Tax Law Archives | Page 21 of 56

26Apr 2022 by Anthony Diosdi

The U.S. and Canadian Tax Consequences of a Canadian Investor’s Acquisition of U.S. Real Estate

Tax Law

Canadian investors generally have the same goals of minimizing their tax liabilities from their U.S. real estate and business investments, as do their U.S. counterparts, although their objective is complicated by the very fact that they are not U.S. persons. That is, Canadian investors must be concerned not only with income taxes in the United States, but also income taxes in Canada. Further, the United States has a special tax regime that is applicable to foreign persons. Specifically, if the non-U.S. person derives certain types of passive income, it is typically taxed at a flat 30 percent rate (without allowance for deductions), unless an applicable tax treaty reduces this statutory rate. In contrast, if the U.S. activities of the foreign person rise to the level of constituting a “U.S. trade…

26Apr 2022 by Anthony Diosdi

The United States-Canada Income Tax and Estate Tax Treaty Revisited

Tax Law

By Anthony Diosdi The major purpose of an income tax treaty is to mitigate international double taxation through tax reduction or exemptions on certain types of income derived by residents of one treaty country from sources within the other treaty country. Because tax treaties often substantially modify U.S. and foreign tax consequences, the relevant treaty must be considered in order to fully analyze the income tax consequences of any outbound or inbound transaction. The U.S. currently has income tax treaties with approximately 58 countries. This article discusses the implications of the United States.-Canada Income Tax Treaty. There are several basic treaty provisions, such as permanent establishment provisions and reduced withholding tax rates, that are common to most of the income tax treaties to which the U.S. is a party. In…

13Apr 2022 by Anthony Diosdi

The IRS Form 5472 Reporting Requirements for Foreign Owners of a U.S. Disregarded Entity

Tax Law

By Anthony Diosdi Recently, the Internal Revenue Service (“IRS”) and the Treasury Department issued final regulations regarding the reporting requirements for domestic disregarded entities held by a nonresident. According to the regulations under Internal Revenue Code Section 6038A, a disregarded entity will be treated as a U.S. corporation. Historically, a foreign-owned disregarded entity was just that- disregarded. As a result, nonresidents were not required to disclose disregarded entities to the IRS on a tax return or informational return. Under the new rules, this is no longer the case. Under the new regulations, a disregarded entity held by a nonresident individual or foreign entity is required to obtain a Employer Identification Number (“EIN”), prepare a pro-forma Form 1120, and file a Form 5472, Information Return of a 25% Foreign Owned US…

13Apr 2022 by Anthony Diosdi

A Closer Look as to How Nonresidents Can Utilize the U.S.- Korean Income Tax Treaty to Avoid U.S. Taxation Associated With a Domestic Retirement Plan Distributions

Tax Law

By Anthony Diosdi In an increasingly global economy, workers are experiencing unprecedented mobility. As such, foreigners living in America, even for a limited time, often participate in a pension or retirement plan in the United States; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. retirement such as 403(b) plans, 401(k) plans, and Individual Retirement Accounts (“IRAs”) are commonly encountered by foreigners who are employed in the United States. In the alternative, Americans who are employed abroad often contribute to foreign retirement plans. Whether contributions, earnings, and distributions are includible in a foreign worker’s U.S. taxable income depends on how the worker is classified for U.S. tax purposes and whether a tax treaty exempts an event that…

12Apr 2022 by Anthony Diosdi

Utilizing the U.S.- China Tax Treaty to Avoid U.S. Withholding Tax and Early Withdrawal Penalties From a 403(b) Plan

Tax Law

By Anthony Diosdi In an increasingly global economy, workers are experiencing unprecedented mobility. As such, foreigners living in America, even for a limited time, often participate in a pension or retirement plan in the United States; participation might even be mandatory. In most cases, pretax money is contributed into retirement accounts where it accumulates tax-free until retirement. U.S. retirement such as 403(b) plans, 401(k) plans, and Individual Retirement Accounts (“IRAs”) are commonly encountered by foreigners who are employed in the United States. In the alternative, Americans who are employed abroad often contribute to foreign retirement plans. Whether contributions, earnings, and distributions are includible in a foreign worker’s U.S. taxable income depends on how the worker is classified for U.S. tax purposes and whether a tax treaty exempts an event that…

