Numerous US Taxpayers Are Receiving Automated $10,000 Penalty Assessments For Late Filed Form 5472's - We Can Help!

We have been receiving a lot of calls from businesses who have recently received penalty notices regarding late filed or non-filed Form 5472's. 

The reason that US taxpayers are currently receiving these automatic assessments is that the IRS updated its IRM 20.1.9, Penalty Handbook, International Penalties on March 21, 2013 to now include and Automatic Assessment of this $10,000 Penalty for Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business.

The Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business (Under Sections 6038A and 6038C of the Internal Revenue Code), is filed as an attachment to the U.S. income tax return by the due date of that return, including extensions. If the reporting corporation’s income tax return is not timely filed, Form 5472 nonetheless must be timely filed at the campus where the return is due. When the income tax return is ultimately filed, a copy of Form 5472 must be attached.

The IRM 20.1.9, Penalty Handbook, International Penalties also provides:

1. Pattern Letter for Failure to File Form 5472 ( Form Letter) See Exhibit 20.1.9-8     
2. Penalty Assertion   (20.1.9.5.3) (03-21-2013) An initial penalty is asserted on Form 8278 using PRN 625 when the examiner determines that a U.S. corporation that is 25 percent foreign-owned during a taxable year has had transaction(s) with a related party and:   
• Has failed to timely file Form 5472,
• Has filed a Form 5472 which is inaccurate or incomplete, or
• Has failed to maintain records of transactions with related parties.
3. Penalty Computation (20.1.9.5.4) (03-21-2013) Initial Penalty—The initial penalty is $10,000 for each failure during a taxable year of a reporting corporation to:                    
• Timely file a separate Form 5472 with respect to each related party with which it had a reportable transaction during such taxable year,
• Maintain the required records relating to a reportable transaction, or
• In the case of records maintained outside the U.S., meet the non-U.S. record maintenance requirements.
4. Continuation Penalty—If any failure continues more than 90 days after the day on which the notice of such failure was mailed to the taxpayer (90-day period), additional penalties will apply. The continuation penalty is $10,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of the 90-day period. These additional penalties are also asserted on Form 8278 using PRN 701 (prior to January 2013, PRN 619 was used for this continuation penalty).       

Reasonable Cause     

Our Experienced Tax Attorneys at M&A have extensive experience with obtaining waivers of penalty based upon "Reasonable Cause" and have been able to get such automatic assessments of the $10,000 Penalty for Form 5471's, waived after their assessment; either by the issuing IRS Service Center or at Appeals!

 

Other Defenses

 

Depending on the facts in your case, there are other defenses, both legal and factual, which also will result in the taxpayer obtaining a waiver of this $10,000 form 5472 late filing penalty.

 

Has  Your Company  Been Assessed an
Automatic $10,000 Penalty for a Late Form 5472?

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

for a FREE Tax Consultation

at www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid (888 882-9243)

 

 

 

2015 Tax Filings Are Due on April 18, 2016 or April 18, 2016, not April 15th!

As originally announced by IRS in May 2015, in Rev Rul 2015-13, 2015-22 IRB, the due date for returns for which the due date would otherwise be April 15, 2016 will instead be April 18, 2016 or April 19, 2016 for residents of Maine and Massachusetts.

Based on the reasoning in an example in Rev Rul 2015-13 and on the instructions to 2016 Form 1040-ES, Estimated Tax for Individuals, the due date for the first 2016 estimate for individual taxpayers will be Monday, April 18, 2016, regardless of your state of residence.

 Have a Tax Problem?

 

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at 

www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid (888 882-9243).
 

 

President Obama and Treasury Update Their Plan for Business & International Tax Reform

The Administration and Treasury Department released a joint report titled “The President's Framework for Business Tax Reform: An Update,” which is an updated version of their 2012 proposal. In addition to providing the President's vision for tax reform, the report includes recent figures to demonstrate the urgent need for such reform, including statutory vs. effective tax rates, effective rates broken down by industry, and global corporate tax rate trends.

This updated report emphasizes that “...the urgency of closing loopholes and reforming the tax system more broadly has grown” significantly since 2012, pointing to:

• the increased number of corporate inversions occurring over the past couple years
• the global problem of base erosion and profit shifting (BEPS), currently being tackled by the Organization for Economic Cooperation and Development (OECD).

