct an ordinary loss (subject to certain statutory limitations).
Shareholders who directly own shares in a PFIC electing the mark-to-market method may increase their adjusted basis in PFIC shares through income recognized, and decrease the adjusted basis through deductions taken.
Conclusion
The tax issues surrounding PFICs are very complex and should be handled by a tax professional. Sherayzen Law Office can help you analyze your tax situation, determine whether PFIC rules apply, identify the alternatives in light of your whole tax situation, and implement the tax strategy most suited to your business and investment needs.
Contact Sherayzen Law Office to discuss your tax situation with an experienced tax lawyer!

### Capital Gains and Losses: Tax Implications for Individuals and C-Corporations
Capital gains and losses defined
Capital gains and losses result from the taxable realized sale or exchange of capital assets. In general, capital assets include investments (such as stocks and real estate) and fixed assets, as opposed to personal-use property.
Capital gains result when the sale or exchange price is greater than the adjusted basis of the capital asset. Conversely, capital losses occur when the adjusted basis is higher than the sale or exchange price, and certain expenses associated with the sale may be added to the loss. The holding period of the capital asset being sold or exchanged will determine whether the capital gain or loss is long-term (held for more than a year) or short-term (held for less than a year).
Netting Capital Gains and Losses (Individual taxpayers)
Each taxable year, capital gains and losses are aggregated or "netted" on Schedule D. First, long-term capital gains and losses are netted. Second, short-term capital gains and losses are netted. Four possible scenarios will result from this two-step process:
Scenario A: A long-term gain and short-term gain
Scenario B: A long-term gain and short-term loss
Scenario C: A long-term loss and short-term gain
Scenario D: A long-term loss and short-term loss
In scenario A, the short-term gain will be taxed with the taxpayer's ordinary income at his or her marginal rate. For the long-term capital gain, the favorable long-term capital gains tax rate will apply, depending upon the taxpayer's tax bracket.
In scenario B, there are two possible outcomes depending upon which result is larger, the loss or the gain. If the short-term loss is greater than the long-term gain, a net short-term loss will result, and up to $3,000 can be used to offset other income, with additional amounts can be carried forward to subsequent tax years. Alternatively, if the long-term gain is larger than the short-term loss, then a net long-term gain will result, and the favorable long-term capital gains tax rates will apply.
In scenario C, there are two possible outcomes depending upon which result is larger, the loss or the gain. If the long-term loss is larger than the short-term gain, then a net long-term loss will result, and (as with scenario B) up to $3,000 can be used to offset ordinary income. Any unused amount above $3,000 can be carried forward to subsequent years as long-term loss. Alternatively, if the short-term gain is larger than the long-term loss, then a net short-term gain will result, and it will be taxed at the taxpayer's marginal rate.
In scenario D, there are several possible outcomes. First, if the total long-term and short-term losses combined total $3,000 or less, then the amount may be used to offset ordinary income. However, if the total amount of short-term losses exceed $3,000, then the first $3,000 of short-term loss will be applied to offset other income, and any remainder will be carried forward to subsequent years as a long-term loss. If the short-term loss is less than $3,000, then that amount will be applied to offset ordinary income, and any amount of available long-term loss making up the difference between the short-term loss applied and $3,000 will also be used to offset ordinary income (with the additional, unused amounts carried forward).
Capital Gains and Losses (C Corporations)
C corporations, unlike individuals, do not receive favorable tax rate on capital gains. Capital gains must be included as part of ordinary income, in their entirety.
Further, capital losses must be used only to offset capital gains, and are non-deductible against ordinary income for C corporations. Net capital losses can be carried back to the three preceding years (and are applied in chronological order, beginning with the earliest tax year) provided the corporation has capital gains to offset. Additionally, corporate taxpayers may carry forward the capital loss five years from the year of loss, again provided that there are capital gains to offset. Carryforwards expire after the fifth year. Importantly, all losses carried back or forward are considered to be short-term.
Offsetting Capital Gains and Losses 
Are you a taxpayer interested in benefiting from the capital gains and losses tax rules? Do you have questions about selling capital assets such as stocks or real estate for tax purposes, and how to best time your transactions in order to pay less taxes? Are you concerned about how new capital gains and loss tax changes may affect your situation?
Sherayzen Law Office can guide you with all of your capital gains and losses questions, and help you plan ahead so that you pay less taxes.
Call NOW to discuss your case with an experienced tax attorney!

### Preparing for Business Contract Litigation in Minnesota: Recordkeeping Techniques
Since most of the business-to-business relationships are organized on the basis of written business contracts, it is inevitable that contract disputes would arise between businesses. Frequently, these disputes are serious enough to lead to business contract litigation between the relevant parties
Therefore, it is important for any business to prepare for such a possibility ahead of the actual commencement of the contract litigation. One of the most crucial (to the success of such litigation) tasks of a business owner is to maintain good records. Proper recordkeeping is essential to successful contract litigation, and, hence, this article lists the following five techniques for the business owners on what type of business records should be kept and how to best organize them.
1. Keep an original copy of your contract
Keeping your original copy is the most basic step in preparation for a contract litigation. Yet, it is shocking how many business owners ignore this. By “original copy” of a contract, I mean one of the counterparts of the contract which bears the original signatures of all parties. Where only one copy of a contract is signed, then you should keep this original. If, for some reason, the decision is made that the other party would keep a copy of a contract, you should request a copy of the contract for your records. This situation is especially common in joint ventures and inter-corporate agreements, but it is very unusual in business-to-business dealings.
The contract should be kept in a separate folder in a safe place. However, do not file your contract in a place that you would not remember. If your business has designated an officer of your company to keep business records, you should make sure that you know the filing system adopted by that officer and where the most important files are.
2. File “negotiation” notes and documents
In addition to the contract itself, you should file all notes, documents, and printed copies of e-mails that were produced in connection with the negotiation of a contract. “All” means “all” – any of these documents may be important to resolve an ambiguity in the contract later as well as to demonstrate a party’s intent.
There are two types of “negotiation” materials: exchanged and internal. The exchanged materials are the notes and documents that were shared with the other parties to the contract during the negotiation process. Generally, in a business-to-business setting, these types of documents are not covered by the attorney-client privileged. Absent a non-disclosure agreement stating to the contrary, it is likely that these documents would not even be considered as proprietary.
The internal materials are the notes and documents that were produced in connection with the negotiation process but were never shared with anyone outside of the company (with the exception of the company’s business lawyer). Examples could include: internal profit-loss assessments, corporate documents (such as board memorandums), assessment of risk, and so on. These documents should be marked as “proprietary information” and filed in a separate folder also marked as “proprietary information.”
Moreover, the internal documents produced by the company’s lawyer should be marked as “attorney-client privileged”; such documents should be filed in a separate folder also marked as “attorney-client privileged”.
All folders of exchanged and internal materials, including the folder containing attorney-client privileged information, should be kept together with the contact. Such organization of documents will be very useful for discovery purposes during the litigation and can save you thousands of dollars in attorney and accounting fees.
3. File Contract-Modification Materials
Documents discussing and potentially modifying the already executed contract should also be filed in a separate folder and kept together with the rest of the documents described above. While some of these documents may be obvious (such as a letter entitled “Request for Contract Modification), others may be much more difficult to classify, especially if the potentially modifying circumstances are not explicitly discussed in the contract.
Therefore, in order to take full advantage of this advanced recordkeeping technique, the business owner should consult his lawyer. An experienced legal professional with deep understanding of contact law and the facts of a specific case is in the best position to determine which documentary materials may be construed as contract modification.
4. Document Contract Performance 
This is another sophisticated recordkeeping technique that requires understanding of the term “usage of trade”. Armed with this knowledge, your business lawyer will be able to determine how to document the parties’ contract performance and whether this performance is modifying or has modified the contract.
5. Record Your Company’s Intent and Understanding
This is probably the most flexible advanced recordkeeping technique aimed specifically at the possible future contract dispute. Basically, this is a technique that uses the management structure of the company to create business records regarding the intention and interpretation of a contract. As business records, this evidence of intent and understanding will most likely be admissible in court. The most common example of this technique are corporate board minutes (in the corporate context) or Board of Governors resolutions (for the LLCs).
Again, due to the level of sophistication and legal knowledge required to accurately record a company’s intent and understanding of a contract, it highly advisable that you hire a business lawyer to draft the relevant documents.
Conclusion
Good recordkeeping is crucial to successful business contract litigation. The techniques listed above do not constitute an exhaustive list of recordkeeping suggestions, but they should provide the minimal necessary structure that is likely to be cost-effective and highly efficient in a contract litigation context. Not all of the techniques cited in this article can be implemented by a business owner. Therefore, it is crucial to retain the services of a business contract attorney to fully protect from and prepare your business for the possible contract litigation in the future.
Sherayzen Law Office can help you create and implement a recordkeeping system appropriate for your industry and compatible with your business model.
Call NOW to discuss your case with an experienced business contract lawyer!

### Contract Lawyers Minneapolis | Getting Out of Contract in Minnesota
This is an odd article to write for a Minnesota contract lawyer who spends most of his contract law practice making sure that the terms of a contract are enforceable.  Yet, occasionally, I have clients who are looking for a way to get out of a contract for many reasons.  Some of these clients suddenly found themselves in a situation where compliance with the contract terms is no longer economically feasible or desirable. Others have personal reasons which make continuation of compliance with a contract non-practical and even personally disagreeable (especially in business partnerships).
Lawyer-Written versus Non-Lawyer Written Contracts
For the purposes of getting out of contract, the situations where one party suddenly wishes to attack the enforceability of a contract can be divided into two large categories.  The first category involves contracts written, or rather copied from other sources (especially Internet), by the parties themselves.  In this case, the contracts are usually inadequately drafted and contain many errors and omissions.  Naturally, this type of contracts is much easier to attack for someone who wishes to avoid his contractual obligations.
On the other hand, the contracts in the second category are drafted by Minnesota contract attorneys.  Usually, these contracts are based on the court-tested provisions, involve multiple levels of defense, constrict venues of attack, and prescribe certain procedures for disputing the enforceability of the contract. These contracts present a much more difficult target than those in the first category.
Methods for Getting Out of Contract
Irrespective of the category to which a contract belongs, Minnesota contract litigation lawyers usually utilize five broad methods for helping their clients avoid their contractual obligations.
1.  Exit Provision in the Contract
First, the most simple method is to take advantage of the provisions that a contract already contains.  Most of the contracts I draft for my clients contain negotiated “exit” provisions, which prescribe the procedure for either contract termination or withdrawal of a party from a contract.
This is especially true in the case of entity governance contracts such as Partnership Agreements, Member Control and Operating Agreements (for multi-member LLCs), corporate Bylaws, and so on.  Also, Independent Contractor Agreements, in order to comply with law, often include a very detailed contract termination procedure. Sales contracts often utilize a “liquidated damages” clause to cap the amount of damages.
2.  Validity of Contract
The second method is to attack the validity of the contract itself.  Some of these attacks, such as lack of adequate consideration or the Statute of Frauds, will be based on the terms or form (i.e. oral versus written) of a contract; others, such as lack of legal capacity or the doctrine of unconscionability, will focus on the broad factual context which led to the creation of the contract.  The precise method of attacking the validity of the contract should be chosen by a Minnesota contract litigation lawyer (if you live in Twin Cities, try locating a Minneapolis contract litigation attorney or St. Paul contract litigation attorney).
3.  Contract Construction
The third method is to reinterpret the contract in such a way as to modify parties’ obligations.  Here, the issue is the contract construction – interpretation of contractual terms based on the rules of contract construction and the facts of a specific case, including the parties’ course of dealing.  If this is a contract for a sale of goods, UCC terms may determine the outcome.  This method requires a very deep understanding of contract law.  Therefore, only Minnesota contract litigation lawyers should be involved in implementing this strategy (again, if you live in Twin Cities, try locating a Minneapolis contract litigation attorney or St. Paul contract litigation attorney).
It should be noted that contract construction is involved to a varying degree in all of the methods described in this article.  This is why it is crucial to retain a Minnesota contact lawyer as soon as possible.
4.  Excuse for Non-Performance
The fourth method is to find an excuse for the non-performance of a party’s obligations under the contract.  Notice the difference between the fourth and the second method – in the fourth method, the contract is assumed to be valid, but a party’s breach of this contract is discharged for some reason.   Examples of this method include: doctrines of Impossibility and Frustration of Purpose, discharge by a later contract (for example: rescission, release, et cetera), change in law, and so on.  It is up to your particular Minnesota contract litigation lawyer to determine which of these excuses applies and how to prove it in court.
5.  Breach
Finally, the fifth method is to just breach the contract.   Generally, there are two situations where a Minnesota contract lawyer may advise this course of action.  First, whether the benefits of the breach of contract are likely to substantially outweigh the damages the breaching party will need to pay.  Second, where the contact is breached in such a way as to significantly reduce the damages.   Again, the circumstances of a particular case will determine whether this method should be utilized.
Conclusion
Getting out of contract in Minnesota is not easy.  Yet, it may be possible if there is a right combination of facts and legal strategy.  Once the plan of attack is established, its implementation will require skillful implementation by your contract lawyer.
Sherayzen Law Office can help you analyze your case, choose the legal strategy right for you, and vigorously and skillfully implement this strategy in negotiations as well as in court.
Call NOW to talk with an experienced contract law attorney!

### Contract Litigation Lawyers Minnesota | Understanding Contract Litigation
Contract litigation permeates the very fabric of advanced economic societies. The primary reason for this widespread presence of this type of litigation is because contracts provide the most common and basic means of conducting transactions between individuals and especially businesses. Contracts, whether written or oral, govern the everyday economic relations. Every time you buy something for a certain price at a store, you agree to a contract. Every time your business hires a worker, it enters a contract.
Since contracts can be found almost everywhere in our economic lives, it is little wonder that disputes often arise between the parties about the exact terms of what they have agreed to or what their contractual obligations are.
Contract litigation is a civilized way to settling these contract disputes. It is a process where the parties to a contract, usually represented by contract litigation attorneys, present their respective arguments to an impartial judge of the relevant jurisdiction the laws of which govern the interpretation of the contracts and even which laws apply. Usually, the parties’ arguments revolve around three common themes. First, interpretation of the contract and the parties’ rights and obligations. Second, enforcement of a party’s contractual rights or obligations. Third, obtaining remedy for whatever damage produced as a result of the other party’s breach of contract. Usually, the remedy is limited to recovering damages, but there are situations where a party will seek an order from the court to compel the other party to perform as promised (this is known as "specific performance"). In some situations, an injunction prohibiting a party from doing something may be appropriate.
A lot of people unfamiliar with contract litigation commit a common mistake of thinking that contract interpretation is limited solely to the language that can be found in the contract itself. While ambiguous, competing or contradictory clauses may form the core of a party’s argument, contract litigation lawyers usually have to also analyze the particular facts of a case which may be relevant to the interpretation of the disputed language of the contract.
Beyond these basic litigation themes, contract litigation involves a myriad of other procedural and substantive decisions: assessment by contract litigation lawyers of whether a case should be litigated, where to file the case, the laws of which jurisdiction of should apply, what evidence should be presented, who should testify, how would a judge interpret the contract given the trends in the laws of a relevant jurisdiction, and so on. Therefore, it is very important to involve a contract litigation lawyer as early as possible in the contract litigation process.
Sherayzen Law Office can guide you through this labyrinth of procedural and substantive issues and litigate the case for you. When you retain Sherayzen Law Office to represent you in a contract dispute litigation, you get a vigorous advocate of your legal position who is thorough, detail-orientated and possesses strong litigation skills, with the analytical ability to identify and achieve effective resolutions. We recognize that litigation is a means to an end and structure our litigation strategies in such a way as to protect and enforce your business interests.
Call NOW  to discuss your case with a Minnesota contract litigation lawyer!

### Federal Income Tax Litigation: the Basics
When taxpayers file their income tax returns, a determination of tax is made. The IRS must then "assess" a tax liability in order to collect the amount owed. Generally, the period for assessment is three years from the due date, or from the date the return is filed, whichever is later (see this article for more details on the IRS statute of limitations).
If the IRS questions a tax return, it may then begin the audit process. The IRS may conduct its audit at the taxpayer's place of business ("field audit"), in IRS offices ("office audit"), or by correspondence. If the IRS agent then determines after the audit that a tax deficiency exists but the taxpayer does not agree, the revenue agent will then send the taxpayer an examination report called, "Revenue Agent's Report" along with a letter termed a, "30-day letter". The 30-day letter details various information and informs the taxpayer that he/she has a right to request a hearing with the IRS Appeals Division within 30 days.
At this point, the taxpayer has three options: (1) accept the IRS' determination of the tax deficiency, (2) appeal to IRS Appeals, or (3) simply disregard the letter and wait for the next IRS notice. If the taxpayer then appeals to IRS Appeals and is unable to settle the case, or if the taxpayer simply disregards the 30-day letter, the IRS will then send a notice of deficiency letter called the, "90-day letter".
The 90-day letter gives a taxpayer several options. He may pay the amount owed based upon the IRS determination of deficiency and pursue refund tax procedures in U.S. District Court or the Court of Federal Claims. A taxpayer may also petition to the Tax Court within 90 days (unlike pursuing refund procedures, payment of a deficiency is not required in order to litigate in Tax Court). If the taxpayer's case involves less than $50,000 in dispute for each tax year, a taxpayer may file the case as a "small tax case" (also called, "S-case"). S-cases are advantageous for taxpayers who are arguing without legal counsel, as informal court procedures are used; however, right to appeal the case is waived. Finally, if a taxpayer does not respond to the 90-day letter at all, the tax deficiency is then assessed, and the amount owed may then be collected by the IRS if not paid within ten days. The IRS is required to give a notice and demand for payment within sixty days of assessing the deficiency.
If a taxpayer loses in Tax Court, the case may then be appealed to the Appellate Court in the Circuit the taxpayer resides when the case was filed (provided it is not an S-case). Alternatively, taxpayers who lost pursuing refund procedures in District Court may appeal to the Court of Appeals, and those who lost in the Court of Federal Claims may appeal to the Court of Appeals for the Federal Circuit. The U.S. Supreme Court will hear appeals for any of the Circuit Courts.
This is a very basic overview of Federal Income Tax Procedure and Litigation. It is important to note, that depending upon your case, it may be strategically necessary to litigate in traditional district court, as opposed to Tax Court. This will involve more formal legal procedures.
Sherayzen Law Office can help you analyze your case, choose the appropriate litigation venue for the appeal, and vigorously represent your interests before the IRS and in courts.
Call NOW to discuss this case with an experienced tax attorney!

### Minnesota Business Lawyers: Applying for a Business License
In many industries, obtaining a business license is one of the most significant prerequisites for doing business in Minnesota. Paradoxically, despite its importance, too many businesses resist involving Minnesota business lawyers in this process from the very beginning – at the stage of the business license application preparation. Instead, attorneys throughout Minnesota (including Minneapolis business attorneys and St. Paul business attorneys) are involved in the process only after the business license application is rejected by the relevant state agency.
There are two primary reasons for the late involvement of Minnesota business lawyers in the process. First, business owners believe themselves perfectly capable of filling-out a license application. Second, small businesses are always looking for a way to cut costs and think they are saving money by involving business lawyers only by the time of an administrative appeal hearing.
Both motivations are flawed. A business license application often involves much more than simply filling out the basic information and gathering the supporting materials (such as financial statements or criminal records). The key to a successful application is the ability to spot potential issues and fix the problems prior to the submission of the application to the government agency. It is true that Minnesota business owners are smart and energetic individuals perfectly capable of filling out an application. However, they often lack the necessary legal experience and training to identify potential problems and know how to fix them.
Second, it is much cheaper to involve an attorney at an early stage of the business license application process than to deal with the problems at an administrative appeal hearing. Prior to the submission of the application to the agency, the attorney should be able to review the application filled-out by the owner and all of the supporting materials, spot potential problems, and advise on how to fix these problems immediately. Even after the application is submitted and the relevant Minnesota government agency raises an objection, involving an attorney who may be able to negotiate the solution to the problem prior to the final agency determination may prove to be very cost-effective.
By the time the application is rejected, however, Minnesota business license appeal lawyers will have to deal with a prolonged process defending the business owner’s interests. Even worse, in many cases, the burden of proof may be on the initial applicant, which means, for example, that a business lawyer would have to prove that the government more likely than not committed an error of judgment (or some other legal theory).
In sum, litigation is almost always more expensive than the prophylactic measure of involving a Minnesota business license lawyer at an early stage of the business license application process. At the very latest (i.e. the last opportunity to save the application while lowering legal expenses), the business owners should involve Minnesota business lawyers at the time when they receive the first request for additional information from a relevant Minnesota government agency.
Sherayzen Law Office can help you at every stage of the business license application process, starting from the initial review of the application to dealing with the government agencies , handling the administrative appeal hearing, and litigating further appeals to the district court and higher appellate courts if necessary.
Call  to speak with an experienced Minnesota business license application lawyer!

### Innocent Spouse Relief
In general, a husband and wife are jointly and separately liable for any tax, penalty and interest owed for a year in which they have filed a joint tax return. This means that the IRS can collect the entire amount of tax owed from either spouse alone, regardless of who reported income, or who may have been responsible for errors, omissions, or fraud on a tax return. Joint and several liability thus can potentially result in a situation where substantial amounts of taxes, penalty and interest are owed by one spouse due to the errors, omissions, or fraud committed by the other spouse.
Difficulties involving joint and several liability tend to arise especially when spouses have divorced or separated, and are no longer living together after they have filed a joint tax return. A spouse who is responsible for the errors, omissions, or fraud in a tax return may have an incentive to not cooperate with the former spouse, and may be difficult to even locate. However, due to the fact that a joint return was filed, the IRS could collect the entire amount of tax, penalties, and interest owed from the spouse who was not at fault for the problematic tax return.
In order to provide a remedy for this unjust outcome, in certain circumstances, the IRS allows a spouse, who lacked knowledge of a tax understatement and did not engage in activity giving rise to the understatement, to claim “Innocent Spouse Relief” resulting in full or partial relief from the payments and penalties associated with an understatement of tax made by another spouse.
Legal Test for Innocent Spouse Relief
In order to qualify for Innocent Spouse Relief, all five of the following conditions must be met:
1. A taxpayer must have filed a joint return for a taxable year.
2. On the tax return, there was an understatement of tax attributable to “erroneous items” (see definition below) of a spouse (or former spouse).
3. A taxpayer must establish that when he/she signed the joint return he/she did not know (“actual knowledge”) and “had no reason to know”, that there was an understatement of tax.
4. Taking into account all the facts and circumstances, it would be unfair to hold the taxpayer liable for the deficiency in tax for such taxable year attributable to the tax understatement; and
5. A request for innocent spouse relief will not be granted if the IRS can prove that the taxpayer requesting Innocent Spouse Relief and the taxpayer's spouse (or former spouse) transferred property to one another as part of a fraudulent scheme. (A fraudulent scheme includes a scheme to defraud the IRS or another third party, such as a creditor, ex-spouse, or business partner.)
Definitions
a) Erroneous Items: an “item” for the Innocent Spouse Relief purposes generally means anything that is required to be reported separately on a tax return or its attachments. There are two types of erroneous items. The first is unreported income, which is any gross income item received by a spouse (or former spouse) that is not reported. The second is an any improper deduction, credit, or property basis claimed by a spouse (or former spouse).
b) Actual Knowledge: if taxpayer requesting Innocent Spouse Relief actually knew about an
erroneous item that belongs to his/her spouse (or former spouse), then the taxpayer will not qualify for Innocent Spouse Relief, and will remain jointly liable for that part of the understatement.
c) Reason To Know: If a reasonable person in similar circumstances would have known of the
understatement, then the taxpayer will not qualify for Innocent Spouse Relief, and will remain jointly liable for that part of the understatement. The IRS will consider a number of facts and circumstances in determining whether a taxpayer had reason to know of an understatement of tax due to an erroneous item, including the taxpayer's educational background and business experience, the financial situation of both spouses, the nature of the erroneous item and the amount of the erroneous item in relation to other items, the extent of the taxpayer's participation in the activity that resulted in the erroneous item, whether a reasonable person would have inquired at the time the tax return was signed about the erroneous items, omitted items on the return, and whether the erroneous item represented a departure from a recurring pattern reflected in prior years' returns.
d) Indications of Unfairness: The IRS will examine a number of factors including, whether the taxpayer's spouse (or former spouse) deserted him/her, whether the taxpayer and his/her spouse have divorced or separated, whether the taxpayer benefitted from the understatement on the return, and whether the taxpayer received a “significant benefit” (any benefit in excess of normal support), including transfers of property or rights to property, and transfers that are received several years after the year of the understatement.
Types of Innocent Spouse Relief
There are three types of Innocent Spouse Relief available:
1. Full Relief from tax liability (including penalties and interest) for a taxable year to the extent that the liability is attributable to the tax understatement on the joint return. There are certain requirements which must be met in order to qualify.
2. Apportionment of Relief from tax liability (including penalties and interest) for a taxable year. Under this type of innocent spouse relief, the understatement of tax is apportioned between the taxpayer and his/her (or former spouse). In order to meet this type of relief, a taxpayer must show that he or she did not know, and had no reason to know, the extent of understatement on a tax return. If granted, the taxpayer will be relieved of a tax liability to the extent that such liability is attributable to the portion of the understatement that the taxpayer did not know, or did not have reason to know that was in error or omitted.
3. Equitable Relief may be granted if an individual does not meet the requirements for the first two types of relief, but, after taking all the facts and circumstances into consideration, the IRS determines it would be inequitable to hold the taxpayer liable for the unpaid tax.
How Sherayzen Law Office can Assist You
Requesting Innocent Spouse Relief may require legal expertise because of the specificity of the requirements involved, and the necessity of persuading the IRS that you qualify for this relief. Moreover, in some cases, the Tax Code regulations governing the Innocent Spouse Relief process may themselves be challenged in courts. Sherayzen Law Office can help you understand and comply with the required regulations, draft the necessary documents and represent you in your negotiations with the IRS in order to help you limit your tax liability.
Call NOW to discuss your case with an experienced tax attorney!

