Why Offshore Voluntary Disclosure Program is Important?

Posted by in Financial Planning

Having an offshore account does not mean the government considers you as a suspect for criminal activity. Offshore simply means you have financial investments in foreign bank accounts. But, not disclosing this information to The Internal Revenue Service is a criminal activity. Whether you consciously made the decision to keep these assets a secret, or you made a mistake while filing your taxers, the IRS can impose steep financial penalties and even criminal charges. However, the offshore voluntary disclosure program is a way for taxpayers with undisclosed offshore accounts to have a second chance at revealing this information.

The Program

The IRS designed a special program to bring individuals, estates, and businesses into offshore and foreign compliance. The Offshore Voluntary Disclose Program is specifically for taxpayers who face exposure to potential criminal liability and/or civil penalties due to willful failure to report and pay all tax on foreign financial assets. Those who have undeclared foreign assets can disclose in exchange for protection from criminal prosecution. Once these taxpayers have completed the program they are protected from criminal liability and are provided with terms to resolve their civil tax and penalty obligations.

In order to qualify for the Offshore Voluntary Disclosure Program, you must have unreported assets, income, or investments abroad. While you can also include domestic undisclosed money, taxpayers do not get the same protection as they would with their offshore assets. You must also enter the program on your own free will — hence the word voluntary. This means that you cannot be under audit or examination by the IRS and then submit to the program. But why doesn’t the IRS allow you to enter the program once you are under audit? Because you, as a taxpayer, have the responsibility to bring these issues to the forefront during an audit even if the auditor did not specifically ask.

Your Obligations

Once you enter the program, there are specific time requirements and reporting disclosures that must be done according to the IRS’s milestones. If you do not meet these milestones, you can be removed from the Offshore Voluntary Disclosure Program. Now that you are no longer a part of the program, the IRS can use the information they have regarding your offshore finances to enforce higher fines and penalties against you. We know that last part sounds a little scary — what is the point of disclosing all of this information for protection when the IRS can kick you out and use that information against you? No matter how hidden you believe an account is, you must perform a full disclosure and report all financial information when you enter the program.

The reason why successfully entering and completing the Offshore Voluntary Disclosure Program is so critical, is because the IRS can issue significant penalties against what may seem like a relatively minor infraction. If you fail to file a tax return than you can be imprisoned for a year and fined $100,000; however, failure to file an FBAR (Foreign Bank Account Report) can lead to ten years of prison time and criminal penalties of $500,000.  A person that is convicted of tax evasion or conspiracy to commit offence/defraud the United States is subject to a prison term of up to five years, and a fine of $250,000.

Those entering the Offshore Voluntary Disclosure program must understand that completing the program does not mean they are exempt from civil penalties entirely. These penalties are not insignificant either — they are substantial fees that must be taken into consideration by those considering the Offshore Voluntary Disclosure program. However, they should not deter you from applying. You must also consider the major benefit that the program provides you with, and that is protection from criminal prosecution. Even though the penalties can be high, they are also rather predictable. If the IRS uncovers your secret offshore accounts through an audit, then both the civil and criminal charges skyrocket.

If you or someone you know is facing tax issues with the IRS, it is important that they reach out to an experienced tax attorney to help them deal with the IRS directly. With qualified legal advice, disputes with the IRS are more likely to be resolved in a quick and satisfactory manner.

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Learn the Basics of CRA Payroll Remittances and When They’re Due

Posted by in Everything Else

Every employer in Canada has to remit the CPP contributions and the EI premiums in addition to the income tax that is deducted from the employees’ income and your share of CPP contribution and EI premiums. This means that the employer pays salaries and certain benefits to the employees, and the employer is required to calculate and deduct the amount and remit the source deduction every time a payroll is issued.  These include deductions which are based on the income earned by every employee.

