Archive for Offshore account
In 2010, the Hiring Incentives to Restore Employment (HIRE) Act added Code Sec. 6038D requiring individual taxpayers with an interest in a specified foreign financial asset during the tax year to attach a disclosure statement to their income tax return for any year in which the aggregate value of all such assets is greater than a threshold amount. This law gives the IRS authority to apply these new rules to any domestic entity that is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets, in the same manner as if the entity were an individual. The 2011 individual tax returns were the first ones affected by the new law.
Although the nature of the information required under Code Sec. 6038D is similar to the information disclosed on Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), it is not identical. For example, a beneficiary of a foreign trust who is not within the scope of FBAR reporting requirements because his interest in the trust is less than 50 percent may nonetheless be required to disclose the interest in the trust with his tax return under Code Sec. 6038D if the value of his interest in the trust together with the value of other specified foreign financial assets exceeds the aggregate value threshold.
Disclosures under Code Sec. 6038D are made on Form 8938, Statement of Specified Foreign Financial Assets. Failure to make the required disclosures can result in a penalty of $10,000 for the tax year. An additional penalty may apply if the individual is notified by mail of the failure to disclose and the failure to disclose continues. A maximum penalty of $50,000 can be assessed for one tax period.
Specified Foreign Financial Assets
Under Code Sec. 6038D(b), a specified foreign financial asset is any financial account maintained by a foreign financial institution and the following assets, to the extent not held in an account at a financial institution:
(1) stocks or securities issued by foreign persons;
(2) any other financial instrument or contract held for investment that is issued by or has a counter party that is not a U.S. person; and
(3) any interest in a foreign entity.
Specified Persons Required to File Form 8938
In Reg. Sec. 1.6038D-2T and Prop. Reg. Sec. 1.6038D-6, the IRS provides rules for determining if a specified individual or a specified domestic entity (i.e., a specified person) must file a Form 8938 with the specified person’s annual return.
A specified individual is a U.S. citizen, a U.S. resident alien, or a nonresident alien who has elected under Code Sec. 6013(g) or (h) to be taxed as a U.S. resident. A resident alien who elects to be taxed as a resident of a foreign country pursuant to a U.S. income tax treaty’s residency tie-breaker rules is a specified individual for purposes of Code Sec. 6038D and the regulations. In addition, certain nonresident aliens who are treated as residents under other sections of the Code are specified individuals. For example, the rules under Code Sec. 6038D apply to a nonresident alien who is a bona fide resident of Puerto Rico or American Samoa in the same manner as they apply to a U.S. citizen or resident. Bona fide residents of Puerto Rico or a Code Sec. 931 possession (currently, American Samoa) generally are required to file a federal income tax return with the IRS only if they have income from sources without the relevant U.S. territory, because Code Sec. 931(a) and Code Sec. 933 generally exclude from gross income any income derived from sources within the relevant U.S. territory. Thus, the temporary regulations generally require only bona fide residents of Puerto Rico or a Section 931 possession that are required to file a federal income tax return with the IRS to file a Form 8938 with the IRS.
A specified person is not required to file Form 8938 if the specified person is not required to file an annual return with the IRS. With respect to bona fide residents of U.S. territories, this rule means that a bona fide resident of a U.S. territory has a filing requirement under Code Sec. 6038D and the temporary regulations only if he or she is required to file a federal income tax return for the tax year. In general, bona fide residents of the U.S. Virgin Islands and U.S. territories to which Code Sec. 935 applies (currently, Guam and the Northern Mariana Islands) are not required to file a federal income tax return provided they correctly report and pay tax on their worldwide income to their U.S. territory taxing authority.
A specified person’s annual return includes an annual federal income tax return of a specified individual or an annual federal income tax return or information return of a specified domestic entity filed with the IRS under Code Secs. 876, 6011, 6012, 6013, 6031, or 6037, and the regulations. For example, a partnership that is a specified domestic entity is required to attach Form 8938 to its Form 1065, U.S. Return of Partnership Income, for the tax year.
Filing Thresholds
A specified person must file Form 8938 if the person has an interest in one or more specified foreign financial assets and those assets have an aggregate fair market value exceeding either $50,000 on the last day of the tax year or $75,000 at any time during the tax year. Married specified individuals filing a joint annual return are not required to file Form 8938 unless the aggregate value of all of the specified foreign financial assets in which either spouse has an interest exceeds $100,000 on the last day of the tax year or $150,000 at any time during the tax year.
