Byrnes' Tax & Wealth Management Blog

William Byrnes graduate law programs blog

FATCA Supplement to the 2014 General Instructions for Certain Information Returns Reporting on Forms 1099

Posted by William Byrnes on September 29, 2014


International Financial Law Prof BlogInternational Financial Law Prof Blog.

FATCA filing requirements of certain foreign financial institutions (FFIs). If you are required to report an account that is a U.S. account under chapter 4 of the Code (chapter 4), you may be eligible to elect to report the account on Form(s) 1099 instead of on Form 8966, “FATCA Report.”

Caution: If the account is either a U.S. account held by a passive NFFE that is a U.S. owned foreign entity or an account held by an owner-documented FFI, do not file a Form 1099 with respect to such an account. Instead, you must file a Form 8966, “FATCA Report,” in accordance with its requirements and its accompanying instructions to report the account for chapter 4 purposes. …

download for free –> LexisNexis® Guide to FATCA Compliance

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Inside the New York Fed: Secret Recordings from a Whistle Blower

Posted by William Byrnes on September 29, 2014


International Financial Law Prof Blog.

Segarra had made a series of audio recordings while at the New York Fed. Worried about what she was witnessing, Segarra wanted a record in case events were disputed. So she had purchased a tiny recorder at the Spy Store and began capturing what took place at Goldman and with her bosses.

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Professor William Byrnes Develops Online Teaching Methodologies And Distance Learning In Face Of Disabilities

Posted by William Byrnes on September 29, 2014


William Byrnes pioneered the “online classroom” so he could continue teaching, despite a prognosis of lifetime disabilities resulting from traumatic injury. The program he developed to guarantee his future employment has now become a groundbreaking distance learning model used by higher education institutions and the U.S. military.

Byrnes suffered life threatening injuries in an African ski country accident and spent six months in the hospital undergoing grueling recovery from physical and brain trauma. Doctors could not predict his level of recovery, nor his future quality of life. In an effort to prepare himself for a productive future, Byrnes developed online, multi-media teaching methodologies that effectively ignore disability. ….

read the full article at International Business Times

Professor William Byrnes released remarks in the form of a white paper about teaching photodistance education methodologies called Alternative Methods of Teaching and The Effectiveness of Distance Learning For Legal Education.

Posted in Education Theory | Tagged: , , , | Leave a Comment »

4 Tax Facts about Hobbies

Posted by William Byrnes on September 29, 2014


IRS logo“Millions of people enjoy hobbies that are also a source of income. Some examples include stamp and coin collecting, craft making, and horsemanship.” the IRS stated in its Summertime Tax Tip 2014-15.

A taxpayer must report on the tax return the income earned from a hobby.  The rules for how a taxpayer reports the income and expenses depend on whether the activity is a hobby or a business.  There are special rules and limits for deductions a taxpayer can claim for a hobby.  Five tax tips  about hobbies:

1. Is it a Business or a Hobby?  A key feature of a business is that a taxpayer do it to make a profit.  Taxpayers often engage in a hobby for sport or recreation, not to make a profit. A taxpayer should consider nine factors when to determine whether an activity is a hobby.  A taxpayer must base the determination on all the facts and circumstances of the situation.

2. Allowable Hobby Deductions.  Within certain limits, a taxpayer can usually deduct ordinary and necessary hobby expenses. An ordinary expense is one that is common and accepted for the activity. A necessary expense is one that is appropriate for the activity.

3. Limits on Hobby Expenses.  Generally, a taxpayer can only deduct your hobby expenses up to the amount of hobby income.  If hobby expenses are more than the hobby’s income, then a loss results from the activity.  That loss is not deductible from other income.

4. How to Deduct Hobby Expenses.  A taxpayer must itemize deductions on a tax return in order to deduct hobby expenses.  Expenses may fall into three types of deductions, and special rules apply to each type.  See of Publication 535 for the rules about how you claim them on Schedule A, Itemized Deductions.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , | Leave a Comment »

Rethinking Virtual Currency Regulation in the Bitcoin Age

Posted by William Byrnes on September 28, 2014


International Financial Law Prof Blog

This Article investigates an increasingly important yet under-developed body of law: regulation of virtual currency. At its peak in March of 2014, the daily volume of Bitcoin transactions in U.S. Dollars exceeded $575,000,000. …

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Professor Byrnes Leads Online Education Workshop

Posted by William Byrnes on September 26, 2014


Professor Byrnes Leads Workshop in St. Paul Minnesota | Thomas Jefferson School of Law.

Byrnes became involved with distance education models after he suffered a traumatic injury in a ski accident. Since then, Byrnes has developed online, multi-media teaching methodologies  that effectively ignore disability. Byrnes multi-media approach continuously incorporates the newest technologies to accommodate a wide range of disabilities, making it easier for many more individuals to achieve their educational goals.

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FATCA Updates: Substitute W-8BEN-E, non-reporting FFI GIIN Registration, and new FATCA compliant 1099s

Posted by William Byrnes on September 25, 2014


International Financial Law Prof Blog.

Treasury-Dept.-Seal-of-the-IRSFATCA Releases of September 25: 

- two new Q&As, one addressing whether a nonreporting FFI under the IGA should register for a GIIN, the other addressing whether a substitute W-8, allowed for IGA countries, is FATCA compliant.

- new FATCA compliant 1099s that have a check-box added to identify an FFI filing the 1099 to satisfy its chapter 4 reporting requirement.

download for free –> LexisNexis® Guide to FATCA Compliance

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25% student loan borrowers 90 days behind, 13.7% in default

Posted by William Byrnes on September 25, 2014


International Financial Law Prof Blog.

Still, the government’s default measure vastly underestimates the problem. The government considers people in default if they have made no payments in 360 days. A broader measure by Federal_Reserve_Governors_sealthe New York Federal Reserve—which accounts for all Americans with student loans—shows that roughly one in four borrowers are at least 90 days behind on a payment.

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IRS Video Helps Same-Sex Couples

Posted by William Byrnes on September 24, 2014


The new video, less than two minutes long, is designed to help same-sex couples file their federal income tax returns.

 

 

 

 

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IRS Notice 2014-52 – Rules Regarding Inversions and Related Transactions

Posted by William Byrnes on September 23, 2014


12833-6a00d8341bfae553ef01a3fd3e6553970b-piSECTION 1.  OVERVIEW

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) are concerned that certain recent inversion transactions are inconsistent with the purposes of sections 7874 and 367 of the Internal Revenue Code (Code).  The Treasury Department and the IRS understand that certain inversion transactions are motivated in substantial part by the ability to engage in certain tax avoidance transactions after the inversion that would not be possible in the absence of the inversion.  In light of these concerns, this notice announces that the Treasury Department and the IRS intend to issue regulations under sections 304(b)(5)(B), 367, 956(e), 7701(l), and 7874 of the Code.

Section 2 of this notice describes regulations that the Treasury Department and the IRS intend to issue that will address transactions that are structured to avoid the purposes of sections 7874 and 367 by (i) for purposes of section 7874, disregarding certain stock of a foreign acquiring corporation that holds a significant amount of passive assets; (ii) for purposes of sections 7874 and 367, disregarding certain non-ordinary course distributions; and (iii) for purposes of section 7874, providing guidance on the treatment of certain transfers of stock of a foreign acquiring corporation (through a spin-off or otherwise) that occur after an acquisition.

Section 3 of this notice describes regulations that the Treasury Department and the IRS intend to issue that will address certain tax avoidance by (i) preventing the avoidance of section 956 through post-inversion acquisitions by controlled foreign corporations (CFCs) of obligations of (or equity investments in) the new foreign parent corporation or certain foreign affiliates; (ii) preventing the avoidance of U.S. tax on pre-inversion earnings and profits of CFCs through post-inversion transactions that otherwise would terminate the CFC status of foreign subsidiaries and/or substantially dilute the U.S. shareholders’ interest in those earnings and profits; and (iii) limiting the ability to remove untaxed foreign earnings and profits of CFCs through related party stock sales subject to section 304.

Section 4 of this notice provides the effective dates of the regulations described in this notice.  Section 5 of this notice requests comments and provides contact information for purposes of submitting comments.

Notice 2014-52, Rules Regarding Inversions and Related Transactions

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Revised Qualified Intermediary (QI) Agreement

Posted by William Byrnes on September 23, 2014


IRS logoForm 1099 Reporting Responsibility, Private Arrangement Intermediaries (PAIs) and Joint Account and Agency Options under the Revised QI Agreement,  Special Procedures for New QIs during Calendar Year 2014, and QI Application and Renewal Procedures for Central Banks of Issue

This applies to certain entities that apply to enter into or have entered into the revised Qualified Intermediary (QI) agreement published in Revenue Procedure 2014-39, 2014-29 I.R.B. 151.

I. Form 1099 Reporting Responsibility

Section 8.06 of the revised QI Agreement provides the Form 1099 reporting responsibilities of a QI and incorporates the coordination rule provided in §1.6049-4(c)(4) for Form 1099 reporting with reporting under chapter 4 or an applicable IGA.  The following paragraphs are revised as set forth below.

