International Tax Series: Know the Basics of Entity Classification and Check-the-Box when Forming or Acquiring a Foreign Company

A U.S. person who plans to form or acquire an ownership interest in a foreign company should be aware of the following U.S. tax requirements. The Form 8832 check-the-box entity classification election can be filed to treat a foreign eligible entity as a pass-through entity for U.S. tax purposes. A foreign entity which is not on the U.S. list of per se foreign corporations is eligible to elect its classification for U.S. tax purposes on the Form 8832. A foreign entity on the U.S. list of per se foreign corporations is not eligible to make the election, and such foreign entity is required to be treated as a foreign corporation for U.S. tax purposes. The list of per se foreign corporations is provided Continue reading »

Even Simplified Employee Pensions Aren’t Always So Simple

Retirement plan sponsors and vendors alike will all tell you that nothing in the world of retirement plans is truly simple. This was supported by the findings of the Employee Plans Compliance Unit’s recent SEP Plan Compliance Check project. The project revealed an abundance of errors by both SEP plan sponsors and financial institutions.

A SEP is designed to allow small employers to provide retirement benefits to its employees without getting bogged down in all of the rules associated with the more complex qualified plans like 401(k) plans and the like.  SEPs are not subject to the Employee Retirement Income Securities Act of 1974 (ERISA), do not have a 5500 filing requirement with the DOL and their assets are invested in individual retirement accounts (IRAs). While these differences make them far less complex and expensive to administer, contributions to the participants’ account still receive Continue reading »

Maximize Use of the 2012 Gift Tax Exemption: A “Defined Value” Formula Clause Approach

For 2012, the cumulative lifetime gift tax exemption is $5.12 million per person ($10.24M for married couples), with a 35% tax rate on gifts over that amount.  Unless Congress takes action, the exemption is scheduled to decline to $1 million next year, with a 55% tax rate on gifts in excess of the exemption.

Most advisors regard the 2012 exemption as a great gifting opportunity that Continue reading »

Employers Need to Act Soon to Get Expanded Credit for Hiring Vets

IRS Special Edition Tax Tip 2012-11, June 12, 2012

Employers that hired unemployed veterans during late 2011 and early 2012 had an expanded period to request the required certification for claiming the expanded Work Opportunity Tax Credit (WOTC). That expanded period ends on Tuesday, June 19.

The IRS is reminding employers that for eligible veterans hired on or after Nov. 22, 2011 and before May 22, 2012, they have until Continue reading »

Be Aware: FBAR Filing Date Moved Up!

The Form TD F 90-22.1 is commonly referred to as the foreign bank account report or “FBAR.” The FBAR is usually due on June 30th following the calendar year end. This year June 30th is on a Saturday so the FBAR for the calendar year 2011 is required to be received by the U.S. Treasury Department on or before June 29, 2012. The mailbox rule does not apply to the filing of the FBAR and an extension of the due date is not allowed. The mailbox rule means that U.S. federal income tax returns are considered to be filed based on the date Continue reading »

Maryland Increases Personal Income Tax Rates

Maryland Governor Martin O’Malley has just signed legislation that, effective for tax years beginning after December 31, 2011, increases personal income tax rates for certain individuals and reduces allowable personal exemption deductions. The salient specifics of the legislation are that: Continue reading »