Foreign Banks Agree to Share Tax Info

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In response to a 2010 law known as FATCA (Foreign Account Tax Compliance Act) the U.S has encouraged foreign institutions to supply the IRS with names, account numbers and balances for accounts controlled by U.S. Taxpayers. All this in an effort to target Americans hiding assets overseas.

Nearly 70 countries have agreed to share this information with the IRS due to a new penalty they will incur under the FATCA that withholds 30% of a foreign banks transactions if they refuse to share information with the IRS. This is a steep penalty that most countries are trying to avoid.

Additionally U.S. banks that fail to withhold the 30% tax would be liable for it themselves and could face steep charges.

More than 77-thousand foreign banks, investment funds and other financial institutions have already agreed to share this information. The Treasury will keep an updated list of all complying banks so American Financial Institutions will know it is OK to send them payments without withholding tax information. As a side note to those with investments in Russia; 515 Russian institutions were forced to apply directly with the IRS because the U.S. halted negotiations with the Russian Government due to the crisis in the Ukraine.

 

     Robert Stack, deputy assistant treasury secretary for international tax affairs, said “The strong international support for FATCA is clear, and this success will help us in our goal of stopping tax evasion and narrowing the tax gap.”

 

The law is so strong, foreign banks are using loopholes in their own laws to provide personal information to the U.S. They circumvent their countries privacy laws by providing the information to their local government and having them release it to the U.S. As the provisions of this law affect more financial institutions, the U.S. is slowly making tax havens a thing of the past.

Officials are still debating a “tax holiday” which would allow corporations and individuals to transfer funds from their foreign accounts to the U.S. at little or no tax at all. The reason why it’s still being disputed is in 2004, when the policy was being tested, it did little for the economy as most companies just transferred some income in order to make their financial statement look better to investors.

As long as companies and investors keep receiving preferred tax rates in other countries, they will keep their income overseas and maximize their tax savings and investment opportunities.

IRS Taxpayer Bill Of Rights

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The Internal Revenue Service adopted a “Taxpayer Bill Of Rights.” Most of them are rights that are already exist in the tax code, but this allows them to be more visible to clients.

Taxpayer Bill of Rights

  1. The Right to Be Informed
  2. The Right to Quality Service
  3. The Right to Pay no More than the Correct Amount Of Tax
  4. The Right to challenge the IRS’s Position and Be Heard
  5. The Right to Appeal an IRS Decision in an Independent Forum
  6. The Right to Finality
  7. The Right to Privacy
  8. The Right to Confidentiality
  9. The Right to Retain Representation
  10. The Right to a Fair and Just Tax System

 

These rights can be found under the IRS Publication 1. They will also be sent to taxpayers when they receive notices from the IRS; including audits and collections.

 

“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen.

“These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”

 

The IRS released the Taxpayer Bill of Rights after an extensive discussion with the Taxpayer Advocate Service; an independent office inside the IRS that represents the interest of U.S. taxpayers. Since 2007, it has been the Offices priority to publish the Taxpayer Bill of Rights and report it in their most recent Annual Report to Congress.

 

“Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,'” Olson said. “However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS, and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.”

 

The timing of this Bill is important because the IRS is currently at its peak of sending notices to taxpayers from the 2014 filing season. The publication will initially be available in English and Spanish, but will be translated to other languages in the future. To help spread the word, the IRS created a special section on the IRS.gov website highlighting the ten rights. They will also add posters and signs to its public offices in the coming months.

 

The importance of this was echoed by IRS Commissioner Koskinen, who said.  “This information is critically important for taxpayers to read and understand. We encourage people to take a moment to read the Taxpayer Bill of Rights, especially when they are interacting with the IRS. While these rights have always been there for taxpayers, we think the time is right to highlight and showcase these rights for people to plainly see.”

 

“I also want to emphasize that the concept of taxpayer rights is not a new one for IRS employees; they embrace it in their work every day,” Koskinen added. “But our establishment of the Taxpayer Bill of Rights is also a clear reminder that all of the IRS takes seriously our responsibility to treat taxpayers fairly. Koskinen added, “The Taxpayer Bill of Rights will serve as an important educational tool, and we plan to highlight it in many different forums and venues.”

 

This is a move in the right direction because many taxpayers are afraid of the IRS and unaware they have rights. As they become more aware of their rights, it might subside the general feeling of fear.

 

In my professional career, I have seen clients so scared of opening letters from the IRS they wait for me to open it for them. Most of the time it’s nothing but a harmless notification, But the fact remains the IRS logo scares people and makes them unsure of what to do next. If you ever do get a notice from the IRS, be aware you do have rights and there are professionals who can help you resolve any issue.


Source:
http://www.irs.gov/uac/Newsroom/IRS-Adopts-Taxpayer-Bill-of-Rights;-10-Provisions-to-be-Highlighted-on-IRSgov,-in-Publication-1

Qualified Educator Expense Still Unchanged 11 Years Later

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Since 2003, an eligible educator can take a Pre-AGI (adjusted gross income) deduction of up to $250. Although helpful, the rising cost of standard of living and inflation leaves our educators ignored.

 (Latest annual inflation rate for the United States is 2.0%, as reported by the Bureau of Labor Statistics)

It’s time for that to change; educators should receive more benefits during tax time. Educators use these funds on items such as books, school supplies, and even software which is paid out-of-pocket to ensure their students have all the materials they need to learn and master their craft.

(In some states, home schools are considered private schools by case law and statute.)

Any expenses educators incur past the original $250 can be deducted towards their AGI, but the problem is they are entered as a Miscellaneous Business Expense, which is hindered by the 2% limitation.This meansif they haven’t reached the limitation, they won’t benefit from their contribution to a student’s learning, and if they have, their contributions will be limited.

EducatorExpense

 

 

Who qualifies?

  • You are a kindergarten through grade 12:

-Teacher
-Instructor
-Counselor
-Principal
-Aide

  • You work at least 900 hours a school year in a school that provides elementary or secondary education, as determined under state law.

 

 Benefits:

  • An Increase to Educator Expense would assist our educators financially.
  • Benefits would trickle down to students as more learning materials are provided to them.
  • It will give us clear understanding of the burden we place on our educators.
  • More incentive for teacher to remain in their profession and give a better experience to students


Sources:
Inflation: http://www.bls.gov/
Qualifications: http://www.irs.gov/taxtopics/tc458.html