Category Archives: IRS Problems

How Do You Get Rid of an IRS Tax Lien?

By:  Coleman Jackson, Attorney, Certified Public Accountant
January 29, 2020

How Do You Get Rid of an IRS Tax Lien

When the Internal Revenue Service sends you a tax bill and you do not pay it, a federal tax lien is created by operation of law whether the IRS files the lien in the public property records in your state or not.  A tax lien is merely an enforceable claim that attaches to your property and right to property.  If the IRS files the lien in the public property records, they must under the law inform you of this action.  This is done by a Notice of Federal Tax Lien.

 

IRS levy property

A federal tax lien does not authorize the IRS is take your property.  For this, the IRS must levy your property.  A levy is a lawful process by which the taxing authority can take your property or right to property without the necessity to obtain a court order. Don’t get confused between a lien (notice of tax debt) and a levy (taking of your property).  Taxpayers have a right to appeal both actions in the Office of Appeals and possibly to the U.S. Tax Court if their challenge is timely.For now, the question in this blog is how do you get rid of an IRS tax lien?

 

Taxpayers can get rid of an IRS tax lien

Taxpayers can get rid of an IRS tax lien!  If the tax debt has paid in full, the taxpayer can get rid of the tax lien by seeking a release of the lien.  This is typically an automatic process; but if it’s not, request a release of the lien.  Taxpayers can seek exemption of certain property from the lien.  This is typically done to facilitate the sale or financing of real property or business property with an attached federal tax lien.  Taxpayers can post a bond and ask that the lien be released.  Taxpayers can get rid of a tax lien by filing a challenge in the Office of Appeals as to procedural issues since the IRS must comply with exacting legal rules with respect to filing federal tax liens.  Perfecting an IRS tax lien like any lien is a matter of state law which varies from state to state.   In Texas property law varies from county to county.  This simply means that the IRS must comply with each counties law when filing liens in the county property records.  There are 254 counties in Texas.  In addition to any procedural issues,taxpayers can also get rid of a federal lien by challenging it on substantive legal grounds.  Finally, taxpayers can get rid of an IRS tax lien if the ten-year collections statute has expired unless the collection statute has been extended or suspended by bankruptcy proceedings or for other reasons.  The release of the tax lien is automatic on the expiry of the ten-year collection statute.  This is merely a summary of how to get rid of a tax lien; in law, there are a lot of twist and turns depending upon all the facts and circumstances.

 

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

What’s up with the Taxpayer First Act

By Coleman Jackson, Attorney & Certified Public Accountant
November 20, 2019

Taxpayer First Act - TFA

During this past summer, the Taxpayer First Act (“TFA”) became U.S. tax law.  The U.S. Congress’ stated purpose of implementing the Taxpayer First Act was to modernize and improve the Internal Revenue Code of 1986.  From a bird’s eye view, the following are three tax law changes that are among the more significant changes made to the Internal Revenue Code of 1986 by the Taxpayer First Act:

 

Form 1040 Taxpayer

  1. The TFA established within the Internal Revenue Service an office known as the ‘Internal Revenue Service Independent Office of Appeals’ to be headed by a Chief of Appeals completely independent and reporting directly to the Commissioner of Internal Revenue. The Office of Appeals is designed to give taxpayers a path to resolution of their disputes with the IRS in the administrative process without the need for costly tax litigation.  Any taxpayer in receipt of a notice of deficiency authorized under Internal Revenue Code section 6212 may request referral to the Internal Revenue Service Independent Office of Appeals.  Individuals and businesses in tax disputes with the IRS can request and obtain their IRS case files in advance of their appearing at an office of appeals conference in defense of their position.  This would permit the taxpayers to school themselves on the applicable law and marshal the facts in support of their tax return position.  Moreover taxpayers will have the right to have their tax cases heard by an independent decision maker and the right to protest adverse IRS decisions against them, including but not limited to, the IRS rejection of their request to go to the Independent Office of Appeals.  The taxpayer will have certain due process rights in the conduct of the Office of Appeals and the dispute resolution procedures.  Finally, the TFA provides that the IRS Independent Office of Appeals process will enjoy increased Congressional Oversight since the IRS Commissioner must submit annual reports to Congress under the TFA.

