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Complying with Requirement to Report a Foreign Bank Account

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Persons from the United States who have a financial interest, as well signature authority, over a foreign financial account may have to report it annually to the Department of Treasury. Should their account be over a certain threshold, they may be required, by the Bank Secrecy Act, to file a Report of Foreign Bank and Financial Accounts (FBAR).

Who Must File

Individuals who have a signature authority or a financial interest in a minimum of one or more financial account located outside of the United States must file a FBAR. The value of one or more of these financial accounts must have been over $10,000 at some time during the calendar year. Persons from the United States required to file a FBAR include a United States citizen as well as United States residents. This requirement also includes limited liability companies, corporations, partnerships organized and created in the United States or in accordance with the laws of the United States. This requirement also extends to any estate or trust created under the laws of the United States.

Exceptions

There are certain exceptions when it comes to the FBAR filing requirements.

*Any type of financial account operating as part of a United States military banking facility.
*Certain types of foreign financial accounts that are owned jointly by a married couple.
*A United States person who is trust a beneficiary reporting an account when a FBAR is filed on behalf of the trust.
*A United States person who is part of a FBAR consolidated filing.
*A United States person who is a beneficiary of a retirement plan that is tax-qualified.
*A United States person who is a beneficiary or participant of a plan that is tax qualified.
*Any financial account being used by a governmental entity.
*Any foreign financial account being used by an international financial institution.

Determining Reporting Obligation

In certain situations, a United States person may be required to report a foreign financial account even if it produced no taxable income. The requirement to file a FBAR can be determined by answering questions about foreign accounts on a tax return. FBAR is a calendar year report. It is required to be filed on or before April 15. Beginning in 2013, the filing of a FBAR is required to be done electronically. The FinCEN’s BSA E-Filing System must be utilized.

Failure To File

FBAR Should a United States person be required to file an FBAR and not do it, they could be given civil monetary penalties. It is possible for the IRS to give a civil monetary penalty and that has been adjusted for inflation. The penalty should not exceed $12,400 for each violation that is willful and does not have a reasonable cause. A penalty could be over $124,500 or 50 percent of the balance in an account at the time of the violation.

Reporting any and all foreign bank accounts became a major issue in recent years. This is when the IRS began to pursue taxpayers who appeared to be engaging in abusive offshore transactions. Many taxpayers have attempted to evade or avoid paying income tax by hiding their funds in offshore bank accounts. There is no amount of income so small it is not worth reporting. It is always best to be in compliance. It is best to avoid the penalties associated with noncompliance for not reporting a foreign bank account.

Key Tips for Buying a Business

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Buying a business is something many people may consider, especially those who are retired or seeking a new career. Entrepreneurs may also be faced with tough decisions like whether or not to buy a business. There are some important considerations that should be taken into account when planning to launch a venture. Here are some key tips to successfully buying a business.

 

Should You Buy a Business?

You want to be certain that this business venture is right for you. After conducting some research, you may find that starting a business is very risky. You may also find that a more established entity may be a better investment for you. Being able to work with a tested model can make a difference when gauging the potential success of a business. Consulting with a business lawyer for guidance could be extremely beneficial because he or she can provide insight useful in determining the purchase and purchase process of a business.

 

Are the business opportunities perfectly aligned with you and the market?

You should be familiar with the industry on some level to maximize your chances of success in operating your business. Sites like BizBuySell are great resources to start your search efforts. Keeping up with trends in the industry is crucial; you wouldn’t want to buy a business that makes typewriters because the market is saturated with much newer technologies. By making certain that your potential investment makes sense for the current environment and demand of the business, you won’t be in a position where you are purchasing a company that isn’t likely to be a lucrative investment.

 

The company’s history is also important.

Having basic information like the owner history and how much time it has been spent in business is necessary to attain a full understanding of the company. The state is also a valuable resource for researching a business, and information recorded is likely accessible to the public. Available public records can be instrumental in providing you with this information.

 

Consider financing at this stage.

A business up for sale may provide limited assistance with financing options. Local banks and credit unions may be able to provide you with the necessary assistance required to acquire a business. There are also federal grants that provide conditional financing assistance for prospective business owners. Attorneys like John McDuff can assist with determining the method of financing for your acquisition, as well as with tax planning counsel to minimize your tax hit.

 

What are you getting in the purchase?

An itemized list will give you a clear picture of what will you will be getting when acquiring a business. There may intellectual property concerns such as trade secrets that need to be considered. You may not be entitled to the name of certain patents when acquiring a business, so you definitely need to make sure that your transaction is backed by an itemized list.

 

Buying a business takes preparation and a lot of research.

The most important tool when preparing to acquire a business is information. The more information you have available to you, the better your chances are of buying the right, lucrative business. Buying a company can be a good alternative to launching a business in many cases. When you are considering buying or selling a business, consult with an experienced business attorney to facilitate the process and help you plan the best course of action.

