Tuesday, July 30, 2013

Who Knew that Golf was such a Taxing Sport?


On Tuesday, March 19, 2013 we posted Professional Golfer Sergio Garcia "Whiffs" Tax Case regarding US Tax on "Image Rights" which discusses that the US Tax Court has ordered professional golfer Sergio Garcia to pay tax on endorsement income he had claimed was tax-free under the US-Switzerland tax treaty.

The court decided Garcia's contract with his sponsor TaylorMade had attributed too much of the money to royalty payments for image rights, which the treaty exempts from US tax.  p http://i.forbesimg.com t Move down
                    
Mickelson capped a dominant fortnight in Scotland by shooting a final round 66 to come from behind and win The Open Championship. He also won the Scottish Open the previous week. For his two weeks of play, earned £1,445,000, or about $2,167,500. 

The United Kingdom, which has authority to set Scotland’s tax rate until 2016, graduates to a 40% tax rate when income hits £32,010 then 45% when it reaches £150,000. Mickelson will pay £636,069 ($954,000, or 44.02%) on his Scottish earnings. 

But that’s not all. The UK will tax a portion of his endorsement income for the two weeks he was in Scotland. It will also tax any bonuses he receives for winning these tournaments as well as a portion of the ranking bonuses he will receive at the end of the year, all at 45%.  

The good news for Mickelson is that he can take a foreign tax credit on his US return so he is not double-taxed at the federal level on this income. The bad news is that the credit does not cover self-employment taxes (2.9%) or the new Medicare surtax (0.9%). Additionally, California does not have a foreign tax credit so he will have to fork out 13.3% there as well. Although he receives federal deductions for his California tax and half of his self-employment tax, these deductions do not benefit him on this income because as they reduce his federal tax they reduce his foreign tax credit. 

Without considering expenses, Mickelson will pay 61.12% taxes on his winnings, bringing his net take-home winnings to about $842,700. When expenses are considered (10% to caddy Jim “Bones” Mackay, airfare, hotel, meals, agent fees on endorsement income/bonuses—all tax deductible here and in the UK), his take-home will fall closer to 30%.
 
Professional Golfers & Athlete's Need Professional Tax Advice!
 
Don't Let The Taxing Authorities put you in the Ruff!
 
Need a Scratch Tax Attorney! 

Contact the Tax Lawyers
at Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).
 

 
 

 

 

 

IRS Releases 2010 Form 8805 -Foreign Partner's Information Statistics.

Under the Tax Reform Act of 1986, U.S. partnerships are required to withhold income tax on "effectively connected taxable income" deemed allocable to foreign partners.

The U.S. partnership must file a Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, to show the amount of effectively connected taxable income and the total tax credit allocable to the foreign partner for the partnership's tax year.

Foreign partners must attach this form to their U.S. income tax returns to claim a withholding credit for their shares of the Section 1446 tax withheld by the partnership.

New Advise Regarding Foreign Partners?

Contact the Tax Lawyers
at Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).

 
 



 

 Source:

IRS Issue Number:    2013 - 9

Monday, July 29, 2013

Rodriguez, et al. v. Commissioner - Section 951 Inclusions Not Qualified Dividend Income.

Petitioner challenged the IRS's determination that the gross income petitioners reported in 2003 and 2004 based on their ownership of a controlled foreign corporation should have been taxed at the rate of petitioners' ordinary income rather than the lower tax rate they had claimed.

At issue was whether amounts included in petitioners' gross income for 2003 and 2004 pursuant to 26 U.S.C. 951(a)(1)(B) and 956 (collectively, "section 951 inclusions") constituted qualified dividend income under 26 U.S.C. 1(h)(11).

The court concluded that section 951 inclusions did not constitute actual dividends because actual dividends required a distribution by a corporation and receipt by a shareholder and these section 951 inclusions involved no distribution or change in ownership; Congress clearly did not intend to deem as dividends the section 951 inclusions at issue here; and petitioners' reliance on other non-binding sources were unavailing.

Accordingly, the court affirmed the judgment of the tax court. View "Rodriguez, et al. v. Commissioner of Internal Revenue" on Justia Law

Need Help with Correctly Charactering Sub Part F Income?
 
 Contact the Tax Lawyers at Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).



 

'Leaver lists' will expose more Swiss banks to US Dragnet!