 

2.	The TFA modifies Internal Revenue Code Section 6015 with respect to Equitable Relief from Joint Liability

  1. The TFA modifies Internal Revenue Code Section 6015 with respect to Equitable Relief from Joint Liability, such as, the joint and severable liability associated with taxpayers signing a tax return with a spouse. The U.S. Tax Court now have the right to review de novo the administrative record established at the time of the IRS determination on the taxpayers innocent spouse relief or other equitable relief claim.  Under the TFA the Tax Court also can consider any additional newly discovered or previously unavailable evidence.  Equitable Relief cases are to be decided based on all the facts and circumstances.  Federal tax law governing equitable relief has always established certain limitations both in fact and time that are not removed or modified by the TFA.  The TFA changes impacting equitable relief claims apply to pending cases filed before this summer and all future equitable relief cases.

 

3.	The TFA modifies Internal Revenue Code Section 6503 with respect to IRS Issuance of Designated Summons

  1. The TFA modifies Internal Revenue Code Section 6503 with respect to IRS Issuance of Designated Summons. First the issuance of such summons must now be preceded by a review and written approval by the Commissioner of the relevant operating division of the Internal Revenue Service and Chief Counsel.  Moreover the burden is on the IRS to establish in the court proceeding that reasonable requests were made for the information forming the basis of the summons.  Taxpayers defending summons in court have due process rights to present counter argument and evidence to the contrary.

These are only three of the changes to tax law pursuant to the Taxpayer First Act (“TFA”); there are other significant changes as well.  Watch our future blog posts which could deal with the IRS implementation of the TFA; Internal Revenue Service Independent Office of Appeals developments under the TFA; and the federal court’s interpretations of the TFA.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

The Earned Income Tax Credit Two Year Band

By Coleman Jackson, Attorney, Certified Public Accountant
September 10, 2019

 

The Earned Income Tax Credit

The Earned Income Tax Credit or EITC is designed to assist working class families with children by putting money in their pockets.  The EITC is a tax credit, not, a tax deduction.  The difference is huge!   A tax credit is a dollar for dollar reduction in the taxes owed.  Tax credits generally will result in refunds and money in the taxpayers’ pockets. EITC often results in refunds to the taxpayer; although the IRS cannot issue refund checks for the Earned Income Tax Credit before mid-February.

 

The Earned Income Tax Credit

 

The rules for qualifying and claiming the Earned Income Tax Credit are complicated.  An excerpt from IRS Publication 596 reads as follows:

 

Table 1. Earned Income Credit in a Nutshell:  First, you must meet all the rules in this column.
Chapter 1. Rules for Everyone
1. Your adjusted gross income (AGI) must be less than: • $49,194 ($54,884 for married filing jointly) if you have three or more qualifying children, • $45,802 ($51,492 for married filing jointly) if you have two qualifying children, • $40,320 ($46,010 for married filing jointly) if you have one qualifying child, or • $15,270 ($20,950 for married filing jointly) if you don’t have a qualifying child. 2. You must have a valid social security number by the due date of your 2018 return (including extensions).

3.Your filing status can’t be married filing separately.

4. You must be a U.S. citizen or resident alien all year.

5. You can’t file Form 2555 or Form 2555-EZ (relating to foreign earned income).

6. Your investment income must be $3,500 or less. 7.You must have earned income.

Second, you must meet all the rules in one of these columns, whichever applies.
Chapter 2. Rules If You Have a Qualifying Child Chapter 3. Rules If You Do Not Have a Qualifying Child
8. Your child must meet the relationship, age, residency, and joint return tests.

9. Your qualifying child can’t be used by more than one person to claim the EIC.

10. You can’t be a qualifying child of another person.

11. You must be at least age 25 but under age 65.

12. You can’t be the dependent of another person.

13. You can’t be a qualifying child of another person.

14. You must have lived in the United States more than half of the year.

Third, you must meet the rule in this column.
Chapter 4.Figuring and Claiming the EIC
15. Your earned income must be less than: • $49,194 ($54,884 for married filing jointly) if you have three or more qualifying children, • $45,802 ($51,492 for married filing jointly) if you have two qualifying children, • $40,320 ($46,010 for married filing jointly) if you have one qualifying child, or • $15,270 ($20,950 for married filing jointly) if you don’t have a qualifying child.

