US Tax Reporting Requirements

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US Tax Reporting Requirements

  1. 1. New US International ReportingRequirementsAICPA PFP12 Jan. 2011 Prof. William H. Byrnes & Prof. Stephen Polak International Tax & Financial Services Graduate Program
  2. 2. Compliance Topics Foreign Account Tax Compliance Act (FATCA) Qualified Intermediary Regime (before and after UBS) (QI) 1099 major change Jan 1, 2011 reporting for expenditures of $600 or more within a year with any person Report of Foreign Bank and Financial Accounts Form TD F 90-22 (FBAR) Currency Transaction Reports FINCEN Form 104 Report of International Transportation of Currency or Money FINCEN Form 105 Patriot Act - Suspicious Activity Reports (SARS) for foreign tax evasion … see Pasquantino v. United States (2005)
  3. 3. FACTA in briefForeign Financial Institution (FFI) provide IRS any US persons invested in accounts outside the USForeign entities provide IRS any US substantial (10%) owners information (0% if invest vehicle)All FFIs and FEs with payments from USRequires Sec. 1471(b) agreement with IRS – (like Sec. 1441 QI agreement but more bite)
  4. 4. FACTA in briefRequires 30% w/h on all US source income including all types of sales if no agreement with IRSReverse onus – burden on FFI / FE to prove not USAll persons must prove to FFI / FE NOT a US person, otherwise a US person – UBO standardFFI / FE must EDD the non-US personsJan 1, 2013 (b/c hundreds of thousands of new FATCA agreements)
  5. 5. FACTA in briefExcluded from reporting by FFIs & FEs – Public listed companies – Individual Retirement Plans in rare situations – Banks – REIT – TEOs – ECI
  6. 6. FACTA in briefReport must contain – Name / address / TIN – Account No(s) / Balance(s) – Gross transactions (receipt/dep/payment/withdrawal)Can elect to report like US-FI (1099s)Or w/h and close account
  7. 7. FACTA in briefPenalties – Personal liability for w/h tax (x2) – 40% of w/h accuracy related penalty – 75% of w/h if civil fraud – Lack of w/h = “uncertain tax position” FASB No. 48
  8. 8. QI differencesQI differencesExpanded application of reporting – (names + specific account in(s)/out(s))Look throughExpanded application of reporting personsExpanded application of reportable transactionsFFI cannot determine customer w/h poolsOnly approx. 5,500 QI v. 100,000s of FFIs and FEs
  9. 9. FIRPTASee IRS website http://www.irs.gov/businesses/small/international/ article/0,,id=120943,00.htmlForm 1099-S, Proceeds From Real Estate Transactions Form 8288-A
  10. 10. Other Survey Topics FBAR Currency Transaction Reports Report of International Transportation of Currency or Money Suspicious Activity Reports (SARs) … see Pasquantino v. United States (2005) 1099 major change Credit card merchant 1099
  11. 11. Typologies & Trends Part ISecuritiesTrade BasedCounterfeit TradeSports Clubs (and Equestrian)
  12. 12. Typologies & Trends Part IIChild Pornography & Human TraffickingGovernment Contracting / Bribery / PEPsInternet Based Market Systems – Amazon, E-Bay, Second-Life & World of Warcraft
  13. 13. Topic II: I - SecuritiesIf incidence of Opaqueness relative to Transparency; withhigher Liquidity is an indicator for Launderer, thenSecurities•GEM, AIM, B®IC•Hedge Funds•Audit firms, banks, law firms = $100B in tax losses = $Talleged w/o business purpose and w/o risk, IMAGINEwhat launders can do…
  14. 14. Topic II: I – Trade BasedTransfer Pricing Dump (harm market price & higher risk detection)L.A. goods hP a USA Smurf purchases to avoid CTRs Switzerland  USA $31B Russia  USA $9B
  15. 15. Topic II: I – Counterfeit Trade• 2% - 7% of World Trade $200B - $650B• CF currency• CF goods perceived by BRIC as less harmful than drugs This weakness in perception can allow substantial $ flows from other crimes (B movie industry)
  16. 16. Topic II: I - EquestrianEquestrian > HollywoodEconomic Impact = $25B / $100B indirect# of Americans Involved = 7.1 Million# of Full-Time Jobs = 1.4 Million# of Horses = 6.9 MillionTotal Taxes Paid = $1.9 Billion
  17. 17. Topic 2: II - Trends• Child Pornography & Human Trafficking• Government Contracting / Bribery / PEPs• Internet Based Market Systems • Amazon & E-Bay • Second-Life (Direct) & World of Warcraft (3rd Party)
  18. 18. Predictive Modeling•Neural Networks•Concept Mapping•Evolutionary Programming = Genetic Algorithmshttp://amlsample.googlepages.com/Securities_and_Trade_ML.html
  19. 19. Contact Us for Further DetailsSee my daily tax and wealth management blogs – http://www.advisorfyi.comContact the International Tax and Financial Services graduate program http://www.tjsl.edu/Contact me http://profwilliambyrnes.com/about-2/

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