Providing Focused Representation for International Tax Matters
Kundra & Associates, P.C., is a tax law firm that has distinguished itself by offering legal representation that provides thorough advice to U.S. and international businesses as well as individuals in various areas concerning overseas tax exposure and involvement.
It is important to remember that severe penalties may be imposed for those failing to comply with U.S. tax laws. If you are dealing with an international tax concern involving income, employment, or excise or departure taxes, our attorney can be your steadfast advocate. Call our Rockville law office at 301-424-7585 for more information.
Assisting U.S. Businesses
United States businesses must adhere to U.S. tax laws as well as the tax laws of the other countries in which they operate. The United States and many countries have tax treaties that are meant to protect businesses and individuals from being taxed twice (once by each jurisdiction).
If you are opening an office or a manufacturing plant in a country outside of the U.S. or have an existing business operating beyond American borders, our attorney, Chaya Kundra, can advise you on your tax obligations and strategies for meeting them lawfully.
Serving International Businesses
Foreign companies face various tax obligations when operating within United States borders. Some of the biggest concerns of global businesses are reporting requirements, the threat of double taxation and proper compliance with U.S. tax laws relating to income, employment, transfer pricing and excise taxes.
If you are looking to open a business or simply operate a portion of your existing enterprise in the U.S., our attorney can provide you with the legal support you need to make informed and proactive decisions that will benefit your company today and in the future.
At Kundra & Associates, P.C., our lawyer has experience helping clients facilitate business in India and other countries. Kundra Tax Law also operates a satellite office in Mumbai.
International Tax Law: Questions And Answers
Here are brief answers to some of the most common questions our lawyer receives.
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The Internal Revenue Service (IRS) has been offering some form of voluntary disclosure program to help U.S. taxpayers report foreign assets for over a decade. One of the agency’s primary programs began in 2009 and morphed into what we know as the Offshore Voluntary Disclosure Program (OVDP) in 2012. OVDP allowed taxpayers with foreign accounts to come forward and make sure that their assets complied with United States tax law. In exchange for taxpayers voluntarily stepping forward, the IRS was less likely to move forward with some of the more serious criminal penalties that can come with failing to report these assets.
The IRS reports that during its run, OVDP collected more than $11 billion in back taxes from more than 58,000 taxpayers. The program was terminated on Sept. 28, 2018.
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The IRS commissioner at the time of the program’s termination, David Kautter, stated that the program had provided taxpayers with years to come into compliance. He asserted that the program had met its goals, which included increased taxpayer awareness and compliance as well as advances in third-party reporting efforts.
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Voluntary disclosure is just one tool that has been used by the government to monitor foreign assets. Another key tool used by the IRS is the Foreign Account Tax Compliance Act (FATCA). The FATCA has two requirements. First, U.S. taxpayers must report certain foreign assets. Second, certain foreign financial institutions must report the presence of financial accounts held by U.S. taxpayers directly to the IRS.
Other tools that the government utilizes to find these assets include tips from whistleblowers both inside and outside American-owned companies conducting business abroad, computer analytics that detect overseas business activity and monitoring of social media updates for evidence of businesses evading taxation on foreign assets.
There are multiple agencies keeping track of taxpayers’ obligations, and any one of them may uncover a violation and report it to the IRS. It is wise to take steps to ensure that your reporting complies with applicable tax laws.
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The penalties for failing to disclose foreign assets are serious and vary depending on the details of the case. These cases are often broken down into two categories: negligent acts and intentional acts.
A negligent violation generally does not come with criminal penalties but can result in hefty financial penalties. This violation is assessed when the IRS believes that the taxpayer has made an honest mistake.
The taxpayer’s case becomes much more complicated when the government believes that the failure was intentional. In this situation, the taxpayer may face criminal charges for tax evasion as well as substantial fines.
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Even with the demise of OVDP, IRS compliance programs that can result in reduced penalties or possible immunity are available. However, at this point, successful participation requires that the taxpayer come forward before the IRS or Department of Justice (DOJ) begins an investigation. Some alternatives for compliance are discussed in more detail below.
Current Compliance Alternatives To Voluntary Disclosure
One common option is the present version of the Voluntary Disclosure Form, also known as Form 14457, which has two parts. The first part provides a pre-clearance so the taxpayer can participate in voluntary disclosure programs. The second part is to be used to disclose detailed information to explain noncompliance as well as a list of previously undisclosed assets. The IRS recently announced an update to this form, noting that it was expanded to account for the potential need of taxpayers to voluntarily disclose information about virtual currency. This option can work well for taxpayers who could face allegations of willfully, or intentionally, failing to report taxable assets.
The Voluntary Disclosure Practice option involves providing the IRS Criminal Investigation (CI) group with timely and accurate disclosures. Although participation in this option does not automatically shelter the taxpayer from prosecution, it does increase the chances that the IRS CI group will not recommend prosecution.
Utilizing the IRS’ streamlined filing compliance procedures is an option for those who unintentionally neglected to report their foreign assets to the agency. This option requires the taxpayer to certify that the failure to report the foreign assets – including the failure to file a Report of Foreign Bank and Financial Accounts (FBAR) – was non-willful. They must also certify that the failure was instead the result of neglect, inadvertence, a mistake or a good faith misunderstanding. This option is available for individual taxpayers or the estate of an individual taxpayer.
For those concerned about the filing of an FBAR, the delinquent FBAR submission procedures option may be a good fit. This form of voluntary compliance requires that the taxpayer is not currently under investigation and has not previously been contacted by the IRS about delinquent FBARs. If these qualifications are met, then the taxpayer puts together a statement about why they failed to file their FBAR on time and files the form electronically. The IRS generally does not impose a penalty for those who qualify for this option if they pay the taxes on the assets and have not been previously contacted by the government about delinquent returns.
There is also the delinquent international information return submission procedures (DIISRP) option for those who realize that they need to file international informational returns that did not timely accompany their tax returns. This option also includes a reasonable cause statement. Here, the idea is to reduce the risk of penalties.
Take Charge Of The Tax Implications Of Living And Working Abroad
International tax law is ever-evolving and complicated. The above is just a brief review of some of the more common questions that can surface when foreign accounts need to come into compliance with U.S. tax law. Those who are trying to come into compliance are wise to reach out to an international tax law attorney who can provide legal counsel on how the law will work in their specific situations.
To discuss your concerns with our international tax lawyer, please contact our Maryland office by calling 301-424-7585. We serve clients across the globe and throughout the United States, including those in the Maryland, Virginia and the Washington, D.C., area.
