IRS announces new filing procedure for non-resident US taxpayers – What you must know

In the last few years, the  (IRS) has been focusing on tracking offshore accounts of its residents and citizens. There are several forms to be filed with the US treasury department declaring one’s offshore account information with  compliance becoming  stringent. To help ‘low compliance risk’ US citizens and green card holders living abroad to comply with their offshore disclosures, a new IRS procedure went into effect from September 1st 2012. The new  initiative is aimed at ‘taxpayers who have only just become aware of their filing obligations and now seek to come into compliance with the law.’ The new procedure does not offer protection from criminal prosecution if the IRS and Department of Justice determine that the taxpayer’s particular circumstances deserve such prosecution.

Here is a quick glance at the details of this new procedure:

• Who is eligible?
  

While this procedure is available for non-resident US taxpayers who have resided outside of the US since January 1, 2009 and who have not filed a US tax return during the same period, these taxpayers must present a low level of compliance risk

• Understand low compliance risk
  

On the nonexistence of any excessive risk factors, if the proposed returns and application is less than $1,500 in tax owing in each of the years, they will be treated as low risk and handled in a streamlined manner. There is a probability of the risk level increasing  under several circumstances. For instance if the return filed under this program is an amended return or it the taxpayer has not declared all of his/her income in his/her country of residence or if the taxpayer is under audit or investigation by the IRS etc.

• What is the procedure to participate
  

One needs to submit a complete and accurate delinquent tax returns and mention ‘Streamlined’ at the top of the return to indicate that these returns are being filed under the new initiative. It is also essential to pay all the taxes due along with interest and penalty, if any, for delay, and submit a questionnaire as prescribed by the IRS to present the compliance risk profile.

This procedure is an initiative from the IRS that provides US green card holders and citizens a likelihood of coming into compliance and is for exceptionally low risk taxpayers.  With newer and more stringent laws like FATCA, the opportunities to come into compliance in the future may not be easily available. Taking advice from the professionals will save one from paying extra taxes. Taking the  help of a professional will give you the necessary support and guidance in all your tax planning issues and overseas voluntary disclosure.

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Tax-Wise Tips to Reduce Your Legal Expenses

No one likes to pay large amounts in legal fees, however one may be relieved to know that certain tax rules can help reduce your bills. While it is almost impossible for taxpayers to be aware of their various tax rules, a tax planner can be of great help. Here are a few tips that can help reduce legal fees.

• Personal Legal Fees are not deductible.

Most of the personal legal expenses like divorce, etc. are not deductible.

• Legal Fees for Tax Advice Are Deductible.

Legal fees for tax advice whether tax planning,  tax qualifies, income, estate, gift, property, sales, use and excise tax, (even though the taxes are personal) are deductible.

• Business Legal Fees Are Deductible.

Any legal fees incurred in business are deductible by corporations, LLCs, partnerships and proprietorships.  However, some fees must be capitalized and added to the basis of assets.  

• Investment Legal Fees Are Miscellaneous Itemized Deductions.

If legal expenses don’t relate to your business but only to investments, you can still deduct them but usually only as a miscellaneous itemized deduction.  That means a 2% threshold, phase-outs and (worst of all) Alternative Minimum Tax    

• Beware Contingent Lawyer’s Fees.

If you recover $1 million in a lawsuit and owe 40% to your contingent fee lawyer, as you have $600,000 the tax has to be paid only on this amount.   In a pure personal physical injury the entire recovery is tax-free, so therefore  it doesn’t usually matter whether you consider the recovery including legal fees. Usually, there is often confusion about what is and is not tax-free.

• Legal Fees in Employment Cases Are Fully Deductible.

Most employment lawsuit recoveries include  either wages (on a Form W-2) or non-wage income (on a Form 1099), even if your lawyer receives 40%, you still must include 100% in your income.  However, it is possible to  deduct the legal fees “above-the-line,” before reaching adjusted gross income.  That means you have no tax–no regular tax and no AMT–on the legal fees.

Tax deductions can alleviate some of the pain of high legal bills.  The tax analysis can be complicated, and you may incur legal fees falling into more than one category.  There are often several ways of allocating fees, so planning can pay off. Take the help of an expert who could offer you the best tax solutions and give you assistance in other taxes like FBAR, Overseas voluntary disclosure, etc.

Important Pointers For Global Tax Planning

Enterprises that are into foreign ventures and business, needs to implement an effective global strategy or they have a risk of witnessing adverse business tax return consequences. The most negative outcome that can take place is that organizations might be unaware and miss the benefits that are available for cross-border business ventures. Global tax hindrances and opportunities are present in even a small firm in U.S that sells products to U.S or is into foreign R&D.

Why global taxation is a complex process?

Several U.S and other foreign tax planning authorities have been aiming for cross-border revenue benefits. They are gradually becoming extremely active and careful in attempting the share of an organization’s FBAR. For instance, the changes and development that has happened in the last decade and the complex global transfer pricing guidelines, require companies to document their annual compliance to set standards for pricing inter-organization transfers of goods and services. This apart, other global taxation policies are changing and is gradually becoming a critical aspect of uninformed enterprise’s that are involved in cross-border business transactions.

Global tax consultants are able to restore the foreign and U.S tax sides of an organization’s business into a unified business and tax strategy. They are all updated with the changing concerns and trends that surround global tax planning and are tracking them consciously.

Efficient International Tax Strategy

If you want to carry out an apt global tax planning, then it is essential to set up a comprehensive global tax strategy that assists in fulfilling the global business objectives. This starts with having an in-depth understanding of an organization’s financial and business conditions, its global operating strategy and where and the manner in which it plans to operate outside with U.S. With these significant data a global tax consultant can help an organization to overcome with an overall global tax strategy that can be practiced and has an appropriate business sense. Global tax planning in case of certain concerns can be managed in a compact way by considering an enterprise’s larger international tax and functional strategies.

Global tax rules remain the same irrespective of the size of the corporate taxpayer. The difference lies in the fact as to how business firms utilize technicalities and legal interpretation to their benefit as compared to the profits of the small scale businesses that just complies with the tax guidelines. Useful tax planning solutions assists the small scale business owners to manage their operations and enable them to leverage the strategies resulting in a lower tax bill.

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