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IRS Interest in Bitcoin and Coinbase May Mean Big Tax Trouble for U.S. Expats and Others

IRS Interest in Bitcoin and Coinbase May Mean Big Tax Trouble for U.S. Expats and Others

In recent years virtual, electronic currency has exploded onto the scene. Many people have been captivated by the technology for a number of reasons including the fact that Bitcoin and similar virtual currencies are the first modern currency to operate outside of the control of a government or central bank. In fact, Bitcoin functions primarily through the contributions of people who take an interest in the platform and provide computing resources to maintain the currency’s public ledger.   While Bitcoin is interesting from both a theoretical and a practical standpoint, many people who have invested in Bitcoin and similar virtual currencies may have failed to contemplate that “mining,” buying, holding, or selling Bitcoin can trigger tax filing and payment obligations. For expatriates and other individuals who failed to consider the tax implications of Bitcoin, the IRS has recently taken initial steps that may lead to a crackdown on those  or pay taxes on income. The first of these steps is a “John Doe” lawsuit filed by the IRS to obtain the identity of all Coinbase.com account holders from 2013 through 2015.  Do you have tax concerns as a US expat? Contact experienced CPA Ted Kleinman for IRS tax help. What Is Bitcoin and Why Do People Use it? Bitcoin is a type of digital currency that can allow people to send or accept money over the Internet. Bitcoin and its competitors do not work like traditional credit cards or other digital forms of payment. Rather, all Bitcoin transactions are conducted and recorded in the public blockchain. This means that all transactions are theoretically available for all to view. However, Bitcoin...
Even Grossly Negligent Taxpayers May Qualify for Streamlined Voluntary Disclosure but Time to File May be Running Out

Even Grossly Negligent Taxpayers May Qualify for Streamlined Voluntary Disclosure but Time to File May be Running Out

U.S. taxpayers with foreign assets face an array of disclosure and informational reporting obligations. Whether they live at home or are living abroad as an expatriate the failure to comply with various offshore tax and account reporting obligations can result in serious consequences. Even when the noncompliance is merely accidental, an initial violation of Report of Foreign Bank Account (FBAR) obligations can result in a penalty of up to $10,000 for each year where a foreign account went undisclosed. Penalties for violations of one’s duty to disclose under the Foreign Account Tax Compliance Act (FATCA) are similarly harsh.   Recent guidance from the IRS suggests that more taxpayers than initially believed can benefit from the reduced paperwork requirements and penalties of the Streamlined Disclosure Program. However, this guidance came prior to the election and there will soon be a new team in place at the Department of the U.S. Treasury. Taxpayers who suspect noncompliance with all or some offshore reporting obligations are therefore urged to leverage this program due to the potential for it to be wound down or for a rules change that makes the program significantly less favorable. CPA Ted Kleinman of U.S. Tax Help can assist U.S. taxpayers living at home or abroad comply with all tax obligations. Call 1-800-810-9312 today to schedule a “no-cost” review of your tax situation. Taxpayers Who Were Non-Willful Can Qualify for Streamlined Disclosure Even if They Were Grossly Negligent The key determination in figuring out if a taxpayer can enter into Streamlined Disclosure or whether he or she must proceed through standard Offshore Voluntary Disclosure (OVDP) turns on whether it appears...
Expatriates Who Claim the Foreign Earned Income Exclusion on the Basis of Foreign Residence Alone Can Face Tax Penalties

Expatriates Who Claim the Foreign Earned Income Exclusion on the Basis of Foreign Residence Alone Can Face Tax Penalties

