Just this week a client of the firm received a telephone call at the client’s home number and left a message to the effect that the client must call the IRS urgently or to have their attorney call. The client called an attorney in the firm who researched the telephone number and found it to be located in the Pomona, California area. When the attorney called that number, an individual represented that he was with the US Treasury Department and that the call involved a situation in which an arrest warrant was going to be issued to the client. Knowing that the client had done no wrong and knowing that the US Treasury always sends written notification of taxes that are due, he questioned the purported “agent” who promptly hung up. If you receive a call from someone purporting to be from the IRS or the US Treasury Department, here’s what you should do:
Treasury Department Takes Aim at Corporate Inversions
By: Amanda Wilson
A few weeks ago, I posted about the increasing popularity of U.S. corporations moving their headquarters abroad, as illustrated most recently by the proposed Burger King/Tim Hortons merger. This type of transaction is referred to as a corporate inversion, which is a transaction in which a U.S. based multinational corporation restructures so that its U.S. parent is now owned by a foreign parent corporation (a Canadian corporation in the Burger King/Tim Hortons proposed acquisition). A corporate inversion has gained increasing popularity because of the high U.S. corporate tax rate and the desire to minimize U.S. taxes. For obvious reasons, the Obama administration does not like corporate inversions and wants to stop them.
Inherited IRAs Subject to Bankruptcy Creditors
By: Jason Palmisano
In 2001, Heidi Heffron-Clark of Wisconsin inherited an individual retirement account (IRA) valued just over $450,000 from her mother. In 2010, Heidi and her husband filed for bankruptcy. The Clarks sought to exclude the inherited IRA from their bankruptcy estate which would block their creditors from obtaining any proceeds from the inherited IRA. At the time of the bankruptcy filing, the inherited IRA was worth approximately $300,000. In a unanimous decision, the Supreme Court of the United States held the inherited IRA was included in their bankruptcy estate and was not protected from the Clark”s bankruptcy creditors. The Supreme Court reasoned an inherited IRA is distinct from an individual’s own IRA, and thus not exempt from creditors in bankruptcy, for 3 reasons:
Have a Foreign Bank Account?
By: Amanda Wilson
A taxpayer that has a foreign bank account is required to file a special form, the Report of Foreign Bank and Financial Accounts, disclosing information about the account. Failure to file this form, which is commonly referred to as an FBAR, can result in significant penalties. A person that fails to properly file an FBAR can be subject to a penalty up to $10,000 per violation. This penalty can be increased to the greater of $100,000 or 50% of the balance in the account at the time of the violation if the violation was willful.
IRS May Issue Guidance on Parnter/Employee Issue
By: Amanda Wilson
When deciding how to form their new business, small business owners are often encouraged to organize as an S corporation because of self-employment tax savings. This recommendation is because the IRS does not recognize that a partner in a partnership can also be an employee. As a result, the IRS takes the position that all of the partner’s income from the partnership should be subject to self-employment taxes, instead of just the amount that reflects a reasonable salary. In contrast, an owner of an S corporation can clearly be treated as both an owner and an employee, resulting in self-employment tax savings.