Wednesday, October 20, 2021

Infrastructure Bill Flirting with IRS Bank Reporting Threshold of $10K and it's Effect on Bitcoin

According to Law360, the current Infrastructure Bill was modified by congressional Democrats to loosened their proposal to require banks to file annual tax information returns with customer account data, raising the reporting threshold from $600 to more than $10,000 and provide an exemption for wage earners and those whose income comes from federal programs such as Social Security.


"If You Don't Have $10,000 Above Your Paycheck,
Social Security Income Or The Like Coming In Or Going Out, There's No Additional Reporting," Wyden Said.

Banks would not be required to report specific transactions to the IRS, Wyden said, only those that result when taxpayers save for major purchases valued above $10,000. He said the IRS would receive only two specific pieces of information: the total amount going into and out of an account.

As originally proposed this year in the Treasury Green Book, the Internal Revenue Service information reporting proposal would require banks to file tax information returns on their customer accounts with data on gross inflows and outflows, cash and foreign transactions, and transfers among each customer's different accounts.

U.S. Treasury Secretary Janet Yellen released a statement Tuesday saying the IRS reporting proposal is needed to help the agency collect taxes from wealthy Americans with opaque sources of income that typically avoid the scrutiny that wage income undergoes.


"This Two-Tiered Tax System Is Unfair And Deprives The Country Of Resources To Fund Core Priorities," Said Yellen,


adding that the administration of President Joe Biden wants to focus on collecting unpaid taxes from Americans at the top of the income scale.

Citizens are worried the proposal will turn "bank presidents, community bankers, credit unions, lenders and tellers into spies for the IRS," he said.

Taxpayers reporting $0 to $100,000 in adjusted gross income on Schedule C were responsible for about 73% of unreported income while taxpayers earning $500,000 and over were responsible for about 4%, Barthold said. 

Republicans said this analysis shows the IRS reporting proposal would impact average Americans not just the uber-wealthy.

"The reality is wealthy people often earn their income through partnerships or other ways in which they can sell an asset for $2 million, put that $2 million in the bank account and tell the IRS that they only earned $200,000," he told lawmakers.

The IRS would be able to "spot when a wealthy tax cheat has millions of dollars flowing into an account, but isn't reporting that money on their tax return," she said. "Their wealthy clients are outright lying about this proposal, claiming that it would give the IRS information on individual transactions."

This mandate could reach anyone who accepts cryptocurrency for goods or services, leaving those who fail to properly complete their paperwork facing ruinous fines and even prison. Imposing it is unnecessary, ill-advised and possibly unconstitutional.

The ostensible purpose of this requirement is to enhance tax collection. 
Those who share detailed personal and financial information with their bank cannot complain, when the bank shares some of that information with the government.

Person-to-person crypto transactions are fundamentally different. They involve no third party. Recipients of cryptocurrency have no reason to gather the sender's personal information and senders have no reason to offer it.

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Tuesday, October 12, 2021

Senators Ask Yellen For Details On Global Tax Treaty Bypass?

According to Law360Top Senate Republicans on three committees want details on how President Joe Biden's administration could bypass the tax treaty process to reallocate U.S. taxing rights as part of a global minimum tax agreement, according to a letter dated October 8, 2021.

U.S. Treasury Secretary Janet Yellen should explain by Oct. 15 how the Biden administration proposes to enact the Organization for Economic Cooperation and Development's so-called Pillar One proposal without the tax treaty process, the senators wrote.

The letter was sent by Republican Sens. Pat Toomey of Pennsylvania and Mike Crapo and James Risch of Idaho. Toomey is the ranking member of the Senate Banking Committee, while Crapo serves as top Republican on the Finance Committee and Risch is the ranking member of the Senate Foreign Relations Committee.


Pillar One, which would reallocate taxing rights to countries where companies have customers but no physical presence, would require changes to U.S. tax law that must go through the Senate's tax treaty process, which requires a vote with two-thirds approval, the senators said. 


