#IRSCompliance

[jangillman]

[nando161mando]

REPORT THE HERITAGE FOUNDATION TO THE IRS

https://drive.google.com/file/d/11ox6BbRjSxkdgKd5Up3aSuJDHQLhuDh1/view?usp=drivesdk

[finlotax]

The Importance of Form 5471 for Controlled Foreign Corporations: What You Need to Know

Sharing ownership in a foreign corporation can be exciting and rewarding, but it has additional disclosure requirements by the IRS. Form 5471 is one of these disclosure requirements and applies to US citizens with ownership in a foreign corporation. If you share ownership in a foreign company, you must deal with the complexities of filing Form 5471. Understand the basics involved in filing Form 5471 below.

Form 5471 and controlled foreign corporations

Understanding Form 5471

Form 5471 is essentially an information statement and not a tax return. It is officially known as the Information Return of US Persons concerning Certain Foreign Corporations. It is meant to inform the IRS about US citizens’ holdings in foreign companies and prevent people from hiding such overseas assets. The IRS also needs to be informed about which countries these investments have been made. Failing to file Form 5471 can attract a penalty but not tax obligations, except in certain cases. These exceptions include shareholdings in a Controlled Foreign Corporation (CFC) which can attract the GILTI (Global Intangible Low-taxed Income) tax. However, you only need to file Form 5471 if you have 10% or more ownership in a foreign corporation. The law applies to any US citizen, partnership, trust, corporation, estate, etc.

IRS categorization for filing Form 5471

The IRS has categorized those required to file Form 5471 into five groups.

1. Category 1

This category includes US citizens who are shareholders of specified foreign corporations (SFCs) and are subject to transition tax under section 965.

 2. Category 2

This category includes US citizens who are officers and directors of foreign corporations with other US shareholders holding 10% of the company’s stock.

 3. Category 3

US citizens who have acquired or disposed of substantial holdings in a foreign corporation.

 4. Category 4

US citizens who had control over a foreign company for at least 30 days during the taxation year.

 5. Category 5

US citizens owning shares in a controlled foreign corporation (CFC)

Understanding what Controlled Foreign Corporations are

A foreign company in which US shareholders hold more than 50% of the stock and combined voting power is known as a controlled foreign corporation. Here, “US shareholder” implies a US citizen who owns 10% or more of the total combined voting power in the foreign corporation. If a US citizen owns less than 10% of the total combined voting power, his/her ownership will not be considered to deem a foreign corporation a controlled foreign corporation. If you hold stock in such a controlled foreign corporation you may be liable to pay GILTI tax.

Direct, indirect, and constructive stock ownership

The IRS has created a wide scope for Form 5471, requiring compliance by those with direct, indirect, and constructive foreign stock ownership. Direct foreign stock ownership is when you directly own 10% or more of a foreign company’s stock. Indirect ownership of a foreign company’s stock includes those who own shares in a foreign company through a complex network of entities which may include partnerships, other corporations, trusts, etc. If you own stock in a foreign company indirectly, and meet the 10% threshold, you are required to file form 5471.

Apart from these two forms of stock ownership, there is another form known as constructive ownership. The constructive ownership rules are based on the attribution rules of IRC Section 318, and permit the IRS to attribute certain forms of foreign stock ownership to you based on your connections or relationships. In such instances too you are required to file Form 5471.

Significance of Form 5471 for US shareholders of controlled foreign corporations

IRS rules for CFCs are complex, with different reporting implications for various shareholding scenarios. The main reason behind reporting in form 5471 is that the IRS needs to know whether US taxpayers are involved in a Controlled Foreign Corporation. Form 5471 Is generally submitted along with the yearly tax return form 1040. Form 5471 is a crucial and complicated component of the tax returns of a US citizen with holdings in a controlled foreign corporation. Depending on the taxpayer’s category, he/she will have to file different schedules under form 5471. In its entirety, the form must include details about the identity of the controlled foreign company; its share structure; the shareholdings of its US shareholders; directors and officers who are US citizens; balance sheet and income statement; particulars of financial transactions between the company and its US shareholders; changes in shareholdings of any US shareholders.

Penalty

Failing to file form 5471 on time can attract steep penalties. The IRS can levy a penalty of $10,000 on each failure for every applicable accounting year plus an additional $10,000 for every month that the failure to comply continues, beginning 90 days after the taxpayer has been notified of the delinquency and extending up to a maximum of $60,000 per return.