  • Section 8.06(A). Reportable Amount.  QI must file a Form 1099 in accordance with the instructions to the form for the aggregate amount of a particular type of reportable amount paid to an account holder that is (or is presumed) a U.S. non-exempt recipient (whether a direct or indirect account holder). However, QI is not required to file a Form 1099 on a reportable amount if–
  • Section 8.06(A)(1).  QI is a non-U.S. payor reporting the account holder of a U.S. account under its FATCA requirements as a participating FFI or registered deemed-compliant FFI (including a reporting Model 1 FFI) and the other conditions of §1.6049-4(c)(4)(i) are satisfied;
  • Section 8.06(B)(1). QI is a non-U.S. payor reporting the account holder of a U.S. account under its FATCA requirements as a participating FFI or registered deemed-compliant FFI (including a reporting Model 1 FFI) and the other conditions of §1.6049-4(c)(4)(i) are satisfied;

The corrections described above conform to the coordination rule under §1.6049-4(c)(4)(i) by eliminating the Form 1099 reporting requirement for non-U.S. payors that are reporting Model 1 FFIs if the conditions of §1.6049-4(c)(4)(i) are satisfied.  The reference to backup withholding in section 8.06(A) of the revised QI agreement is also removed to be consistent with section 8.06(B) and because the backup withholding requirements are referenced separately, to the extent applicable, in sections 8.06(A)(1)-(6) of the revised QI agreement.

II. Private Arrangement Intermediaries (PAIs) and Joint Account and Agency Options under the Revised QI Agreement

Section 4 of the QI Agreement provides the requirements for a QI that enters into an agreement with a PAI or applies the joint account or agency option to a partnership or trust.  Section 4 will include the following:

  • A QI may apply the joint account option (section 4.05 of the revised QI agreement) to a partnership or trust that is an owner-documented FFI or an NFFE (other than a WP or WT) that otherwise meets the requirements of section 4.05 of the revised QI Agreement;
  • A PAI or partnership or trust to which a QI applies the agency option (section 4.06 of the revised QI agreement) may provide its documentation and other information to the QI for inclusion in the QI’s periodic review described in section 10.04 of the revised QI Agreement instead of performing the review itself and providing the QI with a certification of its compliance;
  • A partnership or trust to which a QI applies the joint account or agency option must waive any legal prohibitions against providing its records to the QI (rather than the IRS); and
  • A QI may continue to apply the rules of sections 4 and 4A of the former QI agreement (as published in Revenue Procedure 2002-12, 2000-1 C.B. 387 (as amended)) to a PAI or a partnership or trust to which it has applied the joint account or agency option until January 1, 2015, provided that the QI has entered into an agreement with such entity prior to June 30, 2014, pursuant to the terms of the former QI agreement.

The modifications described above are consistent with the provisions in the joint account and agency option section of the revised Withholding Foreign Partnership and Withholding Foreign Trust Agreements.  See sections 9.01 and 9.02 of the Withholding Foreign Partnership and Withholding Foreign Trust Agreements published in Revenue Procedure 2014-47, 2014-35 I.R.B. 393.

III. New QIs for Calendar Year 2014.

Section 1.03 of Revenue Procedure 2014-39 provides that a QI that submits an application for QI status before July 31, 2014 and is approved during calendar year 2014 may act as a QI in accordance with Revenue Procedure 2000-12 (as amended) until June 30, 2014, as if the QI agreement of such QI were effective on January 1, 2014 and expires on June 30, 2014.  The IRS is allowing an entity that submits an application for QI status at any time during the 2014 calendar year, if such application t is approved by the IRS by the end of 2014, to act as a QI in accordance with the former QI agreement from January 1, 2014, until June 30, 2014 as if the QI agreement were effective during that period.  Thus, a QI does not need to submit its application before July 31, 2014 in order to benefit from this retroactive allowance (as described in section 1.03 of Revenue Procedure 2014-39).  The IRS will specify in its approval letter to a QI how such QI may notify the IRS that it will act as a QI for the entire 2014 calendar year.  See also IRS Qualified Intermediaries News, Issue Number 2014-03, which is supplemented and modified by this issue.

IV. QI Application and Renewal Procedures for Certain Central Banks of Issue

Section 1.02 of Revenue Procedure 2014-39 provides that a central bank of issue may enter into a QI agreement.  A central bank of issue that is not required to register on the registration portal to obtain status as a participating FFI or registered deemed-compliant FFI (as described in sections 1.02 and 3.02 of Revenue Procedure 2014-39) must apply for or renew its QI agreement by submitting an application or request for renewal to the Foreign Intermediaries Program at the address provided in section 3.01 of Revenue Procedure 2014-39.  A central bank of issue described in the preceding sentence that renews its QI agreement on or before July 31, 2014, will have a QI agreement with an effective date of June 30, 2014.  If such QI renews after July 31, 2014, the effective date of the QI agreement will be the date of renewal provided in the IRS approval notice.  A central bank of issue that is not required to obtain status as a participating FFI or registered deemed-compliant FFI and that applies for QI status will have a QI agreement with an effective date of the date it is issued a QI-EIN.

download for free –> LexisNexis® Guide to FATCA Compliance

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Penny Stock Frauds, Kick Backs Schemes, and FBI Stings

Posted by William Byrnes on September 23, 2014


International Financial Law Prof Blog

… arise out of a fraudulent scheme in which insiders of publicly-traded penny stock companies paid secret kickbacks to a purported corrupt hedge fund manager, who was in fact an undercover agent with the Federal Bureau of Investigation (“Fund Manager”), in exchange for the Fund Manager’s purchase of restricted stock of the penny stock companies on behalf of his purported hedge fund (“the Fund”), which did not actually exist. …

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Meeting of G20 Finance Ministers and Central Bank Governors

Posted by William Byrnes on September 23, 2014


Cairns, 20-21 September 2014

OCDE_10cm_4c• Part I – Base Erosion and Profit Shifting, Automatic Exchange of Information and Tax and
Development and Part II – Global Forum on Transparency and Exchange of Information for Tax Purposes, OECD Secretary-General Report to the G20 Finance Ministers and Central Bank Governors, September 2014.

• G20 Common Reporting Standard Implementation Plan, September 2014.
G20 Response to 2014 Reports on Base Erosion and Profit Shifting and Automatic Exchange of Tax
Information for Developing Economies, G20 Development Working Group, September 2014.
o Two other reports which support our agreement on tax and development can be found at
http://www.g20.org/official_resources.
Financial Action Task Force Progress Report to the G20, September 2014

download for free –> LexisNexis® Guide to FATCA Compliance

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OECD and G20 pursue efforts to curb multinational tax avoidance and offshore tax evasion in developing countries

Posted by William Byrnes on September 22, 2014


OCDE_10cm_4cThe OECD and its Global Forum on Transparency and Exchange of Information have today been mandated by the G20 to develop toolkits to support developing countries addressing base erosion and profit shifting (BEPS) and to launch pilot projects to assist them to move towards automatic exchange of information. This mandate comes in response to two reports:

  • a Report on the Impact of Base Erosion and Profit Shifting in Low Income Countries (Part 2); and
  • a Roadmap for developing country participation in the new global standard for the automatic exchange of information between jurisdictions.

The OECD will report to the G20 Leaders in November on its plan to deepen the involvement of developing countries in the OECD/G20 BEPS project and ensure that their concerns are addressed.

Detection of tax evasion is critical for developing countries in particular: US$8.5 trillion of household assets are held abroad. In 2012, more than 25% of all Latin American and almost 33% of all Middle Eastern and African household wealth was held abroad compared to the worldwide average of 6%7.  Estimates of tax revenue and illicit financial flows lost by developing countries generally range in the hundreds of billions of US dollars per year, exceeding the amount of official development assistance.

BEPS in Low Income Countries

Following-up on the release of the first set of BEPS recommendations last week, this new report recognises that the risks faced by developing countries from BEPS, and the challenges faced in addressing them, may differ to those faced by advanced economies. It draws on extensive consultations with developing countries to discuss BEPS issues which are a key priority to them, for example transfer pricing and the abuse of tax treaties, as well as issues that are not part of the BEPS Action Plan, such as tax incentives which may erode the tax base in the developing world but do little to attract inward investment.

Acknowledging that developing countries face specific policy issues and implementation challenges that are not always shared with developed countries, the report sets out areas where additional guidance and tools are required to ensure that the BEPS outcomes fully benefit lower capacity countries. It also highlights the actions developing countries have taken, many with international support, that indicate there are good opportunities to raise additional revenues from addressing BEPS issues and to create a more certain and stable investment climate for business.

Many Global Forum members reported this as a key benefit of AEOI and evidence supports this conclusion. For example, in Denmark, a 2010 study found that tax evasion occurred only in 0.3% of cases where income was subject to third-party reporting, but in 37% cases for self-reported income. In the US, 99% compliance was achieved for individuals whose income was reported to the tax administration by financial institutions whereas misreporting by individuals was found in 56% of cases in which there was little or no third party reporting.

Roadmap for developing country participation in AEOI

The Roadmap points the way to developing country participation in the new standard on automatic exchange of information. Drawing on the Global Forum’s extensive consultations with developing countries, the World Bank Group, other international organisations and civil society, the Roadmap provides a stepped approach to ensuring developing countries can overcome obstacles in implementing the new standard. It identifies the benefits, costs and the fundamental building blocks that developing countries need in order to meet the standard.

Pilot projects with developing countries are one of the key ways in which the Roadmap will be implemented. The pilot projects will take a progressive approach to implementation, with a focus on meeting the particular needs of each developing county pilot and ensuring that all confidentiality standards are reached. The pilot projects will be undertaken with the support of the World Bank Group and G20 countries, and include partnerships with more experienced countries. The results of these pilot projects will help to redress the knowledge imbalance between tax administrations in developing countries and tax evaders.

