Marini & Associates, P.A.
wishes All of Its Readers a
Happy Thanksgiving!
Happy Thanksgiving!
Wednesday, November 27, 2019
G20 Celebrates End of Offshore Banking Secrecy!
According to the OECD, on 26-27 November, the 10th Anniversary Meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) in Paris will bring together more than 500 delegates from 131 member jurisdictions for renewed discussions on efforts to advance the tax transparency agenda.
It Has Been Ten Years Since The G20 Declared The End Of Banking Secrecy, The International Community Has Achieved Unprecedented Success In Using New Transparency Standards To Fight Offshore Tax Evasion.
Working through the Global Forum, 158 member jurisdictions have implemented robust standards that have prompted a tidal shift in exchange of information for tax purposes.
At the heart of this shift are thousands of bilateral exchange relationships now in place, which have enabled more than 250 000 information exchange requests over the past decade.
According to data in The Global Forum’s 10th anniversary report, in 2018 nearly 100 member jurisdictions automatically exchanged information on 47 million financial accounts, covering total assets of USD 4.9 trillion. In total, more than EUR 100 billion in additional tax revenue has been identified since 2009.
 |
A recent OECD study shows that wider exchange of information driven by the Global Forum is associated with a global reduction in foreign-owned bank deposits in international financial centres (IFC) by 24% (USD 410 billion) between 2008 and 2019. The commencement of AEOI in 2017 and 2018 is associated with an average reduction in IFC bank deposits owned by non-IFC residents of 22%.
Almost all Global Forum members have eliminated bank secrecy for tax purposes, with nearly 70 jurisdictions changing their laws since 2009. Almost all members either forbid bearer shares– previously a longstanding impediment to tax compliance efforts – or ensure that the owners can be identified. Since 2017, members must also ensure transparency of the beneficial owners of legal entities, so these cannot be used to conceal ownership and evade tax.
Tax transparency is particularly important for developing countries. With support from the Global Forum, 85 developing country members have used exchange of information to strengthen their tax collection capacity. The Africa Initiative has helped African members identify over EUR 90 million in additional tax revenues in 2018, thanks to information exchanges and voluntary disclosures. To improve developing countries’ uptake of automatic exchange of financial information, the OECD-UNDP Tax Inspectors Without Borders Initiative today launched a pilot project aimed at supporting the effective use of the data.
“There is still a lot of work ahead of us,” said Zayda Manatta, head of the Global Forum Secretariat. “Members must continue efforts to ensure full implementation of existing standards and address the tax transparency challenges of an increasingly integrated and digitalised global economy.”
Have Unreported Income From Offshore Accounts?
Want To Know Which OVDP Program is Right for You?
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact us at:
or Toll Free at 888-8TaxAid (888 882-9243).
Friday, November 22, 2019
Trends in IRS audits - Part I
According to accountinTODAY, most taxpayers envision Internal Revenue Service audits as intrusive investigations resulting in criminal
sentences. Today, nothing could be farther than the truth. The IRS’s auditing power has been greatly
diminished in the past decade. IRS audit resources have been reduced by 28 percent in the last decade and
the audit rate has dropped from 0.9 percent in 2010 to 0.5 percent in 2018. In fact, the number of IRS audits
in 2018 (991,168 audits) dropped almost in half compared to 2010 (1.735 million audits).
Since 2010, the IRS has been tasked with doing more with less resources, but the reality is that the IRS cannot do more audits with less resources. The IRS audit data reveals 10 trends from the past decade that have become the new realities for current state of IRS audits.
1. Most audits are done by mail - This trend started with IRS reforms in the late 1990s. In 1998, just before IRS reforms, the service audited 47 percent of taxpayers by mail. In the past decade, IRS data shows that the service prefers the less-intrusive mail audit. Today, three out of four audits of individual taxpayers are done by mail — a ratio that has held since 2010. These audits usually challenge small amounts of credits or deductions on a return, and require only a mail response, with documentation, to an IRS central campus location.
