FinCEN Provides BOI Reporting Relief to Victims of Recent Natural Disasters

On October 3, 2024, we posted Only 90 Days Left To File BOI Report, where we discussed that there was only 90 days remain to ensure your business complies with the Corporate Transparency Act (CTA). 

On October 7, 2024 the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced that certain victims of Hurricane Milton, Hurricane Helene, Hurricane Debby, Hurricane Beryl, and Hurricane Francine will receive an additional six months to submit beneficial ownership information reports, including updates and corrections to prior reports. 

FinCEN has issued five Notices extending the filing deadlines to for reporting companies that 1) have an original reporting deadline beginning one day before the date the specified disaster began and ending 90 days after that date, and 2) are located in an area that is designated both by the Federal Emergency Management Agency as qualifying for individual or public assistance and by the Internal Revenue Service as eligible for tax filing relief. 

Please refer to the applicable Notice for specific information.

• Notice regarding Hurricane Milton: https://www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Milton-508FINAL.pdf 
• Notice regarding Hurricane Helene: https://www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Helene-508FINAL.pdf
• Notice regarding Hurricane Debby: https://www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Debby-508FINAL.pdf
• Notice regarding Hurricane Beryl: https://www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Beryl-508FINAL.pdf
• Notice regarding Hurricane Francine: https://www.fincen.gov/sites/default/files/shared/FinCEN-BOI-Notice-Francine-508FINAL.pdf

FinCEN is providing this relief to reporting companies that meet two requirements.  

First, the deadline for the reporting company to file an initial or updated BOI report must fall on or between October 4, 2024, and January 2, 2025.  I

Second, the reporting company must have its principal place of business in an area designated both by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance, and by the Internal Revenue Service (IRS) as eligible for tax filing relief as a result of Various Hurricanes.  

If, after the date of this announcement, the IRS designates other areas affected by this natural disaster as eligible for tax filing relief, the reporting companies with their principal place of business in those areas will also receive the same BOI reporting relief from FinCEN automatically, i.e., reporting companies with an initial or updated BOI report due on or between October 4, 2024, and January 2, 2025, with a principal places of business located in these other areas, will also have an additional six months from their original deadline to submit BOI reports.   

For example, the initial BOI report of a reporting company created or registered before January 1, 2024, normally would be due by January 1, 2025.  If such a company has its principal place of business in an area designated both by FEMA as qualifying for individual or public assistance and by the IRS as eligible for tax filing relief as a result of a Hurricane, the company’s initial BOI report is now instead due by July 1, 2025.  

Similarly, the initial BOI report of a reporting company created or registered on July 25, 2024, normally would be due by October 23, 2024.  If such a company has its principal place of business in an area designated both by FEMA as qualifying for individual or public assistance and by the IRS as eligible for tax filing relief as a result of a Hurricane, the company’s initial BOI report is now instead due by April 23, 2025. 

In addition, FinCEN will work with any reporting company whose principal place of business is outside the disaster areas but that must consult records located in the affected areas to meet the deadline.  

Reporting companies with a principal place of business outside the affected areas and that are seeking assistance in meeting their filing obligations should contact FinCEN at  www.fincen.gov/boi.

Need Help Filing Your BOI Report?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

Shall I Stay or Shall I Go? - IRS Reports That US Expatriations Jumped Nearly 24% During The Third Quarter Of 2024!

The Internal Revenue Service said in its notice that the number of people who expatriated from the U.S. increased nearly 24% during the third quarter of 2024 compared with the previous quarter. 

The Number Of People Losing Or Renouncing Their U.S. Citizenship Increased to 2,123 For the 3rd Qtr of 2024.

A 25% Increase From The 2nd Quarter of 2024.

Included on the list are those who lost U.S. citizenship under Internal Revenue Code Section 877(a) and Section 877A, according to the notice, as well as long-term residents who are treated as losing citizenship under Section 877(e)(2).

According to CNBC the top reason why Americans abroad want to dump their U.S. citizenship include:

• Nearly 1 in 4 American expatriates say they are “seriously considering” or “planning” to ditch their U.S. citizenship, a survey from Greenback Expat Tax Services finds.  
• About 9 million U.S. citizens are living abroad, the U.S. Department of State estimates.
• More than 4 in 10 who would renounce citizenship say it’s due to the burden of filing U.S. taxes, the Greenback poll shows.

