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.

Summer Tax Basics – Tax Tips to Keep You Ahead of the Game!

Posted on August 1, 2013 by Kursti Nakagawa

Summertime Tax Tips!

It’s summertime and probably the last thing you want to think about is taxes! However, I am an organizer and I like to be prepared so at least I feel like I am ahead of the game…. Here are some easy and simple summer tax tips that will help you save money! Most people wait until December to start thinking about their taxes, but in actuality planning half way through the year is a better tax planning strategy.

First Things First

Have you filed your 2012 Tax Return (remember to file and take care of your taxes so back taxes do not incur)? If you were given an extension in April DO NOT procrastinate any longer. Finish your taxes NOW! If you wait until the last minute to meet the October 15^th extension deadline, your return will be sloppy and rushed (the same thing goes for last minute April returns). You do not want to forget any tax deductions or make any filing errors.

Get Organized

I realize that now is the time to be outside in the sun. However, just take a couple minutes and organize your 2012 tax filing materials. Now go ahead and do the same thing for your 2013 taxes. It will make filing next year’s return seem painless!

It is very important that you keep some type of system for filing and organizing your tax information. It can be a desk drawer in your home office, an accordion file or a very large filing cabinet…. The important thing to remember is to choose something that works for you and stick with it. The system should make everything easy to find. Nice labels for things such as charitable deductions, medical bills, business expenses, etc. are recommended. Just remember to keep everything in place!

Keep Day Camp Receipts

If you have young children like I do, this tip is important! The IRS allows parents to claim a child’s day camp expenses the same way that they can claim the Child and Dependent Care Credit to help cover the day care costs for children while they are working. Many people do not realize this or forget to claim summer day camps. It is important to note that overnight camps do not qualify, only day camps.

Assess Your Estimated Taxes

Estimated tax payments are needed if you have income that isn’t subject to withholding. The IRS wants to know that you going to pay taxes on all of your income. To avoid a tax penalty, it is critical that you do not underpay your taxes. Summer is great time to recalculate your estimated tax situation in order to keep on track so there are no surprises!

If you have tax 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 or call us at 877.889.6527. 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

Tax Penalties: Removing the Failure to Pay Penalty

Posted on June 25, 2012 by Kursti Nakagawa

Have you received an IRS notice of Failure to Pay? Last week, we discussed the IRS penalties and consequences of Failure to Pay, which is when a taxpayer fails to either meet a tax filing deadline, or make a tax payment by its due date. The consequences for Failure to File include 5% per month of the taxes due according to a tax return that the IRS has prepared in your place, with the maximum penalty being 25% of the owed amount. For outstanding taxes, the monthly IRS Failure to Pay Penalty can be 0.25%–1.0% of the amount due, with the average being a 0.5% IRS penalty. These penalties can accumulate over time and become a large financial burden.

So, how can you remove the IRS Failure to Pay Penalty and reach a tax settlement? The IRS realizes that not every situation is black and white. They understand that a taxpayer’s full compliance is not always possible. Here are a few steps that may be helpful.

Reasonable cause If there is a legitimate reason for your failure to pay, the IRS may opt to remove your penalties. About a third of all IRS penalties are later removed. Reasonable causes include: the death of a family member or close friend, unavoidable absence (including hospitalization, prison, rehab, etc.), destruction of the location where the taxpayer’s records are held (by fire, flood, etc.), inability to pay due to material impairment by civil disturbances (such as divorce), bad or incorrect advice from a tax professional or directly from the IRS, and errors made while acting with “ordinary business care and prudence.” Whatever your reason, be prepared to answer questions about your situation and have the necessary applicable documentation to back it up.

Penalty abatement If you do have a reasonable cause, you may apply for penalty abatement. This is a formal dispute of the penalties and interest from failure to pay. Penalty abatement can also apply when you have an administrative waiver, or if IRS made a mistake. If you have a reasonable explanation for your situation and failure to pay, your penalties and interest could be completely removed and a refund could be claimed. Penalty abatements can be filed through sending a letter to the IRS or completing a Request for Abatement and Refund form.

