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San Jose foreign asset tax attorneyThe federal government has long been concerned with assets and businesses based abroad but owned by United States citizens. The IRS regularly looks to address income that is purposefully generated outside the country to avoid taxation. As part of the efforts to ensure that foreign investments are taxed correctly, the Tax Cuts and Jobs Act (TCJA), which was passed last year, made sizable changes to taxation rules, such as the addition of regulations mandating that global intangible low-taxed income produced by controlled foreign corporations be included in a taxpayer’s taxable income.

What Is a Controlled Foreign Corporation?

A controlled foreign corporation (CFC) is an American corporation that operates in another country with U.S. shareholders who hold 50% or more of the control of that corporation. American shareholders, directors, or officers of one of these businesses must report their income from the foreign corporation and pay taxes on that income. 

New Laws Under the Tax Cuts and Jobs Act

The TCJA provides that a U.S. taxpayer who possesses at least 10% of the value or voting rights in at least one CFC must now report global intangible low-taxed income from these CFCs as currently taxable income. This holds true even if there are no distributions to shareholders. 

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San Jose offshore tax attorney OVDPIf it has come to your attention that your tax filings may not be in compliance with U.S. tax laws and regulations, and you may be concerned you could face criminal liability, the IRS Offshore Voluntary Disclosure Program (OVDP) may provide a means to rectify your noncompliance status. 

About the Offshore Voluntary Disclosure Program

The OVDP applies to tax issues related to unreported offshore income or assets. The OVDP was created for taxpayers who are concerned the IRS will view their conduct as willful or fraudulent. Under the law, a taxpayer’s failure to report offshore financial assets and fully pay the taxes due related to such assets may lead to criminal charges. Allowing for voluntary disclosure once tax returns have been filed is a way a taxpayer may be able to avoid criminal prosecution.

In order to utilize the OVDP, certain requirements must be met and certain procedures must be followed. Several iterations of the OVDP have been in effect over the past few years. The IRS ended one disclosure program on September 28, 2018 and announced new rules that would affect disclosures made after that date.

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San Jose tax attorney, foreign tax compliance, IRS criminal investigation, pay taxes, International Tax Enforcement GroupThe IRS is turning to large-scale data analysis to help detect criminal activity among taxpayers. It is doing this through the creation of two initiatives, each with a different focus. Both initiatives will heavily rely on data gained through the IRS’s civil departments that will be used by the agency’s Criminal Investigation Division.

Initiative 1: International Tax Enforcement Group

Foreign tax compliance, including the reporting of offshore accounts, has long been a priority for the IRS. Recently, the IRS announced that a new team, the International Tax Enforcement Group, will analyze massive amounts of collected data in an attempt to find non-compliant tax filers.

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