"We are especially concerned, given Treasury has failed to meaningfully consult our members on the potential treaty or legislative action that would be necessary to fully carry out the Pillar One agreement," the senators said.

They added that Republicans on the Foreign Relations Committee, which has jurisdiction over tax treaties, have received no correspondence from the Biden administration, according to the letter.

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136 Countries Agree To A Global 15% Minimum Tax Rate

According to Law360A comprehensive overhaul of the international corporate tax system was finalized on October 8, 2021 by 136 jurisdictions, including the United States, who agreed to a global 15% minimum tax rate and rules that would rewrite how the profits of large multinational businesses are allocated among jurisdictions.


The Landmark Deal Will Ensure That Multinational Corporations With Annual Revenue Above
€750 Million ($867 Million)
Will Be Subject To A
Minimum 15% Tax Rate
Starting In 2023.

The global pact will also reallocate earnings from about 100 of the world's largest and most profitable companies to countries worldwide, "ensuring that these firms pay a fair share of tax wherever they operate and generate profits," the OECD said.

U.S. Treasury Secretary Janet Yellen On Described The Agreement As "A Once-In-A-Generation Accomplishment" Where Virtually The Entire Global Economy Has Decided To End The Race To The Bottom To Lower Corporate Tax Rates.


Discussions appeared close to the finish line when Ireland, which had previously signaled commitment to its 12.5% rate, on October 7, 2021 agreed to the global pact after successfully lobbying for the term "at least" to be removed from the 15% minimum rate language. Two other holdout countries, Estonia and Hungary, also recently signed on to the agreement, including the minimum rate — a measure that will see countries collect around $150 billion in new revenues annually, according to the OECD.

Sri Lanka, Kenya, Pakistan and Nigeria have declined to endorse the deal, according to the OECD. (The next tax havens? -Not very safe.)

The Global Tax Pact Will Also Create New Taxing Rights Where A Portion Of Large Companies' Earnings Will Be Reallocated
To Market Jurisdictions Where Businesses Have Customers
But Not A Physical Presence.

Specifically, the rules will apply to multinational corporations with global sales above €20 billion and profitability above a 10% ma a baby with the rgin companies that "can be considered as the winners of globalization," according to the OECD.

For companies that fall within this scope, 25% of profit above the 10% threshold will be reallocated to market jurisdictions, according to the OECD, which said the new rules will reallocate more than $125 billion in total profits.

The OECD also outlined the implementation process for the profit allocation rules and global minimum tax, called Pillars One and Two of its overhaul, including a multilateral treaty that will be used to implement Pillar One's new taxing rights. Countries are aiming to have the treaty implemented in 2023, when domestic legislation for Pillar Two is also planned to be effective, according to the OECD.

The global agreement also entails "the standstill and removal" of digital services taxes, according to the OECD. Several countries had pursued unilateral measures in the absence of global rules, prompting trade tensions with the U.S. government, which argued the taxes unfairly targeted American tech companies.

The deal has drawn criticism from some advocacy groups, which have contended that neither the minimum rate nor the profit allocation rules go far enough. Oxfam's Tax Policy Lead Susana Ruiz said in a statement Friday said the 15% minimum rate has "practically no teeth" after the last-minute addition of a 10-year grace period for full implementation of the measure.

As for the profit allocation agreement, Alex Cobham, chief executive at the Tax Justice Network, said in a statement Friday that new rules are "a tokenistic measure" that affects "only a sliver of the profits of just 100 multinationals."

Negotiations began at the OECD four years ago to address concerns that large multinational corporations were shifting income from where it was generated to low-tax jurisdictions. The OECD also took on the task of retooling a century-old international tax system, which the organization said fails to fairly allocate taxing rights now that many companies can earn substantial profits in a country without needing a physical presence.

