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Direct Foreign Investment Into The US

Posted by James Simango, CPA
James Simango, CPA
James Simango CPA (U.S. Qualified), CPA Australia, B.Sc (Fin)(Acc) James is a
User is currently offline
on Saturday, 28 January 2012
in Australian Property Investors

Form BE-15 Claim for Exemption  

This report is required if foreign ownership in the U.S affiliate falls below 10 percent, the U.S. affiliate is fully consolidated or merged into another U.S. affiliate, or if all of the following three items for the affiliate are $40 million or less (positive or negative):

 Following an initial filing, the BE-15 Claim for Exemption is not required annually from U.S. affiliates that meet the stated exemption criteria from year to year.

The reporting is similar when foreigners are buying property here in Australia.  They request permission to acquire property from the Foreign Investment Review Board (the FIRB).

 Who Must Use This Form?

All U.S. business enterprises in which a foreign person (in the broad legal sense, including a company) owns directly and/or indirectly a ten-percent-or-more voting interest (or the equivalent) are subject to these reporting requirements.

This includes foreign ownership of real estate, improved and unimproved, except residential real estate held exclusively for personal use and not for profit making purposes. A U.S. business enterprise or real estate subject to these reporting requirements is hereinafter referred to as a U.S. affiliate.

A foreign person owning a ten-percent-or-more voting interest (or the equivalent) in a U.S. affiliate is hereinafter referred to as a foreign parent.

Why Report BE-15 Claim For Exemption?

If the value of your total assets is below $40 million, you eligible to obtain an exemption from   filing on an annual basis. Any exemption is obtained by filing.

Is this reported to the IRS?

No.  The report  is filed with the the Bureau of Economic Analysis (BEA). This is required pursuant to the International Investment and Trade in Services Survey Act.

Are they any other requirements?

Every 5 years the Bureau conducts a benchmark survey (Form BE-12) and any company, whether exempt or not, must file a form. The next benchmark form BE-12 is for the year 2012 and is expected sometime in June, 2012.

The BE-12 Benchmark Survey is BEAs most comprehensive survey of foreign direct investment in the United States, and is intended to cover the universe of foreign direct investment in the United States in terms of value. The benchmark survey is conducted once every 5 years (in lieu of the BE-15, annual survey. Note BE-15 is annual form. The purpose of the BE-15 Claim for exemption is so that you would not need to file an annual BE-15). The current benchmark survey covers the year 2007. A 2007 BE-12 report is required for each U.S. affiliate whose fiscal year ended in calendar year 2007.

 Why Comply? (Penalties)

Penalties – Whoever fails to report shall be subject to a civil penalty of not less than $2,500, and not more than $25,000, and to injunctive relief commanding such person to comply, or both.

These civil penalties are subject to inflationary adjustments.

Whoever wilfully fails to report shall be fined not more than $10,000 and, if an individual, may be imprisoned for not more than one year, or both. Any officer, director, employee, or agent of any corporation who knowingly participates in such violations, upon conviction, may be punished by a like fine, imprisonment, or both.

Does the Bureau of Economic and Analysis Report this information to the IRS?

Confidentiality – The reports you provide to the Bureau are CONFIDENTIAL and may be used only for analytical or statistical purposes. Without your prior written permission, the information filed in your reports CANNOT be presented in a manner that allows it to be individually identified. Your report CANNOT be used for purposes of taxation, investigation, or regulation. Copies retained in your files are immune from legal process.

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IRS Cracking Down On Banks With US Citizens

Posted by James Simango, CPA
James Simango, CPA
James Simango CPA (U.S. Qualified), CPA Australia, B.Sc (Fin)(Acc) James is a
User is currently offline
on Saturday, 28 January 2012
in US Expatriates

If you're thinking that you "got away" with not filing a tax return five years ago because the IRS never contacted you, it may come back to haunt you. Think Again. 

If you do owe back taxes and do not pay, you can incur additional penalties and interest for the time lapse of these unpaid taxes.

What are you waiting for? The sooner you take care of your delinquent tax return the better. Do not wait for the IRS to contact you first.