It includes the Canada Pension Plan Contribution which is 4.95% up to a yearly maximum. It further includes the employment insurance premium up to a yearly maximum and income tax which is based on the current rates that are determined by whether the employee reports the business establishment or not. The employer’s portion includes the contributions made by the employer CPP and the employer EI premiums which is 1.4 times the amount deducted from the employee’s premium.

Things to keep in mind

  • There is no minimum age requirement or restriction for income tax or EI.
  • Employers may choose to reduce the employer premium by offering short term disability coverage.
  • CPP must be deducted for employees aged 18 to 70, who are engaged in pensionable employment and who are not considered as disabled.

As an employer, you need to know which remittance schedule you should follow. This basically depends on the average monthly withholding amount which is the sum of all the payroll deductions you paid to the CRA in a particular year. Your two year history of AMWA is used to help classify you as a remitter. There are four types of remitters-new, regular, accelerated and quarterly.

New remitter: You will be classified as a new remitter if you are a new employer and have never made remittance payment earlier. If you are a new remitter, your payment will be due on the 15th of the month following the one in which you made the deduction. Small businesses may qualify as a new remitter.

Regular Remitter: You will be classified as a regular remitter if you are a new employer with a history of less than two years and have a two year AMWA not exceeding $25,000. The remittances for regular remitters are due on the 15th day of the month following the one in which deductions are made.

Accelerated Remitter: The third category is of an accelerated remitter which has two sub categories. The first has a threshold of employers with a two year AMWA ranging between $25,000 – $99,999.99. Remittances for these threshold remitters are due on the 25th day of the same month for the payroll which is processed in the first 15 days of the month. For a payroll that is processed after the 16th day of the month, the remittances are due by the 10th day of the next month. The second threshold is for employers with a two year AMWA exceeding $1, 00,000. The payments for threshold 2 remitters are due no later than the third working day after the 1st. 7th, 8th, 14th, 15th, 21st and 22nd day and the last day of the month. Basically, the remittance will be due no later than the third business day after the week in which the payroll has been processed. Remitters in this category also need to make payments through a financial institution one day before the due date. In order to make your job easier, you can opt for CRA payroll remittance online.

Quarterly Remitter: The last category is a quarterly remitter which usually consists of small businesses. These remitters have an AMWA not exceeding $3, 000 in the previous two years and have an ideal compliance history with the CRA. Their remittances are due on or before the 15th of April, 15th of July, 15th of October and 15th of January for the payrolls that are processed in the previous quarters.

It is extremely important for every employer to make payments on time in order to avoid fines and penalties.

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What is The Offshore Voluntary Disclosure Program and How Does it Help?

Posted by in Financial Planning, Everything Else

The Offshore Voluntary Disclosure Program (OVDP) is an initiative by the IRS to assist individuals, estates, and businesses into Offshore and Foreign Compliance. But what does it mean? Offshore refers to anything that is not domestic, meaning, in the IRS’s perspective, you have money overseas. The money can be in the form of foreign accounts, investments, or property.  Voluntary means that you are entering the program on your own volition: you cannot be currently audited or under examination; it has to be a proactive decision. Disclosure refers to full disclosure, if you want to disclose offshore assets, then you must disclose all of it, whether it was held in an institution that no longer exists or held anonymously where you believe the IRS would never find it. The OVDP is an approved IRS Program, which means it has specific time requirements: disclosures must be done according to the program’s milestones or you risk removal from the program. The Offshore Voluntary Disclosure Program, in its current 2014 iteration, will terminate on September 28, 2018.

Eligibility

You can be eligible to join the Offshore Voluntary Disclosure Program if you have invested legal source funds (funds not derived from criminal activity) in undisclosed assets overseas. As well, you must not have made a submission pursuant to a streamlined procedure, such as the Streamlined Filing Compliance Procedures (SFCP). The act of not disclosing assets must have been willful to be able to use the OVDP, if it was not willful, then you would use the SFCP to become compliant. Lastly, you also cannot be under civil examination or criminal investigation by the IRS; it must be a proactive action on your part and by your own volition.

