tax law Archives | Page 25 of 30

24Sep 2019 by Anthony Diosdi

Bringing a Case Before the United States Tax Court A to Z Part III. How to Proceed with a Tax Court Trial

Tax Law

By Anthony Diosdi Although the vast majority of cases brought before the Tax Court are settled, some cases proceed to trial. If you are considering bringing a case to trial before the Tax Court, it is important to be familiar with the order in which a trial proceeds. Although no rigid format applies in every case, a basic framework has evolved within which a trial will be conducted. This framework is subject to change depending on the preference of the presiding judge. In my experience, a significant number of individuals do not take their trials before the Tax Court seriously. Many individuals believe the IRS has the burden of proof in Tax Court cases so they do not properly prepare for trial. Others, believe that Tax Court controversies rarely proceed…

24Sep 2019 by Anthony Diosdi

Bringing a Case Before the United States Tax Court A to Z. Part 1. What is the Significance of Receiving a Notice of Deficiency From the IRS?

Tax Law

By Anthony Diosdi The Internal Revenue Service (“IRS”) audits thousands of tax returns every year. At the conclusion of these tax audits, on many occasions, the IRS proposes to assess additional tax liabilities against the individual who was subject to the audit. Many times the tax adjustments proposed during an audit is wrong. This article will discuss step-by-step how to contest an IRS audit before the United States Tax Court.Although there are exceptions to this rule, anyone considering disputing an audit result in Tax Court must wait until they are issued a notice of deficiency by the IRS. A notice of deficiency states the tax liability they believe a taxpayer owes as the result of an audit. As a general rule, the IRS cannot legally collect a tax liability proposed…

24Sep 2019 by Anthony Diosdi

How is the Branch Profits Tax Calculated?

Tax Law

By Anthony Diosdi By introducing the U.S. branch profits tax, Congress substantially reduced the desirability of a foreign corporation as the vehicle for operating a U.S. trade or business. Previously, foreign corporations often were the vehicle of choice for U.S. investments, since (as now), use of a properly established and maintained foreign corporation generally avoided U.S. estate tax issues, and dividends often could be repatriated free of U.S. withholding tax. Withholding tax on dividends from a foreign corporation applied only if earnings and profits from U.S. trade or business were greater than 50 percent of worldwide earnings and profits, and then only a proportionate amount of the dividend suffered the withholding tax. U.S. income tax treaties with intermediary countries offered the possibility of repatriation of earnings totally free of second-tier…

24Sep 2019 by Anthony Diosdi

Disagree with an IRS Audit- Here Are Your Options

Tax Law

By Anthony Diosdi The Internal Revenue Service (“IRS”) audits thousands of tax returns every year and often proposes to assess significant additional tax liabilities against hardworking taxpayers. If you have been assessed an additional tax liability through an audit, you should understand that the IRS auditor is not always correct and you have options. First, you can administratively appeal (within the IRS) the determination of the auditor. If an appeal of the audit is not successful or you simply do not wish to deal with the IRS anymore, if your facts and circumstances warrant, you can take the IRS to court and ask the court to reverse the auditor’s determination. Litigating a tax controversy in court will present a number of important decisions prior to going to court. One of…

23Sep 2019 by Anthony Diosdi

Possible Waiver for 2018 Failure to Meet Estimated Tax Obligations

Tax Law

When the Tax Cuts and Jobs Act (TCJA) went into effect in 2018, it caused many tax-related changes for businesses, including changes regarding tax withholdings. The result was many companies that failed to withhold enough to cover their end-of-the-year tax obligations. Generally, if a company fails to cover 90 percent or more of their estimated tax, it can face serious penalties from the Internal Revenue Service (IRS). While the IRS emphasizes the importance of accurately estimating taxes, it understands that obligations can vary from year to year, and the agency provides a 10 percent leeway without penalties. A larger discrepancy can result in tax compliance issues and fines. The TCJA, however, caused problems for many taxpayers when it came to matching their withholdings to their newly calculated tax obligations. Because…

20Sep 2019 by Anthony Diosdi

What Happens if You Are a Criminal Tax Defendant and Receive a Summons to Appear Before a District Court