The IRS is cracking down on foreign banks making them report US citizens on the banks books. Wegelin & Co., the 270-year-old Swiss private bank, agreed to a sale to Switzerland’s Raiffeisen Group after coming under investigation in the U.S. for allegedly helping Americans evade taxes. Wegelin & Co., the 270-year-old Swiss private bank, agreed to a sale to Switzerland’s Raiffeisen Group after coming under investigation in the U.S. for allegedly helping Americans evade taxes.

UBS settled the U.S. tax-evasion scandal that threatened to bring the banking giant to its knees. UBS agreed on February 18, 2009 to pay a fine of $780 million to the U.S. government and entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service. As part of the deal, UBS also settled Securities and Exchange Commission charges of having acted as an unregistered broker-dealer and investment adviser for Americans.

In July 2008, a United States Senate panel accused Swiss banks, including UBS and LGT Group, of helping wealthy Americans evade taxes through offshore accounts. U.S. clients held about 19,000 accounts at UBS, with an estimated $18 billion to $20 billion in assets, in Switzerland, according to the findings. In response to the report and the FBI investigation, UBS announced that it would cease providing cross-border private banking services to US-domiciled clients through its non-US regulated units as of July 2008.

The U.S. government agreed last August to drop tax-evasion charges against UBS after Switzerland promised it would transfer the details of around 4,450 clients that UBS had helped to dodge taxes. The transfer lifted the veil on Switzerland's cherished tradition of banking secrecy.

UBS, in a statement, said it was "pleased" to learn the Swiss authorities would transfer the names and meet terms of the U.S. agreement.

"UBS expects that implementation of the treaty will be completed in the coming weeks, although the exact date of completion is not yet defined," UBS said.

UBS's wealthy clients left in droves, with the threat of renewed legal action looming if Switzerland failed to deliver on its promises to release the account names within a year of the U.S. deal being struck.

“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.

Foreign Banking Account Reporting (FBAR) rules apply to all U.S. individuals and organizations and across all industries and are not limited to financial services. Compliance with these rules is likely to be a significant undertaking for many organizations. Time is of the essence, because of the effort required to gather required information and to prepare FBAR forms. Penalties associated with failure to report these accounts can be significant and proper preparation is important.

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Six Ways To Avoid IRS Problems

Posted by James Simango, CPA
James Simango, CPA
James Simango CPA (U.S. Qualified), CPA Australia, B.Sc (Fin)(Acc) James is a
User is currently offline
on Friday, 06 January 2012
in IRS Problems

For taxpayers looking for ways to avoid the last-minute rush for preparing and filing tax returns, it is important that you:

1. Organize Tax Records. Tax preparation time can be significantly reduced for taxpayers who develop a system for organizing their records and receipts. Start with the income, deduction or tax credit items that were on last year’s return.

2. Don’t Procrastinate. Resist the temptation to put off doing taxes until the last minute. Hurrying to meet the filing deadline may cause a taxpayer to overlook potential sources of tax savings and could increase the risk of making an error.

3. File Electronically. Aside from ease of filing, IRS e-file is the fastest and most accurate way to file a tax return. For those due a refund, the wait time for e-filers is half that of paper filers.

4. Double-Check Math and Data Entries. Taxpayers should review their return for possible math errors and make sure the names and Social Security or other identification numbers for themselves, their spouse and dependents are correct and legible.

5. Don’t Panic if Immediate Payment Is Not an Option. For those who can’t immediately pay the taxes due, consider some stress-reducing alternatives. A taxpayer can apply for an IRS installment agreement, suggesting their own monthly payment amount and due dates, and getting a reduced late payment penalty rate. Taxpayers also have various options for charging their balance due on a credit card, either as part of an electronic return or via a phone call to a processing agent. Official Payments Corporation may be reached at 1-800-2PAY-TAX (1-800-272-9829) or at The Link2Gov Corporation may be reached at 1-888-PAY-1040 (1-888-729-1040) or at There is no IRS fee for credit card payments, but the processor charges a convenience fee. Electronic filers with a balance due can file early and authorize the government’s financial agent to take the money directly from their checking or savings account on the due date.