 

If a taxpayer claims the Earned Income Tax Credit, the IRS may send a letter to them asking that they send the IRS information to verify the EITC claim.  An appropriate and timely response to the request for substantiation of the EITC is very important because failure to do so could prohibit the taxpayer from claiming the Earned Income Tax Credit (EITC) for subsequent tax periods.  The EITC substantiation may be in the form of the child’s birth certificate, health records, school records and other evidence in substantiation that the taxpayers’ meet all of the qualifications listed above to claim the EITC.  In the event the taxpayers improperly claim the EITC, the taxpayer is banded for two years from claiming the credit.  Internal Revenue Code Section 32(k)(1) permits the IRS to enforce the rules regulating the Earned Income Tax Credit by banding violators from claiming the EITC up to two years.  Recently the IRS Office of Chief Counsel issued an advisement that essentially states that where a taxpayer improperly claim (or fail to substantiate) their EITC claim for one child and continues to claim the EITC in subsequent years for that child, the taxpayers are prohibited from claiming the EITC for that child and all other children even though they may qualify for the EITC in subsequent years.  Claiming the child tax credit when under the two year band for any child has grave consequences.

 

Taxpayers can use the EITC Assistant on the IRS website to see if they qualify for the EITC.  Again claiming the EITC improperly has grave financial consequences.  Working people with low to moderate incomes must follow all the EITC rules so that they don’t run afoul of them and be stopped from claiming the Earned Income Tax Credit even when they otherwise qualify for this working family tax benefit.

 

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

Taxpayers with Significant Tax Debts Can Lose Their U.S. Passports

By Coleman Jackson, Attorney, Certified Public Accountant
August 21, 2019

 

Taxpayers with Significant Tax Debts Can Lose Their U.S. Passports

 

Ever heard of the Fixing America’s Surface Transportation (FAST) Act of 2015?  Well, under FAST the IRS has the authority to notify the State Department of taxpayers certified as owing the federal government.  A significant tax debt is currently defined as a delinquent tax bill of $52,000 or moreThe FAST requires the State Department to revoke the delinquent taxpayer’s U.S. passport and limit the taxpayer’s ability to travel outside the United States.

 

Taxpayer’s who intend to travel outside the United States must negotiate with the IRS to get the delinquent tax certification lifted

 

Taxpayer’s who intend to travel outside the United States must negotiate with the IRS to get the delinquent tax certification lifted.  Until that happens the taxpayer could become stranded outside of the U.S. with a revoked passport, or be blocked receiving a passport for the first time or on renewal leaving them unable to travel out of the country for any reason.

 

taxpayers who have to travel abroad must responsibility deal with their federal tax obligations long before they need to travel; because other than option one, above (paying the tax debt in full), the suggested options take months and some of them even take years to resolve in negotiations with the IRS

 

The IRS has identified several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt as follows:

  1. Paying the tax debt in full;
  2. Paying the tax debt timely under an approved installment agreement;
  3. Paying the tax debt timely under an accepted offer in compromise;
  4. Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice;
  5. Having a pending collection due process appeal with a levy; or
  6. Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

The practical tiptaxpayers who have to travel abroad must responsibility deal with their federal tax obligations long before they need to travel;  because other than option one, above (paying the tax debt in full),  the suggested options take months and some of them even take years to resolve in negotiations with the IRS.

The following types of taxpayers have been exempted from the delinquent taxpayer certification requirements under FAST:

  • Taxpayers in bankruptcy proceedings;
  • Identity Theft Victims;
  • Taxpayers whom the IRS has deemed non-collectible;
  • Taxpayers located within a federal declared disaster area;
  • Taxpayers with pending Installment Agreement request;
  • Taxpayers with pending Offer in Compromise with the IRS; or
  • Taxpayers with an IRS accepted adjustment that will satisfy the debt in full; and
  • Taxpayer’s serving in a combat zone is not exempt from the certification rules, but the certification is postponed while they do their tour of duty in the combat zone.

 

Taxpayers with plans to travel abroad simply need to be aware of the fact that their plans can be totally upended if they owe the federal government more$52,000 or more in back taxes.