One of the most common complaints regarding U.S. taxes that is leveled by expats and others with a U.S. tax obligation is the potential for double taxation. The United States is the only developed nation in the world that taxes on the basis of citizenship. All other developed nations tax on the basis of physical presence and economic nexuses. When these different methods of taxation intersect, U.S. taxpayers can face additional, double taxation on the income they earn abroad.   Thankfully, many U.S. taxpayers living abroad are often able to leverage certain tax treaties and tax agreements the United States has with foreign nations. These agreements frequently allow the taxpayer to eliminate all or a significant portion of the double-taxation he or she would otherwise face. However, taxpayers should ensure that they qualify for tax exclusions and tax credits before claiming them. Taxpayers who improperly claim tax exclusions like the Foreign Earned Income Tax Exclusion (FEIE) can face fines, penalties, and interest on any unpaid tax. Ted Kleinman of U.S. Tax Help has helped expats minimize double-taxation while maintaining all aspects of tax compliance for more than 20 years. Whether you are living at home or abroad in China, Brazil, India, Israel, or any other nation call U.S. Tax Help today to work with a trusted CPA. When Can a Taxpayer Claim FEIE on His or Her Tax Return? Minimizing the effects of double-taxation is often one of the foremost concerns in an expatriate taxpayer’s mind. Unfortunately, in some instance, these concerns can overwhelm a taxpayer’s better judgment and he or she may make claims for tax credits and exclusions...
IRS Expands Eligibility Criteria for Tax Installment Agreement Payment Plans

IRS Expands Eligibility Criteria for Tax Installment Agreement Payment Plans

For many taxpayers who have accumulated significant tax debts, the ability to pay by installment agreement is extremely welcome. By setting up a monthly payment agreement with the IRS taxpayers can avoid some of the potential consequences of owing money to the IRS. For instance, taxpayers who set-up and follow payment plans will not have to worry about IRS attempts to garnish wages or bank accountants. Agreeing to pay via an installment agreement can also reduce the amount of penalties and interest a taxpayer will pay.  The ability to pay by installment agreement is government by certain rules, conditions, and requirements. Taxpayers and their debt must satisfy these conditions to be eligible to pay via an installment agreement. While the rules are generally rather expansive, certain taxpayers may not qualify. In the past, these taxpayers may have been forced to seek alternate forms of relief. However, a new IRS pilot program means that some individuals who would not have qualified for installment agreements in the past can now qualify. Accountant Ted Kleinman of U.S. Tax Help can help taxpayers assess as to whether an installment agreement is likely to provide appropriate relief for the unique tax situation faced. If so, Ted can assess whether the taxpayer is likely to qualify and handle all aspects of the application. To schedule a private consultation with an experienced accountant, please call U.S. Tax Help at 1-800-810-9312 today. Who typically Qualifies for an IRS Installment Plan? The IRS recognizes that encouraging taxpayers to come forward and address unpaid balances voluntarily is frequently the most efficient and effective method of collecting tax debts. Drawing...
Filed for a Tax Extension? The Extended Tax Filing Deadline is Approaching

Filed for a Tax Extension? The Extended Tax Filing Deadline is Approaching

For many expatriates and other taxpayers, the ability to file for an automatic extension is extremely welcome. For many individuals, the annual April tax filing and payment deadline simply comes too soon. The taxpayer may not have time to get his or her documents in order. Alternatively, the taxpayer may have questions regarding income earned overseas, foreign accounts, or an array of other tax concerns and may need additional time to seek tax guidance from a professional. However, regardless of whether you live in the United States or in a foreign nation, the extended filing date is quickly approaching.  At U.S. Tax Help, CPA Ted Kleinman has provided careful tax guidance for U.S. taxpayers living at home and abroad for more than 20 years. Ted can help with an array of tax issues including filing income taxes, making foreign account disclosures, and fixing issues created by unfiled or unpaid taxes as a U.S. expat. To discuss how ted can assist with your tax concerns, call U.S. Tax Help at 1-800-810-9312 or contact the firm online. The Final Extended Tax Filing Deadline is October 17, 2016 Most expatriates are already aware that by virtue of living outside of the United States, expats are automatically granted a filing extension from the regular April 15th tax filing and payment deadline (the deadline was April 18, 2016, this year due to a federal holiday and weekend). Thus, all qualifying expats automatically have an additional two months – until June 15 – to file their taxes. However, taxpayers can request additional time to file their taxes by filing IRS Form 4868, Application for Automatic...
Tax Compliance Alert: IRS Issues Final Rule for Disguised Partnership Transfers