The report states that “[i]n the face of these challenges, inaction is not an option.”

Statutory vs. Effective Tax Rates. The U.S. has the highest statutory corporate tax rate among G-7 countries (Canada, France, Germany, Italy, Japan, the United Kingdom (U.K.), and U.S.) at 39%, with the average among the other six countries being 29.6%.

However, the report cautions that effective tax rates don't “give a complete picture of how the tax code affects decision making and the competitiveness of the U.S. economy and U.S. firms in world markets.”

The effective marginal tax rate in the U.S. is 18.1%, which is significantly closer to the 19.4% average marginal tax rate among the other six G-7 countries. The difference between the statutory and effective rates in the U.S. suggests that corporate tax reform should lower the statutory rate while broadening the base to maintain the same level of revenue. Eliminating loopholes and subsidies would “level the effective marginal tax rates,” and encourage decisions to be made for business and investment reasons instead of tax. 

Distortions in Location of Production & Allocation of Products. Under the current rules, U.S. companies can reduce their tax by shifting their reported profits to lower-tax jurisdictions and/or engaging in corporate inversions (i.e., changing their tax residence to a low-tax country by merging with a foreign corporation). This causes economic distortions both from encouraging firms to invest and grow business activities abroad and by causing firms to spend their money on tax planning instead of productive investment. 

The President's framework for business tax reform is intended to reduce tax distortions, including those discussed above, and to address problems with the current international tax system. include:

• Reduce the top corporate tax rate from 35% to 28%.
• Eliminate the corporate alternative minimum tax (AMT).
• Revise current depreciation schedules that generally overstate the true economic depreciation of assets. (The report notes that many other large countries have scaled back depreciation allowances as a way of paying for rate-lowering corporate tax reform.)
• Limit the deductibility of interest.
• Cut the top corporate tax rate on manufacturing income to 25% and to an even lower rate for income from advanced manufacturing activities. This would be accomplished by reforming the Code Sec. 199 domestic production activities deduction to: focus more on manufacturing activity; increase the credit to 10.7%; and increase it even more for advanced manufacturing.
• Eliminate tax breaks for specific industries “with the few exceptions that are critical to broader growth or address certain externalities.” Specifically, the President's framework would: eliminate last-in, first out (LIFO) accounting; eliminate tax breaks for the oil and gas industry; reform the treatment of the insurance industry and products; and reform the measurement and character of gains, including modifications to the rules for like-kind exchanges.
• Provide reforms specific to the financial sector, including imposition of a financial fee (i.e., a tax on large financial institutions based on the amount of their liabilities), increase certain transaction fees, close the “carried interest” loophole, and modernize the taxation of certain financial products to prevent tax arbitrage.
• Promote innovation by expanding and simplifying the now-permanent research credit.
• Consolidate, enhance, and permanently extend key tax incentives to encourage investment in clean energy while repealing fossil fuel subsidies.
• Effectively cut the top corporate tax rate on manufacturing income to 25% by reforming the Code Sec. 199 domestic production activities deduction and increasing the credit to 10.7%.
• Establish a new per-country minimum tax (19%, less a foreign tax credit equal to 85% of the per-country average foreign effective tax rate) on foreign earnings that would reduce firms' ability to avoid U.S. tax by shifting profits overseas, reduce the incentive to shift production overseas, and increase the global competitiveness of U.S. corporations.
• Impose a one-time 14% tax on unrepatriated earnings, which could then be repatriated without any further U.S. tax.
• Limit U.S. interest expense deductions to curb “earnings stripping.”
• Limit inversions by preventing firms from acquiring smaller foreign firms and changing the tax residence as a result, and from changing their tax residence to any country where they do not have substantial economic activities if their operations in the U.S. are more valuable than their operations in the other country and they continue to be managed and controlled in the U.S.
• Close loopholes and stop strategies that facilitate BEPS, including tightening rules governing cross-border transfers of intangible property, closing loopholes by expanding the scope of the existing Subpart F rules, and restricting the use of “hybrid” arrangements that take advantages of differences in tax rules. The report notes that these reforms are consistent with the cooperative efforts being made by the OECD's BEPS project, which were endorsed by President Obama and other world leaders at the 2015 G-20 Summit.
• Allow small businesses to expense up to $1 million in investments.
• Allow cash accounting for businesses with up to $25 million in gross receipts.
• Simplify additional accounting rules for small business and harmonize eligibility.
• Quadruple the deduction for start-up costs (from $5,000 to $20,000).
• Reform and expand the health insurance tax credit for small businesses.