Since 2010, the IRS has been tasked with doing more with less resources, but the reality is that the IRS cannot do more audits with less resources. The IRS audit data reveals 10 trends from the past decade that have become the new realities for current state of IRS audits.
1. Most audits are done by mail - This trend started with IRS reforms in the late 1990s. In 1998, just before IRS reforms, the service audited 47 percent of taxpayers by mail. In the past decade, IRS data shows that the service prefers the less-intrusive mail audit. Today, three out of four audits of individual taxpayers are done by mail — a ratio that has held since 2010. These audits usually challenge small amounts of credits or deductions on a return, and require only a mail response, with documentation, to an IRS central campus location.
2. The main issue in audits: The EITC -
Fifty percent of all individual audits involve a taxpayer who is claiming the Earned Income Tax Credit. IRS efforts to curb EITC
errors largely rely on audits to hold a questionable EITC claim on a return. Politicians have criticized the IRS in the past for picking
on low-income taxpayers, and the EITC audit rate is their main evidence. Compared to other taxpayer profiles, the IRS clearly has
the propensity to address the EITC taxpayer more than other issues, even the small-business individual taxpayers.
3. An alarming amount of people do not respond to an audit
There is linkage here to the EITC mail audit. The Taxpayer Advocate reports that almost two-thirds of all mail audits go without
response or are assessed by taxpayer default. That is, the IRS just assesses the additional tax without the taxpayer contesting the
service’s determination. Only one in five taxpayers agree to their mail audit adjustment — and likely, from the data, they don’t
understand how to appeal. This mess leads to many audit reconsiderations (i.e. an audit “re-do” request). Again, more question
marks here for the targets of mail audits — the low-income population.
To be continued in parts II & III.
Have an IRS Tax Problem?
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact us at:
or Toll Free at 888-8TaxAid (888 882-9243).
Tuesday, November 19, 2019
Ten Facts About Tax Expatriation - Part II
For those who expatriate after June 16, 2008, the rules are different, since Internal Revenue Code Section 877A applies instead of Section 877. You are subject to an immediate exit tax, which deems you (for tax purposes) to have sold all of your worldwide property for its fair market value the day before your departure from the U.S.
We also discussed in Ten Facts About Tax Expatriation - Part I:
1. Uncle Sam taxes income worldwide.
2. Expatriating means really leaving.
3. The old 10-year window is closed.
4. Big changes came in 1996.
Thirty years later, in 1996, after the Forbes story on "The New Refugees" created a stir, Congress tried again. As part of the Health Insurance Portability and Accountability Act of 1996 (otherwise known as HIPAA), Congress added a presumption of tax avoidance if an expatriate's five-year average net income tax exceeded $100,000, or if the expatriate's net worth was $500,000 or more (both adjusted each year for inflation). But people could--and with the help of skilled lawyers did--rebut the presumption, and the IRS still had to show tax avoidance in most cases.
5. Tax avoidance is now irrelevant.
In 2004 (in the American Jobs Creation Act), Congress threw out the tax avoidance motive test altogether, imposing 10 years of U.S. tax on U.S. source gross income and gains on a net basis if you left the country for any reason. However, Congress increased the threshold for determining who was subject to this expatriation tax. An individual was only subject to the expatriation tax if he had an average net annual income tax for the five years preceding expatriation of $124,000, or if he had a net worth of $2 million or more on the date of expatriation. (If you expatriated on or after June 17, 2008, under the new Section 877A, there is a higher net worth threshold--currently $145,000 of annual net income tax for 2010.)
In some cases, even if you're below these thresholds, you'll get taxed. For example, expatriates must certify their past U.S. tax compliance by filing an IRS Form 8854. Any expatriate who fails to certify compliance with U.S. federal income tax laws for the five taxable years preceding expatriating is subject to the expatriate income tax even if he didn't meet the income tax liability or net worth tests.
