Entries Tagged 'IRS' ↓

A Federal judge has issued an order allowing the IRS to proceed against UBS AG, in their never-ending quest to find tax evaders.

U.S. people with undisclosed Swiss bank accounts?  The bell tolls for thee. *

*Kinda ironic that the quote comes from John Donne’s poem that starts “No man is an island” when people think they can hide money in palm-fronded island paradises.

For those of you who have U.S. passports (or have permanent residency status AKA “green cards”), leaving the country just became a little more expensive.

We now have an exit tax–new Section 877A of the Internal Revenue Code.

The new law was signed on June 17, 2008. I’ll get a “plain English” explanation shortly. In the meantime, feel free to print off and read the Joint Committee on Taxation’s explanation. (Warning: massive PDF). The discussion you want to read starts on page 36.

The exit tax will raise an estimated $411 million in tax over the next 11 years, they think. (Sorry, the source is in Tax Notes Today, locked inside Lexis-Nexis. 2008 TNT 118-2 is the cite, if you want it. I couldn’t find the source of the estimate, which apparently was a Baucus/Grassley press release).

Comment #1: good luck with that.

Comment #2: peanuts, really.

The exit tax rules (new Internal Revenue Code Section 877A) are buried in a special law aimed at giving tax relief to people serving in the Armed Services.

Comment: this is a classic example of “for the children” politics.

June 30 is the deadline to file your annual “show and tell” about all the offshore bank accounts over which you have signature authority.  The IRS used a quaint 20th Century device called a “press release” to remind you about filing your disclosure form.

Form TD F 90-22.1 is what you use.  (Warning:   PDF).

The IRS FAQ about reporting foreign bank accounts is useful.  Read it if you have questions.

A bit of advice:  if you MIGHT be someone who has to file this form, and you get a brainstorm with a staggeringly clever trick so you don’t “technically” have to file–check your clever idea by talking to someone whose brain is not infected with your thinking.  :-)

Every so often I get people wandering into my office to talk about offshore trusts, estate planning, and saving tax. Some of them utter the following phrase, “Well, how would the government ever know that I have money offshore?”

I tell them that if they plan to lie about their taxes why should they spend a gob of money on legal fees? I tell them the cheapest tax shelter is to just lie. They just sort of look at me blankly or do a nervous giggle. Then they go away and I never hear from them again.

Yet another example of how secrecy fails

The latest warning is floating through the interwebs right now.

I came across it on my favorite website. It is the story of Bank Julius Baer, a disgruntled former employee, and a bunch of Southern California litigators who, well, let’s just say they seem to be pursuing the impossible.

The lawyers seem to be attempting to erase information from the internet, an action that triggers the Streisand Effect and is about as feasible as trying to take the pee out of the pool. I’m guessing that they see that now.

In the middle of this giant moronathon are a bunch of normal rich folks whose names are now spread all over the web. These are people just like our customers. (I refuse to use the word “client” because I think it smacks of lawyer ego, self-generated arrogance, and clubbiness. They are customers. We’re a business. Get over it.)

The 30 second overview

Here’s the Slashdot article about the whole mess. From here you can follow all sorts of links to information and documents. Read the comments, too. The comments are the reason Slashdot is so much fun.

There’s a website, www.wikileaks.org, that acts as a whistleblower resource.

In early 2008 it received and posted a load of documents from a whistleblower and former employee of Bank Julius Baer. The story can be found at endless links in the Slashdot article, or here.

I don’t know (and I don’t care) about the details of the case. I don’t care who is right and who is wrong. The point I want to make is directed to the kind of people that I work with.

Secrecy fails

That’s my point.

The Bank’s customers have their names splayed all over creation via the interwebs. It was trivial for me to download the documents from one of the hundreds of mirror sites that have this information. I looked at it. Hey! It’s fun! You can do it too.

Does Bank Julius Baer deserve the accusations thrown at it? I don’t know. I don’t care. The only thing to take away from this little escapade is that there may be confidentiality, but there is no secrecy.

Ask not for whom the whistleblower leaks. He leaks for you.

Life is too short to convert a money problem (paying taxes) into a jail problem.

Every year, the IRS publishes a Priority Guidance Plan. It lists the subject matters in which they plan to publish tax regulations and other administrative guidance during the year.

This year shows an impressively ambitious group of topics in the international tax arena. Here is the list, as published by the IRS:

A. Subpart F/Deferral

# Regulations on the allocation of subpart F income.
# Regulations under section 959 on previously taxed earnings and profits.
# Guidance on the PFIC provisions.

B. Inbound Transactions

# Guidance on cross-border pension distributions.
# Guidance under section 1441.
# Guidance on securities lending.
# Guidance on the treatment of certain financial products for withholding purposes.
# Regulations under section 1446.
# Regulations relating to the reporting of bank deposit interest.

C. Outbound Transactions

# Guidance on international restructurings.
# Guidance follow-up to Notice 2003-46.

D. Foreign Tax Credits

# Regulations on the allocation of foreign taxes under section 901.
# Regulations under sections 902 and 904.
# Regulations on look-through treatment for 10/50 company dividends (see Notice 2003-5).
# Regulations on the change of taxable year and foreign tax credits.

E. Transfer Pricing

# Regulations on the treatment of cross-border services.
# Regulations on cost sharing under section 482.
# Guidance on the APA process (Rev. Proc. 96-53).
# Regulations on global dealing.

F. Sourcing and Expense Allocation

# Guidance on interest expense apportionment.
# Regulations on the allocation and apportionment of charitable contributions.
# Regulations relating to the treatment of fringe benefits.
# Guidance on the source of payments for cross-border use of property.
# Regulations under sections 863(d) and (e).

G. Treaties

# Treaty guidance on the determination of residence for dual resident companies.
# Treaty guidance under the independent services article for nonresident partners.
# Guidance on the procedures for claiming treaty waiver of insurance excise tax.
# Guidance on reporting for Canadian RRSPs and other plans.

H. Other

# Guidance on the definition of “qualified foreign corporation” for purposes of taxation of dividends received by individuals.
# Regulations under section 269B.
# Guidance on cross-border insurance issues.
# Guidance on possessions issues.
# Regulations concerning the treatment of currency gain or loss.
# Regulations under section 1503(d).