IRS TO GO AFTER WEALTHY TAXPAYERS AND INTERNATIONAL DEALINGS

IRS to Go After Wealthy Taxpayers and International Dealings

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The U.S. Internal Revenue Service, flush with funding from last year’s Inflation Reduction Act, has promised to go after international tax cheats, among others.

Report of Foreign Bank and Financial Accounts (FBAR) filers, cryptocurrency dealers, rich tax cheats: The Internal Revenue Service has them all in its sights.

As part of what the agency calls a “sweeping effort to restore fairness” to the American tax system with Inflation Reduction Act funding and artificial intelligence technology, “weeks and months” of new developments are ahead, the IRS promises.

Initial pledges affecting international taxpayers include more scrutiny on FBAR violations. “High-income taxpayers from all segments continue to utilize foreign bank accounts to avoid disclosure and related taxes,” the IRS said in an announcement.

A U.S. person with a financial interest over a foreign financial account is required to file a Report of Foreign Bank and Financial Accounts (FBAR) if the aggregate value of all foreign financial accounts is more than $10,000 at any time. IRS analysis of multi-year filing patterns has supposedly pinpointed hundreds of possible FBAR non-filers with account balances that average more than $1.4 million. The IRS plans to audit the most egregious potential non-filer FBAR cases in fiscal 2024.

Similarly, the IRS Virtual Currency Compliance Campaign will continue in the months ahead after an initial review showed the potential for a 75% non-compliance rate among taxpayers identified through record production from digital currency exchanges. The IRS projects more digital asset cases will be developed for further compliance work early in fiscal 2024.

Among other agency moves likely to affect international investors:

Hiring 3,700 new compliance agents for enforcement work. These revenue agents will fill specialized technical positions that generally focus on audits. This “key talent” such as tax accountants, the agency says, will focus on higher-income and complex tax areas such as partnerships, including those with extensive subsidiaries with operations of national or international scope.

Prioritizing high-income cases, those involving taxpayers with total positive income above $1 million who have more than $250,000 in recognized tax debt. The IRS is now contacting some 1,600 taxpayers in this category that owe hundreds of millions of dollars in taxes.

Expansion of focus on largest partnerships, using artificial intelligence to analyze partnership returns to identify patterns that may indicate problems. The IRS plans to open examinations of 75 of the largest partnerships in the U.S. that on average each have more than $10 billion in assets.

These changes won’t happen overnight, and the intense partisanship of American national politics could mean that the IRS won’t be able to carry through on some things it promises. Still, international taxpayers should recognize that the agency seems infused with a new energy for cross-border enforcement.

Your tax specialist needs to stay on top of this and many other issues of wealth, foreign income and tax enforcement. If we can help, please let us know.

About the Author?

Alicea Castellanos is the CEO and Founder of Global Taxes LLC. Alicea provides personalized U.S. tax advisory and compliance services to high net worth families and their advisors.?Alicea has more than 17 years of experience. Prior to forming Global Taxes, Alicea founded and oversaw operations at a boutique tax firm, worked at a prestigious global law firm and CPA firm.?Alicea specializes in U.S. tax planning and compliance for non-U.S. families with global wealth and asset protection structures which include non-U.S. trusts, estates and foundations that have a U.S. connection.

Alicea also specializes in foreign investment in U.S. real estate property, and other U.S. assets, pre-immigration tax planning, U.S. expatriation matters, U.S. persons in receipt of foreign gifts and inheritances, foreign accounts and assets compliance, offshore voluntary disclosures/tax amnesties, FATCA registration, and foreign companies wanting to do business in the U.S.?Alicea is fluent in Spanish and has a working knowledge of Portuguese.

Alicea is an active member of the Society of Trusts & Estates Practitioners (STEP), the New York State Society of Certified Public Accountants (NYSSCPAs), the American Institute of Certified Public Accountants (AICPA), the International Fiscal Association (IFA), a member of Clarkson Hyde Global, a world-wide association of accountants, auditors, tax specialists and business advisors and the Global Referral Network (GRN).

Distinctly, in 2020, Alicea was awarded with a prestigious NYSSCPA?Forty?Under 40 Award.?She was selected as someone that has notable skills and is visibly making a difference in the accounting profession.?

In 2021 and 2022, Alicea was the Gold and Silver Winner, respectively, of Citywealth's Powerwomen Awards in the category USA - Woman of the Year - Business Growth (Boutique). In 2023, she continued her winning streak by receiving the Gold award for Company of the Year Female Leadership (Boutique). Furthermore, Alicea is currently listed in the Global Elite Directory 2023, which is an annual exclusive directory of the world's elite lawyers and outstanding wealth advisors advising ultra-high net-worth clients.

Please note: This content is intended for informational purposes only and is not a replacement for professional accounting or tax preparatory services. Consult your own accounting, tax, and legal professionals for advice related to your individual situation. Any copy or reproduction of our presentation is expressly prohibited. Any names or situations have been made up for illustrative purposes — any similarities found in real life are purely coincidental.?