The IRS scored much more than a glancing blow to former action movie powerhouse actor Wesley Snipes this week, with the Tax Court sustaining the Service’s rejection of a lowball offer in compromise settlement. Snipes owes more than $23.5 million in back taxes to the government, dating back to between 1999 and 2006, a period during which he made approximately $40 million but paid no taxes (he also didn’t file tax returns during that time).
The Foreign Accounts Tax Compliance Act (FATCA) is now operational and the Internal Revenue Service is reportedly poised to start issuing penalties for non-compliance. FATCA requires foreign banks to disclose to the federal government Americans who have foreign accounts with more than $50,000. The 30 percent withholding penalty on foreign transactions was supposed to be a deterrent; but with few withholdings taking place and more to come, the deterrent may not have had its intended effect.
With tax reform signed into law, many business owners are optimistic about what 2018 will bring. A substantially lower tax rate could mean substantial savings come April 2019. Of course, businesspeople want to pay only as much as they legally owe in taxes; and if they can avoid paying additional taxes, they will.
Taxes are one of the many things on a long list of obligations a business owner must address. Although entrepreneurs balance many obligations, a failure to properly deal with Uncle Sam can result in serious ramifications.
In what seems to a recurring theme, a mass data release - this one known as the "Paradise Papers" - has disclosed the identities of high-profile users of offshore accounts. It is vitally important to note prior to discussing the content of the Paradise Papers that there is nothing inherently wrong with having offshore or foreign accounts. The IRS even recognizes the validity of these accounts, which is why it established protocols for reporting income from them via the FATCA and FBAR.
More Americans than ever before – an estimated one in four – are taking so-called “side gigs” to bring in extra money. Whether it is walking dogs on the weekends, renting out your home occasionally through Air BNB or another similar service, delivering, or hauling passengers with a ride-share service like Lyft or Uber, “side hustles” generate hundreds of billions of income annually.
The difference between tax avoidance and tax evasion may seem solely like a semantic one, but to the IRS, the differences are important.
Anyone with assets diversified in foreign accounts with balances that total $10,000 or more at any time in a given year needs to file a disclosure (FinCEN Form 114 of previously referred to as a FBAR). Fail to file this disclosure and the penalties are draconian.
In neighboring Connecticut, a Chinese restaurant owner accused of using “zapper” software faces serious tax fraud penalties. Massachusetts also assesses a sales tax on meals.
The willful failure to file FBARs (Report of Foreign Bank and Financial Account) increases the associated civil penalties. The exact definition of willful was at the heart of a recent Tax Court case.