Posts Tagged ‘FATCA’

Tax Roundup, 3/28/14: Trusts beat IRS. And: Seven-bedroom poverty!

Friday, March 28th, 2014 by Joe Kristan

Trusts won big over the IRS yesterday.  The Tax Court ruled that trusts can “materially participate” in business activities.  Taxpayers who materially participate in an activity don’t have to pay the Obamacare net investment income tax on income from the activity.  I have a full writeup, Tax Court decision cuts 3.8% Obamacare Net Investment Income Tax for many trusts.  


20120912-1FATCA: giving the government more ways to shoot jaywalkers.

 We submit these comments in the hope that they will help lawmakers and the public understand that FATCA, while intended to catch tax evaders, is poised instead to impose serious and unjustified harms on people who live around the world as non-resident U.S. citizens and green card holders, as well as their family members and business associates.

After all, you have to shoot the jaywalkers so you can slap the real international tax evaders on the wrist.

Quoted text from “Submission to Finance Department on Implementation of FATCA in Canada” by Allison Christians and Arthur Cockfield, via the TaxProf.


William Perez, Tips for Same Sex Married Couples Filing Their Tax Returns.

Kay Bell, Donating and deducting gifts to current, past disaster victims

TaxGrrrl, Taxes From A To Z (2014): N Is For Name Change and Taxes From A To Z (2014): O Is For Overpayment

Steven Rosenthal, You Could Owe Capital Gains Taxes When You Spend Bitcoin (TaxVox)

Tax Trials, IRS Releases Guidance on Convertible Virtual Currency: Bitcoin Treated As Property for Federal Tax Purposes

Scott Schumacher, Does Equity Have a Role in Offers in Compromise? (Procedurally Taxing)


William McBride,New Study Finds U.S. Multinationals Pay Extremely High Effective Tax Rate. (Tax Policy Blog). Since Iowa corporate rates are the highest in the U.S., that makes us number 1 in the world, baby!

TaxProf, The IRS Scandal, Day 323

Tax Justice Blog, Tax Cuts Fall Flat in Idaho

False choice.  The Drive for Tax Reform: Hitting the Breaks or the Gas?  (Renu Zaretsky, TaxVox)

Career Corner.  The More Money Your Parents Made, the Less Likely You Are to Become an Accountant (Going Concern)


monk mountainIf all poverty were like this, monasteries would be more popular.  A Pennsylvania taxpayer is accused of trying the old “I’m a church” dodge.  From

Erik Von Kiel, formerly of Macungie, falsely told the federal government he was a minister with a Utah-based religious organization, and that he had renounced any interest in property or income, authorities said.

He did so while concealing his salary and assets, including a seven-bedroom Macungie home he bought with his wife in 2006 and later sold for $175,000, according to court documents.

Seven bedrooms?  Not bad for poverty.  Probably more accessible than many monastic residences, too.



Tax Roundup, 8/16/2013: Red light cameras, fleeing the country, and suing the IRS.

Friday, August 16th, 2013 by Joe Kristan

Clive red-light cameras to go live again Monday (Des Moines Register):

The cameras will be turned back on Monday at 12:01 a.m.

In addition to approving the contract the council signed off on language that sets in motion a plan for the program to be dismantled at the end of the current fiscal year, which is June 30, 2014.

After turning them off because they are obnoxious, the Clive city fathers are restarting them with a frank admission that they need the money this year.  So of course it’s about the money, just like in Des Moines, except Clive admits it.


TaxProf, IRS Hits Estate of Former Detroit Pistons Owner With $2 Billion Tax Bill.  “The estate tax bill alone — $1.9 billion — would represent more than one-tenth of the $13 billion collected through that tax nationwide in 2010, when taxes on most estates of those who died in 2009, like Davidson, were paid.”


passportMatthew Feeney on Renouncing U.S. Citizenship to Escape the IRS (

It’s astonishing that the American government would punish some of the world’s most patriotic people by making them choose between their citizenship and the headache that comes with trying to be compliant with awful laws like FATCA. The requirements imposed by FATCA on foreign financial institutions and the punishments that come with non-compliance mean that sometimes foreign banks don’t let Americans open accounts at all.

It’s only astonishing anymore if you haven’t figured out just how awful our political leadership is.


Your web guide to despair.  The IRS has taken live a new web page for Affordable Care Act Tax Provisions for Individuals and Families


Peter Reilly,  Charity Begins At Home But Cannot End There.

You have to wonder why more families don’t start exempt organizations.  Well, it may be because, as the PLR explains it does not work – for at least four different reasons…

Peter then provides the reasons, one by one.