Should I Stay or Should I Go?

Need Advise on Expatriation?

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.   

for a FREE Tax Consultation contact us at:

www.TaxAid.com or www.OVDPLaw.com 
or Toll Free at 888-8TaxAid (888) 882-9243

IRS Adds New Unit to Increase Audit Rates for Partnerships, S-Corporations And Trusts!

In IR-2024-276, dated October 22, 2024 the Internal Revenue Service announced the new pass-through field operations unit announced last fall has officially started work in its Large Business and International (LB&I) division to more efficiently conduct audits of pass-through entities.

The Creation Of A New Unit Specifically Devoted
To Ensuring Compliance Of Pass-Throughs Of
Every Size And Form, Including 
Partnerships, S-Corporations And Trusts,
Reflects The IRS’s Broader Efforts To Focus More
Attention And Resources On An Area That
Has Historically Been Under-Scrutinized.

Previously, pass-through exams were divided between LB&I and the Small Business/Self-Employed (SB/SE) division based on the size of the entity. Going forward, revenue agents in pass-through field operations will be assembled into geographically based teams that are responsible for primary exams of pass-through entity returns. LB&I will be responsible for starting pass-through exams, regardless of entity size. SB/SE will continue to examine pass-through entities as part of a related exam of a tax return.

Consolidating the case-working expertise and removing the entity-size barrier helps the IRS achieve its goal of increased audit rates in this complex area, streamlines workflows and provides a more consistent experience for taxpayers.

"The establishment of pass-through field operations is a significant step in our goal to increase fairness in enforcement while improving service,” said IRS Commissioner Danny Werfel. 

A pass-through is a business entity in which the profits “pass through” to the owner(s) of that business and are taxed at the individual tax rate. They are frequently used by higher-income groups and can be complex tax arrangements.

"This combination of LB&I and SB/SE’s diverse expertise is an important milestone,” said Holly Paz, LB&I Commissioner. "This group will undoubtedly have a lasting impact as we continue building a modern pass-through compliance structure that is passionate about taxpayer service and fair enforcement.”

The IRS has also embarked on other important changes to help dedicate resources and support to this complex compliance space.

• The IRS launched examinations of 76 of the largest partnerships with average assets over $10 billion that includes hedge funds, real estate investment partnerships, publicly traded partnerships, large law firms and many other industries. These audits can take years depending on the size and complexity of the partnerships.
• IRS Chief Counsel announced the creation of a new associate office that will focus exclusively on partnerships, S-corporations, trusts and estates. This office will be drawn from the current Passthroughs and Special Industries (PSI) Office.

The stand-up of pass-through field operations meets one of the priorities of the Strategic Operating Plan under Objective Three: Fairness in Enforcement. 

It is also a significant part of the overall expanded enforcement efforts that focus on high-income and high-wealth individuals, partnerships and large corporations that have seen sharp drops in audit rates during the past decade.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Automatic Foreign Gift Reporting Penalty For Late Filed Form 3520, Part IV Ending

According to Law360, the Internal Revenue Service Commissioner Danny Werfel told the UCLA Tax Controversy Conference audience on October 24, 2024 that the agency will no longer automatically assess penalties for the late reporting of large foreign gifts, with the announcement eliciting applause from the audience of several hundred tax attorneys and tax professionals.

Werfel appeared for the second year in a row as a keynote speaker for the event at the Beverly Hills Hotel in Beverly Hills, California, and credited the policy change to the lobbying of National Taxpayer Advocate Erin Collins, who was sitting in the audience near the front.

Failure to disclose large foreign gifts can result in penalties of up to 25% of the gift under Internal Revenue Code Section 6039F, with the penalty being automatically assessed even though the gift is likely not a taxable event. The penalty can be challenged in court and overturned, but only if it is paid first. 

"So We Have Decided To Stop Assessing Penalties 
Immediately For Late-Filed Forms 3520, Part IV,
Which Deals With Foreign Gifts,"
Werfel Said As The Crowd Applauded.

