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15Mar 2019 by Anthony Diosdi

A Closer Look at the Non-Willful FBAR Penalty Associated with Not Timely Filing a FinCen Report 114

By Anthony Diosdi I. DEFINING THE IMPORTANT TERMS EVERY U.S. INDIVIDUAL WITH AN INTEREST IN FOREIGNFINANCIAL ACCOUNT(S) NEEDS TO UNDERSTANDA. Introduction This article is designed to provide a background and overview of the laws governing the disclosure of foreign accounts on a Foreign Bank Account Report, FinCen Report 114 (“FBAR”). This article also discusses the penalties that can be assessed against individuals for not timely disclosing foreign accounts on an FBAR. Although FBAR violations can result in both criminal and civil penalties, this article focuses on civil penalties that can be assessed by the Internal Revenue Service (“IRS”) for an FBAR violation. In particular, this article analyzes the highly controversial non-willful penalty that can be assessed by the IRS against individuals who did not timely disclose foreign financial accounts on…

15Mar 2019 by Anthony Diosdi

The U.S. Tax Effects of Entities Used by Foreign Investors

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By Anthony Diosdi Introduction Foreign investors typically have the same objectives of minimizing their income tax liabilities from their real estate and businesses located in the U.S. as do their domestic counterparts. However, foreign investors are subject to an even more complicated set of tax laws than their domestic counterparts. Foreign investors must understand the difference between effectively connected income compared to not effectively connected income. Foreign investors must also understand the difference between income earned in a trade or business compared to passive income. These distinctions in income make a big difference for U.S. tax purposes. For example, if a foreign investor derives certain types of passive income from the U.S., the income typically taxed at a flat 30 percent rate (without allowance for deductions), unless an applicable U.S.…

12Mar 2019 by Anthony Diosdi

Should You Hire an Attorney for Your Business Tax Preparation in 2019?

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While many tax lawyers in San Francisco can help address issues that arise after you file taxes, few will help with the actual preparation and filing of business taxes, often because most tax lawyers are not accountants. When they do, it is often at a premium cost. At SF Tax Counsel, however, we offer the services of Certified Public Accountants (CPAs) and Enrolled Agents (EAs) - and we do so at a reasonable cost for your business. We regularly handle the following for business owners: Partnership returnsCorporate returnsInternational business taxes The question that many owners have is - do you really need the assistance of a tax law firm come tax season in 2019? Business taxes are always complicated, as you want to minimize your tax liability as much as…

07Mar 2019 by Anthony Diosdi

The General Treaty Provisions That All Individual Foreign Investors Should Consider Before Investing in the United States

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By Anthony Diosdi Introduction In the individual foreign investor setting, inbound tax planning often requires a balancing of U.S. income tax considerations and U.S. federal gift and estate tax considerations. While U.S. federal income tax rates on the taxable income of an individual foreign investor are the same as those applicable to a U.S. citizen or resident, the federal estate and gift tax as applied to individual foreign investors can and often results in a dramatically higher burden on a taxable U.S. estate or donative transfer of a foreign investor than for a U.S. citizen or domiciliary. As a result, for many individual foreign investors, the most important U.S. tax consideration is the U.S. federal estate and gift taxation. The United States imposes estate and gift taxes on certain transfers…

07Mar 2019 by Anthony Diosdi

“BEAT” Again- The New BEAT Tax Regime Considerations and Compliance Requirements Imposed on U.S. Inbound Transactions Involving Foreign Corporate Parents

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By Anthony Diosdi Introduction to the BEAT Tax Regime The 2017 Act introduced the Base Erosion Anti-Abuse tax (“BEAT”) as codified under Internal Revenue Code Section 59A, which is designed to prevent base erosion in the crossborder context by imposing a type of alternative minimum tax, which is applied by adding back to taxable income certain deductible payments, such as interest and royalties, made to related foreign persons. As a threshold matter, the BEAT provisions generally do not apply to small to medium-sized “C” corporation structures but will apply to applicable “C” corporation groups that have average annual gross receipts for a three-taxable year look back period period ending with the preceding year of at least $500 million. (BEAT does not apply to Regulated Investment Companies (“RIC”) and Real Estate…