Ursula von der Leyen, president of the European Commission, said Friday that the agreement's details will be finalized later this month during the summit of the Group of 20 industrial and emerging-market nations.

Have an IRS Tax Problem?


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or 
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US Couple Owe $1M In FBAR Penalties - OUCH !!!

According to Law360, an American couple owe the government almost $1 Million in FBAR Penalties and interest for willfully failing to report their overseas bank account, the U.S. told a federal court in a civil action to collect tax penalties.

Juan and Catherine Reyes did not file the report, commonly known as an FBAR, for 2010, 2011 and 2012 for a foreign bank account containing over $2 million, the U.S. said in a complaint filed in U.S. v. Juan Reyes and Catherine Reyes, case number 1:21-cv-05578, in the U.S. District Court for the Eastern District of New York on October 7, 2021.

Juan Reyes was born in Nicaragua but has lived in the U.S. for more than 60 years and is a naturalized American citizen, the U.S. said in its complaint. His parents opened an account for him at Banco de Londres y America del Sur in 1972. Catherine Reyes became a joint owner of the account around 2000, it said. 

They Linked The Account To Credit Cards
That Paid For Their Domestic Living Expenses,
The U.S. Alleged.

  • The couple filed joint federal income tax returns for the 2010-2012 tax years without disclosing the account, the U.S. claimed.
  • They checked "No" on each year's Schedule B form when asked if they had an interest in a foreign account, the U.S. said. 
  • They also did not disclose the account to their tax preparer for the 2010-2012 tax years, the U.S. added. 
As of July 2021, each owed $472,000 in penalties and interest, the U.S. said.


 Do You Have Undeclared Offshore Income?

 
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Voluntary Disclosure Program
is Right for You?
 

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9th Circ. Affirms That Pot Biz Owner Owes Tax Fraud Penalties

According to Law360, A tax preparer owes around $103,000 in Fraud Penalties, as the Ninth Circuit ruled on October 8, 2021, that the U.S. Tax Court was justified in finding he underpaid his marijuana business's taxes, hid income and failed to cooperate with the IRS. 

The Ninth Circuit affirmed in Raymond and Ruby Chico v. Comm., case number 20-71017, in the U.S. Court of Appeals for the Ninth Circuit, the lower court's decision finding that Raymond Chico owes fraud penalties under Internal Revenue Code Section 6663  for 2010 through 2012 for underreporting income from his marijuana cigarette container company, Doobtubes, and other ventures. 

The Tax Court wasn't wrong to find there was convincing evidence that Chico committed fraud, including his presenting of scant documentation supporting his tax reporting for those years and is failure to cooperate with an Internal Revenue Service investigation.

Other "Badges of Fraud"
Supporting Chico's Liability For 
The Section 6663 Penalties Include: That He Hid Income From a Marijuana Dispensary Owned By Raymond Chico And That He Underreported More Than $275,000 in Income,
According To The Opinion.The Ninth Circuit declined to give the case a fresh look and instead reviewed the Tax Court's decision for clear error.

"The Tax Court did not clearly err in finding clear and convincing evidence of fraud based on the six badges of fraud present in the record," the opinion said. 

The U.S. Tax Court found in September 2019 that Raymond Chico had failed to report Doobtubes' gross receipts for the three tax years by around $180,000 and that Chico wasn't entitled to business deductions he originally claimed on tax returns. He also failed to report constructive dividends from the marijuana dispensary and failed to report income from a rental property, according to the opinion.

The lower court also held him liable for the fraud penalties, and indicated in an order in January 2020 that that liability totaled around $103,000.

Chico told the Ninth Circuit in December 2020 that there's not enough evidence indicating he fraudulently underreported his income and that he initially relied on an attorney who failed to cooperate with the IRS in its audit and was later disbarred from practicing law in California.

The U.S. rejected those arguments, saying in its own filing in February 2021 there was more than enough evidence indicating he committed fraud. This evidence includes that he understated income, kept inadequate records and failed to file business tax returns, according to the government.