Plus, later U.S. visits can be expensive if you expatriated before June 17, 2008 (and Internal Revenue Code Section 877 applies). In that case if an expatriate comes back to the U.S. for more than 30 days in any year during the 10 years following expatriation, that person is considered a resident of the U.S. for that whole tax year. That means the person would again be subject to U.S. tax on his worldwide income, not just his U.S.-source income. Ouch!
This 30-day rule does, however, have an exception for any days (up to a 30-day limit) that the individual performed personal services in the U.S. for an employer (who is not related). This exception only applies if that individual either had certain ties with other countries or was physically present in the U.S. for 30 days or less for each year in the 10-year period on the date of expatriation or termination of residency.
6. There are special rules for long-term residents.
It's easy to define who is or is not a U.S. citizen, but the term "long-term resident" isn't quite so clear. A long-term resident is a non-U.S. citizen who is a lawful permanent resident of the U.S. in at least eight years during the 15-year period before that person's residency ends. A "lawful permanent resident" means a green card holder. However, a person is not treated as a lawful permanent resident for purposes of this eight-year test in a year in which that person is treated as a resident of a foreign country under a tax treaty, and does not waive the treaty benefits applicable to the residents of that country. Caution: holding a green card for even one day during a year will taint the whole year.
7. There's an exit tax for expatriations on or after June 17, 2008.
The Heroes Earnings Assistance and Relief Tax Act of 2008 (generally known as the Heroes Act) changed the method of taxation for those who became expatriates on or after June 17, 2008, adding even more complexity and usually higher U.S. taxes. If you are a U.S. citizen or long-term resident who expatriates on or after June 17, 2008, you will be deemed (for tax purposes) to have sold all of your worldwide property for its fair market value the day before you leave the U.S.! All that gain is subject to U.S. tax at the capital gains rate. Plus, all your gain is taken into account without regard to any ameliorative tax provisions in the Internal Revenue Code.
Put differently, you get all of the bad parts of the tax code, and none of the good. That would include, for example, the inability to benefit from the $250,000 per person ($500,000 per couple) exclusion from gain on a principal residence (Section 121 of the Internal Revenue Code) and many other rules. The exit tax is like an estate tax, in the sense that everything that would be part of your estate will be subject to income tax on unrealized gains as of the day before you expatriate, as if you sold all your assets the day before leaving. In effect this is Congress' way of making sure your assets don't escape the estate tax entirely through expatriation.
3. The old 10-year window is closed.
Herein will discuss 7 more, of the 10 things you need to know about Expatriation:
(set forth below and in one subsequent blog posts)
Thirty years later, in 1996, after the Forbes story on "The New Refugees" created a stir, Congress tried again. As part of the Health Insurance Portability and Accountability Act of 1996 (otherwise known as HIPAA), Congress added a presumption of tax avoidance if an expatriate's five-year average net income tax exceeded $100,000, or if the expatriate's net worth was $500,000 or more (both adjusted each year for inflation). But people could--and with the help of skilled lawyers did--rebut the presumption, and the IRS still had to show tax avoidance in most cases.
5. Tax avoidance is now irrelevant.
In 2004 (in the American Jobs Creation Act), Congress threw out the tax avoidance motive test altogether, imposing 10 years of U.S. tax on U.S. source gross income and gains on a net basis if you left the country for any reason. However, Congress increased the threshold for determining who was subject to this expatriation tax. An individual was only subject to the expatriation tax if he had an average net annual income tax for the five years preceding expatriation of $124,000, or if he had a net worth of $2 million or more on the date of expatriation. (If you expatriated on or after June 17, 2008, under the new Section 877A, there is a higher net worth threshold--currently $145,000 of annual net income tax for 2010.)
In some cases, even if you're below these thresholds, you'll get taxed. For example, expatriates must certify their past U.S. tax compliance by filing an IRS Form 8854. Any expatriate who fails to certify compliance with U.S. federal income tax laws for the five taxable years preceding expatriating is subject to the expatriate income tax even if he didn't meet the income tax liability or net worth tests.