Filing Form 5471 is a complex and daunting process for shareholders of controlled foreign corporations, irrespective of whether you hold shares directly, indirectly, or through constructive ownership. If you own shares in more than 1 controlled foreign corporation, you must file a separate form 5471 for each such corporation. Failing to comply with the provisions of Form 5471 can attract high penalties.

Finlotax: An efficient taxation firm in CA

We are Finlotax, experts you can count on for all your tax needs in CA. Avail our unmatched services in bookkeeping, tax prep, tax planning, payroll, and compliance solutions. If you need to deal with the complexities of Form 5471, just reach out to us at 4088229406 and we will guide you through the entire process of filing your returns. Trust us for a hassle-free and smooth return filing process!

[obgoutsourcinginc]

At OBG Outsourcing, we understand that filing taxes is a complex process where mistakes or changes can occur despite the utmost care

[legacytaxresolutionservices]

An installment agreement with IRS

Know about installment agreement with IRS

Many taxpayers often struggle when the income tax amount they owe is more than what they can pay. This is a stressful situation. But an installment agreement with IRS can be an option. In addition, taxpayers are also eligible for another collection alternative such as an offer in compromise or others.

Here are a few basic things you should know about the IRS installment agreement.

As the name suggests, an installment agreement is like a promise on the part of any taxpayer to make monthly payments to the IRS to satisfy any personal tax debt. But before the person rushes to set up an agreement, it is vital to understand the eligibility criteria and different installment agreement terms and conditions.

To qualify for it, the taxpayer should be "compliant." A taxpayer is said to be compliant when

All needed tax returns have been filed.

The taxpayer is upgraded with existing year tax obligations.

It is vital to mention that IRS charges some user fees for installment agreement applications. The fee amount might vary based on the payment methods, agreement type, and the current financial situation of the taxpayer. For instance, fees are lower for any taxpayer who usually sets up a direct deposit for the payment than a taxpayer who physically mails a check every month.

As per the reports given by IRS, more than 90% of individual taxpayers often qualify for using the online application. To be eligible for an installment agreement, a taxpayer must owe $50,000 or less by combining personal tax, interest, and penalties and must have filed all needed returns. But when the taxpayer is not eligible for any online installment agreement, they might have to complete and mail forms no 9465, along with the installment agreement and form 433 F.

An experienced tax consultant can better guide a taxpayer on how to fill out forms to avoid all possible denials or any rejections by IRS.

[foundationsearch]

Year-End Reflections & the January Effect: Foundation Giving Insights for 2024

Explore year-end trends in foundation giving, including the 'January Effect' and IRS updates. Discover grant opportunities, foundation applications, and effective fundraising education strategies to maximize nonprofit success.

[saicpaservices]

IRS Problem Resolution Made Simple with SAI CPA Services

Tax issues with the IRS can be overwhelming, but they don’t have to be. SAI CPA Services specializes in IRS problem resolution, offering personalized solutions to help you tackle tax issues confidently.

Why IRS Problem Resolution Matters

Tax issues can have serious consequences if not addressed promptly. Here’s how our IRS resolution services work to protect your financial well-being:

Tax Dispute Support: Whether it’s an audit or unexpected tax bill, we’re here to represent you and negotiate on your behalf to reach the best possible outcome.

Penalty Abatement: Our team will review your case and, where possible, apply for penalty relief, potentially reducing the amount owed.

Payment Plans and Offers in Compromise: If you’re unable to pay in full, we explore options like installment agreements or offers in compromise to make payments more manageable.

How SAI CPA Services Can Help

At SAI CPA Services, we provide compassionate and effective IRS problem resolution services, ensuring you have a trusted partner to help navigate any tax issues.

Connect Us:  https://www.saicpaservices.com https://www.facebook.com/AjayKCPA https://www.instagram.com/sai_cpa_services/ https://twitter.com/SaiCPA https://www.linkedin.com/in/saicpaservices/ https://whatsapp.com/channel/0029Va9qWRI60eBg1dRfEa1I

908-380-6876

1 Auer Ct, 2nd Floor

East Brunswick, NJ 08816

[gnsaccountacy]

 NGO for an IRS audit

 NGO for an IRS audit

IRS Audit Survival: Is Your Nonprofit Ready for the Public Support Test?

