Kim & Rosado LLP

06/12/2024

Nick and Tony were recognized as the 2023 outstanding tax law volunteers by the Justice & Diversity Center of the Bar Ass’n of San Francisco. We were flanked by legal heavy weights CA Supreme Court Chief Judge Patricia Guerrero and USDC Senior Judge William Orrick.

05/20/2024

01/20/2024

🚨 New Blog Alert: The Paradox of U.S. Tax Policy 🚨

As the U.S. has cracked down on foreign bank secrecy with FATCA, it's becoming an unlikely tax haven. But how? Our latest post dives into the ironic twist of U.S. tax policy. Learn about the intricate dance of information sharing, the gaps in the system, and what it means for global tax compliance.

Stay ahead of the curve with Kim & Rosado LLP's expert insights into the ever-evolving landscape of tax law. Don't miss out on this must-read piece for anyone navigating the complexities of international finance.

Read the full blog here: https://www.kimrosado.com/blog/cracking-down-on-foreign-bank-secrecy-while-becoming-a-tax-haven-the-irony-of-u-s-tax-policy/

01/05/2024

Substantial Control Will Make You A Beneficial Owner

The Corporate Transparency Act requires reporting companies to disclose each “beneficial owner.” Individuals exercising “substantial control” over the entity will be beneficial owners. Substantial control is defined very broadly. It includes senior officers, and anyone performing functions similar to a senior officer, regardless of job title. Anyone with the authority to appoint or remove senior officers or a majority of the entity’s governing body has substantial control. And substantial control is exercised by someone with substantial influence over important decisions that the reporting company makes. The CTA also includes anyone with any other forms of substantial control within the definition. And keep in mind that control can be direct or indirect. This means that substantial control exercised indirectly, such as through other entities, trusts, or even other individuals can make you a beneficial owner.

11/25/2023

The Ongoing Obligation To Update Beneficial Ownership Information Reports

Beginning in 2024, certain types of domestic and foreign entities, called “reporting companies,” must submit specified beneficial ownership information (BOI) reports to FinCEN. All reporting companies will have to file an initial report. But will this be an annual report that must be filed, like an income tax return or FBAR? No. The BOI report is required to be filed just once. But if there is any change to the required information about your company or its beneficial owners in a BOI report that your company previously filed, your company must file an updated BOI report no later than 30 days after the date of the change. But a change can potentially be as minor as a change of address of any beneficial owner. And updated BOI reports must be filed within 30 days of any subsequent changes as well.

11/22/2023

Current Due Dates For Beneficial Ownership Information Reports

The Corporate Transparency Act added a new section, 31 U.S.C. § 5336, to the Bank Secrecy Act to address the broader objectives of beneficial ownership transparency. The section requires certain types of domestic and foreign entities, called “reporting companies,” to submit specified beneficial ownership information (BOI) reports to FinCEN. At this time, and this may be changed in the future, a “reporting company” created or registered to do business before January 1, 2024 - will have until January 1, 2025 to file its initial BOI report. A “reporting company” created or registered on or after January 1, 2024, will have 30 days to file its initial BOI report. This 30-day deadline runs from the time the company receives actual notice that its creation or registration is effective, or after a secretary of state or similar office first provides public notice of its creation or registration, whichever is earlier.

11/20/2023

Beneficial Ownership Information Report Penalties

The U.S. government will require certain types of foreign and domestic entities to file beneficial ownership information (BOI) reports. The purpose of those reports is to assist U.S. law enforcement agencies in investigating financial and other crimes. To ensure compliance with these new reporting requirements, Congress added stiff penalties. Any person that willfully violates the BOI reporting requirement “shall be liable to the United States for a civil penalty of not more than $500 for each day that the violation continues or has not been remedied; and may be fined not more than $10,000, imprisoned for not more than 2 years, or both.” A violation includes not only the failure to timely file but also the failure to submit correct BOI reports.

11/17/2023

Why Is The U.S. Government Requiring Beneficial Ownership Information Reports?