Credit Suisse and Zurich Cantonal, have obtained government approval to send the US Department of Justice (USDoJ) lists of American clients who have moved assets out of their accounts to another bank.  

The so-called 'leaver lists' do not identify clients but do name the destination banks, which the USDoJ will then pursue with further disclosure notices.  

The Swiss government announced a new approach allowing banks to hand over data to U.S. authorities in a bid to solve a dispute over undeclared assets and forestall further indictments by the Department of Justice. 

The government is proposing banks apply for individual authorization to surrender records intended to yield information on Americans who cheated on their taxes, Finance Minister Eveline Widmer-Schlumpf said in the capital, Bern, Wednesday.

The government took the step in a bid to shield more banks from being charged by the U.S. after Parliament last month voted down a bill that would have enabled the transfer and established more legal protection for bank employees. The decree, dubbed plan B by politicians, comes after Wegelin & Co. pleaded guilty in January to helping Americans dodge taxes.

Client data isn’t covered by the authorization, according to the government. That information can only be handed over in response to a request for administrative assistance by the U.S. under existing double-taxation agreements, it said.

Switzerland is the biggest center for global offshore wealth with $2.2 trillion, or about 26 percent of the market, according to Boston Consulting Group.

The government has already issued similar authorizations for banks including Credit Suisse Group AG last year. The lender is among a group of at least 12 financial institutions already subject to a U.S. probe.

So-called leaver lists of clients who left for another Swiss bank can be transmitted as long as they don’t include any personalized data, Widmer-Schlumpf said.

The Swiss government recently announced it is negotiating individual agreements with each bank to allow them to pass on this information, which would otherwise be a gross breach of Swiss privacy laws. However, these agreements will not allow the banks unrestricted powers of disclosure. In particular, the so-called 'leaver lists' will not identify clients by name. But they will give details of the assets moved, and crucially they will name the destination banks.

The official reason cited for disclosing leaver analysis information to the US authorities is that it will help them assess the size of the penalties to be imposed on each bank.  

However, some observers, such as Geneva lawyer Douglas Hornung, have a different theory. They believe the USDoJ will assume that the destination banks for these asset switches have deliberately solicited them in order to help the clients keep their untaxed assets hidden. These banks will thus become new targets for so-called group disclosure requests issued by the USDoJ, and will in turn be exposed to further criminal investigations. 

In order to frame good group requests, the US authorities need to be able to identify the Swiss banks involved. 

With the leaver list information, they could identify the banks who actively promoted US tax evasion and thus who should be targets for additional group requests and perhaps even criminal prosecution in the US. 

This strategy has already worked once, when UBS was forced to yield up a leavers' list under heavy US pressure. The money trail derived from this list appears to have revealed that much of the departing funds went to Bank Wegelin, which immediately became a target for US investigators. Wegelin had to pay the US authorities a USD58 million penalty and as a result was forced to cease operations earlier this year.

Undeclared Income from a Swiss Bank Account?

Contact the Tax Lawyers
at Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).


 

Sources: 

Step 

 

For Hong Kong Chinese Residents that have U.S. Citizenship; maybe it's Time to re-consider?

               
Scott Michel, a partner and President of Caplin & Drysdale, a DC-based law firm, advises that on July 10, 2013, the Hong Kong Legislative Council moved to enable Hong Kong to enter into stand-alone Tax Information Exchange Agreements and, more importantly for U.S. persons who have financial accounts there, to sign an “intergovernmental agreement” (IGA) with the U.S. for implementation of the Foreign Account Tax Compliance Act (FATCA).
 
It is expected that the U.S. and Hong Kong will agree on an IGA, and that financial institutions in Hong Kong will begin to comply with FATCA’s due diligence and automatic disclosure provisions next year.
 

The implications are profound for any U.S. citizen, green card holder or tax resident who has non-U.S. financial accounts or other financial assets, such as life insurance, retirement plans and the like. FATCA will require banks and other entities to ascertain which clients are subject to the U.S. tax system, to ask them to sign a W-9 form making their account transparent to the IRS and a waiver of domestic bank secrecy or confidentiality rules, and to begin in 2014 to share data with the IRS regarding their assets.
 
To the extent affected Americans have not complied with U.S. tax rules, they should consider their options in order to try to spare them from the most extreme enforcement measures available to the IRS.
 
Automatic Information Exchange Comes to Central The towering skyscraper financial firms in Central hold trillions of dollars in funds among millions of account holders and offer wealth and trust management services, insurance and annuity products, retirement plans, and the like.
 