Over half of the Global Forum’s 121 member jurisdictions are developing countries and stand to benefit from the Roadmap and its implementation.

book cover

download for free –> LexisNexis® Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA)

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Wolf of Wall Street Back With a Pack, Seeking Vengeance

Posted by William Byrnes on September 22, 2014


International Financial Law Prof Blog

…bankers and brokers defiantly have hardened in their quest for bigger and bigger paydays. Wolf of Wall Street? What we’re seeing is a pack of wild dogs that continue to use any means necessary to line their pockets no matter the fines, convictions and settlements that regulators throw at them.

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COLA Increases for Dollar Limitations on Benefits and Contributions

Posted by William Byrnes on September 22, 2014


IRS logoThe Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases.  The IRS announced on October 31, 2013 cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2014.

Please see the COLA Increases Table below for prior years’ dollar limitations and Internal Revenue Code references.


 

2014 2013

2012

IRAs

IRA Contribution Limit $5,500 $5,500 $5,000
IRA Catch-Up Contributions 1,000 1,000 1,000

IRA AGI Deduction Phase-out Starting at

Joint Return 96,000 95,000 92,000
Single or Head of Household 60,000 59,000 58,000

SEP

SEP Minimum Compensation 550 550 550
SEP Maximum Contribution 52,000 51,000 50,000
SEP Maximum Compensation 260,000 255,000 250,000

SIMPLE Plans

SIMPLE Maximum Contributions 12,000 12,000 11,500
Catch-up Contributions 2,500 2,500 2,500

401(k), 403(b), Profit-Sharing Plans, etc.

Annual Compensation 260,000 255,000 250,000
Elective Deferrals 17,500 17,500 17,000
Catch-up Contributions 5,500 5,500 5,500
Defined Contribution Limits 52,000 51,000 50,000
ESOP Limits 1,050,000
210,000
1,035,000205,000 1,015,000200,000

Other

HCE Threshold 115,000 115,000 115,000
Defined Benefit Limits 210,000 205,000 200,000
Key Employee 170,000 165,000 165,000
457 Elective Deferrals 17,500 17,500 17,000
Control Employee (board member or officer) 105,000 100,000 100,000
Control Employee (compensation-based) 210,000 205,000 205,000
Taxable Wage Base 117,000 113,700 110,100

 

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Retirement Planning | Tagged: , , , | Leave a Comment »

Mafia Takes Over FirstPlus Financial, Drains it Into Bankruptcy

Posted by William Byrnes on September 21, 2014


International Financial Law Prof Blog.

According to court documents and evidence introduced at the trial of his coconspirators, Scarfo is a made member of the Lucchese organized crime family.  In April 2007, Scarfo, Salvatore Pelullo and others devised a scheme to take over FirstPlus.  Scarfo and Pelullo used threats of economic harm to intimidate and remove the prior management and board of directors and replaced those officers with individuals beholden to Scarfo and Pelullo.   

Posted in Financial Crimes, Money Laundering | Tagged: , , , , | Leave a Comment »

Willingness to Pay to Reduce White Collar and Corporate Crime?

Posted by William Byrnes on September 21, 2014


International Financial Law Prof Blog

Utilizing a contingent valuation survey approached that has been used to estimate the cost of street crimes, the average willingness to pay for a 10% reduction in each of these four offenses is estimated to range between $70 and $75 per household. In the case of consumer fraud and financial fraud – where estimates of prevalence are available, this translates into a willingness to pay of $2,700 per consumer fraud and $21,000 for financial fraud. In contrast, the out-of-pocket costs to victims of consumer fraud have been estimated to average about $100, and about $200 to $250 for various types of financial frauds. These figures also compare favorably to the willingness to pay for a reduced household burglary of $18,000.

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Four Things to Know about Net Investment Income Tax

Posted by William Byrnes on September 17, 2014


IRS Tax Tip 2014-48

Starting in 2013, some taxpayers may be subject to the Net Investment Income Tax. You may owe this tax if you have income from investments and your income for the year is more than certain limits. Here are four things from the IRS that you should know about this tax:

1. Net Investment Income Tax.  The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.

2. Net investment income.  This amount generally includes income such as:

  • interest
  • dividends
  • capital gains
  • rental and royalty income
  • non-qualified annuities

This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. Net investment income also does not include any gain on the sale of your main home that you exclude from your income.

After you add up your total investment income, you then subtract your deductions that are properly allocable to this income. The result is your net investment income. Refer to the instructions for Form 8960, Net Investment Income Tax for more on how to figure your net investment income or MAGI.

3. Income threshold amounts.  You may owe the tax if you have net investment income and your modified adjusted gross income is more than the following amount for your filing status:

Filing Status                            Threshold Amount
Single or Head of household            $200,000
Married filing jointly                        $250,000
Married filing separately                  $125,000
Qualifying widow(er) with a child       $250,000

4. How to report.  If you owe this tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enoughestimated taxes, you may have to pay an estimated tax penalty.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation, Uncategorized | Tagged: | Leave a Comment »

Court Grants US Extraterritorial Search of Emails

Posted by William Byrnes on September 17, 2014


Feds Pose Privacy Risk by Grabbing Overseas ISP E-mails

read the synopsis by the law firm of Pepper Hamilton LLP …

Warrant Issued Pursuant to the SCA

This matter began with an application by the United States for a “search and seizure warrant” targeting a specific @msn.com e-mail account provided by Microsoft, and used by a person who is the subject of a government narcotics investigation. Magistrate Judge James C. Francis IV issued the warrant, after which Microsoft undertook to locate the data associated with the account. Microsoft determined that there were two buckets of data related to the account, one stored in the United States and the other in Ireland.

The “noncontent” bucket consisted of information such as the sender and recipient e-mail addresses as well as date and time information. Microsoft stored this information in the United States, and produced it in response to the warrant. The “content” bucket of information included the substance of the e-mails and their subject lines. For this particular user, Microsoft stored this information at a data center operated by a Microsoft subsidiary in Dublin, Ireland. Microsoft did not produce this information and instead moved to quash the warrant to the extent that it required information from the Dublin data center. Notably, Microsoft began the practice of using foreign data centers in 2010 to address the problem of “latency” that occurred when the servers were too far away from the user. The Irish data center would typically serve users that live closer to Ireland than the United States.

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OECD releases first BEPS recommendations for international approach to combat tax avoidance

Posted by William Byrnes on September 16, 2014


Full Video of BEPS release and the Post link is here.

The first 7 elements of the Action Plan released today focus on helping countries to:

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UK trusts under the UK-US Intergovernmental Agreement (IGA)

Posted by William Byrnes on September 16, 2014


August 2014, STEP, alongside ICAEW and The Law Society of England and Wales, updated their joint guide to the treatment of UK trusts under the UK-US Intergovernmental Agreement (IGA) to take into account minor revisions from HMRC. The trust tests (left hand side of the flowchart) have been amended. Detailed questions in Appendix II of the guidance have also been revised to reflect this.  The changes are not fundamental.

book cover

 

download for free –> LexisNexis® Guide to FATCA Compliance (Chapter 1, Background and Current Status of FATCA)

 

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Mark Cuban joins critics of SEC’s ‘broken windows’ policy

Posted by William Byrnes on September 15, 2014


International Financial Law Prof Blog.

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Back-to-School Tax Credits

Posted by William Byrnes on September 15, 2014


IRS logoThe IRS revealed in its Summertime Tax Tip 2014-23 that some of the costs a taxpayer pays for higher education can lead to a taxpayer owing less tax.  Here are several important tax facts about “education tax credits” from the IRS:

  • American Opportunity Tax Credit.  The AOTC can be up to $2,500 annually for an eligible student. This credit applies for the first four years of higher education. Forty percent of the AOTC is refundable. That means a taxpayer may be able to get up to $1,000 of the credit as a refund payment from the IRS, even if no tax is owed.
  • Lifetime Learning Credit.  With the LLC, a taxpayer may be able to claim a tax credit of up to $2,000 on the federal tax return. There is no limit on the number of years the LLC can be claimed for an eligible student.
  • One credit per student.  A taxpayer may claim only one type of education credit per student on the federal tax return each year. If more than one student qualifies for a credit in the same year, then the taxpayer can claim a different credit for each student.
  • Qualified expenses.  A taxpayer may include qualified expenses to calculate the credit.  This may include amounts paid for tuition, fees and other related expenses for an eligible student.
  • Eligible educational institutions.  Eligible schools are those that offer education beyond high school. This includes most colleges and universities. Vocational schools or other postsecondary schools may also qualify.
  • Form 1098-T.  In most cases, a taxpayer will receive Form 1098-T, Tuition Statement, from the school.  This form reports the qualified expenses to the IRS and to the taxpayer. A taxpayer may notice that the amount shown on the form is different than the amount actually paid.  Some of the paid costs may not appear on Form 1098-T.  For example, the cost of textbooks may not appear on the form, but these textbook costs still may be able to be claimed as part of the credit.
  • Nonresident alien.  A F-1 student visa usually files a federal tax return as a nonresident alien.  A nonresident alien may not claim an education tax credit for any part of the tax year unless electing to be treated as a resident alien for federal tax purposes.
  • Income limits. These credits are subject to income limitations and may be reduced or eliminated, based on the taxpayer’s income.

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2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation | Tagged: , , | Leave a Comment »

Credit Suisse Expands Private Banking to Canada

Posted by William Byrnes on September 11, 2014


International Financial Law Prof Blog -

The number of Canadian millionaires increased 7.2 percent last year, helping make North America the wealthiest region in the world, according to a June 18 report by consulting firm Cap Gemini SA and Royal Bank of Canada. Canadians with at least $1 million in investable assets climbed to 320,000 people, about 1 percent of the country’s population, with a collective wealth of $979 billion, according to the report.