Running a nonprofit can be challenging, and the last thing you want is to worry about an IRS audit. With the focus on making a positive impact, managing donor relations, and ensuring smooth operations, it's easy to overlook the importance of meeting IRS requirements. One key area that can raise concerns is the Public Support Test. So, how do you ensure that your nonprofit is fully prepared if the IRS decides to audit your organization?

What is the Public Support Test?

The Public Support Test is a critical IRS measure that checks whether your nonprofit is primarily supported by the public. To maintain your status as a public charity, your organization must meet the threshold where at least one-third of your funding comes from public contributions (as per Code Sec. 509(a)(1)).

If your nonprofit generates most of its income through programs or sales—such as museums or performing arts centers—there's a second test (509(a)(2)) that balances both public donations and program revenue. Passing either test ensures you keep your public charity status. However, failing the test could lead to your nonprofit being reclassified as a private foundation, which comes with stricter regulations and higher tax liabilities.

What Triggers an IRS Audit?

The IRS doesn't audit nonprofits without reason, but certain factors can raise red flags:

Inaccurate Reporting: Errors or discrepancies in your Form 990 can attract attention.

Over-reliance on Major Donors: Relying too heavily on a small group of large donors may lead to failure of the Public Support Test.

Funding Changes: Sudden shifts in funding sources may also raise suspicion.

Incorrect Calculations: Miscalculating public support, including the improper handling of unusual grants or excess contributors, can be a problem.

Key Areas the IRS Will Focus On During an Audit

If your nonprofit is audited, here are the areas the IRS will likely scrutinize:

Public Support Percentage: Did your nonprofit meet the one-third public support threshold?

Source of Income: Were all income sources—donations, grants, and sales—accurately reported?

Handling of Unusual Grants: Were any one-time large grants excluded from your public support calculations, and was it done correctly?

Failing to meet these requirements can lead to serious consequences for your organization.

How to Prepare for an IRS Audit

Now that you understand what might trigger an audit and what the IRS will be examining, here are some tips to ensure your nonprofit is always audit-ready:

Keep Detailed Records: Maintaining accurate records of donations, grants, and income sources for at least five years is crucial. This way, if an audit occurs, you can easily demonstrate where your funding comes from.

Double-Check Your Public Support Percentage: If your public support percentage is close to the 33.3% threshold, double-check your calculations. Even minor errors can cause big issues.

Review Schedule A of Form 990: Schedule A is where you provide details about your public support percentage. Ensure this is filled out correctly every year.

Seek Professional Help: Nonprofit tax compliance can be tricky. Consulting with experts like G&S Accountancy can help you avoid mistakes and keep your organization compliant.

Consequences of Failing an IRS Audit

If your nonprofit fails the Public Support Test during an IRS audit, the consequences can be severe:

Reclassification as a Private Foundation: This reclassification brings stricter rules, more reporting requirements, and higher taxes.

Excise Taxes: As a private foundation, your organization may face excise taxes on investment income.

Administrative Burdens: Private foundations are required to distribute a percentage of their income yearly, and conflicts of interest rules are much stricter.

How G&S Accountancy Can Help

At G&S Accountancy, we specialize in helping nonprofits stay IRS-compliant. Our services include:

Audit-Ready Recordkeeping: We'll ensure your records are clear, detailed, and compliant with IRS standards.

Public Support Test Calculations: We'll manage your public support percentage calculations to ensure your nonprofit meets IRS criteria.

Form 990 Preparation: Let us take the stress out of preparing your annual tax forms. We'll ensure your Schedule A is accurate and complete.

IRS Audit Representation: If you ever face an audit, we'll represent you and guide you through the process.

Frequently Asked Questions

1. What is the Public Support Test, and why is it important?

The Public Support Test ensures that your nonprofit is funded by a broad base of donors and the public. If your organization meets the requirement, you can continue operating as a public charity, avoiding reclassification as a private foundation, which has stricter rules and taxes.

2. What might trigger an IRS audit for nonprofits?

Common triggers for audits include discrepancies in Form 990, over-reliance on a few major donors, and incorrect public support calculations.

3. How can we avoid mistakes in public support calculations?

Partnering with G&S Accountancy can help. We ensure accurate, compliant calculations and handle the complexity of donations, grants, and unusual contributions.

4. What should we do if we are audited?

If you're audited, don't panic. G&S Accountancy will help you gather necessary records, review your financials, and represent your nonprofit in front of the IRS.

