International Tax Awards – November 2017

November 08, 2017  |   Posted by :   |   International Tax Planning   |   0 Comments

The Wolfe Law Group is pleased to announce that we have been chosen to receive the following international tax awards:

1. International Tax Advisor of the Year, USA (2017) – Global 100/2017. The Global 100 awards are selected by no less than 23% in votes from their 151,000+ global readership and awards 100 of the world’s leading firms in over 163 countries world wide.

2. International Tax Advisory Firm of the Year, USA (2017) – ACQ5 Magazine.

3. International Tax Planning Law Firm of the Year (2017) – International Advisory Experts. IAE has 190,000 subscribers to their publication and 33,000 group members (who select recipients).

4. International Tax Advisor of the Year (2017) – Global Business Magazine/Prof. Sector Network (over 200,000 advisors worldwide).

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​ The Paradise Papers – Secrets of the Global Elite

November 06, 2017  |   Posted by :   |   International Tax Planning,Panama Papers,Paradise Papers,Tax Evasion   |   0 Comments

The International Consortium of Investigative Journalists (ICIJ) has recently leaked 13.4m documents from Appleby offshore law firm (Bermuda), Asiaciti Trust (family owned trust co.) and Co registries in 19 secrecy jurisdictions.

The Paradise Papers include: nearly 7m documents including loan agreements, financial statements, e-mails, trust deeds and other financial records from the last 50 years.

The yearlong investigation exposes offshore interests of more than 120 politicians and world wide leaders including US Commerce Secretary Wilbur Ross and Russian investments, 12 other Trump allies, Queen Elizabeth II UK, Former British Prime Minister Father, Ian Cameron (son David), members of British Parliament, Presidents and Prime Ministers (and families worldwide).

Also named were Rex Tillerson US Secy of State, three former Canadian Prime Ministers (Chretien, Martin and Mulroney), Former Prime Minister of Japan (Hatoyama), Argentina President (Macri) and former Presidents (husband and wife, Kircheners), President of Colombia (Santos), Queen Noor of Jordan, Putin friends and family, the President of Ukraine (Poroshenko) and the King and Crown Prince of Saudi Arabia.

Over 31,000 US Taxpayers (US citizens, tax residents and companies) were also named as compared to the Panama Papers which named less than 5000 US persons/taxpayers.

The Paradise Papers disclose how major US companies Apple, Nike, and Allergan of 100 multi-national US companies used “offshore tax engineering” by “tax havens” in Mauritius and Singapore that used shell companies to reduce taxes. It also disclosed how owners of jets and yachts, including royalty, celebrities and sports stars used Isle of Man tax avoidance schemes.

The Paradise Papers reveal the following:

Russia Kremlin owned firms made major investments in US social media companies: Twitter and Facebook via Yuri Millner who had major ties to two Russian Government owned firms known as Kremlin investment vehicles:

1) VTB Bank directed $191m into an investment fund and used the funds to buy a stake in Twitter; and 2) Gazprom heavily funded an off-shore company that partnered with DST Global in a large Facebook investment.

In the case of Wilbur Ross, US Secretary of Commerce, he apparently has an undisclosed investment (never disclosed to US Senate during confirmation hearing) in Navigator Holdings, a shipping firm that receives milliions of dollars from a company owned by close relatives of Putin.

The key owners of Navigator include: Putin’s son-in-law Kirill Shamalov (married to Putin’s younger daughter) and Gennady Timchenko, who is a sanctioned oligarch whose energy sector activities were disclosed by the US Treasury Dept to be directly linked to Putin.

Ross divested many of his holdings before joining Trump’s cabinet in 2/17 but he kept ownership in 9 offshore entities which owned interests in Navigator (which is incorporated in the Marshall Islands in the South Pacific). Ross may have a major conflict of interest since as US Commerce Secretary he plays a major role in US economic relationships with other countries including Russia.

Ross used up to 9 Cayman Island companies to conceal ownership interest in Navigator which since 2014 has been paid $68m by Russian company Sibur (which transfers Russian oil and gas to Europe). Two of the major Sibur shareholders are under US sanctions: Gennady Timchenko who has 12 Paradise Papers companies listed and Leonid Mikhelson whose main company, Novatek, is also under sanctions. Putin’s son-in-law Kirill Shamalov has a 3.9% ownership interest in Navigator while the Ross companies total interest in Navigator is 31% (unclear as to Ross share).

Ross has known Donald Trump for over 25 years when he worked with Trump to pre-package his Atlantic City casino bankruptcies (while Ross was a member of Wall Street investment banking firm, Goldman Sachs).