How the OVDP Helps

You may wonder why you would acquiesce to the IRS, especially if you think that an offshore asset can never be found out by the IRS, but you also have to realize that the penalties are very heavy, and criminal prosecution is possible for willfully not disclosing offshore assets. You may even consider becoming compliant with the current year and not correcting prior years, or filing amended returns and paying any tax or interest related to previously undisclosed offshore assets and income, the former being a “quiet disclosure” and the latter a “qualified quiet disclosure.” Both options are very risky (especially the quiet disclosure), as quiet disclosures could lead to you being criminally prosecuted if the amounts and facts surrounding the case are not acceptable to the IRS examiner.  By using the Offshore Voluntary Disclosure Program, you are able to limit the amount of penalties you incur for your willful acts.

Penalties

The Offshore Voluntary Disclosure Program will assess a mandatory “miscellaneous Title 26 offshore penalty” of 27.5% on the highest account balance in exchange for not facing criminal prosecution. The penalty will jump to 50% if the foreign financial institute is on the IRS’ Foreign Financial Institutions or Facilitator’s List. You will also be required to pay 20% accuracy-related penalties under IRC § 6662(a) on the full amount of your offshore-related underpayments of tax for all years; pay failure-to-file penalties under IRC § 6651(a)(1), if applicable; and Pay failure-to-pay penalties under IRC § 6651(a)(2), if applicable.  The penalty for not using the OVDP and having the IRS discover your foreign assets can reach up to 100% of the value of the foreign account in a multi-year audit scenario. If you can show reasonable cause, the IRS has extreme leeway with penalties and could waive your penalties entirely, but it is a huge risk to take without the help of the OVDP

How to Apply for the Offshore Voluntary Disclosure Program

To start the procedure to apply for the Offshore Voluntary Disclosure Program, you must first submit a preclearance letter to the IRS. It will typically take 30 to 45 days for a response from the IRS; if they had already discovered your undisclosed assets, then they will deny your preclearance. Once you have been granted preclearance, you will have 90 days to fully comply with any provisions stated in their response (submission of amended tax forms and questionnaires), and in exchange, the IRS will not recommend prosecution by the Department of Justice for noncompliance.  Once you have submitted all the required forms stated in the letter, the IRS will then propose a closing agreement (Form 906), at which point you can sign the agreement or decide to opt out of the OVDP.

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Offshore Asset Protection – Important for Securing the Future

Posted by in Financial Planning, Everything Else

Offshore asset protection may seem like one of those grey-area, perhaps not-quite-so-legal things companies do to evade taxes and smuggle profits, but it really isn’t such a sinister concept. Simply put, offshore asset protection provides you with a way to take further control over your assets—and, more importantly, to take further control over the protection of those assets. It would be silly to run a company without investing in insurance—life, critical illness, disability, etc.—to secure your and your business’s future security. Offshore asset protection provides you with a way to better insure your finances, and that is an extremely important part of securing the future for you, your business, and your family.

What is it?

Offshore asset protection usually presents itself in the form of a trust. Asset protection trusts provide an effective means of protecting onshore assets from third-party interference by locating that trust in specific offshore regions. This relocation of assets puts your assets out of the legal reach of third parties who may later attempt to seize them from you. Legally speaking, those parties won’t even be able to gain legal access to see how much worth your assets hold because the laws that could cause that information to be released here don’t apply to the offshore setting. When a court judgement settles in the third party’s favor, forcing your current assets to be revealed (and thus vulnerable to seizure by the courts), you can feel much more secure in knowing that the laws protecting your offshore assets are completely unaffected by that ruling.

It’s essentially the modern-day version of burying your treasure—only you won’t need a map to dig up your assets in the end, and offshore asset protection offers a lot more laws to keep other people from finding the x on the map.

