Several recent court cases could have important implications for businesses and individuals who maintain accounts in foreign banks, brokerages, or other financial institutions.
In one case, the U.S. Supreme Court significantly curtailed the potential penalties for account holders who inadvertently fail to comply with reporting requirements related to their foreign accounts. That decision has generated hope among other petitioners who have incurred penalties in similar cases.
Any taxpayer with a foreign financial account should be aware of these easily overlooked reporting requirements and the recent court rulings that could affect them. (more…)
When a domestic company begins operations in another country, its tax picture grows dramatically more complicated. If an international expansion is part of your company’s growth strategy, your financial management and tax teams will need to make a number of critical tax-related decisions in addition to the many strategic, competitive, and financial considerations your company already must address.
Here are seven important tax-related variables that will affect when, where, how, and even whether you launch overseas operations. While these are by no means the only issues you must consider, your answers to these questions will drive much of your future decision-making. (more…)
If you have an interest in (or authority over) a foreign financial account, you may have to electronically file a form called the “Report of Foreign Bank and Financial Accounts” (FBAR). Failing to file a required FBAR can result in penalties.
In the recent case of U.S. v. Park, a federal district court refused to dismiss an action to collect an FBAR penalty from a decedent’s family. In the court’s view, the IRS provided sufficient factual detail about the penalty and assessment, the penalty didn’t exceed the statutory maximum, and the assessment survived the decedent’s death. (more…)
In March, the IRS issued proposed regulations that cover determining the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). The regs also coordinate the FDII and GILTI deduction with other tax provisions. Here’s an overview.
Background
The Tax Cuts and Jobs Act (TCJA) established a “participation exemption system” under which certain earnings of a foreign corporation can be repatriated to a corporate U.S. shareholder without U.S. tax. (This occurs under Internal Revenue Code Section 245A.) (more…)
On February 13, 2018, the Treasury Department and the Internal Revenue Service issued Rev. Proc. 2018-17, which provides modifications to the procedures for changing the accounting period of foreign corporations owned by U.S. shareholders that are subject to the transition tax under the Tax Cuts and Jobs Act. Rev. Proc. 2018-17 basically disallows the accounting period change if such change could result in the avoidance, reduction, or delay of the transition tax. (more…)
A U.S. District Court held that it isn’t unconstitutional under a provision of the United States–Canada tax treaty for Canada to offset Canadian tax refunds against unpaid U.S. tax liabilities.
The U.S. District Court for the District of Columbia stated that “the arm of the U.S. tax man is long, but in this case it needed extend only over our northern border to find” the taxpayer. The court dismissed the expat’s case, finding that he’d failed on his claims for relief under the Eighth Amendment and both the Due Process and Equal Protection Clauses of the Fifth Amendment. (more…)
The U.S. Tax Court has held that a commercial airline pilot stationed in South Korea failed both the “tax home” and the “bona fide residence” tests that determine whether a taxpayer qualifies for the foreign earned income exclusion.
The pilot flew airplanes for Korean Air Lines (KAL) in 2011 and 2012. KAL considered him to be stationed in Incheon, Korea, which meant that Incheon was the airport he most frequently operated from. (more…)
The Tax Court ruled that certain payments received by a U.S. citizen working abroad from a foreign taxing authority were in fact refunds under the Internal Revenue Code.
Facts of the case
A U.S. citizen worked for the London office of Goldman Sachs and received employee compensation from which United Kingdom income tax was withheld. The taxpayer filed both U.S. and UK income tax returns for each year at issue. On a timely filed U.S. return for each year, she claimed a foreign tax credit in an amount equivalent to the UK tax withheld by her employer.
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In a further indication of the IRS’s continued focus on international tax issues, the tax agency updated an International Practice Unit (IPU) summarizing the calculation and recapture of foreign and domestic losses and their impact on the foreign tax credit.
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