Trish McIntire,  Documenting Donations


Tony Nitti, IRS (Finally) Consolidates All Late S Election Relief Into One Handy Revenue Procedure 

Kay Bell,  Turning financial failures into tax-saving successes

TaxProf, The IRS Scandal, Day 99

Robert D. Flach is ready with your Friday Buzz!


Phil Hodgen, I was in Philmont.  I plan to be there next year.


News you can use.   How to Blow a 1031 Exchange (Paul Neiffer):

The taxpayer indicated they had rolled the gain into other real estate costing about a $1 million and wondered how the rollover gain would affect the basis of their new real estate investment.  Many of you probably can guess what my next question was.  “Did you receive the cash and then buy the real estate?” To which, the taxpayer said “Yes, we received the cash, but we bought the real estate within 180 days of selling the land”.  

That doesn’t work, as Paul explains.


taxanalystslogoChristopher Bergin, Tax Analysts v. Internal Revenue Service (Tax Analysts Blog):

Here’s the background: On May 21, Tax Analysts sent a FOIA request to the IRS seeking all materials used since 2009 to train IRS personnel in the IRS exempt organizations determinations office in Cincinnati. I’m guessing that there is probably no one who doesn’t know that the IRS is currently under huge scrutiny for how it handles – or mishandles – applications for tax exempt status. This is not just a big story for Tax Analysts but for a lot of news organizations as well. We asked the IRS to expedite the process and it agreed, telling us that our request had “priority” and that it would “make every effort to respond as quickly as possible.” But on June 25, the IRS invoked a 10-day extension period, which extended the deadline to July 10. But in the same letter, the IRS also told us it wouldn’t be meeting that deadline either, and unilaterally extended the response date to August 9.

If the IRS has nothing to hide, it sure has a funny way of showing it.

Going Concern has more:  The IRS Is Being Difficult.  Caleb really, really wants to believe that nobody cares about IRS harassment of the Tea Party.  Yet stories like this keep coming up. 




Tax Roundup, 7/10/2012: A truly Rich expatriate; the tax effects of executive politics; just park it by the pole.

Tuesday, July 10th, 2012 by Joe Kristan

Lynnley Browning at Reuters reports that “Denise Rich Renounces U.S. Citizenship, Will Save Tens Of Millions In Tax Dollars,”  prompting millions to wonder, who is Denise Rich?  Celine Dion fans (I’ve never met one, but I know they are out there) will know her as the songwriter behind Celine’s “Love is On the Way,” but political junkies know her as the wife of Marc Rich, the former fugitive billionaire who stopped running when Denise pulled enough strings and spread enough cash around to get him a pardon at the end of the Clinton administration.

Her move prompted some folks to tell her not to let the door hit her on the way out, and perhaps anybody who enables Celine Dion deserves a little venom.  But we should ponder for a moment why money is fleeing the country like deposits fleeing a Greek bank.  Mark Steyn tells us why celebrating her departure is unseemly:

… all this “what sort of red-blooded American renounces her citizenship over tax?” stuff is a wee bit much. It is the Government of the United States, uniquely in the civilized world, that binds citizenship to tax. An American who falls in love with an Uzbek or takes a job helping starving Third World children in Southern Sudan remains liable for US taxation and has to file US paperwork that is, in fact, more onerous than that required of US residents, and is about to get more so…

Most countries tax you if you live within their borders, some tax you if you live elsewhere but earn money within their jurisdiction, but only America claims the right to tax you simply for being American – even if you, say, live in Belgium but drive over the border to work in Luxembourg every day. This is unique to the United States: Spain taxes you if you’re a resident of Spain, Slovenia taxes you if you’re a resident of Slovenia, but America taxes you if you’re an American who’s working as a teacher in Gabon. You’re at permanent risk of double-taxation, and the fines for minor and accidental infraction are arbitrary and confiscatory.

As I say, no other developed country does this – although Eritrea does.

On January 1st 2013, all this gets worse. The FATCAT act (technically, it’s FATCA, but we all get the acronymic message) makes it not worth a foreign bank’s while to do business with Americans. I don’t just mean Mitt Romney’s chums in the Cayman Islands, but an American of modest means on a two-year secondment to Hong Kong requiring a small checking account with which to pay local utility bills – or a small businessman attempting to expand his distribution in Canada.

IRS Commissioner Shulman’s shoot-the-jaywalkers approach to offshore tax compliance, combined with half-baked populist legislation against “the rich” that punishes Americans abroad and businesses for committing everyday finance, is quietly bleeding our economy with a thousand little cuts.  Fabulously-wealthy people like Denise Rich can take a hike, but most of us are stuck here.  We can berate her as “unpatriotic” for leaving, but when you get that $10,000 fine for being one-day late in reporting that bank account you inherited from Uncle Hans in the old country, she’ll have the last laugh.