Offshore asset protection is essentially a form of diversification that ensures that, should the worst happen, you have select assets that can only be accessed by you and your successors or beneficiaries. The laws surrounding offshore assets can protect you beyond the capabilities of your onshore laws to protect your onshore assets—and that means a lot more future security.

What kinds of assets can you protect?

Offshore asset protection can ensure the protection of a wide range of assets, liquid or tangible. This can include investment portfolios, intellectual property, digital assets, life insurance and

annuity policies, bank accounts, and even precious metals. Anyone can participate in offshore asset protection if they have assets they want to secure for the future. The most common and beneficial uses of offshore asset protection provide for wealth preservation, estate planning, asset diversification, and even minimising estate taxes.

How can it help?

Perhaps it’s hard for you to imagine that your hard-earned assets could become vulnerable to a third party—but it happens more commonly than you might think. Just consider lawsuits and judgements. If you run a company, then you probably already know that you are trying to manage a number of wild cards. You have employees, clients, products, and services, and each poses its own set of legal risks. A employee could get in a car accident injuring himself and perhaps even other people on company time. One of your customers could injure him or herself on company property. You could end up selling a faulty product that doesn’t get recalled until it’s too late. There are a lot of potential risks that could leave you legally vulnerable to lawsuits and judgements, and the decisions the courts make in cases like that can often depend on a consideration of your assets. That may mean you end up getting sued for more than you otherwise may have because you have larger assets, or it may simply mean that the information about those assets gets released to third parties, making you more vulnerable to future problems. Offshore asset protection protects your assets against the threat of seizure by the courts. Even if you end up having to face a monetary judgement, your future will remain secure because your offshore assets will remain untouched, no matter what happens onshore.

That’s why offshore asset protection is such an important investment. You take steps every day to secure your business’s future success, your future financial security, and your family’s future financial security. Offshore asset protection provides a means of guaranteeing that security. If you have assets of any kind that you want to keep safe from creditors, the courts, and the prying eyes of other third parties, then you need to consider offshore asset protection. It’s the best insurance you can get to guarantee the security of your future.

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All You Need to Know About Expat Taxes

Posted by in Financial Planning, Everything Else

When it comes to expat taxes for American citizens living abroad, the questions can mount up pretty quickly. The ways in which your life overseas interacts with your duty as an American taxpayer gets very complicated, which is why so many expats have many questions about how to stay compliant with the IRS without paying too much. Here are some answers to the most common questions expats have about expat taxes in US.

Q: What qualifies as foreign income?

In general, there is a three-step test to see if your income counts as foreign income for the purposes of expat taxes. First, your tax home must be in a foreign country. From there, you must meet either the bona fide residence test or the physical presence test, which are thresholds for how much time you spent outside of the United States in a period of 12 consecutive months. Finally, your income does not necessarily need to be from a foreign source, like a company whose headquarters are outside the United States, but can come from an American employer working overseas.

Q: What does not count as foreign income?

A: In general, the above is all you need for your income to count as foreign, but there are notable exceptions, as outlined by the IRS. These exceptions include:

-Food and lodging provided by your employer.

-Pension payments or annuity payments. These include social security benefits.

-Payments from the United States Government or any American governmental agency to its employees.

-Moving expenses.

-Payments received after the tax year in which you performed the service that earned you the foreign income.

Q: When do I need to file?

The IRS has generously extended two extra months to file your taxes every year if you meet certain criteria for being an expat. In general, this means your year-end filings need to be filed by June 15 instead of the usual April 15. The provisions for this are quite strict, however, and only apply if you are “a U.S. citizen or resident alien residing overseas, or if you are in the military on duty outside the U.S. on the regular due date of your return.”

Q: Can I pay in my current country’s currency?