Posted in Wealth Management | Tagged: | Leave a Comment »

Recharacterizing Roth IRAs Smartly: Use Multiple Roths

Posted by William Byrnes on September 11, 2014


International Financial Law Prof Blog -

The benefits of creating a stream of tax-free income during retirement is key to most successful retirement income strategies, and a Roth conversion that allows the client to “undo” the transaction if investments perform poorly is an attractive option for accomplishing this goal. However, despite the benefits that recharacterizing a Roth conversion can offer, this route can sometimes function as a double-edged sword by erasing the gains on successful investments within the account. Despite this, …

Posted in Retirement Planning, Wealth Management | Tagged: | Leave a Comment »

OECD releasing recommendations for combating international tax avoidance by multinational enterprises

Posted by William Byrnes on September 10, 2014


International Financial Law Prof BlogThe OECD will release its first recommendations for a coordinated international approach to combat tax avoidance by multinational enterprises under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project on Tuesday 16 September 2014. …

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Six Indicted For $500 Million FATCA Avoidance Scheme for 100 US Clients

Posted by William Byrnes on September 10, 2014


International Financial Law Prof BlogFor example, in response to a request received by a U.S. corrupt client from a U.S. transfer agent who had to determine whether the proceeds from manipulative stock trading transaction were taxable under U.S. law, the defendant Bandfield forwarded an IRS Form signed by co-defendant Godfrey as the nominee for the shell company which had been set up at the request of the client.  At one point during the government’s investigation, Bandfield boasted to an undercover law enforcement agent that he had specifically designed this “slick” corporate structure to counter President Barack Obama’s new laws, a reference to FATCA….

Posted in Compliance, FATCA, Financial Crimes, Money Laundering | Leave a Comment »

Fixed Annuity Sales Rising in 2014, but Why ?

Posted by William Byrnes on September 10, 2014


International Financial Law Prof Blog – New studies show that, despite relatively stable conditions, fixed annuity sales have increased considerably in 2014 over 2013, as a perhaps unexpected number of clients flock toward these traditional guaranteed income products. 

Posted in Retirement Planning, Wealth Management | Tagged: , , | Leave a Comment »

Will Delaware Give Up Its Status as the #1 Corporate Tax Haven?

Posted by William Byrnes on September 6, 2014


International Financial Law Prof Blog.

The tiny state is perennially at the top of the list of global tax havens and has gained a reputation as place where those with something to hide – embezzlers, arms merchants, money launders, drug dealers and the like – can set up shop, no questions asked. This is thanks to Delaware laws that allow the true owners of a corporate entity to remain a secret.

Posted in Money Laundering, OECD | Tagged: , , | 1 Comment »

Did Russian State Sponsored Hackers Attack 5 US Banks To Retaliate Against Sanctions? Or the NSA Attacks Against Russia?

Posted by William Byrnes on September 4, 2014


International Financial Law Prof Blog -

At least one of the banks has linked the breach to Russian state-sponsored hackers, said one of the people. The FBI is investigating whether the attack could have been in retaliation for U.S.-imposed sanctions on Russia, said the second person, who also asked not to be identified, citing the continuing investigation.

Code WH13743849

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Follow Up on FATCA’s Soft GIIN Registration Numbers – or – Why Isn’t Every FFI Excited to Register WIth the IRS?

Posted by William Byrnes on September 4, 2014


free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

Think my response to Michael Deblis’ FATCA post may interest my readers – Michael’s article: https://taxconnections.com/taxblog/getting-it-right-on-fatca/#.VAgOLZRdXh6

The actual response to your previous Tax Connections post is that you “should” be correct. I have now lost three ‘should’ bets (July, Aug and Sept) as to the number of registrants.

My educated ‘guess’ back in March (I prefer to call it ‘analysis’ but I’ve been too far off to use that term) put the number of book coverGIIN registrants at close to 200,000 at this point. Moreover, I calculated with some precision, and understanding of the industry, that the UK would have 10,000 FFI GIINs registered, while France and Germany would each have 5,000.

In my defense, back in April and May I was still of the opinion that only 300,000 FFIs, by that FATCA definition (after exemptions by regulation and by IGA, after sponsored entities), would need to actually register. However, I have been later convinced, in talking with high level bank and financial institution compliance officers in charge of FATCA, that the number if certainly north of 500,000. How far North? There is much disagreement.  I think that my discussions with Haydon Perryman of Streveus have been most enlightening for my sometimes myopic US goggles.

How many sponsored entities will there be? Will sponsored entities seek a GIIN anyway (I have heard that this may be the case)?

For countries without a USA DTA, will FFIs simply divest because collecting all the W8s / equivalents is costs more than the relative safety of the T-bill? Some investment professionals say the precipice of divestment is the quarter leading up to gross proceeds withholding. Others say that gross proceeds withholding is the real FFI registration deadline.

And anyway, with the probably adoption of the OECD’s Common Reporting Standards, whether it’s a W8 or an OECD equivalent, all institutions investing in the OECD (and likely BRIC) are going to be collecting tax information.  Haydon Perryman sent me PwC’s interesting article on the friction of the US forms versus everyone else’s (well, at least the UK’s) http://www.pwc.com/en_US/us/tax-accounting-services/newsletters/global-information-reporting-withholding/assets/pwc-the-interaction-us-fatca-uk-cdot-poses-unique-challenges.pdf  Until I see a Rev Proc blessing another form, it’s still a W8 world. 

But along this argument, one potential for the foot dragging is that institutions are figuring out how to handle the back office complexities of collecting the required tax information for at least each country of investment/doing business in. It’s not that they are protesting FATCA. It’s just that FATCA is one piece of an increasingly complex data gathering, management and dissemination puzzle, along with the UK’s requirements and its tax forms (the UK we know about), and how many other countries? And the OECD.

On the other hand, in 2003 I wrote a 900 page report about this exact same FATCA type issue. Same horror stories except then it was called the European Union Tax Savings directive. While compliance for the EU states’ institutions, territories that were drug into it, and 3rd party states like Switzerland, may have been expensive, they survived. Capital flight from Switzerland and the Channel Islands to SIngapore was exactly as predicted. But the compliance was like a snowball rolling down a cliff. Most of the institutions came on-line only at the last moment.

Will October finally see the big jump? Probably not based on the decline of September’s results. But just looking at the UK for a moment, the UK professional associations set an internal suggested best practice deadline of October 25th for GIIN registration. So the November list – I expect to see the UK registration to be higher than the Cayman Islands. The UK Revenue stated, after the IGA was signed, that 75,000 UK entities were still impacted (and I read that as most requiring registration). Cut the 75,000 in half – so at least 30,000 for UK November seems reasonable.

China, Brazil? They’ll register in big numbers – on December 31st. I have read on other blogs that their institutions may roll their interest earning US investments into bonds or securities and hold out another year.  Automatic financial information exchange has reached inevitability.   So kicking and screaming they may come to the dinner table, but come they will.

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

Posted in Uncategorized | Leave a Comment »

Tax Information for Students Who Had a Summer Job

Posted by William Byrnes on September 3, 2014


In IRS Special Edition Tax Tip 2014-13, it discussed the tax issues of students who work summer jobs.  Many students take a job in the summer after school lets out. The IRS provided eight tax tips for students who take a summer job.

1. The IRS stated that a student should not be surprised when an employer withholds taxes from the paycheck.  But if the student is self-employed, then he or she may have to pay estimated taxes directly to the IRS on certain dates during the year. This is called a “pay-as-you-go” tax system.

2. As a new employee, a student must complete a Form W-4, Employee’s Withholding Allowance Certificate.  An employer will use it to figure how much federal income tax to withhold from the paycheck. The IRS Withholding Calculator tool on IRS.gov can help a student fill out the form.

3. Keep in mind that all tip income is taxable. If a student receives tips, then the student must keep a daily log so that he or she can report them to the IRS.  A student must report $20 or more in cash tips in any one month to the employer.  All yearly tips must be reported on the tax return.

4. Money earned doing work for others is taxable.  Some work may count as self-employment. This can include jobs like baby-sitting and lawn mowing. Keep good records of expenses related to this work.  Some expenses may be deducted from the income on the tax return. A deduction may help lower the final tax due.

5. If a student is ROTC, then active duty pay, such as pay received for summer camp, is taxable.  But the subsistence allowance while in advanced training is not taxable.

6. A student may not earn enough from a summer job to owe income tax.  But an employer usually must withhold Social Security and Medicare taxes from any pay. If a student is self-employed, then the student must pay these directly to the IRS.  Yet, these count toward coverage under the Social Security system.

7. If a student is a newspaper carrier or distributor, special rules apply. If certain conditions, then the student is considered self-employed.  But if those conditions are not met and the student is under age 18, then the student is usually exempt from Social Security and Medicare taxes.

8. The student may not earn enough money from a summer job to be required to file a tax return. Even if that is true, the student will probably want to file.  For example, if an employer withheld income tax from the paycheck, then the employee will need to file a return to receive a refund of those taxes.  The student can prepare and e-file a tax return for free using IRS Free File.

Finally, see tax rules for students.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation, Uncategorized | Tagged: , | Leave a Comment »

BPI Fined $125,000 for Money Laundering Violations, Shuts Down its MSB Operation

Posted by William Byrnes on September 2, 2014


The Financial Crimes Enforcement Network (FinCEN) today imposed a civil money penalty of $125,000 against BPI, Inc., a New Jersey money services business (MSB), for willful and repeated violations of the Bank Secrecy Act (BSA).  In November 2013, BPI’s parent, Banco BPI, S.A., received approval from the Board of Governors of the Federal Reserve System to establish representative offices in New Jersey and Massachusetts and BPI ceased operations as an MSB in March 2014.  

read the entire article International Financial Law Prof Blog.