### Internet Sales and Use Taxes: A Growing Concern for Small Businesses and Consumers
Are you a small business owner who frequently sells goods or services over the Internet, or a consumer who purchases expensive products online?  Then you may be responsible for charging sales taxes as a seller, or reporting unpaid use taxes as a consumer under new laws that have been passed by various states.  As states look for ways to reduce budget deficits, merchants and consumers should expect to see collection of sales and use taxes become a top priority, and this may require sound tax advice.
Sales and Use Tax Defined
Sales taxes
Sales taxes are state or local taxes based upon a set percentage of the sales price of a product or service.  Almost all states have sales taxes, except Alaska, Delaware, Montana, New Hampshire and Oregon.  Likewise, most states charge sales tax for Internet purchases made in the state. Certain types of products may be exempt from sales taxes, such as clothing, prescription drugs and some foods and beverages in Minnesota.
Where sales taxes are applicable, merchants who sell via the Internet charge the appropriate sales tax rate for the location of the buyer.  For example, a California merchants selling a product to a Minnesota consumer online, would charge the appropriate Minnesota sales tax rate, and then remit the collected tax amount to the state of Minnesota. (Certain exemptions may be applicable in some states depending upon whether the buyer is a consumer or a reseller.)
Use taxes
Use taxes for Internet or mail order purchases, apply when consumers located in a state with a sales tax, purchase goods or services for use in their home state, but are not charged a sales tax (or are taxed at a lower rate than in their home state) by the merchant.  In such transactions, the consumer still owes a tax to their home state.  Use taxes, unlike sales taxes however, are paid by the consumer.  Use taxes that were not paid at the time of sale may be reported on a taxpayer's state income tax form. Nearly half the states, including California and New York, include a line on individual state income tax forms for taxpayers to voluntarily calculate their use tax liability amount.
Difficulties with Collection of Internet Sales and Use Taxes
A 1992 Supreme Court decision, Quill vs. North Dakota, held that mail order retailers do not need to collect sales taxes unless they have a physical presence in the state of the customer purchasing its product or service.  Physical presence may include a store, office, warehouse, or similar facility.
This decision was subsequently applied to exempt Internet retailers that met the requirements.  Even though sales taxes are still legally due in circumstances in which an online merchant does not have a physical presence in a customer's state, such taxes however are rarely reported by customers.  Because of the difficulties in tracking online purchases, states often resorted to attempting to collect online sales taxes for expensive items (often requiring licenses to use the good), such as an automobile.  In Minnesota, for example, residents are required to pay sales taxes on any online purchases that total $770 over the course of a year.
As many individuals increasingly began using the Internet to purchase goods and services however, states looked for new ways to collect sales taxes.  In 2002, 40 states and the District of Columbia joined together to create an initiative called the Streamlined Sales and Use Tax Agreement (SSUTA) to simplify sales tax collection efforts.  Although compliance with SSUTA is non-binding, according to recent numbers, nearly 1,200 online retailers now voluntarily collect sales taxes.
Future of Sales and Use Taxes: Collections Likely to Increase 
Sales taxes make up the second largest source of state revenue, following individual income taxes.  Thus, with many states facing widening budget deficits, the trend is for states to increasingly pursue collection efforts for unpaid sales and use taxes. Recently, state legislatures in New York, North Carolina, and Rhode Island have enacted laws requiring online retailers to collect sales taxes if the retailer operates an 'affiliate program' with payments to individuals in return for customer referrals.  Similar legislation has been proposed in at least fifteen other states.  In Colorado, a new law requires online retailers that run affiliate programs to notify customers of applicable use taxes that must be paid.
The fate of state efforts to increase collection of online sales and use taxes may hinge in part on lawsuits brought by online retailer Amazon.com challenging some of these laws.  In challenging the constitutionality of New York's law, Amazon argued that sending referral payments to its customers through an affiliate program does not constitute a physical presence in a state.  Amazon however lost a case in trial court, and has since appealed.  Additionally, the company recently filed a lawsuit in federal court challenging North Carolina's law.  States have also filed lawsuits against certain online retailers in an effort to collect unpaid sales taxes and enforce existing state laws.
In addition to the various state laws and pending proposals, federal legislation has been proposed to require most online retailers to collect sales taxes in any states that have joined the Streamlined Sales Tax Project and have passed legislation complying with SSUTA.  If the proposed federal legislation eventually becomes law, it would thus override the physical presence requirement.  Twenty-three states are members or associate members of this project: Arkansas, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.  The proposed law may also allow retailers to retain as an allowance, a small percentage of the sales tax collected, in order to cover reasonable expense for their sales tax collection efforts and tax return filings, as well as other associated costs.
Conclusion
All of the various state and federal legislative initiatives indicate that the states are stepping up their efforts to collect sales and use taxes.  This will likely produce an increased complexity of the Internet tax laws with which both, Internet retailers and consumers, will have to comply.  Remember, a tax-collection mistake may become very expensive for the involved partes since the unpaid taxes may be subject to penalties and interest.
Sherayzen Law Office can help you navigate this ever-changing tax landscape. Call NOW to discuss your case with an experienced tax attorney!

### Preventing the Disaster: Understanding When to File the Report on Foreign Bank and Financial Accounts (FBAR)
Despite the potentially grave consequences, many U.S. taxpayers are completely unaware of the extensive reporting requirements under the Bank Secrecy Act, particularly of the disclosure of ownership or other interest in or authority over financial accounts in a foreign country by filing the Report of Foreign Bank and Financial Accounts (the “FBAR”). While one can often fault the desire for secrecy on the part of the taxpayers or insufficient diligence of their tax advisors, it seems that the greater part of the blame for this failure should be ascribed to the ever-increasing scope of the reporting requirements (for example, see increasing disclosure requirements and new penalties imposed under Title V of the Hiring Incentives to Restore Employment Act). A person with a foreign account of only $10,500 is unlikely to imagine that he needs to file every year unfamiliar additional paperwork by a date which usually does not coincide with the rest of his tax filings. Nor is this person likely to forward to his tax advisors any information about the account. Given the severe penalties for non-compliance, however, the tax practitioners must be able to alert their clients to the FBAR requirements. This is precisely the purpose of this essay – to clarify for tax attorneys and other tax advisors the situations in which their clients need to file the FBAR. First, I will discuss the definition of “U.S. persons” who may need to file FBARs. Second, I will explain the crucial term “financial accounts.” Then, I will review the procedures for determining the aggregate maximum value of these accounts. I will turn next to the confusing issues of what constitutes a financial interest in or signature and comparable authority over a “financial account.” Finally, I will examine the consequences of failing to file the FBARs.
General Requirements of the FBAR 
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 the 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. Thus, the FBAR filing is required if four conditions are present:
1). The filer is a U.S. person;2). There is one or more financial accounts in a foreign country;3). The aggregate balances of these foreign financial accounts exceed $10,000; and4). This U.S. person has either a financial interest in or signature authority (or other comparable authority) over these foreign financial accounts.
Definition of “U.S. Person”
Since October of 2008, the definition of a “U.S. person” has been going through a turbulent phase of uncertainty with periodic expansions and retractions. The pre-2008 FBAR instructions (dating back to July of 2000 version) defined the “U.S. person” broadly as: “(1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust.”
Two important features of this definition stand out. First, the term “person” is defined to include not only individuals, but also virtually any type of business entity, estate or trust. Even a single-member LLC, which is generally disregarded for tax purposes, may be classified as a U.S. person because it has a separate juridical existence from its owner. A partnership or a corporation created or organized in the United States is considered “domestic” under 26 U.S.C. §7701(a)(4).
Second, the definition of who should be considered as a U.S. resident is interpreted under 26 U.S.C. §7701. Under 26 U.S.C. §7701(b), an individual is a U.S. resident if he meets any of the three bright-line tests: (1) lawful admission for permanent residence to the United States (“green card”); (2) substantial presence in the U.S.: the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier determined under the relevant IRS table) equals or exceeds 183 days; and (3) first-year election to be treated as a resident under 26 U.S.C. §7701(b)(4). Thus, the definition of a U.S. resident under the tax rules is much broader than the one used in immigration law.
In October of 2008, the IRS revised the FBAR instructions and further expanded the definition of a “U.S. person” by including the persons “in and doing business in the United States.” This revision caused a widespread confusion among tax professionals. The outburst of comments and questions prompted the IRS to issue Announcements 2009-51 and 2010-16, suspending FBAR filing requirement through June of 2010 (i.e. for calendar years 2008 and 2009) for persons who are not U.S. citizens, U.S. residents, and domestic entities. Instead, the tax professionals were referred back to July of 2000 FBAR definition of a “U.S. person.”
In the meantime, in February of 2010, the IRS published new Proposed FBAR regulations under 31 C.F.R. §103. The proposed rules modify the definition of a “U.S. person” as follows: “a citizen or resident of the United States, or an entity, including but not limited to a corporation, partnership, trust or limited liability company, created, organized, or formed under the laws of the United States, any state, the District of Columbia, the Territories, and Insular Possessions of the United States or the Indian Tribes.” This definition applies even if an entity elected to be disregarded for tax purposes. The determination of a U.S. resident status is to be done according to 26 U.S.C. §7701(b) and regulations thereunder, except the meaning of the “United States”(which is to be defined by 31 U.S.C. 103.11(nn)).
Thus, if the proposed regulations will ultimately be codified in their current form, the definition of the “U.S. person” will be slightly broader than that of the July of 2000, but will represent a major regression from October 2008 definition. Nevertheless, based on even contemporary definition of the “U.S. person,” the IRS has been able to cast a wide net over U.S. taxpayers, trying to force disclosure of as many foreign financial accounts as possible. This trend toward maximizing the scope of disclosure also dominates the definition of what constitutes a foreign financial account – the issue to which I now turn.
Definition of “Foreign Financial Account”
The term “foreign financial accounts” is described expansively and includes any bank, brokerage, securities, securities derivatives and other financial instruments accounts located outside of the United States and its territories. In the instructions to the Form 114, the IRS also includes in this definition savings, demand, deposit, time deposit, debit card, prepaid credit card and any other account maintained with a financial institution or other person engaged in the business of a financial institution. Since October 2008, accounts, such as mutual funds, where the assets are held in a commingled fund and the account owner holds an equity interest in the fund are also considered “financial accounts.” It should be noted that the IRS granted the extension for reporting mutual fund accounts (and certain other filers) for the tax year 2008 and earlier years until June 30, 2010. Individual bonds, notes and stock certificates are not considered as “financial accounts.”
The Proposed Regulations further elaborate the definition of “foreign accounts.” The term includes all “bank, securities, and other financial accounts,” but the understanding of what these terms mean is expanded. The IRS expressly states that, in defining types of the accounts that must be reported on the FBAR, it will focus on the kinds of financial services for which a person maintains an account with a foreign financial institution, irrespective of how long this account is being maintained. The IRS, however, limits itself by stating that “an account is not established simply by conducting transactions such as wiring money or purchasing a money order where no relationship has otherwise been established.”
Outside of this limitation, the Proposed Regulations tend to add the types of accounts that need to be reported on the FBAR. The definition of the “bank account” expressly includes time deposits, such as certificates of deposit accounts that allow an account owner to “deposit funds with a banking institution and redeem the initial amount, along with interest earned after a prescribed period of time.” A “securities account” is defined as “an account maintained with a person in the business of buying, selling, holding, or trading stock or other securities.”
The term “other financial accounts” receives most attention under the Proposed Regulations. The IRS states that, due to the fact that this term covers a broad range of relationships with foreign financial institutions, the new regulations strive to delineate clearly what accounts should be included in the definition. Hence, the Proposed Regulations include in “other financial accounts” the following types of accounts:
“an account with a person that is in the business of accepting deposits as a financial agency; an account that is an insurance policy with a cash value or an annuity policy; an account with a person that acts as a broker or dealer for futures or options transactions in any commodity on or subject to the rules of a commodity exchange or association; or an account with a mutual fund or similar pooled fund which issues shares available to the general public that have a regular net asset value determination and regular redemptions.”
Foreign retirement accounts present an interesting classification problem. The Proposed Regulations state that “participants and beneficiaries in retirement plans under sections 401(a), 403(a) or 403(b) of the Internal Revenue Code as well as owners and beneficiaries of individualretirement accounts under section 408 of the Internal Revenue Code or Roth IRAs under section 408A of the Internal Revenue Code are not required to file an FBAR with respect to a foreign financial account held by or on behalf of the retirement plan or IRA.” This exception, however, is not extended to the foreign financial accounts. Therefore, it appears that a foreign retirement account that is similar in design to an IRA needs to be disclosed in the FBAR.
The readers must also be aware that other reporting requirements may apply to a foreign retirement account. For example, Canadian Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) should be reported by U.S. residents on Form 8891. In other cases, a foreign retirement plan may be considered as “foreign trust” by the IRS and should be reported on Form 3520.
There are three narrow categories of foreign financial accounts for which the U.S. persons do not have to file the FBAR. First, accounts held in a military banking facility designated by the U.S. government to serve U.S. Government installations located abroad. Second, officers or employees of most banks regulated by the federal government are exempt from filing the FBARs (unless an officer or an employee has personal financial interest in the account). Finally, officers or employees of publicly-traded domestic corporations or privately-owned corporations with assets exceeding $10 million and 500 or more shareholders of record, need not file an FBAR concerning the signature authority (usually acquired by virtue of the officer’s or employee’s position) over a foreign financial account of the corporation (as long as an officer or an employee has no personal financial interest in the account, and he is advised in writing by the chief financial officer of the corporation that the corporation has filed a current report which includes that account).
Aggregate Balance Exceeds $10,000
Despite appearances, the requirement that the aggregate value of all of the foreign financial accounts exceeds $10,000 at any time during a calendar year is not without complications. In order to figure out the account value in a calendar year, one needs to look first at the largest amount of currency and/or monetary instruments that appear on any quarterly or more frequently issued account statement for the relevant year. If the financial institution which manages the account does not issue any periodic account statements, then the maximum account value is the largest amount of currency and/or monetary instruments in the account at any time during the applicable year. If the account consists of stocks or other non-monetary assets, then one only needs to consider fair market value at the end of the relevant year. If, however, the non-monetary assets were withdrawn before the end of the calendar year, then the account value is determined to be the fair market value of the withdrawn assets at the time of the withdrawal.
The maximum value of a foreign financial account must be reported in U.S. dollars on the FBAR. Therefore, a taxpayer needs to convert foreign currency into the corresponding amount of U.S. dollars using the official exchange rate at the end of the relevant calendar year.
A final word of caution on the topic of the account balance. Notice the word “aggregate” – it means that the balances of all of the filer’s foreign financial accounts should be tallied to determine whether the $10,000 threshold is exceeded. For example, if the filer has one foreign bank account of $6,000 and another of $5,000, then he still needs to file the FBAR with the DOT, because the aggregate value of both accounts exceeds the required $10,000.
Financial Interest, Signature Authority, and Other Comparable Authority
The final condition that must be met before the requirement to file the FBAR arises is that the U.S. person has either a financial interest in, or a signature authority or other comparable authority over the relevant foreign financial accounts. In deciding whether the FBAR is required, it is useful to go through all three of these requirements in order.
First, the filer needs to determine whether he has a financial interest in the account. If the account is owned by an individual, the financial interest exists if the filer is the owner of record or has legal title in the financial account, whether the account is maintained for his own benefit or for the benefit of others, including non-U.S. persons. Hence, if the owner of record or holder of legal title is a U.S. person acting as an agent, nominee, or in some other capacity on behalf of another U.S. person, the financial interest in the account exists and this agent or nominee needs to file the FBAR. If a corporation is the owner of record or the holder of legal title in the financial account, a shareholder of a corporation has a financial interest in the account if he owns, directly or indirectly, more than 50 percent of the total value of the shares of stock or has more than 50 percent of the voting power. Where a partnership is the owner of record or the holder of legal title in the financial account, a partner has a financial interest in the financial account if he owns, directly or indirectly, more than 50 percent of the interest in profits or capital. Similar rule applies to any other entity (other than a trust) where a U.S. person owns, directly or indirectly, more than 50 percent of the voting power, total value of the equity interest or assets, or interest in profits. Special rules apply to trust and can be found in the Proposed Regulations. Finally, a U.S. person who “causes an entity to be created for a purpose of evading the reporting requirement shall have a financial interest in any bank, securities, or other financial account in a foreign country for which the entity is the owner of record or holder of legal title.”
If there is no financial interest in the foreign financial account, the filer should determine whether he has signature authority over the account. A U.S. person has account signature authority if that person can control the disposition of money or other property in the account by delivery of a document containing his signature to the bank or other person with whom the account is maintained. Notice, once again, that control over the disposition of assets in the account is one of the main factors in deciding whether the FBAR needs to be filed.
It is important to mention that, pursuant to the IRS Announcement 2010-23, persons with signature authority over, but no financial interest in, a foreign financial accounts for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts. Combined with IRS Announcement 2009-62, this means that the deadline has been extended for the calendar year 2009 and all prior years.
Finally, even if no financial interest or signature authority exists, the filer has to continue his analysis and determine whether he has “other comparable authority” over the account. This catch-all, ambiguous term is not defined by the IRS. Nevertheless, the instructions to Form 114 generally state that the other comparable authority exists when the filer can exercise power comparable to the signature authority over the account by communication with the bank or other person with whom the account is maintained, either directly or through an agent, or in some other capacity on behalf of the U.S. person.
Penalties
Now that the reader has received an extensive background on the FBAR filing requirements, I would like to discuss some of the penalties that may be imposed as a result of the failure to file the FBAR even though your client was required to do so. In particular, I will focus on three general scenarios describing specific penalties commonly attributed to each of them. The first scenario is where your client willfully failed to file the FBAR, or destroyed or otherwise failed to maintain proper records of account, and the IRS learned about it when it launched an investigation of your client. This is the worst type of scenario which carries substantial penalties. The IRS may impose civil penalties of up to the greater of $100,000, or 50 percent of the value of the account at the time of the violation, as well as criminal penalties of up to $500,000, or 10 years of imprisonment, or both. It should be noted these penalties apply separately to each undisclosed account. Hence, if your client fails to disclose two or more accounts, the penalties are likely to be significantly higher.
Another scenario is where your client negligently and non-willfully failed to file the FBAR, and the IRS learned about it during an investigation of your client. Unlike the first scenario, there are no criminal penalties for non-willful failure to file the FBAR; only civil penalties of up to $10,000 per each violation (unless there is a pattern of negligence which carries additional civil penalties of no more than $50,000 per any violation). Each undisclosed account constitutes a separate violation, and, therefore, the penalties may be significantly higher where your client fails to disclose two or more accounts . In this scenario, your client fares much better, and you may be able to obtain lower penalties by showing of reasonable cause for the failure to file.
The third scenario is where your client non-willfully fails to file the FBAR, accidentally discovers his mistake, and comes to you before the IRS commences its investigation of your client’s finances. This is the most favorable of all scenarios due to the fact that your client may qualify for the benefits of a voluntary disclosure program, despite the fact that the position of the IRS regarding civil penalties for voluntarily filed but delinquent FBARs is uncertain following the October 15, 2009 voluntary disclosure deadline. The best strategy for addressing delinquent FBARs, however, varies depending on the facts and circumstances of the particular case.
A word of caution: this discussion focuses solely on the penalties associated with the failure to file the FBAR. This article does not address the various strategies that may be employed in dealing with the delinquent FBAR filings in the post-October 15, 2009 world, including qualification for the voluntary disclosure program. In certain situations, there may also be other relevant significant tax issues outside of the FBAR realm – the most important of which is non-payment of taxes on undisclosed income by the U.S. taxpayers – which may significantly alter the amount of penalties, interest, and taxes due to the IRS.
Conclusion
Based on the analysis above, it is easy to see now why so many of the U.S. taxpayers fail to file an FBAR when it is required. While the seemingly simple instructions of the FBAR can readily become complex and unpredictable when applied to specific individual circumstances, the main cause of non-filing seems to be simply a failure to recognize that the FBAR report needs to be filed. This problem is exactly what this article is designed to address, and I hope that I have provided the readers with the necessary legal knowledge to conduct a proper legal analysis of relevant circumstances and recognize when the FBAR needs to be filed. This is the crucial first step in preventing regulatory non-compliance and its potentially disastrous consequences for you and your clients.

### Minnesota Unemployment Insurance Appeal Hearing: Top Five Preparation Strategies
Minnesota Unemployment Insurance Appeal Hearing (“UI hearing”) is a serious legal event for many small- and mid-size businesses that may have far-reaching tax and employment law consequences for these businesses, especially when the hearing is about such a delicate and important issue as classification of workers as independent contractors. Yet too many business owners are completely ignorant of the rules and procedures of the UI hearings. Too often they think that it is enough to just show up and tell their story. As a consequence, these business owners often lose a case even when the facts seemed mostly favorable to the employer.
In this essay, I will list and discuss top five strategies that business owners should adopt in order to adequately prepare for their UI hearings.
1. Accept the Need to Prepare for the Hearing.
Too many business owners (and even some inexperienced attorneys) accept the wrong myth that the UI hearings are so straightforward that there is no need to prepare for them. It is very convenient for a busy business owner to believe that he needs not spend any time preparing for the hearing.
This is exactly the attitude that results in so many lost cases. Indeed the UI hearings are conducted in a manner less formal and more flexible than a district court trial. Yet, these are hearings conducted by an unemployment insurance judge, usually a lawyer with specialized knowledge in this area; there are rules and procedures that must be followed; there is a direct and cross-examination of witnesses; physical and testimonial evidence is presented; and there is a ruling by the judge that determines whether you lose or win.
If this were not enough, the UI hearing is the last opportunity for you to enter your evidence into the record of the proceedings. If you decide to appeal the unemployment insurance judge’s ruling, the Court of Appeal will almost always only consider the evidence on record for the UI hearing; you will not be able to enter new evidence into the record.
This is why your first strategy is to accept the reality of spending time, perhaps significant amount of time, on the preparation for the UI hearing.
2. Hire an Attorney.
There can be no downside to hiring a legal professional to represent you and help you properly prepare for the hearing. While you will know the facts (especially at the beginning of the representation) better than any outsider, your attorney should have the general legal knowledge about and specialized experience in the administrative appeal proceedings. Moreover, your attorney is likely to take advantage of the pre-hearing rules and procedures to better your case. Finally, even a business owner who has had experience in relevant areas of law will be no match for a lawyer’s deeper understanding of the law and procedure.
There is a notion that a cost-benefit analysis shows that an attorney just costs too much money for a business owner to spend on the unemployment insurance hearing. Usually, this analysis is wrong because it compares how much money you would spend on the hearing if you hire an attorney versus how much money you would spend on a hearing without one – the issue at stake is completely ignored in these calculations. The proper comparison would be between the importance of the issue to your business and the higher chance of winning the UI hearing with an attorney on the one side versus the costs of losing the UI hearing. Usually, if you deemed the issue important enough to file an appeal, this means that you assessed the cost of losing the UI hearing higher than the legal representation expenses necessary to properly prepare for the UI hearing.
3. Know and Be Able to State the Facts of Your Case.
There are two sides to this strategy. First, you need to know every relevant fact of your case: remember the exact dates and relevant events, construct a time-line of events, and know what the relevant documents say. Second, you should be able to state the facts of your case in court in a way that the judge understands and using the “verbiage” that clarifies your argument. For example, if the appeal is about classification of workers as independent contractors, you should use the word “contractor” and not “employee” to describe your workers. Your lawyer should educate you in the legal meaning and implications of each relevant term.
4. Submit Relevant Exhibits and Other Records into Evidence
It is almost impossible to over-estimate the importance of having good records and timely submitting them into evidence. Most cases are won on complete favorable documentation that supports a well-prepared testimony.
Your lawyer can help you identify the relevant records, present them in the most favorable manner and timely submit them into evidence. Remember that, pursuant to Minn. Rules pt. 3310.2912, the exhibits for a telephone hearing must be submitted no later than five calendar days prior to the hearing.
There is one more advantage to submitting your own records for the hearing. By the time of the hearing, there is usually already an adverse written report made by the UI auditors that supports their findings. Therefore, by entering your own exhibits into evidence (even better if it is supported by your lawyer’s written brief detailing the legal arguments), you are countering the already written evidence that supports the other side of the argument.
5. Learn the Hearing Etiquette
It is important that your behavior during the hearing leaves the impression of you as a law-abiding, responsible, and courteous human being. Knowing the hearing etiquette is crucial to creating this image. Your lawyer should be able to educate you about how to behave in front of the judge, listen to the testimony of the other side, and general rules of the court etiquette.
Conclusion
Obviously, these five factors described above do not constitute a conclusive list of strategies for a successful preparation and conduct of the UI hearing. There are many other important tactics that may be employed during the hearing. However, these fivw top strategies are designed to provide you with the most basic structure for how to move forward in your preparation for the Minnesota Unemployment Insurance Appeal Hearing.
Sherayzen Law Office has the necessary experience and knowledge to help you prepare for and conduct the UI hearing. We will lead you every step of the way and offer you a vigorous ethical representation during the hearing.
Call NOW to discuss your case with a Minnesota unemployment insurance business lawyer!

### Business License Denial Appeals and Office of Administrative Hearings
If your business license was denied by a government agency in Minnesota, you need to act immediately to secure an administrative appeals lawyer to analyze the facts of your case from a legal perspective. In almost all cases, a license denial by a government agency can be appealed for additional review. This right to appeal, however, usually has a definite time limitation. Most Minnesota government agencies give you as little as thirty (30) days to appeal the denial of your business license, and it is very rare to have more than sixty (60) days to appeal an administrative determination.
In Minnesota, most of the business license denial cases are appealed to the State of Minnesota Office of Administrative Hearings. The Office of Administrative Hearings is an independent agency which should conduct impartial hearings for other state agencies. Once you appeal your business license denial, you will become part of what is known as a “contested hearing” – basically, this means that there will be a trial-like hearing. An administrative law judge will preside over a hearing while both sides have an opportunity to present their evidence and cross-examine each other’s witnesses.
Indeed, even though this is supposed to be an administrative hearing with much more relaxed procedures than those adopted by the civil courts, the Office of Administrative Hearings follows a set of rules which partially adopt and/or resemble the Minnesota Rules of Civil Procedure. This means that a skilled lawyer may take full advantage of the prehearing motion practice to benefit his client’s case.
A major drawback of the contested hearings conducted by the Office of Administrative Hearings is the fact that, in most cases, an administrative law judge is only able to issue a recommendation which may be rejected or accepted by a government agency that originally denied the license. This means that, if the government agency persists in its denial and ignores a contrary ruling by an administrative judge, you will have to appeal the case further to the district court. This is not common, but it happens.
As you can see, the appeal of a business license denial is not an easy task and may require a detailed knowledge of laws and administrative procedures. This is why it is important to secure the help of a Minnesota administrative appeals business attorney as soon as possible.
Sherayzen Law Office has the necessary administrative appeals experience and knowledge of the rules and procedures of the Office of Administrative Hearings to mount an effective and vigorous representation of your interests.
Call NOW to talk with an experienced administrative appeals lawyer!

### October 15 Deadline for Extension Filers and Certain Non-Profit Organizations
If you filed Form 4868 to request a six-month extension to file your tax return, beware that October 15, 2010 is the fast-approaching deadline to file your tax returns. The IRS expects to receive as many as ten million tax returns from such extension filers.
The other important group of filers are small nonprofit organizations at risk of losing their tax-exempt status because they failed to file the required tax returns for the past three tax years (2007, 2008, and 2009). Their one-time chance to preserve their tax-exempt status is to file the appropriate variation of the Form 990 with the IRS.
The IRS has posted on a special page on its website listing the names and last-known addresses of these at-risk organizations, along with guidance about how to come back into compliance. The organizations on the list have return due dates between May 17, 2010 and October 15, 2010, but the IRS has no record that they filed the required returns for any of the past three years.
Click here for more information about this unique one-time relief program.
This essay is provided as a courtesy notice by Sherayzen Law Office, Minnesota tax law firm for businesses and individuals.

### Employee vs. Independent Contractor: Common-Law Test in Minnesota
One of the most crucial distinctions in employment and tax law is one made between employees and independent contractors.  The applicability of a whole host of labor and tax provisions hinges on how the worker is classified.  In Minnesota, most statutory provisions that deal with these issues (including Minnesota Unemployment Insurance) incorporate in one way or another the common-law test factors adopted by the courts to classify workers. In this essay, I will list and explain each of the five factors for determining whether a worker is an employee or an independent contractor.
Common-Law Test
The common-law test consists of five factors.  The two most important factors are: the right to control the means and manner of performance and the right to discharge a worker.  The presence of one factor is insufficient to find employment relationship if such factor is countered by other factors. Instead, the courts look at the overall relationship between the parties in order to determine whether a master-servant – this is the so-called “totality of circumstances” approach.
Let us review each of the five factors in more detail.
1.	The Right to Control the Means and Manner of Performance
This is one of the two most important factors (right to discharge is another) in the test.  If the employer has the right to control how a worker performs his job, then the worker is likely to be classified as an employee. In Minnesota, it is important to distinguish between control over “means and manner” versus control over the “end-product.”  In the latter case, the employer control the end result of the worker’s product, not the manner in which the worker was able to achieve this result.  Therefore, such control does not evince a master-servant relationship, but, rather, is characteristic of an independent contractor status.
2.	The Mode of Payment
The most important issue here is whether the worker is paid on a per job basis or on a basis more akin to an employer-employee relationship (such as payment per hour or fixed salary).  Payment based on a job evinces an independent contractor relationship, whereas payment per hour indicates an existence of a master-servant contract.
3. 	Furnishing of Materials and Tools
An employer-employee relationship is more likely where the employer furnishes all materials and tools necessary for the worker to do his job.  On the contrary, if the worker supplies all of his tools and materials, then the court will be inclined to rule that this factor indicates that an independent contractor relationship exists.
4.	Control of Premises Where Work Is Performed
Where the services are performed on the premises controlled by the employer, a court may adopt a position that this situation implies that employer exercises control over worker (though, there exceptions). On the other hand, if the worker controls the premises where the work is performed , it is usually indicative that the worker enjoys at least some freedom from the employer’s control.  It is important to point out, however, that in some professions where the work is necessarily done outside of the employer’s premises, the worker’s control of the place of work loses its importance.
5. 	Right of Employer to Hire and Discharge
The right to discharge is the other most important factor in determining whether there is an employer-employee relationship. Where a worker may be terminated by the employer with little notice, without cause, or for failure to follow specified rules or methods, and the employer does not incur any liability as a result of such termination, the court is likely to find that a master-servant relationship exists.  On the other hand, if the worker cannot be terminated without the employer being liable for damages (assuming the worker is producing according to his contract specifications), the court is more likely to determine that there is an independent contractor relationship between the parties.
The foregoing is a very simplified overview of the common-law test. The actual analysis may be much more complex, especially when applied to a specific set of facts. Remember, the common-law test emphasizes the “totality of circumstances” approach which is necessarily involves a fact-driven analysis.
Codification of the Common-Law Test
It is also important to emphasize that, in most areas of law, the Minnesota legislature codified the common-law test with significant alterations, adding and deleting various factors.  For example, Minnesota Unemployment Insurance administrative rules list more than a dozen factors just to determine whether there is a right to control the means and manner of performance. Moreover, the Rules detail eight factors to consider in addition to the modified common-law test.
Often, the common-law test is modified according to specific circumstances of a relevant industry.  For example, the specific factors for the construction and trucking industries will vary significantly from the rules that apply to non-emergency medical transportation, even though the common-law test still constitutes the basis for the divergent rules.
Furthermore, one should remember that several different tests may apply to the same situation depending on the government agency that makes the determination of an employment relationship.  For example, the IRS applies a different test than the Minnesota Department of Commerce (the “DOR”), and, in turn, the DOR’s rules differ from the factors adopted by the Minnesota Unemployment Insurance.  Yet, all three agencies are trying to find an answer to the same question – whether a worker should be classified as an employee or an independent contractor.
Conclusion
In applying the common-law test, whether modified or not, you should hire an attorney familiar with these rules.  Lawyers usually have the necessary familiarity with the rules, training in legal research, and experience in dealing with the government agencies.
Sherayzen Law Office is a law firm with a tested experience in the area of worker classification.  We can help you make sure that you are in compliance with existing laws and regulations, draft the necessary documents (such as an Independent Contractor Agreement), and defend your interests in the administrative and judicial courts.
Call NOW to speak with an experienced business attorney!