Generally, a specified individual who is a qualified individual under Code Sec. 911(d)(1) (i.e., living abroad) for the tax year is required to attach a Form 8938 to the specified individual’s annual return and report the required information if the aggregate value of the specified foreign financial assets in which the specified individual has an interest exceeds $200,000 on the last day of the tax year or $300,000 at any time during the tax year. For married individuals meeting the same requirements, the threshold amounts are $400,000 on the last day of the tax year or $600,000 at any time during the tax year.
Interest in a Specified Foreign Financial Asset
For Code Sec. 6038D purposes, a specified person is generally considered to have an interest in a specified foreign financial asset if any income, gains, losses, deductions, credits, gross proceeds, or distributions attributable to the holding or disposition of the asset are or would be required to be reported, included, or otherwise reflected on the specified person’s annual return filed with the IRS (even if no income, gains, losses, deductions, credits, gross proceeds, or distributions are attributable to the asset for a particular tax year).
For purposes of Code Sec. 6038D and the regulations, a parent that makes an election under Code Sec. 1(g)(7) to include certain unearned income of a child in the parent’s gross income has an interest in any specified foreign financial asset held by the child.
A specified person that is the owner of an entity disregarded as an entity separate from its owner (disregarded entity) is treated as having an interest in any specified foreign financial assets held by the disregarded entity. Generally, a specified person that is treated as the owner of a trust or any portion of a trust under Code Sec. 671 through 679 is treated as having an interest in any specified foreign financial assets held by the trust or by the portion of the trust that the specified person owns. However, a specified person that is treated as an owner of a domestic liquidating trust created pursuant to a court order issued in a bankruptcy under Chapter 7 or a confirmed plan under Chapter 11 of the Bankruptcy Code, a domestic widely held fixed investment trust, or any portion of such a trust under Code Sec. 671 through 679 is not required to file Form 8938 to report any specified foreign financial asset held by the trust.
A specified person is not treated as having an interest in any specified foreign financial assets held by a partnership, corporation, trust (except as described in this explanation), or estate solely as a result of the specified person’s status as a partner, shareholder, or beneficiary.
Joint Interests in Specified Foreign Financial Assets
A joint interest in a specified foreign financial asset is subject to reporting by each specified person that is a joint owner of the asset. In general, each joint owner includes the full value of the jointly owned asset for purposes of determining whether the aggregate value of all specified foreign financial assets in which the joint owner has an interest exceeds the reporting thresholds.
Married specified individuals who file a joint annual return for the tax year must fulfill their reporting requirements by filing a single Form 8938 that reports all of the specified foreign financial assets in which either married specified individual has an interest. A specified foreign financial asset that is jointly owned by married specified individuals or a specified foreign financial asset held by a child for which the married specified individuals have made an election under Code Sec. 1(g)(7) is reported once on the single Form 8938. Married specified individuals who file a joint annual return include the value of a specified foreign financial asset that they jointly own together or a specified foreign financial asset held by a child for which they have made an election under Code Sec. 1(g)(7) only once in determining whether the aggregate value of all the specified foreign financial assets in which either married specified individual has an interest exceeds the appropriate reporting threshold.
A married specified individual who files a separate annual return for the tax year must fulfill the reporting requirements by filing a separate Form 8938 that reports all the specified foreign financial assets in which the married specified individual has an interest, including assets jointly owned with the married specified individual’s spouse. A married specified individual that files a separate annual return and whose spouse is a specified person includes only one-half of the value of a specified foreign financial asset that the married specified individual jointly owns with his or her spouse in determining whether the married specified individual has an interest in specified foreign financial assets the aggregate value of which exceeds the appropriate reporting threshold.
Specified Domestic Entities
The proposed regulations would apply to domestic entities formed or availed of for the purposes of holding, directly or indirectly, specified foreign financial assets. Such entities are referred to as specified domestic entities and include certain closely held corporations and partnerships that meet passive income or passive income tests. With exceptions, domestic trusts are included if they have a specified individual(s) as a current beneficiary and exceed the reporting threshold.
Under Prop. Reg. Sec. 1.6038D-6, specified domestic entities include certain domestic corporations, domestic partnerships and domestic trusts, but not domestic estates.