Posted in Financial Crimes, Money Laundering | Tagged: , , | Leave a Comment »

FATCA FFI Update and It Doesn’t Look Pretty. September Did Not Break 100,000!

Posted by William Byrnes on September 2, 2014


The IRS published its September list of 99,861 FFIs registered for FATCA.  But that’s just an increase of about 4,500 registrations since the August list of 95,239.  The disappointing September result is a harbinger of the rough waters ahead for general FATCA compliance.  Considering the growth in registrations has slowed dramtically from the July to August increase of only7,246 additional entities (up from 87,993 in July), many industry watchers are sounding the alarm bells.

How Many Foreign Financial Institutions Are Still Not Registered?  Most!

read the country by country analysis at International Financial Law Prof Blog.

Read the August analysis and a country-by-country, and IGA, breakdown at International Financial Law Professor

Who We Are?

Haydon Perryman, FATCA Compliance expert of Strevus, and I have been undertaking (and publishing) the leading, same-day, analysis of the previous June 2nd  and the July 1st  of the FATCA FFI GIIN list by country, by IGA, by EAG, as well as exploring other interesting aspects of registered FFIs, and FATCA compliance documentation (e.g. W-8s and equivalent forms allowed by IGA). Haydon brings the practical side to bear having established the FATCA compliance system for Tier 1 UK institutions and Tier 1 EU ones, and I the academic side being the primary author of Lexis’ Guide to FATCA Compliance and an international tax professor.

free chapter download here —> http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671   Number of Pages in PDF File: 58

Posted in FATCA | Tagged: , , | 1 Comment »

Swiss Banks Lost $383 Billion So Far Due To Tax Evasion Investigations

Posted by William Byrnes on September 1, 2014


International Financial Law Prof Blog.

Posted in FATCA, Money Laundering | Tagged: , , , | Leave a Comment »

Tax Facts for Travel For Charities

Posted by William Byrnes on September 1, 2014


In the IRS Summertime Tax Tip 2014-06, it discussed the tax tips associated with travelling for a charity.  The IRS directed the tax tips to taxpayers that plan to donate services to charity this summer, such as travel as part of the service.

The IRS disclosed five tax tips to assist with using the travel expenses to help lower taxes when filing the tax return for 2014.

1. A taxpayer cannot deduct the value of your services that is provided to charity.  the taxpayer may be able to deduct some out-of-pocket costs paid to provide the services.  This can include the cost of travel.

The out-of pocket costs must be:

• unreimbursed,

• directly connected with the services,

• expenses you had only because of the services you gave, and

• not personal, living or family expenses.

2. The volunteer work must be for a qualified charity. Most groups other than churches and governments must apply to the IRS to become qualified.  Ask the group about its IRS status before donating services that include out-of-pocket expenses. The Select Check tool on IRS.gov can be used to check a charity’s IRS status.

3. Some types of travel do not qualify for a tax deduction. For example, a taxpayer cannot deduct costs if a significant part of the trip involves recreation or a vacation.

4. A taxpayer can deduct travel expenses if the work is real and substantial throughout the trip.  But the expenses may not be deducted if the taxpayer only has nominal duties or does not have any duties for significant parts of the trip.

5. Deductible travel expenses may include:

• air, rail and bus transportation,

• car expenses,

• lodging costs,

• the cost of meals, and

• taxi or other transportation costs between the airport or station and your hotel.

2014_tf_on_individuals_small_businesses-m_1Due to a number of recent changes in the law, taxpayers are currently facing many questions connected to important issues such as healthcare, home office use, capital gains, investments, and whether an individual is considered an employee or a contractor. Financial advisors are continually looking for updated tax information that can help them provide the right answers to the right people at the right time. This book provides fast, clear, and authoritative answers to pressing questions, and it does so in the convenient, timesaving, Q&A format for which Tax Facts is famous.

Anyone interested can try Tax Facts on Individuals & Small Business, risk-free for 30 days, with a 100% guarantee of complete satisfaction.  For more information, please go to www.nationalunderwriter.com/TaxFactsIndividuals or call 1-800-543-0874.

Posted in Taxation, Uncategorized | Tagged: , , , | Leave a Comment »

FinCEN Proposes New Customer ID Rules

Posted by William Byrnes on August 29, 2014


International Financial Law Prof Blog – According to a Treasury press release and ThinkAdvisor, “The Treasury Department’s Financial Crimes Enforcement Network (FinCEN), recently issued proposed rules under the Bank Secrecy Act to clarify and strengthen customer due diligence requirements — including anti-money laundering rules — for banks, brokers or dealers in securities, mutual funds, and futures commission merchants as well as introducing brokers in commodities.” … read on at International Financial Law Prof Blog

Posted in Compliance, Money Laundering | Tagged: , , , , | Leave a Comment »

Prof. Byrnes to Deliver Paper on Pioneering Distance Learning for Legal Education | Thomas Jefferson School of Law

Posted by William Byrnes on August 28, 2014


Prof. Byrnes to Deliver Paper on Pioneering Distance Learning for Legal Education | Thomas Jefferson School of Law.

Posted in Education Theory | Leave a Comment »

SEC Adopts Credit Rating Agency Reform Rules

Posted by William Byrnes on August 28, 2014


International Financial Law Prof Blog:

The Securities and Exchange Commission Wednesday, August 27 adopted new requirements for credit rating agencies to enhance governance, protect against conflicts of interest, and increase transparency to improve the quality of credit ratings and increase credit rating agency accountability.  The new rules and amendments, which implement 14 rulemaking requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act, apply to credit rating agencies registered with the Commission as nationally recognized statistical rating organizations (NRSROs). …. 

International Financial Law Prof Blog

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revised IRS procedure for verifying social security numbers

Posted by William Byrnes on August 28, 2014


IRS logoRevenue Procedure 2014-43 provides guidance to individual payees on verifying social security numbers.

This revenue procedure provides revised procedures for individual payees who are required under Treas. Reg. § 31.3406(d)-5(g)(5) to obtain validation of social security numbers (SSNs) from the Social Security Administration (SSA) to prevent or stop backup withholding under section 3406 of the Internal Revenue Code following receipt of a second backup withholding notice from a payor within a three-year period.

This revenue procedure sets forth revised procedures for an individual payee to obtain validation of the payee’s name and SSN from SSA on or after August 1, 2014.  Following receipt of a second B notice, a copy of a social security card, as described in section 4, is validation from the SSA of a name and SSN combination.

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White Paper – Alternative Methods of Teaching and the Effectiveness of Distance Learning for Legal Education

Posted by William Byrnes on August 26, 2014


Professor William Byrnes, Associate Dean for Graduate and Distance Education Programs at Thomas Jefferson School of Law, released remarks in the form of a white paper about teaching photodistance education methodologies called Alternative Methods of Teaching and The Effectiveness of Distance Learning For Legal Education.  The white paper makes the case for combining traditional classroom learning with online education because it is cost effective, accessible, flexible, and addresses the biggest criticism of legal education today, the lack of law school graduates who can think and practice law.  The white paper covers such topics as -

  • U.S. Department of Education’s Review of the Effectiveness of Distance Learning
  • Developing Learning Outcomes
  • Occupational Outcomes Framing Learning Outcomes
  • Information Acquisition
  • Information Delivery
  • Learning Communities
  • Learning Media
  • Learner Motivation
  • Knowledge Acquisition
  • Learning Tools

In his white paper, Professor Byrnes argues that a challenge for institutions and faculty for the pedagogical development of distance learning is to facilitate deep learning and understanding through the creation of learning materials and opportunities for various learning experiences.

in officeProfessor Byrnes explains, “The goal is to implement best practices in law schools across the country to the benefit of our esteemed institutions, our law students and the legal system at large.”  To this end, he is a primary driver of the invitation-only Work Group for Distance Learning in Legal Education that will finalize its Best Practice Report at its 10th development meeting (see https://www.eventbrite.com/e/working-group-for-distance-learning-in-legal-education-fall-2014-meeting-registration-12051364957).

White Paper: Byrnes, William H., Alternative Methods of Teaching and the Effectiveness of Distance Learning for Legal Education (August 27, 2014). Available at SSRN: http://ssrn.com/abstract=2487679

Posted in book, Courses | Tagged: , , , , , | 1 Comment »

HSBC hired 4,500 new compliance professionals (why aren’t law students preparing for AML careers?)

Posted by William Byrnes on August 26, 2014


See International Financial Law Prof Blog.

Posted in Uncategorized | Leave a Comment »

Goldman Sachs’ $3.15 billion Settlement with FHFA

Posted by William Byrnes on August 25, 2014


International Financial Law Prof Blog.  … Under the terms of the settlement, Goldman Sachs will pay $3.15 billion in connection with releases and the purchase of securities that were the subject of statutory claims in the lawsuit FHFA v. Goldman Sachs & Co., et al., in the U.S. District Court of the Southern District of New York …

Posted in Compliance | Tagged: , , , | Leave a Comment »

7 Tax Facts for Vacation Home Rentals

Posted by William Byrnes on August 25, 2014


IRS logoIRS Summertime Tax Tip 2014-13 addressed the topic of a taxpayer renting to others, such as summer vacation rentals in San Diego.

The IRS stated that of a taxpayer rents a home to others, then usually the taxpayer must report the rental income on the tax return.  But the taxpayer may not have to report the income if the rental period is less than 15 days and the property is also the taxpayer’s home.

In most cases, a taxpayer can deduct the costs of renting a property.  However, the deduction may be limited if the property is also the taxpayer’s home.