### Claiming New Health Care Tax Credit: Draft Form 8941
On September 7, 2010, the Internal Revenue Service released a draft version of the form 8941 that small businesses and tax-exempt organizations will use to calculate the small business health care tax credit when they file income tax returns next year.
The small business health care tax credit was created as part of the Affordable Care Act. In 2010, the credit is generally available to small business employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. Beginning in 2014, the maximum tax credit will go up to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible, tax-exempt organizations for two years.
The maximum credit goes to smaller employers, defined as small businesses that employ ten or fewer full-time equivalent (FTE) employees, paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, and not simply the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.
The final version of Form 8941 and its instructions will be available later this year.

### Business Tax Lawyers Minneapolis | IRS Classification of Workers
Determining the business relationship between your business and your workers can be one of the most important aspects of your business and tax planning. The consequences of worker mis-classification can carry a heavy penalty for your businesses, including liablity for employment taxes for misclassified workers.
There are many various competing definitions of how a worker should be classified, including specialized formulas developed by states for particular industries (for example, construction and trucking industries in Minnesota). In this essay, however, I will only generally describe the classifications used by the U.S. Department of Treasury, particularly the IRS.
There are four classification categories used by the IRS: common-law employees, statutory employees, statutory nonemployees, and independent contractors.
Common-Law Employees
The IRS states that, under common-law rules, anyone “who performs services for you is your employee if you have the right to control what will be done and how it will be done.” (See IRS Publication 15-A) The most important factor here is the right to control the details of how the services are performed. I will not further deal here with the specific factors of common-law employment and how it is distinct from the independent contractors (this discussion is left for a later article).
Remember, if you have an employer-employee relationship, it makes virtually no difference how it is labeled. The substance of the relationship, not the label, governs the worker's status. Nor does it matter whether the individual is employed full time or part time. Finally, the IRS makes no distinction between classes of employees: superintendents, managers, and other supervisory personnel are all employees.
An officer of a corporation is generally an employee; however, an officer who performs no services or only minor services, and neither receives nor is entitled to receive any pay, is not considered an employee. Id. A director of a corporation is not an employee with respect to services performed as a director.
Leased workers (i.e. workers supplied by a firm to other firms) are considered “employees” of the firm furnishing the workers for the employment tax purposes. This situation usually arises with respect to temporary staffing agencies.
The most important consequence of this classification for tax purposes is the fact that the employer is usually required to withhold and pay income, social security, and Medicare taxes on wages that the employer pays to its common-law employees. There are a number of exceptions such as some religious employees.
Statutory Employees
Some classes of workers are considered as employees by the Federal Code (and, hence, the IRS) regardless of whether they may qualify for an independent contractor status under the common-law rules. This means that the employer should treat the worker as its employee and pay the necessary payroll taxes, while the worker may be able to report their wages, income, and allowable as if he were self-employed (using schedule C (or schedule C-EZ)). Statutory employees are not liable for self-employment tax because their employers must treat them as employees for social security tax purposes.
A worker is considered by the Federal Code as a “statutory employee” if he falls within any one of the listed four categories. The categories are defined as follows:
1. A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is agent of the business employer or is paid on commission;
2. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company;
3. An individual who works at home on materials or goods that the business employer supplies and that must be returned to the business employer or to a person the business employer names, if the business employer also furnish specifications for the work to be done; and
4. A full-time traveling or city salesperson who works on the business employer’s behalf and turns in orders to the employer from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer's business operation. The work performed for the business employer must be the salesperson's principal business activity.
If the worker falls within one of the categories of statutory employment above, the employer should withhold social security and Medicare taxes from the wages of statutory employees only if all three of the following conditions are met:
a. The service contract states or implies that substantially all the services are to be performed personally by the worker;
b. The worker does not have a substantial investment in the equipment and property used to perform the services (other than an investment in transportation facilities); and
c. The services are performed on a continuing basis for the same payer.
FUTA (federal unemployment tax) tax may be imposed only with respect to workers who fit into categories 1 and 4 above. The main reason is because the term “employee” for FUTA purposes does not include statutory employees in categories 2 and 3 above.
Remember, an employer should not withhold federal income tax from the wages of statutory employees.
Statutory Nonemployees
Under the Federal Code, there are three categories of statutory nonemployees: direct sellers, licensed real estate agents, and certain companion sitters. Direct sellers and licensed real estate agents are treated as self-employed for all federal tax purposes, including income and employment taxes, if:
a. Substantially all payments for their services as direct sellers or real estate agents are directly related to sales or other output, rather than to the number of hours worked; and
b. Their services are performed under a written contract providing that they will not be treated as employees for federal tax purposes.
Independent Contractors
The final classification category is an independent contractor. The definition of an independent contractor can be complex and is a proper subject of another essay. Generally, however, an individual is an independent contractor if the employer (i.e. the person for whom the services are performed) has the right to control or direct only the result of the work and not the means and methods of accomplishing the result.
Usually, lawyers, contractors, subcontractors, auctioneers, and other workers who follow an independent trade, business, or profession in which they offer their services to the public, are not employees. However, whether such people are employees or independent contractors depends on the facts in each case.
Conclusion
Determining the business relationship between your business and your workers can be a very complex issue fraught with dangers. Moreover, even if you comply with the regulations above and correctly classify your workers for federal tax purposes, this does not necessarily mean that your federal compliance will be sufficient to satisfy the conflicting requirements of the various state classification rules. Since the consequences of mis-classification can be very serious, it is advisable that you seek an attorney’s advice on these issues.
Sherayzen Law Office can help you correctly classify your workers and make sure that your business follows the necessary and advisable procedures to comply with various, often conflicting, state and federal regulations.
Contact Mr. Sherayzen to discuss your business situation.

### International Contract Lawyers Minneapolis | New Incoterms 2010 
The International Chamber of Commerce (“ICC”) has announced that Incoterms 2010 is scheduled to be launched in September and come into effect on January 1, 2011.
Incoterms is the abbreviation for "International Commercial Terms" and were introduced by the ICC back in 1936 to provide people engaging in international trade a common set of trade terms that would be understood across the world. Incoterms are crucial when trading across borders and should be included in all international sale of goods contracts because they help parties avoid misunderstandings by clearly identifying the obligations of the buyer and seller. They stipulate in one short acronym exactly who will pay for the freight, who wears the risk in the goods at which point in time, who pays for insurance and duty.
In order to keep up with the rapid expansion of world trade and globalization, the Incoterms rules are revised about once a decade. Since the last revision in 2000, much has changed in global trade and the current revision will take into account issues such as developments in cargo security and the need to replace paper documents with electronic ones.
Therefore, the new 2010 edition includes 11 terms instead of the 13 in the previous edition. The following terms from Incoterms 2000 have been deleted from the list: DAF, DES, DEQ and DDU. These two new terms have been added to the list: DAT and DAP.
Another significant change has to do with categories of the Incoterms. Incoterms 2000 had four categories, while Incoterms 2010 only has two categories. The first category can be called “Rules for Any Mode of Transport” (also knows as “multimodal” Incoterms) and includes the following terms:
CIP - Carriage and Insurance Paid
CPT - Carriage Paid To
DAP - Delivered At Place
DAT - Delivered At Terminal
DDP - Delivered Duty Paid
EXW - Ex Works
FCA - Free Carrier
The second category is described as “Rules for Sea and Inland Waterway Transport Only” and includes the following terms:
CFR - Cost and Freight
CIF - Cost, Insurance and Freight
FAS - Free Alongside Ship
FOB - Free On Board
All current and potential exporters should be aware that new Incoterms are expected to take effect in 2011. Sherayzen Law Office will continue to update the readers on the progress of the revisions. In the meantime, we recommend that you ensure, and if necessary seek legal advice to ensure, that your commercial trading terms accurately reflect the transaction.
Call NOW to discuss your contract with an international trade attorney!

### Estimated Tax Payments are due on September 15, 2010
Estimated tax payments for the third-quarter (June 1-August 31) of 2010 are due on September 15, 2010.  The estimated tax payments should be made using Form 1040-ES.  Note, if the due date for an estimated tax payment falls on a Saturday, Sunday, or legal holiday, the payment will be considered on time if it is made on the next business day.

### Minnesota Money Transmitter License Application: Required Enclosures
When a business entity applies for a Minnesota money transmitter license, the applicant must be aware that, in addition to answering the questions on the application, the Department of Commerce (“Department”) requires a large number of additional documents that must accompany the original license application. While the precise nature of the required documentation varies depending on whether the applicant is a corporate entity or noncorporate entity and how many locations the applicant intends to operate, the following documents usually must be submitted with the original license application.
1. Sample of the authorized delegate contract(s), if applicable;
2. Sample of the form of payment instrument(s);
3. If the applicant is a corporation, copy of the “Certificate of Incorporation” or, if incorporated in another jurisdiction, copy of the “Certificate of Foreign Incorporation” from the Minnesota Secretary of State. If, however, the applicant is not a corporation, then a copy of the “Article of Organization”;
4. Certificate of good standing from the state in which the applicant is incorporated (if applicable);
5. Copy of criminal history verification for each person listed in Section III or IV of the application;
6. Required financial statements;
7. Surety bond, irrevocable letter of credit, or other similar security device for the required amount (the form is included in the application);
8. Uniform Consent to Service of Process and acknowledgment form;
9. If the applicant has employees in Minnesota, then evidence of current worker’s compensation coverage;
10. Authorization to Release Information form;
11. Affidavit of Official Signing Application form; and
12. Check of money order for the applicable fee amount payable to the “Department of Commerce”.
Sherayzen Law Office can help you correctly collect all of this information, review your money transmitter license application, and file the application with the Minnesota Department of Commerce.
Please, call NOW to discuss your license application with a business attorney!

### Minnesota Money Transmitter License Application: Expiration of Initial License Considerations
Applying for a money transmitter license in Minnesota can be an expensive enterprise, and the applicant should make sure that he will be able to maximize the benefits that can be derived from the license. The definition of the licensed period, therefore, becomes one of the most important considerations.
The Department of Commerce (“Department”) states that the licenses issued under Chapter 53B (the statute which grants the Department authority to issue money transmitter licenses) expire annually on December 31. In order to conduct money transmissions after December 31, the applicant will have to timely submit the application for the license renewal. Hence, it does not matter whether the license is issued on January 1 or October 30 of the same year – the license will still expire on December 31 and, in the latter case, the applicant will need to file the license renewal application almost immediately after the initial license application is granted.
Therefore, if the applicant applies for a money transmitter license in the last quarter of a calendar year, it may be beneficial for him to insist that the license should be issued as of the first of January of the following calendar year. Obviously, in this situation, the applicant may not conduct any transmissions prior to January 1 of the following calendar year. Hence, a cost-benefit analysis must be conducted in order to determine whether it is more profitable for the applicant to obtain the license now or to postpone it until January 1 of the following year.
Sherayzen Law Office can help you file your money transmitter license application with the Minnesota Department of Commerce.
Please, call NOW to discuss your license application with a business attorney!

### FBAR: Financial Interest, Signature Authority, and Other Comparable Authority
One of the major requirements that gives rise to the obligation to file the FBAR is that a U.S. person has either a financial interest in, or a signature authority or other comparable authority over the relevant foreign financial accounts. In deciding whether the FBAR is required, it is useful to go through all three of these requirements in order.
First, the filer needs to determine whether he has a financial interest in the account. If the account is owned by an individual, the financial interest exists if the filer is the owner of record or has legal title in the financial account, whether the account is maintained for his own benefit or for the benefit of others, including non-U.S. persons. See 75 Fed. Reg. at 8847. Hence, if the owner of record or holder of legal title is a U.S. person acting as an agent, nominee, or in some other capacity on behalf of another U.S. person, the financial interest in the account exists and this agent or nominee needs to file the FBAR. If a corporation is the owner of record or the holder of legal title in the financial account, a shareholder of a corporation has a financial interest in the account if he owns, directly or indirectly, more than 50 percent of the total value of the shares of stock or has more than 50 percent of the voting power. Id. Where a partnership is the owner of record or the holder of legal title in the financial account, a partner has a financial interest in the financial account if he owns, directly or indirectly, more than 50 percent of the interest in profits or capital. Similar rule applies to any other entity (other than a trust) where a U.S. person owns, directly or indirectly, more than 50 percent of the voting power, total value of the equity interest or assets, or interest in profits. Id. Special rules apply to trust and can be found in the Proposed Regulations. Id. Finally, a U.S. person who “causes an entity to be created for a purpose of evading the reporting requirement shall have a financial interest in any bank, securities, or other financial account in a foreign country for which the entity is the owner of record or holder of legal title.” Id.
If there is no financial interest in the foreign financial account, the filer should determine whether he has signature authority over the account. A U.S. person has account signature authority if that person can control the disposition of money or other property in the account by delivery of a document containing his signature to the bank or other person with whom the account is maintained. See 75 Fed. Reg. at 8848. Notice, once again, that control over the disposition of assets in the account is one of the main factors in deciding whether the FBAR needs to be filed.
It is important to mention that, pursuant to the IRS Announcement 2010-23, persons with signature authority over, but no financial interest in, a foreign financial accounts for which an FBAR would otherwise have been due on June 30, 2010, will now have until June 30, 2011, to report those foreign financial accounts. Combined with IRS Announcement 2009-62, this means that the deadline has been extended for the calendar year 2009 and all prior years.
Finally, even if no financial interest or signature authority exists, the filer has to continue his analysis and determine whether he has “other comparable authority” over the account. This catch-all, ambiguous term is not defined by the IRS. Nevertheless, the instructions to FinCEN Form 114 formerly Form TD F 90-22.1 generally state that the other comparable authority exists when the filer can exercise power comparable to the signature authority over the account by communication with the bank or other person with whom the account is maintained, either directly or through an agent, or in some other capacity on behalf of the U.S. person.

### FBAR Penalties
In this essay, I would like to discuss some of the penalties that may be imposed as a result of the failure to file the FBAR even though you were required to do so. In particular, I will focus on three general scenarios describing specific penalties commonly attributed to each of them. The first scenario is where you willfully failed to file the FBAR, or destroyed or otherwise failed to maintain proper records of account, and the IRS learned about it when it launched an investigation. This is the worst type of scenario which carries substantial penalties. The IRS may impose civil penalties of up to the greater of $100,000, or 50 percent of the value of the account at the time of the violation, as well as criminal penalties of up to $500,000, or 10 years of imprisonment, or both.
Another scenario is where you negligently and non-willfully failed to file the FBAR, and the IRS learned about it during an investigation. Unlike the first scenario, there are no criminal penalties for non-willful failure to file the FBAR; only civil penalties of up to $10,000 per each violation (unless there is a pattern of negligence which carries additional civil penalties of no more than $50,000 per any violation). In this situation, you are likely to fare much better, and you may even be able to obtain lower penalties by showing of reasonable cause for the failure to file.
The third scenario is where you non-willfully fail to file the FBAR, accidentally discover your mistake, and come to an attorney to file a delinquent FBAR before the IRS commences its investigation of your finances. This is the most favorable of all scenarios due to the fact that you may qualify for the benefits of a voluntary disclosure program, despite the fact that the position of the IRS regarding civil penalties for voluntarily filed but delinquent FBARs is uncertain following the October 15, 2009 voluntary disclosure deadline (now ended). The best strategy for addressing delinquent FBARs, however, varies depending on the facts and circumstances of the particular case.
A word of caution: this discussion focuses solely on the penalties associated with the failure to file the FBAR. This essay does not address the various strategies that may be employed in dealing with the delinquent FBAR filings in the post-October 15, 2009 world, including qualification for the voluntary disclosure program. In certain situations, there may also be other relevant significant tax issues outside of the FBAR realm – the most important of which is non-payment of taxes on undisclosed income by the U.S. taxpayers – which may significantly alter the amount of penalties, interest, and taxes due to the IRS.

### FBAR: Aggregate Value Requirement
FBAR filing is required only if the aggregate balances of a U.S. person's foreign financial accounts exceed $10,000.
Despite appearances, the requirement that the aggregate value of all of the foreign financial accounts exceeds $10,000 at any time during a calendar year is not without complications. In order to figure out the account value in a calendar year, one needs to look first at the largest amount of currency and/or monetary instruments that appear on any quarterly or more frequently issued account statement for the relevant year. If the financial institution which manages the account does not issue any periodic account statements, then the maximum account value is the largest amount of currency and/or monetary instruments in the account at any time during the applicable year. If the account consists of stocks or other non-monetary assets, then one only needs to consider fair market value at the end of the relevant year. If, however, the non-monetary assets were withdrawn before the end of the calendar year, then the account value is determined to be the fair market value of the withdrawn assets at the time of the withdrawal.
The maximum value of a foreign financial account must be reported in U.S. dollars on the FBAR. Therefore, a taxpayer needs to convert foreign currency into the corresponding amount of U.S. dollars using the official exchange rate at the end of the relevant calendar year.
A final word of caution on the topic of the account balance. Notice the word “aggregate” – it means that the balances of all of the filer’s foreign financial accounts should be tallied to determine whether the $10,000 threshold is exceeded. For example, if the filer has one foreign bank account of $6,000 and another of $5,000, then he still needs to file the FBAR with the DOT, because the aggregate value of both accounts exceeds the required $10,000.
Deciding whether you are required to file the FBAR is a complicated process. Sherayzen Law Office can help you!
Call now to discuss your situation with an experienced tax attorney!

### FBAR: Definition of Foreign Financial Accounts
The term “foreign financial accounts” is described expansively and includes any bank, brokerage, securities, securities derivatives and other financial instruments accounts located outside of the United States and its territories. In the instructions to the FinCEN Form 114 Foreign Bank Accounts Reporting (FBAR) formerly Form TD F 90-22.1, the IRS also includes in this definition savings, demand, deposit, time deposit, debit card, prepaid credit card and any other account maintained with a financial institution or other person engaged in the business of a financial institution. Since October 2008, accounts, such as mutual funds, where the assets are held in a commingled fund and the account owner holds an equity interest in the fund are also considered “financial accounts.” It should be noted that the IRS granted the extension for reporting mutual funds accounts (and certain other filers) for the tax year 2008 and earlier years until June 30, 2010. See IRS Announcement 2009-62. Individual bonds, notes and stock certificates are not considered as “financial accounts.”
The Proposed Regulations further elaborate the definition of “foreign accounts.” The term includes all “bank, securities, and other financial accounts,” but the understanding of what these terms mean is expanded. 75 Fed. Reg. at 8846. The IRS expressly states that, in defining types of the accounts that must be reported on the FBAR, it will focus on the kinds of financial services for which a person maintains an account with a foreign financial institution, irrespective of how long this account is being maintained. The IRS, however, limits itself by stating that “an account is not established simply by conducting transactions such as wiring money or purchasing a money order where no relationship has otherwise been established.” Id.
Outside of this limitation, the Proposed Regulations tend to add the types of accounts that need to be reported on the FBAR. The definition of the “bank account” expressly includes time deposits, such as certificates of deposit accounts that allow an account owner to “deposit funds with a banking institution and redeem the initial amount, along with interest earned after a prescribed period of time.” Id. A “securities account” is defined as “an account maintained with a person in the business of buying, selling, holding, or trading stock or other securities.” Id.
The term “other financial accounts” receives most attention under the Proposed Regulations. The IRS states that, due to the fact that this term covers a broad range of relationships with foreign financial institutions, the new regulations strive to delineate clearly what accounts should be included in the definition. Hence, the Proposed Regulations include in “other financial accounts” the following types of accounts: “an account with a person that is in the business of accepting deposits as a financial agency; an account that is an insurance policy with a cash value or an annuity policy; an account with a person that acts as a broker or dealer for futures or options transactions in any commodity on or subject to the rules of a commodity exchange or association; or an account with a mutual fund or similar pooled fund which issues shares available to the general public that have a regular net asset value determination and regular redemptions.” Id.
Foreign retirement accounts present an interesting classification problem. The Proposed Regulations state that “participants and beneficiaries in retirement plans under sections 401(a), 403(a) or 403(b) of the Internal Revenue Code as well as owners and beneficiaries of individual retirement accounts under section 408 of the Internal Revenue Code or Roth IRAs under section 408A of the Internal Revenue Code are not required to file an FBAR with respect to a foreign financial account held by or on behalf of the retirement plan or IRA.” 75 Fed. Reg. at 8851. This exception, however, is not extended to the foreign financial accounts. Therefore, it appears that a foreign retirement account that is similar in design to an IRA needs to be disclosed in the FBAR.
The readers must also be aware that other reporting requirements may apply to a foreign retirement account. For example, Canadian Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) should be reported by U.S. residents on Form 8891. In other cases, a foreign retirement plan may be considered as “foreign trust” by the IRS and should be reported on Form 3520.
There are three narrow categories of foreign financial accounts for which the U.S. persons do not have to file the FBAR. First, accounts held in a military banking facility designated by the U.S. government to serve U.S. Government installations located abroad. Second, officers or employees of most banks regulated by the federal government are exempt from filing the FBARs (unless an officer or an employee has personal financial interest in the account). Finally, officers or employees of publicly-traded domestic corporations or privately-owned corporations with assets exceeding $10 million and 500 or more shareholders of record, need not file an FBAR concerning the signature authority (usually acquired by virtue of the officer’s or employee’s position) over a foreign financial account of the corporation (as long as an officer or an employee has no personal financial interest in the account, and he is advised in writing by the chief financial officer of the corporation that the corporation has filed a current report which includes that account).
Determining whether you need to have a foreign financial account that needs to be reported on the FBAR can be difficult. Sherayzen Law Office can help you deal with this complex maze of U.S. tax compliance laws. Call to discuss your tax case with an experienced tax attorney!

### IRS Interest Rates: 4th Quarter of 2010
On August 19, 2010, the IRS announced that interest rates for the calendar quarter beginning October 1, 2010, will remain the same as follows:
1. Individual underpayment and overpayment: 4%;
2. Corporate overpayment: 3%
3. Large corporate underpayment: 6%
4. Portion of corporate overpayment exceeding $10,000: 1.5%
The interest rate is determined on a quarterly basis and compounds daily. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point.
Interest factors for daily compound interest for annual rates of 1.5 percent, 3 percent, 4 percent, and 6 percent are published in Tables 8, 11, 13, and 17 of Rev. Proc. 95-17, 1995-1 C.B. 556, 562, 565, 567, and 571.

### Recently Married Taxpayers: Five Basic Tips
If you are getting married this year, this may have a significant impact on your tax returns for the year 2010.  While you are likely to deal with most of these changes when you will be filing your tax return for the tax year 2010, there are some basic administrative actions that you should be taken right now.
1. Notify the Social Security Administration (“SSA”). Report any name change to the SSA, so that your name and Social Security Number will match when you file your next tax return. Informing the SSA of a name change is quite simple. File a Form SS-5, Application for a Social Security Card, at your local SSA office.
2. Notify the IRS. If you have a new address you should notify the IRS by sending Form 8822, Change of Address.
3. Notify the U.S. Postal Office. You should also notify the U.S. Postal Service when you move so it can forward any IRS correspondence
4. Notify Your Employer. Report any name and address changes to your employer(s) to make sure you receive your Form W-2, Wage and Tax Statement, after the end of the year.
5. Tax Withholding. If both you and your spouse work, your combined income may place you in a higher tax bracket. You can use the IRS Withholding Calculator available on IRS.gov to assist you in determining the correct amount of withholding needed for your new filing status. The IRS Withholding Calculator will even provide you with a new Form W-4, Employee's Withholding Allowance Certificate, you can print out and give to your employer so they can withhold the correct amount from your pay.

### Due Date to Preserve Tax-Exempt Status: October 15, 2010
On July 26, 2010, the IRS instituted a one-time relief program under which that small nonprofit organizations at risk of losing their tax exempt status because they failed to file required returns for 2007, 2008 and 2009 can preserve their status by filing returns by October 15, 2010. The IRS also posted on its website the names and last-known addresses of these at-risk organizations, along with guidance about how to come back into compliance.
There are two types of relief available for small exempt organizations.  First, filing an extension for the smallest organizations required to file Form 990-N. An organization simply needs to go the IRS website, supply the information items required by the Form 990-N, and electronically file it by October 15, 2010.
Second, IRS has a voluntary compliance program (“VCP”) for small organizations eligible to file Form 990-EZ (Short Form Return of Organization Exempt From Income Tax). Under the VCP, tax-exempt organizations eligible to file Form 990-EZ must file their delinquent annual information returns by October 15, 2010 and pay a compliance fee. More details are available on the IRS website.
The relief announced today is not available to larger organizations required to file the Form 990 or to private foundations that file the Form 990-PF.
Once an organization loses its exemption, it has to reapply with the IRS to regain its tax-exempt status. Any income received between the revocation date and renewed exemption may be taxable.

### Fee Agreement Arrangements with Tax Lawyers in St. Paul: 5 Most Important Issues
In this article, I will discuss five most important issues that you need to know before you sign a fee agreement with tax lawyers in St. Paul.
1. How is the 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 tax lawyer compensation and it is fairly simple – the tax attorney is paid only based on the time he spends on the case. If you're paying your 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 tax attorney takes a percentage of the amount the client wins at the end of the case, is almost never used by tax attorneys in St. Paul. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the 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 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 tax lawyers in St. Paul 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 tax lawyer’s fees.
2. Does the agreement include the amount of the retainer? Most tax lawyers in St. Paul 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 a tax attorney asks his client to pay in advance. In this scenario, the 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).
3. How often will you be billed? Most tax attorneys in St. Paul 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.
4. What is the scope of the tax attorney’s representation? Most tax lawyers in St. Paul will insist on defining their obligations in the fee agreement. The most important issue here is to state what the 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 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.
5. Who controls what decisions? Whether this information should be included in the fee agreement really depends on a case and on an attorney. Generally, tax attorneys in St. Paul 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 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, tax lawyers in St. Paul 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 tax lawyer, you should ask at least these five questions and make sure that the answers are complete and to your satisfaction.