Plus, later U.S. visits can be expensive if you expatriated before June 17, 2008 (and Internal Revenue Code Section 877 applies). In that case if an expatriate comes back to the U.S. for more than 30 days in any year during the 10 years following expatriation, that person is considered a resident of the U.S. for that whole tax year. That means the person would again be subject to U.S. tax on his worldwide income, not just his U.S.-source income. Ouch!
This 30-day rule does, however, have an exception for any days (up to a 30-day limit) that the individual performed personal services in the U.S. for an employer (who is not related). This exception only applies if that individual either had certain ties with other countries or was physically present in the U.S. for 30 days or less for each year in the 10-year period on the date of expatriation or termination of residency.
6. There are special rules for long-term residents.
It's easy to define who is or is not a U.S. citizen, but the term "long-term resident" isn't quite so clear. A long-term resident is a non-U.S. citizen who is a lawful permanent resident of the U.S. in at least eight years during the 15-year period before that person's residency ends. A "lawful permanent resident" means a green card holder. However, a person is not treated as a lawful permanent resident for purposes of this eight-year test in a year in which that person is treated as a resident of a foreign country under a tax treaty, and does not waive the treaty benefits applicable to the residents of that country. Caution: holding a green card for even one day during a year will taint the whole year.
7. There's an exit tax for expatriations on or after June 17, 2008.
The Heroes Earnings Assistance and Relief Tax Act of 2008 (generally known as the Heroes Act) changed the method of taxation for those who became expatriates on or after June 17, 2008, adding even more complexity and usually higher U.S. taxes. If you are a U.S. citizen or long-term resident who expatriates on or after June 17, 2008, you will be deemed (for tax purposes) to have sold all of your worldwide property for its fair market value the day before you leave the U.S.! All that gain is subject to U.S. tax at the capital gains rate. Plus, all your gain is taken into account without regard to any ameliorative tax provisions in the Internal Revenue Code.
Put differently, you get all of the bad parts of the tax code, and none of the good. That would include, for example, the inability to benefit from the $250,000 per person ($500,000 per couple) exclusion from gain on a principal residence (Section 121 of the Internal Revenue Code) and many other rules. The exit tax is like an estate tax, in the sense that everything that would be part of your estate will be subject to income tax on unrealized gains as of the day before you expatriate, as if you sold all your assets the day before leaving. In effect this is Congress' way of making sure your assets don't escape the estate tax entirely through expatriation.
"Should I Stay or Should I Go?"
Need Advise on Expatriation?
Contact the Tax Lawyers of
Marini & Associates, P.A.
Marini & Associates, P.A.
For a FREE Tax Consultation at:
www.TaxAid.us or www.TaxLaw.ms or
Toll Free at 888-8TaxAid ( 888 882-9243)
Monday, November 18, 2019
In-Person IRS Tax Compliance Visits Coming to Your Neighborhood Soon!
The IRS has announced, in a Fact Sheet 2019-15, that it will begin visiting taxpayers who have ongoing tax compliance issues and they are expanding their efforts to ensure businesses and individuals are paying their taxes, particularly payroll taxes, with in-person visits planned by revenue officers to more parts of the country, starting in Wisconsin and later this in Texas and Arkansas.
One of the main focuses will be unremitted payroll taxes. “In many cases business owners have been withholding large amounts of employment taxes from their employees and not [sending] them over to the Treasury,” said Guillot.
Sources:
IRS Fact Sheet 2019-15
accountingTODAY
Taxpayers should be aware they have a tax issue before they receive a visit from a revenue officer (revenue officers are trained IRS civil enforcement employees who work to resolve compliance issues, such as missing returns or unpaid taxes). However, the first face-to-face contact from a revenue officer will almost always be unannounced. When an IRS revenue officer visits a taxpayer, they will always provide two forms of official credentials, both include a serial number and photo of the IRS employee. Taxpayers have the right to see each of these credentials.
