2012 Offshore Voluntary Disclosure Initiative Announced by IRS

If you have to file US tax returns, doing nothing is no longer an option. You have to file a US Tax Return, if you are,

1. A USA Citizen
2. A Dual USA Citizen Living Abroad
3. A USA Resident
4. A USA Green Card Holder Living Abroad

United States Internal Revenue Service (IRS) has been aggressively pursuing US persons (including US citizens and green-card holders living abroad) who have failed to report foreign income on their US income-tax returns and/or failed to report foreign bank and investment accounts on a Foreign Bank Account Report (FBAR). A US Person, must file income tax return with IRS, regardless of their residency.

IRS implemented amnesty programs since 2009 for US citizens to come forward with their foreign income reporting. More than 30,000 people have voluntarily complied since 2009, at least 30 have been criminally indicted and the IRS has netted a total of $4.4 billion in unpaid taxes, interest and penalties.

The State Department estimates that more than 6 million citizens live overseas, excluding those in the military, yet the IRS receives only 1.6 million tax returns each year with foreign addresses. And just over 500,000 FBARs were filed in 2009.

On January 9, 2012 the IRS announced a third amnesty, formally known as the Offshore Voluntary Disclosure Program. It is substantially the same as the 2011 amnesty (aka 2011 OVDI), with some exceptions:
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How Would You Like To Pay Tax Like A USA Corporation

A major study of USA corporations published today, proved again that even though USA has a high 35% corporate income tax rate, none of the biggest corporations in the world, operating in USA pay taxes at that rate.

These are companies listed on the top of Fortune 500 rankings and admired by professionals, investors and consumers all over the world. Their net profits are in billions of dollars, huge cash stashed in offshore accounts, and they are being subsidized by tax rebates from the USA Federal government.

The study of 280 fortune 500 companies identified,

• They have received about $223 billion in tax subsidies.
• Financial service companies (Banks) received the largest share of subsidy (17% or $37bn).
• Over the last three years 2008-2010, 50% of the tax subsidy was awarded to financial services, utilities, telecoms and oil, gas pipelines. more »

How to Read Notice of Assessment and Reply to Request for Documents

Canadians tax filing deadline has passed on April 30th, 2011. And if you are one of those who have filed their tax return on time, you have probably got back your refund or if you owed taxes, paid your tax bill by now, to avoid penalties and interest.

You also probably got a Notice of Assessment from Canada Revenue Agency, explaining, how much carry forward you have for the next tax year and what is your TFSA and RRSP contribution limits for the next tax year. NOA is a very important document for you to understand and keep in file. If you do not agree with the NOA, you must file your objection in due time. If you fail to file your objection to CRA’s NOA, by law you are obligated to abide by the NOA information and data. Get help of your Tax Advisor to understand your NOA.

If your tax return was a bit complicated and you have lots of medical, tuition expense, business loss, etc., CRA will not send you a NOA. CRA will send you a 4 to 9 page letter, requesting supporting/additional documents to support your deduction claims. This letter is usually sent from CRA’s preassessment review section.

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On Line Business Tax Saving Tips

I was requested to talk about tax saving ideas for Online Business owners by Arik Sternberg founder of a Vancouver Meetup group Vancouver’s ‘Online Business Optimization’.

On line revenue generating business are taxed like any other money making business in Canada. The most important thing on line business owners can do to reduce their tax bill is to keep a detail record of all expenses related to their on line business. This alone will reduce their taxable income significantly. Further tax planning should be done with a tax advisor.

Here are the slides of the presentation.

How Much Tax Do You Pay on $50 Million Jackpot Winning?

After a $50 million Jackpot was won in Vancouver, people are curious as to how much tax do you pay for that Lotto winning?

The winners should thank their luck that they have won the Jackpot in Canada.

If they had won the Lotto in USA, they would have to pay 38% or more of their winning to IRS.

Since they have won it in Vancouver and are not U.S. citizens, their Tax liability to the Canada Revenue Agency is, “0”.

Lotto or any other lottery winning is not taxable in Canada.

As per Canadian Income Tax Act “Income from a source” of employment, business or investment is taxable income. Since lottery winning is not a regular source of income, not a single penny of the winning is Taxable under Canadian Income Tax Act.

Unfortunately it is a different situation for U.S. citizens or lottery winning in USA.

If you are a U.S. citizen, it does not matter where in the world you win a lottery; you must report and pay income tax on your lottery winning.

If you are not a U.S. citizen and you win lottery/gambling in U.S.A. 30% to 38% of your winning will be taken out and sent to IRS, before you are given the winning proceeds. You must file a Non-Resident Income Tax Return, to get the tax deducted at source back. How much you will get back, depends your foreign residential status and any tax treaty agreement between the USA and your country of residence.