### Franchise Agreements: Typical Structure
Over the past fifteen to twenty years, the franchise agreements have grown tremendously in complexity and size. They also tend to be more and more favorable toward the franchisor. Therefore, if you are a potential franchisee, you must read the franchise agreement very carefully to make sure that you fully understand what the agreement is saying. While it is imperative to hire a business attorney to advise you before you sign the agreement, this essay will sketch the typical structure of most franchise agreements in order for you to be able to better navigate your franchise contract.
1. Recitals. The recital provisions usually attempt to describe the franchisor’s system, its potential to contribute a great variety of proprietary information, and the reputation of the franchisor in the industry. Be careful: these provisions are generally not repeated as commitments of the franchisor and are typically disclaimed later in the franchise agreement (otherwise, the franchisee may have a breach of contract claim later).
2. Term of the Franchise and Exclusive Territory (if any). This part of the franchise agreement describes the longevity of the franchise agreement, whether any renewals are available, and what territory is granted exclusively to the franchisee against the same-brand competition.
3. Payment Obligations. Most of the agreements set out the payment obligations of the franchisee separately, while others merge this part of the contract with the rest of the franchisee’s duties.
4. Franchisor’s Duties. This part of the franchise agreement describes the franchisor’s duties toward the franchisee. Usually, however, these obligations are riddled with exceptions and references to the franchisor’s discretion. For examples, phrases such as “in its discretion” or “upon written request” are very common. Be careful: this part of the franchise contract may actually be used to impose obligation on the franchisee. Your attorney needs to review this section of the agreement very closely.
5. Franchisee’s Duties. The provisions regarding franchisee’s obligations may be especially numerous. Many modern franchise agreements may contain a very detailed list of duties imposed on the franchisee, and incorporate by reference the entire content of additional manuals and “any subsequent changes and additions thereto.” Additional covenants in separate articles may also be included in the franchise agreements.
6. Transfer, Assignment, and Termination. This part of the franchise contract sets forth how the franchisee may transfer (including through death, incapacitation, and sale) the franchise to another party. A right of first refusal in favor of the franchisor is often included. Also, be on the lookout for additional substantial fees paid by the franchisee to the franchisor in case of a transfer.
7. Miscellaneous: Choice of Law/Forum, Dispute Resolution, Disclaimers, Indemnification and Exculpatory Clauses. This part of the franchise agreement usually contains a mandatory arbitration clause and unfavorable choice of law provisions which may attempt to deprive the franchisee of the existing statutory protections. Here, you will also find various disclaimers and the indemnification requirements. Finally, various “no representation”and “no reliance” clauses (admitted by the franchisee upon execution of the franchise contract) are often included here. Despite the extreme pro-franchisor bias of many of these provisions, state and federal courts have a tendency to enforce them. Therefore, you must study these provisions with your attorney in order to make sure you understand what types of claims against the franchisor you are giving up by signing this agreement.
A typical franchise agreement is about 40-50 pages of dense legal language. Usually, it contains more information in addition to what is described above. Some agreements do not follow the above-described structure at all, but, rather, adopt their own format which may divide, omit or merge the sections described above into more or fewer articles and sub-sections. Therefore, it is highly advisable to retain services of a franchise attorney to review your franchise agreement to make sure you understand all of the provisions of this contract.
Sherayzen Law Office can help you review and analyze your franchise agreement so that you can understand your rights and obligations before you sign the contract.
Call NOW to discuss your franchise agreement with a business lawyer!

### Business Litigation: Definition
While its definition varies, most attorneys would agree that "business litigation" is a complex area of law which includes a variety of contractual and tort claims. Examples of such claims include but not limited to: breach of contract, fraud, tortious interference with contract, breach of fiduciary duty, infringement of intellectual property rights, and unfair competition. Often, when these types of business disputes arise, the parties are unable to resolve them through negotiation or arbitration proceedings. In these cases, business litigation can be used as a way to resolve the disputes.
Business litigation is not limited exclusively to businesses suing other businesses. In certain cases (such copyright and trademark violations), individuals may asset claims against businesses and vice-versa.
Corporate litigation constitutes an important part of business litigation. Corporate disputes often arise as a result of a breach of fiduciary duty. For example, shareholders in a closely-held corporation may recover against a corporate director if he breaches his fiduciary obligations.
Commercial insurance litigation is another frequent source of business litigation. For example, where a commercial insurance company undervalues or denies a fair claim, then the victimized business may sue to recover the amount it believes it is entitled to. Often, these situation deal with contract litigation where an insurance company relies on a particular wording in the contract to avoid fully paying an otherwise legitimate claim.
These are just some of the countless areas in which a business may have a need for a Minnesota business litigation lawyer to resolve a dispute against another business. A good Minneapolis business litigation attorney or a St. Paul business litigation lawyer can be invaluable in protecting your rights and your company's business interests.
Sherayzen Law Office can help you deal with a business litigation claim, whether defending against another business or enforcing your business rights against other parties.
If you or your company is in need of representation in a business litigation matter, please call NOW to discuss your case with a business litigation lawyer!

### IRS Statute of Limitations: Tax Collections
The statute of limitations limits the time for the IRS tax collection activities. Generally, there is a ten-year statute of limitations for the IRS collection of owed taxes.  Thus, for assessments of tax or levy made after November 5, 1990, the IRS cannot collect or levy any tax ten years after the date of assessment of tax or levy. See 26 U.S.C. §6502(a)(1). Court proceedings must also be started by the IRS within the 10 year statute of limitations. Treas. Reg. Section 301.6502-1(a)(1).
For assessments of tax or levy made on or before November 5, 1990, the IRS cannot either collect or levy any tax six years after the date of assessment of tax or levy. See  26 U.S.C. §6501(e). However, if the six-year period ends after November 5, 1990, the statute of limitations is extended to ten years. Hence, in order to come under the six-year statute of limitations, the six-year period must end prior to November 5, 1990.
The ten-year statute of limitations can be extended by agreement between the taxpayer and the IRS, provided that the agreement is made prior to the expiration of the ten-year period. See 26 U.S.C. §6501(c)(4).
Thus, in figuring out the applicable statute of limitations, you must understand: the starting date for the running of the statute of limitations, any exceptions to the tolling of the statute of limitations, the last day that the IRS can audit a tax return, and the last day that the IRS can collect overdue tax on a tax return.
Sherayzen Law Office can help you understand all of these issues and represent your interests in your negotiations with the IRS.
Call NOW to discuss your case with a tax lawyer!

### Amending Tax Returns
Whether you need to amend your previously-filed tax return depends on your particular situation. In some situations, such as simple math errors, the IRS will correct the return for you. In other situations, however, you should file an amended tax return. The most common situations occur when you need to change your: filing status, dependents, income, deductions and credits.
If you are eligible to claim the first-time homebuyer credit for a qualified 2010 home purchase, you may wish to elect to amend your 2009 return in order to claim the credit this year without waiting for the next year to file the 2010 tax return.
You should use Form 1040X, Amended U.S. Individual Income Tax Return, to correct a previously filed Form 1040, 1040A or 1040EZ. Be sure to check the box for the year of the return you are amending on the Form 1040X, Line B, or write in the year if you are amending a return filed in year prior to those listed on the form. If you are amending more than one tax return, you will need to prepare a 1040X for each return If the changes involve other schedules or forms, attach them to the Form 1040X.
If you are filing to claim an additional refund, you should wait until you have received your original refund before filing Form 1040X. However, if you owe additional tax for 2009, the opposite is true – you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges. Interest is charged on any tax not paid by the due date of the original return, without regard to extensions.
Whether you are able to claim a refund will depend on the applicable statute of limitations, but generally, you have three years from the date you filed your original return or two years from the date you paid the tax, whichever is later.
Sherayzen Law Office can help you determine whether you need to amend your tax return and help you prepare Form 1040X with all attachments.
Call Sherayzen Law Office to discuss your tax situation with a tax attorney!

### IRS Statute of Limitations: Taxpayer Audit
The tax statute of limitations limits the time during which an action can be brought by the IRS for an audit. The general rule is that IRS has three years from the filing date to audit a tax return. 26 U.S.C. §6501(a) and Treas. Reg. §301.6501(a)-1(a). Similarly, under Treas. Reg. 301.6501(a)-1(b) no proceeding in court by the IRS without assessment for the collection of any tax can begin after the expiration of three years.
However, if the taxpayer fails to report on his tax return an amount in excess of 25% of the gross income (as stated on the filed tax return), then the statute of limitations is increased to six years. 26 U.S.C. §6501(e).
If the tax return was prepared by the IRS under the authority of section 26 U.S.C. §6020(b) the statute of limitations simply does not apply. See 26 U.S.C. §6501(b)(3). Likewise, the statute of limitations does not apply in the case of a false tax return or fraudulent tax return filed with the IRS with intent to evade any tax. See 26 U.S.C. §6501(c)(1).
This essay states only the general rules. The statute spells out numerous exceptions to these general rules. Therefore, even though most of the situations are resolved by the general rule, it is best to consult your tax attorney to see if your situation fits into one of the exceptions.
Call Sherayzen Law Office to discuss your tax situation with a tax attorney!

### Business Tax Returns: The Advantages of a Tax Attorney Review
A lot of businesses simply look at the tax returns as “adding numbers.” Yet, tax returns are so much more than that. A tax return is a result of a long series of decisions made by the business, such as elections, classifications, investment strategies, structuring of business transactions, and numerous other actions and inactions. Dealing with this interior constitution of a business tax return from a legal perspective (rather than from a more rudimentary accounting view) is the superior advantage of a business tax attorney.
The advantages of the legal approach to tax returns can be grouped in three classifications. First, an attorney will review a business tax return from a structural perspective, taking into account the temporal element of a business transactions (i.e. comparing the effect of a business strategy throughout different time periods – prior years and future projections) and non-tax business and legal goals. This structural overview is especially effective in advantageous positioning of a tax strategy into the overall legal structure of a business.
This first approach necessarily leads to the second advantage – a business tax attorney will explore an alternative treatment of a given business and/or tax issue and will strive to find a legal solution to a taxation matter. Armed with a deeper understanding of other legal and non-legal goals of a business client, a tax attorney may engage in re-classification of certain business transactions to take better advantage of the contemporary provision of the Internal Revenue Code. In certain situations, an attorney review may even result in filing amended tax returns for prior tax years in an attempt to recapture tax benefits (i.e. receive tax refunds), which were unavailable or overlooked in the past.
Finally, an overview of a business tax return by a business tax lawyer is likely to lead to comprehensive tax planning for the future. In some situations, an overview of a business tax return by a business tax lawyer will result in a recommendation of a complete re-structuring of business transactions in a more tax-advantageous matter while seeking to achieve the same business goals. In others, a business tax lawyer may implement tax deferment and tax reduction strategies centered around purely legal and tax concepts.
Whether your business is small or large, growing or maturing, local or international, retaining the services of a business tax lawyer to overview your business tax return should become your annual practice. The benefits of such overview are usually substantial. In addition to the direct advantages of a better current tax strategy and future tax planning, an overview of a business tax return by an attorney may lead to completely unexpected and important discoveries about the legal and tax situation of your business – the legal issues that were overlooked in the past, but could have grown into severe problems in the future had it not been for their timely discovery.
Sherayzen Law Office can help you review your business tax returns and create responsible and tax effective strategies for the current and future tax years. Call NOW to discuss your business tax return(s) with an international business tax lawyer!

### IRS Statute of Limitations: Claiming a Tax Refund
Generally, a taxpayer may file a claim for a tax refund of an  overpayment of any tax within three years from the time the tax return  was filed with the IRS or two years from the time the tax was paid to  the IRS, whichever period is later. If no tax return was filed with the IRS, the claim may also be made within two years from the date that the tax was paid to the IRS. See 26 U.S.C. §6511(a).
The statute spells out numerous exceptions to this general rule.  For example, pursuant to 26 U.S.C. §6511(d)(1), a taxpayer may file a claim within 7 years if the tax refund pertains to a bad debt under section 166 or 832(c) or in connection with a loss from a worthless security under section 165(g).
Therefore, even though the majority of situations are resolved by the general rule, it is prudent to consult your tax attorney to see if your situation fits into one of the exceptions.
Call NOW Sherayzen Law Office to discuss your tax situation with a tax attorney!

### Effect of Legal Separation and Divorce on Your Ability to Claim “Single” Tax Status
According to the IRS, in order to be able to claim “single” tax status, you must be “unmarried or legally separated from your spouse under a divorce or separate maintenance decree” on the last day of your tax year, and you do “not qualify for another filing status.” (See IRS Publication 501).
Determining your marital status can be a complex legal matter with numerous exceptions, and exceptions to exceptions. Only a tax professional who reviews the facts of your case may be in position to advise you on your marital status. Here, I will only attempt to sketch the broadest concepts to give you some awareness of the issues.
IRS may consider your marital status as “unmarried” if, on the last day of the relevant tax year, “you were unmarried or legally separated from your spouse under a divorce or separate maintenance decree.” Id. Usually, the state law will determine whether you were legally separated from your spouse on the last day of the relevant tax year. If you were divorced under a final decree by the last day of the year, the IRS will consider you unmarried for the entire year. However, if the divorce was motivated by the desire to file your tax return as unmarried persons, and you and your spouse remarry the next year, the IRS will disregard the divorce for tax purposes and demand that you and your spouse file your tax return(s) as married persons.
If your marriage is annulled (by a court decree which holds that no valid marriage ever existed), the IRS will consider you as “unmarried,” and you must amend your tax returns for all years (within the Statute of Limitations – usually the past three tax years) affected by the annulment.
Keep in mind that, if you are able to claim “single” status, you may also be eligible for a more advantageous tax filing status, such as “head of household” or “qualifying widow(er) with a dependent child.”
Call Sherayzen Law Office to discuss your tax filing status with an attorney!

### Difference between Self-Employment Tax and FICA tax
The best way to understand the difference between the Self-Employment tax (“SE tax”) and the FICA (Federal Insurance Contributions Act) tax is by contrasting self-employment versus regular salary employment.  In essence, the SE tax is a Social Security and Medicare tax imposed on individuals who for themselves, while FICA tax is paid in equal portions by employees and employers.
Usually, if you receive a salary by working for someone else, you do not pay the SE tax, but only your half of the FICA tax, which consists of the Social Security and Medicare taxes imposed on employers and employees by the U.S. government to fund Social Security and Medicare programs. Employee’s share of FICA tax consists of 6.2% Social Security tax (in 2010, imposed on up to $106,800 of an employee’s salary) and 1.45% of Medicare tax (no wage limit). The employee’s share of the FICA tax is calculated based on employee’s gross earnings.  The other half of FICA tax is also calculated based on the employee’s gross earnings, but it is paid by the employer.  Thus, the total FICA tax imposed by the federal government is 15.3% and it is paid in equal shares by employees and employers.
SE tax is a rough equivalent of FICA tax. When you are self-employed, however, you are your own employer.  Therefore, the U.S. government imposes a similar 15.3% SE tax on the self-employed individuals, but you are the only one fully responsible for the tax (since there is no employer who would pay one-half of the tax).
In an effort to apparent eliminate tax discrimination between employees (who pay full SE tax) and self-employed individuals (who pay one-half of FICA tax), the federal government created significant differences between the SE tax and the FICA tax.  Two of them stand out and deserve special mention in this essay.  First, unlike the FICA tax, the SE tax is imposed only on net earnings.  Therefore, if you are self-employed, you are able to deduct your business expenses from your self-employment gross income and calculate your SE tax on your net self-employment income. Second, in calculating his adjusted gross income, a self-employed individual is able to deduct a half of his SE tax from his total gross income, further reducing his income tax burden.
Nevertheless, despite these and other differences between these taxes, significant disparity persists.  This disparity, however, does not always favor the employees; on the contrary, in many cases, self-employed individuals (especially start-up businesses) are able to make full use of the business expense deductions available to them and significantly reduce their tax burden.   Generally, however, once the business matures, the SE tax is felt more heavily by self-employed individuals than employees.  In these cases, it is prudent to consult your tax attorney to see what tax planning strategies are available under the Internal Revenue Code to reduce your tax burden.
Sherayzen Law Office can help you correctly assess your current tax situation and help you develop responsible tax planning strategies for you and your business.  Call NOW to discuss your tax situation!

### Importance of Determining Your Tax Filing Status
Figuring out your filing status is the first major step in filing your tax return. Your tax filing status not only will allow you to determine the correct tax (from the Tax Computation Worksheet or appropriate column in the Tax Table), but also it is crucial to understanding your eligibility for and the exact amount of deductions, exemptions, tax credits. For example, in some situations, if your taxable income is close to $160,000, the choice between filing as “single” and filing as “married filing separately” may influence whether you need to pay the alternative minimum tax (“AMT”); it is more likely that filing as “single” will help you avoid AMT, while “married filing separately” status may have the opposite effect.  Sometimes, the latter tax filing status may also make you ineligible for certain tax credits even at a much lower income bracket – a situation that may be avoided if you are filing joint tax return with your spouse.
There are five possible tax statuses: 1) single; 2) married filing jointly; 3) married filing separately; 4) head of household, and 5) qualifying widow(er) with dependent child.  The benefits and drawbacks of each status differ greatly depending on a tax situation. In some cases, you may be eligible for more than one status (for example, single and head of household); in other cases, your eligibility may be greatly influenced by the choices you make.
In order to draw out the benefits and avoid costly mistakes, careful tax planning is necessary. The Internal Revenue Code (“IRC”) is so complex that it requires a tax professional to fully understand its provisions. Tax attorneys are professionals who usually are in a much better position to legitimately utilize possibilities offered by the IRC.
Sherayzen Law Office is a law firm that offers individual and business tax services.  We can help you understand your current tax position, file the tax returns for you, and carefully plan your tax strategies for the future. CALL NOW to start resolving your tax issues!

### Foreign Earned Income Exclusion Amount for 2010
Under I.R.C. §911, if certain conditions are met, a qualified individual can exclude his foreign earned income from taxable gross income for the U.S. income tax purposes.  This income may still be subject to U.S. Social Security taxes.
The income exclusion amount for 2010 has increased to $91,500.

### Eugene Sherayzen re-appointed to the Publications Committee of the MSBA
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”.

### Eugene Sherayzen elected to be the new treasurer of International Business Law Section of the MSBA
On June 30, 2010, Eugene Sherayzen, Esq. was elected to be the next treasurer of the International Business Law Section of the Minnesota State Bar Association.

### First-Time Homebuyer Tax Credit: Deadline Extension
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.

### International Tax Lawyers in Minneapolis Minnesota: Fee Agreement Arrangements
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.

### FBAR (Report on Foreign Bank and Financial Accounts) is due on June 30, 2010
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).
Excerpt: The FBAR must be filed by June 30 of each relevant year, including this year (2010).

### Trademark Lawyers Minneapolis: Advantages of Federal Trademark Registration
Obtaining federal registration of a trademark can bestow on the trademark owner (“registrant”) a number of evidentiary and substantive advantages:
1. Federal trademark registration is a prima facie evidence of the validity of a registered mark, the registrant’s ownership of the mark, the continued use since the filing date of the application and the exclusive right to use the mark in commerce (in connection with specified class of goods or services);
2. Federal trademark registration give the registrant nation-wide rights (with certain exceptions);
3. Federal trademark registration provides a constructive notice of the registrant’s claim of ownership of the mark;
4. Federal trademark registration allows the registrant to file the lawsuit for trademark infringement in a federal court;
5. Federal trademark registration entitles the registrant to statutory remedies, including treble damages and criminal penalties in counterfeit cases;
6. Federal trademark registration allows the registrant to obtain “incontestability” (which precludes cancellation of a trademark registration based on prior use or descriptiveness) after five years of continuous use and filing of necessary paperwork with the USPTO (United States Patent and Trademark Office);
7. Federal trademark registration establishes registrant’s rights under the Paris Convention, including priority rights on foreign filings and the right to register abroad based on the U.S. registration;
8. Federal trademark registration provides the registrant with an ability to bar importation of goods which bear infringing trademarks. The registrant will need to deposit a copy of its U.S. trademark registration with the U.S. customs.
Call Now at (952) 500-8159 to discuss your trademark registration with an experienced Minneapolis trademark lawyer!

### Understanding Your Contract: Top Seven Questions to Ask Yourself Before Signing a Contract
The standard definition of a contract states that: a contract is a promise or set of promises, for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. Therefore, an enforceable contract, whatever its type or form, inevitably creates rights and obligations. This is why it is so important to make sure you understand the contract before you sign it. Therefore, ask yourself the following questions before you bind yourself to an agreement with another party:
1. Do I understand exactly the extent, timing, and nature of my contractual obligations?
2. Do I understand exactly the extent, timing, and nature of the other party’s contractual obligations?
3. Do I understand exactly my rights under the contract and when I can enforce them?
4. Do I understand exactly the other party’s contractual rights and when they can enforce them?
5. Am I personally liable (i.e. your personal assets are at risk) for the promises made in the contract?
6. Is the contract enforceable?
7. If the contract is enforceable, where and under which state’s or country’s laws can it be enforced?
There are many more detailed questions that should be asked before you sign a contract. Never, however, sign a contract without at least positively answering these seven questions.
Obviously, it is best if a contract attorney reviews your agreement before you sign it. Sherayzen Law Office has extensive experience in drafting and reviewing a wide variety of U.S. and international contracts, including but not limited to: confidentiality agreements, disclaimers, distributor agreements, sale of goods contracts, personal services contracts, general employment contracts, independent contractor agreements, franchise agreements, manufacturing agreements, non-compete agreements, lease agreements, licensing agreements, operating agreements, partnership agreements, and sale/purchase of business contracts.
Call Now at (952) 500-8159 to discuss your contract with a Minnesota and international contract lawyer.

### Reporting Canadian Registered Retirement Savings Plan (RRSP) and Registered Retirement Income Fund (RRIF)  Income to the IRS
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!

### Definition of “U.S. person” for FBAR (Report on Foreign Bank and Financial Accounts) Purposes
Since October of 2008, the definition of a “U.S. person” has been going through a turbulent phase of uncertainty with periodic expansions and retractions. The pre-2008 FBAR instructions (dating back to July of 2000 version) defined the “U.S. person” broadly as: “(1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust.” See IRS Announcement 2010-16.
Two important features of this definition stand out. First, the term “person” is defined to include not only individuals, but also virtually any type of business entity, estate or trust. 31 C.F.R. §103.11(z) Even a single-member LLC, which is generally disregarded for tax purposes, may be classified as a U.S. person because it has a separate juridical existence from its owner. A partnership or a corporation created or organized in the United States is considered to “domestic” under 26 U.S.C. §7701(a)(4). Second, the definition of who should be considered as a U.S. resident is interpreted under 26 U.S.C. §7701. Under 26 U.S.C. §7701(b), an individual is a U.S. resident if he meets any of the three bright-line tests: (1) lawful admission for permanent residence to the United States (“green card”); (2) substantial presence in the U.S.: the sum of the number of days on which such individual was present in the United States during the current year and the 2 preceding calendar years (when multiplied by the applicable multiplier determined under the following table) equals or exceeds 183 days; (3) and first-year election to be treated as a resident under 26 U.S.C. §7701(b)(4). Thus, the definition of a U.S. resident under the tax rules is much broader than the one used in immigration law.
In October of 2008, the IRS revised the FBAR instructions and further expanded the definition of a “U.S. person” by including the persons “in and doing business in the United States.” This revision caused a widespread confusion among tax professionals. The outburst of comments and questions prompted the IRS to issue Announcements 2009-51 and 2010-16, suspending FBAR filing requirement through June of 2010 (i.e. for calendar years 2008 and 2009) for persons who are not U.S. citizens, U.S. residents, and domestic entities. Instead, the tax professionals were referred back to July of 2000 FBAR definition of a “U.S. person.”
In the meantime, in February of 2010, the IRS published new Proposed FBAR regulations under 31 C.F.R. §103. The proposed rules modify the definition of a “U.S. person” as follows: “a citizen or resident of the United States, or an entity, including but not limited to a corporation, partnership, trust or limited liability company, created, organized, or formed under the laws of the United States, any state, the District of Columbia, the Territories, and Insular Possessions of the United States or the Indian Tribes.” 75 Fed. Reg. 8845 (proposed February 23, 2010) (to be codified as 31 C.F.R. 103.24(b)). This definition applies even if an entity elected to be disregarded for tax purposes. Id. The determination of a U.S. resident status is to be done according to 26 U.S.C. §7701(b) and regulations there under, except the meaning of the “United States”(which is to be defined by 31 U.S.C. 103.11(nn)). Id.
Thus, if the proposed regulations will ultimately be codified in their current form, the definition of the “U.S. person” will be slightly broader than that of the July of 2000, but will represent a major regression from October 2008 definition. Nevertheless, based on even existing (July of 2000) definition of the “U.S. person,” the IRS has been able to cast a wide net over U.S. taxpayers, trying to force disclosure of as many foreign financial accounts as possible.

### Net Worth Requirement for Money Transmitter License in Minnesota
An applicant for a money transmitter license in Minnesota must comply with Minn. Stat. §53B.05 net worth requirements. Under Minnesota law, each licensee engaging in money transmission in three or fewer locations in the state, either directly or through authorized delegates, must have a net worth of at least $25,000. However, if a licensee engages in money transmission at more than three locations in the state, but fewer than seven locations (either directly or through authorized delegates), he must have a net worth of at least $50,000. If there are more than six locations in the state, the licensee should have a net worth of $100,000 and an additional net worth of $50,000 for each location or authorized delegate located in the state in excess of seven, to a maximum of $500,000. The net worth is calculated in accordance with generally accepted accounting principles (“GAAP”).
The required net worth must be maintained throughout the licensed period. Failure to meet the statutory net worth requirement may lead to license revocation and denial of the license renewal application. Minn. Stat. §53B.19 (2).
The burden of proof is on the initial licensee. This means that when the applicant files its money transmitter license application for the very first time, he must prove by preponderance of evidence that he satisfies the net worth requirements and any other issues raised by the Minnesota Department of Commerce (“Department”). When an application for license renewal is filed, however, the issue of who bears the burden of proof is not yet settled by courts. There is a very good argument that the Department bears the burden of proof once the initial burden of production is satisfied by the applicant. Sherayzen Law Office can help you make this argument once the need arises.
It is very important to hire a Minnesota attorney to review your license application. The regulatory compliance costs are very high and making sure that your application satisfies the statutory requirements prior to its filing may be crucial to containing legal expenses and even ultimate ability to obtain (for the first time) or renew the license.
If, however, you submit your license application without professional review of a Minnesota attorney and the Department raises issues with respect to the application, it is indispensable to retain a Minnesota business lawyer as soon as possible. Timely professional intervention may lead to quick resolution of the issues and led to significant savings in accounting and legal expenses.
Sherayzen Law Office can help you file a new license application as well as a renewal application. If your application has been rejected and you appeal the case with the Office of Administrative Hearings, Sherayzen Law Office will provide you with a vigorous yet cost-effective legal representation. Call our office at (952) 500-8159!

### Eugene Sherayzen is a new Legal Advisor to Bright New Ideas
It is with pleasure that Sherayzen Law Office announces that on May 5, 2010, Eugene Sherayzen became a Legal Advisor to the Bright New Ideas (“BNI”), a Minnesota non-profit corporation devoted to the alleviation of worldwide poverty through the use of solar energy. In his new capacity, Mr. Sherayzen will help overview the BNI’s U.S. and international contracts, and provide legal support for the BNI’s import and export strategy.

### Tax-Exempt Organizations Must File Form 990 by May 17, 2010 
Under the Pension Protection Act of 2006, most tax-exempt organizations, with the exception of churches and church-related organizations, must file Form 990 with the IRS effective the beginning of year 2007.  Any tax-exempt organization that fails to file the relevant version of the form for three consecutive years automatically loses its federal tax-exempt status.
All Form 990-series returns are due on the 15th day of the fifth month after an organization’s fiscal year ends. Many organizations use the calendar year as their fiscal year, which makes May 15 the deadline for those tax-exempt organizations. This year, however, since May 15 falls on a Saturday, the deadline is actually on May 17, 2010. Absent a request for extension, there is no grace period from filing by the original due date.
Small tax-exempt organizations with annual receipts of $25,000 or less can file an electronic notice Form 990-N.  Other tax-exempt organizations with annual receipts above $25,000 must file a Form 990 or 990-EZ, depending on their annual receipts. Private foundations must file Form 990-PF.