For a domestic corporation or partnership to be considered a specified domestic entity, three conditions must apply:
(1) The corporation/partnership must have an interest in specified foreign financial assets with an aggregate value exceeding the $50,000/$75,000 reporting threshold.
(2) The corporation/partnership must be closely held (80 percent by vote or value at end of the tax year) by a specified individual taking into account indirect and constructive ownership rules.
(3) The corporation/partnership must either meet an at least 50 percent passive income/assets test, or meet a 10 percent passive income/assets test and based on the facts and circumstances been formed or availed of with a principal purpose of avoiding reporting under Code Sec. 6038D.
Two different aggregation rules apply to determine whether a domestic corporation or domestic partnership is a specified domestic entity:
(1) In determining whether a domestic corporation or domestic partnership meets the reporting thresholds, domestic corporations and domestic partnerships that are closely held by the same specified individual are treated as a single entity.
(2) For purposes of determining whether a corporation or partnership meets the passive income/asset tests, domestic corporations and domestic partnerships that are closely held by the same individual and that are connected through stock or partnership interest ownership with a common parent corporation or partnership are treated as a single entity.
A domestic trust is considered a specified domestic entity if it has an interest in specified foreign financial assets (other than assets excepted from reporting) with an aggregate value exceeding the $50,000/$75,000 reporting threshold and at least one specified person as a current beneficiary.
A domestic entity is not considered to be a specified domestic entity if it is described in Code Sec. 1473(3) and the related regulations as excepted from the definition of the term specified United States person. This exception does not apply to any trust that is exempt from tax under Code Sec. 664(c).
A domestic trust is not considered a specified domestic entity if the trustee or executor is a bank, financial institution, or domestic corporation that is subject to certain examination, oversight, or registration requirements, has supervisory authority over or fiduciary obligations with regard to the trust’s specified foreign financial assets, and files income tax returns and information returns on behalf of the trust.
A domestic trust or any portion of the trust that is treated as owned by one or more specified persons under Code Secs. 671 through 679 and the regulations issued under those sections is not considered to be a specified domestic entity.
Information Required to be Disclosed
Under Code Sec. 6038D(c), the information required to be disclosed depends on the type of asset involved. For a financial account, the name and address of the financial institution in which the account is maintained must be reported, as well as the account number. For any stock or security, the name and address of the non-U.S. issuer, as well as information necessary to identify the class or issue of which the stock or security is a part, must be reported. In the case of any other instrument, contract, or interest, the names and addresses of all issuers and counter parties must be reported, together with the information necessary to identify the instrument, contract, or interest. The maximum value of each specified foreign financial asset during the tax year also must be reported.
Penalty for Failing to Disclose
Individuals who fail to make the required disclosures are subject to a penalty of $10,000 for the tax year. An additional penalty may apply if the Secretary notifies an individual by mail of the failure to disclose and the failure to disclose continues. If the failure continues beyond 90 days following the mailing, the penalty increases by $10,000 for each 30-day period (or a fraction thereof), up to a maximum penalty of $50,000 for one tax period. The computation of the penalty is similar to that applicable to failures to file reports with respect to certain foreign corporations under Code Sec. 6038. Thus, an individual who is notified of his failure to disclose with respect to a single tax year under this provision and who takes remedial action on the 95th day after the notice is mailed incurs a penalty of $20,000 comprising the base amount of $10,000, plus $10,000 for the fraction (i.e., the five days) of a 30-day period following the lapse of 90 days after the notice of noncompliance was mailed. An individual who postpones remedial action until the 181st day is subject to the maximum penalty of $50,000: the base amount of $10,000, plus $30,000 for the three 30-day periods, plus $10,000 for the one fraction (i.e., the single day) of a 30-day period following the lapse of 90 days after the notice of noncompliance was mailed.
No penalty is imposed under the provision against an individual who can establish that the failure was due to reasonable cause and not willful neglect. Foreign law prohibitions against disclosure of the required information cannot be relied on to establish reasonable cause. To the extent the IRS determines that the individual has an interest in one or more foreign financial assets but the individual does not provide enough information to enable the IRS to determine the aggregate value thereof, the aggregate value of such identified foreign financial assets will be presumed to have exceeded $50,000 for purposes of assessing the penalty.