 

Taxpayers with plans to travel abroad simply need to be aware of the fact that their plans can be totally upended if they owe the federal government $52,000 or more in back taxes.  The $52,000 could be owed on personal income taxes or business taxes where the individual taxpayer has been found be to be a responsible party, such as in payroll taxes with respect to the trust fund penalty that usually applies to delinquent taxpayer who owns the business or even employees of the business responsible for deciding what vendors and suppliers get paid and when.  Also the $52,000 certification threshold can be reached for a single tax period or multiple tax periods combined.  Example No 1, the taxpayer owes the IRS $2,000 for 2009, $14, 000 for 2015, and $40,000 for 2018.  In this example the taxpayer is seriously delinquent and the IRS under FAST can certify them as seriously delinquent to the U.S. State Department.  Example No. 2, the taxpayer owns a windmill manufacturing company with twenty employees; their business slowed to a whisper in the third quarter 2019 and the business owner decided to pay office rent, utilities, employees and suppliers and not the IRS payroll taxes.  The IRS learns of this decision and finds the owner the responsible party under the germane tax section and access a $52,000 trust fund penalty on the owner.  In this case, the owner/taxpayer could be certified by the IRS as a seriously delinquent taxpayer under FAST.  The owner’s passport could be revoked or their passport renewal could be denied by the U.S. State Department.

 

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

FBAR

By:  Coleman Jackson, Attorney, Certified Public Accountant
July 16, 2019

FBAR - foreign bank accounts

 

The 1970 Currency and Foreign Transactions Reporting Act, which is otherwise known as the Bank Secrecy Act requires U.S. residents, citizens and businesses with foreign bank accounts and certain other overseas assets to report those interest to the Financial Crimes Network annually on Form 114 by April 15th of the following year. Form 114 is the Report of Foreign Bank and Financial Accounts or (FBAR). The Bank Secrecy Act has a number of reporting requirements that are placed on financial institutions as well as those placed persons with foreign asset interests.  The record keeping and reporting requirements placed on  foreign account holders  are set out in detail in 31 U.S.C. Sec. 5414Form 114, the FBAR must be filed electronically through the Bank Secrecy Act E-Filing Network website.  The Financial Crimes Network is an agency of the United States Treasury but it is not the Internal Revenue Service.  These are two separate agencies under the U.S. Department of Treasury.

 

The Bank Secrecy Act at 31 U.S.C. Sec. 5414 also requires taxpayers with foreign bank accounts to disclose those accounts on their annual federal tax returns.

 

The Bank Secrecy Act at 31 U.S.C. Sec. 5414 also requires taxpayers with foreign bank accounts to disclose those accounts on their annual federal tax returns.  IRS Form 1040 at line 7a of Schedule B specifically asks whether the taxpayer has an interest or signatory authority over a foreign bank account.  A ‘yes ‘answer to this question on Schedule B requires the taxpayer to identify the country of the account and certain other details.  A taxpayer’s failure to check the box ‘yes’ when they have foreign bank interest or signatory authority over a foreign asset seriously increases their legal jeopardy because courts have said that failure to ‘check the box’  constitutes a willful violation of the  Bank Secrecy Act.  Failure to read the return has been held to be insufficient to avoid liability under the Act.  Avoiding knowledge of the Acts requirements has not been a successful plan.   Federal courts all over the country have addressed these various defenses and found them lacking weight.

 

IRS Form 1040 at line 7a of Schedule B specifically asks whether the taxpayer has an interest or signatory authority over a foreign bank account.

 

When a violation of the Bank Secrecy Act is not willful, the FBAR penalty for failure to disclose financial interest in foreign bank accounts, securities or other financial assets is capped at $10,000.  This cap only applies to non-willful violations of the FBAR statute.  Failure to check the box correctly and failure to disclose to a tax return preparer the existence of foreign bank accounts or other assets overseas is extremely likely to be found to be a willful violation of the Act.  The penalty permitted under the Bank Secrecy Act for a willful violation is equal to the greater of $100,000 or 50% of the highest balance in the account at the time of the violation.  There are also criminal penalties for violation of the Bank Secrecy Act if a taxpayer is tried and convicted under the Act.  Under the law, the Internal Revenue Service has 6 years from the date of the violation to assess the FBAR penalty and they can sue the taxpayer or the taxpayer’s estate to the collect the penalties.  Note that assessed FBAR penalties do not go away with the death of the taxpayer.