### Commercial Lease Negotiation: Priority Issues for Landlords
It is impossible to know what issues will actually arise during the term of a lease. Hence, it is important for a landlord to hire an attorney to carefully analyze the landlord’s specific situation, spot potential problems and address them in the lease agreement. The process of addressing these issues in the lease, however, can become very contentious since landlords and tenants often disagree about the terms that the other party wishes to include in the lease. This may lead, in turn, to multiplication of disagreements and eventually even ruin the deal altogether.
Therefore, it is very important for the landlord to prioritize the issues in order to know when to concede an issue and when to hold the ground and insist on an agreeable resolution. In this essay, I will identity and discuss six most crucial commercial lease issues for the landlord; these issues are worth fighting for and must be given priority in a commercial lease negotiation.
A. Tenant Payments During the Term of the Lease Agreement
This is the most fundamental part of the lease agreement – the lease agreement (“Agreement”) must require tenant to make the rent payments for the duration of the lease agreement. In order to do so, the landlord should consider adopting four strategies. First, the Agreement should clearly set forth the tenant’s obligation to pay under the lease. Second, the landlord should strive to minimize the number of conditions to the obligation of the tenant to pay rent and operating expenses. Third, minimize the number of events that give the tenant the right to terminate the lease. Finally, eliminate the right of the tenant to set-off payments if the landlord defaults. Similar attitude should be adopted to the rent abatement situations.
B. Control Over the Leased Property
Leasing the property does not automatically mean that the landlord should give up all control over it. Usually, a landlord’s attorney will insist on requiring landlord’s consent to anything that could interfere with the smooth operation or safe condition of the leased property. Another strategy is for the landlord to retain reasonable control over who will occupy the leased property.
C. Unhindered Ability of the Landlord to Finance or Sell the Leased Property
Closely related to the previous topic of control, the landlord should make sure that his ability to finance and/or sell the leased property is left unhindered by the provisions of the Agreement. It is also suggested that the Agreement includes provisions typically expected by lenders, such as subordination and attornment requirements as well as provisions mirroring typical borrower-to-lender covenants.
D. Clear Obligations and Reasonably Enforceable Remedies
This is another priority area for the landlord. The Agreement should set forth clearly both parties’ obligations and responsibilities, conform notice requirements to the landlord’s standard practices, and provide for reasonable remedies such as: adequate security (security deposit, guarantees, letters of credit, etc.), record-keeping of the tenant’s gross sales, realistic late fees and interest, and the landlord’s self-help rights.
E. Insurance and Indemnification Provisions
The Agreement should strive to make sure that there is an insurance against every risk, whether the insurance is provided by the landlord or the tenant. It is suggested, however, to avoid needlessly requiring both landlord and tenant to carry multiple levels of insurance coverage.
F Avoidance of Unexpected Costs
The Agreement should plan for unexpected costs by providing for expenses that vary based on occupancy. The landlord should work toward including in the Agreement provisions reimbursing him for out-of-pocket expenses in connection with attorney’s fees incurred in dealing with tenant requests for lease assignment and sublease. Other professionals’ fees (such as design professionals who review or supervise construction projects) may also be incorporated in the reimbursement provisions.
Conclusion
The purpose of this essay is to familiarize the readers with the very dense and complex landlord issues in a commercial lease negotiation setting. Obviously, in order to achieve better understanding by my non-lawyer audience, I necessarily over-simplified the issues and greatly narrowed the description of the lease provisions. I hope, however, is that I provided sufficient legal background for you to be able to better explain your goals and wishes to the attorney who will be drafting your commercial lease agreement.

### Top 3 Reasons to Hire Attorney to Represent You in a Contested Hearing Conducted by the Office of Administrative Hearings
In this article, I will discuss three most important reasons for retaining a lawyer to represent you in a Contested Hearing conducted by the Office of Administrative Hearings (OAH).
1. Contested Hearing conducted by the OAH is an Administrative Version of a Trial
Contested Hearing is an administrative trial. In most ways, it is highly similar to a regular civil trial, only with somewhat relaxed procedural and evidentiary rules. There is an administrative law judge and an attorney representing the other side. The rules of procedure and evidence, while more informal and less strict than in a usual trial, must be followed. Moreover, where the OAH does not provide for or omits certain procedures, the administrative judge will refer back directly to the civil court rules for the guidance.
Thus, you need to know the OAH rules. It is very easy to damage your case by making unnecessary procedural mistakes. Even where the mistakes are reversible, the image of your case may suffer.
2. Government Agencies are Represented by Attorneys
Government agencies realize the complexity and importance of the Contested Hearings. Hence, they are always represented by attorneys, often highly experienced and specialized in the relevant areas of law. Government lawyers are also well-versed in the procedural rules of the OAH.
Therefore, it is simply very difficult, if not impossible, for a business owner, who is not trained in law and inexperienced in the OAH procedures, to match the government’s combination of experience, knowledge, and skillful advocacy – even when the judge is lenient when it comes to procedural mistakes committed by the pro se litigators (i.e. business owners who choose to represent themselves).
3. Legal Fees are Often Lower than the Cost of Failure
An adverse ruling by the judge in a Contested Hearing may often put you out of business (for example, in a business license denial case). Even if your business is able to absorb the costs of the final outcome, the expenses associated with the provisions of the ruling may often be significantly higher than in a situation where an attorney’s timely intervention may have mitigated or averted altogether the worse terms of the judge’s decision.
Of course, hiring an attorney does not mean that you will automatically win your case. It does mean, however, that you will have a professional ardent advocate skilled in the art of law and procedure working solely to reach the most favorable outcome in your case. Even in a losing situation, your attorney may be able to find the least-damaging solution to your problem. Often, a lawyer may be able to settle the case even without the need to go to the hearing, avoiding the expenses associated with it.
Conclusion
While a Contest Hearing is not as full-blown civil trial, you should make sure that you are adequately represented during the hearing proceedings. There are procedures to follow, rules to know, and a formidable opponent to defend against. The stakes are usually sufficiently high to justify reasonable expenses on the legal representation.
Sherayzen Law Office can help you every step of the way in the pre-hearing process and it will provide vigorous and creative defense of your interests during the hearing. Call NOW at (952) 500-8159 to schedule the consultation!

### Hiring Incentives to Restore Employment Act: Two New Tax Benefits for Employers
On March 18, 2010, the Hiring Incentives to Restore Employment Act (“HIRE”) was enacted into law. The Act offers timely benefits to the employers who hire unemployed workers.
HIRE Benefits
Under the HIRE, qualified employers who hire unemployed workers may qualify for two main tax benefits.
First, under the HIRE, Employers who hire unemployed workers between February 3, 2010 and January 1, 2011 may qualify for a 6.2% payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after the date of enactment. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers will still have to withhold the employee’s share of Social Security taxes, as well as income taxes. Moreover, both employers and employees will still have to pay their share of Medicare taxes.
Second, employers may claim an additional general business tax credit of up to $1,000 per each worker retained.
Notice, new workers filling existing positions may also qualify but only if the workers they are replacing left voluntarily or for cause. Family members and other relatives do not qualify.
Types of Employers Qualified to Claim HIRE Benefits
Businesses, agricultural employers, tax-exempt organizations and public colleges/universities all qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot claim this new tax benefit.
When to Claim HIRE Benefits
Employers may claim the payroll tax benefit on the federal employment tax return they file, usually quarterly, with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment tax form for the second quarter of 2010.
The additional business tax credit should be claimed on the employers’ 2011 income tax returns.
Additional Requirements
Under the HIRE, in order to benefit from the new law, employers must get a statement from each eligible new hire certifying that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else during the 60-day period.

### Organizing Business in Minnesota: Top Five Reasons to Incorporate
Generally, all business entities in Minnesota can be organized into two large groups: incorporated business entities and unincorporated business entities. The first group mainly consists of corporations, limited liability companies (“LLC”), limited liability limited partnerships (“LLLP”), limited liability partnerships (“LLP”) and business trusts. If the incorporated entity operates in certain professions, the business title of such entity often includes an extra “P” for “professional” (for example: PLLC). Incorporated entities are organized by registering with the State of Minnesota; in addition, there is usually a maintenance requirement which consists of annual filings with the State. Furthermore, additional documentation, such as buy-sell agreements, bylaws, operating agreement, and partnership agreement, may be required to organize the relations between business owners and managers. Since incorporated entities are treated as separate entities, there are also numerous legal and tax implications associated with a particular choice of incorporation.
The unincorporated business entities mainly include sole proprietorships and general partnerships. Unlike the incorporated entities, unincorporated businesses usually do not require any type of registration with the state and often (in the case of sole proprietorships, always) avoid any complications associated with being treated as separate legal entities.
Given the accounting and legal complications and expenses of money and/or time associated with additional paperwork, what are the main reasons for business owners to incorporate, i.e. why go through all these troubles? Answering this question is precisely the objective of this essay. In this article, I will detail the top five powerful incentives which account for why most successful businesses seek incorporation.
1. Limited Liability Protection for Owners
Probably the most common incentive for business incorporation is protection of the owner’s assets. As a consequence of incorporation of a business, business owners are not personally liable for business debts and only have risk up to the amount of their investment and additional contributions they may have contractually obligated themselves to contribute to the entity. Thus, under the limited liability protection doctrine, liabilities of the business are separated from the owner’s personal assets.
Remember, however, that the limited protection is not absolute. A business owner may still be liable under the common law concept known as “piercing the corporate veil” (a common-law doctrine which removes the limited liability protection in certain circumstances). Furthermore, there are additional statutory provisions which may encroach on the limited liability protection (such as personal liability for the employees’ portion of FICA and withholding payroll taxes).
Finally, it must be remembered that an incorporated business will not provide limited liability protection from professional liability. For example, lawyers and doctors cannot protect themselves against professional liability by incorporating their business. The incorporation, however, can usually shield professionals from debts and obligations of the business itself.
2. Flexible Ownership Structure
The second reason for business incorporation is flexibility in structuring business ownership, especially transferability of ownership. In order to understand this superiority of the incorporated entity over unincorporated one, one must remembered that, unlike a sole proprietorship, an incorporated entity is considered to be separate from its owners. Therefore, the ownership interest in an incorporated entity is generally considered as personal property and can be transferred independent of the business. The same analysis applies to general partnerships, but such partnerships usually do not have the features, such as different classes of stocks or stock compensation options, enjoyed by the incorporated entities.
The transfer of the ownership interest in an incorporated entity may be restricted by the owners themselves by using bylaws, shareholder control agreements, buy-sell agreements, operating agreements, member control agreements, partnership agreements, et cetera.
3. Business Tax Planning
Incorporation of a business may be one of the best ways to reduce or defer taxes. The primary reason for this is the fact that the State of Minnesota and the federal government tax each business entity differently. Moreover, there are great differences with respect to the types of taxes and tax rates imposed on an entity and its owners. Structuring compensation differently (for example, issuing equity to employees in exchange for services rendered) may produce a completely different end-of-year tax bill. Some business entities may even choose their own tax year different from the usual calendar year used by a solo proprietorship. With careful tax planning, a business owner may greatly reduce his tax burden, thereby increasing his profits and competitiveness of his business.
In addition to the pure business tax planning, incorporation of a business can be a great tool for estate planning.
4. Superior Options for Attracting Investors
It is much easier for an incorporated entity to attract investors and secure business financing. This is usually the case because an incorporated entity can be capitalized either with debt or an ownership interest in the entity (equity), and the business owners can simply sell equity to raise capital and attract investors. Thus, investors become co-owners of the business without having to going through the process of constant re-titling of the assets (as would usually happen in a sole proprietorship). Obviously, the limited liability protection and the flexible ownership structure are two other very important factor in attracting investors.
5. Continuity of Life of a Business Entity
In a general partnership or a sole proprietorship, a death of an owner or a partner’s withdrawal from business will lead to the dissolution and the winding up of the business. Unlike unincorporated entities, however, the incorporated businesses can continue their existence indefinitely, unless the organizational documents specifically limit the term of the entity. This continuity of life creates goodwill value for the business and its owners, and it is very important to the stability of the business.
Conclusion
Incorporation of a business can be very important to business success. Except for professional liability, the owner’s personal assets are separated from the debts and obligations of the business. Incorporation can help a business to attract investors through its flexible ownership structure and assured continuity. Finally, incorporation of a business can create tremendous opportunities for business tax planning, reducing the tax burden and promoting the competitiveness of the business.
Obviously, these five factors are not the only reasons for business incorporation. They are, however, the most common and the most powerful ones. You should remember though, that, once the decision to incorporate your business is made, the next step is to decide which particular entity best fits your situation. The choice of entity should be made a business and tax attorney, who will choose the right entity for you through analysis of the combination of business and tax factors. Sherayzen Law Office can help you make this choice, draft and file the necessary documents, and create the right legal structure for your business entity so that you can concentrate on working toward your business success.

### Extension of the Homebuyer Tax Credit under the Worker, Homeownership, and Business Assistance Act of 2009
New Deadlines
While the maximum tax credit amount remains at $8,000 for a first-time homebuyer, the Worker, Homeownership, and Business Assistance Act of 2009 (“WHBAA”)extends the deadline for qualifying home purchases from November 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase. The first-time homebuyer is defined as a taxpayer who has not owned a primary residence during the three years up to the date of purchase.
WHBAA also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” In order to qualify, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.
Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011.
New Income Limits
WHBAA further raises the income limits for buyers who purchase homes after November 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.
Remember, for homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Taxpayers who enjoy higher incomes do not qualify for this tax credit.
Top New Restrictions
WHBAA imposes several new restrictions for homes purchased after November 6, 2009.  Among the most important restrictions are inability by the dependants and minors (less than 18 years of age on the date of purchase) to claims the tax credit.  Also, home purchased for the price exceeding $800,000 do not qualify for the tax credit.
How to Claim this Tax Credit
The qualifying homebuyers have the option of claiming the tax credit on either their 2009 or 2010 tax returns.  In order to claim the tax credit, the eligible taxpayers must fill-out the new Form 5405 together with the following additional documentation:
a). Generally: a copy of the settlement statement showing all parties' names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement;
b). If the taxpayer purchased a mobile home and unable to get a settlement statement, then he should include a copy of the executed retail sales contract, showing all parties' names and signatures, property address, purchase price and date of purchase;
c). If the taxpayer purchased a newly constructed home and a settlement statement is not available, then he should include a copy of the certificate of occupancy, showing the owner’s name, property address and date of the certificate.
If the taxpayer is claiming a “long-time resident” tax credit, it is advisable (to avoid refund delays) to attach the following documents covering the five-consecutive-year period:
I)   Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements, or
ii)  Property tax records, or
iii) Homeowner’s insurance records.
Notice the word “or” – this means that either of the aforementioned three categories of records may suffice.
Remember, the taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.

### Home-Buyer Credit: New Form 5405
On January 15, 2010, the IRS released a new Form 5405 that eligible homebuyers need to claim the first-time homebuyer credit this tax season and announced new documentation requirements to deter fraud related to the first-time homebuyer credit. The new form and instructions follow the major changes to the homebuyer credit made by the Worker, Homeownership, and Business Assistance Act of 2009.
A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the previous version of Form 5405.
The processing of the tax returns containing Form 5405 will begin in mid-February, and, as long as all required documents are attached, it will take about four to eight weeks to get a refund claimed on a complete and accurate paper tax return.
Remember, the taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.

### Fee Agreement Arrangements with Tax Lawyers in Minneapolis: 5 Most Important Issues
In this article, I will discuss five most important issues that you need to know before you sign a fee agreement with tax lawyers in Minneapolis.
1. How is the 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 tax lawyer compensation and it is fairly simple – the tax attorney is paid only based on the time he spends on the case. If you're paying your 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 tax attorney takes a percentage of the amount the client wins at the end of the case, is almost never used by tax attorneys in Minneapolis. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the 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 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 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 tax lawyer’s fees.
2. Does the agreement include the amount of the retainer? Most 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 a tax attorney asks his client to pay in advance. In this scenario, the 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).
3. How often will you be billed? Most 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.
4. What is the scope of the tax attorney’s representation? Most tax lawyers in Minneapolis will insist on defining their obligations in the fee agreement. The most important issue here is to state what the 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 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.
5. Who controls what decisions? Whether this information should be included in the fee agreement really depends on a case and on an attorney. Generally, 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 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, 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 tax lawyer, you should ask at least these five questions and make sure that the answers are complete and to your satisfaction.

### Fee Agreement Arrangements with Business Lawyers in Minneapolis: 5 Most Important Issues
In this article, I will discuss five most important issues that you need to know before you sign a fee agreement with business lawyers in Minneapolis.
1. How is the 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 business lawyer compensation and it is fairly simple – the business attorney is paid only based on the time he spends on the case. If you're paying your business lawyer by the hour, the agreement should set out the hourly rates of the business attorney and anyone else in this attorney’s office who might work on the case. The contingency fee, where the business attorney takes a percentage of the amount the client wins at the end of the case, is rarely used by business attorneys in Minneapolis. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the business 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 business 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 $5,000 to your business attorney to organize your corporation with all of the corresponding corporate documents. While a flat fee arrangement is possible in a small project, it is generally disliked by business 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 business 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 business lawyer’s fees.
2. Does the agreement include the amount of the retainer? Most business 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 the lawyer’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 a business attorney asks his client to pay in advance. In this scenario, the 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).
3. How often will you be billed? Most business 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.
4. What is the scope of the business attorney’s representation? Most business lawyers in Minneapolis will insist on defining their obligations in the fee agreement. The most important issue here is to state what the business 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 business 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.
5. Who controls what decisions? Whether this information should be included in the fee agreement really depends on a case and on an attorney. Generally, business attorneys in Minneapolis let their clients make the important decisions that affect the outcome of the case (such as: acceptance or rejection of a settlement offer, commencement of a lawsuit, financial and personal contractual issues, 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 should be in the contract, negotiation tactics, etc.) are usually taken by the business 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, business 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 business relationship with your business attorney will work. Before you sign the fee agreement with your business lawyer, you should ask at least these five questions and make sure that the answers are complete and to your satisfaction.

### Reporting Payments to Independent Contractors: Form 1099-MISC
Reporting Payments to Independent Contractors: Form 1099-MISC
If you hire an independent contractor to do work for your business, you may have to report to the IRS your payments to him by filing Form 1099-MISC (Miscellaneous Income) if the following four conditions are met:
1. The payee is not your employee;
2. The payment was for services in the course of your trade or business (including nonprofit organizations);
3. The payment is made to an individual, partnership, estate, or in some cases, a corporation; and
4. You made payments to the payee of at least $600 during the calendar year.
In order to comply with the first requirement, it is advisable (and in many industries - required) to ask your contract attorney to draft the Independent Contractor Agreement, the Independent Contractor Certification, and the appropriate Independent Contractor Statement.  The Independent Contractor should read and sign all three of these documents before he commences his services to your business.
Non-employee compensation paid to nonresident aliens should be reported on Form 1042-S, (Foreign Persons' U.S. Source Income Subject to Withholding) where some withholding may be required., Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons) must be filed if Form 1042-S is required.

### Filing This Year's Tax Return: Name Change as a Result of Divorce or Marriage
If you changed your last name last year as a result of getting married or divorced, you need to make sure that  the name on your tax return matches the name registered with the Social Security Administration (the “SSA”). This is because the new name which you adopted as a result of marriage (or an old name to which you reverted after your divorce) is usually not reflected on your social security card.  Therefore, your new name is not likely to match your old social security number (the “SSN”).
Informing the SSA about the name change is relatively easy.  All you have to do is file Form SS-5, Application for a Social Security Card, at your local SSA office.  The form can be found on the SSA’s website.  You can also obtain the form by calling 800-772-1213 or at the local SSA offices.
It usually takes about two weeks to have the change verified.

### Fee Agreement Arrangements with Contract Lawyers in Minneapolis: 5 Most Important Issues
In this article, I will discuss five most important issues that you need to know before you sign a fee agreement with contract lawyers in Minneapolis.
1. How is the 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 contract lawyer compensation and it is fairly simple – the contract attorney is paid only based on the time he spends on the case. If you're paying your contract lawyer by the hour, the agreement should set out the hourly rates of the contract attorney and anyone else in this attorney’s office who might work on the case. The contingency fee, where the contract attorney takes a percentage of the amount the client wins at the end of the case, is almost never used by contract attorneys in Minneapolis. In the unlikely case that this latter type of fee arrangement is used, the most important issue to understand is whether the contract 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 contract 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 $3,500 to your contract attorney to create a standard independent contractor agreement. While a flat fee arrangement is possible in a small project, it is generally disliked by contract 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 contract 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 contract lawyer’s fees.
2. Does the agreement include the amount of the retainer? Most contract 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 the lawyer’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 a contract attorney asks his client to pay in advance. In this scenario, the 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).
3. How often will you be billed? Most contract attorneys in Minneapolis bill their clients on a monthly basis. Sometimes, however, when the project is small, 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.
4. What is the scope of the contract attorney’s representation? Most contract lawyers in Minneapolis will insist on defining their obligations in the contract. The most important issue here is to state what the contract 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 contract 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.
5. Who controls what decisions? Whether this information should be included in the fee agreement really depends on the case and on an attorney. Generally, contract attorneys in Minneapolis let the client to make the important decisions that affect the outcome of the case (such as: acceptance or rejection of a settlement offer, commencement of a lawsuit, financial and personal contractual issues, 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 should be in the contract, negotiation tactics, etc.) are usually taken by the contract 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 contract.
Generally, before you sign the fee agreement, contract 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 business relationship with your contract attorney will work. Before you sign the fee agreement with your lawyer, you should ask at least these five questions and make sure that the answers are complete and to your satisfaction.

### Tax Lawyers in Minneapolis: Three Most Important Questions You Should Ask
When you are about to hire a tax lawyer to help you with a tax issue, there are three fundamental questions that you need to ask him.
1. What percentage of the practice is devoted to the tax law? The purpose of this question is two-fold. First, you will figure out whether this tax lawyer likes handling cases in your area of law. If a Minneapolis attorney devotes more than 20% of his practice to tax law, you know that he likes this area of law and will be enthusiastic about your case. This means that, in addition to his general due diligence obligations, this tax lawyer will have a professional interest in your case. Second, generally, a tax lawyer who devotes 20% or more of his practice to tax law is likely to have good experience in this area.
2. How will I be billed?  Generally, Minneapolis tax lawyers will bill you on an hourly basis, particularly in a tax litigation setting. They will provide you with a general estimate of your future expenses, which, understandably, will vary with the progress of the case. In a tax preparation or sometimes even in a simple tax planning case, a tax attorney may also offer a flat fee option. Where there are complex tax planning issues involved, however, most Minneapolis tax lawyers are likely to charge on an hourly basis. Similarly, Minneapolis international tax lawyers tend to rely on the hourly fee arrangements.
The more important issue with regard to this question is the manner in which you will be billed. Here, the practice varies among tax lawyers in Minneapolis. Some tax attorneys may require you to supply a large retainer which is later deposited in a client’s trust account; if the retainer is later depleted, your lawyer may ask you to replenish it. Other tax lawyers will require a smaller retainer and will then bill you on a monthly basis. If the latter option is proposed by your tax lawyer, you should ask for a sufficient time period (usually 10-14 days) to pay your bill. A mix of these options is also available. You will find that Minneapolis tax lawyers, especially solo practitioners, are rather flexible in their choice of the payment mode, but, once the fee agreement is signed, they will be firm in insisting that you comply with the terms of the agreement.
3. Will the tax lawyer devote his personal attention to your case? This question is very important, especially in the context of mid-size and large law firms, because in those firms the partner with whom you signed the agreement will generally delegate some of his responsibilities to his associates, who are generally less experienced in the area than the partner. In this case, you should insist that the tax attorney with whom you signed the agreement devotes his personal attention to your case and delegates only marginal matters to his associates. Generally, tax lawyers in Minneapolis who operate as solo practitioners or in small firms do not have similar problems.
The other important issue involved in this question is whether your tax attorney is generally responsive to your calls and keeps you up-to-date with respect to the progress of your case. Most tax lawyers in Minneapolis are very busy people; yet, you must insist that you would be able to communicate with them. In my practice, I devote a great deal of energy and time to make sure that my clients do not feel neglected and have the latest information about their case. For example, my firm has a rule of returning most calls within two hours after the client calls. I also make sure that the communication details are discussed during the first meeting. Usually, in additional to bi-weekly phone updates, I also send out a monthly written update, which generally includes a brief summary of events and copies of all relevant documents and materials, including communications with the other party.
In conclusion, by asking these three questions to tax attorneys in Minneapolis, you will make sure that the tax lawyer you are choosing is congruent to your interests and character.

### Business Lawyers in Minneapolis: Three Most Important Questions You Should Ask
When you are about to hire a business lawyer to help you with a business issue, there are three fundamental questions that you need to ask him.
1. What percentage of the practice is devoted to the business law?  The purpose of this question is two-fold.  First, you will figure out whether this business lawyer likes handling cases in your area of law. If a Minneapolis attorney devotes more than 20% of his practice to business law, you know that he likes this area of law and will be enthusiastic about your case. This means that, in addition to his general due diligence obligations, this business lawyer will have a professional interest in your case.  Second, generally, a business lawyer who devotes 20% or more of his practice to business law is likely to have good experience in this area.
2. How will I be billed?  Generally, Minneapolis business lawyers will bill you on an hourly basis, particularly in a business litigation setting. They will provide you with a general estimate of your future expenses, which, understandably, will vary with the progress of the case.  In corporate organization or corporate governance cases, a business attorney may also offer a flat fee option. Flat fees may also be used for some corporate document drafting or certain legal services supplemental to your business issues.  For example, a business attorney in Minneapolis might charge a flat fee for a board memorandum or review of your current business lease agreement.
The more important issue with regard to this question is the manner in which you will be billed.  Here, the practice varies among business lawyers in Minneapolis.  Some business attorneys may require you to supply a large retainer which is later deposited in a client’s trust account; if the retainer is depleted, your lawyer may ask you to replenish it later.   Other business lawyers will require a smaller retainer and will then bill you on a monthly basis. If the latter option is proposed by your business lawyer, you should ask for a sufficient time period (usually 10-14 days) to pay your bill.   A mix of these options is also available.  You will find that Minneapolis business lawyers, especially solo practitioners, are rather flexible in their choice of the payment mode, but, once the fee agreement is signed, they tend to be firm in insisting that you comply with the terms of the agreement.
3. Will the business lawyer devote his personal attention to your case?  This question is very important, especially in the context of mid-size and large law firms, because in those firms the partner with whom you signed the agreement will generally delegate some of his responsibilities to his associates, who are generally less experienced in the area than the partner.  In this case, you should insist that the business attorney with whom you signed the agreement devotes his personal attention to your case and delegates only marginal matters to his associates.  Generally, business lawyers in Minneapolis who operate as solo practitioners or in small firms do not have similar problems.
The other important issue involved in this question is whether your business attorney is generally responsive to your calls and keeps you up-to-date with respect to the progress of your case.  Most business lawyers in Minneapolis are very busy people; yet, you must insist that you would be able to communicate with them.  In my practice, I devote a great deal of energy and time to make sure that my clients do not feel neglected and have the latest information about their case.  For example, my firm has a rule of returning most calls within two hours after the client calls.  I also make sure that the communication details are discussed during the first meeting.  Usually, in additional to bi-weekly phone updates, I also send out a monthly written update, which generally includes a brief summary of events and copies of all relevant documents and materials, including communications with the other party.
In conclusion, by asking these three questions to business attorneys in Minneapolis, you will make sure that the business lawyer you are choosing is congruent to your interests and character.

### Contract Lawyers in Minneapolis: Three Most Important Questions You Should Ask
When you are about to hire a contract lawyer to help you with a contract issue, there are three fundamental questions that you need to ask him.
1. What percentage of the practice is devoted to the contract law?  The purpose of this question is two-fold. First, you will figure out whether this contract lawyer likes handling cases in your area of law. If a Minneapolis attorney devotes more than 15-20% of his practice to contract law, you know that he likes this area of law and will be enthusiastic about your case. This means that, in addition to his general due diligence obligations, this contract lawyer will have a professional interest in your case. Second, generally, a contract lawyer who devotes 20% or more of his practice to contract law is likely to have good experience in this area.
2. How will I be billed? Generally, Minneapolis contract lawyers will bill you on the hourly basis. They will provide you with a general estimate of your future expenses, which, understandably, will vary with the progress of the case. In contract drafting situations, a contract attorney may also offer a flat fee option, but, usually, there will be an additional charge when contract modifications are likely. Flat fees are almost never used in contract litigation.
The more important issue with regard to this question is the manner in which you will be billed. Here, the practice varies among contract lawyers in Minneapolis. Some contract attorneys may require you to supply a large retainer which is later deposited in a client’s trust account; if the retainer is depleted, your lawyer may ask you to replenish it later. Other contract lawyers will require a smaller retainer and will then bill you on a monthly basis. If the latter option is proposed by your contract lawyer, you should ask for a sufficient time period (usually 10-14 days) to pay your bill. A mix of these options is also available. Finally, in a contract drafting situation, some contract attorneys require a large flat fee right away with modifications paid for later upon completion of the contract. You will find that contract lawyers in Minneapolis, especially solo practitioners, are rather flexible in their choice of the payment mode, but, once the fee agreement is signed, they tend to be firm in insisting that you comply with the terms of the agreement.
3. Will the contract lawyer devote his personal attention to your case?  This question is very important, especially in the context of mid-size and large law firms, because in those firms the partner with whom you singed the agreement will generally delegate some of his responsibilities to his associates, who are generally less experienced in the area than the partner. In this case, you should insist that the contract attorney with whom you signed the agreement devotes his personal attention to your case and delegates only marginal matters to his associates. Generally, contract lawyers in Minneapolis who operate as solo practitioners or in small firms do not have similar problems.
The other important issue involved in this question is whether your contract attorney is generally responsive to your calls and keeps you up-to-date with respect to the progress of your case. Most contract lawyers in Minneapolis are very busy people; yet, you must insist that you would be able to communicate with them. In my practice, I devote a great deal of energy and time to make sure that my clients do not feel neglected and have the latest information about their case. For example, my firm has a rule of returning most calls within two hours after the client calls. I also make sure that the communication details are discussed during the first meeting. Usually, in additional to bi-weekly phone updates, I also send out a monthly written update, which generally includes a brief summary of events and copies of all relevant documents and materials, including communications with the other party.
In conclusion, by asking these three questions to contract attorneys in Minneapolis, you will make sure that the contract lawyer you are choosing is congruent to your interests and character.