Taxpayers who file their tax return or a request for an extension on time, even if they can’t pay, avoid potential late filing penalties.

6. Request an Extension of Time to File. If the clock runs out, taxpayers can get an automatic four-month extension of time to file. An extension of time to file is not an extension of time to pay, however. Taxpayers may call 1-888-796-1074, e-file a Form 4868 that is included in most tax preparation software, or send a paper Form 4868 to the IRS. Taxpayers who charge their expected balance on a credit card don’t have to file the form. Contact Official Payments Corporation or Link2Gov Corporation. There is no IRS fee for credit card payments, but the processors charge a convenience fee.

The extension itself does not give a taxpayer more time to pay any taxes due. The taxpayer will owe interest on any amount not paid by the April deadline, plus a late payment penalty if at least 90 percent of the total tax due has not been paid by April 15.

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IRS Offers Some Relief for Expats and Dual Citizens

Posted by James Simango, CPA
James Simango, CPA
James Simango CPA (U.S. Qualified), CPA Australia, B.Sc (Fin)(Acc) James is a
User is currently offline
on Friday, 02 December 2011
in US Expatriates

The Internal Revenue Service has provided information to clarify the tax responsibilities of U.S. citizens and dual citizens living abroad in response to concerns from Canadians and expatriates from other countries about penalties that might be levied on their unpaid taxes and undeclared bank accounts.

The IRS posted the information on its Web site Friday after meetings between the U.S. Ambassador to Canada and Canadian officials to address worries from Americans living abroad that they would be subject to heavy penalties they had never been aware of until recently (see IRS to Ease Tax Penalties for Americans Living in Canada).

The Foreign Account Tax Compliance Act, or FATCA, which was included as part of the HIRE Act last year, requires foreign financial institutions to report directly to the IRS information about the financial accounts held by U.S taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. Taxpayers who don’t report the information on foreign bank account reporting forms could be subject to heavy penalties. Expatriate groups such as American Citizens Abroad have expressed concerns about being penalized for having retained their U.S. citizenship.

The IRS tried to allay such fears in its new page, entitled “Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.,” but still insisted that some of the requirements for reporting are necessary.

“The IRS is aware that some taxpayers who are dual citizens of the United States and a foreign country may have failed to timely file United States federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), despite being required to do so,” it said. “Some of those taxpayers are now aware of their filing obligations and seek to come into compliance with the law. This fact sheet summarizes information about federal income tax return and FBAR filing requirements, how to file a federal income tax return or FBAR, and potential penalties. Note that penalties will not be imposed in all cases.”

However, the IRS is still under obligation to levy certain penalties for noncompliance since it cannot flout congressional legislation. The FATCA provisions were included in the HIRE Act of 2010 as a way to help offset the cost of tax credits for hiring new employees by cracking down on unpaid taxes that the IRS has been aggressively pursuing in countries like Switzerland.

In its new information page, the IRS noted, “If you are required to file a federal income tax return and fail to do so, or you fail to pay the amount of tax shown on your federal income tax return, you may be subject to a penalty under Internal Revenue Code (IRC) section 6651, unless you show that the failure is due to reasonable cause and not due to willful neglect.  The penalty is 5 percent of the amount of tax required to be shown on the return.  If the failure continues for more than one month, an additional 5 percent penalty may be imposed for each month or fraction thereof during which the failure continues.  The total failure to file penalty cannot exceed 25 percent.  Note that there is no penalty if no tax is due.”

As for FBAR penalties, the IRS left open the possibility of not imposing penalties if a taxpayer could show reasonable cause.

“If you fail to file an FBAR, in the absence of reasonable cause, you may be subject to either a willful or non-willful civil penalty,” said the agency. “Generally, the civil penalty for willfully failing to file an FBAR can be up to the greater of $100,000 or 50 percent of the total balance of the foreign account at the time of the violation.  See 31 U.S.C. Section 5321(a)(5).  Note that this penalty is applicable only in cases in which there is willful intent to avoid filing.  Non-willful violations that the IRS determines are not due to reasonable cause are subject to a penalty of up to $10,000 per violation.  There is no penalty in the case of a violation that IRS determines was due to reasonable cause.”

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