The TaxProf has moreUpdate: Matt Welch on the Dark Side of Anti-”Swiss Bank Account” Politics”

But we can still move within the country:  Did a Maryland Tax Increase Cause Taxpayers to Flee the State?  (Russ Fox)

Nanette Byrnes: Study: Companies of Republican CEOs pay more tax than Democrats’ (Tax Break).  Why?  One theory is that Democratic CEOs would tend to be in industries that play the government for tax breaks, like low-income housing and renewable fuels, and that Democrats are more comfortable with politicians playing God with the economy.  Unfortunately, the desire  to meddle with the economy via tax breaks is one thing both parties can agree on.

But we knew that before it become official: It’s Official: Tax Gridlock Until After November Election (Janet Novack)

William Perez, Tax Reform Proposal from the Bipartisan Policy Center

Blaming the accountant: Rihanna Files Suit, Alleges Financial Mismanagement Resulted in Tax Audit (TaxGrrrl)

Anybody could lose track of $800,000 in singles.  Take this hard-working Ohio attorney described by

Sparta attorney Meredith “Larry” Lawrence will be sentenced in October on federal tax evasion charges for failing to report income from various sources – including Racers Gentleman’s Club in Sparta.

A jury found him guilty Friday on three counts of filing a false tax return for three consecutive years, starting in 2005.

Attorney by day, strip club operator by night?  “Gentlemen’s clubs” tend to be open late.  Maybe he was just sleep deprived?

During the two week trial, Assistant U.S. Attorney Elaine Leonhard described how federal agents found $800,000 in Lawrence’s safety deposit boxes.

She described how fees collected from women who stripped at the club would be stuffed in a white envelope and delivered to Lawrence once a week. Strippers were independent contractors required to pay “house fees” to dance at the club. The strippers even had to pay a parking fee.

“Parking fee?” Yes, the glamor has truly gone out of show business.


Another victory in Shulman’s war against international tax cheats!

Thursday, April 12th, 2012 by Joe Kristan

File:US Permanent Resident Card 2010-05-11.JPGThe IRS international tax compliance pogrom seems to work under the assumption that you need to terrorize the innocent to catch the guilty.  Phil Hodgen has an important story about how these efforts hound the innocent out of the country:

He has no U.S. tax exposure since he pays more in tax there than he would pay in the United States.  So he’s not doing this to save income tax.  This is the common assumption:  that people leave the USA to avoid paying tax.  My experience is quite the contrary.  This gent is typical.

His business takes him back and forth from Europe to the United States and it would be exceedingly valuable for him to remain a green card holder.  Yet today he sent in the forms to cancel it.

Wait.  If he’s not a tax cheat, what’s he afraid of?

The U.S. tax complexities would force him to lose an opportunity to participate in a startup business.  His tax situation is so anomalous compared to the other participants that he would either have to absorb enormous compliance costs himself, or be barred from participating in the business as too much trouble.

So there you have it.  A person who gets things done.  Who builds businesses.  He’s been pushed out of the USA because of U.S. tax compliance burdens.  Not U.S. tax.  U.S. paperwork.

Commissioner Shulman’s ham-handed enforcement of international tax rules, and the FATCA rules that only make it worse, will impose unintended, but easily foreseen, damage on the economy for years to come.


Your tax preparer needs to know about that place in Mexico

Friday, March 23rd, 2012 by Joe Kristan

Do the new rules on reporting foreign financial assets require you to report foreign-owned real estate?  Strictly speaking, no, reports Jack Townsend, but practically it often does.  He quotes the IRS web site on the issue:

Foreign real estate is not a specified foreign financial asset required to be reported on Form 8938.  For example, a personal residence or a rental property does not have to be reported. 

If the real estate is held through a foreign entity, such as a corporation, partnership, trust or estate, then the interest in the entity is a specified foreign financial asset that is reported on Form 8938, if the total value of all your specified foreign financial assets is greater than the reporting threshold that applies to you.

It’s the “corporation, partnership, trust or estate” language that gets you.  Many countries don’t allow direct foreign ownership of their real estate, but they do allow it through various entities.  Mexico, for example, requires a sort of trust for ownership of real estate.  You also have to report loans you have made to foreign persons, including real estate loans.  As the penalties for failure to report foreign financial assets on Form 8938 start at $10,000, even for inadvertent violations, you don’t want to miss the filing.