### Effect of the Foreign Earned Income Exclusion on the Self-Employment Tax on Business Activities Oversees
In this essay, I would like to explore the relationship between the self-employment tax and the tax exclusion of income earned by the U.S. businesses abroad.
The self-employment tax is a social security and Medicare tax on net earnings from self-employment. A self-employed U.S. citizen or resident must pay self-employment tax if his net earnings from self-employment are at least $400. In tax year 2009, the maximum amount of net earnings that is subject to the social security portion of the tax is $106,800, while all net earnings are subject to the Medicare portion of the tax.
Despite the commonly-held belief, in calculating his self-employment tax liability, a U.S. citizen or resident must take all of his self-employment income into account, even if this income is exempt from income tax because of the foreign earned income exclusion. For example, suppose A, a U.S. citizen, provides consulting services in a European country as part of his business activities. Under the independent contractor agreement, A is paid $120,000 for his services; A’s total business deductions are $50,000, and his net income is therefore $70,000. A can successfully exclude $70,000 from taxable gross income (the exclusion for year 2009 is up to $91,400). He, however, must pay the self-employment tax on all of his net profit, including those $70,000 that he excluded from taxable income.
Similar rule applies to U.S. citizens or residents alien who own and operate a business in the U.S. possessions (Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, and the U.S. Virgin Islands). Self-employment tax must be paid on all of the self-employment income (as long as it is $400 or more) derived from such businesses, even if the income is exempt from the U.S. income taxes. Schedule SE (Form 1040) must be attached to the U.S. income tax return. If the owner of the business is a resident of any of the U.S. possessions and he does not have to file Form 1040, then the self-employment tax should be determined on Form 1040-SS. Residents of Puerto Rico may file the Spanish-language Form 1040-PR, Self-Employment Tax Form -- Puerto Rico (Spanish Version).
While non-resident aliens generally are not subject to the self-employment tax, they still have to pay the tax on self-employment income received while they were resident aliens, even if such income was paid for services performed while they were non-resident aliens. For example, royalties received by a U.S. resident for the intellectual property created while this person was non-resident alien.
Finally, one must be aware that the United States has entered into social security agreements (also known as Totalization Agreements) with foreign countries to eliminate duel coverage and duel social security tax payments for the same work. Hence, the social security taxes (including the self-employment tax) are paid only to one country. If a person’s self-employment earnings should be exempt from foreign social security tax and subject only to U.S. self-employment tax, he should request a certificate of coverage from the U.S. Social Security Administration, Office of International Programs. The certificate will establish this person’s exemption from the foreign social security tax.
To establish that one’s self-employment income is subject only to foreign social security taxes and is exempt from U.S. self-employment tax, this person must request a certificate of coverage from the appropriate agency of the foreign country. If the foreign country will not issue the certificate, he should request from the U.S. Social Security Administration a statement that his income is not covered by the U.S. social security system.

### Sales Tax Deduction for Vehicle Purchases
If you are considering whether to buy a new car, it is important to remember that, under the American Recovery and Reinvestment Act of 2009 (the “ARRA”), taxpayers may deduct state and local sales and excise taxes paid on the purchase of new passenger cars, light trucks, motor homes and motorcycles. The deduction is available on new vehicles purchased from February 17, 2009 through December 31, 2009. In states that don't have a sales tax, the ARRA provides a deduction for other taxes or fees paid as long as these taxes and fees are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee. This deduction is available whether or not a taxpayer itemizes deductions on Schedule A.
The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

### House passes the Tax Extenders Act of 2009
On December 9, 2009, the U.S. House of Representatives approved H.R. 4213, the "Tax Extenders Act of 2009." The bill would extend for one more year more than forty tax provisions that are set to expire at the end of this year, including the research credit and a number of important tax breaks for individuals. In order to offset more than $30 billion in tax relief, the bill also requires stricter reporting on U.S.-held foreign assets by foreign financial institutions and U.S. citizens.
Three provisions draw particular attention. First, starting with tax year 2013, the foreign financial institutions, foreign trusts, and foreign corporations are required to obtain and provide information from each of their account holders to determine if any account is American-owned. Foreign financial institutions must also comply with verification procedures and to report any U.S. accounts maintained by the institution on an annual basis. Then, any foreign financial institution that complies with the new verification and reporting standards would be subject to a 30 percent tax on income from U.S. financial assets held by the foreign institution. Where the owner of the account is a foreign government, an international organization, a foreign central bank, or any other class identified by the Treasury Department as posing a low risk of tax evasion, the withholding tax would not apply. Notice, the H.R. 4213's requirements only apply if the aggregate value of the accounts in the foreign institutions exceeds $10,000. Hence, the basic FBAR rule that the owners of foreign financial accounts with the aggregate value of below $10,000 do not need to report the accounts still applies.
Second, H.R. 4213 requires any U.S. taxpayer with a foreign financial asset exceeding $50,000 in value to report the asset with their tax return. The penalty for failure to report a foreign financial asset would be $10,000 and could possibly increase to as much as $50,000.
Third, additional annual reporting requirements (similar to other U.S. holders of foreign assets) are imposed on the shareholders of passive foreign investment companies and U.S. owners of foreign trusts. A U.S. taxpayer failing to report a foreign owned trust would pay the greater of $10,000 or 35 percent of the amount of the trust.
Finally, the Tax Extenders Act of 2009 increases the tax rate on so-called "carried interest" levied on investment partnerships by treating carried interest as normal income and taxing it at the standard income tax rate (currently 35 percent) rather than the capital gains rate (currently 15 percent). This measure would have a particular impact on most private equities and hedge funds (which operate as partnerships with a general partner managing the fund and contributing partners supplying the capital), because the managers of these funds generally receive two forms of compensation from the fund: a small percentage of the fund's assets like a contributing partner, and a higher percentage of the fund's annual earnings that only the fund's manager receives (i.e. carried interest).
While most of the provisions of the H.R. 4213 are expected to pass the Senate, the "carried interest" provision might present a significant problem.

### IRS Announces 2010 Standard Mileage Rates
The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.  Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car will be:
	 50 cents per mile for business miles driven
	 16.5 cents per mile driven for medical or moving purposes
	 14 cents per mile driven in service of charitable organizations
Remember, you may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, you cannot use the business standard mileage rate for any vehicle used for hire or for more than four vehicles used simultaneously.
Also note that you always have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

### Report on Foreign Bank and Financial Accounts (FBAR): General Requirements
Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (the “FBAR”) with the U.S. Department of Treasury if two conditions apply.
The first condition is that the U.S. person must have either a financial interest in or signature authority (or other comparable authority) over one or more financial accounts in a foreign country. Several clarifications are necessary in order to understand the applicability of this first condition. First, for the purposes of the FBAR, the definition of a “U.S. person” includes U.S. citizens, U.S. residents, and persons in, and doing business in, the United States. “Person” is defined to include not only individuals, but also all forms of business entities, trusts, and estates.
Second, the term “financial account” itself is defined fairly broadly and includes: bank accounts (saving and checking), mutual funds, brokerage accounts, securities derivatives accounts, accounts where the assets are held in a commingled fund and the account owner holds an equity interest in the fund, and other similar types of financial accounts. A financial account is considered to be foreign if it is located outside of the United States and its territories (Northern Mariana Islands, American Samoa, Guam, Puerto Rico, U.S. Virgin Islands, and Trust Territories of the Pacific Islands).
Third, the term “financial interest” is defined as account for which the U.S. person is the owner of record or has legal title, whether the account is maintained for his own benefit or for the benefit of others, including non U.S. persons. Even where the owner of record or holder of legal title is a person acting as an agent, nominee, or in some other capacity on behalf of a U.S. person, the financial interest in the account exists and the agent may need to file the FBAR as well. Note, however, that the agent may need not file the FBAR if he is not a U.S. person. Furthermore, the definition of a financial interest in an account encompasses a corporation in which a U.S. person directly or indirectly owns more than 50 percent of the total value of the shares of stock.
It is important to understand that a U.S. person who has no financial interest in a foreign account, but retains a signature authority (or other comparable authority) may still be required to file the FBAR. A U.S. person has account signature authority if that person can control the disposition of money or other property in the account by delivery of a document containing his signature to the bank or other person with whom the account is maintained.
The second condition for filing the FBAR is that the aggregate value of all of these foreign financial accounts exceeds $10,000 at any time during the calendar year. Notice the word “aggregate” – this means that if, for example, a person has one foreign bank account of $6,000 and another of $5,000, then he still needs to file the FBAR with the U.S. Department of Treasury, because the aggregate amount of both accounts exceeds the required minimum of $10,000.
If a person is required to file the FBAR and fails to do so, it is still generally recommended that he files a delinquent FBAR, because, if the Internal Revenue Service (IRS) discovers this failure earlier, severe civil and criminal penalties may be imposed. Sherayzen Law Office can help you deal with this difficult situation and make sure that you fully comply with the U.S. tax laws.
Excerpt: Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (the “FBAR”) with the U.S. Department of Treasury if two conditions apply.

The first condition is that the U.S. person must have either a financial interest in or signature authority (or other comparable authority)over one or more financial accounts in a foreign country. Several clarifications are necessary in order to understand the applicability of this first condition. First, for the purposes of the FBAR, the definition of a “U.S. person” includes U.S. citizens, U.S. residents, and persons in, and doing business in, the United States. “Person” is defined to include not only individuals, but also all forms of business entities, trusts, and estates.

### Significance of Income Source Rules in International Tax Law
When dealing with the international transactions, the United States tax law usually divides income into two broad categories: foreign source income and the U.S. source income. The determination of whether the income is foreign or U.S. in origin depends on a set of rules – the source-of-income rules – created by Congress, elaborated by the U.S. Treasury regulations, refined in courts, and further modified by the international treaties. While jurisdictional in nature, the income source rules are fundamentally and critically important to the understanding and operation of international transactions, primarily because these rules generate real operational consequences that affect a variety of substantive U.S. tax provisions. For the purposes of this essay, these consequences may be classified according to the grouping of the affected taxpayers.
The first set of such taxpayers are U.S. citizens, residents and domestic corporations subject to foreign tax on their income. The income source rules are crucial for these taxpayers because the U.S. foreign tax credit is available only if the foreign taxes are paid on the foreign source income. Hence, foreign taxes paid on the U.S. source income are not available to offset U.S. income tax liability. For example, suppose that a U.S. corporation earns income in the United Kingdom, which under the U.S. tax rules and relevant treaties is considered to be U.S. source income. If the U.K. authorities tax this income, the U.S. corporation will not be able to credit these taxes against the U.S. tax liability. Thus, the unfortunate result in this situation is double-taxation of the same income (note, however, that a deduction may be available to the U.S. corporation).
The other set of affected taxpayers is comprised of the nonresident aliens and foreign corporations. For this group, the impact of income source rules is two-fold. First, with respect to the business income, only U.S. source income may be regarded as effectively connected income and subject to the U.S. taxation. Hence, if the income is not a U.S. source income, then it cannot be considered as effectively connected income, thereby avoiding taxation by the U.S. government, unless the exception under I.R.C. §871(c)(4) applies. Under this exception, where certain types of income (such as dividends, interest, rents, royalties, sale of personal property, et cetera) are attributed to the nonresident alien’s (or foreign corporation’s) U.S. office or other fixed place of business, the income is regarded as effectively connected income and may be subject to the U.S. taxation.
Second, in case of non-business (usually, investment) income, the 30 percent withholding tax may be imposed only on U.S. source income. If, however, the income is considered by the U.S. tax authorities to be foreign source income, then no such tax may be imposed. For example, if a French investor receives interest that is deemed not to be U.S. source income, then the withholding tax will not be imposed.
Thus, based on the analysis above, the enormous importance of the income source rules in structuring international transactions becomes apparent. Obviously, for the purposes of illustrating their significance, I simplified this discussion into a simple domestic versus foreign dichotomy. The reality may quickly become much more complex when one takes into account various variations with respect to U.S. territories, certain types of income and/or transactions, politically-motivated exceptions regarding some foreign countries, and modification of the rules by bilateral tax treaties.
It should be remembered, however, that while they contain many traps and dangers for the unwary, the income source rules may provide excellent opportunities for beneficial and responsible tax planning.
Excerpt: When dealing with the international transactions, the United States tax law usually divides income into two broad categories: foreign source income and the U.S. source income.  The determination of whether the income is foreign or U.S. in origin depends on a set of rules – the source-of-income rules – created by Congress, elaborated by the U.S. Treasury regulations, refined in courts, and further modified by the international treaties.  While jurisdictional in nature, the income source rules are fundamentally and critically important to the understanding and operation of international transactions, primarily because these rules generate real operational consequences that affect a variety of substantive U.S. tax provisions. For the purposes of this essay, these consequences may be classified according to the grouping of the affected taxpayers.

### Definition of Foreign Earned Income for the purposes of Foreign Income Exclusion under I.R.C. §911
Under I.R.C. §911, if certain conditions are met, a qualified individual can exclude as much $91,400 (for tax year 2009) of foreign earned income from taxable gross income. Two questions arise: what is earned income, and when is such income considered to be foreign earned income?
Earned Income
Earned income usually means wages, salaries, or professional fees, and other amounts received as compensation for personal services actually rendered, but does not include that part of the compensation derived by the taxpayer for personal services rendered by him to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered.
The issue of earned income becomes complicated in a situation where a taxpayer engaged in a trade or business in which both personal services and capital are material income producing factors. Capital is a material income-producing factor if the operation of the business requires substantial inventories or substantial investments in plant, machinery, or other equipment. In this case, a reasonable allowance as compensation for the personal services rendered by the taxpayer, not in excess of 30 percent of his share of the net profits of such trade or business, shall be considered as earned income (I.R.C. §911(d)(2)(B)). This rule, however, would not apply where the capital is merely incidental to the production of income (see Rousku v. Commissioner (Tax. Ct.1971)).
In a situation where the services rendered abroad culminate in a product that is either sold or licensed, it is difficult to determine whether the proceeds are earned income. Usually, such issues are resolved on a case-by-case basis.
Foreign Earned Income 
Earned income is usually considered as “foreign earned income” if it is attributable to services actually rendered by the taxpayer while oversees. The place at which the taxpayer receives the income is not relevant. For example, an employee working abroad for a U.S. employer does not lose the exclusions by having her compensation paid into a bank account in the United States. Note, however, that services rendered in anticipation of, or after the conclusion of an oversees assignment are not covered by the exclusion. I.R.C. §911(b)(1)(A) and §911(d)(2)
Excerpt: Under I.R.C. §911, if certain conditions are met, a qualified individual can exclude as much $91,400 (for tax year 2009) of foreign earned income from taxable gross income. Two questions arise: what is earned income, and when is such income considered to be foreign earned income?

### Understanding Foreign Income Exclusion under I.R.C. §911: General Information
Under I.R.C. §911, a U.S. citizen or resident can elect to exclude as much as $91,400 (for tax year 2009) of foreign earned income and some or all foreign housing costs from taxable gross income if two conditions are met. First, the individual must satisfy either a foreign presence or bona fide residence test.  Second, the individual’s tax home must be in a foreign country. The first requirement (foreign presence/bona fide residence test) is satisfied when: (i) the individual is a U.S. citizen or resident who is physically present in a foreign country for at least 330 full days during any 12 consecutive months, or (ii) the individual is a U.S. citizen who is a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year. The second requirement is satisfied if the individual’s tax home – i.e. main place of business, employment, or post of duty – is in a foreign country. Tax home generally means the place where the individual is permanently or indefinitely engaged to work as an employee or self-employed individual.
Excerpt: Under I.R.C. §911, a U.S. citizen or resident can elect to exclude as much as $91,400 (for tax year 2009) of foreign earned income and some or all foreign housing costs from taxable gross income if two conditions are met.

### Eugene Sherayzen re-appointed to the MSBA Publications Committee
On June 30, 2009, Eugene Sherayzen was re-appointed 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".
Excerpt: On June 30, 2009, Eugene Sherayzen was re-appointed 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".

### Reduction of Estimated Tax Payments under the American Recovery and Reinvestment Act of 2009 (ARRA)
Prior to the ARRA, small businesses usually had to pay 110 percent of their previous year’s taxes in estimated taxes. The ARRA permits small businesses to reduce their estimated payments to 90 percent of the previous year’s taxes.
Excerpt: The ARRA permits small businesses to reduce their estimated payments to 90 percent of the previous year’s taxes.

### Eugene Sherayzen joins the MSBA Publications Committee
On January 28, 2009, Eugene Sherayzen was appointed 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".
Excerpt: On January 28, 2009, Eugene Sherayzen was appointed 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".

### Minnesota Unemployment Insurance: Independent Contractors in the Trucking Industry ~ By: Eugene Sherayzen, Sherayzen Law Office
Standing at the crossroads of tax and employment law, the perennial problem of whether a worker is an employee or an independent contractor has been among the most important and common unemployment insurance tax issues. This problem is particularly complex in the trucking industry, due to the special conditions present in that industry’s working environment. In fact, it became so complicated that Minnesota legislators found it necessary to deal with it specifically in Minnesota Statute 268.035. In this article, I will rely on my own experience to explain the requirements of this legislation as it pertains to independent contractors in the trucking industry, and offer practical guidelines in certain common situations in that industry.
I will start by providing some background on the Minnesota Unemployment Insurance Program (hereinafter “UI”). Under Minnesota law, an individual or an organization that pays “covered wages” in the state of Minnesota is required to register with the UI, submit quarterly wage reports, and pay the appropriate unemployment insurance taxes as computed by the UI. Generally, “covered wages” are the compensation that a Minnesota employer pays to his employees for the work done mostly in Minnesota (there are some important exceptions regarding covered wages, especially with regard to the officers of business entities, religious services, and work performed out-of-state). Because covered wages are those paid to employees, we can deduce that if the compensation is paid to an independent contractor, then the business owner does not need to pay any UI taxes. This clarifies the reason why one of the most frequent battles fought between employers and the UI is the issue of proper classification of a worker as an employee or independent contractor.
To provide context for this classification, this article will examine who is considered an independent contractor in the trucking industry by the UI. Traditionally, under common law, five factors (still closely followed by the UI for the classification of many other categories of workers outside of the trucking industry) were used to determine whether a worker is an independent contractor: (1) the right to control the means and manner of performance; (2) the mode of payment; (3) furnishing of materials and tools; (4) control of premises where work is performed; and (5) the right of employer to hire and discharge. Wise v. Denesen Insulation Co., 387 N.W.2d 477, 479 (Minn. Ct. App. 1986). The presence of one factor is insufficient to find an employment relationship if such factor is countered by other factors. Stenvik v. Constant, 502 N.W.2d 416, 420-421 (Minn. Ct. App. 1993). While the common-law test is no longer the current law for trucking industry purposes, it is useful to mention these factors because they still form the basis for the current statutory requirements as spelled out in Minn. Stat. § 268.035.
Minn. Stat. § 268.035 subd. 25b regulates the issue of whether a worker in the trucking industry qualifies as an independent contractor. Minn. Stat. § 268.035 subd. 25b states:
“In the trucking industry, an owner operator of a vehicle that is licensed and registered as a truck, tractor, or truck tractor by a governmental motor vehicle regulatory agency is an independent contractor, and is not considered an employee, while performing services in the operation of the truck only if each of the following factors is present:
(1) the individual owns the equipment or holds it under a bona fide lease arrangement;
(2) the individual is responsible for the maintenance of the equipment;
(3) the individual bears the principal burdens of the operating costs, including fuel, repairs, supplies, vehicle insurance, and personal expenses while on the road;
(4) the individual is responsible for supplying the necessary personal services to operate the equipment;
(5) the individual’s compensation is based on factors related to the work performed, such as a percentage of any schedule of rates, and not on the basis of the hours or time expended; and
(6) the individual enters into a written contract that specifies the relationship to be that of an independent contractor and not that of an employee.”
Each of these six requirements must be met in order for a worker to be considered as an independent contractor. An analysis of the specific requirements follows below.
1) The individual owns the equipment or holds it under a bona fide lease arrangement.
This first requirement means that the employer has to show one of the following: a) the worker supplies his own equipment, or b) the worker entered into a bona fide lease with the employer or a third party. Usually, it is the second option that causes problems for the employer (especially if the employer is also a lessor), because the issue of whether a lease is bona fide depends mainly on the facts. There are two common scenarios, though, that I wish to share with the reader.
Scenario one: A worker rents all of his equipment from the employer, and pays the employer a nominal rental price of one dollar per month. When this case comes to a UI auditor, he will raise two issues immediately. First, the fact that the employer is also the lessor immediately invites greater scrutiny on whether this is a bona fide lease. The second, and much more significant, problem is the one-dollar rent. The UI is usually unwilling to consider a lease as bona fide if the rent is nominal.
Scenario two: A worker rents all of his equipment from the employer, and the corresponding rental payment results in a worker’s pay reduction (i.e. the employer deducts the rent payment from the worker’s paycheck). In general, the pay reduction as a rent payment is sufficient to satisfy the bona fide lease requirement, but the outcome again depends on the details. The employer must be prepared to show (i.e. his assertion must be supported by business records) that the deduction is real, consistent, and equivalent to the actual rent payment. When such a scenario arises, the business owner’s attorney should insist that the independent contractor sign the necessary documents to support his client’s assertion.
2) The individual is responsible for the maintenance of the equipment.
This requirement is fairly straightforward. Whether he owns or rents the equipment, the worker must be responsible for the maintenance of all trucking equipment (trucks, trailers, cargo chains, etc.). This requirement should be included in the “independent contractor” agreement between the worker and the employer. I have also found that often the best evidence of the worker’s responsibility for the maintenance of the equipment is a lawsuit initiated by the employer against any current or previous workers for damaging the equipment.
3) The individual bears the principal burdens of the operating costs, including fuel, repairs, supplies, vehicle insurance, and personal expenses while on the road.
This “principal burden” requirement can become very complicated on account of even the most minute of details. This is mainly because the real issue here (as in requirement two) is the first factor of the common law test – control over the means and manner of performance. To satisfy this standard, the worker should be required pay for the operating costs of the business such as fuel, repairs, and supplies.
The less obvious issues are exemplified by the following scenario: a worker bears the burden of the operating costs through a pay reduction. In general, this scenario could satisfy the “principal burden” requirement, but once again it is highly fact-dependent. Unlike the rent, the operating costs are not so easily calculated especially given the wild fluctuations in the price of oil and diesel that the reader has had an opportunity (or misfortune) to observe recently. It is tremendously difficult to properly reflect this calculation in the records. Yet, such failure to correlate the operating costs with the pay reduction is likely to result in the UI finding that the pay reduction is not related to the operating costs, and, therefore, the employer bears the principal burden of the operating costs. Another important factor is whether the worker is given a choice to pay the operating costs directly or through a pay reduction. Where such choice exists, the UI is more likely to consider the worker as an independent contractor since the worker seems to have more control over the manner of his performance.
4) The individual is responsible for supplying the necessary personal services to operate the equipment.
The usual problems associated with this requirement are the ones that are related to the control of the actual performance. The most common issues involve route and schedule control. The employer’s control over the manner of performance can be strong evidence in favor of finding an employment relationship. Note, however, that the employer’s control might be mitigated and even entirely disregarded if it corresponds to governmental regulations or common industry practices. I will deal with this issue again in more detail in connection with the next statutory requirement.
5) The individual’s compensation is based on factors related to the work performed, such as a percentage of any schedule of rates, and not on the basis of the hours or time expended.
Usually, this requirement is satisfied if the workers are paid per job, and not on an hourly basis. A business owner’s attorney should try to make sure that the workers are paid on a percentage basis if possible. The other common alternative, which is payment on a “per mile” basis, is fraught with danger. The most significant concern with this alternative is the “control over manner of performance” issue discussed in connection with requirement four. This is because the UI auditors might consider per mile payment as a disguised hourly payment.
The best remedy to this problem is to explain per mile payment basis as compliance with government regulations and common industry practices. For example, per mile payment might be based on the federal government’s calculation of mileage for interstate highways. This way, the payment is related to the job performed, but there is no control by the employer because the number of miles traveled is based on an objective (i.e. divorced from the actual number of miles traveled) government calculation which is a common practice in the trucking industry.
6) The individual enters into a written contract that specifies the relationship to be that of an independent contractor and not that of an employee.
This requirement must be strictly complied with. If there is no written contract between the worker and the business owner, the UI will consider the worker to be an employee. The contract should include at least the following two clauses: a) this is a relationship between an independent contractor and the business owner, and b) this is not an employee-employer relationship. If possible, an owner-operator addendum should be considered by the attorney, because it provides additional evidence of the existence of an independent contractor relationship.
An ambiguous or reckless choice of words in the contract can jeopardize the outcome of the case. The business owner’s attorney should be very careful about what he includes in the contract. Statements that are interpretative of control or of an employment relationship should be avoided. Clauses that include careless inaccuracies, such as “the contractor must obey” or “follow instructions”, need to be redrafted. If some control by the employer is required by state or federal regulations, the contract should so indicate.
Finally, the business owner’s attorney should advise his client that the contract is only as good as the parties’ compliance with it. The UI does not automatically accept that the contract accurately describes the parties’ performance, and, if necessary, it may choose to investigate whether the parties actually conform to the terms of their agreement. Even the best contract will not protect the employer where the parties’ conduct does not correspond to it.
These are, in essence, the current statutory requirements which may result in a finding an independent contractor relationship in the trucking industry. While I provided a number of practical comments on this issue, there are many more issues to consider with respect to Minn. Stat. § 268.035 subd. 25b. I hope that this article provides sufficient background for practicing attorneys to understand the basics of this area of law and to avoid the most common traps.
Excerpt: Standing at the crossroads of tax and employment law, the perennial problem of whether a worker is an employee or an independent contractor has been among the most important and common unemployment insurance tax issues. This problem is particularly complex in the trucking industry, due to the special conditions present in that industry’s working environment. In fact, it became so complicated that Minnesota legislators found it necessary to deal with it specifically in Minnesota Statute 268.035. In this article, I will rely on my own experience to explain the requirements of this legislation as it pertains to independent contractors in the trucking industry, and offer practical guidelines in certain common situations in that industry.


## Pages
### DELINQUENT FBAR SUBMISSION PROCEDURES CENTER
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### DELINQUENT FBAR SUBMISSION PROCEDURES
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Excerpt: International tax attorney will help help you understand Streamlined Domestic Offshore Procedures, evaluate whether you meet the SDOP eligibility requirements, prepare and file all of the legal and tax documents required under SDOP, and defend your voluntary disclosure position(s) against the IRS.

### STREAMLINED DOMESTIC OFFSHORE PROCEDURES
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Excerpt: International tax attorney will help help you understand Streamlined Domestic Offshore Procedures, evaluate whether you meet the SDOP eligibility requirements, prepare and file all of the legal and tax documents required under SDOP, and defend your voluntary disclosure position(s) against the IRS.

### STREAMLINED FOREIGN OFFSHORE PROCEDURES CENTER
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Excerpt: International tax attorney will help help you understand Streamlined Domestic Offshore Procedures, evaluate whether you meet the SDOP eligibility requirements, prepare and file all of the legal and tax documents required under SDOP, and defend your voluntary disclosure position(s) against the IRS.

### IRS VOLUNTARY DISCLOSURE PRACTICE CENTER
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Excerpt: International tax attorney will help help you understand Streamlined Domestic Offshore Procedures, evaluate whether you meet the SDOP eligibility requirements, prepare and file all of the legal and tax documents required under SDOP, and defend your voluntary disclosure position(s) against the IRS.