Many clients of these entities have a U.S. passport or green card. Maybe it is time to reconsider their U.S. Citizenship and Expatriate?
 
Need FATCA or Expatriation Advise?

Contact the Tax Lawyers
of  Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).
 
 
 
 
 
 
Source:
 

Offshore Voluntary Disclosure Practice: IRS Report Card: C-?


Steven Mopsick has an interesting view of how well or poorly the IRS has preformed in it's Offshore Voluntary Disclosure Program (OVDP). It should be obvious to practitioners and taxpayers alike that the IRS offshore voluntary disclosure program first announced in 2009, is not for everyone. It is expensive, time consuming and sometimes nerve-wracking.
 
But for those taxpayers and practitioners who still consider it an option, here are some miscellaneous comments and observations.

What has been your experience as to how the IRS has preformed in it's Offshore Voluntary Disclosure Program?  Please feel free to add your comments! Also, feel free to advise the IRS directly, since they are currently seeking comments on Offshore Voluntary Disclosure Program! 
 
Undeclared Income from an Offshore Bank Account?
 
Want to Make an Offshore Voluntary Disclosure?
 

 
Contact the Tax Lawyers
of  Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).

Friday, July 26, 2013

Are You Ready for Back-to-School Sales Tax Holidays?

There are currently 17 states offering sales tax holidays where state sales tax charges
are temporarily dropped on back-to-school items such as clothing, footwear, classroom supplies, computers and certain other products, according to CCH.

“What’s really important for consumers to know is the specific information about products that qualify for each state’s holiday in order to maximize sales tax savings,” said CCH senior state tax analyst Carol Kokinis-Graves in a statement. “Typically several restrictions will apply and each state usually provides official, highly detailed rules on specific items that do or do not qualify for state sales tax exemptions on designated dates.”

Florida: On Aug. 2-4, the following are exempt: clothing with a sales price of $75 or less per item and school supplies with a sales price of $15 or less per item; and personal computers and related accessories with a sales price of $750 or less purchased for noncommercial use. The holiday exemption does not apply to sales of such items made within a theme park, entertainment complex, public lodging establishment or airport.

For a complete listing of State Sales Tax Back to School Holidays see AccountingToday.

State Sales Tax Problems?

Contact the Tax Lawyers
at Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).

 

Could This Be The End of Income Stripping?


The U.S. Internal Revenue Service is pursuing tax enforcement cases against companies over the issue of "stateless income," a senior agency official said on Wednesday Jul 24, 2013  in a reference to corporate profits that are not taxed by any country.

Erik Corwin, an IRS deputy chief counsel, said there were international tax disputes with companies, "most involving consequences of complex restructurings designed either to create stateless income or to affect a tax efficient repatriation."

"So those are a family of cases that are in the pipeline and being looked at," he told tax lawyers in a speech in Washington.

Asked by reporters later to elaborate on any litigation, Corwin declined to comment. But tax lawyers said the references to stateless income and profits held offshore could signal a new enforcement approach by the IRS.

"I have not heard the IRS use the term before," Edward Kleinbard, who coined the "stateless income" phrase in a 2007 research paper, said in a telephone interview.
By “stateless income,” I mean income derived by a multinational group from business activities in a country other than the domicile of the group’s ultimate parent company, but which is subject to tax only in a jurisdiction that is not the location of the customers or the factors of production through which the income was derived, and is not the domicile of the group’s parent company.
 
Stateless income thus can be understood as the movement of taxable income within a multinational group from high-tax to low-tax source countries without shifting the location of externally-supplied capital or activities involving third parties. Stateless persons wander a hostile globe, looking for asylum; by contrast, stateless income takes a bearing for any of a number of zero or low-tax jurisdictions, where it finds a ready welcome.
 
As an example, a U.S. firm that sells software in Germany earns stateless income when through structuring the added value from the sales to German consumers is taxed in Ireland rather than
Germany or in the U.S. where the parent company resides. The same analysis would apply to a German firm whose income from sales to U.S. or French customers comes to rest for tax purposes in Luxembourg.

Concern over stateless income was raised in May when the Senate Permanent Subcommittee on Investigations released a report that found Apple Inc avoided $9 billion in U.S. taxes in 2012 using a strategy involving three offshore units with no discernible tax home or "residence."