January 17, 2012 John R. Dundon II Business Expense, Colorado Department of Revenue, Intent To Levy, Intent To Lien, International Tax, IRA, IRS Appeal, IRS Audit, IRS Centralized Insolvency, IRS Collections, IRS Enforcement, IRS Examination, IRS Levy, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, IRS Transcript, Marijuana, Medical Expenses, Offshore account, PTIN, Retirement Attached is the summary of the IRS Stakeholder Liaison Meeting I attended on January 4th 2012 in Denver, Colorado as produced by Deborah Rodgers of the IRS. Some interesting insights were revisited. The most provocative discussion surrounded the comments made by Matthew Houtsma of District Counsel regarding the taxation of medical marijuana specifically as it pertains to cost of goods sold as well as further defining what constitutes “traffic” under IRC 280(e)
Jack Estoll, Appeals
This is Jack’s last meeting. He will retire on June 1st. Linda Alden, Appeals Team Manager will replace Jack at the PLM meetings. Welcome Linda. Appeals lost 3 processors and 1 analyst to the buyouts in December. Processing will be slowed due to those retirements; Appeals will not fill the retired positions. Examination inventory is decreasing, while Collection inventory is still increasing.
Patience Ellis, Automated Collection Site (ACS)
ACS is business as usual. We are 60 people short compared to a year and a half ago. ACS has instituted some internal process improvements. We have an abbreviated financial information statement. We are using a probe and response guide for offers in compromise, which will ask the right questions to determine if a tp wants to move forward with the offer in compromise process.
Question: How are $100,000 cases handled in ACS?
Response: With the large dollar case unit going away, there are limited things that can bring the balance down. ACS is limited with large dollar cases. Generally they will go to the field.
Question: If taxpayer is compliant and doesn’t want to wait can we writeCincinnati?
Response: You can always write toCincinnatibut process time is 45 to 60 days.
Question: Are you raising the streamline installment agreements from $25,000-$50,000?
Response: Yes, ACS Denver has been part of a pilot that has tested the increase to $50,000. Based upon the positive input and increase in efficiency, the process is projected to rollout in late January in all ACS call sites.Denverwill work Small Business cases and Seattle will work Wage and Investment cases.
Question: Will the filling of Liens change?
Response: The employees will still need to make the lien determination; there is no change to that basic process. A lien can be avoided by entering into a DDIA agreement for $25-$50k and streamline for under $25k.
Comment: 800-829-0115 telephone number gives you an estimated wait time of 15 minutes, in reality the wait time is over one hour.
Response: ACS called the number and the automated system advised at the beginning of call that hold time would be greater than 30 minutes. After being on hold for 55 minutes a representative answered and she said that this number belongs to Accounts Management W&I.
ACS’s automated line 1-800-829-3903 does not give any approximate hold time.
We will elevate this issue.
Shelley Foster, Examination
There are significant losses to resources in our 12 Western states. We are down to 90 employees in 12 states. The work plan has been reduced by 3500 returns. Business master file work has increased from 10% to 18%.
We are striving to reduce the time span between initial contact and holding the interview. Phase 1 of the audit process, with a target of completing the first interview within 45 days of the first contact. There will be a big push on this practice in the future.
We are at 95% closure on all open offshore voluntary disclosure cases within the Western Area. These are cases from the 2009 initiative. The time frame has passed for submitting disclosures for the 2011 initiative. Large Business and International has the lead on the 2011 initiative. Small Business/Self Employed will take some of the disclosure due to the projected number of disclosures. Western has dedicated 23 revenue agents to the 2011 program.
The budget is not affecting case related travel. The fallout for non-case related travel or hiring plans is not known at this time. We lost support staff throughout the Area which is impacting operations.
Question: What about the electronic software issue?
Response: This is still being worked, however, our examiners are advised to only look at information tied to the year(s) under audit which may include the month before and month after the end of the tax year.
Question: What is the number of taxpayers on the new voluntary disclosure program?
Response: Significantly more were received under this program the figures are in excess of 16,000.
Question: What are some of the audit hot topics?
Response: Hi DIF scores; audit selections based on historical audit adjustments, high income taxpayers with over $200,000 with and without Schedule Cs, over $1 million income taxpayers, business flow-through returns, and some Schedule A return projects.
Question: Time for closures?
Response: We want to close a case within reasonable time frames. It’s case-by-case based on the complexity of the return and the issues identified. Availability of records can delay the process. The guidance to managers is to get involved earlier in the process to ensure cases are move forward in a timely manner.
