Thursday, August 29, 2013

U.S. Treasury and IRS will recognize same sex marriages | Bellevue Tax Lawyer

The IRS and the U.S. Department of Treasury announced today that they will recognize same-sex marriage for federal tax purposes.  The announcement states that they will recognize the marriage, as long as the couple is married in a state that recognizes same-sex marriages.  Same-sex couples will have to file as married even if they no longer live in a state that recognizes same-sex marriage.  The announcement states that recognition applies only to marriage and does not apply to civil unions, domestic partnerships, or similar formal relationships under state law.

Married same-sex couples are required to file as married beginning with the 2013 tax year.  If desired, couples can also amend their last three years of tax returns.  The announcement is located, here.

If you have any questions about this announcement, please do not hesitate to contact a tax professional.

Saturday, August 24, 2013

Switzerland will soon release bank information to the US | Bellevue Tax Lawyer

Two of the larger Swiss banks have agreed to release bank information to U.S. authorities.  The information consists of leaver data from two of the larger Swiss banks.  Leaver data is the data about people that switched banks or transferred assets when it became know that the U.S. authorities were getting more information about American with Swiss holdings.

The statement about the information release can be found, here.

If you have not filed FBARs and own a Swiss account, you should contact an attorney to review your situation.  If you have any questions, or concerns about your FBARs or other foreign reporting requirements, please do not hesitate to contact a tax professional.    

Thursday, June 6, 2013

Bellevue Tax Law | FBAR Deadline is June 28th

I wanted to post a quick reminder that your 2012 FBAR, Form TD F 90-22.1 is due on June 28, 2013. This is because the June 30th land on a Sunday and the form must be received by June 30th, thus the Friday before the due date.  

Another reminder is that the form must arrive at the office by June 28, not be mailed by the 28th, so make sure you mail the FBAR four or five days ahead of time.  

The penalties failing to file the FBAR are steep.  If you have any type of foreign account and do not think you are required to file; at least contact someone to verify that you are correct.

As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web.  Please do not rely on this article without consulting your tax professional.  If you are unsure about whether you have a requirement to file this form contact a tax professional.

Thursday, February 28, 2013

United States and Switzerland Sign IGA & US and Poland Sign New Tax Treaty | Bellevue Tax Lawyer


On February 14, 2013, the US and Switzerland signed an intergovernmental agreement (IGA) implementing FATCA.  FATCA is a US law that was enacted to improve tax compliance and combat international tax evasion.  The agreement permits Swiss banks to share information with the IRS about US account holders.  The agreement can be found here, and the Swiss announcement can be found here.

On February 14, 2013 the Treasury Department announced that the US and Poland signed a new tax treaty that, once it is ratified, replaces the current tax treaty signed in 1974.  The Treasury release states that the new treaty includes a comprehensive limitation of benefits provision, and also includes provisions for exchange of information between competent authorities of each country.  The new US, Poland tax treaty can be found, here, and the Treasury release can be found, here.

If you are unsure about how these agreements my affect you, please contact a tax professional.  

Monday, February 4, 2013

IRS First Time Penalty Abatement Program | Bellevue Tax Lawyer


With the advent of the 2013 tax season, it is expected that most taxpayers will exercise ordinary care and prudence in filing their returns and thereafter paying all taxes due.  Assessed penalties for failure to file (FTF) or failure to pay (FTP) can be steep, with fines in both cases able to reach 25 percent of the unpaid taxes if these issues are not resolved in a timely manner.  As explained in a recent report from the Treasury Inspector General for Tax Administration, however, these penalties are not intended to increase overall revenue collection but rather to encourage voluntary compliance with IRS filing and payment deadlines.

As such, there are many avenues available for relief to otherwise well-meaning taxpayers who have, for one reason or another, failed to meet these deadlines.  For example, taxpayers who have "reasonable cause" for missing such deadlines owing to a sudden and disabling illness or a natural disaster may have their penalties abated.  Penalty assessments, furthermore, are prohibited on taxpayers residing in combat zones, while taxpayers who are newly retired, disabled, or had a tax penalty of less than $1,000 in the prior year are eligible for an exception to estimated tax penalties.  Penalties may also be waived in advance of litigation or because of a policy statement explicitly affording such relief, such as the "Expanded Fresh Start" initiative of 2012.  

Finally, and most notably, the IRS waives FTF and FTP penalties for taxpayers demonstrating full compliance over the prior three years.  This "First-Time Abate" (FTA) is intended to "reward tax compliance while promoting tax compliance," yet the Treasury Inspector General's report found that "approximately 250,000 taxpayers with FTF penalties and 1.2 million taxpayers with FTP penalties did not receive penalty relief "despite qualifying for such, with "more than $181 million" in penalties going unabated.  Furthermore, some taxpayers who qualified for relief under "reasonable cause" standards instead received FTA waivers, a decision which can negatively impact their future tax status.  

Dealing with penalties of this sort can be a complicated matter, and, as the Treasury Inspector General noted, an improper understanding of one's situation as regards the appropriate method of relief could have significant long-term repercussions.  For a free consultation on these and other tax-related matters, please contact The Law Offices of Aaron P. Richter, a Bellevue-based firm with expertise in Tax Controversy, Business Formation, Estate Planning, and Tax Preparation.

