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Reasonable Cause Written Advice Standard | International Tax Lawyer

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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:

  1. 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.
  2. The practitioner should base his written advice on reasonable factual and legal assumptions (including assumptions of future events).
  3. 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!

Minneapolis Foreign Trust Attorney | International Tax Lawyer

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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!

March 2018 IRS Compliance Campaigns | International Tax Lawyer & Attorney

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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!

Contact Us Today to Schedule Your Confidential Consultation!

Sherayzen Law Office Successfully Completes 2019 April 15 Tax Season

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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!