07Apr 2022 by Anthony Diosdi

There May Be 50 Ways To Leave Your Lover- But You May Only Utilize A CDP Challenge to Contest a Form 3520 Penalty Without Prepayment

Tax Law

安東尼-迪奧斯迪根據《國內稅收法》第 6677（a）條，如果任何美國人受益人（直接或間接）收到來自外國信託的分配，該人必須使用國內稅收署（“IRS”）的 3520 錶對該信託進行申報，並在上面顯示信託的名稱、收到的分配總額，以及 IRS 可能要求的任何其他數據。超過10萬美元的外國禮物、遺贈或繼承也必須在 3520 錶上披露。如果沒有及時提交3520錶，美國國稅局可能會判處相當於信託總價值的 35%或從信託中轉移的財產總價值的35%的年度罰款。如果沒有及時在 3520 錶上披露，國稅局還可以根據《國內稅收法》第6039F條評估相當於 25%的外國禮物的罰款。最後，國稅局可以對被要求提交國稅局3520錶的個人處以每年 1 萬美元或外國信託應報告總金額的 5%的罰款（以較高者為准）。不言而喻，未及時提交國稅局 3520 錶或不正確地提交此類表格的相關處罰可能是巨大的。在某些情况下，填寫 3520 錶可能是非常複雜的，許多納稅人甚至不知道他們必須提交這樣的表格，直到它太晚了。事實上，3520 錶非常複雜，或者許多納稅人不知道他們需要提交這些表格，但這並沒有封锁美國國稅局積極懲罰那些沒有正確提交3520錶或延遲提交這些表格的納稅人。事實上，國稅局最近宣佈，它將自動對任何遲交3520錶的人進行處罰，不管是什麼原因。這些罰款不是開玩笑的。它們可以很容易地達到數萬甚至數百萬美元。許多稅務從業人員已經習慣於向國稅局發送一封信，指出由於可以證明有合理的理由，所以應該免除罰款。在這些情况下，請求寬大處理可能不會很有效。被評估為3520 罰款的納稅人應該考慮擴大他們的抗議，而不僅僅是合理原因的立場。特別是，納稅人應該關注國稅局評估罰款的程式，並考慮基於科技理由挑戰這些罰款。與 3520 錶相關的處罰被歸類為“可評估的處罰”。從程式上講，“可評估的罰款”是非常難以質疑的。本文將討論對未及時提交 3520 錶和未正確提交 3520 錶（以下簡稱“3520罰金”或“3520 罰金”）的相關處罰提出異議的可用抗辯。本文將討論如何通過被稱為國稅局徵收正當程式聽證會（“CDP”）的程式來質疑 3520 表格的處罰。是什麼讓 3520 的處罰變得特別？與未及時提交 3520 錶或未準確提交 3520 錶有關的處罰，與收入或所得稅相關的處罰不同。3520 錶的處罰被歸類為“可評估的處罰”。作為可評估的處罰，3520 表格的處罰不受缺陷程式的限制。見 Smith 訴專員，133 T.C. 424，428-430（2009）。可評估的罰款可以由國稅局評估和收取，而沒有機會在諸如稅務法院這樣的預付款論壇上對罰款提出異議。由於國稅局在法律上可以通過徵收或扣押來評估和收取3520 的罰款，國稅局並沒有太多的動力來消除或减免這些罰款。囙此，一封請求减免罰款的信可能不會給被評估為3520 罰款的納稅人帶來多少希望。當然，一個被評估為 3520 罰款的納稅人總是可以全額支付罰款，並在退稅訴訟中質疑罰款的有效性。問題是，許多被徵收3520 罰款的人沒有能力支付這些罰款並提起退稅訴訟。幸運的是，在某些情况下，被評估為3520錶罰款的個人可以對罰款提出 CDP 質疑（無需首先支付罰款），如果有必要，可以在稅務法院對 3520 錶罰款提出異議。這一過程將在下文中詳細討論。但首先，讓我們回顧一下對 3520 罰款的抗辯。合理的理由辯護對 3520 處罰最常引用的辯護理由可能是合理原因。