The IRS provided 7 tax facts about renting out a vacation home.

  1. Vacation Home.  A vacation home can be a house, apartment, condominium, mobile home, boat or similar property.
  2. Schedule E.  A taxpayer will report rental income and rental expenses on Schedule E, Supplemental Income and Loss.  The rental income may also be subject to Net Investment Income Tax.
  3. Used as a Home.  If the property is “used as a home,” then the rental expense deduction is limited.  This means that the deduction for rental expenses can not be more than the rental income received.  See Publication 527, Residential Rental Property (Including Rental of Vacation Homes).
  4. Divide Expenses.  If a taxpayer uses the property and also rents it to others, then special rules apply.  The taxpayer must divide the expenses between the rental use and the personal use.  To figure how to divide the costs, compare the number of days for each type of use with the total days of use.
  5. Personal Use.  Personal use may include use by the taxpayer’s family.  It may also include use by any other property owners or their family.  Use by anyone who pays less than a fair rental price is also personal use.
  6. Schedule A.  Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.
  7. Rented Less than 15 Days.  If the property is “used as a home” and rented out fewer than 15 days per year, then the taxpayer does not have to report the rental income.

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weekend financial fraud reading

Posted by William Byrnes on August 23, 2014


Former Associate Dean of MIT Sloan School and His Harvard MBA Son Agree to Plead Guilty in Hedge Fund Scam of over $140 of million

Gabriel Bitran, 69, of Newton, a former professor and associate dean of the Massachusetts Institute of Technology (“MIT”) Sloan School of Business, and his son Marco Bitran, 39, of Brookline, a Harvard Business School graduate and money manager, were charged with conspiracy to commit securities fraud, wire fraud and obstruction of justice in connection with their hedge fund businesses, GMB Capital Management and GMB Capital Partners. Both Gabriel and Marco Bitran have agreed to plead guilty to the charge.

PwC pays $25 Million fine, 2 year consulting suspension for hiding sanction and anti-money laundering violations of Tokyo Mitsubishi

PricewaterhouseCoopers (“PwC”) Regulatory Advisory Services will be suspended for 24 months from accepting consulting engagements at financial institutions regulated by the New York State Department of Financial Services (NYDFS); make a $25 million payment to the State of New York; and implement a series of reforms after improperly altering a report submitted to regulators regarding sanctions and anti-money laundering compliance at Bank of Tokyo Mitsubishi (BTMU).

How Did a 21 Year Old, FAU Student Ponzi $10 million From Investors?

Donald R. French was a 21 years old FAU student, living in Boca Raton in 2008 when he opened an LLC online “D3 Funds LP”. He moved to Rome, Italy but from 50 investors in Florida, Massachusetts, and Michigan, he…

Billionaire Found in Middle of Bribery Case Avoids U.S. Probe

Alcoa Inc., the biggest U.S. aluminum producer, pleaded guilty to foreign bribery charges brought by the U.S. Justice Department. Alcoa also settled claims by the Securities and Exchange Commission and agreed to pay a $384 million fine — the fifth-largest such penalty ever.

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FATCA lecture notes for Seminar B (W-8BEN intro, 2nd lecture)

Posted by William Byrnes on August 22, 2014


  1. We’ve covered a lot of ground, yet a long journey lies ahead…

Creative Digital Camera

Everyone will now have read Chapter 1 which is available for download  at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457671

I think it appropriate to begin this week with a quote by Senator Russell Long (of Louisiana) who was Chairman of the Finance Committee in 1969.  Senator Long, speaking of the Tax Reform Act of 1969 stated: “when the Finance Committee began public hearings on the Tax Reform Act of 1969 I referred to the bill as ‘368 pages of bewildering complexity.’  It is now 585 pages  . . . . It takes complicated amendments to end complicated devices.”

Since the original 10 pages of the March 18, 2010 enactment of the Foreign Account Tax Compliance Act, which was as a Pay As You Go revenue raiser for the Hiring Incentives to Restore Employment Act, FATCA has consumed nearly 2,000 pages of regulations, corrections, notices, international agreement models and as of yesterday, 101 international agreements.

To cite some of the important regulatory milestones that will bring us current to July 10, after the HIRE Act was enacted in 2010, the 365 page Draft Regulations were released on Feb 8, 2012, but as Senator Long said “It takes complicated amendments to end complicated devices” the Final Regs released January 28, 2013 came in around 543 pages.

Over the next year, Notices and Corrections added up to another hundred pages, followed by the 565 page Coordinating Regs released Feb 20 of this year.  On top of these, add the FFI agreement that was released Dec 26, 2013 but updated just 2 weeks ago on June 24.

This past March and April we saw the release of the new W-8s, Form 8966, Form 1042-S, and finally on June 25 the instructions for the BEN-E.  Last, but not least, the IRS, much to its credit, managed to release the new QI agreement before the July 1 expiration of all the former QI agreements.

Last month withholding agents began the chapter 4 withholding of 30% on withholdable payments, such as interest earned on bank deposits, made to payees in 143 countries and their dependencies that do not have one of the 101 IGAs with the US as of today.

 While the blog airwaves and commentators have in general been critical of the complexity of FATCA, sophisticated tax compliance officers from the financial industry are actually complementing the US Treasury for having listened to our stakeholder comments and concerns.  The complexity within the FATCA regulations, in general, results from drafting exceptions and exemptions, for institutions and entities, from various diligence, reporting, and withholding obligations.  

  1. Trust but Verify… 

Brazil-Students-Feature-boxThe United States is a self-reporting and assessment system whereby each year 150 million taxpayers fill in their 1040 with their worldwide income.  It is reasonably estimated by various government sources that 10 million of these taxpayers have reporting obligations regarding either their foreign income and / or their foreign accounts.  Unfortunately, less than 10% of Americans with international income or asset exposure are compliant with at least filing the dreaded, but very simple, FBAR form that requires reporting of signatory authority over accounts if the collective balance exceeds $10,000.  Only approximately 800,000 FBARs were filed for 2012 for that group of potentially 10 million American taxpayers.  With so little FBAR reporting, it’s no wonder that Congress and the IRS suspect that hundreds of billions of American’s foreign income goes unreported on the 1040 each year.   Absent alternative information forms, the IRS does not have a scalable method to verify 1040 and select for audit the returns of potential tax evaders.

In the infamous words of Ronald Reagan, “Trust but Verify”, the US tax system is not just based upon self-reporting.  The United States Congress has deputized financial institutions, and some businesses, to be information collectors, and verification auditors.  We know this information collection as forms 1099, W8, W9, and the 1042-S.  And we know the verification standards, such as by example “actual knowledge” and, requirements for “due diligence”.  

  1. Bureau of Information Retrieval … 

Each year, tens of millions of these forms are transmitted to the IRS with information about US and foreign taxpayers.  Allow me briefly to introduce some salient metrics that have been collected by my research colleague, Haydon Perryman, who is Director of Compliance Solutions of Strevus”.

  1. We know that when QI was introduced only 20% of W8s were fit for purpose. We also know that 13 years after QI’s inception that only 35% of W8s are fit for purpose.
  2. We also know form interviews with large financial institutions that on average after a financial institution solicits a pre-existing customer for a new W8 it takes between 5 and 7 months for that W8 to be submitted, valid or otherwise.

When we apply these metrics to the customer base for whom we must reach out, – obtaining W8s or W9s (or their equivalent substitutes under an IGA), – validate those withholding certificates – and then we repeat this process in the 65% of the cases where the W8 submission was ‘invalid’, we can rapidly appreciate the size and scale of the challenge.

Moreover, the IRS estimates that 400,000 – 600,000 FFIs will register on its FATCA portal this portal, although my industry colleagues put the true figure around one million.  Now imagine every FFI registrant approaching its customers and counter-parties for withholding certificates and other documentation.  Industry estimates that there will be 900 million withholding certificates requiring validation for FATCA purposes.

  1. Analysis of GIIN Registrations 

teaching photoThe July 1st GIIN list of financial institutions registrations is instructive in that it is indicative of certain compliance patterns that have emerged.  Again, my colleague Haydon Perryman and myself have undertaken hours of in-depth research of the June and now the July GIIN registrations lists.

87,933 financial institutions and their branches registered from the 250 countries and their dependencies recognized by the IRS for FATCA purposes. Note that not ALL countries and dependencies are recognized by the IRS, such as Kosovo.  And some jurisdictions, which are not recognized by the State Department, such as the State of Palestine, are recognized by the IRS.

Of the total 87,000 registered FFIs, 83,000 representing almost 95% are based in the 101 countries and jurisdictions that as of yesterday have an IGA.  48,000 FFIs registered from Model I IGA jurisdictions whereas approximately 15,000 of the FFIs registered as Model 2 reporting FFIs and branches.  Note that these 15,000 Model 2 FFI registrations are impacted by the FFI Agreement changes of June 24, 2014.  Most of the 4,000 FFIs from the remaining 143 countries and jurisdictions on the GIIN list registered probably either as Participating FFIs or branches.

While the exact number is unknown, based on the July GIIN list, industry and foreign government feedback, it is reasonable to estimate that half a million firms, funds, and other entities, such as trusts, will need to register.  In its FATCA FAQs, the IRS has said that “At this time, the full FFI list is expected to be less than 500,000 records.”, thus implying that it would be close to half a million registrations.  Therefore we can reasonably infer that less than 20% of the global FFIs are currently registered for FATCA.  Moreover, all these non-registered FFIs in the 143 countries without an IGA must be treated as non-participating and withheld upon for FATCA by withholding agents.