In its opinion, the Ninth Circuit said: 

  1. The Tax Court wasn't mistaken in finding that the evidence justified the imposition of tax fraud penalties against Chico. and
  2. The Tax Court wasn't wrong to find that Chico's status as a certified tax return preparer, further strengthened the finding that he committed fraud, the appeals court said. (ya think?)

Have an IRS Tax Problem?


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Saturday, October 9, 2021

New Int'l Tax Reporting Rules For Pass-Throughs


According to Law360, the world of international tax reporting has grown more complicated. In addition to the general globalization in business, the 2017 Tax Cuts and Jobs Act made significant changes to the international tax landscape.

The TCJA introduced the base erosion and anti-abuse tax, global intangible low-taxed income, foreign derived intangible income, and the participation exemption regime. These new international tax rules, coupled with an already complicated U.S. tax system, make tax compliance a daunting task for even the most sophisticated companies and investors.

Navigating this landscape has become particularly complicated for investors in pass-through entities that rely on Schedule K-1, used to report a partner's share of income, deductions credits and other items, to comply with their U.S. income tax reporting requirements. The way international tax items were reported on Schedule K-1 historically lacked structure — often leaving investors to sort through lengthy footnotes that were inconsistent in presentation from one investment to the next.

In response to this problem, the Internal Revenue Service released Schedule K-2, for reporting a partner's international distributive share items, and Schedule K-3, for reporting a partner's share of international income, deductions, credits, etc., on June 3 and June 4, along with corresponding forms related to Form 1120-S.

The schedules are designed to provide greater clarity for pass-through investors on how to compute their U.S. income tax liability with respect to items of international tax relevance — generally foreign activities or foreign partners.

Schedules K-2 and K-3, along with accompanying instructions, will affect taxpayers filing Form 1065, which is used to report partners' share of income and other items; Form 1120-S, which reports U.S. income tax for an S corporation; and Form 8865, which is used to report the income of foreign partnerships for the 2021 tax year.

The recent release of the final forms and instructions provides valuable insight into the future of reporting for international tax matters for pass-through entities. The compliance season for 2021 returns is fast approaching. Taxpayers should take advantage of the availability of the final forms and accompanying instructions — albeit some may be in draft form — as an opportunity to assess their ability to comply with the additional reporting they entail.

Taxpayers should also make any needed changes to their tax compliance processes and systems to best enable themselves to comply with the additional reporting.

Go to Law360 for more on an overview of the new reporting requirements and discusses how to prepare for what is poised to be one of the most significant changes to the partnership compliance function in decades.

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Friday, October 8, 2021

US Citizen- Swiss Resident Assessed $316,000 for Nonwillful Failure to File anFBARs

According to Law360, an American living in Switzerland owes the U.S. government more than $300,000 in penalties and interest for his non-willful failure to report 28 foreign bank accounts, the U.S. told a Virginia federal court.

The American, Albert Cambata, did not file the proper notification, known as a Report of Foreign Bank and Financial Accounts, from 2010 to 2012, the U.S. government said in a complaint filed in case is U.S. v. Albert K. Cambata, case number 5:21-cv-00065, in the U.S. District Court for the Western District of Virginia on October 6, 2021.

Cambata had accounts in multiple foreign banks, the government said, including UBSHSBC and Bank Julius Baer & Co. LTD. 

The U.S. Treasury Department Has Cited Him For
11 FBAR Violations in 2010,
10 
FBAR Violations in 2011 and
FBAR Violations in 2012,
For A Total of $280,000 in Assessments.

His fines remain unpaid even after the U.S. government sent him notices of assessment, according to the government, which said Cambata owes nearly $316,000 as of August 2021.

 Do You Have Undeclared Offshore Income?

 
Want to Know Which
Voluntary Disclosure Program
is Right for You?
 

Contact the Tax Lawyers at 
Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:
www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243