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).