For more detail go to “The President's Framework for Business Tax Reform: An Update.

Want to Know How To Benefit From

This Tax Reform Proposal?  

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888 882-9243).

 

Huge Leak From the Panamanian Law Firm Mossack Fonseca!

According to Forbes, the offshore planning world was set on fire this weekend with the news that 11 million documents were leaked from the Panamanian law firm Mossack Fonseca. According to a BBC article found.

They show how Mossack Fonseca has helped clients launder money, dodge sanctions and evade tax. The company says it has operated beyond reproach for 40 years and has never been charged with criminal wrong-doing.

The documents show links to 72 current or former heads of state in the data, including dictators accused of looting their own countries.

Gerard Ryle, director of the ICIJ, said the documents covered the day-to-day business at Mossack Fonseca over the past 40 years.

While the neither the BBC article, nor a more detailed series of articles from the International Consortium of International Journalists, reference any U.S. client;, U.S. persons will probably show up, given that Mossack Fonseca apparently maintained a branch in Las Vegas, Nevada, under the name of M.F. Company Services and Mossack Fonseca Company Services is currently attempting to fight a subpoena brought in the U.S. District Court for the District of Nevada seeking information on at least 123 companies that it created.

Do You Have Undeclared Income 

From A Foreign Company

Formed By Mossack Fonseca ?

 

 

 

 Want to Know if the OVDP Program is Right for You?

 

Contact the Tax Lawyers at 

Marini& Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243

 

 

 

2015 IRS Data Book - Working Individuals Paying Most of the Taxes with Increases Every Year - Who Are You Voting For?

The Internal Revenue Service (IRS) Data Book is published annually by the IRS and contains statistical tables and organizational information on a fiscal year basis. The report provides data on collecting the revenue, issuing refunds, enforcing the law, assisting the taxpayer, and the budget and workforce.

Highlights of this year's 2015 Data Book

• During FY 2015, the IRS collected more than $3.3 trillion, processed more than 243 million tax returns and other forms, and issued over $403 billion in tax refunds. 

• With more than a 15-percent reduction in full-time-equivalent staffing compared to 5 years ago, operations across a number of areas were downsized, including the total number of individual tax return examinations, which decreased by 22 percent over the same time period. 

• The agency’s Website continued to get heavy use with more than 493 million visits to IRS.gov in FY 2015; and one of our most popular online tools, “Where’s My Refund?”, handled a record-breaking 234 million inquiries, a 24-percent increase over the prior year. 

This chart also evidences the unfairness in the Internal Revenue Code, as it reflects that individuals continue to bear the burden of paying most of the taxes every year and the only thing they have to look forward to is increases in the amount of taxes they pay collectively every year.

I can also tell you from experience that it's not the top 1% of the wealthiest individuals who are paying most of these individual taxes, its is all of us W-2 Wage Earning Employees a/k/a the Middle Class.

If you want this to change, please consider the different tax policies offered by the various presidential candidates when you vote. Here are the Presidential Candidates and their respective tax plans as described by Tax Policy Center (TPC ) of the Urban Institute and Brookings Institute.

 

         

      Sanders Tax Plan

         Clinton Tax Plan 

   Trump Tax Plan                                     Cruz Tax Plan

  

 

Have a Tax Problem?

 

 

Contact the Tax Lawyers at

Marini & Associates, P.A.

 

 for a FREE Tax Consultation Contact US at 

www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid (888 882-9243).
 

 

IRS Revises Due Date for Form 8971 For All Estates Filed After July, 2015 to June 30, 2016.

On February 15, 2016 we posted IRS issues Final Form 8971 & Instructions on How To Report the Final Estate Tax Value of a Property Transfered to Beneficiaries , where we discussed that for many years the IRS has had a problem verifying the basis of assets received by an heir from an estate. Within the last three or four years, the IRS has required brokerage houses and banks to supply it with the cost basis so that it could determine that the capital gain or loss on securities was correctly calculated. 

