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Fort Worth Tax Law Blog

Offshore holdings: Legitimate uses and reporting requirements

The global media has about exhausted the number of angles they can report on the so-called "Panama Papers." The leak has become synonymous with using offshore accounts and companies to avoid tax obligations.

Offshore accounts have been in and out of the news. The prosecution of Swiss bank giant UBS was a starting point. More recently, implementation of the Foreign Account Tax Compliance Act in the U.S. and progress on a Common Reporting Structure by the OECD have received coverage. Information is flowing more freely between countries making it much more difficult to hide offshore assets.

IRS notices: common questions on how to respond

Figuratively, to say that something is “legion” means it’s a very large number. Literally, the term refers back to ancient Rome, where a Roman legion contained thousands of soldiers, arranged into several smaller groups known as cohorts.

In the figurative sense, it would be far to say that IRS notices are legion – in the sense that there many types. In this post, we will address some common questions about responding to them.

How does the IRS find undisclosed foreign accounts?

One way is prosecuting banks that have allegedly helped taxpayers avoid their U.S. tax liabilities. For instance, the Swiss Bank Program required banks to pay hefty fines and disclose information on accounts held by U.S. persons as part of non-prosecution agreements.

Whistleblowers are another. Since 1867, the Treasury Secretary has had the authority to pay people who help the IRS detect tax underpayments. In 2006, Congress even mandated awards of 15 to 30 percent of "collected proceeds" to whistleblowers in certain cases.

Tax day FATCA update

April 15 has become synonymous with tax day in the United States. This year is a little different, because the Internal Revenue Service is celebrating Emancipation Day. Public employees in Washington D.C. get the day off or the closest day when the April 16th holiday falls on a weekend.

As we approach the upcoming U.S. tax filing deadline, we want to update readers on the Foreign Account Tax Compliance Act (FATCA). The IRS recently added three more countries to its list of those with automatic exchange relationships.

Expat tax anxiety: 3 things (among many) that make life difficult

Millions of U.S. taxpayers are scrambling this weekend to get their taxes filed. The filing deadline is April 18 in Texas and most of the rest of the country. (Taxpayers in two New England states get an extra day because of a holiday called Patriot Day.)

If you live abroad, or serve in the military overseas, you get a little extra time to file - until June 15. You don't even have to ask for an extension. But you still have to pay any taxes you owe by April 18.

In this post, we will take note of three things about taxes that make life difficult for Americans living or working abroad.

Personal versus business expenses: Lessons from Hamper v. Commissioner

The general rule is that personal expenses aren’t deductible on your taxes. But what if you use something partly for business and partly for your own purposes?

In this post, we will explore that question, taking note of a recent Tax Court decision that sheds light on it.

Owe taxes: Could your passport be seized at the border?

The best answer we can provide is probably not.

If you owe a significant tax debt, your passport could soon be in jeopardy. A provision in the FAST Act granted the Internal Revenue Service another tax collection tool: the ability to revoke, deny or limit passports.

The law requires the IRS to work with the Treasury and State Departments. The IRS will compile a list of taxpayers who it certifies have serious delinquent tax debt. The threshold appears to be $50,000, but includes interest and penalties.

Banking prosecutions expand to Cayman Islands

For the past decade U.S. government investigators have been ferreting out hidden financial accounts across the world. Much has been written about Department of Justice agreements with Swiss banks starting with UBS. Last year, the agency finalized the last of the non-prosecution agreements under the Swiss Bank Program that involved almost 80 banks.

Earlier this month, the DOJ announced two Cayman Island financial institutions - Cayman National Securities Ltd. And Cayman National Trust Co. Ltd. - pleaded guilty to helping U.S. taxpayers avoid their tax liabilities. Apparently, more than $130 million was hidden in offshore accounts.

As part of the plea agreement, CNS and CNT will turn over information on the all non-compliant U.S. taxpayers. The financial firms must also pay $6 million in penalties.

Criminal tax enforcement: What is the impact of IRS budget cuts?

One of the threads we’ve been following in this blog is the effect of IRS budget cuts on tax enforcement.

It’s widely known that the overall number of audits is down. But what about criminal investigations?

Nearly a year ago, we noted that despite the budget problems caused by a lack of Congressional funding, the number of criminal investigations actually seemed to be increasing. We wrote about that in our April 29 post last year.

What has happened in the last year? In this post, we will update on the story.

How does the foreign tax credit work?

A lot has been written about the Report of Foreign Bank and Financial Accounts (FBAR) disclosure requirements. The Internal Revenue Service has placed a lot of emphasis on offshore tax compliance. As more people realize they need to report foreign financial accounts, the number of these FBARs filed last year reached 1,163,229.

You may not have reported a foreign account or income in the past, because you thought paying tax on it in the foreign country was enough. But the U.S. taxes worldwide income. You may be able to avoid double taxation, however, by using the foreign tax credit.

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