The short answer is no. All taxes must be paid in U.S. dollars and not in Euros, Canadian dollars, or any other foreign currency. In general, taxpayers use the annual average to figure out their conversion rate, which most experienced expat taxes experts can provide. If your financial dealings were on specific days, it may be beneficial to use the exchange rate of that day. Tax experts can help you locate that number as well.

Q: If I’m living overseas, do I need to pay American taxes?

If you are an American citizen or green card holder who is living and earning income outside of the United States, you may still be required to file and pay taxes. You may qualify for foreign earned income exclusions or foreign income tax credits, but these are assessed on a case-by-case basis, depending on your income, type of income, and status as an American. In general, if you are a U.S. citizen or a resident alien living outside the United States, you are required to file and pay taxes to America.

Q: I married someone overseas and have a child born outside of the US. Does this change my filings?

In general, you can claim spouses and dependents for tax purposes if you meet the following criteria. According to the IRS, in order to be claimed as a dependent, “the individual must be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins.”

Q: Do I still need to file my foreign income if it falls below the foreign income exclusion threshold?

A: The short answer is yes. Since the exclusion is voluntary, you need to file it in order to qualify, even if what you earn is below that amount.

Expat taxes are extremely complicated, especially as your international finances become more complex. This is why many expats and people with sources of income overseas are turning to experienced tax experts to help them file with the IRS. If you have questions or concerns about your taxes, be sure to contact professional, experienced tax firms with overseas expertise. They can help you stay compliant without paying more than you should.

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Choosing A Top Accounting Firm Based On Your Required Services

Posted by in Accounting

“Accounting” is a deceptively simple word. It brings to mind the act of keeping accounts, recording numbers, keeping track of things. While these tasks are indeed at the heart of an accountant’s job, there is a great deal more to accountancy than simply writing down the numbers that reflect the ebb and flow of a business’s finances. Many types of people and many types of firms and businesses hire accountants for a wide variety of financial duties, and they do this because accounting is anything but simple. Just as a carpenter knows that making a cabinet takes more than just a few boards and some nails, an accountant knows how to take finances beyond simple mathematics. And just like an expert auto mechanic wouldn’t try to use his expertise to wire a house for electricity, the people and companies who hire accountants do so because they demand the best, safest and most efficient treatment of their finances.

The Language of Business

Accounting has been called “the language of business” by people who study and understand it. At first glance, numbers and language couldn’t appear more different. However, when a person or a company gets down to the specifics of their money, only numbers have the precision and accuracy to express the financial needs of that person or company. An accountant can tell you exactly what needs to happen with your taxes, with no room for vagueness. An accountant can let you know why a business plan will or will not work, without letting confusion enter into the picture. When you set out to find the top accounting firms to address the services you require, you are really looking for someone who speaks the right dialect of the language of business.

Different People, Different Needs

Just like no two people or businesses are identical, no two accounting firms or even individual accountants are exactly the same. A private individual who wants assistance in setting up a trust fund for his or her children would not have the same requirements as a CEO who wants a merger or an acquisition to run smoothly. Some accountants specialist in helping small businesses to remain profitable while others work as part of a team to manage the vast finances of multibillion dollar corporations. All accountants handle money in the form of numbers, but the outcome can be very different depending on whose money it is and what the end goals are. When looking to secure the services of an accounting firm, it’s important to make certain that their expertise (their business language) matches up with your vision for your finances.

Finding The Right Accountant

When you’re looking for an accountant who “speaks your language”, whether you need someone to help you decipher the mysteries of international business management takes or someone to clarify the finer points of a smoothly running payroll department, there are a few things to keep in mind. A firm’s reputation is one of the first things you want to look at. Fortunately, the Internet makes that relatively easy. Doing an exhaustive search can give you an overview of how an accountant or accounting firm is perceived in the business world. Once you have chosen a candidate, nothing can replace the frankness of a face-to-face interview. If you speak plainly and listen carefully, you should know if you’d make a good match.