A legitimate revenue officer is there to help taxpayers understand and meet their tax obligations, not to make threats or demand some unusual form of payment for a nonexistent liability. The officer will explain the liability to the taxpayer.
The IRS emphasizes these visits typically occur after numerous contacts by mail about an existing tax issue; taxpayers should be aware they have a tax issue when these visits occur.
The IRS has been identifying areas of the country where it either no longer has an office near taxpayers or where it has no presence at all. The new program will supplement the IRS’s Private Debt Collection program, in which it works with contracted collection agencies who telephone individual taxpayers who owe longstanding tax debts.
A legitimate revenue officer is there to help taxpayers understand and meet their tax obligations, not to make threats or demand some unusual form of payment for a nonexistent liability. The officer will explain the liability to the taxpayer.
The IRS emphasizes these visits typically occur after numerous contacts by mail about an existing tax issue; taxpayers should be aware they have a tax issue when these visits occur.
If Someone Has An Outstanding Federal Tax Debt, The Visiting Officer Will Request Payment,
But Will Provide A Range Of Payment Options,
Including Paying By Check That
Is Payable To The U.S. Treasury.
The goal of the visits is to help resolve tax compliance issues by meeting face-to-face with taxpayers who have ongoing tax issues, such as payroll tax compliance for employers. The IRS has been identifying areas of the country where it either no longer has an office near taxpayers or where it has no presence at all. The new program will supplement the IRS’s Private Debt Collection program, in which it works with contracted collection agencies who telephone individual taxpayers who owe longstanding tax debts.
“These new visits that we're doing outside involve teams of revenue officers traveling to locations where we have reduced resources or no resources to visit higher-risk cases involving larger balances due and cases that have needed visits from a revenue officer for some time, in some cases years,”
said Guillot.
said Guillot.
One of the main focuses will be unremitted payroll taxes. “In many cases business owners have been withholding large amounts of employment taxes from their employees and not [sending] them over to the Treasury,” said Guillot.
“It’s an extremely high priority. Our efforts are to try to get them into compliance when we meet with them face to face. We have data that proves this is an effective way of getting them to be compliant, which is the kind of success we want, because if the business becomes compliant, they continue to provide jobs for our citizens, and that's good for everybody.”
He noted that there will be additional compliance events like this throughout the year. The IRS plans to send around a dozen revenue officers to an area and they will be splitting up to visit multiple taxpayers to resolve high-priority cases.
Have an IRS Tax Problem?
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact us at:
or Toll Free at 888-8TaxAid (888 882-9243).
IRS Fact Sheet 2019-15
accountingTODAY
Friday, November 15, 2019
IRS Announces Increases Enforcement on Syndicated Conservation Easements
The Internal Revenue Service announced in IR 2019-182, 11/12/2019 a significant increase in enforcement actions for syndicated conservation easement transactions, a priority compliance area for the agency. Coordinated examinations are being conducted across the IRS in the Small Business and Self-Employed Division, Large Business and International Division and Tax Exempt and Government Entities Division. Separately, investigations have been initiated by the IRS' Criminal Investigation division. These audits and investigations cover billions of dollars of potentially inflated deductions as well as hundreds of partnerships and thousands of investors.
"We will not stop in our pursuit of everyone involved in the creation, marketing, promotion and wrongful acquisition
of artificial, highly inflated deductions
based on these aggressive transactions.
"Our innovation labs are continually developing new, more extensive enforcement tools that employ advanced techniques. If you engaged in any questionable syndicated conservation easement transaction, you should immediately consult an independent, competent tax advisor to consider your best available options. It is always worthwhile to take advantage of various methods of getting back into compliance by correcting your tax returns before you hear from the IRS.
Our Continued Use Of Ever-Changing Technologies
Would Suggest That Waiting Is Not A Viable Option
For Most Taxpayers."
