San Francisco Tax Blogs | Diosdi, Ching, & Liu, LLP

05Aug 2023 by Pat Geddie

Here Comes the Employee Retention Credit Enforcement, There Goes the Criminal Indictments

By Anthony DiosdiThe Internal Revenue Service or (“IRS”) has warned business owners to watch out for misleading claims involving the employee retention credit. See IR-2023-105, 5/25/2023. The general public continues to be subject to a barrage of broadcast advertisements and online promotions involving the employee retention credit or (“ERC”). The IRS has stated that while the benefits of the ERC are real, aggressive promoters are misrepresenting and exaggerating who can qualify for the ERC. See This Little-Known Pandemic-Era Tax Credit Has Become a Magnet for Fraud, Alan Rappeport, New York Times, May 26, 2023. The IRS has stepped up audit and criminal investigations involving ERC claims. The IRS is investigating both businesses claiming an employee retention credit and the promoters of these credits. When properly claimed, the ERC is a…

05Aug 2023 by Pat Geddie

What is Superannuation and How it Could be Taxed Under the United States- Australia Income Tax Treaty

Tax Treaty

There are currently more than 100,000 Australian-born people living in the United States. Many of these individuals have an Australian Superannuation account. A superannuation is an Australian pension program created by a company to benefit its employees. Funds deposited in a superannuation account will grow through appreciation and contributions until retirement or withdrawal. As with many foreign pension plans, the U.S. federal taxation of superannuation accounts is a gray area. The most common type of superannuation is the Self-Managed Superannuation Funds. This article will focus on Self-Managed Superannuation Funds. This is because Self-Managed Superannuation Funds are the most common type of superannuation. Many tax professionals consider a superannuation fund to be a foreign grantor trust for U.S. tax purposes. If a superannuation fund can be classified as a grantor trust,…

20Jul 2023 by Pat Geddie

Does the Farhy Decision Apply to 3520 Penalty Assessments?

Tax Law

By Anthony DiosdiRecently the United States Tax Court held in Alon Farhy v. Commissioner of Internal Revenue, that the Internal Revenue Service or (“IRS”) lacked the authority to assess certain penalties against taxpayers under Internal Revenue Code Section 6038(b). In Farhy the petitioner was required to file Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, but he did not. The penalty for failure to file, or for delinquent, incomplete, or materially incorrect filing is a reduction of foreign tax credits by 10% and a penalty of $10,000. An additional $10,000 continuation penalty may be assessed for each 30-day period that noncompliance continues up to $50,000 per return. See IRC Section 6038(b) and (c). The IRS assessed penalties against the petitioner under Section 6038(b) of the…

12Jul 2023 by Pat Geddie

Secure Your Financial Future with Diosdi Ching & Liu, LLP: Your Reliable San Francisco Tax Law Attorneys

Tax Law

Tax law is an intricate maze. It's easy to get lost in its complexities and even easier to make a mistake. Don't navigate this challenging landscape alone. Diosdi Ching & Liu, LLP, a trusted law firm in San Francisco, California, is ready to assist you as your dependable San Francisco tax law attorneys. At Diosdi Ching & Liu, LLP, we understand the intricacies of tax law. We believe that effective tax planning and dispute resolution is vital for your financial well-being. Our experienced attorneys are committed to providing you with comprehensive tax law services, helping you minimize your liabilities and maintain compliance. Our attorneys are adept at handling a range of tax issues. From tax planning and audit representation, to resolving tax controversies and tax litigation, we have the knowledge and skills to guide…

28Jun 2023 by Pat Geddie

The U.S. Taxation of Foreign Computer Programs and Cloud Computing Transactions

Tax Law

By Anthony Diosdi The United States taxes U.S. persons on all of their income, from whatever source derived. Therefore, the source of income generally has no effect on the computation of a U.S. person’s taxable income. Sourcing can, however, have a significant impact on the computation of a U.S. person’s ability to claim a foreign tax credit. The source rules play a more prominent role in the taxation of a foreign person or foreign business, since they effectively define the boundaries of U.S. taxation. The U.S. taxes the gross amount of a foreign person’s or foreign business’s U.S.-source passive type income at a flat rate of 30 percent. The U.S. also taxes foreign persons and foreign businesses at graduated rates on the net amount of income effectively connected with the…

