Court Says IRS Can Assess Form 5471 Penalties

Our federal tax system is code-based. This means that most of what the law is can be found in statutes. The premise is that one can read the statutes and get a general idea of what the law is. This is why when it comes to tax law, each word matters. Adding or removing a…

The Evolution of Foreign Account Tax Reporting

The IRS and Treasury face a number of challenges in administering our tax and financial systems. This includes challenges presented by foreign transactions by U.S. citizens and residents. In recent years, high-profile cases involving Americans using offshore accounts to evade taxes have prompted the U.S. government to crack down on tax evasion and make it…

Recovering Legal Expenses for Mistaken IRS Audit of Non-Resident

The U.S. has significant and complex reporting and filing and notice requirements. This includes a myriad of state and local requirements and federal requirements, including income tax return filing requirements. As odd as it sounds, it is part of what makes America great. We often don’t think about it, but these filing requirements are part…

Gift Tax Return for Wrong Year Starts IRS Statute of Limitations

The IRS receives a vast amount of information, which can make it challenging for them to act on all the information they possess. However, taxpayers have the ability to alert the IRS to potential tax issues and wait for the IRS’s response. The IRS generally cannot ignore information it has received. For example, in the…

If a Foreign Entity is a Foreign Trust

United States persons who have foreign transactions present a number of compliance problems for the IRS. It is difficult for the IRS to know whether taxpayers are simply not paying U.S. taxes on foreign transactions. The IRS officially recognized the significance of its international tax limitations in 2010 when it renamed its large business division…

Wages for Foreign Researcher Are Taxable

A researcher gets a grant award direct from an institution or university. The grant is not paid as wages, but is paid as a stipend or maybe as a scholarship. The payment might not be subject to income tax. Compare that to a grant is awarded to an institution and the institution pays a researcher…

Defense Contractor Able to Exclude Foreign Income

United States citizens pay tax on their worldwide income. This general rule can result in double taxation–with the United States imposing tax on the same income that was already taxed by a foreign government. The United States has tax treaties with many countries that help avoid this type of double taxation. The United States also…

Foreign Trust Owner Liable for 35% IRS Penalty

The IRS shifted its focus to international issues about ten years ago. This included having the penalty group within the IRS’s Small Business/Self-Employed division focus on international reporting penalties. This is in addition to the Treasury’s FBAR filing requirements. The SB/SE division’s focus on penalties started with a few penalty notices. The number of these…

Foreign Corp Tax Returns Must Be Filed Timely

The IRS refocused its efforts on international tax issues about ten years ago. This effort has yielded scores of transfer pricing, foreign tax credit, and similar tax disputes. While not as prominent as transfer pricing and foreign tax credit disputes, the IRS has also focused on U.S.-sourced income that is not reported. The IRS has…

Foreign Trust Beneficiary Liable for a Double Tax Penalty?

Foreign Trust Beneficiary Liable For A Double Tax Penalty?

Can the sole owner of a foreign trust who is also its sole beneficiary be penalized twice for not filing a single Form 3520? Can the IRS choose the higher penalty for the beneficiary in this situation? In Wilson v. United States, No. 19-cv-5037 (BMC) (E.D.N.Y. 2019), the IRS argued that it could impose pick…