IRS Fresh Start Program If you were unemployed for 30 consecutive days in 2011, or in 2012 prior to April 17^th, you may be eligible for the Fresh Start Program. This IRS initiative gives taxpayers 6 months to pay their taxes without incurring failure to pay penalties, as long as the tax liabilities are paid in full by October 15^th, 2012. The Fresh Start Program also applies self-employed individuals with a 25% or more drop in income during 2011. To qualify, the adjusted gross income (AGI) of a single filer must be less than $100,000, and joint filers less than $200,000. There is an application form for the Fresh Start Program on the IRS website.

If you have received an IRS Failure to Pay notice, our tax specialists can help you determine if the assessed tax penalty is accurate. Then, they can work with you on a payment plan, or determine if there was a reasonable cause that could apply to penalty abatement. For more information about our tax debt resolution services, visit us today at professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

You Have to Pay Your Taxes

Posted on April 3, 2012 by Kursti Nakagawa

What is the law regarding the payment of federal income taxes?
Although taxpayers are initially given the responsibility of determining the amount of tax they owe by completing and filing the appropriate tax returns, paying income taxes is not voluntary. The requirement to file an income tax return and pay income taxes is clearly stated in the Internal Revenue Code, which imposes a tax on the income of individuals and corporations as well as estates and trusts. Failure to file an income tax return and submit payment of taxes with the return can result in harsh civil and criminal penalties, including fines and even imprisonment.

What are frivolous tax arguments?
Frivolous tax arguments are a group of arguments that are made by taxpayers who oppose compliance with federal tax laws. These arguments indicate that paying federal income taxes is voluntary and that certain categories of individuals are exempt from paying income taxes for reasons that have no merit.

What are the most common types of frivolous tax arguments?
Although frivolous tax arguments can take many forms, they most commonly fall into one of the following categories:

Paying income tax is voluntary These arguments maintain that the filing of federal income tax returns and the paying of federal income tax is voluntary. They contend that existing laws impose no legal obligation to either pay taxes or file tax returns.

Certain forms of income are exempt from taxation These arguments assert that certain forms of income are exempt from taxation for a variety of bogus reasons. One of the common variations of this argument is that military retirement pay is excluded from income tax. Other groundless contentions maintain that income from foreign sources is not taxable or that wages and tips received for personal services are not subject to taxation.

Taxpayer is not a United States Citizen The most common form of this argument is given by an individual who asserts that they are relieved of an obligation to abide by federal tax laws because they have rejected United States citizenship in favor of state citizenship.

Collection of taxes violates a Constitutional Amendment These arguments assert that the collection of income taxes violates one or more of the amendments of the United States Constitution. Some citizens refuse to pay taxes on the basis of religious or moral grounds that they say are guaranteed by the First Amendment. Others maintain that the payment of income taxes is some form of servitude that is in violation of the Thirteenth Amendment. Another common form of this argument is that federal income taxes represent the confiscation of property, which is prohibited by the Fifth Amendment.

What are the penalties for using a frivolous tax argument?
In order to deter taxpayers from wasting time and resources, the United States Tax Court imposes harsh penalties on individuals who attempt to avoid or delay paying income taxes through the use of groundless or frivolous arguments. In 2006, Congress passed the Tax Relief Health Care Act, which increased the maximum penalty imposed for submitting a frivolous tax return from $500 to $5,000. This amount was increased to $25,000 by an amendment passed in March 2007. In addition to increasing the penalty for submitting a frivolous tax return, this amendment included a list of 40 specific positions that were deemed frivolous by the United States Tax Court.

If you have failed to meet tax filing deadlines or have an unresolved tax liability, our experienced tax resolution professionals can provide you with the tax settlement help you need. For more information about our tax settlement services, visit us today at professionaltaxresolution.com. The members of our staff have the knowledge and experience necessary to know which tax settlement option will most effectively resolve your specific back tax issues. Contact us today at (877) 596-4143 or info@protaxres.com to receive a free, no obligation consultation.