 Related: IRS lowers foreign financial asset filing thresholds; sets up new jaywalker-hunting blinds


Americans abroad become the lepers of international finance

Monday, March 12th, 2012 by Joe Kristan

The much-touted FATCA “crackdown” on offshore accounts has predictibly made life difficult for Americans working overseas. A testimony at Phillip Hodgen’s’ place:

I personally was denied banking services in the US soon after I established myself in Europe. I was unable to maintain a brokerage account and lost thousands in gains that I was not allowed to realize. The brokerage, Donaldson, Lufkin, Jeanrette closed my account without prior notice (the letter arrived weeks later). My banking relations for simple things like credit cards and checking account in the US (needed to pay student loans and other occasional purchases in the US) have been strained to say the least.
European banks told me to buzz off when I tried to open brokerage accounts… Now, despite my US nationality, the banks tell me to go to H every time I try to do anything.

Well done, Congress! Well done, Mr. President!
UPDATE: Robert W. Wood, Despite FATCA, FBAR Penalties Still Under Fire


Wall Street Journal coverage of the great IRS jaywalker hunt

Wednesday, January 4th, 2012 by Joe Kristan

The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements — to shoot the jaywalkers to encourage the others — has gotten the attention of the Wall Street Journal editorial page. From William McGurn:

At the end of the day, after all, the global economy is really about human beings interacting with one another, bettering themselves and enriching their societies as they do. From the Ohio contractor working in Baghdad to feed his family back home, to the American professor teaching in Hong Kong, to the Boston-bred banker working in London, these individuals are overwhelmingly productive and law-abiding. In an ever more competitive global marketplace, their presence provides a critical boost to American fortunes in key parts of the world.
So here’s a New Year’s resolution for the IRS and its allies inside the Beltway: Maybe it’s time we treated these Americans as economic assets instead of criminal liabilities.

Via the TaxProf
Related: IRS lowers foreign financial asset filing thresholds; sets up new jaywalker-hunting blinds


IRS lowers foreign financial asset filing thresholds; sets up new jaywalker-hunting blinds

Friday, December 16th, 2011 by Joe Kristan

Congress last year passed yet another poorly-considered foreign financial asset reporting requirement, one which largely overlaps — but doesn’t replace — existing reporting requirements. Yesterday the IRS issued the rules for complying with the “FATCA” requirements; the rules require reporting at lower amounts than those on their draft forms issued earlier this year.
The new rules (TD 9567) require the filing of new Form 8938 (not yet released in final form) at these threshholds:
Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 (was $100,000 on the draft Form 8938) at any time during the tax year.
Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 (was $200,000 on the draft 8938) at any time during the tax year.
Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 (was $100,000 on the draft Form 8938) at any time during the tax year.
The new form will apply to the the same foreign financial accounts covered by the old FBAR Form TD F 90-22.1 — which is still required — for account owners. It will also apply to a number of items that don’t have to be filed under the FBAR rules, including:
- Shares of a foreign company held directly and not through a broker. For example, many policyholders of Canadian insurer Sun Life received share certificates when the company demutualized. Unless the shares have been transferred to a broker, they are to be reported on Form 8938.
- Interests in foreign partnerships
- Loans to foreign persons.
So if you fronted some cash to Uncle Hans in the old country to help him finance his new strudel shop, you might have a reportable foreign financial asset.
The penalties for failure to file this form are stiff: $10,000 for filing the form even a single day late. If experience with other IRS foreign reporting rules is a guide, they will automatically assess this penalty if they think it applies, no questions asked.
The rules for reporting foreign accounts are a mish-mash of overlapping and confusing rules that do more to ensnare the unwary — to shoot the jaywalkers — than to catch international tax cheats. Many of the items reported on the 8938 are already on the FBAR form, or on Form 5471 or Form 8865 (though some information won’t have to be reported a second time). It’s too bad the IRS isn’t doing more to streamline the rules, eliminate duplication, and help people come into compliance. Instead, they are bent on hammering the inadvertent violators.
Additional information:
Press release, IRS Releases Guidance on Foreign Financial Asset Reporting
Do I need to file Form 8938, “Statement of Specified Foreign Financial Assets”?


Making friends through intimidation

Wednesday, October 26th, 2011 by Joe Kristan

The IRS war on foreign bank accounts isn’t going over well in the Great White North, reports Robert W. Wood at Between the intrusive “FATCA” legislation extending U.S. reporting requirements to foreign banks and the terrorizing of Canada residents with FBAR penalties, we aren’t making friends:

Canadian government ministers, banks, press and citizens have joined the chorus to drum FATCA out of town, doing their part to send it packing. Canadian Federal Minister of Finance Jim Flaherty wrote U.S. newspapers with Canada


Canada: IRS, you aren’t the boss of me

Tuesday, September 20th, 2011 by Joe Kristan

Canada reminds Congress and the IRS that they actually don’t run other countries.