Understanding the PFIC Rules and the Implications of Owning Foreign Mutual Funds
Attached is an article that I co-authored with Randall Brody, EA of Tax Samaritan that appeared in the November-December 2016 issue of “EA Journal.”
Getting To Know Form W-8BEN And What It’s Used For
Non-U.S. persons must pay U.S. tax on certain kinds of income they receive from U.S. sources. Typically, the income is taxed at a flat rate of 30%. The only exception to paying the full amount is if an income tax treaty exists between the U.S. and another country that authorizes a lower rate of tax. Let’s take a slight […]
Survey of Citizens Renunciation Intentions: A Lannister Always Pays His Debts, but Americans Change Kingdoms to Evade Taxation
After the IRS shouted “Dracarys” in 2010, the Foreign Account Tax Compliance Act (FATCA) breathed fire on American taxpayers, causing more chaos than the destruction immortalized in the Rains of Castamere. The law mandates that U.S. citizens, including those residing outside the country, report their financial accounts outside the U.S. The IRS didn’t stop there; […]
International “Double Trouble” Taxation
The Problem A double taxation problem arises when a taxpayer who has a personal relationship with one country (home country) derives income from sources within another country (host country). The host country usually will assert jurisdiction on the basis of its economic relationship with the taxpayer. The home country may assert jurisdiction over the income […]
Understanding the Foreign Tax Credit Limitation
a. Purpose of Limitation The purpose of the foreign tax credit limitation is to confine the effects of the credit to mitigating double taxation of foreign-source taxable income. The limitation accomplishes this by preventing U.S. persons operating in high tax foreign countries from offsetting those higher foreign taxes against the U.S. tax on U.S.-source taxable […]
Calculating the Foreign Tax Credit In Three Easy Steps
The U.S. taxes U.S. persons on all of their income, regardless of its source. This creates a double taxation problem with respect to a U.S. person’s foreign-source income, since foreign countries usually tax all the income earned within their borders, including that derived by U.S. persons. If the U.S. did nothing to mitigate international double […]
Rippling Effect of Simple Source of Interest Rule & How It Can Produce Surprisingly Gratifying Results for Foreign Persons
How It Can Produce Surprisingly Gratifying Results For Foreign Persons The simple rule for the source of interest paid by individuals has become an international tax shelter for tax-averse foreign persons. The active ingredient in virtually all international tax haven operations is the deduction of interest from a stream of business income otherwise subject to […]
The Civil Fraud Penalty
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Failure to File a Tax Return Penalty
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The Accuracy-related Penalty
Under Section 6662(a), the accuracy-related penalty is “20% of the underpayment.”[i] It applies both inside and outside of the OVDP regime. The penalty applies whenever any one of five conditions is present. The two most common are: (1) “negligent or intentional disregard of tax rules” and (2) “substantial understatement of income tax.”[ii] Has the statute […]