Earlier this year, the IRS launched and joined the Joint Chiefs of Global Tax Enforcement, known as the “J5,” in an effort to crack down on international tax fraud, money laundering, and cryptocurrency-related crimes. The J5 includes agencies from the United Kingdom, Canada, Australia, and the Netherlands, along with the IRS. The initiative involves a stated effort to share information …
FBAR Penalty Update
The IRS recently succeeded in imposing a hefty penalty against a US taxpayer for failing to report a foreign bank account in the case of Norman v. United States, 183 Fed. Cl. 189 (2018). That penalty was equal to 50 percent of the balance of the taxpayer’s unreported foreign account at the time of the failure. As a brief background, …
New Changes Are Coming to Partnership Withholding
Section 13501 of the Tax Cuts and Jobs Act created a withholding requirement on the transfer of non-publicly traded partnership interests[1] by amending §§864(c) and 1446 of the Internal Revenue Code.[2] Section 864(c)(8) provides that gain or loss from the sale, exchange, or other disposition of a partnership interest by a nonresident alien or foreign corporation is effectively connected with …
The IRS Announces New “Compliance Campaigns:” Unreported Virtual Currency, S-Corporation Compliance, and International Tax Enforcement Are Top Priorities
The IRS recently announced five new “compliance campaigns”—areas where it intends to focus additional resources and enforcement efforts. It comes as no surprise that unreported virtual currency, S-corporation dividends, and international tax are at the core of its focus. The five compliance campaigns are: S-corporation Distributions Virtual Currency Restoration of AMT Credit Carryforwards Repatriation through Foreign Triangular Reorganizations Section …
Another FBAR Penalty Case Demonstrates the Perils of Failing to Report a Foreign Account
Yet another federal court has determined that the government-friendly, preponderance-of-the-evidence standard—rather than the higher, clear-and-convincing-evidence standard—applies in civil “willful” FBAR penalty cases. The district court’s decision in United States v. Garrity, No. 3:15-cv-00243 (D. Conn. April 3, 2018) comes on the heels of a taxpayer victory in Colliet on different grounds. See our prior blog for comments on Colliot: The Colliot …
The Colliot Decision: The Government Loses an FBAR Case that May Change International Reporting Penalties
A recent federal court decision may stand existing FBAR litigation on its head. The Colliot decision—issued out of the District Court for the Western District of Texas—offers a new take on “willful” FBAR penalties. And the government doesn’t like it. The defendant, Colliot, argued that the IRS acted “arbitrary and capriciously” in assessing penalties against him that exceeded those allowed under …
From Worldwide to Territorial, What Does It All Mean?
To understand the implications of the recent tax legislation and its reform of the international tax system, one first needs a grounding in basic U.S. international tax policies before delving into the major code changes. By understanding the origins of the system, we can see the policy behind the new provisions—and hopefully make them easier to digest. Citizenship – …
20/22 Vision – Tax Consequences for Puerto Rico
In 2012, Puerto Rico enacted two pieces of legislation to encourage and attract an infusion of foreign capital—Act 20 and Act 22. These two acts provide tax incentives for both individuals and businesses depending on their circumstances. Taxpayers looking for tax-saving opportunities should consider the benefits of these two acts, especially in relation to the U.S. tax system and recent …
The Section 965 Transition Tax
The Tax Cuts and Jobs Act of 2017 enacted a number of important tax-law changes. Few changes are more notable than those contained in the international tax provisions. Perhaps chief among the international tax changes was the Section 965 “transition” tax—a.k.a. the “deemed repatriation” tax. Section 965 generally requires that shareholders—as defined under section 951(b) of the I.R.C.—pay a “transition” tax …
Determining the Enforceability of a Section 6038A Summons
When is a section 6038A summons enforceable? The IRS must satisfy certain statutory and other requirements for a section 6038A summons to be enforceable. One approach to challenging a summons is to demonstrate that the IRS did not comply with the Powell requirements – requirements that take their name from the Supreme Court’s seminal case in United States v. Powell, …