Question: Is it appropriate to move an audit out of state?
Response: A request to move an audit out of state can be denied for various reasons including where the taxpayer, business and records are located.
Comment: I received a proposed adjustment with the initial letter from office audit.
Response: If there is no response to the initial contact letter then we often issue a proposed audit report based on the issues classified. This would not happen unless a discontinuance of communication occurred or there was no response from the taxpayer.
Question: Is there any guidance on medical marijuana dispensary expenses?
Response: Subject is still under review by Counsel. Under federal law it is illegal so some of the expenses may be disallowed.
Comment from Counsel: There is a memo from counsel to local agents that cost of goods sold are allowable. Trafficking expenses are not allowed. Counsel mentioned the CHAMP case (128 T.C. No. 14 (2007)) where the dispensary did documentable care type work with patients. The expenses related to the care giving were allowed. Code section 280E should be followed. This is an evolving area. Agents are coming to Counsel on a case-by-case basis. The National Cannabis Industry Association memo that appeared in Tax Notes in2011 and was partially drafted by local CPA Jim Marty is not accepted by Counsel. Watch for the Harborside Health Center case in California.
Question: The salaries of the employees are being taxed but you are not allowing the deductions. Is this inconsistent?
Response: No it is not inconsistent. Behind the counter employees are deemed trafficking, therefore not deductable.
Question: Is the tour of a medical marijuana dispensary protocol?
Response: Businesses have not pushed back visits from revenue agents. It would be in their best interest to explain how the business is run. It is to get their side of the story out. Since Counsel is providing guidance we should take a look at how the business runs.
Matthew Houtsma, District Counsel
Counsel has experienced a few retirements, which included a manager. There will be a new manager coming in February. Counsel had another victory in an easement case recently. We have several easement cases on the calendar for court in March and May. We handle abusive Roth IRA cases for the whole country.
We started developing products to capture knowledge of retiring attorneys on our website.
There is a push to get summary judgment on collection due process cases. Attorneys are advised to ask the taxpayer early whether or not they object to summary judgment.
Charles Musso, Taxpayer Advocate
Local Taxpayer Advocate, Tom Sherwood is back from his detail.
Our inventory levels are down from 90 cases to about 40 cases per case advocate.
One of the changes to TAS criteria is to send amended returns back to the function.
Comment: Taxpayer Advocate received positive feedback that TAS case advocates were incredibly helpful and moved quickly through the practitioners’ issues.
Diane Sandoval, Collection
Staffing has dropped, but case related travel has not declined. Revenue officers will still be in the field. Collection focus areas include timeliness of actions, to resolve case as quickly as possible, and customer satisfaction- to communicate resolution to the taxpayer. Regarding power of attorney bypassing issue, if there is an unreasonable delay of turning over information or a pattern of no cooperation, bypass procedures will be initiated.
Taxpayers with over $100,000 balance due are encouraged to stay current in their tax matters. Also be prepared when a revenue officer knocks on the door. Resources are strained and we have many cases waiting to be worked. If there is a combative relationship between the practitioner and a revenue officer contact the group manager.
Question: The bypass issue is a more serious issue for the practitioner with the active Office of Professional Responsibility. Has there been any thought given to issuing a summons for the information that the client is not providing to the power of attorney? The practitioner doesn’t want to compromise his position with the client but is there something in the manual that suggests a summons is the next step?
Response: Warning of a bypass procedure is issued by the group manager. The actual bypass document is signed by the territory manager. Practitioner should talk to the group manager if you are issued a bypass warning letter. This is the time to consider revocation of power of attorney. When issuing a bypass letter we asked the revenue officer what they tried to do to get the information. Did they issue a summons?
Comment: Practitioner has received letters with a ghost name on them. When he calls the case has not yet been assigned.
Response: Field collection knocks on the door.
Question: If the taxpayer wants to get something resolved, can they request a revenue officer?
Response: A request for a revenue officer can be made but there are no guarantees.
Lilia Ruiz, Criminal Investigation
Our staffing is fairly steady in our states. We continue to investigate allegations of tax fraud in many areas including employment tax, money laundering, non-filers, abusive schemes, international, questionable returns,ID theft. Joel Churches is no longer the voluntary disclosure contact. Brian Thiel is the new contact. His number is 303-603-4924.