Tax Law

By Anthony Diosdi Every year, the federal government prosecutes thousands of individuals for tax crimes such as tax evasion or willfully filing false or fraudulent tax returns. Although criminal tax investigations typically begin with the IRS, the United States Attorney will make the final decision whether or not to criminally prosecute a defendant. If a decision is made to prosecute an individual for tax crime, the United States Attorney must obtain an indictment for a tax crime by a grand jury. A grand jury may issue an indictment for a tax crime if it finds, based upon the evidence that has been presented to it, there is probable cause to believe that a crime has been committed and the individual accused of the crime committed it. Once a criminal tax…

20Sep 2019 by Anthony Diosdi

The IRS Offers Settlements for Owners of Micro-Captives Insurance Companies

Gift Tax

By Anthony Diosdi Once upon a time, there was a type of insurance company known as a micro-captive insurance company. The use of micro-captive insurance companies were a very effective vehicle for transferring wealth out of an operating business so that wealth was not trapped and exposed to higher taxation by the IRS. By paying premiums to a micro-captive insurance company, wealth was effectively transferred out of the operating business and into the captive. The premiums of the policies were paid with pre-tax dollars by the business. Because micro-captive insurance companies had the benefit of being able to accrue reserves tax-free and other tax advantages available only to insurance companies, micro-captive insurance companies offered huge tax benefits. For example, Internal Revenue Code Section 831(b) permitted micro-captive insurance companies to claim…

19Sep 2019 by Anthony Diosdi

Entity Planning Post 2017 Tax Cuts and Jobs Act for Doing Business Outside the United States

Tax Law

By Anthony Diosdi The Tax Cuts and Jobs Act of 2017 dramatically changed the way U.S. businesses plan outbound foreign investments. This article will compare and contrast the different entities available for outbound tax planning. Prior to the enactment of the 2017 Tax Cuts and Jobs Act, U.S. taxpayers had two main entity choices when engaging in outbound foreign tax planning: flow through structures (i.e., disregarded entities or partnerships) and corporate structures. Each had its relative costs and benefits.A. Tax Entities Used in Outbound Foreign Tax Planning Prior to the Enactment of the 2017 Tax Cuts and Jobs Act1. Flow Through EntitiesIndividuals that utilized flow through entities in outbound tax planning were subject to one layer of taxation. The flow through entities provided for one level of tax at a…

13Sep 2019 by Anthony Diosdi

Yes- You Can be Taxed at the Lower Federal C Corporation Rates on Foreign Source Income Without Incorporating or Being Subject to Two Layers of Tax

Tax Law

By Anthony Diosdi Internal Revenue Code Section 962 allows a U.S. individual taxpayer that holds shares of a controlled foreign corporations (“CFC”) to elect to be taxed as a subchapter C corporation. This election is applicable to inclusions of subpart F income as defined under Internal Revenue Code Section 951(a) and Section 951A, the global intangible low-taxed income (“GILTI”) tax regime.In 1962, Congress enacted the subpart F provisions of the Internal Revenue Code. At the time subpart F was enacted, the highest individual tax bracket was 91 percent and the highest corporate rate was 52 percent. Concerned of the impact subpart F income will have on individual taxpayers, Congress provided individual taxpayers with a way to reduce their tax liability on subpart F income through Internal Revenue Code Section 962.…

10Sep 2019 by Anthony Diosdi

When Can a Foreign Tax Credit be Claimed? Part II. The Changes GILTI Made in the Way Foreign Tax Credits are Calculated

Tax Law

By Anthony Diosdi U.S. taxpayers are generally subject to U.S. tax on their worldwide income, but may be provided a tax credit for foreign income taxes paid or accrued. Recently, the Global Intangible Low-Taxed Income (“GILTI”) made some made changes to the way foreign tax credits are computed. This article discusses the changes in the way foreign tax credits are computed under the GILTI regime.Because the United States taxes U.S. persons on their worldwide income, a system of foreign tax credits was enacted in 1918. Foreign tax credits were enacted to prevent U.S. taxpayers from being taxed on their foreign-source income by both the foreign country where the foreign source income was earned and by the United States. Foreign tax credits allow U.S. taxpayers to reduce U.S. income tax on…