Choosing A Top Accounting Firm Based On Your Required Services

Maintaining A Business Relationship

When you secure a top accounting firm to provide the financial services you require, you aren’t just calling in experts to fix a problem. You are forming what should be a lasting and productive relationship. As the accountant comes to understand your business language and to understand your unique requirements, they will be able to maximize your profitability while safeguarding you from errors and pitfalls. Just like with a friendship, open communication will get you everywhere in the relationship between an accounting (www.investopedia.com/terms/a/accounting.asp) expert and a business.

Passion For The Job

Just as you are passionate about your business endeavours, be they personal or professional, a truly great accountant has a passion for numbers that the less mathematically inclined can never understand. Let them work their magic as you work yours, and together you might write the decade’s next great business story!

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Do You Need Offshore Asset Protection?

Posted by in Financial Planning

Offshore asset protection: it’s largely misunderstood, but it’s actually one of the more essential forms of financial protection. Why? Because it is a strategy that actively works to protect your financial assets, putting you in control of your assets—and all of the factors that could affect them.

Whether it’s through taxation or some other legal strategy, other entities are always trying to get their hands on your wealth. Offshore asset protection is one of the best strategies when it comes to ensuring that your assets stay in your hands and no one else’s. Many assume that placing your assets in offshore accounts is an illegal means of avoiding paying money you owe, but that isn’t necessarily true. While some may misuse their offshore accounts, the IRS is cracking down on this more and more, making it harder for individuals (or companies) to get away with the less legal approach to offshore accounts. But not all offshore accounts are illegal. Some are simply good investment choices. If you have the option, why wouldn’t you choose to legally place your assets in a location where they won’t be heavily taxed, and where the legal systems that protect them are much stronger, more efficient, more in your favor, and much more difficult for other entities to penetrate? That’s what offshore asset protection is all about.

It isn’t just a financial protection strategy; offshore asset protection is an investment strategy, too.

Offshore asset protection works by taking your entire asset portfolio out of the US legal system and into any other legal system, across the globe, that has stronger asset protection laws. That means that, if someone were to try to legally access your assets, they wouldn’t just be going through US laws, or the laws of their own country of business; they would have to go through the international legal system, investing hundreds of thousands of dollars in hiring local representation, that is housing your offshore assets, and if that country has stronger asset protection laws, then they are going to have a much more difficult time accessing your hard-earned cash—that means your money is a lot safer.

Simply put, offshore asset protection is a clever means of protecting your interests, whatever those interests might be. It may be a property investment, valuables, or even finances: whatever the asset, offshore asset protection ensures the safety of the asset not only by applying the laws and interests of the other country in your benefit, but also by separating those assets from your local interests, country, and identity.

How does offshore asset protection work?

Let’s start with a property investment. The country in which you own your property dictates the laws and taxes that piece of property is subject to. Instead of buying an investment property at home, where you will have to pay local taxes, you may find it more financially beneficial to own a piece of property in another country, protecting those land assets using an offshore company name. But taxes aren’t the only problem when it comes to wealth. Offshore asset protection can help protect you from losing your assets to over-taxation, but it can also help you protect your valuables and finances from legal lawsuits. If your valuables are subject to the laws of another country, many of which offer greater legal protection for offshore assets, then it is going to be much more difficult for your asset to become part of a financial settlement. This primarily works because of the added cost the other entity would have to pay to initiate their case even being reviewed in your asset’s country of protection, but offshore asset protection also lists the asset under the name of an offshore company. You still own the asset, but your name is removed and your offshore assets are not listed in your public financial profile. As a result, it is much more difficult for other entities to trace your assets back to you. This keeps you and your assets protected, even through the tougher legal proceedings, like divorce proceedings and corporation reviews.

If you are looking for a way to maintain the security of your assets, then offshore asset protection is the right way to go—but make sure you go about it in the right way, too. Consult an offshore asset protection specialist so you can be sure the assets you are protecting keep within your legal reach.

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