In December 2016, the IRS issued Notice 2017-10 (PDF), which designated certain syndicated conservation easements as listed transactions. Specifically, the Notice listed transactions where investors in pass-through entities receive promotional material offering the possibility of a charitable contribution deduction worth at least two and half times their investment. In many transactions, the deduction taken is significantly higher than 250 percent of the investment. Syndicated conservation easements are included on the IRS's 2019 "Dirty Dozen" list of tax scams to avoid.
Taxpayers may avoid the imposition of penalties relating to improper contribution deductions if they fully remove the improper contribution and related tax benefits from their returns by timely filing a qualified amended return or timely administrative adjustment request.
The IRS's comprehensive compliance efforts are focused on the abusive syndicated conservation easement transactions described in Notice 2017-10, recognizing that there are many legitimate conservation easement transactions.
In addition to grossly overstating the value of the easement that is purportedly donated to charity, these transactions often fail to comply with the basic requirements for claiming a charitable deduction for a donated easement. The IRS has prevailed in many cases involving these basic requirements and has now established a body of law that the IRS believes supports disallowance of the deduction in a significant number of pending conservation easement cases. Where it hasn't done so already, the IRS will soon be moving the Tax Court to invalidate the claimed deductions in all cases where the transactions fail to comply with the basic requirements, leaving only the final penalty amount to be determined.
In addition to auditing participants, the IRS is pursuing investigations of promoters, appraisers, tax return preparers and others. Further, the IRS is evaluating numerous referrals of practitioners to the IRS Office of Professional Responsibility. The IRS will develop and assert all appropriate penalties, including penalties for participants (40 percent accuracy-related penalty), appraisers (penalty for substantial and gross valuation misstatements attributable to incorrect appraisals), promoters, material advisors, and accommodating entities (penalty for promoting abusive tax shelters and penalty for aiding and abetting understatement of tax liability), as well as return preparers (penalty for understatement of taxpayer's liability by a tax return preparer).
In December 2018, the Department of Justice filed a complaint seeking to stop several individuals and an entity from organizing, promoting or selling allegedly abusive syndicated conservation easement transactions. The IRS continues to work with the Department of Justice in this area and reminds taxpayers that continued disclosure of syndicated conservation easement transactions is required under Notice 2017-10.
If You Engaged In Any Questionable Syndicated Conservation Easement Transaction, You Should Immediately Consult An Independent, Competent Tax Advisor
To Consider Your Best Available Options.
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact us at:
or Toll Free at 888-8TaxAid (888 882-9243).
Wednesday, November 13, 2019
IRS CI Identifies Dozens of Cryptocurrency Tax Evaders at J5!
Leaders of tax enforcement authorities from the U.S., Australia, Canada, the Netherlands and the United
Kingdom, known as the J5, met this week to discuss ways to deal with tax crimes and tax evasion, particularly involving
cryptocurrency and shared data, tools and tax enforcement strategies to find new leads in a quest to mitigate cross-border money-laundering and cybercrime.
“All of the
participants from the J5 countries rolled up their sleeves and worked together using real data to identify real
criminals. One thing was really clear this week and that’s the J5 countries are committed to identifying and
holding accountable tax cheats and other criminals who attempt to use the dark web and cryptocurrency as an
underground economy.”
All of this occurred while the IRS is preparing for a new wave of cryptocurrency audits. The agency sent letters to more than 10,000 people earlier this year, warning that they might be subject to penalties for skirting taxes on their virtual investments.
The IRS And Its Partners Are Using Data From Previous Enforcement Activities To Find New Criminals, Korner Said.
Using The Data From The Five Countries Gives Them A Broader View Of How Accounts, Money And People Are Connected.
The IRS released guidance last month telling virtual currency investors and their tax advisers how the agency expects them to report income from their holdings. The guidance is the first since 2014 and comes as tax auditors are increasingly focusing on examining individuals with cryptocurrency investments.
