Posts

Happy New Year 2017! | International Tax Attorney Minneapolis

/0 Comments/in , /by

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!

US Continental Shelf Definition of the United States | US Tax Attorney

/0 Comments/in , /by

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.

Contact Sherayzen Law Office Today to Schedule Your Confidential Consultation!

IRS AI Software to Analyze Tax Data | IRS Tax Lawyer Minneapolis

/0 Comments/in , /by

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.

I am Working in the US on L1 Visa and I have Foreign Accounts

/0 Comments/in , /by

“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!

Contact Us Today to Schedule Your Confidential Consultation!

Undeclared Accounts in Singapore Are Under IRS Investigation | FBAR Attorney

/0 Comments/in , /by

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!

Contact Us Today to Schedule Your Confidential Consultation!