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FBAR Requirements

August 12, 2024August 24, 2014 by Brotman Law

FBAR Requirements – FinCEN form 114, Report of Foreign Bank and Financial Accounts (FBAR)

Individuals who are required to file FinCEN form 114 are U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold.[1] This includes residents and resident aliens of U.S. territories and U.S. territory entities. The threshold is a value of $10,000 or more during the calendar year. If you are required to report, you must report the maximum value of the financial account. To make this determination you must determine the maximum value using periodic account statements. Then you must covert this figure to U.S. dollars using the end of the year exchange rates and report the figure in U.S. dollars. As of 2014 the report must be electronically filed through FinCEN’s website by June 30, and no extensions are given. The FBAR does not get filed with the federal income tax return.

Reporting Requirements for Foreign Assets – Part One

August 12, 2024August 24, 2014 by Brotman Law

Individual Reporting Requirements for Foreign Assets – Your Tax Return

Here is a summary of the Reporting Requirements for Foreign Assets. Under the law, U.S. citizens, resident aliens, and certain nonresident aliens are required to report worldwide income from all sources including foreign bank and financial accounts. Required reporters must pay taxes on income from these accounts at their individual tax rates. The IRS recognizes that there are many legitimate reasons for U.S. taxpayers to have offshore accounts such as convenience, investing, and to facilitate international banking transactions. However, U.S. taxpayers are prohibited under law from using offshore accounts, including foreign banks, security accounts, and trusts, to avoid paying tax. [1] To fully understand the problem, it is necessary to understand what the reporting requirements for foreign assets are.

Offshore Voluntary Disclosure Introduction – Part Two

August 12, 2024August 24, 2014 by Brotman Law

The IRS used much of the information it accumulated under the 2009 OVDP to continue investigations into individuals and financial institutions that facilitated the non-compliance with U.S. tax laws. With the investigations ongoing, many tax practitioners pressed the IRS on behalf of concerned non-complaint clients to continue the voluntary disclosure program. In February of 2011 the IRS responded. It announced the 2011 Offshore Voluntary Disclosure Initiative (OVDI.) The program lasted from February 2011 until September 9, 2011. The terms of the 2011 OVDI differed from that of the 2009 OVDP. Participants in the 2011 program paid a 25% miscellaneous offshore penalty on the highest aggregate value of the unreported offshore accounts from 2003 until 2010. In addition, depending on the severity of their noncompliance, they were also exposed to a 5% or 12.5% penalty. The IRS was able to close 70% of the voluntary disclosed cases that year which resulted in 15,000 additional disclosures the collection of $1.6 billion dollars in back taxes, penalties, and interest.

Offshore Voluntary Disclosure Introduction – Part One

August 12, 2024August 24, 2014 by Brotman Law

The Department of Treasury and the Department of Justice have a new mandate – stop offshore tax cheating and bring in billions of dollars of additional tax revenue from non-disclosed foreign accounts. The Internal Revenue Services’ Offshore Voluntary Tax Disclosure Program is designed to encourage non-compliant taxpayers to come clean and bring their tax liabilities current. The IRS began this initiative in 2009 with the Offshore Voluntary Disclosure Program. The Service has now sponsored three voluntary programs. The IRS reports that the efforts have yielded $6.5 billion in back taxes and brought 45,000 tax payers back into the law abiding fold.[1] It is estimated that this represents only a fraction of funds held offshore by U.S. citizens and other required U.S. income tax filers. [2]

California Department of Tax and Fee Administration – Out of State Retailers

August 12, 2024August 24, 2014 by Brotman Law

An out of state retailer “engaged in business in this state” (California) are required to register, collect use tax on taxable sales made to consumers in California, and remit this tax to the California Department of Tax and Fee Administration. Revenue and Taxation Code section 6203 provides that “retailer engaged in business in this state” specifically includes, but is not limited to, any of the following:

Specific Issues in California Use Tax Audits

August 12, 2024August 24, 2014 by Brotman Law

California Use Tax Audits – Use Tax on Leases

In general, during California use tax audits, use tax will only be asserted against the lessor since it is difficult to determine from the lessee’s records whether the lease is a “sale” under the Sales and Use Tax Law. Therefore, a review of the lessor’s records will be made to determine if any tax liability exists. Whenever the audit of a lessee reveals that tax has not been collected by the lessor, and the auditor cannot determine that tax was properly due, an audit memorandum (Form BOE–1164) will be prepared and sent to the lessor’s district. During use tax audits, he auditor will not assert tax against the lessee. An exception to the above general policy is that tax may be assessed against the lessee if the lessor is located out-of-state, and the property being leased is not mobile transportation equipment (MTE). If tax is assessed, Form BOE–1164 will be sent to the lessor’s current district showing the amount of tax assessed and the applicable periods.

Franchise Tax Board Appeals

August 12, 2024August 24, 2014 by Brotman Law

Franchise Tax Board Appeals – Process of Appealing FTB’s Decision in Protest Dispute

The Franchise Tax Board Appeals Process

The protester who wants to appeal the Franchise Tax Board’s decision, has 30 days to file appeal in writing from the day FTB mails Notice of Action letter. If taxpayer does not appeal within 30 days, the decision becomes final. FTB then sends taxpayer written demand for payment, and taxpayer must pay the amount demanded within 10 days from the day the Franchise Tax Board mailed the demand letter.

Franchise Tax Board Wage Garnishment – Orders to Withhold

August 12, 2024August 24, 2014 by Brotman Law

About a Franchise Tax Board Wage Garnishment

With respect to a Franchise Tax Board wage garnishment, the Franchise Tax Board can use involuntary means of delinquent tax collection if voluntary means do not work. For example, an Order To Withhold (OTW) is a one time legal order seizing 100% of the available funds from a financial institution or escrow company (also commonly known as a Franchise Tax Board wage garnishment) . Potential payors for an OTW include California banks or escrow companies holding funds (e.g., checking or savings account, or proceeds from a sale of property or another asset) of a business entity. An OTW can not be issued to a financial institution where no branches are located within California. Prior to remitting funds to the Franchise Tax Board because of a Franchise Tax Board wage garnishmen, banks are required to hold funds for 10 days from the date the OTW was received. Miscellaneous payor sources for OTW may be, but are not limited to the following:

FTB Wage Garnishments – Part Two

August 12, 2024August 24, 2014 by Brotman Law

A Continuous Order To Withhold (COTW) is a legal order seizing funds from a miscellaneous payor and remains in effect for up to a year from the date the COTW was issued. A COTW attaches rents, commissions or scheduled payments from a sale of property or any other type of asset where continuous multiple payments are made. COTW payors do not include funds held by a bank or escrow company. A COTW attaches 100% of the available funds at the time they are received, but does not exceed the amount due on the order. COTW is valid until the amount on the order is withheld in full or the twelve months has expired. The total amount due includes the total tax, penalties, fees and interest to the date of the COTW. Applicable tax years are all tax years with liabilities receiving due process that are due and payable.

Franchise Tax Board Protests Returned for Further Development

August 12, 2024August 24, 2014 by Brotman Law

It may be determined that a protest should be returned to originating auditor for further development. Further development implies gathering additional facts about the case. After sufficient facts are gathered, auditor makes his or her analysis and sends the case along with recommendations back to Protest Unit or Technical Resource Section within FTB. If taxpayer agrees with auditor’s recommendations then a Hearing Officer will issue the Notice of Action based on submitted recommendation. If the taxpayer and representative are not in agreement with the auditor’s recommendation, and they still require an oral hearing, the protest will be assigned to a Hearing Officer to conduct the oral hearing and resolve the case.