Thursday, January 3, 2013

The Tax Implications of the American Taxpayer Relief Act of 2012 | Bellevue Tax Lawyer


In a compromise deal passed a day after the nation began sliding down the so-called “fiscal cliff,” Congress approved tax increases that would affect 77 percent of American households.  The increase that will be most obvious to average Americans will come in the form of the expiration of a 2 percent payroll tax cut that had been enacted during the peak of the recession, thereby restoring the payroll tax to 6.2 percent.  This is expected to limit the short-term spending power of consumers, possibly leading to a slight decline in GDP, while bolstering the long-term health of the national retirement program. 

However, the most long-lasting implications of the ATRA concern significant changes to income and capital gains tax rates.  Individuals with incomes over $400,000 and couples with incomes over $450,000 will see their rates rise from 35 percent to 39.6 percent, thereby fulfilling one of President Obama’s 2012 campaign promises.  However, the bill will keep Bush-era tax rates for incomes below these levels precisely where they were in 2012, providing a significant victory for Republican legislators seeking to preserve the reforms of the preceding administration.  Tax deductions and credits will be phased out for incomes over $250,000 for individuals and $300,000 for couples.  Expansions of the child tax credit, the earned income tax credit, and a $2,500 credit for college tuition—all of which had been sought by the Obama administration—are included in the ATRA.

Capital gains and dividend income over $400,000 for individuals and $450,000 for couples will now be taxed at 20 percent, up from 15 percent.  This is in line with Obama’s 2012 campaign demands, but nevertheless ensures that Bush’s policy of taxing dividends and capital gains equally and gently will be continued. 

The estate tax rate increases from 35 percent to 40 percent on estates valued above the exemption of $5,120,000, with indexing for inflation.  The alternative minimum tax has also been permanently indexed for inflation, thus avoiding the imposition of a tax intended to target only the extremely wealthy on some middle-income earners.  The long-term unemployed will receive relief under the ATRA, which extends unemployment benefits without offsetting cuts in spending to other portions of the federal budget.  Finally—and perhaps quite helpfully for many employees—the congressional deal allows money in pre-tax 401(k) accounts to be converted into Roth 401(k) accounts, an extension of Roth conversions heretofore only available for 401(k) money that was “distributable” (i.e., your vested balance upon retirement age) but that now allows the conversion of everything in traditional 401(k) accounts.

The ATRA is hardly a panacea for the country’s continuing economic woes, and it will have to be reevaluated in two months when $110 billion in delayed spending cuts take effect.  It also contains an “active financing” exemption for manufacturers and financial service providers who avoid double taxation when competing with foreign firms by using foreign subsidiaries to finance the sale of machines and products to overseas customers, a $9 billion tax break that will benefit multinational companies such as J.P. Morgan Chase and General Electric but has raised the ire of labor unions and various corporate watchdog groups. However, the ATRA will require many Americans to reevaluate their tax positions.  Although most taxpayers will wind up paying more taxes in the coming year than in previous ones, it is possible that there are also many additional opportunities now available to them.  For a free consultation on these and other tax-related matters, please contact The Law Offices of Aaron P. Richter, a Bellevue-based firm with expertise in Tax Controversy, Business Formation, Estate Planning, and Tax Preparation.

Monday, October 22, 2012

U.S. Non-Resident, Non-Filer, Streamlined Compliance Initiative | Bellevue Tax Lawyer


As I mentioned in my FBAR Updates post from 6/27, on September 1, the IRS announced the instructions for the new non-resident, non-filing US taxpayer compliance initiative.  The instructions can be found, here.  

The initiative is available to non-resident U.S. taxpayers that have lived abroad since 2009, owe less than $1500 in taxes and have not filed taxes since 2009; and taxpayers that failed to properly request deferral using Treaty Form 8891.  Form 8891 is used for Canadian RRSPs and RRIFs.  The treaty relief is also permitted in the OVDP, and OVDI if your case is still open.

Eligibility for this initiative is based on four questions listed in the questionnaire:

(1) Have you lived in the U.S. for any period since January 1, 2009?
(2) Have you filed a U.S. tax return for 2009 or later?
(3) Do you owe more than $1500 in U.S. taxes for each year individually?
(4) If you are submitting returns solely for the purpose of requesting retroactive
deferral of income on Form 8891, are there any adjustments reported on the amended return to income, deductions, credits, or taxes? 

Unless you are requesting Form 8891 relief, you must answer no to all four of the questions.  If you are requesting 8891 relief, you can answer yes to question (2) if you are only filing amended returns to make the 8891 election.  If you do not meet these requirements you are not eligible for the initiative.  The questionnaire can be found, here

Unlike the OVDP, the initiative does not provide protection against criminal prosecution.  Also, once a taxpayer makes a submission under this initiative, the taxpayer is not longer eligible to participate in the OVDP.

The program does not protect the taxpayer against the risk of audit.  The IRS does not go into detail about how it will decide if a return is high risk and possibly subject to an audit.  Based on the information provided, it appears that the more complicated the tax return and the closer the taxpayer is to the $1500 a year threshold, the higher the risk, and more likely to be examined.  Otherwise, it does not provide much detail about how to determine compliance risk.  

As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web.  Please do not rely on this article without consulting your tax professional.  If you are unsure about whether you should enter this program contact a tax professional.