Is it Possible to Obtain a Refund of the OVDP Offshore Penalty

Is it Possible to Obtain a Refund of the OVDP Offshore Penalty

Tax Law
By Anthony Diosdi Since the Internal Revenue Service (“IRS”) has launched the initial Offshore Voluntary Disclosure Program (“OVDP”) in 2009, more than 56,000 people have disclosed their foreign financial accounts to the IRS. At last count, the IRS has collected over $10 billion dollars in tax, interest, and penalties from various targeted offshore voluntary disclosure programs.The OVDP is a subset of the IRS Criminal Investigation Division’s longstanding Voluntary Disclosure Practice. The Voluntary Disclosure Practice is a longstanding practice of IRS Criminal Investigation (“CI”) whereby CI takes timely, accurate, and complete voluntary disclosures into account in deciding whether to recommend to the Department of Justice that a taxpayer be criminally prosecuted. It enables noncompliant taxpayers to resolve their tax liabilities and minimize their chance of criminal prosecution. When a taxpayer truthfully,…
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Criminal Tax Charges and Penalties

Criminal Tax Charges and Penalties

Tax Law
While you may hear about celebrities and high-profile businesspeople facing tax difficulties, did you know that thousands of people face tax-related criminal charges each year? Many of those defendants are convicted and even incarcerated as a result. While civil penalties are more common from IRS investigations, it is possible to face criminal charges, and you need to contact a San Francisco tax lawyer immediately if you are under investigation. Because tax laws are all federal, the criminal charges for violating those laws will be brought in federal criminal court. The following are some of the possible criminal tax charges and penalties under federal law. Failing to File a Return - This is a misdemeanor charge that alleges you intended to not file your tax return. Civil penalties are more common…
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The Tax Deferral Afforded by an Interest-Charge DISC should be Considered by any Export Company

The Tax Deferral Afforded by an Interest-Charge DISC should be Considered by any Export Company

Tax Law
By Anthony Diosdi Would you like to defer the payment of income tax on a substantial portion of your export profits? An Interest-Charge Domestic International Sales Corporation (“IC DISC”) may be the answer.An IC DISC is a domestic corporation which affords the shareholder the ability to defer income taxes on a significant portion of the income attributable to qualified export sales of $10 million or less, provided the IC DISC meets strict qualifying requirements. The “cost” of obtaining this deferral is the payment of interest annually at approximately Treasury Bill rates on the shareholder’s deferred tax liability i.e., on the tax due as if the accumulated income were distributed. Thus, instead of paying tax on these profits, you are instead paying interest and, even then, at attractive rates with the…
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Working Outside the United States? You Can Potentially Exclude $105,900 from Federal Income Taxation

Working Outside the United States? You Can Potentially Exclude $105,900 from Federal Income Taxation

Tax Law
By Anthony Diosdi If you work and earn money outside the United States, Internal Revenue Code Section 911 may permit you to exclude $105,900 of foreign source income from federal income taxation. The purpose of Internal Revenue Code Section 911 is to mitigate the tax and other economic burdens on U.S. persons working abroad by providing for an exclusion from U.S. of up to a specified amount of foreign earned income and housing costs. Internal Revenue Code Section 911(a)(1) permits a U.S. citizen or U.S. residents (with limitations) who has his or her “tax home” in a foreign country and who meets either of two foreign residence-based eligibility requirements to elect to exclude income from federal income taxation. The amount that can be excluded is up to a stipulated amount…
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The Deductibility Fines and Penalties Has Gotten Easier Thanks to the First Circuit Court of Appeals

The Deductibility Fines and Penalties Has Gotten Easier Thanks to the First Circuit Court of Appeals

Tax Law
By Anthony Diosdi Recently, I was asked if a penalty or fine assessed by a municipality is deductible for federal income tax purposes. At first glance this appears to be an easy question to answer. The Internal Revenue Code says that no deduction can be taken for any fine or similar penalty paid to a government for the violation of the law. This may sound straightforward, that is, until you read the Income Tax Regulations and case law. The Income Tax Regulations unequivocally states that compensatory damages paid to a federal or state government does not constitute a fine or penalty. (Compensatory damages is money awarded to a government for damages, injuries, or another incurred loss). Penalties which are used for remediation purposes may also be deductible for income tax…
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Are Prosecutors Making a Mistake by Prosecuting Lori Loughlin For Honest Services Wire Fraud?