"And Also, Erin Just Said, 'That's Not All,'
We Also Will Now Review Reasonable Consideration Statements That Are Attached To These Late-Filed Forms Before
We Issue A Penalty. So Those Are The Two Changes."

"So victory for your taxpayer advocate there," Werfel continued. "I think this is an important change for taxpayers and I think this room understands the type of situations this was causing for a person maybe with parents living overseas, a parent dies, now you're dealing with the estate, you're dealing with grief, you're dealing with all the moving pieces, and maybe in the middle of all this you late-file your form, even though it's not a taxable event, and then all of a sudden you get hit with a penalty."

"What we were seeing is a there were a lot of immigrants who had families overseas who were receiving gifts and not knowing about the form, not a big surprise because taxes are complex," Collins said. "Who thinks about filling out a form for a non-taxable event?"

"So victory for your taxpayer advocate there," Werfel continued. "I think this is an important change for taxpayers and I think this room understands the type of situations this was causing for a person maybe with parents living overseas, a parent dies, now you're dealing with the estate, you're dealing with grief, you're dealing with all the moving pieces, and maybe in the middle of all this you late-file your form, even though it's not a taxable event, and then all of a sudden you get hit with a penalty."

Collins was named the taxpayer advocate in February 2020, with the role being the Internal Revenue Service's independent watchdog. Collins spent 20 years as the director of KPMG's western tax controversy services, and before that spent 15 years as an attorney in the IRS Office of Chief Counsel.

Collins said late-filers can explain in an attached form called a reasonable consideration statement why they were late in filing the form and the circumstances that surrounded it. Challenged penalties are overturned about 67% of the time, Collins said, which demonstrates that the IRS is spending a lot of wasted energy on the issue with little to show for the effort. 

Collins said. "Because it's taking a lot of our employees' time and then for taxpayers, it's a really scary thing to open up that piece of paper and see that large penalty. So it's a win-win, I think, for both taxpayers and for the IRS."

"We don't want to penalize people for doing to the right thing and voluntarily coming in and falling on their sword and saying, 'I didn't know,' for whatever reason, and then they get penalized," she continued. "So it really is a good thing for taxpayers."

 On automatic assessment of other foreign information forms, Collins said "I want them all to stop,"

Collins said. "Have the IRS review them before they assess the penalty because of the very high rate of abatement, anywhere from 60% to 80%, depending on the year."

She added that she hoped the IRS "will take additional steps over systemic assessment. Give people an opportunity to say, 'I have reasonable cause and under the law you should not be assessing.'"

In addition to a first-time abatement for Section 6039F penalties, the group recommended a review of reasonable cause prior to penalty assessment. Section 6039F contains exceptions for penalties based on reasonable cause, but over the past several years, the IRS has been assessing penalties without first making this consideration, according to the letter.

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

Appeal of Corporate Transparency Act Reaches the 11th Circuit

On March 5, 2024 we posted Federal Court Rules Corporate Transparency Act Unconstitutional - Do You Still Need to File BOI?  where we discussed that in National Small Business United v. Janet Yellen, a Northern District of Alabama Federal Judge ruled on March 1, 2024, that the CTA was unconstitutional. Citing privacy concerns, and a myriad of legal reasoning and precedent around the scope of Congress’s power.

Now during the week of Sept 23rd challengers of the Corporate Transparency Act's beneficial ownership information reporting requirements argued their position in the first case to reach a federal appellate court, however, it was unclear whether the 11th Circuit panel was receptive. (National Small Business United (NSBU) v. Yellen (No. 24-10736).)

NSBU, however, is not challenging the Corporate Transparency Act as applied in a particular circumstance, but rather has said the law "has no constitutional applications." Prevailing on a facial challenge requires clearing a "very high bar," the government has argued in its briefing and NSBU has failed to do so, said the government, because of the "many valid applications" of the statute as to "companies engaged in interstate commercial activity at the time they file reports."

NSBU has argued that facial challenges should be evaluated under a different standard when enumerated powers are at issue. "If Congress lacks constitutional power to enact a federal statute, then that statute is facially invalid and has no constitutional applications," it said in briefing.