Regarding the medical marijuana issue, the US attorney’s office is proceeding cautiously across state lines. Montana is more aggressive.
Question: Can you pursue both a FBAR and criminal tax audit at the same time? Is Title 31 versus title 26 issues in conflict? Can the revenue agent do both audits or must they be separate? Revenue agent is asking for FBAR information on a civil audit.
Response (from various participants): A regular RA can do a Title 31 FBAR examination under certain circumstances. The foreign account has to be related a Title 26 violation. So, for instance, if the interest from the account was not reported on the return, the failure to report is a Title 26 violation. If everything was properly reported, then the regular RA would not be able to open up the FBAR examination. When processing to open one, a Related Statute Memorandum must be done and approved by the TM. Then, the RA can work both. Each would still be a separate case, separate activity codes, etc.
I think where the confusion lies is due to a technicality. The RA can ask anything they want about the account, but cannot ask about the FBAR form…until the Related Statute Memorandum is approved. Since it’s such a subtle item, it can really feel like an FBAR account. But if you think about it, it’s no different than what they might ask about a domestic account. Who are the signers, account balances, copies of statements, etc. It’s the form itself that throws it under Title 31.
Bessie Castro-Zepeda, Department of Revenue
At the moment we have 3000 work-as compared to 20,000 latest years. All items are under 20 days old. Practitioners are encouraged to use the online system. The phone system has a longer wait time. When you file an amended return, include original forms and backup information or your credits will be disallowed.
Question: Will there be an e-file debit account for payment on return program this year?
Response:
Question: Regarding the amnesty return information program, do you share information with federal government?
Response:
Question: What is taxpayers’ protection if rejected from the voluntary classification settlement?
Response:
Question: Contractors’ agreements? Voluntary? Department of Labor issue?
Response:
Question: Are you pursuing violators of the Colorado use tax?
Response: We only address issue in audits-not as a project.
Kristen Hoiby, Stakeholder Liaison
The revised Form 2848 and instructions issued Oct. 2011 include several changes. One of the most significant changes is for individuals who file joint returns. Each individual taxpayer will be required to submit separate Forms 2848 to the IRS Centralized Authorization File even if they are going to be represented by the same authorized representative(s). The individual(s) identified in the power of attorney will only be authorized to represent one person per Form 2848.
Question: Are there any plans to develop a simpler way to revoke a power of attorney?
Response: This question has been elevated.
Stakeholder Liaison is looking at other ways to deliver information virtually in order to deal with a lower travel budget—if practitioners know of any webinar or other systems that could be used for delivering updates, please let SL know.
There is a concentrated place for frequently asked questions and information on payment card reporting requirements on our website.
The IRS website has been redesigned. The frequently asked questions or many topics are from meetings like our PLM.
The IRS is aware some taxpayers who are dual citizens of the United States and a foreign country may have failed to timely file United States federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), despite being required to do so. Some of those taxpayers are now aware of their filing obligations and seek to come into compliance with the law. This fact sheet summarizes information about federal income tax return and FBAR filing requirements, how to file a federal income tax return or FBAR, and potential penalties.
Beginning Jan. 3, hours of service for most IRS toll-free telephone lines will be 7:00 a.m. to 7:00 p.m. local time. This includes telephone assistance for individuals, businesses, and the Practitioner Priority Service. Hours of service for telephone assistance for exempt organizations, retirement plan administrators and government entities are not changing. As a reminder, the IRS is available online 24 hours a day, 7 days a week, for you and your clients
A six-digit Identity Protection Personal Identification Number or IP PIN is being provided to those victims of tax-related identity theft who have had their identities verified by IRS to avoid delays in processing their federal returns. If your client indicates he or she received IRS Letter 4869CS providing them with an IP PIN, please ask your client for the letter and follow the instructions provided when preparing the return.
Important: If your client received an IP PIN, please enter it on the tax return to avoid processing delays. For electronic returns, the software will indicate where to insert the IP PIN. For paper returns, enter the IP PIN in the six boxes to the right of the spouse’s occupation in the signature section. Tax professionals may send general inquiries to-IPPIN.Questions@irs.gov. IRS Identity Protection Specialized Unit, toll-free 1-800-908-4490.
Question: Where can I get the green card information?
Question: With more practitioners being able to use the services, will it become more user-friendly? And the adjusted gross income precludes some from using e-services.