Unfortunately, the compliance story is even worse when we consider how many of the 87,000 FFIs are members of an expanded affiliated group.  3,700 of the FFIs registered are parents of “expanded affiliated group” (“EAG”) that have registered the affiliated group members, which includes entities related by 50% and more ownership.  What this slide and our data informs us is that while the large global institutions from the G5 have registered, the vast majority of smaller FFIs have not.  Interestingly, Cayman Islands leads with 813 EAG parents, followed very far behind by the UK.

Of the 250 countries and jurisdictions with FFI registrations, almost 20% of the total registered FFIs are from the Cayman Islands firms, representing 14,207 registrations.  Our research of the Cayman registrations shows a significant number of investment funds among that total.

The United Kingdom almost 7,000 FFIs are less than 10% of the 75,000 UK FFIs requiring registration as estimated by the United Kingdom Revenue.  Note that the 75,000 figure was reduced from the UK government’s initial estimate of 300,000 after it reassessed self-certifying FFIs that are not required to registered, based upon the USA-UK IGA. The UK list is dominated by fund management firms and their various funds, private equity and the plethora of feeder funds investment trusts and quite a few trusts.

NAFTA has thus far been a large disappointment for Treasury with only 2,500 FFIs registered from Canada and 410 from Mexico. However, Canada and the US already automatically exchange information about bank interest, and the US-Canada IGA removed the registration of trusts as FFIs, so it is expected that Canadian FFIs will have registered and be in full compliance by the end of the year.

Brazil leads the BRIC countries with 2,362 FFI registered, followed by Russia at 729, India at 321 and the world’s 2nd largest economy China only has 213. 

The European countries and financial centers have mixed registration results.  France (2,422), Germany (2,894), Netherlands (2,280) and Ireland (2,007), Switzerland (4,279), Luxembourg (4,061), Austria (2,978), Guernsey (2,395), Jersey (1,618), Isle of Man (312), Lichtenstein (239), and Gibraltar (96).

Caribbean – BVI (2,373), Bahamas (6,146), Panama (484), Bermuda (1,579). 

  1. GATCA

 FATCA is the most important development for a globalized model of international exchange of tax information that will be made on an automatic basis.  But its complexity and the high related costs of FATCA have been the source of important frictions and pressures at the highest level between the stakeholders concerned: the U.S. Treasury, the governments of all other countries, and the financial industry.

To briefly mention two frictions of local law that conflict with the FATCA regulations: firstly, many countries’ national data protection laws do not allow the transmittal of customer information without customer authorization, which is fundamental for FATCA to work, and secondly, some civil law countries do not allow a financial institution to unilaterally terminate certain customer relationships, which is required for recalcitrant account holders.

As a result of these difficulties, the U.S. Treasury issued the “Joint Statement from the United States, France, Germany, Italy, Spain and the United Kingdom regarding the intergovernmental approach to improving international tax compliance and implementing FATCA” known as the “G5 Joint Statement”. The Treasury issued this G5 Joint Statement on the same day of the release of the proposed FATCA regulations, February 8, 2012.

The G5 Joint Statement acknowledged the challenging character of implementation of certain FATCA regulations and resulted in the release on July 6, 2012 “Model Intergovernmental Agreement to Improve Tax Compliance and Implement FATCA”, referred to as an “IGA” model agreement, and specifically as “Model 1”. Basically, the model agreement allows FFIs in each of the jurisdictions to report U.S.-owned account information directly to their local tax authorities, using local reporting forms and systems, rather than the IRS, which in turn will automatically share that information with the IRS.

  1. Intergovernmental Agreements 

This Model 1 IGA allows FFIs of those countries to be considered “deemed compliant”, will avoid the 30 percent withholding and, significant in addressing a substantial industry concern, will not be required to impose “passthru withholding” on non-U.S. source payments they make to other FFIs.

This first model has two versions: reciprocal and non-reciprocal. The reciprocal version includes a policy commitment from the U.S. to pursue regulations and support legislation permitting the U.S. to pass information relating to U.S. accounts held by residents of FATCA partners to other FATCA partners. The U.K. was the first country to sign a reciprocal Model 1 FATCA agreement on September 12, 2012.  Mexico signed one shortly later on November 19, 2012 but the USA and Mexico reissued it on April 4, 2014 to take into account the regulatory and IGA modifications, and implementation extensions granted other countries.

The second model, known as Model 2, was originally released on November 15 of 2012 but has since been updated, most recently re-released June 6 of this year.  This second model provides a framework whereby FFIs register with the IRS and either are exempted from FATCA or agree to share FATCA required information directly with the IRS.  In turn, these FFIs are to be treated by withholding agents as complying with FATCA and will not be subject to 30 percent FATCA withholding on payments to them. In addition, these FFIs would not be required to impose “pass-thru withholding” on payments they make to other domestic registered or exempt FFIs or FFIs in jurisdictions that have entered into an IGA with the U.S.

The most important IGA advantage relevant for today is that a GIIN not required until Jan 1, 2015.  Other advantages include Reporting of Tax Information to the Home Country Revenue instead of IRS, Replacement of “Substantial U.S. Owner” with the standard of “Controlling Persons”, which is an FATF anti money laundering standard, No Closing of and withholding upon Recalcitrant accounts and that Retirement Accounts are Deemed Compliant FFIs or are Exempt beneficial owners.  And finally, most Favored Nation Clause that allows IGA partner countries to Cherry Pick from any advantages granted to another partner or through an amendment to the regulations, such as the 6 month extension granted to treat entity accounts as preexisting ones thus not subject to the stricter FATCA documentation standards.

TIEAs and information exchange articles of the double tax agreements are still relevant because Model 2 countries, by example, must agree to provide additional FATCA information to the IRS about recalcitrant accounts, based on tax information request by the normal channels, that the US IRS may mop up such information that has not been passed in the first instance directly by a financial institution. 

  1. Common Reporting Standards 

OCDE_10cm_4cOn February 13 of this year the OECD released the Standard for Automatic Exchange of Financial Account Information Common Reporting Standard, known by the two acronyms of CRS and GATCA for Globalized FATCA.

The CRS calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.

Part I of the OECD report gives an overview of the standard whereas part II contains the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standards (CRS) that together form the “standard”.

As of last week, 66 countries and major financial centers committed to early implementation of this automatic exchange of information between their jurisdictions.  These early adopters includes all 34 OECD member countries, as well as countries such as the BRIC nations, Argentina, Colombia, Costa Rica, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa.  Thus, more than half the 121 Global Forum members have committed to early adoption of GATCA, with the remaining group expected to join by the end of the year after the publication of the detailed Commentary.

The OECD stated that it will deliver a detailed Commentary on GATCA, as well as technical solutions to implement the actual information exchanges, during the G20 finance ministers meeting in September 2014.

What are the main differences between the OECD’s CRS and the US’ FATCA

The CRS consists of a fully reciprocal automatic exchange system but the US specificities have been removed. For instance, the CRS is based on residence and unlike FATCA does not refer to citizenship. Terms, concepts and approaches have been standardized allowing countries to use the system without having to negotiate individual IGAs.

Unlike FATCA the CRS does not provide for thresholds for pre-existing individual accounts, and it includes a residential address test derived from the EU tax savings directive. The CRS also provides for a simplified indicia search for such preexisting accounts. Finally, it has special rules dealing with certain investment entities where they are based in jurisdictions that do not participate in the automatic exchange under the standard.

The CRS is similar to FATCA in its broad application across three dimensions:

  • The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income) but also account balances and sales proceeds from financial assets.
  • The financial institutions that are required to report under the CRS do not only include banks and custodians but also other financial institutions such as brokers, certain collective investment vehicles and certain insurance companies.
  • Reportable accounts include accounts held by individuals and entities, which includes trusts and foundations, and the standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.

UK Son Of FATCA

EU TSD.

(a) income from employment

(b) director’s fees

(c) life insurance products

(d) pensions

(e) ownership of and income from immovable property 

Clients in the 170 countries and their dependencies that the US does not have a tax treaty already suffer chapter 3 withholding.  So what is it in for them to comply with FATCA? 

Because Chapter 3 has important exemptions to its withholding, such as portfolio interest and interest on bank accounts that chapter 4 does not. FATCA’s 30% will hurt the most when it applies to the gross proceeds of a bond, that is, including its return of the underlying debt, because so much of the world’s financial system depends on US debt such as treasuries as the safe reserve. 

  1. W8-BEN 

book coverThat brings us to the forms wherein we will start the discussion about the simple W-8BEN.

The Form W-8BEN has been split into two forms.  The new 2014 Form W-8BEN is for use solely by foreign individuals, whereas the new Form W-8BEN-E is for use by entities for 2014 (revision date 2014) to provide US withholding agents.

Foreign individuals, such as non-resident aliens – that is NRAs, must use Form W-8BEN to document their foreign status and also to claim any applicable treaty benefits for chapter 3 purposes. A NRA (nonresident alien individual) is any individual who is not a citizen or resident alien of the United States.

The NRA should enter the country of nationality on line 2 of the form.  If the NRA is a dual national, enter the country where the NRA is both a national and a resident at the time of completing the W-8BEN.  If the NRA is not a resident in any country of nationality, then the NRA should type in the country where most recently resident.

However, if the individual is a dual national and one nationality is the United States, then the individual is NOT an NRA.  The US national is always a US taxpayer.  A US taxpayer must file a W-9 even if holding nationality in another jurisdiction.

Moreover, a foreign person who has a “green card” and not had it revoked or voluntarily turned it in, or a foreign person who meets the “substantial presence test” for the calendar year is a resident alien, that is, a US taxpayer.  Resident aliens must also submit a W-9.