### International Tax Lawyer
International Tax Lawyers Brooklyn New York
Sherayzen Law Office is owned by an international tax lawyer who resides in Minneapolis, Minnesota.  Sherayzen Law Office is a professional international tax law firm that is dedicated to helping U.S. taxpayers in the United States and around the world with U.S. international tax issues.
International Tax Law Services | International Tax Lawyer
Our firm offers its expert services in the following fields:
 	International Tax Compliance: FATCA, FBAR (Report on Foreign Bank and Financial Accounts), foreign entity ownership (e.g. Form 5471, Form 8865, 8858),  foreign inheritance, foreign gifts,  individual and business tax returns, foreign trust beneficiary and/or owner, Canadian RRSP (Registered Retirement Savings Plans) and RRIF (Registered Retirement Income Funds), and other international tax compliance services
 	Offshore Voluntary Disclosures: OVDP, Streamlined Disclosures (Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures), Delinquent FBAR Submission Procedures, Delinquent International Information Returns Submission Procedures, Noisy Disclosures, Reasonable Cause Disclosures
 	IRS audits and FBAR Audits
Typical Clients | International Tax Lawyer
 	High-net-worth individuals who seek an international tax lawyer for help with: FATCA, FBAR, foreign trusts, foreign business ownership and other foreign-asset reporting requirements
 	Foreign-born U.S. tax residents (including H1B, H4, L1, L2, F1, J1 and other non-immigrant visa holders) who seek help of an international tax lawyer with their U.S. tax compliance;
 	U.S. tax residents who seek an international tax lawyer for help with U.S. tax compliance regarding foreign gifts and foreign inheritance;
 	Businesses headquartered outside of the United States who seek help of an international tax lawyer with their U.S. operations;
 	U.S. citizens and residents who seek an international tax lawyer to help them with their foreign bank accounts and foreign investment activities;
 	U.S. citizens and residents who are living and/or working abroad and seek international tax lawyer for help with their U.S. tax compliance;
 	Nonresident aliens who seek an international tax lawyer for help with their U.S. business and/or investment activities;
 	Nonresident aliens that own U.S. real estate and seek an international tax lawyer with the U.S. tax compliance.
Business Model | International Tax Lawyer
As an international tax lawyer and founder of Sherayzen Law Office, Mr. Sherayzen emphasizes three aspects of delivery of the firm's internationa ltax law services:
1. Customization: every tax situation is different and we customize our legal tools to address your specific fact pattern!
2. Protection of your interests: we strive to offer maximum foreseeable protection of your business and personal interests! This means that when we provide our tax services, we seek to guard you against the future hazards that commonly occur in a situation similar to yours, and we address the potential problems that might arise from the specific circumstances of your case. In doing so, as an international tax lawyer, we rely on our experience, extensive knowledge of U.S. and international tax law, and proven negotiating skills.
3. Personal attention: throughout our representation of you, your international tax lawyer will work with you personally! You will have an easy access to your attorney and a prompt answer to your questions
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### Video
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### International Tax Lawyers Manhattan New York
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### International Tax Lawyers Brooklyn New York


### International Tax Lawyers Brooklyn
International Tax Lawyers Brooklyn
WELCOME TO SHERAYZEN LAW OFFICE, LTD.!  
Sherayzen Law Office, Ltd. is a US international tax law firm licensed to practice U.S. (federal), Minnesota, and international tax law, headquartered in Minneapolis, Minnesota. Given the fact that we offer our legal services in New York, we may also be considered when one searches for International Tax Lawyers Brooklyn New York.
Our firm offers the following legal services to its individual and business tax clients in the United States and across the world:
International Tax Compliance: FATCA, FBAR (Report on Foreign Bank and Financial Accounts), foreign entity ownership (e.g. Form 5471, Form 8865, 8858), foreign trust ownership and beneficial interests (Form 3520), foreign gifts, foreign inheritance and other international tax compliance services generally offered by International Tax Lawyers Brooklyn
Offshore Voluntary Disclosures: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures and other offshore voluntary disclosure paths offered by International Tax Lawyers Brooklyn
International Tax Planning: business tax planning, individual tax planning combined with estate planning and related services offered by International Tax Lawyers Brooklyn
Our typical clients in Brooklyn, New York are:
Businesses headquartered outside of the United States with U.S. operations in Brooklyn, New York;
Nonresident aliens with U.S. business and/or investment activities in Broolyn, New York;
High-net-worth individuals in Brooklyn, New York affected by the FBAR, foreign trust, and other foreign-asset reporting requirements;
Nonresident aliens that own U.S. real estate in Brooklyn, New York;
U.S. citizens and residents from Brooklyn, New York who are living and/or working abroad;
U.S. citizens and residents in Brooklyn, New York with non-U.S. business and/or investment activities;
Businesses headquartered in the United States, and/or in Brooklyn, New York with foreign operations;
Sherayzen Law Office is an international tax law firm that fits well within the search for International Tax Lawyers Brooklyn for three reasons:
The definition of International Tax Lawyers Brooklyn includes any international tax lawyer who is licensed to practice in any of the fifty states of the United States and offers international tax law services to clients who reside in Brooklyn, New York.
Sherayzen Law Office offers international tax services that fall within the definition of the International Tax Lawyers Brooklyn.
The communication mediums of Sherayzen Law Office are based on modern technology and fall within the communication mediums generally utilized by International Tax Lawyers Brooklyn.
Excerpt: International tax lawyers Brooklyn New York; headquartered in Minneapolis, MN but offer services in Brooklyn.  Services cover: FBAR, FATCA and offshore voluntary disclosure of foreign accounts and foreign assets.

### International Tax Attorney Minnesota Minneapolis Offshore Disclosure | MN
Mr. Sherayzen is a Minneapolis Offshore Disclosure attorney; Sherayzen Law Office is a Minnesota Minneapolis Offshore Disclosure tax law firm. A Minneapolis Offshore Disclosure attorney is also often called IRS Offshore Compliance lawyer. The Minneapolis Offshore Disclosure attorney and Minneapolis IRS Offshore Compliance lawyer are more detailed names for an international tax attorney who is doing an offshore voluntary disclosure in Minneapolis, Minnesota.
Minneapolis Offshore Disclosure: What is Offshore Voluntary Disclosure?
An Offshore Voluntary Disclosure is a process by which a taxpayer voluntarily brings himself into compliance with US tax laws by correcting his prior tax noncompliance with respect to his foreign assets and foreign income. Minneapolis Offshore Disclosure is a merely a variation of this process for a taxpayer who resides in Minneapolis, Minnesota.
Various variations of an Offshore Voluntary Disclosure exist. Given the dynamic nature of US international tax law, these variations are often subject to profound modifications with respect to their terms, penalty amounts and even their very existence. You can find the relevant information for each variation of Offshore Voluntary Disclosure elsewhere on the website. On this page, I will simply list the main options currently available (as of the February 1, 2019) to Minnesota residents who wish to engage in Minneapolis Offshore Disclosure in order to lower or eliminate their IRS penalties.
Minneapolis Offshore Disclosure: OVDP
The 2014 OVDP closed on September 28, 2018. This was the latest version of the flagship IRS Offshore Voluntary Disclosure Program, which dates back to 2003. The earlier versions of the OVDP, however, were not well-known; OVDP’s fame began with the advent of the 2009 OVDP program. Three other variations of the program existed at some point between 2011 and 2018: 2011 OVDI (Offshore Voluntary Disclosure Initiative), 2012 OVDP and 2014 OVDP.
It appears that the closure of the 2014 OVDP means an end to the OVDP as an offshore voluntary disclosure option for a long time. It is possible that another variation may be opened in the future, but there are no indications that this will happen any time soon.
Minneapolis Offshore Disclosure: Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures
Streamlined Domestic Offshore Procedures (“SDOP”) and Streamlined Foreign Offshore Procedures (“SFOP”) are two branches of the IRS Streamlined Filing Compliance Procedures. SDOP and SFOP are two related, but different offshore options available for a Minnesota resident who wishes to do a Minneapolis Offshore Disclosure.
Since the closure of the OVDP, these are the main principal voluntary disclosure options. They are available, however, solely to non-willful taxpayers.
Minneapolis Offshore Disclosure: Traditional Offshore Disclosure Program
Taxpayers who willfully failed to comply with their US international tax obligations will find that the closure of the OVDP still left them with one option – the Traditional Offshore Disclosure Program. The Traditional Offshore Disclosure Program underwent a significant change on November 20, 2018, which established a detailed procedural framework for taxpayers who wish to use this option.
Minneapolis Offshore Disclosure: Reasonable Cause Disclosure
The Reasonable Cause disclosure (a/k/a Noisy Disclosure) is still an available option for certain Minnesota residents who wish to do a Minneapolis Offshore Disclosure. Wildly popular prior to the OVDP and between the OVDP programs, the Reasonable Cause disclosure ceded its title of the main OVDP alternative as early as June of 2014 to SDOP and SFOP. Despite its loss in popularity, however, the Reasonable Cause disclosure continues to be an important voluntary disclosure option, especially for taxpayers who are not eligible to participate in SDOP or SFOP.
Minneapolis Offshore Disclosure: Delinquent FBAR Submission Procedures
Minnesota residents who wish to do a Minneapolis Offshore Disclosure can use the Delinquent FBAR Submission Procedures to bring themselves into FBAR compliance in cases where there was no income tax noncompliance. This is a very good option, but it is highly limited by the absence of any de minimis exception to the income tax noncompliance rule.
Minneapolis Offshore Disclosure: Delinquent International Information Return Submission Procedures
Delinquent International Information Return Submission Procedures are similar to the Delinquent FBAR Submission Procedures, but they apply only to information returns other than FBAR. For example, a Minnesota resident can use the Delinquent International Information Return Submission Procedures with respect to Forms 3520, 5471, 8865, 8858, 8938, et cetera. The legal key to this option is having the legal basis for establishing a Reasonable Cause for prior noncompliance.
Contact Sherayzen Law Office for Professional Help With Your Minneapolis Offshore Disclosure
If you are a resident of Minneapolis, Minnesota, and you have undisclosed foreign assets and/or foreign income, you should contact Sherayzen Law Office for professional help as soon as possible. We have successfully helped hundreds of US taxpayers around the world with their voluntary disclosures of unreported foreign assets and foreign income, and We can help You!
Contact Us Today to Schedule Your Confidential Consultation!

### Minneapolis Foreign Trust Lawyer | International Tax Attorney
Sherayzen Law Office, Ltd. (the “Firm”) is a leading international tax law firm in Minneapolis, Minnesota. Among its core practice areas is US tax law concerning foreign trusts.  Mr. Eugene Sherayzen, a Minneapolis Foreign Trust Lawyer, is a highly knowledgeable international tax attorney and the owner of the Firm.  He has extensive experience in US tax compliance concerning foreign trusts, including offshore voluntary disclosures involving a beneficiary interest in or ownership of a foreign trust.
A professional team of accountants and staff supports this Minneapolis Foreign Trust Lawyer in order to provide a complete package of services to the Firm’s clients.
Minneapolis Foreign Trust Lawyer: Foreign Trusts Are Associated With High Risk of IRS Penalties
US tax compliance concerning foreign trusts is highly complex and filled with pitfalls for the unwary; in fact, it is simply unimaginable how an ordinary taxpayer can stay in US tax compliance without the professional help of a Minneapolis Foreign Trust Lawyer. The IRS has also been relentless in its desire to assert noncompliance penalties for foreign trust noncompliance.
The combination of enormous legal complexity and the IRS severe treatment of non-compliant taxpayers means that US taxpayers who are beneficiaries or owners of a foreign trust face high risks of IRS penalties in this area of law.  This is why it is essential for such US taxpayers to secure the help of Sherayzen Law Office and its Minneapolis Foreign Trust Lawyer as soon as possible.
Minneapolis Foreign Trust Lawyer: Summary of Services Concerning Foreign Trusts
As a Minneapolis Foreign Trust Lawyer, Mr. Sherayzen and the Firm provide the following services:
1. Annual Compliance for Foreign Grantor Trusts, including the filing of Forms 3520 and 3520-A. These services are provided to US grantors, US beneficiaries and the foreign trustees. We also prepare and file annual tax returns (Forms 1040, 1065, 1120-S and 1120) for US persons;
2. Annual Compliance for Foreign Non-Grantor Trusts with US Beneficiaries, including the filing of Forms 3520, 8621, 8938 and other relevant forms. We also prepare and file annual tax returns (Forms 1040, 1065, 1120-S and 1120) for US Beneficiaries;
3. Offshore Voluntary Disclosures Concerning Ownership of or a Beneficiary Interest in a Foreign Trust to remedy past failures to comply with US tax laws;
4. IRS Appeals of Form 3520, 3520-A and 8938 Penalties in situations where Offshore Voluntary Compliance is no longer an option; and
5. Tax Planning Concerning Foreign Trusts, including business trusts.
Minneapolis Foreign Trust Lawyer: Voluntary Disclosure of Foreign Trusts
Our Firm has helped numerous taxpayers around the globe with the voluntary disclosure of foreign trusts.  In fact, Sherayzen Law Office has helped its clients with every major Offshore Voluntary Disclosure Program, including 2009 OVDP, 2011 OVDI, 2012 OVDP, 2014 OVDP, Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures and Delinquent International Information Return Submission Procedures.  Prior to 2009 and during 2009-2010, we have also completed a number of Traditional Voluntary Disclosures. Additionally, Sherayzen Law Office has helped numerous taxpayers complete their Reasonable Cause voluntary disclosures, including those involving foreign trusts.
Contact Us Today to Schedule Your Initial Confidential Consultation!

### Foreign Trust Lawyer & Attorney | Foreign Trust US Tax Firm
Sherayzen Law Office is a leading US international tax firm concerning US tax compliance of US beneficiaries and owners of a foreign trust. Our experience covers US taxpayers with a beneficiary and/or ownership interest in most of the countries that allow for the creation of a trust, including such important jurisdictions as: Australia, the Bahamas, Bermuda, Canada, Cook Islands, Japan, Jersey, New Zealand, Saint Kitts and Nevis, the United Kingdom and others.
Foreign Trust Annual US Tax Compliance
Sherayzen Law Office is an experienced US international tax law firm that helps its clients to stay in full compliance with the US tax reporting requirements concerning foreign trusts, including Forms 3520, 3520-A, 4970, 8938 and FBAR. This applies to both, US beneficiaries and US owners (including US grantors and deemed US owners) of a foreign trust.
Foreign Trust Offshore Voluntary Disclosure
Sherayzen Law Office also helps its clients to remedy past noncompliance with respect to reporting of their beneficiary and/or ownership interests in a foreign trust as well as income from a foreign trust.  The primary legal vehicle for remedying such past tax noncompliance is an offshore voluntary disclosure.
Since 2005, Sherayzen Law Office has developed a profound expertise in all forms of offshore voluntary disclosures, including: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent International Information Return Submission Procedures, IRS Offshore Voluntary Disclosure Program (the 2014 OVDP which closed on September 28, 2018) and Reasonable Cause voluntary disclosure (also known as "Noisy Disclosures" or "Statutory Disclosures").   Due to its unique expertise, our firm is able to handle both, the legal and the accounting sides of an offshore voluntary disclosure; i.e. we prepare all of the legal documents and tax forms for you within one firm.
Foreign Trust Tax Planning
Sherayzen Law Office assists its clients with all aspects of US tax planning concerning foreign trusts.  Foreign trust tax planning can be very complex and involve multiple tax jurisdictions, but it remains one of the most effective tools to ethically and legally reduce your current income tax compliance burden.
Foreign Trust: Challenging IRS Classification and IRS Penalties
Sherayzen Law Office represents its clients before the IRS with respect to challenging IRS classification of a foreign trust as well as high IRS penalties imposed for prior tax noncompliance concerning foreign trusts. In fact, Sherayzen Law Office is experienced in both, IRS appeals and tax litigation in a federal court case.  Timing is highly important in such cases; so, you should contact us as soon as possible in order to maximize the positive impact of our involvement.
We can help You! Contact Us Today to Schedule Your Confidential Consultation!

### IRS Audit Lawyer & Attorney | Experienced Tax Law Firm
Sherayzen Law Office is a highly experienced tax law firm that represents individuals and businesses during an IRS audit. We are also proud to have a singular experience of being involved in all aspects of the necessary tax work from creation of tax returns, IRS audits, offshore voluntary disclosures through litigation of tax issues in a federal court. This highly valuable experience provides us with a unique perspective to effectively analyze and deal with IRS audits.
What is an IRS Audit?
An IRS audit is an examination of a taxpayer’s federal tax and information returns by the Internal Revenue Service to ensure that the taxpayer correctly reported all of the information required to be disclosed on these returns.
How Can Sherayzen Law Office Help With an IRS Audit?
Sherayzen Law Office can help you with all aspects of an IRS audit including: representation before the IRS, creation of audit strategy, preparation of all of the necessary tax forms and legal documents, preparation for an audit interview and post-audit appeals to the IRS Office of Appeals.
IRS audit can also be a highly stressful experience and may result in the imposition of additional taxes and penalties. We aim to make this process as painless as possible for our clients and defend them against imposition of outrageous penalties.
Our goal is to offer a rigorous ethical legal defense of our clients’ interests before the IRS and protect our clients from any over-reach of an IRS audit.
Can Sherayzen Law Office Help Me If I Reside Overseas?
Yes, Sherayzen Law Office is highly experienced with helping US taxpayers who reside outside of the United States to resolve their US tax issues.
What Are the Main Types of an IRS Audit With Which Sherayzen Law Office Can Help Me?
While the basic procedural format of an IRS audit remains the same, we can distinguish various types of an IRS audit based on the subject matter that is being examined by the IRS.
Individual Tax Return Audits: Form 1040
This IRS audit includes an examination of Form 1040 and all accompanying forms and schedules. This type of an IRS audit concerns primarily individuals.
Schedule C of Form 1040 Audit
This is a variation on the individual tax return audits. In this case, the IRS focuses on the business activities of an individual taxpayer who operates as a sole proprietor or through a disregarded entity (i.e. a single member LLC).
FBAR Audits
An FBAR audit is the examination of a taxpayer’s Report of Foreign Bank and Financial Accounts, FinCEN Form 114 (previously known as TD F 90-22.1). This type of an audit may affect both, individual and business taxpayers (even disregarded LLCs).
Other International Information Return Audits
This type of an IRS audit involves such US international tax forms as Forms 3520, 5471, 8865, 8858, 926, et cetera. Sherayzen Law Office has a unique experience in dealing with these forms. Again, this type of an audit may affect both, individual and business taxpayers (even disregarded LLCs).
Streamlined Domestic Offshore Procedures Audits
This is an audit of an offshore voluntary disclosure done through a special IRS program called Streamlined Domestic Offshore Procedures.
Streamlined Foreign Offshore Procedures Audits
This is an audit of an offshore voluntary disclosure done through a special IRS program called Streamlined Foreign Offshore Procedures
Business Tax Return Audits: Forms 1120, 1120-S, 1120-F and 1065
This type of an IRS audit concerns business taxpayers who are required to file business tax returns such as Forms 1120, 1120-S, 1120-F and 1065.
Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!  We can Help You!

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### Jobs
Tax Accountant - Junior
We are looking for a Tax Accountant to join our team at our St. Louis Park office. This is a unique opportunity for the candidates to obtain work experience in international tax accounting.
DUTIES
Preparation and review of federal and state income tax returns
Analysis and preparation of financial statements
Research of domestic and international tax issues
Review and organization of various documents
Performance of other duties as assigned
EDUCATION AND EXPERIENCE
Four-year Accounting degree or Two-Year Accounting Degree with additional background in physics or mathematics
1-3 years Tax/Accounting experience
Work Experience at Wells Fargo is a plus
KNOWLEDGE, SKILLS, AND ABILITIES
Knowledge of GAAP is important
Strong Excel Skills; familiarity with Proseries is a plus
Highly efficient and able to multitask and effectively manage time
Reliable, trustworthy and loyal to the firm
Very detail-oriented
Ability to maintain confidentiality of client information
Desire to take personal responsibility to complete tasks and solve problems
Ability to perform tasks and complete projects with minimal supervision
Outstanding written and verbal communication skills
Background/minor in physics, mathematics and other exact sciences is a plus
Job Type: Full-time
To apply, go to: https://www.indeed.com/cmp/Sherayzen-Law-Office,-PLLC/jobs/Tax-Accountant-79efa0195d91e6aa

### Блог
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### Практика
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### Sherayzen Law Office, Ltd - Su Abogado del Derecho Fiscal Internacional
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### Главная
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### STREAMLINED DOMESTIC OFFSHORE PROCEDURES
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Excerpt: International tax attorney will help help you understand Streamlined Domestic Offshore Procedures, evaluate whether you meet the SDOP eligibility requirements, prepare and file all of the legal and tax documents required under SDOP, and defend your voluntary disclosure position(s) against the IRS.

### Minneapolis International Tax Lawyers and Attorneys
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Excerpt: Sherayzen Law Office is an international tax law firm that consists of Minneapolis international tax lawyers, international tax accountants and professional international tax staff. While we are physically based in Minneapolis, Minnesota, our Minneapolis MN office serves clients throughout the United States and the world.

### FBAR Lawyers Center
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Excerpt: Tax lawyer FBAR, Tax attorney FBAR, tax lawyers FBAR, FBAR lawyer, FBAR lawyers, FBAR tax lawyer, FinCEN Form 114 lawyer, Form 114 lawyer, Form 114 attorney, Form 114 tax lawyers

### IRS Form 5471 Center
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Excerpt: Form 5471 is a US tax information return that must be filed by certain categories of US persons to satisfy the reporting requirements of IRC Sections 6038 and 6046.  There are substantial penalties for Form 5471 noncompliance.

### Tax Blog
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Excerpt: Blog of an International Tax Attorney, Minneapolis international tax attorney, St Paul international tax attorney, Minnesota international tax attorney, US international tax attorney

### Home
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### EUGENE SHERAYZEN, ATTORNEY AND OWNER
Eugene Sherayzen is the founder and owner of Sherayzen Law Office.  Since 2005, Mr. Sherayzen has been helping individuals and companies to solve their personal and business problems, protect their interests, properly plan for future events, and develop their businesses further.
Mr. Sherayzen primarily practices in the areas of U.S. and international business and tax  law.  His main areas of concentration include International Tax Compliance and International Business Law.
Mr. Sherayzen is highly experienced in such complex areas as: FBARs (Report on Foreign Bank and Financial Accounts – formerly Form TD F 90-22.1), PFIC (Passive Foreign Investment Company – Form 8621), FDE (Foreign Disregarded Entity – Form 8858), U.S. Ownership of Foreign Partnerships (Form 8865), U.S. Ownership of Foreign Corporations (Form 5471), Foreign Ownership of U.S. Corporations (Form 5472), and other related forms and regulations.  Mr. Sherayzen regularly engages in complex international and domestic tax planning for businesses and individuals, including such areas as:  foreign rental income, gold and other precious metals investments, foreign mutual funds, international corporate tax planning, international partnership tax planning, international tax and estate planning for business owners and high net-worth individuals, and other related areas.
On the business side of his practice, Mr. Sherayzen also regularly represents his clients in courts, including Minnesota Court of Appeals and administrative courts, with respect to their tax and business issues.  He has an extensive experience as a business and contract attorney, including:  international business transactions, business organization (corporations and various types of partnerships), business planning (buy-out agreements, corporate governance, business tax planning), contract drafting and negotiation, and international sales contracts (Incoterms 2000, Incoterms 2010, and CISG).
His deep knowledge of business and tax law allows Mr. Sherayzen to offer his clients a unique creative approach to solving their business and tax problems, minimize their risk exposure, and confidently plan for future developments.
Mr. Sherayzen is a member of the State of Minnesota Bar, Minnesota State Bar Association, and American Bar Association. He is also a member of the MSBA Publications Committee, a Council member of the Corporate Counsel Section of the MSBA, and President of the International Business Law Section of the MSBA.
Among his favorite hobbies are tennis and chess. In 2006, Mr. Sherayzen won Tornado Section of the Minnesota Open. He has found that the active rhythm of tennis and deep calculations in chess complement his law practice well.
Mr. Sherayzen is fluent in English and Russian; he also has a working knowledge of Spanish.
Practice Areas
Business Law, Contract Law, Estate Planning, Tax Law (International), and International Trade Law.
Industry Experience
Art, Construction, Dentistry, Design, Internet, Learning Technologies, Liquor, Management, Manufacturing, Marketing, Medical, Music, Professional, Publishing, Real Estate, Restaurant, Retail, Sales, Software, Transportation, Technology.
Education
University of Minnesota Law School
Juris Doctor, 2005; Cum Laude Honors
University of Minnesota
B.A., 2002, Global Studies, History and Political Science; Summa Cum Laude Honors
Winner of the George D. Green Prize in American History, 2002
Presentations
Top Three International Tax Compliance Issues Every Corporate Lawyer Should Know.  Corporate Counsel Section of Minnesota State Bar Association, CLE, October 24, 2013.
IRS Foreign Asset Reporting Requirements.  Edina Country Club (Ham&Eggs Group), January 11, 2012.
Dealing with Government Agencies.  Edina Country Club (Ham&Eggs Group), February 9, 2011.
Selected Publications
Preventing the Disaster: Understanding When to File the Report on Foreign Bank and Financial Accounts (FBAR), MSBA Tax Section, Quarterly Newsletter, Volume 13 #7 (2010).
Minnesota Unemployment Insurance: Independent Contractors in the Trucking Industry, MSBA Tax Section, Quarterly Newsletter, Volume 10 #5 (2008).
Internet Publications
Quiet Disclosure: The Russian Roulette of FBAR Disclosures, Sherayzen Law Office, 2014.
Offshore Voluntary Disclosure Program: Key Requirements, Sherayzen Law Office, 2013.
Impact of Form 8938 on the International Tax Compliance Structure, Sherayzen Law Office, 2012.
Incoterms 2010: Most Prominent New Features, Sherayzen Law Office 2011.
Form 5471: General Overview of the Required Information, Sherayzen Law Office 2011.
Reporting Canadian RRSPs and RRIFs in the United States: Form 8891, Sherayzen Law Office, 2011.
Reporting Payments to Independent Contractors: Form 1099-MISC, Sherayzen Law Office, 2010.
Filing this Year’s Tax Return: Name Change as a Result of Divorce or Marriage, Sherayzen Law Office, 2010.
Effect of the Foreign Earned Income Exclusion on the Self-Employment Tax on Business Activities Oversees, Sherayzen Law Office, 2010.
House passes the Tax Extenders Act of 2009, Sherayzen Law Office, 2009.
Report on Foreign Bank and Financial Accounts (FBAR): General Requirements, Sherayzen Law Office, 2009.
Definition of Foreign Earned Income for the purposes of Foreign Income Exclusion under I.R.C. §911, Sherayzen Law Office, 2009.
Understanding Foreign Income Exclusion under I.R.C. §911: General Information, Sherayzen Law Office, 2009.
Call Now to discuss your legal needs: (952) 500-8159

### JENNIFER JORDAN, STAFF
An experienced office professional providing our team with invaluable administrative support.

### FATCA Center
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### St Paul
Sherayzen Law Office offers a wide range of tax services to meet the needs of business and individual taxpayers in St. Paul, Minnesota:
Administrative Representation and Tax Litigation
IRS representation, IRS administrative appeals; Minnesota Department of Revenue representation; tax audit representation; Minnesota Unemployment Insurance audits and appeals; Tax Court litigation; appeals to the U.S. Court of Appeals for the 8th Circuit
Tax Planning
Integrated estate and tax planning services for individuals; tax structuring of domestic and international business transactions; corporate tax planning; business entity reorganization tax counseling
Voluntary Disclosure of Foreign Financial Accounts and Assets
Voluntary Disclosure representation; FBAR (Report on Foreign Bank and Financial Accounts) compliance, foreign entity ownership disclosure (e.g. Form 5471, Form 8865), foreign trust ownership disclosure, Canadian RRSP (Registered Retirement Savings Plans) and RRIF (Registered Retirement Income Funds) reporting; FATCA disclosure
While providing our tax services, we emphasize three aspects of our business model: customization, thorough protection of your interests and personal attention.
1. Customization: every tax situation is different and we customize our legal tools to address your special business and individual needs!
2. Protection of your interests: we strive to offer maximum foreseeable protection of your business and personal interests! This means that when we provide our tax services, we seek to guard you against the future hazards that commonly occur in a situation similar to yours, and we address the potential problems that might arise from the specific circumstances of your case.
3. Personal attention: throughout our representation of you, your attorney will work with you personally! You will have an easy access to your attorney and a prompt answer to your questions.
As always, our main goal is to achieve the most satisfactory result for the client so that you and your business can find your own Legal Way Forward!

