Patel Law Offices Blog

Automatic Form 5471 and 5472 Penalties in Spotlight by 2020 National Taxpayer Advocate Report

IRS National Taxpayer Advocate yesterday released her 2020 annual report to Congress yesterday. Federal law requires the Annual Report to Congress to identify the “most serious problems” encountered by taxpayers and to make administrative and legislative recommendations to mitigate those

Client Case Study: Tax Savings Now

Joe Biden is the President-elect, and the House and Senate are Democratic. There could be massive tax increases on the wealthy, including estate taxes. Clients that did not complete planning in 2020 should be advised to use their gift exemptions

Democratic Win Means Estate Tax Law Changes

The results of the Georgia Senate election are in and Democrats have secured a Senate majority.  As a result, we expect tax changes. President-elect Joe Biden’s tax plans were laid out during his campaign last year. However, we did not

Canceled Debt: Taxable or Not

During the pandemic many clients’ businesses have adversely impacted by lockdowns and many negotiations between borrowers and lenders have occurred or will occur in 2021. There will be many loan modifications, bankruptcies, and foreclosures. In order to properly analyze the

Start 2021 with a few New Year’s tax planning resolutions

COVID-related legislation drove a lot of tax changes for 2020 and President-elect Joe Biden has proposed many tax changes for 2021. With tax laws already very complicated, we have some resolutions to get ahead in 2021: Beware of 2021 tax

Recent Webcast to DC Bar Association on Post-Election Estate Planning and Audits: Tax Considerations For the Unexpected

Parag Patel last month co-presented a Tax Law Webcast to the District of Columbia (D.C.) Bar Association on “Post-Election Estate Planning and Audits: Tax Considerations for the Unexpected”. The program was hosted by D.C. Bar Estates, Trusts and Probate Law,

2020 New “Universal” Deduction for Charitable Contributions

As clients look for last-minute tax-saving strategies in 2020, one area that should be considered involves the changes to the charitable giving rules made by the 2020 CARES Act. The CARES Act established a ‘universal’ provision that allows you to deduct non-itemized, above-the-line

“Financial interest” or “Signature Authority” in a Foreign Account

Any United States person with a “financial interest” in or “signature authority” over a foreign financial account, where the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the year, must file a Foreign Bank Account

Smart Planning for Expected Capital Gains Tax Increases

One of the most likely changes in the tax law will be an increase in tax rates. For example, the Biden campaign has proposed increasing long-term capital gains and qualified dividends currently at 20% up to ordinary income rates at

Tax Strategies to Explore Now

It appears more likely than not the United States is headed towards a split government next year. For purposes of tax planning next year, we can probably assume that control of Congress is divided between Republicans and Democrats and we

IRS Revises Delinquent International Information Return Submission Procedure (DIIRSP)

The IRS revised its Delinquent International Information Return Submission Procedure (DIIRSP) last week. The DIIRSP provided an alternative 0% penalty voluntary disclosure process to taxpayers other than the Offshore Voluntary Disclosure Program or the Streamlined Filing Compliance Procedures to file

Estate Planning for 2021 and Beyond: SLATs

The estate and gift tax exemption, which allows each U.S. person to pass a certain amount of assets free of the federal estate and gift tax, was doubled under the 2017 Tax Cuts and Jobs Act. The current estate and

Now is the time to explore a Spousal Lifetime Access Trust (SLAT)

With the upcoming election and potential tax law modifications based on the outcome, high net worth married couples should consider meeting with their advisors to determine what they can do to prepare for potential tax changes. One strategy worth consideration is

FBAR Deadline Slightly Extended

After a misworded posting caused confusion about the 2020 deadline to file FBARs (i.e., FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)), Treasury’s Financial Crimes Enforcement Network (FinCEN) has extended the deadline to Oct. 31. Last Wednesday,

IRS Warning Letter Warns Foreign Business Owners About Section 965 Transition Tax Enforcement

The IRS has recently begun sending “soft letters” (warning letters) to U.S. taxpayers owning foreign companies about IRC Section 965 transition tax compliance. In July 2020, The IRS Large Business & International (LB&I) division expanded its list of compliance campaigns

To Gift or Not to Gift? Gift.