“Being able to come together and share expertise, which hasn’t been done before, we can develop new platforms
that we can each take back to our respective countries, importing the data that we each have to be able to data
map, utilizing these new tools and develop new leads that we previously would not have known about prior to
this challenge,” said Brooke Tetzlaff, a supervisory special agent at the IRS Criminal Investigation division and a
U.S. participant in the Challenge.
Have a Virtual Currency Tax Problem?
Value Your Freedom?
Contact the Tax Lawyers at
Marini & Associates, P.A.
for a FREE Tax Consultation Contact us at:
or Toll Free at 888-8TaxAid (888 882-9243).
Sources:
accountingTODAY
Bloomberg
Tuesday, November 12, 2019
Form W-8's Being Audited By the IRS for Reliability - It is About Time
A withholding agent is a U.S. or foreign person that has control, receipt, custody, disposal, or payment of any item of income of a foreign person that is subject to withholding. (Code Sec. 1473(4)). Generally, a payment is subject to withholding if it is U.S. source income that is fixed or determinable annual or periodic (FDAP) income. FDAP income is all income included in gross income, including interest (and original issue discount), dividends, rents, royalties, and compensation.
When a withholding agent determines that a payment is withholdable, the withholding agent must obtain a Form W-8 from the payee to determine whether the payee is a foreign person subject to withholding. Generally, a withholding agent making a withholdable payment must withhold at the 30% rate unless the withholding agent can reliably associate the payment with a Form W-8 or a withholding exemption.
A withholding agent can reliably
associate a payment with a Form W-8 if the withholding agent: 1. holds a valid
Form W-8 that contains the required information, 2. can reliably determine how
much of the payment relates to that Form W-8, and 3. can rely on the Form W-8, unless the withholding
agent has actual knowledge or reason to know that the information on the Form W-8
is unreliable or incorrect.
As
part of an audit of a withholding agent, an examiner selects payments made by a
withholding agent to foreign payees for evaluation against the withholding
agent’s filed Forms 1042-S. The examiner performs this evaluation by reviewing
foreign payees’ Forms W-8, Certificate of Foreign Status, on file with the withholding
agent.
Many withholding agents collect and store Forms W-8 in electronic format. Therefore, an examiner must determine whether the withholding agent has systems and procedures for creating, collecting, and storing Forms W-8 that are reliable.
The Process Unit
Outlines The Steps An Examiner Should Follow To Obtain Electronic Data Needed
To Determine The Reliability Of Information Provided On Forms W-8.
According to the process unit,
before the examination begins, an examiner should obtain and review any of the withholding
agent’s data and records that are maintained by the IRS. This review should
include any Forms 1042-S submitted by the withholding agent. An examiner should
use Forms 1042-S to identify foreign persons receiving large amounts of U.S.
source income with small amounts of withholding tax or any administrative
inconsistencies, such as reporting and residence address mismatches. 
If the withholding agent uses a
system for payees to electronically furnish Form W-8, the examiner should ask
the withholding agent whether the system properly authenticates and verifies
users and, if yes, how that authentication and verification is accomplished.
The should also explain how incorrect and/or incomplete Forms W-8 are
handled. The process unit also discusses how an examiner should review Forms W-8 the withholding agent received from a third party on behalf of a payee. In a case where the withholding agent has an agreement to use a shared electronic system for furnishing and authenticating Forms W-8, the process unit notes that all Forms W-8 and authenticating documents collected by the shared electronic system should be readily available to the withholding agent and consequently should be available for inspection by an examiner.
After
Each Step In The Audit Process,
An Examiner Should Determine If The Withholding
Agent
Is Performing All Tasks Necessary
To Ensure Collection of Reliable Forms
W-8.
Have an IRS Audit Problem?
Contact the Tax Lawyers of
Marini & Associates, P.A.
For a FREE Tax Consultation contact us at:
www.TaxAid.com or www.OVDP.com or
Toll Free at 888-8TaxAid ( 888 882-9243)
Subscribe to:
Posts (Atom)