Over the last 25 years they have maintained a close relationship which resulted in Ross being appointed US Commerce Secretary. It is not known how Ross became a Trump cabinet member while at the same time investing in the same company (Navigator) as Putin’s son-in-law which received millions of dollars annually from Sibur a major Russian company. It is also not known why Ross did not disclose his investment relationship with Russia at the time of his Senate confirmation since as the US Secy of Commerce he oversees US commerce activities with Russia, which appears to be a major conflict of interest.

The ICIJ plans daily further disclosures so stay tuned.

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Tax Planning for Hurricane Relief: The IRS, Harvey, Irma, & Maria

October 12, 2017  |   Posted by :   |   Casualty Loss   |   0 Comments

The Wolfe Law Group is pleased to announce the publication of Attorney Gary Wolfe’s 20th book, Tax Planning for Hurricane Relief: The IRS, Harvey, Irma, & Maria. The downloadable e-book is currently available on Amazon.

In 2017, millions of Americans in Texas, Florida and adjacent states as well as U.S. citizens in Puerto Rico have been traumatized by Hurricanes Harvey, Irma, and Maria. Property damages is in the billions of dollars. Hundreds of thousand of homes have been damaged or destroyed, and many Americans are sick, scared, carless, homeless and without resources.

As of 9/23/17 five different US states and territories have been declared Presidential Federal Disaster Areas (Master Disaster):

1. Texas (8/25/17) Hurricane Harvey
2. Florida (9/10/17) Hurricane Irma
3. Georgia (9/15/17) Hurricane Irma
4. Puerto Rico (9/10/17) Hurricane Irma; (9/17/17) Maria
5. US Virgin Islands (9/7/17) Hurricane Irma; (9/20/17) Maria

The quickest most effective way to help all Americans faced with casualty losses from the multiple 2017 hurricanes (Harvey et al) is to expedite federal income tax refunds as provided under IRC Sec. 165, in federal disaster relief proclaimed areas.

The IRS issues nearly $400B in federal income tax refunds annually with a national computerized database that may expedite payments of federal income tax refunds to all affected Americans.

For US taxpayers in hurricane ravaged zones, consult your tax advisors about declaring hurricane losses for your 2016 tax returns  (originally due 10/15/17); now due 1/31/18 extended by the US Govt.

There are over 60 million Americans who may be affected by this trio of hurricanes. Conventional advice to seek insurance recovery is not going to help those without flood (or other) insurance (apparently 80% of Texans had no flood insurance).

Puerto Rico Governor Rossello, in response to his hurricane-ravaged island, “(As a result) of the immediate humanitarian crisis Puerto Rico is on the brink of a massive liquidity crisis.”

Puerto Rico’s federal disaster relief approved of nearly $30B is not enough and Gov. Rossello requested an additional $4b in aid or face a continued crisis which triggers massive exits of Puerto Rico residents (over 3m) to US states especially Florida.  A Puerto Rico “diaspora” in which Puerto Rico residents fan out among the United States may create much family hardship, state and local government related costs to both “Manage” and “Direct” new arrivals.

Immediate cultural assimilation issues including work, home site, schools for children as well as democracy issues of registration, voting, political choices, portend an avalanche of immediate issues which may easily overwhelm available federal/state/local resources.

Puerto Ricans may arrive penniless, homeless, hungry and suffering all the miseries that a Category 5 Hurricane can breed.

As Americans, Puerto Ricans deserve all help from their American Brothers and Sisters.

If losses are related to storm, fraud or theft Taxpayer may receive an income tax deduction which may result in immediate federal income tax refunds for the tax year 2016 (2017).

Any excess losses may be carried back to prior 3 tax years (with refunds under amended tax returns) so affected Taxpayers may immediately receive up to 4 years of federal income tax refunds for 2016 (2017) plus 3 prior tax years.

Unused losses may be carried forward for up to 20 years so that Taxpayer income, up to the amount of the unused carryforward loss, may be received tax-free until their loss carryforward is exhausted.

Governmental assistance is hampered by lack of planning (FEMA is already close to out of funds), political infighting, and charities are besieged with requests for help in amounts of money beyond their resources.

In short, the first American environmental disaster in history which has had such punitive and unknown financial consequences to all involved the American citizens and residents, the first responders, federal/state and local governments, insurance companies and charities (both public and private).

