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Duluth FBAR Attorney | International Tax Lawyer Minnesota

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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!

26 U.S.C. Subpart A: Taxation of Recipients of Corporation Distributions

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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 Information Returns: Introduction | International Tax Lawyer Minnesota

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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!

Contact Us Today to Schedule Your Confidential Consultation!

Broadcom Re-domiciliation Approved | International Tax Lawyer & Attorney

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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.

Happy New Year 2017! | International Tax Attorney Minneapolis

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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!

Twin Cities international tax lawyer

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!