Frequently Asked Tax Lawyer Questions

How is McMahon & Tivnan Different Than Other Tax Law Firms?

McMahon & Tivnan’s mission is to provide ethical and sound legal representation to individual and business taxpayers during what can be one of the most stressful and emotional periods of their life. What sets us apart from other law firms is our IRS experience and specialization in tax controversy. The rules and regulations of tax law are incredibly complicated and constantly changing. All we do is tax controversy work and all of our senior professionals have years of experience working at the IRS. When the IRS comes knocking at your door, you want experienced tax counsel.

Read more about McMahon & Tivnan in this interview with managing partner Sean McMahon by Massachusetts Lawyers Weekly.

Do IRS Revenue Agents have the authority to negotiate complicated tax issues?

No. If you are facing an IRS audit with complicated tax issues, the IRS Revenue Agent has limited ability to negotiate and resolve tax issues that are not black and white. Only the IRS Appeals or Chief Counsel’s Office have authority to compromise on complicated tax issues based on litigation risks. Our senior staff has spent decades working for the IRS and we know the process inside and out.

What should I do if I have an undisclosed foreign bank account?

There are several options for U.S. taxpayers with interest or signature authority over an undisclosed foreign account to come into compliance with the Internal Revenue Service (IRS).

You should consult the IRS website or a tax attorney to determine which option is best for you.

  • Streamlined Filing Compliance Procedures
  • Offshore Voluntary Disclosure Program
  • Delinquent FBAR Submission Procedures
  • Delinquent International Information Return Submission Procedures

Read more about how to disclose an undisclosed foreign bank account.

I am a retired U.S. citizen living abroad. Do I have any U.S. tax obligations?

Retired U.S. taxpayers living outside the United States with assets in foreign bank accounts may need to file Foreign Bank Account Reporting (FBAR) or other reports with the Internal Revenue Service (IRS).

If the total value of all foreign accounts, including bank accounts, brokerage accounts, mutual funds, retirement accounts and some life insurance policies, is greater then $10,000 at any time during the calendar year, retirees may need to report the account yearly to the IRS.

Read more about FBAR and Foreign Asset Reporting Requirements for Taxpayers Living Abroad.

What is an FBAR?

FBAR stands for Foreign Bank Account Reporting. It is also referred to as FinCEN Form 114. U.S. taxpayers with a financial interest or signature authority over a foreign financial account that exceed certain values may need to file annual FBARs. Foreign financial accounts include bank accounts, brokerage accounts, mutual funds, trusts, and some life insurance policies to name a few.

An FBAR must be filed electronically and there are no extensions for filing FBARs, even if you receive an extension on filing your income tax returns. For 2015 an FBAR must be filed on or before June 30, 2016 for the previous year’s Federal tax return. (For 2016 and after, the FBAR filing deadline will be April 15th).

Visit the IRS website Report of Foreign Bank and Financial Accounts (FBAR) page for more information.

What are Foreign Asset Reporting Requirements?

If you are a U.S. taxpayer and have foreign financial accounts such as bank accounts, brokerage accounts, mutual funds, trusts, and some life insurance policies that exceed $10,000 in combined value, then you are required to report the assets to the U.S. government. If your combined assets exceed $50,000, you are required to submit additional reports to the IRS.

The reporting requirements include:

  • Foreign Bank Account Reporting (FBAR) also referred to as FinCEN Form 114
  • IRS Form 8938: Statement of Foreign Specified Assets is similar to the FBAR but has a higher account balance
  • Form 8938 includes reporting of foreign partnership interests, private equity and hedge funds
  • IRS Form 8621 are used to report investments in Passive Foreign Investment Companies (PFICs)

Can my passport be revoked if I owe taxes?

Yes! The State Department can revoke, deny or limit your passport if you owe a large tax debt.

What is FATCA?

The Foreign Account Tax Compliance Act (FATCA) was enacted by Congress in 2010 as a way to target non-compliance by U.S. taxpayers using foreign accounts.

FATCA requires foreign financial institutions (FFIs), including foreign banks, hedge funds and other financial institutions to report on the holdings of U.S. citizens and dual citizens to the IRS, or else face stiff penalties.

What countries have tax compliance agreements with the United States under FATCA?

According to the Department of Treasury’s website, The United States has Intergovernmental Agreements (IGAs) and related agreements or exchanges with 112 jurisdictions. Foreign financial institutions (FFIs) in these countries are required to report information about US taxpayers’ accounts to the IRS. Some of the other countries that have agreements with the US include:

Cayman Islands
Hong Kong
Saudi Arabia
South Africa
United Arab Emirates
United Kingdom

Do I qualify for the Streamlined Filing Compliance Procedures?

Streamline Filing Compliance Procedures are one option available to taxpayers seeking to come into compliance with foreign bank account reporting requirements.

The Streamlined Filing Compliance Procedures are available to U.S. taxpayers residing inside or outside the United States. Taxpayers must certify they did not willful conspire to evade paying taxes. You are not eligible if you previously have been investigated by the IRS.

If you make a submission under the Streamlined Filing Compliance Procedures, you may not participate in the Offshore Voluntary Disclosure Program (OVDP). You should carefully review the options and consider talking with a qualified attorney to determine which program is best for your situation.

Please see the IRS website for more information on streamlined filing compliance procedures.

Do I qualify for the Offshore Voluntary Disclosure Program?

The Offshore Voluntary Disclosure Program (OVDP) is available to taxpayers who willfully failed to report foreign financial assets in an attempt to avoid paying taxes. OVDP offers protection from criminal liability and specific terms for resolving civil tax and penalty obligations.

To qualify, you must first determine if the IRS Criminal Investigation Lead Development Center (LDC) will allow you to enter the program. A tax attorney can assist you with contacting the LDC. If the LDC already has your account information, you probably will not be allowed to participate in the OVDP.

Please see the IRS website for more information on OVDP and Frequently Asked Questions.

I just received a letter from my bank notifying me that they are sharing my account information with the IRS. Should I be concerned?

It depends. If you have purposely been trying to hide assets from the U.S. government, then yes you should be concerned. If you have filed all the necessary report with the IRS, then you probably don’t need to be concerned. If you are not sure if you have filed the proper reports with the IRS or didn’t realize you had to file reports, then you should give us a call. If you haven’t filed the necessary reports with the IRS, you have several options for coming into compliance with the IRS. The main option is the Offshore Voluntary Disclosure Program (OVDP). The penalties and qualifying requirements vary greatly between the options and it is imperative that you select the right one as you only get one chance. Failure to select the correct program could result in criminal charges or large civil penalties.

As a small business owner, am I personally liable for unpaid payroll taxes?

Most likely, yes. Many small and medium size business owners think that by operating their company through a business entity/corporate they are not personally liable for business debts. There is an exception though through which the IRS can take your house and bank account for unpaid business taxes. View our Business Services

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    The information contained in the McMahon & Tivnan, PC website is solely for informational purposes and does not create an attorney-client relationship or constitute legal advice. Unsolicited information transmitted electronically to our attorneys via this website or the Internet is not considered confidential.