The Nuts and Bolts of the CARES Act Economic Disaster and Payroll Protection Loan Programs

The Nuts and Bolts of the CARES Act Economic Disaster and Payroll Protection Loan Programs

Tax Law
By Anthony Diosdi Recently, President Donald Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The Cares Act provides for special loan programs for businesses impacted by the coronavirus (COVID-19) pandemic. There are two types of relief a business can apply to receive. They are both discussed in detail below.Economic Injury Disaster LoansThe Small Business Administration (“SBA”) provides low-interest Economic Injury Disaster Loans (EIDLs) that have been available to small businesses following a disaster declaration. EIDLs are authorized by Section 7(a) of the Small Business Act.EIDLs are typically granted after a natural disaster. Each EIDL provides up to a $2 million loan. These loans may be used to pay fixed debts, pay fixed debts, payroll accounts payable, and other bills. The current interest rate on…
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Demystifying the Form 5471 Part 8. Schedule M

Demystifying the Form 5471 Part 8. Schedule M

Tax Law
By Anthony Diosdi Schedule M is designed to measure intercompany payments. Schedule M requires the majority U.S. owner to provide information on transactions between the CFC and its shareholders or other related persons. This is the eighth of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule M of IRS Form 5471. This article will go column by column and line by line through the attachment to Form 5471.Who Must Complete Schedule MForm 5471 and appropriate accompanying schedules must be completed and filed by the following categories of persons:Category 1 FilerU.S. persons who are officers, directors or ten percent or greater shareholders in a CFC. Category 1 includes U.S. shareholders…
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Do Shareholders of Dormant Foreign Corporations Still Need to File a Form 5471?

Do Shareholders of Dormant Foreign Corporations Still Need to File a Form 5471?

Tax Law
By Anthony Diosdi U.S. persons with certain interests in controlled foreign corporations (“CFCs”) must disclose their interests on Form 5471. Sometimes, CFCs temporarily stop conducting business and as a result, the CFC’s U.S. shareholders assume that it is not necessary to file an IRS Form 5471. This is an incorrect assumption and can result in serious penalty assessments by the IRS. Even if a CFC is dormant, the U.S. shareholders must still file a Form 5471. The good news is shareholders of a dormant CFC can qualify for minimal Form 5471 reporting requirements. Revenue Procedure 92-70 discusses the circumstances when a CFC shareholder qualifies for minimal Form 5471 reporting requirements.Per Revenue Procedure 92-70, there are eight conditions that must be met in order for a foreign corporation to be considered…
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Beware of the New CFC Rules Triggering a Surprise 965 Inclusion

Beware of the New CFC Rules Triggering a Surprise 965 Inclusion

Tax Law
By Anthony Diosdi The Controlled Foreign Corporation (“CFC”) rules are embedded in the Internal Revenue Code. The CFC rules are designed to limit artificial deferral of foreign income using foreign entities. The CFC provides that certain classes of taxpayers must include in their U.S. taxable income amounts earned by foreign entities they or related entities/persons control. The 2017 Tax Cuts and Jobs Act made significant changes to these rules. The Definition of a CFC Before the Enactment of the 2017 Tax Cuts and Jobs ActPrior to the 2017 Tax Cuts and Jobs Act, Internal Revenue Code Section 951 provides that a United States shareholder of a CFC must include in its income its pro rata share of its “Subpart F income” regardless of whether that income has been distributed to…
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Relief from Filing Forms 3520 and Form 3520-A for Some

Relief from Filing Forms 3520 and Form 3520-A for Some

Tax Law
By Anthony Diosdi The Internal Revenue Code provides that if any United States Person (i.e. U.S. citizen or U.S. resident) beneficiary receives (directly or indirectly) a distribution from a foreign trust during any taxable year, such person is required to make a return with respect to such a trust for such year 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. The IRS may assess an annual penalty equal to 35 percent of the gross value of the trust. See IRC Section 6048(c).The Internal Revenue Code also provides that each U.S. Person treated as an owner of any portion of a foreign trust under Internal Revenue Code Section 671…
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The IRS Has Deferred 2020 Income Tax Payments by 90 Days. What Happens in 90 Days?

The IRS Has Deferred 2020 Income Tax Payments by 90 Days. What Happens in 90 Days?

