Expatriates Renouncing Citizenship

Posted on October 10, 2013 by Kursti Nakagawa

In the face of increasingly strict asset disclosure legislation, more and more United States citizens are renouncing their citizenship in order to avoid potential tax consequences. In the second quarter of this year, the number of expatriates turning in their passports to United States embassies abroad was up almost 500% from that same time period the previous year. Compared to the first half of 2008, the number of renunciations in the first half of 2013 was up over 15 times!

The United States is the only county of the 34 members of the Organization for Economic Development that taxes its citizens no matter where they reside. Although this has been the case for quite some time, the government’s fairly recent crackdown on the reporting of foreign assets and income has made more and more Americans aware of their tax reporting responsibilities. As a result, an increasing number of the 6 million plus individuals residing aboard are apparently deciding that holding their United States citizenship is not worth the financial consequences that come with it.

The campaign to identify and tax the foreign income of United States citizens has slowly gathered force since the terrorist attacks in 2001. Foreign income reporting legislation has been on the books since 1970 when the Bank Secrecy Act of 1970 was passed, requiring the filing if an annual Report of Foreign Bank and Financial Accounts (FBAR). However, the reporting rate has historically been very low and, until recently, little was done to force compliance. All this is has change over the past few years. The government has not only stepped up its efforts to enforce the existing tax laws but has passed new legislation to supplement what was already there.

The most significant development in the area of foreign tax compliance has been the passage of the Foreign Account Tax Compliance Act (FATCA) in March of 2010. This legislation increases the disclosure requirements for United States citizens who have money in overseas accounts and for the banks that hold those accounts. Basically, FATCA requires individuals who have more than $50,000 in foreign assets to report those asserts on Form 8038. It also requires foreign banks to disclose information about their U.S. account holders or face stiff penalties for not doing so. Although the enforcement of FATCA has been postponed until July of 2014, apparently the hassle of increased compliance requirements together with the threat of steeper consequences for noncompliance has caused more and more individuals to think twice about the value of their United States citizenship.

If you have questions about the taxation and reporting of foreign assets or income, the CPAs, Enrolled Agents and Tax Attorneys at Professional Tax Resolution can provide you with the answers you are looking for. Our tax specialists have extensive experience in the area of FBAR reporting and are up to date on the current requirements for FATCA compliance. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527 to receive a free, no obligation consultation.

Beanie Babies Creator Admits Tax Evasion

Posted on September 26, 2013 by Kursti Nakagawa

Beanie Babies Creator Admits to Tax Evasion

The creator of Beanie Babies, Ty Warner, has been accused of tax evasion due to the non-reporting of income earned on funds held in a secret Swiss bank account. Mr. Warner failed to report $3.2 million in income on an account which held as much as $93.6 million in assets. He will be assessed over $50 million in penalties for his oversight.

U.S. attorney Gay Shapiro said that Warner, 69, will plead guilty in federal court to dishonestly recording his 2002 income as $49.1 million, overlooking money he made on his UBS account. His plea will take place on October 2^nd. Once his plea is entered, he will be required to pay a civil penalty of $53.6 million for failing to file the required Report of Foreign Bank and Financial Accounts.

In 1996, Warner opened a secret account at UBS. Then, in December of 2002, he transferred $93.6 million to an alternate secret Swiss account. He was able to cover his involvement with this account by holding it under an entity called the Molani Foundation. However, because he failed to report his UBS income of $3.2 million to his outside accountants, the tax return he filed for 2002 was false.

In 2009, Warner tried to avoid prosecution for tax evasion through an amnesty program set up by the Internal Revenue Service known as the Offshore Voluntary Disclosure Program. However, he was denied entry.

Warner founded Ty Incorporated in 1985. The company took off after he created Beanie Baby toys in the 1990’s. Despite the current proceedings, Ty Incorporated is now a $4.5 billion business and Warner has donated almost $140 million in cash to charities and other organizations. Mr. Warner also owns the Four Seasons Hotel in New York, the San Ysidro Ranch in Santa Barbara, and the Las Ventanas al Paraiso in Los Cabos, Mexico.

If you have questions about FBAR reporting, the Offshore Voluntary Disclosure Program or other issues concerning the taxation of foreign income, our tax settlement professionals are happy to answer them free of charge. Visit us today at www.professionaltaxresolution.com or call us at 877.889.6527 for more information about our full range of tax settlement services. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law as it applies to the reporting and taxation of both foreign and domestic income.

The Argument Against Tax Deductions

Posted on June 17, 2013 by Kursti Nakagawa

Tax Day

A current survey after the 2012 United States tax season showed that a majority of taxpayers were in favor of a tax system where everyone pays the same percentage of their income in taxes. Think about it: After another stressful tax season, in which, decent and fair Americans rush to get all of their information together and out of the door by mid-April, it seems that these taxpayers would like to trade their system in for a more efficient and easy system. How would this work?

The United States tax law is currently 72,000 pages. It is a complicated and always evolving system. One of main factors of the confusion for the taxpayers is all of the deductions and exemptions and tax codes. For this reason alone, our country has 1.2 million tax preparers to assist the people with their taxes.

Let’s look at Schedule A itemized deductions, many experts believe that these items appear as though they are created to aid the wealthier people in society. For example, in 2010 the IRS reported that itemized deductions totaled $1.2 trillion dollars. A staggering number to imagine, in comparison to the total nationwide adjusted gross incomes of $8.1 trillion! If one breaks the itemized deductions down here is the order: Taxes (state, local, and real estate) at $445 billion, interest totaling $414 billion, and then charitable deductions at $170 billion.