There is a silver lining. Americans who experience losses from the Hurricanes or related lawlessness (theft, robbery and frauds) may immediately file their 2016 federal income tax returns (Form 1040) and seek a tax refund (for those taxes paid in 2016) while declaring the casualty (other) losses from 2017 hurricanes (i.e. the hurricane damages may be declared in prior tax year 2016 and tax refunds received for 2016).

If the taxpayer has net operating losses (in excess of their 2016 income) these NOLs (losses) may be carried back for 3 tax years (2013-2015), by filing amended federal income tax returns and seeking tax refunds as appropriate.

If there remains NOLs after carrybacks, these losses may be carried forward for up to 20 tax years so the income received to up to the loss amount is not subject to federal income tax. In future years, the taxpayer (after advice from their tax advisors) may either reduce federal income tax withheld on their salary/wages or make lower estimated tax payments to take advantage of any 20-year NOL carryforwards.

The sooner Americans take advantage of their tax refunds for casualty (theft) losses by filing original or amended federal income tax returns, the sooner “they get paid”.

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Hurricane Tax Relief and IRS Collection Activity

September 18, 2017  |   Posted by :   |   Casualty Loss   |   0 Comments

Under the IRS Internal Revenue Manual (Section 5.1.12.2) disaster areas are entitled to special IRS tax collection relief. These types of cases are considered to require special handling with extreme sensitivity for taxpayer’s circumstances. The key issues are IRS collection activity, penalty and interest due. In a federally declared disaster area, as in the case of Hurricane Harvey, if a taxpayer is unable to meet filing deadlines or make federal tax payments due, the IRS may cease collection activity in total, or maintain collection activity but not assess interest and penalty on the delinquent taxes due.

As of 5/20/08 under IRM 5.1.12.2.1(1), (2), an “O-freeze” may be instituted which stops IRS compliance notices and collection activity (including the IRS assessment of penalty and interest due on the taxes owed). An “S-freeze” does not include suspension of IRS collection activity but does include interest and penalty relief.

During the “O-freeze”, the cases remain in inactive status. The IRS Group Manager may move these cases out of the Revenue Officer inventory into a “hold file” pending release of the “O-freeze”. During the “O-freeze” IRS taxpayer contact is restricted unless there are exigent circumstances (e.g. statute of limitations expiration). During an “O-freeze”, a Taxpayer may initiate IRS contact but any agreements are voluntary and not enforceable for the period the “O-freeze” is in effect.

Under IRM 5.1.12.2.3 (as of 8/5/14) IRS Field Collection Management is given guidelines for response to disasters. Within 48 hours following a major disaster, the Field Collection Territory Manager (TM) has options which include:

1) Initiate a “soft contact procedure” (IRM 5.1.12.2.7) with taxpayer to determine impact status of disaster prior to resumption of collection activity);

2) Initiate an initial suspension of all collection activity (including soft contact) pending the initial determination of the exact disaster zip codes and disaster magnitude which includes no Taxpayer contact whatsoever.

Under IRM 5.1.12.2.3(2) once the TM receives the IRS Disaster Relief Memorandum, the TM must follow the guidance which may include that the IRS be required to suspend compliance actions in the covered disaster area.

The most favorable IRS position for the Taxpayer is the “O-freeze” (i.e. collection activity suspended and no interest or penalty imposed on delinquent tax due).

Under IRM 5.1.12.2.4 (3) at the end of the “suspension period” the IRS may resume normal taxpayer contacts within the covered disaster area (which is better for the Taxpayer than the “S-freeze” which never suspended IRS Collection Activity.

Taxpayers in this precarious position due to taxes due and Hurricanes creating a federally declared disaster area may seek to have the IRS freeze collection and request thru counsel that the IRS consider initiation of an “O- freeze”. Once this designation is applied then the IRS computers will redirect collection activity away from the affected taxpayers.

Taxpayers may wish to cite IRM 5.1.12.2.5 (3) and request that any IRS Revenue Officers who contact them regarding federal taxes due both implement and retain an “O-freeze” on their taxpayer IRS account until the disaster area is reclassified as a “non-disaster area”. In addition, request the IRS not pursue collection activity until either the pre-determined release date has passed, or if it passed any new information that may impact collection.

For those taxpayers who are seriously damaged by the hurricanes, which damage may prove irreparable, request the IRS consider the identification of a “long-term” hardship that may indicate a currently not collectible claim and a case closure. Under the IRS rules they have 10 years to collect a tax due, once the tax is assessed. After the 10 year period elapses, the tax collection is precluded by the IRS’ ten year statute of limitations.