### Minneapolis
Tax law is a major area of our practice. We offer a wide range of tax services to meet various needs of business and individual taxpayers in Minneapolis, Minnesota:
Administrative Representation and Tax Litigation
IRS representation, IRS administrative appeals; Minnesota Department of Revenue representation; tax audit representation; Minnesota Unemployment Insurance audits and appeals; Tax Court litigation; appeals to the U.S. Court of Appeals for the 8th Circuit
U.S. Tax Compliance and Voluntary Disclosure of Foreign Financial Accounts and Assets
Voluntary Disclosure representation; FBAR (Report on Foreign Bank and Financial Accounts) compliance, foreign entity ownership disclosure (e.g. Form 5471, Form 8865), foreign trust ownership disclosure, Canadian RRSP (Registered Retirement Savings Plans) and RRIF (Registered Retirement Income Funds) reporting; FATCA disclosure
Tax Planning
Integrated estate and tax planning services for individuals; tax structuring of domestic and international business transactions; corporate tax planning; business entity reorganization tax counseling
While providing our tax services, we emphasize three aspects of our business model: customization, thorough protection of your interests and personal attention.
1. Customization: every tax situation is different and we customize our legal tools to address your special business and individual needs!
2. Protection of your interests: we strive to offer maximum foreseeable protection of your business and personal interests! This means that when we provide our tax services, we seek to guard you against the future hazards that commonly occur in a situation similar to yours, and we address the potential problems that might arise from the specific circumstances of your case.
3. Personal attention: throughout our representation of you, your attorney will work with you personally! You will have an easy access to your attorney and a prompt answer to your questions.
As always, our main goal is to achieve the most satisfactory result for the client so that you and your business can find your own Legal Way Forward!

### About The Law Firm | International Tax Law Firm
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### Sample International Tax Cases
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### Testimonials
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### International Tax Lawyers Boulder Colorado
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### International Tax Lawyers Odessa Texas
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### International Tax Lawyers Centennial Colorado
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### International Tax Lawyers Palm Bay Florida
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### International Tax Lawyers Antioch California
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### International Tax Lawyers Davenport Iowa
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### International Tax Lawyers Wichita Falls Texas
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### International Tax Lawyers Wilmington North Carolina
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### International Tax Lawyers Green Bay Wisconsin
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### International Tax Lawyers Daly City California
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### International Tax Lawyers Gresham Oregon
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### International Tax Lawyers Columbia Missouri
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### International Tax Lawyers Frisco Texas
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### International Tax Lawyers Norwalk California
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### International Tax Lawyers Pompano Beach Florida
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### International Tax Lawyers Berkeley California
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### International Tax Lawyers Burbank California
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### International Tax Lawyers Richmond California
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### International Tax Lawyers Richardson Texas
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### International Tax Lawyers High Point North Carolina
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### International Tax Lawyers Murfreesboro Tennessee
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### International Tax Lawyers Denton Texas
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### International Tax Lawyers New Haven Connecticut
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### International Tax Lawyers Thousand Oaks California
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### International Tax Lawyers Hartford Connecticut
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### International Tax Lawyers Topeka Kansas
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### International Tax Lawyers Clarksville Tennessee
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### International Tax Lawyers West Valley City Utah
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### International Tax Lawyers Elizabeth New Jersey
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### International Tax Lawyers Waco Texas
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### International Tax Lawyers Coral Springs Florida
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### International Tax Lawyers Bellevue Washington
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### International Tax Lawyers Sterling Heights Michigan
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### International Tax Lawyers McKinney Texas
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### International Tax Lawyers Cedar Rapids Iowa
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### International Tax Lawyers Carrollton Texas
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### International Tax Lawyers Columbia South Carolina
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### International Tax Lawyers McAllen Texas
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### International Tax Lawyers Fullerton California
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### International Tax Lawyers Mesquite Texas
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### International Tax Lawyers Warren Michigan
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### International Tax Lawyers Sunnyvale California
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### International Tax Lawyers Savannah Georgia
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### International Tax Lawyers Elk Grove California
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### International Tax Lawyers Cary North Carolina
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### International Tax Lawyers Orange California
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### International Tax Lawyers Bridgeport Connecticut
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### International Tax Lawyers Syracuse New York
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### International Tax Lawyers Fort Collins Colorado
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### International Tax Lawyers Escondido California
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### International Tax Lawyers Torrance California
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### International Tax Lawyers Lakewood Colorado
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### International Tax Lawyers Hollywood Florida
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### International Tax Lawyers Kansas City Kansas
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### International Tax Lawyers Naperville Illinois
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### International Tax Lawyers Pasadena California
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### International Tax Lawyers Palmdale California
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### International Tax Lawyers Richmond Virginia
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### International Tax Lawyers Lincoln Nebraska
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### International Tax Lawyers Greensboro North Carolina
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### International Tax Lawyers Chandler Arizona
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### International Tax Lawyers Fort Wayne Indiana
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### International Tax Lawyers Henderson Nevada
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### International Tax Lawyers Buffalo New York
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### International Tax Lawyers Plano Texas
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### International Tax Lawyers Newark New Jersey
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### International Tax Lawyers Anchorage Alaska
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### International Tax Lawyers Corpus Christi Texas
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### International Tax Lawyers Stockton California
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### International Tax Lawyers Lexington Kentucky
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### International Tax Lawyers Riverside California
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### International Tax Lawyers Pittsburgh Pennsylvania
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### International Tax Lawyers Toledo Ohio
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### International Tax Lawyers Bakersfield California
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### International Tax Lawyers Aurora Colorado
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### International Tax Lawyers Cincinnati Ohio
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### International Tax Lawyers Anaheim California
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### International Tax Lawyers Tampa Florida
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### International Tax Lawyers St. Louis Missouri
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### International Tax Lawyers Wichita Kansas
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### International Tax Lawyers Arlington Texas
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### International Tax Lawyers St Paul Minnesota
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### International Tax Lawyers Tulsa Oklahoma
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### International Tax Lawyers Colorado Springs Colorado
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### International Tax Lawyers Raleigh North Carolina
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### International Tax Lawyers Miami Florida
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### International Tax Lawyers Virginia Beach Virginia
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### International Tax Lawyers Omaha Nebraska
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### International Tax Lawyers Atlanta Georgia
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### International Tax Lawyers Oklahoma City Oklahoma
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### International Tax Lawyers Portland Oregon
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### International Tax Lawyers Louisville Kentucky
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### International Tax Lawyers Las Vegas Nevada
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### International Tax Lawyers Milwaukee Wisconsin
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### International Tax Lawyers Nashville Tennessee
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### International Tax Lawyers Denver Colorado
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### International Tax Lawyers Seattle Washington
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### International Tax Lawyers El Paso Texas
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### International Tax Lawyers Baltimore Maryland
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### International Tax Lawyers Boston Massachusetts | FBAR FATCA
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### International Tax Lawyers Detroit Michigan
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### International Tax Lawyers New York New York
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### International Tax Lawyer
International Tax Lawyers Brooklyn New York
Sherayzen Law Office is owned by an international tax lawyer who resides in Minneapolis, Minnesota.  Sherayzen Law Office is a professional international tax law firm that is dedicated to helping U.S. taxpayers in the United States and around the world with U.S. international tax issues.
International Tax Law Services | International Tax Lawyer
Our firm offers its expert services in the following fields:
 	International Tax Compliance: FATCA, FBAR (Report on Foreign Bank and Financial Accounts), foreign income (including PFIC Form 8621 compliance), (US ownership of foreign entities (e.g. Form 5471, Form 8865, 8858),  foreign ownership of US Entities (Form 5472), foreign trust ownership and beneficial interests (Form 3520), foreign inheritance, foreign gifts,  individual and business tax returns, foreign trust beneficiary and/or owner, Canadian RRSP (Registered Retirement Savings Plans) and RRIF (Registered Retirement Income Funds), and other international tax compliance services
 	Offshore Voluntary Disclosures: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, IRS Voluntary Disclosure Practice and other offshore voluntary disclosure paths offered by International Tax Lawyers Brooklyn, New York
 	IRS audits and FBAR Audits
Typical Clients | International Tax Lawyer
 	High-net-worth individuals who seek an international tax lawyer for help with: FATCA, FBAR, foreign trusts, foreign business ownership and other foreign-asset reporting requirements
 	Foreign-born U.S. tax residents (including H1B, H4, L1, L2, F1, J1 and other non-immigrant visa holders) who seek help of an international tax lawyer with their U.S. tax compliance;
 	U.S. tax residents who seek an international tax lawyer for help with U.S. tax compliance regarding foreign gifts and foreign inheritance;
 	Businesses headquartered outside of the United States who seek help of an international tax lawyer with their U.S. operations;
 	U.S. citizens and residents who seek an international tax lawyer to help them with their foreign bank accounts and foreign investment activities;
 	U.S. citizens and residents who are living and/or working abroad and seek international tax lawyer for help with their U.S. tax compliance;
 	Nonresident aliens who seek an international tax lawyer for help with their U.S. business and/or investment activities;
 	Nonresident aliens that own U.S. real estate and seek an international tax lawyer with the U.S. tax compliance.
Business Model | International Tax Lawyer
As an international tax lawyer and founder of Sherayzen Law Office, Mr. Sherayzen emphasizes three aspects of delivery of the firm's international tax law services:
1. Customization: every tax situation is different and we customize our legal tools to address your specific fact pattern!
2. Protection of your interests: we strive to offer maximum foreseeable protection of your business and personal interests! This means that when we provide our tax services, we seek to guard you against the future hazards that commonly occur in a situation similar to yours, and we address the potential problems that might arise from the specific circumstances of your case. In doing so, as an international tax lawyer, we rely on our experience, extensive knowledge of U.S. and international tax law, and proven negotiating skills.
3. Personal attention: throughout our representation of you, your international tax lawyer will work with you personally! You will have an easy access to your attorney and a prompt answer to your questions
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### International Tax Lawyers San Francisco California
Welcome to International Tax Services division of Sherayzen Law Office (International Tax Lawyers San Francisco California)!
Sherayzen Law Office is a Minneapolis-based international tax law firm licensed to practice Minnesota, U.S. (Federal) and international tax law. The firm offers the following legal services to its individual and business tax clients in Minnesota, United States, and across the world:
International Tax Compliance: FATCA, FBAR (Report on Foreign Bank and Financial Accounts), foreign income (including PFIC Form 8621 compliance), US ownership of foreign entities (e.g. Form 5471, Form 8865, 8858), foreign ownership of US entities (Form 5472), foreign trust ownership and beneficial interests (Form 3520), foreign gifts, foreign inheritance and other international tax compliance services generally offered by International Tax Lawyers San Francisco
Offshore Voluntary Disclosures: Streamlined Domestic Offshore Procedures, Streamlined Foreign Offshore Procedures, Delinquent FBAR Submission Procedures, Delinquent International Information Return Submission Procedures, IRS Voluntary Disclosure Practice and other offshore voluntary disclosure paths offered by International Tax Lawyers San Francisco
International Tax Planning: business tax planning, individual tax planning combined with estate planning and related services offered by International Tax Lawyers San Francisco
Our typical clients are in San Francisco are:
Businesses headquartered outside of the United States with U.S. operations in San Francisco, California;
Nonresident aliens with U.S. business and/or investment activities in San Francisco, California;
High-net-worth individuals in San Francisco, California affected by the FBAR, foreign trust, and other foreign-asset reporting requirements;
Nonresident aliens that own U.S. real estate in San Francisco, California;
U.S. citizens and residents from San Francisco, California who are living and/or working abroad;
U.S. citizens and residents in San Francisco, California with non-U.S. business and/or investment activities;
Businesses headquartered in the United States, and/or in San Francisco, California with foreign operations;.
Sherayzen Law Office is an international tax law firm that fits well within the search for International Tax Lawyers San Francisco, California for three reasons:
The definition of International Tax Lawyers San Francisco includes any international tax lawyer who is licensed to practice in any of the fifty states of the United States and offers international tax law services to clients who reside in San Francisco, California.
Sherayzen Law Office offers international tax services that fall within the definition of the International Tax Lawyers San Francisco, California.
The communication mediums of Sherayzen Law Office are based on modern technology and fall within the communication mediums generally utilized by International Tax Lawyers San Francisco, California.
Eugene@SherayzenLaw.com 

### Terms of Use
http://www.sherayzenlaw.com
THIS WEBSITE DOES NOT PROVIDE LEGAL ADVICE. The materials on this website have been prepared and provided by Sherayzen Law Office for informational and advertising purposes only. Accessing this website constitutes a request for information.
Your use of the information on this website does not create an attorney-client or any other contractual relationship between you and Sherayzen Law Office. Transmission and receipt of the materials on the web site do not constitute legal advice, establish an attorney-client relationship, or create any duty of Sherayzen Law Office to any reader. An attorney-client relationship with Sherayzen Law Office may be established only by a retainer agreement properly executed by Eugene Sherayzen. Unsolicited information sent to Eugene Sherayzen by persons who are not clients of the firm is not subject to any duty of confidentiality on the part of the firm.
The information on this website is for your general education only, and cannot replace the relationship that you have with your attorney.  Due to the fact that the legal information changes quickly, some information on this website may be out of date. Moreover, legal information on this website may be specific to Minnesota law and may not apply in other states or countries.
Any service marks, logos, graphics, and other materials on this website belong to Eugene Sherayzen and may be protected by United States copyright and trademark laws. All rights not expressly granted are reserved.
Sherayzen Law Office may provide links to other websites not operated by Sherayzen Law Office. We provide these links for your convenience only, but we do not review, control, or monitor the materials on any other websites. We do not endorse and are not responsible for the information practices or privacy policies of websites operated by others that may be linked to or from our Web site. If you decide to access a third party's website that may be linked to or from this website, you should consult that website's privacy policy.
THIS WEBSITE AND THE MATERIALS ARE PROVIDED ON AN “AS IS” BASIS. ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, ARE DISCLAIMED. NEITHER EUGENE SHERAYZEN NOR ANY PERSON OR COMPANY ASSOCIATED WITH EUGENE SHERAYZEN WILL BE LIABLE FOR ANY DAMAGE RESULTING FROM YOUR USE OR INABILITY TO USE THIS WEBSITE OR THE MATERIALS ON THIS WEBSITE.

### International Law
Sherayzen Law Office is one of the few boutique law firms in the Midwest that is able to offer high-quality international business and tax legal services to its clients throughout the United States.  Irrespective of the state (and, where necessary, country) in which our clients reside, we have been able to harness new affordable technology to provide up-to-date and personalized conduct of our clients' cases.
Our international law services are designed to complement each of our major areas of practice in the United States.  This ability to advice our clients on the U.S. as well as international aspects of a case constitutes one of the most prominent advantages of retaining Sherayzen Law Office.
We organized our international law practice in three distinct divisions:  international contract law division, international tax law division, and international trade law division.
International Contract Law Services:  international contract drafting and negotiation, consultation/review of international contracts, international contract litigation, international employment contracts (including expatriates)
International Tax Law Services: International/U.S tax compliance (FBARs, FATCA disclosure, Foreign Corrupt Practices Act ), ownership of foreign corporation disclosure, ownership of foreign partnership disclosure, anti-money laundering compliance,  international tax planning (in case of individuals, combined with international estate planning)
International Trade Law Services: international business transactions, foreign investment in the United States (including business organization for foreign investors), international copyright and trademark protection, international business litigation, international business tax planning
While providing our international law services, we emphasize three aspects of our business model: customization, thorough protection of your interests and personal attention.
 	Customization: every legal situation is different and we customize our legal tools to address your special business and individual needs!
 	Protection of your interests: we strive to offer maximum foreseeable protection of your business and personal interests! This means that when we provide our international legal services, we seek to guard you against the future hazards that commonly occur in a situation similar to yours, and we address the potential problems that might arise from the specific circumstances of your case.
 	Personal attention: throughout our representation of you, your attorney will work with you personally! You will have an easy access to your attorney and a prompt answer to your questions.
As always, our main goal is to achieve the most satisfactory result for the client so that you and your business can find your own Legal Way Forward!
Call Now to discuss your legal needs: (952) 500-8159!
Recent Posts in the International Trade category:
Significance of Income Source Rules in International Tax Law
Definition of Foreign Earned Income for the purposes of Foreign Income Exclusion under I.R.C. §911
Understanding Foreign Income Exclusion under I.R.C. §911: General Information

### Estate Planning
Sherayzen Law Office offers estate planning services as an integral part of its overall tax planning practice. We will help you organize all of your property, including business and retirement assets, into your overall personal estate plan, making sure that your property is distributed according to your wishes while taking full advantage of the opportunities offered by the tax laws of the United States. Our services include but not limited to:
Estate Planning: organization of your assets according to a comprehensive personalized plan, which corresponds to your wishes while benefiting from the opportunities offered by the U.S. tax laws.
Trusts: creation of trusts relevant to your overall estate planning goals.
Wills: preparation of new wills and review of current wills.
Premarital Agreement: protection of your assets prior to marriage.
Call Now to discuss your legal needs: 952-500-8159!

### Links
Business Links
American Arbitration Association
Minnesota Department of Commerce
Minnesota Secretary Of State Business Center
Fourth Judicial District  (Hennepin County)
Intellectual Property Links - United States and International
United States Patent and Trademark Office
United States Copyright Office
World Intellectual  Property Organization
Tax Links
Internal Revenue Service
Minnesota Department of Revenue
International Trade Links
Bureau of Industry and Security (U.S. Department of Commerce)
European Union
Foreign Corrupt Practices Act - U.S. Department of Justice
International Chamber of Commerce
U.S. International Social Security Agreements
U.S. Trade Representative
World Bank
World Trade Organization
Miscellaneous
Library of Congress - Law Library

### Tax Services
Sherayzen Law Office offers comprehensive tax services to our clients, concentrating on the toughest areas of U.S. tax law such as international tax compliance, IRS audits and complex tax planning for individuals and businesses. Our firm is also a one-stop US tax compliance center - we will process your entire case internally, including preparation of all legal documents and tax forms. The ability to cover the case from the beginning through the end, allows our experienced tax professionals to approach the resolution of your case with unmatched creativity and diligence.
Most of our clients are upper-middle class and high-net-worth individuals, including professionals, college professors, entrepreneurs, investors, and small- and mid-size businesses located in the United States, Europe, Australia and Latin America. Oftentimes, we also deal with start-ups and non-profit organizations.
Our tax services may be grouped into four categories:
1. International Tax Compliance
Ability to provide efficient international tax compliance services in combination with creative professional solutions is one of the most unique aspects of Sherayzen Law Office.
In providing such services, our experienced owner and international tax attorney of Sherayzen Law Office, Ltd., Eugene Sherayzen, esq. usually prepares the following tax forms: TD F 90-22.1 nka Form 114 (FBAR - Report on Foreign Bank and Financial Accounts), foreign business entity ownership compliance (Forms 5471, 8865, 8858, 926 and related forms), foreign ownership of U.S. corporation (Form 5472 and related forms), foreign trust ownership (Form 3520), foreign gifts and inheritance (Form 3520), Canadian RRSP (Registered Retirement Savings Plans) and RRIF (Registered Retirement Income Funds) compliance (Form 8891), Passive Foreign Investment Company information returns (PFIC - Form 8621), FATCA compliance (Form 8938) and other related forms.
Representative Case: U.S. person living overseas owns a foreign corporation and several foreign partnerships with PFIC investments in Germany. Sherayzen Law Office prepared the client's FBARs, Form 5471 for the foreign corporation, Forms 8865 for the partnerships and Forms 8621 for PFICs.
2. Offshore Voluntary Disclosures for Delinquent FBARs and Other Information Returns
This is our biggest tax compliance area. Every year, Sherayzen Law Office prepares, files and negotiates with the IRS a large number of Offshore Voluntary Disclosures for clients who live in the United States and overseas. Our experienced tax attorney has dealt with IRS official voluntary disclosures as well as modified (a/k/a noisy or reasonable cause) voluntary disclosures, involving delinquent FBARs, foreign ownership forms (e.g. Forms 5471 and 8865), PFIC non-compliance, FATCA non-compliance. We have also had various clients in the 2011 OVDI (Offshore Voluntary Disclosure Initiative) and 2012 OVDP (Offshore Voluntary Disclosure Program).
Representative Case: Sherayzen Law Office successfully conducted voluntary disclosure for a dual citizen of the United States and Canada involving delinquent FBARs, unreported foreign rental income, unreported foreign taxes, non-compliant PFICs and non-compliant Form 5471 with respect to a foreign corporation.
3. IRS Audits including Audit Representation, Audit Reconsideration, Audit Appeals, and Tax Court Litigation
Whether you just received a notice from the IRS or you are in the middle of an IRS audit, Sherayzen Law Office can help. Our tax firm is a rigorous advocate of your interests. We will thoroughly review your case, identify the relevant audit strategies with unmatched creativity, prepare all of the necessary tax forms and present the necessary legal arguments.
Representative Case: A corporation was subject to an IRS audit with respect to unfiled employment and income tax returns as well as unpaid employment and income taxes. At the outset, the business and its owner were not represented; the IRS expanded its review to five years, subjecting the business to extreme deadlines with the ultimate intention to dissolve the corporation and criminally charge its owner and officers. Sherayzen Law Office successfully represented the business and its owner, met all of the IRS deadlines, and prepared and filed all Forms 940/941 and 1120. During the final negotiation process, the corporation was preserved, the filing of criminal charges was avoided, the penalties were reduced and the IRS agreed to an installment payment plan.
4. Complex Tax Planning for Businesses and Individuals
Unmatched creativity combined with our tradition of detail-oriented ethical diligence gives Sherayzen Law Office a unique edge in the tax planning market. Sherayzen Law Office regularly engages in complex U.S. and international tax planning for businesses and high-net-worth individuals who reside in the United States and overseas. Our guiding principle in creating a comprehensive tax plan is to balance your ability to maximize the opportunities offered by the Internal Revenue Code (IRC) against the rising risk of IRS adverse decision - i.e. we strive to make sure that you do not overpay your taxes under the IRC provisions while minimizing the risk of an IRS audit.
Representative Case: A Nevada corporation and a Nevada limited partnership owned by the same owners. Sherayzen Law Office was able to identify various tax return errors that resulted in gross over-payment of tax by the corporation and the owners. After the implementation of a comprehensive tax plan, the overall tax liability was reduced by more than 70% in the first year and further went down by about 15% in the second year.
As always, our main goal is to achieve the most satisfactory result for the client so that you and your business can find your own Legal Way Forward!
Fee Agreement Arrangements with Tax Lawyers in Minneapolis: 5 Most Important Issues
Tax Lawyers in Minneapolis: Three Most Important Questions You Should Ask 
Call Now to discuss your legal needs: 952-500-8159!

### Business Law
Sherayzen Law Office offers a complete spectrum of business services including but not limited to:
	Administrative Law:  business license applications, appeal of business license denial, contested hearings conducted by the Office of Administrative Hearings
	Business Organization:  choice of entity (business incorporation, LLC,  LLP, LP, professional incorporated entities, et cetera),  articles of  incorporation, articles of organization, membership agreements,  partnership agreements
	Business Litigation:  contract enforcement, copyright and trademark infringement, lease dispute, shareholder disputes, unfair business practices
	 Business Planning:  buy-sell agreements, corporate governance documents, family business planning, business tax planning
	Business Transactions: commercial lease agreements, contract negotiation and drafting, contract review, distributorship agreements, franchise compliance and representation, licensing agreements, owner control agreements, purchase and sale of business
	Employment:  employment contracts, independent contractor agreements, Minnesota Unemployment Insurance representation
	Intellectual Property: registration and litigation of copyrights and trademarks
Since 2005, we have helped a whole range of businesses, from start-up entrepreneurs to established industry leaders. While providing our business services, we emphasize three aspects of our business model: customization, thorough protection of your interests and personal attention.
1. Customization:  every business is different and we customize our legal tools to address your special business needs!  This means that we do not just use the same standard procedures for every customer, but, instead, adjust legal services to your business model. What your business needs is our governing rule!
2. Protection of your business interests:  we strive to offer maximum foreseeable protection of your business interests!  This means that when we provide our business services, we seek to guard you against the future hazards natural to your business and the industry to which your business belongs.  We also seek to address the potential problems that might arise from the your specific business methods and transactions.
3. Personal attention: throughout our representation of you, your attorney will work with you personally!  You will have an easy access to your attorney and a prompt answer to your questions.
As always, our main goal is to achieve the most satisfactory result for the client so that your business can find its own Legal Way Forward!
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### Contract Law
Sherayzen Law Office contract attorneys have extensive experience in contract drafting, review and negotiation with respect to both, US and international contracts.   We can also help you with any contract dispute resolutions (see below for details).
While providing our contract services, we work hard to make sure that the final contract reflects the most optimal position with respect to your other business and tax positions.  Therefore, our lawyers engage in extensive business and tax planning while drafting and negotiating the contracts for our clients.
Sherayzen Law Office focuses mainly on the following types of contracts.
1. Acquisition and Sale of Business Contracts
This type of contracts includes mainly Asset Purchase Agreements, Stock Purchase Agreements, and other types of Mergers and Acquisitions for small and medium-sized businesses.   Our international practices focus particularly on U.S. owners of foreign businesses, striving to provide the most balanced approach between the business and tax demands of such transactions.
Representative Case:  Eastern European Controlled Foreign Corporation (unrelated 90% US owners) engaged in foreign joint venture with Western European investors.  The company underwent conversion from corporation to partnership (liquidation and organization of new business for U.S. tax purposes) before being sold to unrelated Central European investors.  The case involved three stages of contracts involving the company, the joint venture and sales agreements; the case further demanded high-level international tax planning with respect to Subpart F and business liquidation issues.
2. Business Governance/Operational Agreements
This types of contracts mainly includes: Bylaws, Founders’ Agreements, Shareholders’ Agreements, Partnership Agreements, Limited Liability Company Member Control Agreements, Limited Liability Company Operating Agreements, Voting Agreements, and Buy/Sell Agreements.
Representative Case:   Member Control Agreement  drafted for a Minnesota Limited Liability Company owned by Mexican citizens with unequal distribution of profits and losses.
3. Employment and Service Agreements
This type of contracts usually includes international and U.S. Consulting Agreements, Employment Agreements, Independent Contractor Agreements.
Representative Case:  Drafted a comprehensive Independent Contractor Agreement between an established dental office and a dentist-contractor.
4. Intellectual Property Contracts
This is a fairly broad area that covers (Internet) Disclaimers, Franchise Agreements, Intellectual Property Transfer Agreements, Intellectual Property Licensing Agreements, Non-Competition Agreements, and Non-Disclosure Agreements.
Representative Case:  Drafted a Non-Disclosure Agreement for a non-profit corporation operating in Central America for negotiations with respect to joint research and development using client's intellectual property.
5. Commercial Contracts and International Trade Agreements
This type of contracts usually involves International Sales Contracts (including Incoterms 2010), U.S. Sale of Goods Contracts and Release Agreements (by Seller).
Representative Case:  Drafted a Sale of Goods Agreement for a contract involving a purchase of certain industrial goods by an Eastern European factory from a U.S. firm based in Midwest.
Contract Dispute Resolution
In addition to contract drafting, review and negotiation services, Sherayzen Law Office attorneys offer comprehensive contract dispute resolution services.
When you retain Sherayzen Law Office to represent you in a contract dispute litigation, you get a vigorous advocate of your legal position who is thorough, detail-orientated and possesses strong litigation skills, with the analytical ability to identify and achieve effective resolutions. We recognize that litigation is a means to an end and structure our litigation strategies in such a way as to protect and enforce your business interests.
Contract litigation is not only about ambiguous, competing or contradictory clauses, but it also involves understanding the facts of your case and the likely judicial interpretation of the underlying agreement. Therefore, the knowledge of the contract construction rules (i.e. how the contract should be interpreted) and conflict-of-laws rules (i.e. which state’s or country’s rules of interpretation should apply) is indispensable in contract litigation.
The following is the list of types of contract disputes that Sherayzen Law Office accepts: breach of contract disputes, commercial litigation, contract interpretation disputes (including litigation about parties’ rights and obligations), implied contracts, purchase contracts, service agreements, and most other types of contract disputes.
Throughout our representation, we adhere to the principal of personal attention to your case and your legal needs. Whether you retain us for the purposes of contract negotiation, consultation or litigation, you will have an easy access to your attorney and a prompt answer to your questions.
As always, our main goal is to achieve the most satisfactory result for the client!
Call Now to discuss your legal needs: (952) 500-8159
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Contract Lawyers in Minneapolis: Three Most Important Questions You Should Ask

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