Tax Compliance Alert: IRS Issues Final Rule for Disguised Partnership Transfers

Many successful professionals and business owners have selected the partnership as the form of organization for their business. Compared to other entity forms, the partnership provides for certain tax advantages. Chiefly, the partnership is a pass-through entity that allows all profits and liabilities realized by the entity to pass through to a partner’s individual income tax. Essentially, the partnership acts as an extension of the general partner’s finances for tax purposes.   However, the pass-through nature and other aspects of the partnership entity means that it can be used by certain individuals to avoid paying tax that is legally owed. This may be accomplished by mischaracterizing income received from the partnership, misstating partnership income, mischaracterizing transactions, and a variety of other potentially fraudulent acts. In particular, the IRS is concerned about business owners who may mischaracterize certain transfers of property involving a partnership. IRS concerns include the potential for a business owner to mischaracterize a compensated transfer or sale of property as an uncompensated transfer. New final tax rules intended to detect and prosecute these types of transfers may require partners and partnerships to reassess their approach to certain transactions. CPA Ted Kleinman and U.S. Tax Help can help business partnerships assess their compliance with the new rule. How Will The Final Rule Impact Transactions Involving Partnerships? The final rule T.D. 9787, finalizes most of the proposed rules that were originally announced as part of REG-119305-11 in 2014. Essentially, the final rule makes changes to certain aspects of the tax code including changes to §707 and §752. In general, the changes to these sections went into effect on October 5,...
IRS Redefines Tax Regulations Opening Door to Married Filing Jointly  Status for Same-Sex Couple Taxpayers

IRS Redefines Tax Regulations Opening Door to Married Filing Jointly Status for Same-Sex Couple Taxpayers

For same-sex couples in the United States, the treatment received has not always lived up to the ideals set forth in our Constitution. While many gains have been made and public acceptance for same-sex marriages is at all-time highs in the United States, the country is still moving towards full marriage equality. For some same-sex couples married in the United States but disillusioned over subsequent efforts to curtail their right to marriage equality, the pace of change has not been rapid enough and some have gone on to live in European and other nations as expatriates. However, as these individuals soon found out, their status as a U.S. citizen means that American tax law—and its previous inequities concerning same-sex marriages. There is generally good news for same-sex couples married under the laws of a U.S. state. A recently announced IRS final regulation makes changes to the definition of marriage that provides for a recognition of same-sex marriages throughout the nation. This final rule, Regulation Section 301.7701-18, is a step forward for equality, but it will likely require taxpayers in same-sex marriages to reassess their tax filings to comply with the new regulation. For married same-sex taxpayers who filed using sole filer status, you will almost certainly need to make changes to your approach. This obligation will apply regardless of whether you live in the U.S. or abroad provided you have entered into a same-sex marriage recognized under Regulation Section 301.7701-18. Whether you are a taxpayer living in the United States or abroad, CPA Ted Kleinman can help. Over the past 20 years, Ted has helped numerous taxpayers with an...
IRA Rollover Problems? Is the IRS seeking a Penalty? New Rules May Provide Tax Relief

IRA Rollover Problems? Is the IRS seeking a Penalty? New Rules May Provide Tax Relief