Tax Law
By Anthony Diosdi Treasury Secretary Steven Mnuchin recently announced that the Internal Revenue Service (“IRS”) is deferring income tax payments for the 2019 tax year by 90 days. Steven Mnuchin says that taxpayers will not be assessed interest and penalties on the late payments. According to Mnuchin, individuals can defer up to $1 million in federal taxes. Businesses can defer up to $10 million in federal taxes. The deferral is only available for tax payments. It does not permit the deferral of payroll taxes or estate and gift taxes. The announcement also does not impact estimated tax payment requirements. As of now, the income and corporate tax filing deadlines still have not pushed back. Although the announcement this is a step in the right direction. It does not go nearly…
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Demystifying the Form 5471 Part 7. Schedule P

Demystifying the Form 5471 Part 7. Schedule P

Tax Law
By Anthony Diosdi Schedule P is used to report the Previously Taxed Earnings and Profits (“PTEP”) of the U.S. shareholder of a controlled foreign corporation (“CFC”) in the CFC’s functional currency (Part I) and in U.S. dollars (Part II). This schedule is also used to report the PTEP of the U.S. shareholder of a specified foreign corporation (“SFC”) that is only treated as a CFC for limited purposes under Internal Revenue Code Section 965(e)(2). This is the seventh of a series of articles designed to provide a basic overview of the Internal Revenue Service (“IRS”) Form 5471. This article is designed to supplement the IRS’ instructions to Schedule P of IRS Form 5471. This article will go column by column and line by line through the attachment to Form 5471.Who…
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The IRS Has Deferred 2020 Income Tax Payments by 90 Days. What Happens in 90 Days?

The IRS Has Deferred 2020 Income Tax Payments by 90 Days. What Happens in 90 Days?

tax return
By Anthony Diosdi Treasury Secretary Steven Mnuchin recently announced that the Internal Revenue Service (“IRS”) is deferring income tax payments for the 2019 tax year by 90 days. Steven Mnuchin says that taxpayers will not be assessed interest and penalties on the late payments. According to Mnuchin, individuals can defer up to $1 million in federal taxes. Businesses can defer up to $10 million in federal taxes. The deferral is only available for tax payments. It does not permit the deferral of payroll taxes or estate and gift taxes. The announcement also does not impact estimated tax payment requirements. As of now, the income and corporate tax filing deadlines still have not pushed back. Although the announcement this is a step in the right direction. It does not go nearly…
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Advanced Strategies Available to Mitigate the Tax Consequences of GILTI Inclusions

Advanced Strategies Available to Mitigate the Tax Consequences of GILTI Inclusions

Tax Law
By Anthony Diosdi Introduction to the Global Intangible Low-Tax RegimeThe 2017 Tax Cuts and Jobs Act dramatically changed the way outbound international transactions are taxed. The Tax Cuts and Jobs Act retained the existing Subpart F tax regime, but it also created a new class of taxable income known as global intangible low-taxed income (”GILTI”). Internal Revenue Code Section 951 authorizes GILTI. GILTI was intended to impose a current year tax on income earned from intangible property that was subject to no or a low tax rate offshore. GILTI is defined as the residual of a controlled foreign corporations (CFC’s) income (excluding Subpart F income or income that is effectively connected with a U.S. trade or business, and certain other classes of income) above a 10 percent return on the…
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A District Court Determines that a Sole Beneficiary of a Foreign Trust is Subject to Only a 5 Percent Penalty for the Untimely Filing of IRS Form 3520 and Not the Usual 35 Percent Penalty

A District Court Determines that a Sole Beneficiary of a Foreign Trust is Subject to Only a 5 Percent Penalty for the Untimely Filing of IRS Form 3520 and Not the Usual 35 Percent Penalty

Tax Law
By Anthony Diosdi In a claim for refund action, the estate of Joseph Wilson (“Wilson”) sought the return of penalties assessed under Section 6048(b). See Wilson and Est. of Joseph A. Wilson v. United States, Dkt. No. 2:19-cv-05037 (E.D.N.Y. Nov. 18, 2019). Wilson established an overseas trust in 2003. Wilson named himself the grantor of the trust and was its sole owner and beneficiary. The singular purpose of the trust was to “place assets beyond the reach of his then wife, who he had reason to believe was preparing to file a divorce against him.” (Which she ultimately did do). Wilson funded the trust worth approximately $9 million in U.S. Treasury bills, accruing  annual interest approximately 5 percent.From the 2003 through 2007 calendar years, Wison filed “various income tax and…
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