Certain tax return preparers are required to take and pass a competency test. View a summary of the return preparer requirements
Test Preparation:
Scheduling a Test:
In order to take the test, you must have a PTIN. You can schedule your test directly from your online PTIN account.
Test Logistics:
Question: Do we need to fill out the opt out form for e-file if the obvious reason is that the credit taken is not a form accepted for e-file, such as the adoption credit?
Response: Covered returns that cannot be filed electronically. Some covered returns are not currently capable of being accepted electronically by the IRS. In certain instances, the IRS has instructed taxpayers not to file some covered returns electronically. Additionally, certain covered returns cannot be e-filed if they have attached forms, schedules, or documents that the IRS does not accept electronically and these forms, schedules, or documents cannot be sent to the IRS separately using Form 8453 or Form 8453-F as a transmittal document. In any of these situations, the preparer does not need to complete and submit Form 8948. However, if the forms, schedules, or documents can be sent to the IRS separately using Form 8453 or Form 8453-F as a transmittal document, the rest of the return must be e-filed. For more information, see Form 8453, Form 8453-F, and Notice 2011-26, 2011-17 I.R.B. 720.
The Issue Management Resolution System is a streamlined, structured process that captures, develops and responds to significant national and local issues from tax practitioners and other stakeholders.
Check out this month’s IMRS Hot Issues report.
Thank you for your participation in this meeting.
Next meeting is scheduled for July 18, 2012.
June 9, 2011 John R. Dundon II Foreign Income, International Tax, IRS Enforcement, IRS Lien, IRS Mediation, IRS Penalties, IRS Penalty and Interest Abatement, Non-filed Tax Returns, Offshore account, Paying Taxes, Tax Fraud, Tax Guidance & Preparation, Tax Problems & Requests, Tax Relief The purpose of the Offshore Voluntary Disclosure Initiative (OVDI) as I understand it today is to provide reasonable assurance to a taxpayer who comes forward, before an investigation is started, that if they truthfully disclose all facts and circumstances about their unreported offshore account and all unreported income is reported now, they will be relieved of the risk of prosecution. Not entering the OVDI program whatsoever is a very serious decision with far reaching implications. Very Big Brother-esque.
This is essentially the IRS’ attempt to offer taxpayers another new, voluntary disclosure initiative in order to get current on their tax returns. The 2011 Offshore Voluntary Disclosure Initiative (OVDI) is available only through Aug. 31, 2011. However, taxpayers who made a good faith effort to comply may be eligible for an extension.
The 2011 initiative has a higher penalty rate than the IRS’s previous voluntary disclosure program, which ended on Oct. 15, 2009, but offers clear benefits to encourage taxpayers to disclose foreign accounts now rather than risk IRS detection and possible criminal prosecution. In addition, the 2011 initiative includes new guidelines to provide fairness to people with smaller amounts of undisclosed assets or unusual situations. For general details on the 2011 initiative, see news release IR-2011-14, Second Special Voluntary Disclosure Initiative Opens; Those Hiding Assets Offshore Face Aug. 31 deadline.
Further details about this initiative are provided in a series of questions and answers (revised June 2, 2011) put together by the IRS.
How to Participate
Several documents are needed to participate in the initiative. Taxpayers interested in the new voluntary disclosure initiative can get complete details here:
Related Items:
Entering the 2011 OVDI program means that among other things, all applicants must pay the amount of tax, interest, a 20% accuracy related penalty and if applicable, failure to file penalties at the time of submission of the voluntary disclosure letter. A limited exception is provided if full payment cannot be made at the time of submission. All non filed FBAR’s and other non filed information returns must also be filed. The miscellaneous civil penalty (FABR - 25% of the highest single year aggregate value ofthe taxpayer’s foreign financial assets) will be determined by the revenue agent who audits the voluntary disclosure and submitted documents. The FBAR penalty is proposed at the end of the audit and then the tax payer has the option of agreeing or “opting out”. It is worth a very careful consideration of the time and expense of getting to the “opt-out” point when making the decision to enter or not enter the OVDI program. Unfortunately there is no guidance whatsoever for those taxpayers who wish to not to enter the OVDI program whatsoever other than threats of prosecution. An inappropriate “opt-out” can result in possible referral for prosecution, and in a willful case FBAR penalties of 50% of account balances per year and civil fraud penalties of 75% of the tax per year. It gets expensive.