Today, a ever-increasing share of responsibility for retirement planning and retirement savings is placed on the individual rather than pension plan administrators and other professionals. Reasons behind this shift include business’s desire to reduce costs, a do-it-yourself national ethos, and the rise of investment vehicles like the 401(k). While many taxpayers successfully navigate the often complex rules that govern IRAs and other retirement accounts, it is not outside the realm of possibility to make serious tax mistakes regarding these retirement accounts and disbursements you may receive. If you have received an IRA rollover disbursement and failed to reinvest that money in a qualifying account in a timely manner, you may be subject to significant penalties. Working with careful tax lawyers can help taxpayers avoid a situation of this type. However, if you fear that you have already made an error, Ted Kleinman of U.S. Tax Help may be able to utilize new IRS rules to mitigate the tax consequences of the this mistake. To schedule a free consultation, call Ted at 1-800-810-9312 or online today. What Happens If I Fail to Deposit an IRA Rollover Within 60 Days? When it comes to distributions from an IRA or IRA rollovers, the IRS applies what is known as the 60-day Rule. Under the 60-day Rule, a taxpayer is afforded 60 days to redeposit or reinvest the account in a qualifying account. If the taxpayer fails to redeposit the funds within this timeframe, significant penalties can apply. After 60 days elapses without appropriate action, the IRS assumes that you have had use of the money. This determination means that income tax becomes...
Update: ITIN Compliance May Require Renewal Starting January 1, 2017

Update: ITIN Compliance May Require Renewal Starting January 1, 2017

We have previously blogged about the upcoming changes to Individual Taxpayer Identification Numbers (ITNS) announced in IRS Notice 2016-48. These changes were implemented through the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). The changes implemented by the PATH Act and announced in IRS Notice 2016-48 means that many current ITIN holders will need to take action to maintain their compliance with the U.S. Tax Code. Ted Kleinman of U.S. Tax Help assists taxpayers living in the United States and abroad with tax concerns. To discuss how Ted can help with your ITIN concerns, foreign disclosure issues, and other tax issues please call U.S. Tax Help at 1-800-810-9312. Why Are Taxpayers Confused About ITIN Renewals? Many taxpayers have expressed confusion regarding whether they need to update or renew their ITIN. If you have questions about this issue or any other tax issues, it is typically prudent to seek professional assistance as soon as possible. Taking action swiftly provides your accountant time to assess the situation and take action before you have a compliance lapse. Some of the confusion regarding whether one needs to renew an ITIN comes from the previous regulatory regime under which ITIN renewals were processed. Under the old rules, the ITIN remained in effect so long as the taxpayer did not apply for and receive a Social Security number. This handling of ITINs is no longer relevant for most taxpayers and new rules determine whether you need to file for a new ITIN. How Do I Know I Need to Renew my ITIN? Under the new rules explained in IRS Notice 2016-48, there are...
AICPA Recommends the IRS Simplify Offshore Tax Disclosure Requirements for American Expatriates

AICPA Recommends the IRS Simplify Offshore Tax Disclosure Requirements for American Expatriates

The AICPA (American Institute of CPAs) is the world’s largest member association representing the accounting profession. AICPA has more than 412,000 members in 144 countries across the globe. In a letter to the IRS dated August 15, 2016, AICPA expressed its frustration with certain duplicative offshore reporting requirements and other aspects of the U.S. Tax Code that unnecessarily complicate the compliance process for expatriates and others with financial interests overseas. While AICPA recognizes that the IRS and U.S. government needs to take steps to address potential offshore tax evasion, the organization believes that IRS and U.S. government efforts to address this behavior are overboard and great an unnecessary burden. The attempts to combat offshore tax fraud needlessly impose significant tax and financial regulatory compliance burden on American expats who are living abroad and keeping foreign financial accounts to accommodate common financial activities. What Reports Are Americans Living Abroad Currently Required to File? Americans living abroad are currently required to file an array of tax returns and other informational reports. These reports are often duplicative and impose a significant compliance burden on expats and other affected taxpayers. Reports that taxpayers living abroad are frequently required to file include: To satisfy an FBAR obligation, FinCEN Form 114, Report of Foreign Bank and Financial Accounts must be filed annually. To satisfy a Foreign Account Tax Compliance Act (FATCA) obligation a taxpayer must file Form 8938, Statement of Specified Foreign Financial Assets If the taxpayer has received foreign gifts or is associated with a foreign trust he or she will likely have to file Forms 3520/3520A, Annual Return To Report Transactions With Foreign...

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