Companies that avoid taxes say they are doing nothing illegal, but are taking advantage of breaks offered by governments to create jobs and business.

The repatriation of profits has been a top concern for U.S. companies, which collectively have more than $1.5 trillion sitting offshore. Most say they keep the money there to avoid the taxes they would face by bringing it home.

The IRS official's comments came days after the G20, a group of leading world economies made up of 19 countries plus the European Union, voiced support for a fundamental reassessment of the rules on taxing multinational corporations.

On July 19, the Organization for Economic Co-operation and Development, which advises the G20 on tax and economic policy, released an action plan that said existing national tax enforcement regimes do not work. The plan took aim at loopholes used by companies such as Apple and Google Inc to avoid billions of dollars in taxes.

"We must address the persistent issue of 'stateless income,' which undermines confidence in our tax system at all levels," U.S. Treasury Secretary Jack Lew said in a statement on July 19 following the OECD report.


Need Up To Date Tax Planning Advice?

Contact the Tax Lawyers
at Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).
 
 

Source:

Reuters

 

 

 

 

 

U.S. IRS pursuing 'stateless income' tax enforcement -official



WASHINGTON, July 24 (Reuters) - The U.S. Internal Revenue Service is pursuing tax enforcement cases against companies over the issue of "stateless income," a senior agency official said on Wednesday in a reference to corporate profits that are not taxed by any country.

Erik Corwin, an IRS deputy chief counsel, said there were international tax disputes with companies, "most involving consequences of complex restructurings designed either to create stateless income or to affect a tax efficient repatriation."

"So those are a family of cases that are in the pipeline and being looked at," he told tax lawyers in a speech in Washington.

Asked by reporters later to elaborate on any litigation, Corwin declined to comment. But tax lawyers said the references to stateless income and profits held offshore could signal a new enforcement approach by the IRS.

"I have not heard the IRS use the term before," Edward Kleinbard, who coined the "stateless income" phrase in a 2007 research paper, said in a telephone interview.

He is a former chief of staff to the congressional Joint Committee on Taxation and now a professor at the University of California.

Concern over stateless income was raised in May when the Senate Permanent Subcommittee on Investigations released a report that found Apple Inc avoided $9 billion in U.S. taxes in 2012 using a strategy involving three offshore units with no discernible tax home or "residence."

Companies that avoid taxes say they are doing nothing illegal, but are taking advantage of breaks offered by governments to create jobs and business.

The repatriation of profits has been a top concern for U.S. companies, which collectively have more than $1.5 trillion sitting offshore. Most say they keep the money there to avoid the taxes they would face by bringing it home.

The IRS official's comments came days after the G20, a group of leading world economies made up of 19 countries plus the European Union, voiced support for a fundamental reassessment of the rules on taxing multinational corporations.

On July 19, the Organization for Economic Co-operation and Development, which advises the G20 on tax and economic policy, released an action plan that said existing national tax enforcement regimes do not work. The plan took aim at loopholes used by companies such as Apple and Google Inc to avoid billions of dollars in taxes.

"We must address the persistent issue of 'stateless income,' which undermines confidence in our tax system at all levels," U.S. Treasury Secretary Jack Lew said in a statement on July 19 following the OECD report. (Reporting by Patrick Temple-West; Editing by Howard Goller and Andre Grenon)


Monday, July 22, 2013

Liechtensteinische Settlement with US is Imminent!

Liechtensteinische Landesbank is close to reaching a settlement with the US Department of Justice, which is threatening to prosecute it for allegedly abetting tax evasion by American clients.

LLB would become the third European bank, after Switzerland's UBS and Wegelin, to settle with U.S. authorities clamping down on offshore banks they accuse of helping wealthy Americans to avoid paying tax.

The tiny European principality of Liechtenstein has been quicker than Switzerland to succumb to pressure on its banking secrecy laws, but its banks have struggled with the resulting drop in client assets.



LLB now expects the settlement to cost it up to CHF47 million (USD50 million), rather than the CHF16 million originally budgeted.

In March it announced plans for a 25 per cent staffing cut following the closure of its Swiss operation.

And what about ALL THOSE NAMES OF US DEPOSITORS?

Undeclared Income from an Offshore Bank Account?
 

Contact the Tax Lawyers
at Marini & Associates, P.A.
 
for a FREE Tax Consultation
or Toll Free at 888-8TaxAid (888 882-9243).


Source:

Reuters