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trump sign new tax law -2018 IRS tax bill

Who’s Been Naughty And Who’s Been Nice? President Trump Signs New Tax Law In Time For Christmas.

On December 22, 2017, President Trump signed into law the 2017 Tax Cuts And Jobs Act. It’s been a good 30 years since the last time the Internal Revenue Code received such a major update.  With much discussion on the touted benefits of the plan, there has been very little discussion on what is missing.

Major Changes From The New Law Include:

  • Compressed And Lower Income Tax Rates For Individuals.
  • Increased Standard Deduction For Individuals
  • Elimination Of Personal Exemptions
  • Limitations of Deductibility Of Itemized Deductions including Mortgage Interest and State & Local Taxes.
  • Lower Corporation Tax Rates.

More details on these changes and others will be forthcoming.

But What Is Missing In The New Law? 

U.S. Taxpayers Still Taxed On Worldwide Income.  There is no change to citizen based taxation for U.S. taxpayers.  That means that U.S. citizens and resident aliens who are subject to U.S. taxation will still have to report their worldwide income, including income from foreign trusts and foreign bank and securities accounts, on their U.S individual income tax returns. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Repeal Of The Foreign Account Tax Compliance Act (“FATCA”). There is no repeal of or for that matter any change in FATCA.  FATCA was enacted into law in 2010 to impose a reporting obligation by foreign financial institutions to report information on U.S. account holders so that it is received by the IRS.  It also mandates that U.S. citizens, resident aliens and certain non-resident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds. Reporting thresholds vary based on whether a taxpayer files a joint income tax return or lives abroad. The lowest reporting threshold for Form 8938 is $50,000 but varies by taxpayer.

 Other Filing Requirements If You Have Foreign Accounts Remain Unchanged.

By law, many U.S. taxpayers with foreign accounts exceeding certain thresholds must file Form 114, Report of Foreign Bank and Financial Accounts, known as the “FBAR.” It is filed electronically with the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”).

Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during a calendar year must file FBARs. It is due by the due date of your Form 1040 and must be filed electronically through the BSA E-Filing System website.

By law, Americans living abroad, as well as many non-U.S. citizens, must file a U.S. income tax return. In addition, key tax benefits, such as the foreign earned income exclusion, are only available to those who file U.S. returns.

Penalties for non-compliance.

Civil Fraud – If your failure to file is due to fraud, the penalty is 15% for each month or part of a month that your return is late, up to a maximum of 75%.

Criminal Fraud – Any person who willfully attempts in any manner to evade or defeat any tax under the Internal Revenue Code or the payment thereof is, in addition to other penalties provided by law, guilty of a felony and, upon conviction thereof, can be fined not more than $100,000 ($500,000 in the case of a corporation), or imprisoned not more than five years, or both, together with the costs of prosecution (Code Sec. 7201).

The term “willfully” has been interpreted to require a specific intent to violate the law (U.S. v. Pomponio, 429 U.S. 10 (1976)). The term “willfulness” is defined as the voluntary, intentional violation of a known legal duty (Cheek v. U.S., 498 U.S. 192 (1991)).

Additionally, the penalties for FBAR noncompliance are stiffer than the civil tax penalties ordinarily imposed for delinquent taxes. For non-willful violations it is $10,000.00 per account per year going back as far as six years. For willful violations the penalties for noncompliance which the government may impose include a fine of not more than $500,000 and imprisonment of not more than five years, for failure to file a report, supply information, and for filing a false or fraudulent report.

Lastly, failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40% penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.

The Solution.

The IRS has special programs for taxpayers to come forward to disclose unreported foreign accounts and unreported foreign income. The main program is called the Offshore Voluntary Disclosure Program (OVDP). OVDP offers taxpayers with undisclosed income from offshore accounts an opportunity to get current with their tax returns and information reporting obligations. The program encourages taxpayers to voluntarily disclose foreign accounts now rather than risk detection by the IRS at a later date and face more severe penalties and possible criminal prosecution.

For taxpayers who willfully did not comply with the U.S. tax laws, we recommend going into the 2014 Offshore Voluntary Disclosure Program (OVDP). Under this program, you can get immunity from criminal prosecution and the one-time penalty is 27.5% of the highest aggregate value of your foreign income producing asset holdings.

For taxpayers who were non-willful, we recommend going into the Streamlined Procedures of OVDP. Under these procedures the penalty rate is 5% and if you are a foreign person, that penalty can be waived. This is a very popular program and we have had much success qualifying taxpayers and demonstrating to the IRS that their non-compliance was not willful.

What Should You Do?

Don’t delay because if the government finds out about you first, you will be subject to the maximum civil and maybe criminal penalties under the law.  Taxpayers who hire an experienced tax attorney in Offshore Account Voluntary Disclosures should result in avoiding any pitfalls and gaining the maximum benefits conferred by this program. Let the tax attorneys of the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County, San Jose and other California locations resolve your IRS tax problems, get you in compliance with your FBAR filing obligations, and minimize the chance of any criminal investigation or imposition of civil penalties.

 

    Request A Case Evaluation Or Tax Resolution Development Plan

    Get a Tax Resolution Development Plan from us first before you attempt to deal with the IRS. There are several options for you to meet or connect with Board Certified Tax Attorney Jeffrey B. Kahn. Jeff will review your situation and go over your options and best strategy to resolve your tax problems. This is more than a mere consultation. You will get the strategy or plan to move forward to resolve your tax problems! Jeff’s office can set up a date and time that is convenient for you. By the end of your Tax Resolution Development Plan Session, if you desire to hire us to implement the strategy or plan, Jeff would quote you our fees and apply in full the session fee paid for the Tax Resolution Development Plan Session.

    Types Of Initial Sessions:

    Most Popular GoToMeeting Virtual Tax Development Resolution Plan Session
    Maximum Duration: 60 minutes - Session
    Fee: $495.00 (Credited if hired*)
    Requires a computer, laptop, tablet or mobile device compatible with GoToMeeting. Please allow up to a 10-minute window following the appointment time for us to start the meeting. How secure is GoToMeeting? Your sessions are completely private and secure. All of GoToMeetings solutions feature end-to-end Secure Sockets Layer (SSL) and 128-bit Advanced Encryption Standard (AES) encryption. No unencrypted information is ever stored on our system.


    Face Time or Standard Telephone Tax Development Resolution Plan Session
    Maximum Duration: 60 minutes - Session
    Fee: $395.00 (Credited if hired*)
    Face Time requires an Apple device. Please allow up to a 10-minute window following the appointment time for us to get in contact with you. If you are located outside the U.S. please call us at the appointed time.


    Standard Fee Face-To-Face Tax Development Resolution Plan Session
    Maximum Duration: 60 minutes - Session
    Fee: $795.00 (Credited if hired*)
    Session is held at any of our offices or any other location you designate such as your financial adviser’s office or your accountant’s office, your place of business or your residence.


    Jeff’s office can take your credit card information to charge the session fee which secures your session.

    * The session fee is non-refundable and any allotted duration of time unused is not refunded; however, the full session fee will be applied as a credit toward future service if you choose to engage our firm.