 

The IRS has created a form 8971 along with the schedule A which requires anyone who must file a form 706 or form 706NA to compel the executor/personal representative/administrator to file this form 8971+ schedule A with the Internal Revenue Service. Each heir/beneficiary is to be supplied with a copy of schedule A to inform him of his basis in the assets inherited from the estate. This filing requirement is limited to estates which must file a 706 or 706NA. The upshot of this is that estate tax returns filed merely to achieve portability are exempt from this filing requirement. Such filing had to be made within 30 days of the filing of the estate tax return or, in the case of estate tax returns filed subsequent to July, 2015, by March 30, 2016. 

 

Now, however, the IRS is basically admitting that the form that it released is extremely flawed. The form is now being redrafted/clarified so that estate tax preparers will now have a reasonable idea of what needs to be done to prepare an accurate 8971.

In order to do this and realizing that the filing date was already past, the IRS extended the filing dates for forms 8971 on all estate tax returns filed after July, 2015, to June 30, 2016. Hopefully this will give the IRS the opportunity to draft a form that is comprehensible, free of errors, and relatively easy to file. It is not often that IRS admits that it's products are flawed; this change of date and redrafting of instructions is a tacit admission that the IRS tried to push this form onto the tax preparation world before the form was ready.

Once we see the new manifestation of the form plus instructions which should be out at some point in June, we will have a better idea the IRS accomplished its task.

Have a US Estate Tax Problem?

 

Estate Tax Problems Require

an Experienced Estate Tax Attorney

Contact the Tax Lawyers at

Marini & Associates, P.A.

 for a FREE Tax Consultation Contact US at

www.TaxAid.us or www.TaxLaw.ms

or Toll Free at 888-8TaxAid (888 882-9243).

 

Robert S. Blumenfeld  - 

 Estate Tax Counsel

Mr. Blumenfeld concentrates his practice in the areas of International Tax and Estate Planning, Probate Law, and Representation of Resident and Non-Resident Aliens before the IRS.

Prior to joining Marini & Associates, P.A., he spent 32 years as the Senior Attorney with the Internal Revenue Service (IRS), Office of Deputy Commissioner, International.

While with the IRS, he examined approximately 2,000 Estate Tax Returns and litigated various international and tax issues associated with these returns.As a result of his experience, he has extensive knowledge of the issues associated with and the preparation of U.S. Estate Tax Returns for Resident and Non-Resident Aliens, Gift Tax Returns, Form 706QDT and Qualified Domestic Trusts.

 

 

Why You Need An Experiance Tax Attorney To Successfully File a Petition to Quash an IRS Summons!

We previously posted Right to Challenge IRS Summonses Important With New IRS Audit Procedures! on June 19, 2014,where we discussed that the United States Supreme Court issued its decision in United States v. Clarke, No. 13-301, reaffirming the right of a recipient of an IRS summons to challenge the summons by examining IRS officials in an adversarial proceeding. 

The impact of the Supreme Court’s decision in Clarke will be significant in light of a recent IRS directive (LB&I Control No: LB&I-04-0613-004), effective January 2014, which mandates that IRS examining officers issue a summons if a taxpayer fails to respond to an information document request (IDR) during the information gathering phase of an examination. (See our post: 2014 LB&I Information Document Request (IDR) Enforcement Process - Ready or Not?).

However, it's important to understand that you need an attorney, and preferably an Experiance Tax Attorney,

to successfully file a Petition to Quash an IRS summons!

Case in point Fisher v. U.S., which was filed February 10, 2014:                

Pro se taxpayer's petition to quash 3d party summons was dismissed based on her failures to prosecute, to follow F.R.Civ.P. and local court rules, and to comply with prior order to respond to govt.'s dismissal motion: although public policy generally favored decision on merits, dismissal was warranted here given taxpayer's delinquencies, risk of prejudice to govt., and public interest in judicial efficiency and prompt resolution of litigation. But, dismissal was without prejudice. (Fisher v. U.S., DC AZ, 114 AFTR 2d ¶2014-5241 ) 

Do You Have An IRS Summon

That Needs To Be Challenged? 

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243