For individuals and families who wish to pass assets to children, grandchildren, and more descendants as part of their overall estate plan, gifting now, rather than later, could provide significant tax benefits.  We are advising clients of the likely impact

The FinCEN Files Leak

The FinCEN Files are leaked documents from the US Financial Crimes Enforcement Network (FinCEN), that have been globally earlier published this week. FinCEN is an agency US Treasury that collects and analyses forms to combat money laundering, terrorism financing, evasion

Caution: Increased FBAR Enforcement

The last month or so has unfortunately seen a lot of FBAR enforcement court rulings against US taxpayers and in favor of the government. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury can levy high penalties

Post-Covid: Re-explore the Home Office deduction

In a recent notice last week, the Internal Revenue Service reminded individuals to consider taking the home office deduction if they qualify. The benefit may allow taxpayers newly working from home to deduct certain expenses on their tax return. In

Tax Changes Due to the Election

Many Tax Changes Expected At the time of this writing, the political conventions are over, and Joe Biden has a double-digit lead in some polls. A number of Senate seats may turn blue as well, and this could give the

FBARs from Wuhan

The US Department of Justice recently announced the indictment for tax-related crimes of Dr. Charles Lieber, the former Chair of Harvard University’s Chemistry Department, for monies received from a university in Wuhan, China. Key excerpts from the announcement are: Dr. Charles

Foreign Retirement Plans: New IRS Exemption from Required Information Reporting on Forms 3520 and 3520-A

In recent IRS Revenue Procedure 2020-17, the IRS has created a procedure where certain U.S. persons having an interest in tax-favored foreign trusts established and operated exclusively or almost exclusively to provide pension or retirement, medical, disability, or educational benefits

New Court Ruling: FBAR penalties applied per form and not per account

The FBAR rules require the filing of a FinCEN Report 114, Report of Foreign Bank and Financial Accounts (FBAR) to report for accounts of U.S. persons aggregating $10,000 or more. For a non-willful failure to disclose, the maximum penalty imposed

How to Avoid Jail and Clean Up Tax Problems

If you have willfully failed to report income or claimed excessive deductions or failed to file your tax returns and pay the tax owed, you may be liable for civil penalties and possible jail time for criminal tax evasion. Few

The IRS has woken up.

Due to the coronavirus, the IRS paused all collection and enforcement activities until July 15, 2020. But recently we have started to receive some tax enforcement actions against some of our clients. The IRS has woken up and is getting

How to Fix an Erroneous Filed Tax Return without Penalties

But what if you discover an error or omission on a return already filed with the IRS that needs to be corrected and it is still before the extended due date? The advantage of fixing the return now, before the

IRS’ New “Dirty Dozen” list of tax scams

The Internal Revenue Service announced on July 16, 2020, its annual “Dirty Dozen” list of tax scams. This year, the Dirty Dozen focused on scams that target taxpayers, and emphasized aggressive and evolving schemes related to coronavirus tax relief, including

What Happens to Your Digital Accounts In Case of Death

We have completed over 1,000 estate plans for clients over the years. Recently, however, we have unfortunately probated a disproportionate number of clients’ wills after death. Through estate planning, many of our clients have planned well for their families in

Expect Coronavirus Bankruptcies

With the downturn in the economy and massive job losses, bankruptcy filings will skyrocket this year. Unpaid tax liabilities will likely be a large part of clients’ debts. There is a common misconception that income taxes are never dischargeable in

No Springing in Spring

You may have heard of a “springing” powers of attorney (POA), which is a POA that “springs” into effect when you become incapacitated. This type of POA literally “springs” to life when it’s needed. Many people like the idea of