為了獲得與3520 表格處罰相關的减免，必須確定被評估處罰的個人不僅有“合理的原因”，而且缺乏“故意忽視”的行為。是否同時存在“合理原因”和缺乏“故意忽視”是一個事實問題。1985 年美國最高法院在博伊勒一案中，將“故意忽視”一詞定義為有意識的、故意的失敗或魯莽的漠不關心“。國稅局在其法規中對博伊勒案的裁决進行了解釋，將”合理原因“和缺乏”故意忽視“定義為納稅人行使了”普通的商業關懷和審慎“。見 Treasury. Reg. Section 301.6651-1（c）（1）。囙此，如果一個納稅人能够證明他行使了普通的商業關懷和審慎，他可能有合理的理由接受3520 的處罰。當然，問題隨之而來，什麼構成了普通的商業關懷和謹慎？在過去，國稅局認為以下的例子構成了對拖欠申報罰款的合理原因。 1.及時郵寄但因郵資不足而被退回的退貨。 2.及時向地區專員或國內稅收專員提交的申報表，但在錯誤的地區。 3.國稅局官員提供了錯誤的資訊。 4.納稅人或其直系親屬的死亡或重病。 5.納稅人不可避免的缺席。 6.企業或企業記錄因火灾或其他意外事故而被毀。 7.國稅局沒有及時提供適當的回報要求。 8.通過親自到國稅局辦公室獲得完成申報所需的幫助或資訊，但由於納稅人不是因為自己的過錯而無法見到國稅局的代表，所以沒有成功。囙此，如果一個被徵收 3520 罰款的人能够證明他或她在上述任何一個例子中行使了普通的商業關懷和謹慎，這個人就可以對 3520 罰款進行合理的辯護。判例法也規定了基於合格稅務顧問的建議而對 3520 罰款的合理理由辯護。明確地說，沒有及時提交3520錶並不能因為個人對稅務專家的依賴而得到原諒。這種依賴不屬於3520 罰款的“合理原因”。依賴稅務專業人員，即使是合理的依賴，也不能免除個人提交3520 表格的義務，也不能作為 3520 罰款的辯護理由。說到這裡，對稅務專業人員的行為的依賴和對稅務顧問的建議的依賴是有區別的。在海伍德木材和礦業公司訴專員，172 F2d 769771（2d Cir.1950）案中，法院說。“當一個公司的納稅人選擇一個有能力的稅務專家，向他提供所有必要的資訊，並要求他準備適當的納稅申報，我們認為該納稅人已經做了所有普通的商業關懷和審慎可以合理要求的事情。” 囙此，從一個合格的顧問那裡真誠地尋求和得到的建議，構成了未能提交3520錶的合理原因。最後，在某些有限的情况下，如果有其他因素支持這一論點，如個人是第一次提交3520 錶，或被要求提交 3520 錶的個人英語不流利，對法律的無知可被視為合理原因。要求準予《國內稅收法》第 6751 條規定的 3520 處罰措施許多專業人士錯誤地認為，3520 罰款的唯一辯護理由是合理的理由。合理理由並不是3520 罰款的唯一辯護理由。如果美國國稅局在評估罰款時沒有遵循適當的程式，納稅人也可以對 3520 項罰款提出異議。根據《國內稅收法》第 6751（b）節，所有處罰（包括3520 項處罰）必須符合某些程式要求。第 6751 節要求美國國稅局在對納稅人進行處罰時遵循兩項程式要求。首先，個人必須收到罰款通知、《國內稅收法》中規定罰款的部分，以及如何計算罰款。這一要求通常很容易滿足。其次，評估處罰的“初步决定”必須得到“直接首長”或“準予的高級官員”的“書面”準予參見 IRC 第6751（b）節。美國國稅局有不遵守第二項要求的歷史。任何最近被評估 3520 罰款的人都應該考慮到，國稅局不僅對逾期申報自動評估罰款，而且還在大量評估。自 2020 年初以來，國稅局已經在很短的時間內評估了數千份3520罰款。鑒於國稅局在相對較短的時間內發出的處罰通知的數量，國稅局很有可能沒有遵守第6751 條的要求，在評估 3520 處罰時沒有獲得“直接首長”或“經準予的更高官員”的“書面準予”。國稅局沒有遵守第 6751 條的規定可能是對第 3520 條處罰的一個非常有力的辯護。這就提出了一個問題：納稅人在收到 3520…