 

If the IRS assess FBAR penalties and the taxpayer refuses to pay them, the U.S. government can seek to collect the penalties in federal court pursuant to 31 U.S.C. Sec. 5321(b)(1).

 

Again, If the IRS assess FBAR penalties and the taxpayer refuses to pay them, the U.S. government can seek to collect the penalties in federal court pursuant to 31 U.S.C. Sec. 5321(b)(1).   The government must demonstrate in court by a preponderance of the evidence that (a) the taxpayer is a U.S. resident, citizen or business entity subject to the Bank Secrecy Act, (b) the taxpayer had a reporting obligation under the Bank Secrecy Act and failed to satisfy that reporting obligation, and (c) the nature of the taxpayer’s violation in terms of non-willful or willful violation of the statute, and (d) the taxpayer has failed to timely pay the assessed penalty.  The taxpayer must plead and prove any statute of limitations defects in the government’s case.  FBAR cases, as a general matter, are fact based cases.  Taxpayers win some and loose some.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432

Giving is good! Giving is Subject to Federal Taxation

By Coleman Jackson, Attorney and Certified Public Accountant
June 10, 2019

Giving is good!  Giving is Subject to Federal Taxation

The Holy Bible at 1 Timothy 6:17 says that God gives to us richly all things….  It is a blessing to be able to give.  Giving is an expression of gratitude and love.  It is good to give.  Every relationship should be based on the desire to give.  It is more blessed to give than to receive.

Giving in the United States creates tax obligations on the giver.  Internal Revenue Code Section 2503 defines “taxable gifts” as the “total amount of gifts made during the calendar year, less deductions provided in subchapter C (section 2522 and following).”  The federal gift tax rules applies to gifts of present interest to a donee as oppose to transfers of future interest by the donor to the donee.  Under United States federal tax laws, the donor (giver) is taxed on the fair market value of the gift.  The recipient of the gift or donee is not taxed on the gift.  But!   Special tax reporting rules imposes on the donee a duty to disclose to the IRS certain large gifts from foreign nationals.

 

Giving in the United States creates tax obligations on the giver

 

The total annual valuation of gifts given by a donor is a tally of all gifts given by the donor for the calendar year.  Such gifts are reported annually on Form 709, United States Gift (and Generation-Skipping Transfer) Tax ReturnForm 709, United States Gift (and Generation-Skipping Transfer) Tax Return is due on April 15th of the year following the year of the gift.  For example if Jose Giver gives the following gifts in 2019:

  • Stocks and bonds to Jeremiah Recipient worth $40,000 fair market value;
  • Wires $250,000 to the foreign bank account of Jennifer Recipient ; and
  • Gives $4,000 to his niece, Carolyn Recipient under 21 years of age at the date of the gift.

 

Form 709 United States Gift

Jose Giver must tally the three gifts to all recipients made in 2019 and report the gifts on April 15th 2020 on Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.  The total amount of gifts for 2019 is $294,000. Internal Revenue Code Section 2503 provides an annual exclusion for gifts of present interests made to any person by a donor.  In 2018 the annual exclusion amount is $15,000 and pursuant to IRC Sec. 2523 the annual exclusion is $155,000 on gifts to spouses who are not U.S. Citizens.  For gifts given in 2019 the annual exclusion amount remains $15,000, but the annual exclusion for gifts to spouses who are not U.S. Citizens decreases to $152,000 for gift made in 2019.  Note that the annual exclusion amount is indexed to the inflation rate; therefore, it could change from year to year.

 

Form 114, Report of Foreign Bank and Financial Accounts

Other federal laws, including other tax reporting and disclosure rules could be implicated by the facts described in the above hypothetical.  For example, Jeremiah Recipient may have to report gains & losses realized on the stocks and bonds.  The $250,000 wired to Jennifer Recipient’s foreign bank account could possibly create reporting requirements under the Bank Secrecy Act which requires that U.S. persons; which includes U.S. citizens, resident aliens, trusts, estates, and domestic entities to file Form 114, Report of Foreign Bank and Financial Accounts with the Financial Crimes Network on April 15th 2020 if the foreign account balance is $10,000 or more at any time during the calendar year.  Further the $4,000 to his under aged niece implicates the Generation- Skipping Transfer tax rules. That applies when gifts skip a generation.   Giving is good!  Giving is subject to federal taxation.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432.