13Feb 2019 by Anthony Diosdi

Just in Time for Tax Season: Change to IRS Form 5471

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By Anthony Diosdi Introduction Subpart F of the Internal Revenue Code requires every person who is a U.S. shareholder of a controlled foreign corporation (or “CFC”), and who owns stock in such corporation to include in gross income a deemed dividend equal to the shareholder’s pro rata share of the CFC’s earnings. In order to provide the Internal Revenue Service (“IRS”) with the information necessary to ensure compliance with Subpart F, each year, a U.S. shareholder who owns a certain portion of a foreign corporation’s vote and/or value must file a Form 5471 entitled “Information Return of U.S. Persons With Respect to Certain Foreign Corporations.” A Form 5471 ordinarily is filed by attaching it to the U.S. shareholder’s regular federal income tax return. A U.S. shareholder of a CFC that…

06Feb 2019 by Anthony Diosdi

Demystifying the Taxation of Deferred Foreign Earnings

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By Anthony Diosdi Introduction For those who advise clients in international tax, the 2018 tax season was not easy. This is partially due to the enactment of the revised Internal Revenue Code Section 965 transition tax. The new Section 965 was enacted by the Tax Cuts and Jobs Act of 2017. Section 965 taxes retained earnings of foreign corporations attributable to U.S. shareholders. This included income which consisted of post-1986 earnings and profits (“E&P”) allocated to U.S. shareholders through complex calculations. As a result of the Section 965 revision, U.S. shareholders of foreign corporations with retained earnings were required to repatriate as much as 31 years of accumulated foreign earnings in a single year. The good news is the tax rate for foreign repatriated earnings is discounted. Shareholders of…

24Jan 2019 by Lynn Ching

GILTI as Charged? Maybe 962 Can Bail You Out

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It has come to my attention that some advertisers have made vague references to helping individual taxpayers claim the same “tax breaks” as “the big boys.” What exactly is meant by “tax breaks” or “big boys” is neither here nor there, (although I assume for purposes of this article that what is referred to as the “big boys” are large C corporations). What is clear is the tax planning opportunities that arise through the new tax on global intangible low-taxed income (“GILTI”). Unlike the hazy references of said tax advertisers, GILTI may offer tax planning opportunities to individual shareholders of controlled foreign corporations (“CFCs”). C corporate shareholders of CFCs are now entitled to important benefits that are unavailable to their non-corporate counterparts: they are entitled to a 50 percent deduction…

22Jan 2019 by Lynn Ching

GILTI vs. FDII: Outbound International Taxation Showdown

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We all have guilty pleasures (no pun intended). One of my guilty pleasures used to be watching WWE wrestling. WWE battles were always epic and you never knew who was going to be the hero or villain in any given match. Just like WWE characters, tax regulations can be a hero in one case and become a dreaded villain in another. For those that have had the pleasure of trying to make sense of the new Global Intangible Low-Tax Income (“GILTI”) regime and the Foreign-Derived Intangible Income (“FDII”) tax rules, you may feel like you are in the middle of a WWE battle. Not only is GILTI and FDII needlessly complicated, it’s unclear which of these provisions is the hero or the villain. What Exactly is the GILTI Tax Regime…

04Jan 2019 by Lynn Ching

A New Anti-Deferral for International Taxation has Been Announced, Don’t be Guilty of Owing the GILTI Tax

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Introduction to GILTI For years, tax planning for international outbound taxation remained the same, mitigation of Subpart F income, maximization of foreign tax credits, and transfer pricing. The 2017 Tax Cuts and Jobs Act has broken the monotony associated with international tax planning for outbound transactions and added a new category for tax planning. In addition to the anti-deferral regime built into Subpart F, the Tax Cuts and Jobs Act has introduced a new anti-deferral category known as the Global Intangible Low-Taxed Income (“GILTI”). GILTI is now a provision that can found in Internal Revenue Code Section 951A. The Tax Cuts and Jobs Act requires a U.S. shareholder of a controlled foreign corporation (“CFC”) to include in income its global intangible low-taxed income or GILTI. The GILTI tax is meant…