21Jun 2023 by Pat Geddie

To Withhold, or Not to Withhold, That is the Question For Foreign Workers

Tax Law

By Anthony Diosdi U.S. companies regularly hire foreign contractors to perform various tasks. U.S. companies often do not consider the potential U.S. withholding tax consequences of retaining a foreign contractor. Many forms of U.S.-source income received by foreign persons is subject to a flat tax of 30 percent on the gross amount of income received. Internal Revenue Code Sections 871(a) (for nonresident aliens) and 881(a) (for foreign corporations) impose the 30-percent tax on “interest * * * dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical gains, profits, and income.” This enumeration is sometimes referred to as “FDAP income.” The collection of such taxes is affected primarily through the imposition of an obligation on the person or entity making the payment to…

14Jun 2023 by Pat Geddie

Diosdi Ching & Liu, LLP: Experienced San Francisco Tax Law Attorneys

Tax Law

Dealing with tax-related issues can be complex and demanding. At Diosdi Ching & Liu, LLP, we understand this challenge and aim to make the process less daunting for our clients. As seasoned San Francisco tax law attorneys, we offer comprehensive support in a wide range of tax-related matters. Our team is well-versed with the intricate labyrinth of tax laws. We've handled numerous cases, employing innovative strategies to help our clients navigate complex tax situations. Be it a tax dispute, an audit, or an international tax issue, our San Francisco tax law attorneys are equipped to handle it all. What sets us apart at Diosdi Ching & Liu, LLP, is our client-centric approach. We believe that every tax problem is unique, and thus, deserves a unique solution. Our attorneys listen to…

14Jun 2023 by Pat Geddie

Can a Foreign Tech Company be Subject to U.S. Tax on Internet-Related Income by Utilizing U.S. Servers?

Tax Law

By Anthony Diosdi The U.S. source rules in general derive from an attempt to identify the geographic locus of the economic activity or financial arrangements that generate income. The source rules play a prominent role in the taxation of foreign persons, since they effectively define the boundaries of U.S. taxation. The source rules for gross income are organized by categories of income, such as interest, dividends, personal services income, rentals, royalties, and gains from the disposition of property. The rapid evolution of electronic commerce and the internet has generated many difficult conceptual issues such as how to source a foreign person’s business activities undertaken on the internet that affect the U.S. economy. The U.S. source rules provide that the source of rental and royalty income is determined by the place…

14Jun 2023 by Pat Geddie

A Closer Look at the Benefits of Cross-Border Finance Transactions that are Characterized as Portfolio Debt

Tax Law

By Anthony Diosdi The United States is the world’s top destination for foreign direct investment. Foreign investors generally have the same goals of minimizing their income tax liabilities from their U.S. real estate and business investments as do their U.S. counterparts, although their objective is complicated by a special income tax regime that is applicable to foreign persons. Specifically, if the non-U.S. person receives passive U.S. source income, the income is taxed at a flat 30 percent rate, unless a tax treaty reduces this rate. On the other hand, if the U.S. activities of the foreign investor rises to the level of a “trade or business,” then the foreign person will be taxed at the same graduated tax rates applicable to U.S. persons.Portfolio Debt PlanningForeign investors often utilize portfolio debt…

08Jun 2023 by Pat Geddie

A Deep Dive into the FIRPTA Rules

Tax Law

By Anthony Diosdi U.S. real estate has become a popular investment with foreigners. However, few foreign investors fail to consider the U.S. tax implications of holding U.S. real property. There are significant income, gift and estate tax consequences that may result when U.S. real property is sold or transferred. This article discusses the withholding requirements of the Foreign Investment in Real Property Tax Act of 1980 (or “FIRPTA”) and how the FIRPTA withholdings may be reduced or eliminated. Under FIRPTA, gains or losses realized by foreign corporations or nonresident alien individuals from any sale, exchange, or other dispositions of a U.S. real property interest are taxed in the same manner as income effectively connected with the conduct of a U.S. trade or business. This means that gains from dispositions of…