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France Asks Switzerland for Names of UBS Accountholders

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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.

IRS Uses Panama Papers to Identify Noncompliant Taxpayers

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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!

Contact Us Today to Schedule Your Confidential Consultation!

St Paul International Tax Lawyer: Hiring Questions

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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

Definition of Foreign Earned Income for the purposes of Foreign Income Exclusion under I.R.C. §911

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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)