5. How can G&S Accountancy help keep us compliant year-round?

We offer year-round support beyond tax season. Our services include detailed recordkeeping, ongoing reviews, and assistance with Form 990 and public support calculations to keep your nonprofit compliant.

[form1099]

Filing Requirements for Non-Employee Compensation

Businesses must file Form 1099-NEC for payments totaling $600 or more annually, requiring the recipient's accurate name and TIN. The filing deadline for the 2024 tax year is January 31, 2025, and electronic filing is mandatory for 10 or more forms. Staying compliant helps avoid penalties and ensures accurate income reporting.

[nando161mando]

smh

[a-nieceb]

For the IRS, some important numbers to keep handy include the toll-free IRS phone number for individual tax-related questions at 1-800-829-1040, the IRS Business and Specialty Tax Line at 1-800-829-4933 for business tax inquiries, and the IRS Fraud Hotline at 1-800-829-0433 for reporting suspected tax fraud or identity theft. Additionally, the IRS offers online resources such as the official IRS website (www.irs.gov) for forms, publications, and tax information, as well as the IRS Taxpayer Assistance Centers for in-person help with tax matters. Always verify the authenticity of any communication claiming to be from the IRS to protect against scams and fraud.

[finlotax]

Exploring US Tax implications on foreign property sales: Strategies for compliance and optimization

Owning real estate abroad can be financially rewarding. However, a vital aspect to consider is the tax implications on the sale of such property. Keeping yourself well-informed will ensure you are not caught unawares and confronted by huge tax liabilities. The US is one of the few countries that extends its tax net beyond its borders, and as soon as you sell property abroad, you land under the IRS spotlight.

A key aspect to be considered when selling property abroad is capital gains tax.

Capital gains tax

Capital gains tax is levied on profits earned on the sale of a capital asset such as real estate. This means that if you sell property in the US or abroad and make a profit or loss, you must report it, and capital gains tax could be owed on the profit. The IRS frowns on attempts to dodge capital gains tax, so ensure you pay up. Gains from foreign property sales are regarded as foreign income.

You must consider these factors when reporting on the sale of your foreign property.

· Sale of a primary foreign residence – Your foreign residence qualifies as your principal residence if you lived in and owned it for at least 24 months out of the last 60 months ending on the date of the sale of the property. Any gains from selling such property are usually tax-free below certain thresholds.

· Sale of inherited foreign property –For the sale of inherited foreign property, the rules are similar to those for the sale of a primary foreign residence. However, once a forebearer passes, the property value is stepped up to its fair market value on the date of the forebearer’s passing. Your capital gains would be calculated based on this stepped-up value.

· Sale of foreign rental property – When you sell a foreign rental property your profits could be taxed at multiple rates, depending on your holding period, depreciation, etc.

Foreign tax credit

Foreign tax credit comes into play when the country in which foreign property is located requires you to pay tax on capital gains. This will result in double taxation for you and foreign tax credit ensures you avoid paying capital gain taxes in two countries.

Compliance and optimization

The following tips will help you comply with regulations pertaining to foreign property sales.

1. Maintain immaculate records

Ensure you maintain squeaky-clean records regarding the purchase and sale of your foreign property. Track all your expenses on renovations, maintenance, property management fees, etc.

2. Strategically time your sale

Try to strategically time the sale of your foreign property since capital gain tax rates depend on how long you owned the property. Short-term capital gains taxes are levied on properties held for less than a year and are charged at higher rates. Long-term capital gains taxes are levied on properties held for over a year and are charged at lower rates.

 3. Obtain professional guidance

It is advisable to seek professional help before selling foreign property. Consult an expat tax advisor about the tax implications of the transaction.

Selling foreign property isn’t just about which country your property is located. False compliance strategical maneuvering and financial finesse. So, if you are considering selling your foreign property keep the taxation issues in mind. With the right approach, you can keep your gains in your pocket rather than handing them over to the IRS.

Finlotax: An established accounting and taxation firm in CA

We are Finlotax, a professional bookkeeping and taxation firm based in CA. We offer multifaceted bookkeeping and taxation services for individuals and businesses. Consult us before selling your foreign property; we will help you through the practical details of taxation and compliance. Contact us today at 4088229406 and schedule a consultation.

[obgoutsourcinginc]

At OBG Outsourcing, we understand the critical importance of accurate tax return preparation.