The U.S. government has imposed onerous new reporting requirements on certain types of foreign and domestic entities (called “reporting companies”). This new beneficial ownership information (BOI) report requires significant information about the beneficial owners and those who exercise sufficient control over reporting companies. But why? Congress recognized that most or all states do not require information about the beneficial owners of corporations, limited liability companies, or other similar entities formed under the laws of various states. With this absence of ownership information, Congress believed that bad actors leveraged this gap of information to engage in illicit activity, including money laundering, tax fraud, financial fraud, and foreign corruption. These reports will assist U.S. law enforcement agencies in investigating financial and other crimes. And to compel compliance, the law imposes significant penalties for failing to report or to report correctly.

11/15/2023

What Will FinCEN Do With Beneficial Ownership Information Reports?

The Corporate Transparency Act added a new section, 31 U.S.C. § 5336, to the Bank Secrecy Act to address the broader objectives of beneficial ownership transparency. The section requires certain types of domestic and foreign entities, called “reporting companies,” to submit specified beneficial ownership information (BOI) reports to the Financial Crimes Enforcement Network. FinCen already is the repository for filing various other forms such as Report 112 (Currency Transaction Report), Report 110 (Designation of Exempt Person), Report 111 (Suspicious Activity Report), Report 114 (Report of Foreign Bank and Financial Accounts), and Form 8300 (Report of Cash Payments Over $10,000 Received in a Trade or Business). The stated purpose of these filing requirements is to combat financial crimes such as money laundering or tax fraud. In certain circumstances, FinCEN is authorized to share this BOI with government agencies (including foreign governments), financial institutions, and financial regulators, subject to certain protocols.

11/10/2023

The Form 3520 Filing For Large Gifts From Foreign Persons

The U.S. tax code poses many pitfalls for U.S. persons with foreign financial connections. Foreign information reporting ensnares not only Americans living overseas, but also resident aliens, legal permanent residents, and U.S. citizens with ties overseas. Section 6039F of the Internal Revenue Code, titled notice of large gifts received from foreign persons, is one such provision. While gifts are generally nontaxable to and nonreportable by the recipient, the tax code requires U.S. persons to report certain “foreign gifts.” A foreign gift is any amount received from a person other than a U.S. person that the U.S. recipient treats as a gift. Direct payments of tuition or medical expenses may be exempted. Section 6039F requires foreign gifts of more than $10,000 to be reported on Form 3520. But the IRS, in Notice 97-34, raised the floor for foreign gift reporting to $100,000. Therefore, if a U.S. person receives foreign gifts of more than $100,000 in a year, he or she must file Form 3520. All foreign gifts received in a year must be aggregated to determine if you exceed the $100,000 Form 3520 filing limit. The penalties can be severe – 5% of the total foreign gift amounts for each month the Form 3520 filing is late, up to a maximum of 25% of the foreign gifts received during the year. Because the penalty is based on the gift amounts, the IRS commonly imposes penalties in the hundreds of thousands and millions of dollars for late filed Forms 3520.

11/08/2023

The Bad Acts Of Employee Retention Credit Mills Can Harm Their Clients

All things should come to an end, including the IRS’ aggressive scrutiny of Employee Retention Credit (ERC) claims. Generally, the IRS has three years to impose additional tax – which begins running from the later of the date the original return is due or filed. Filing an amended return doesn’t extend the general three-year statute of limitations. But the IRS can seek to recover a refund that it issued within two years of the date of the refund, or even five years of the date of the refund, if the taxpayer engaged in fraud or misrepresentation in making the refund claim. In addition, perhaps anticipating significant noncompliance, Congress extended the general three-year statute to five years for ERC claimed for the third and fourth quarters of 2021. There are exceptions to these general statutes of limitations – most significantly for fraud. If there is fraud on a return, the IRS can always go back and impose additional tax and penalties. And, perhaps unexpectedly, the IRS doesn’t need to prove that you engaged in fraud to get an unlimited statute of limitations. The Tax Court ruled, in Allen v. Commissioner, that if a return preparer engages in fraud in preparing and filing a tax return, that’s sufficient to extend the statute of limitations for fraud as to the preparer’s client. This legal fact creates the specter of an unlimited statute of limitations for many businesses who used ERC mills. The fraudulent practices of the ERC mills may be used against their customers.