The Treasury Department's Financial Crimes Enforcement Network made its interpretation of the ruling clear in a statement issued by FinCEN stated that the ruling applies (ONLY) to the plaintiffs in NSBU.

Choosing to file means potentially losing a filing fee and any cost incurred for taxpayers who decide to use an advisor. However, filing provides peace of mind, staying in CTA compliance means there's no chance of facing more stringent financial and criminal penalties for failure to file.

Need Help Filing Your BOI Report?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)

 

IRS Released 2022 Projections Showing A Tax Gap of $696 Billion

The Internal Revenue Service released the tax gap projections for tax year 2022, a detailed analysis showing the nation’s projected gross tax gap at $696 billion. This reflects the difference between projected ‘true’ tax liability and the amount of tax that is actually paid on time. 

The new tax gap projections reflect an increase over the tax year 2014-2016 estimates and the tax year 2017-2019 projections. The 2022 projection is an increase of $200 billion over tax years 2014-2016. 

However, the IRS noted the increase for 2022 is similar to the 41 percent increase in the economy since the 2014-2016 time period as measured by the Gross Domestic Product. With the new study also showing the voluntary compliance rate among taxpayers remaining steady at 85%, the IRS noted the tax gap increase ultimately reflects growth in the economy and changes in the sources of income – not a change in taxpayer behavior involving filing or paying their taxes. 

In addition, the new tax gap projections reflect the time period before the IRS began increasing tax compliance work following passage of the Inflation Reduction Act (IRA) in August of 2022. Since then, the IRS has stepped up compliance activity in a variety of areas with the additional funding, including the agency collecting an initial $1.3 billion from high-income non-filers following IRA funding. 

“This is a critical study about the nation’s tax system, and the results underscore there remains a sizable tax gap between taxes that are legally owed but aren’t actually being paid,” said IRS Commissioner Danny Werfel. “

While the bottom line for the new tax gap numbers shows the increase basically reflects growth in the larger economy, the size of the gap also vividly illustrates the ongoing need for adequate funding for the IRS. 

We need to focus both on compliance efforts to enforce existing laws as well as improving service to help taxpayers with their tax obligations to help address the tax gap. The new projections are published in Tax Gap Projections for Tax Years 2021 and 2022 (IRS Publication 5869).  

Gross tax gap

The projected $696 billion gross tax gap is the difference between projected ‘true’ tax liability for a given period and the amount of tax that is paid on time. The gross tax gap covers three key areas – non-filing of taxes, underreporting of taxes and underpayment of taxes. 

• Non-filing, which means tax not paid on time by those who do not file on time:
• $63 billion in tax year 2022, representing 9% of the gross tax gap.
• Underreporting, which reflects tax understated on timely filed returns.
• $539 billion in tax year 2022, representing 77% of the gross tax gap.
• Underpayment, or tax that was reported on time, but not paid on time.
•  $94 billion in tax year 2022, representing 14% of the gross tax gap. 

Voluntary compliance rate remains unchanged

The tax year 2021 and 2022 tax gap projections translate to about 85% of taxes paid voluntarily and on time, which is consistent with recent levels. The projections are based largely upon the compliance behavior estimated from the most recent set of completed audits (from tax years 2014-2016). 

After IRS compliance efforts and other late payments are factored in, the projected share of taxes eventually paid is 86.9% for tax year 2022, down slightly from the 87% for tax years 2014-2016. 

Is Consistently Shows That Compliance Is Higher 
When There Is Third-Party Information Reporting,
And Even Higher When Also Subject To Withholding.

With the help of Inflation Reduction Act resources, the IRS is taking a variety of steps to help improve voluntary compliance by improving taxpayer services and offering new technology tools to work in concert with additional compliance work. In fiscal year 2023, the latest year for which data is available, the IRS collected more than $4.6 trillion in taxes, penalties, interest and user fees. 

The voluntary compliance rate of the U.S. tax system is vitally important for the nation. A one-percentage-point increase in voluntary compliance would bring in about $46 billion in additional tax receipts. 

Have an IRS Tax Problem?

     Contact the Tax Lawyers at

Marini & Associates, P.A. 

for a FREE Tax HELP Contact us at:
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888 8TAXAID (888-882-9243)