When one looks at these numbers they wonder the logic behind these deductions. Would people still contribute to charities if these itemized deductions were not allowed? Is this donating “saving the world?” Where are these donations going exactly? Many analysts have researched that only 10 percent of charities are out there that actually assist people who are actually in need of help. It seems that only another 10 percent went to actually went to education and health combined. Where are the donations going?

It seems as though the wealthy donate less of money to basic needs charities and more of it to the arts and universities. It also seems as though this systems favors the richer individuals. Another investigation showed that most of the people who get the large write offs from their charitable donations are not spending their money on donations that would actually benefit most people. In fact it seems their donations only benefit a specialized few, such as certain schools, colleges, and universities. It seems Colombia University received the second biggest single donation. Two other big donations included the Metropolitan Museum of Art and the Central Park Conservancy.

As implied it seems that those citizens of Manhattan seem to largely benefit from the tax deduction. In fact, New York itself had 40 percent of the 50 million dollar plus donations of 2012. However, if you live in rural North America you may be out of luck!

The schedule A deductions is just one example of how the wealthy can benefit and tweak the tax system. Some experts have the opinion that the tax codes, deductions, and exemptions needs to be simplified not only to make tax day easier, but to make it more fair.

If you have tax questions or a tax debt you are unable to pay, our tax settlement professionals are happy to discuss your tax resolution options free of charge. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

For more information about our tax debt resolution services, visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

How To Endure An Audit

Posted on May 6, 2013 by Kursti Nakagawa

Tax season has come to an end and now audit season is about to commence. People always fear that they will be audited, but in reality the chance of being audited is fairly low. About 1 out of 100 people are actually audited. Read below on how to endure an audit.

However, if you do happen to be one of the unlucky people, here are a few easy steps to take to make the process go smoothly:

Don’t Ignore Mail From the IRS – Although it may be frightening, it is always best to open mail from the IRS. It is best to face the problem head on and resolve the issue. You are usually given about 30 days to respond to the letter. Keep in mind that if you ignore such information, the IRS will simply keep adding penalties to the amount owed.

Contact a Tax Professional – You will want to a hire a tax professional to represent you and to communicate directly with the IRS on your behalf. Tax law is very complicated so, in the case of an audit, it is important to hire a licensed CPA or other tax professional that specializes in IRS audit defense representation. It is important to keep your tax preparer up to date on everything as well.

Get All Records and Documentation in Order- Find out what part of your tax return is in question and gather all of the necessary paperwork. All tax documents should be kept for three years but, if you are missing a file, you can always get a copy. If you have lost a receipt, you can usually get a duplicate copy depending on the type of business that issued it. For example, doctor’s offices and charity services usually keep good records and will be able to supply you with a copy of your receipt.

Remain Calm – One of the best pieces of advice for handling an audit is to be polite and respectful to your assigned IRS agent. It is never helpful to begin an audit by being rude and difficult. The process will be much smoother if you approach it with the assumption that the IRS agent is simply doing their job. Also, no matter what you do, do not hide or cover anything up. It also will serve you well to be upfront and honest.

Tax returns are selected for audit in a variety of different ways including random sampling. If your return is selected for an audit, it is important not to panic and to realize that many IRS audits can result in the acceptance of a return without change or perhaps even a refund when they are handled properly. When faced with an IRS audit, selecting a qualified Certified Public Accountant to provide IRS audit defense is well worth the investment.

For more information about our tax debt resolution services, visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation

4 Tax Surprises and How to Handle Them!

Posted on March 13, 2013 by Kursti Nakagawa

4 Surprise Taxes and How To Handle Them!

One thing is certain besides taxes….you probably will want to stay on IRS’s good side! Here are some common items you may come upon this tax season. These are a few terrible tax surprises and how to handle them!

Alimony Collected

Now that you made it through the divorce you will also have to accept the fact that the IRS is going to take some of your alimony.

It is important to know that alimony is completely taxable. Alimony and other similar payments of the type from your former spouse are taxable the year that you receive them. Child support money on the other hand is not taxable.

It is important to make your IRS payments on alimony and other untaxed income via estimated filings so that you will not have a large tax bill in April.

One positive for the person that is writing the alimony check, the check amounts are deductible.

Unemployment Benefits

Unemployment benefits are considered wage income; therefore, the IRS does receive a portion of these benefits.

So that you do not have to pay a big tax bill in April, it is important, that when you apply for unemployment benefits, you select the option to have your federal income taxes withheld. Similar to payroll withholding, you fill out a form called the federal W-4Voluntary Withholding Request, or a like IRS-acceptable form. This way 10% of your benefit amount will be taken out of each unemployment check.

Excused Debt

The IRS still collects from the total amount of debt owed, even if some debt is excused. For example, if you are able to modify your credit card bill from $10,000 to $5,000 you can expect the credit card holder to send you a form called the Form 1099-C or a similar statement. The rest of money owed from the debt will be labeled miscellaneous income and you will be expected to pay it.

It is important to keep in mind that there are certain debts that can be forgiven. The Mortgage Debt Relief of 2007 states that certain homeowners that qualify will be forgiven and will not have to pay taxes on that amount.

Money and Other Prizes Won

Are you lucky? Did you win a $1,000 raffle? Money won as a “prize” is listed on the lengthy list of taxes that needs to be paid.

Regardless of whether you win a monetary amount or any type of non-monetary gift you are expected to pay taxes on it. You must pay taxes on the fair market value of any property that you win. In most cases the company you won from will send you a 1099 form in which you will declare how much you have won.

It is important that you are careful when you report the amount of a non cash property. If you under report you could be subjected to an audit.

If you have tax any questions or tax debt you are unable to pay our tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com. With over 16 years, in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.

For more information about our tax debt resolution services, visit us at www.professionaltaxresolution.com. Contact us by phone at 877.889.6527 to receive a free, no obligation consultation