Are Prosecutors Making a Mistake by Prosecuting Lori Loughlin For Honest Services Wire Fraud?

Tax Law
By Anthony Diosdi Actress Lori Loughlin has been indicted on fraud and money laundering charges by a federal grand jury for their alleged roles in a college admission scandal. Federal prosecutors ultimately filed a superseding indictment against Loughlin alleging that she conspired to commit mail and wire fraud, honest services mail and wire fraud, and money laundering. According to the indictment Loughlin knowingly laundered bribes through charities and corporations set up by William “Rick” Singer, from outside the United States, for the purpose of promoting a fraudulent scheme. In particular, prosecutors allege that Loughlin paid Singer approximately $500,000 to get her daughters admitted to University of Southern California (“USC”) as crew recruits, even though neither daughter had previously rowed as crew. Prosecutors claim that Loughlin made payments to Key Worldwide…
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Can Non-U.S. Citizens Elect to be Taxed as an “S” Corporation?

Can Non-U.S. Citizens Elect to be Taxed as an “S” Corporation?

Tax Law
By Anthony Diosdi As part of the complex U.S. tax law, certain domestic corporations can make an election to be taxed as an “S” corporation. An “S” corporation is only permitted to have certain types of shareholders which are generally limited to individuals who are U.S. persons and certain trusts and estates. The result is that the corporation is not subject to income tax, but its taxable income is instead taxed directly to shareholders. In the case of a “C” corporation, the corporation is subject to income tax but there is a second tax at the individual level upon the receipt of corporate dividends.Among the technical requirements of an “S” corporation is that such corporation cannot have a nonresident alien as a shareholder. Unfortunately, many tax practitioners who may not…
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The Potential Adverse Consequences Associated with the Transfer of Property to Foreign Entities by U.S. Persons

The Potential Adverse Consequences Associated with the Transfer of Property to Foreign Entities by U.S. Persons

Tax Law
By Anthony Diosdi Over the past couple of decades, there have been substantial changes to the U.S. tax law which can adversely affect any U.S. citizen, U.S. income tax resident alien, or domestic corporation, partnership, estate, or trust (hereinafter “U.S. Person”) that transfers assets to a foreign entity such as a foreign corporation, a foreign partnership, or a foreign trust. This article will briefly describe the U.S. tax consequences that could result from such transfers and the forms that must be filed with the Internal Revenue Service (“IRS”) as a result of such transfers. This article will also discuss the potential reporting consequences of such transfers. General Rules of TaxationIn general, contributions to a corporation, transfers to “controlled” corporations, certain reorganizations, and contributions to partnerships are tax-free events for federal…
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How Long Can the IRS Audit Your Tax Return?

How Long Can the IRS Audit Your Tax Return?

tax return
Many people are concerned about a possible IRS audit, as anyone can be audited, even without suspicions of misconduct. How long do you have to worry about a particular return being audited? It depends on the situation, and the following are some timelines for IRS audits. If you receive notice of an audit, you should immediately contact an experienced tax lawyer in San Francisco. Three years - Generally speaking, the IRS has three years from the due date of your returns to begin an audit. However, there are many exceptions to the three-year rule. Six years - If the IRS believes that your returns included at least a 25 percent understatement of income, it has six years to conduct the audit of those specific returns. For example, if you earned…
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The Perils of a Foreign Individual Transferring U.S. Real Property for No Value

The Perils of a Foreign Individual Transferring U.S. Real Property for No Value

Tax Law
By Anthony Diosdi When a U.S. estate and gift tax nonresident domiciliary (“Foreign Individual”) gratuitously transfers U.S. real estate to another individual, he or she should be aware of the various U.S. gift and estate tax consequences associated with such a transfer. In addition, the Foreign Individual should also make his or her U.S. legal advisor aware of his or her ultimate goal when transferring such U.S. real property.The example which follows comes from our previous experiences and demonstrates a situation in which a Foreign Individual transfers “or gifts” to another individual U.S. real property without intending to make it a gift for U.S. transfer tax purposes. Transfers of real estate are often made by an elderly and/or sick Foreign Individual who was thinking in terms of avoiding potentially costly…
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