06Apr 2022 by Anthony Diosdi

Final Regulations Issued Regarding Partnerships and S Corporations that Hold Controlled Foreign Corporations

Tax Law

By Anthony Diosdi On January 25, 2022, the United States Department of Treasury (“Treasury”) and Internal Revenue Service (“IRS”) published final regulations related to the treatment of domestic partnerships and S corporations that hold stock in a controlled foreign corporation (“CFC”) for purposes of determining amounts included in the gross income of their partners and shareholders with respect to the CFCs. The regulations finalize a portion of the proposed regulations published on June 21, 2019.The final regulations provide pass-through entities such as partnership and S corporations consistent treatment for subpart F income, GILTI, and Section 956 inclusions. The guidance provided in the regulations represent a shift in the way pass-through entities are taxed on foreign source income. Since 1962, U.S. partnerships have been treated as separate entities for purposes of…

06Apr 2022 by Anthony Diosdi

An Overview of Reporting Deemed Paid Foreign Tax Credits Related to GILTI Inclusions of an S Corporation on Part III, Section 3 for the New IRS Schedule K-3

Tax Law

By Anthony Diosdi The U.S. federal income tax liability associated GILTI or “global intangible low-taxed income” is dramatically different to an individual U.S. shareholder of a controlled foreign corporation (“CFC”) compared to a U.S. shareholder that holds a CFC through a pure passthrough entity such as an S corporation. Individual CFC shareholders of CFCs are subject to GILTI tax at federal rates of up to 37. Absent planning, no indirect foreign tax credits are available to offset the income liability imposed on a GILTI inclusion. Furthermore, each CFC shareholder (within the meaning of Internal Revenue Code Section 951(b)) must attach an IRS Form 5471 to their individual income tax return. Filing the Form 5471 Information Return of U.S. Persons With Respect To Certain Foreign Corporations, requires disclosure about the CFC,…

06Apr 2022 by Anthony Diosdi

Fighting IRS Form 3520 Penalties- Your Best Defense Maybe Your Offense

Tax Law

By Anthony Diosdi IntroductionUnder Internal Revenue Code Section 6677(a), if any United States Person beneficiary receives (directly or indirectly) a distribution from a foreign trust, that person is required to make a return with respect to such a trust using Internal Revenue Service (“IRS”) Form 3520, and show thereon the name of the trust, the amount of the aggregate distribution received, and any other data the IRS may require. A foreign gift, bequest, or inheritance that exceeds $100,000 must also be disclosed on a Form 3520. The IRS may assess an annual penalty equal to 35 percent of the gross value of the trust or 35 percent of the gross value of the property transferred from the trust if a Form 3520 is not timely filed. The IRS may also…

31Mar 2022 by Anthony Diosdi

Filing a Tax Extension

Tax Law

With approaching tax deadlines, many people have already filed and might have even received their refunds. However, some individuals and businesses are not prepared to file their taxes for whatever reason. In this situation, you should never simply ignore the deadline. Instead, take the time to file a tax extension. Tax laws are constantly changing in recent years, making it confusing for many filers who want to make sure they do it right. If you are unable to make the deadline, you can file an extension, which gives you an extra six months to file your returns. The new deadline for your taxes will be October 17, 2022, if you file the extension. There is not an opportunity to extend the deadline again past October, however, so you will need…