 

 

 

Statement of Specified Foreign Financial Assets

By:  Coleman Jackson, Attorney, Certified Public Accountant
May 06, 2019

Statement of Specified Foreign Financial Assets

 

Statement of Specified Foreign Financial Assets is Department of Treasury (internal Revenue Service’s Form 8938. Form 8938 is filed with the taxpayers’ annual tax return.   Internal Revenue Code Sec. 6038D mandates that specified individuals, who include U.S. citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold must annually report those specified foreign assets using Form 8938.  The federal tax law that mandates these reporting requirements was enacted by the U.S. Congress and signed into law by President Obama in 2010.  The law is entitled the Foreign Account Tax Compliance Act (FATCA).  The law’s stated purpose is to combat tax evasion by U.S. taxpayers using foreign bank accounts and assets.  This law is separate and distinct from the better known Bank Secrecy act enforced by the Financial Crimes Network (FinCen) mandating foreign accounts disclosures under the FBAR requirements.  We have discussed the FBAR requirements in prior blogs on a number of occasions.  We will not repeat those discussions here.   Interested readers should look up our prior blogs for discussions regarding the FBAR and the penalties associated with violation of the FBAR reporting requirements.  You can read all of our blogs at http://www.cjacksonlaw.com/blog/.

 

Form 8938

 

For now, let’s return to our discussion of FATCA and Form 8938.  Specified individuals with foreign assets meeting a certain reporting threshold must report their foreign financial assets to the Internal Revenue Service annually using Form 8938.   The term, “Foreign Financial Assets” under FATCA is defined broader than mere foreign deposit and custodian accounts; FATCA applies also to “Other Foreign Assets”, which could be any property, including virtual property interest of   Specified Individuals.  For example, the term other foreign asset could apply to foreign land, foreign buildings & equipment, foreign business interest, such as ownership interest in a foreign partnership, corporation, trust, or estate if the reporting threshold is met for the tax period.  Further, other foreign assets also could apply to Specified Individuals’ interest in foreign stocks, bonds, debentures, virtual currency and, practically speaking, wealth or value formulated in any other form and composition if the reporting threshold is met for the tax period.  The point is this; the definition of the term ‘asset’ is interpreted broadly under FATCA.

annually reporting of FATCA and Form 8938

 

To summarize, specified individuals must annually report their interest in specified foreign financial assets using Form 8938 if the values of the assets are $50,000 on the last day of the tax year or $75,000 at anytime during the tax year (higher reporting threshold amounts apply to married individuals filing jointly and individuals living abroad).  Fair market value in U.S. dollars is used to compute the asset value pursuant to the IRS instructions for Form 8938.  Normal civil and criminal penalties under the Internal Revenue Code could apply when Specified Individuals who meet the FATCA reporting threshold fail to comply with FATCA requirements.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432.

A Spouse May Be Relieved of Federal Tax Liability under Certain Circumstances

April 08, 2019
By Coleman Jackson, Attorney, Certified Public Accountant

 

Innocent Spouse Relief from Federal Tax Liability

 

Texas is a community property state, which means that income earned by either spouse during their marriage is an item of community income.  Under federal tax law, each spouse is liable for federal taxes on community income regardless of which spouse earned the item of community income.

Under Internal Revenue Code Section 66(b), the Internal Revenue Service can modify the federal tax  outcome resultant from application of community property laws and charge only one spouse with respect to an item of community income if that spouse acted as if they were solely entitled to the  item of income; that is, they used it on themselves and not the community or household benefit,  and they did not notify their spouse of the item of community income before the due date for filing the spouse’s federal tax return for the applicable tax period.

 

Relief from Federal Tax Liability

 

 

This is only one of the many situations where an innocent spouse might be relieved of federal tax liability.  There is also, sometimes equitable relief available for innocent spouses even when the couple filed a joint tax return which created joint and severable liability for both spouses for the entire amount of the tax deficiency, penalties and interest due on the joint return.

This law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel in your geographical area with respect to any legal issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432.