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Florida and Texas: Hurricane Irma and Hurricane Harvey Tax Relief

September 11, 2017  |   Posted by :   |   Casualty Loss   |   0 Comments

For our American Brothers and Sisters in Texas and Florida, tax relief can help you.

The IRS may be of great help for you. See IRS Publication #2194: Disaster Resource Guide for Individuals and Businesses. The extant problem in Texas is as follows:

80% of Texans affected by Hurricane Harvey apparently have no flood insurance (homes, businesses). So their risk insurance policies will not pay them for their damages from Hurricane Harvey.

This failure to insure for floods means that many Texans will get no insurance recovery and will be forced to use their own resources to pay for their damages including replacing their irreparably damaged cars, homes, businesses and personal property.

What to Do?

First and foremost all affected Texans and Floridians should claim unreimbursed casualty losses on property that was damaged or destroyed.

Hurricane Harvey has been declared a Presidentially Declared Federal Disaster Area. Texans may immediately get tax refunds for prior taxes paid.

For all Texans who paid taxes in Tax Year 2016, the tax year immediately preceding Tax Year 2017 (which is the tax year Hurricane Harvey occurred) you can elect to deduct the tax loss (a casualty loss from storms under IRC 165) on Form 1040x (amended individual tax return for 2016) and receive a tax refund of some or all the taxes paid in Tax Year 2016.

If the casualty losses (damages to property) are in excess of your income for 2016, the losses may be carried back to three prior tax years (2013, 2014, 2015) and declared as Net Operating Losses and result in tax refunds for prior 3 tax years.

If the losses are in excess of the income for the year 2016 and 3 prior tax years, the losses may be carried forward for tax year 2017 and up to 20 additional future tax years (under the carryforward NOL tax rules) through 2037 and give the taxpayer tax free income up to the amount of the tax losses.

Do Not Wait! File amended Tax Returns immediately for tax year 2016 (and prior 3 tax years in available.)

For taxpayers who will receive insurance recovery, do not wait to receive the recovery to declare your tax losses and get the tax refunds. Instead amend tax year 2016 (and prior 3 tax years) and receive the tax refunds. In the year that the insurance recovery is received, declare the insurance recovery as taxable income and pay any tax due (from the insurance proceeds received).

How?

Contact your tax preparers immediately and request they file amended tax returns for tax year 2016 and include Form 4684 (for casualty loss)

When?

In the words of Paul McCartney, do it “YESTERDAY”.

For any questions have your tax preparers contact the IRS (don’t try to do it yourselves you have already had enough stress, let the “pros take over”).

The IRS announced on 8/29/17 (TX-2017-09) that the President declared a major disaster area in Texas, which will afford affected taxpayers tax relief.

The tax relief includes the following (See IRS: IR 2017-135)

1) For tax year 2016 filings due on extension (businesses 9/15/17; individuals 10/15/17) the IRS extended the tax filing deadline to 1/31/18 (a 3-4 month extension);

2) For tax year 2017, quarterly estimated tax payments originally due either 9/15/17(3rd payment) or 1/16/18 (4th payment) may now be paid by 1/31/18 without penalty.

3) These new tax relief rules apply to both affected taxpayers who live in the covered disaster areas and to those who reside elsewhere but whose records are located in the covered disaster area.

For all affected taxpayers who seek tax refunds for uninsured casualty losses, please consider the “silver lining”; if you qualify for a casualty loss you may receive up to 4 years of income tax refunds (tax loss year and 3 carryback tax loss years), up to 20 years tax free income (20 year carryforward losses).

In addition, the IRS becomes the “Bank”, your federal income taxes paid in the current year (and prior 3 tax years) becomes a “rainy day” savings account which you get to make withdrawals from up to the amount of the taxes saved from the casualty loss.

How can the IRS go from “Public Foe to New Friend” simple: every year they issue billions of dollars in tax refunds so they are just doing their job (which they do better than any taxing agency in the world.

According to the IRS 2012 Data Fact Book (for Fiscal Year 2012 through 9/30/12) the IRS collected $2.51 Trillion in Taxes, processed 237.3 million tax returns and issued $373.4 billion in tax refunds.

The IRS has tax refund capability in place now. With proper tax planning and the right tax compliance they can be the “Tax Cavalry” coming to the immediate aid of distressed Texans (and other state residents) making the difference between financial “life or death” for those brave Americans suffering the hurricane horrors and their aftermath.

So, what to do? Follow one of my favorite Beatles, Sir Paul McCartney and file those tax refund claims for uninsured casualty losses “YESTERDAY”.

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