However, an alien who is a bona fide resident of one of the five US territories, being Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U.S. Virgin Islands, or American Samoa, is considered an NRA, and thus should fill out a W-8BEN, not the W-9.

The NRA must give the Form W-8BEN to the withholding agent if the NRA is the beneficial owner of an amount subject to withholding, — or if the NRA is an account holder of an FFI — then to the FFI to document his/her status as a nonresident alien.   Also, an NRA receiving payments from a payment settlement entity for credit card transactions and other third-party network transactions, such as paypal, must provide a Form W-8BEN.  Finally, to avoid backup withholding by a broker of securities, an NRA will need to provide a W-8BEN.

Important to note – a sole member of a “disregarded” entity is considered the beneficial owner of income received by the disregarded entity, and thus the sole member must provide a W-8BEN. The sole member should inform the withholding agent if the account is in the name of a disregarded entity. The sole member includes his or her own name in line 1, but must include the name and account number of the disregarded entity on line 7 where it states “reference number”.  However, if the disregarded entity is claiming treaty benefits as a hybrid entity, it must instead complete Form W-8BEN-E.

If the income or account is jointly owned by more than one person, the income or account can only be treated as owned by a foreign person if Forms W-8BEN or W-8BEN-E are provided by EVERY owner of the account.  If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, then the payment must be treated as made to a U.S. person and the account treated as a U.S. account.

In general the W-8BEN will remain valid until December 31st of the 3rd year after the date of the signature unless there is a change of circumstances.  There are exceptions to the validity period that our last two speakers will bring up.

If any information on the Form W-8BEN becomes incorrect because of a change in circumstances, then the NRA must provide within 30 days of the change of circumstances the withholding agent, payer, or FFI with a new W-8BEN.   By example, if an NRA has a change of address to an address in the United States, then this change is a change in circumstances that requires contacting the withholding agent or FFI within 30 days.  Generally, a change of address within the same foreign country or to another foreign country is not a change in circumstances.   However, if Form W-8BEN is used to claim treaty benefits of a country based on a residence in that country and the NRA changes address to outside that country, then it is a change in circumstances requiring notification within 30 days to the withholding agent or FFI.

On line 2, the NRA must enter the country of citizenship. If the NRA is a dual citizen, then the NRA must enter the country where the NRA is both A citizen and A resident at the time of completing the W-8BEN.  If the NRA is not a resident in any country in which the NRA has citizenship, enter the country where the NRA was most recently a resident. 

Line 3 requires the NRA’s permanent resident address in the country where the NRA claims to be a resident for purposes of that country’s income tax. If the Form W-8BEN is to be used for claiming a reduced rate of withholding under an income tax treaty, then the NRA must determine permanent residency in the manner required by that tax treaty.  The NRA may not use the address of a financial institution, a post office box, or any of other type of mailing address.

If the NRA does not have a tax residence in any country, then his permanent residence is where the NRA normally resides.

If the country does not use street addresses, line 3 allows a descriptive address, such as “Manor House, Kensington Estate”.

Line 5 requires a taxpayer identification number, which is the US social security number (SSN), or if not eligible to receive a SSN which most NRA are not, then an individual taxpayer identification number (ITIN).  To claim certain treaty benefits, either line 5 must be completed with an SSN or ITIN, or line 6 must include a foreign tax identification number (foreign TIN).

IRS logoIndividual Taxpayer Identification Numbers (ITINs) will expire if not used on a federal income tax return for five consecutive years, the Internal Revenue Service announced today. To give all interested parties time to adjust and allow the IRS to reprogram its systems, the IRS will not begin deactivating ITINs until 2016.

The new, more uniform policy applies to any ITIN, regardless of when it was issued. Only about a quarter of the 21 million ITINs issued since the program began in 1996 are being used on tax returns.

Under the new policy, an ITIN will expire for any taxpayer who fails to file a federal income tax return for five consecutive tax years.  Any ITIN will remain in effect as long as a taxpayer continues to file U.S. tax returns. This includes ITINs issued after Jan. 1, 2013. These taxpayers will no longer face mandatory expiration of their ITINs and the need to reapply starting in 2018, as was the case under the old policy.

A taxpayer whose ITIN has been deactivated and needs to file a U.S. return can reapply using Form W-7. As with any ITIN application, original documents, such as passports, or copies of documents certified by the issuing agency must be submitted with the form.

Line 6 of Form W-8BEN requires a foreign tax identifying number (foreign TIN) issued by a foreign jurisdiction of residence when an NRA documents him or herself with respect to a financial account held at a U.S. office of a financial institution.  However, if the foreign jurisdiction does not issue TINs or has not provided the NRA a TIN yet, then the NRA must enter a date of birth in line 8.

At this point let us turn to our client case studies… 

Posted in Uncategorized | 1 Comment »

International Financial Law Professor headlines of Aug 22

Posted by William Byrnes on August 22, 2014


 

Economic Financial Crimes Commission Recovers N5 Billion Oil Subsidy Fund

The Daily Times Nigeria reports, amazingly that an Oil Fraud is being prosecuted. “While underlining the importance the Commission places on transparency and corruption issues in the oil sector, Uwujaren noted that the Commission presently has a full fledged section…

Bank of America Pays $16.65 Billion for Financial Fraud – Total Exceeds $23 Billion

The DOJ has reached a $16.65 billion settlement with Bank of America Corporation – the largest civil settlement with a single entity in American history ­— to resolve federal and state claims against Bank of America and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch. Total now over $23 billion.

Former Rabobank LIBOR Submitter Pleads Guilty in Scheme to Manipulate Yen LIBOR

The FBI in a press release discusses the guilty plea by Paul Robson, a citizen of the United Kingdom. According to the press release, “Paul Robson is the second employee at Rabobank, one of the world’s largest banks, to plead…

BOA’s Securities Fraud Settlement with SEC for shifting the risk for toxic waste losses to investors

The Securities and Exchange Commission today announced a settlement in which Bank of America admits that it failed to inform investors during the financial crisis about known uncertainties to future income from its exposure to repurchase claims on mortgage loans.

Credit Suisse Caught up in Espírito Santo Mess

According to numerous stories, it is reported that Credit Suisse helped sell billions of dollars of securities that were issued by offshore investment vehicles and then sold to retail customers of Portugal’s Banco Espírito Santo SA. According to the Wall…

Too Little Bank Reform

In a recent commentary in the Independent, “Bank of England’s Governor, Mark Carney (in his capacity as chairman of the Financial Stability Board), the Senior Supervisor’s Group reported: ‘Firms’ progress toward consistent, timely and accurate reporting of top counterparty exposures…

Standard Chartered Bank Pays $300 Million Penalty For Newest AML Failures, Suspends Dollar Clearing For Hong Kong ‘High Risk’ Clients

Under the order, SCB will suspend dollar clearing through its New York Branch for high-risk retail business clients at its SCB Hong Kong subsidiary; exit high-risk client relationships within certain business lines at its branches in the United Arab Emirates; not accept new dollar-clearing clients or accounts across its operations without prior approval from DFS; pay a $300 million penalty; as well as take other remedial steps.

Is it OK to Pick Up Stock Tips at Alcoholics Anonymous?

McGee breached duties of trust and confidence that he owed to a PHL Y senior executive (the “Insider”) – with whom he had a long-term relationship through Alcoholics Anonymous (“AA”) — by misappropriating material nonpublic information about the merger negotiations from the Insider.

How One “Sack Of S**t” Mortgage-Backed Security Came To Define The Financial Crisis

The history of SACO 2006-8, as told through court documents dating back more than six years, provides a view into how the mortgage-backed security industry was built up and spectacularly collapsed. For JPMorgan, it has become the mortgage-backed security from hell.

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International Financial Law Blog headlines

Posted by William Byrnes on August 21, 2014


 

SEC Charges Golfing Buddy with Insider Trading Ahead of Bank Acquisition

O’Neill tipped Robert H. Bray, a fellow golfer with whom he socialized at a local country club. In the two weeks preceding a public announcement about the planned acquisition, Bray sold his shares in other stocks to accumulate funds he used to purchase Wainwright securities.

Barclays Bank adds to its new global financial crime unit

Joe Smith, Wells Fargo’s deputy money-laundering reporting officer and financial crime reporting officer, will join Barclays as a vice-president in October.

Is the UK elimination of criminal intent for criminal prosecution of tax non-compliance sound ? Is tax non-compliance equal with ‘Cruelty to Animals’ and ‘Illegal Guns’?

The Government has announced its intention to introduce a new strict liability criminal offence. This consultation seeks views on the design of this offence.

S630_HMRC_sign__media_library__960_

The UK Government has announced its intention to introduce a new strict liability criminal offence, similar to the crime of cruelty to animals.

Strict liability offences 

2.5 A strict liability offence is a criminal offence where it is not necessary for the court to ascertain the state of mind of the defendant before convicting.

Box 1: Other strict liability offences 

There are several existing offences which can be construed to imply strict liability, including some carrying custodial sentences. These include, for example: …

Cruelty to animals, including the offences of causing unnecessary suffering while transporting an animal or holding it at a market; ….

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/345370/140819_Tackling_offshore_tax_evasion_-_A_new_criminal_offence.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/345236/140819_Tackling_offshore_tax_evasion_-_Strengthening_civil_deterrents.pdf

Posted in Financial Crimes, international taxation | Tagged: , , , | Leave a Comment »

Standard Chartered Fined $300m For Lax Controls

Posted by William Byrnes on August 20, 2014


Standard Chartered Fined $300m For Lax Controls.

Posted in Uncategorized | Leave a Comment »

 
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