The Taxpayers Bill of Rights

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Getting your taxes done can be, well, a very taxing job. For many Americans, there is plenty of frustration trying to understand, digest and then comply with the rules and regulations that govern the US tax code. In part, tax-season stress is due to the fact that the tax compliance is so incredibly complex. But beyond that headache and frustration, many taxpayers have an outright fear that they will be hassled and audited by the IRS. They are afraid to do their own taxes for fear of getting in hot water with the government. They are afraid that they may even end up in court!

Do US taxpayers have any remedy for this beyond the due-diligence of honestly and accurately filing the forms that are required?

TBOR, The Taxpayer Bill of Rights

Fortunately, Congress has made some progress in quelling taxpayers’ fears. They established The Taxpayer Bill of Rights, or TBOR for short. In summary, it provides guidelines so that taxpayers are treated fairly and respectfully in all their interactions with the Internal Revenue Service.

Ten basic taxpayer rights are incorporated in TBOR:

  • The Right to Be Informed
  • The Right to Be Informed
  • The Right to Pay No More than the Correct Amount of Tax
  • The Right to Challenge the IRS’s Position and Be Heard
  • The Right to Appeal an IRS Decision in an Independent Forum
  • The Right to Finality
  • The Right to Privacy
  • The Right to Confidentiality
  • The Right to Retain Representation
  • The Right to a Fair and Just Tax System

Although many of these appear self-explanatory, a few additional words might be helpful:
These rights were established by Congress to cover each and every taxpayer. By the Right to Quality Service, TBOR means the “right to receive prompt, courteous, and professional assistance in their dealings with the IRS, to be spoken to in a way they can easily understand, to receive clear and easily understandable communications from the IRS, and to speak to a supervisor about inadequate service”. Additionally, The Right to Retain Representation means “the right to retain an authorized representative of their choice to represent them in their dealings with the IRS.

When to Bring in Legal Counsel

Given the incredible complexity of the US tax system, it is inevitable, despite the TBOR, that disagreements and disputes with the IRS will arise. In some cases, legal counsel of your choice, which is right, may be necessary. Some of the most litigated issues pertaining to tax filing include trade or business expenses, accuracy in filing, gross income, passive activity, and charitable deductions, among many others.

What if you disagree with the IRS? What if you question one or more of the IRS’ conclusions related to a legitimate concern? What if you are audited and disagree with the IRS’ findings. Although you are free to handle such concerns without representation, it may be wise to consider competent, knowledgeable legal counsel. When dealing with the IRS, it pays to have experts in your court.

Failure to File

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Failing to timely file your tax returns is a crime. While the IRS seldom prosecutes, there is always the risk. This is why you do not use a CPA or one of those national collection companies. This risk requires a legal education, and substantial legal experience. It would be nice if the lawyer has experience in criminal investigations, as I do. It is also important that your communications about being late on returns and on the return drafting is covered by attorney-client privilege.

Being late is not uncommon. I see it frequently. The usual reason is procrastination. Don’t be ashamed of this condition, just get things right with the IRS, now that you are ready to deal with this. I also see circumstances of avoidance, because you do not have the ability to pay at the time. Wrong move, but let’s fix it now.

Let’s now focus on the return drafting itself. If it has been years since you filed, you may not have any records. I can help with that; all is not lost. Left on your own, you would report a lot more taxable income, than you would if you had help.

The common consequence of filing those returns is a payment problem. If the return you file is several years back, you are facing penalties that are about half of what you owe in taxes. And interest, while the rate is low, becomes substantially more when the several years have in past. You face the collections division of the IRS. This is where we will pick up in my next post.

Dispute Resolution: Informal Negotiation

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There are four forms of resolution of a dispute in, for instance, a contract dispute. First, there is an informal negotiation between you and the other contracting party. Second, there is negotiation after a demand letter has been sent by your lawyer. Third, there is litigation, followed by a settlement, achieved informally between the lawyers or through mediation. Fourth, there is a trial of the dispute.

Informal Negotiation

In this blog entry, I discuss the first form of resolution: informal negotiation. Let’s say that the contract is executory—neither side has fully performed all of his/her’s side of the contract. When neither of you has fully performed what you were supposed to do, there is an opportunity to negotiate informally. There may be two different forms of dispute: what a default in performance should cause to happen, and what a term of the contract means. Frequently these two forms are merged into one dispute: one party does not perform due to a difference in opinion about what a term of the contract means. One party’s performance or non-performance is, in the eyes of the other party a default.

Everyone knows the advantage of negotiating informally. You may be able to resolve a dispute without lawyers getting involved. Common opinion is that lawyers create more of a dispute than is necessary, and make resolution more difficult. And they cost money. Regardless, I support informal resolution when it is possible.

However, informal resolution works better when you have a lawyer advising you. You do not want to “give away the farm.” The lawyer’s purpose is to inform you of the strength of your legal position, so that you know how far you can push the other party. The lawyer, being a very experienced negotiator, can advise you on what you should do next in your negotiation with the other party. And your next step, after the other party has reacted. Let’s hope that you can reach an agreement with the other party. How do you document your agreement, and what should be in the document? Once again, your lawyer advises you, and may even give you a rough draft of a very informal document.

I have plenty of successful experience advising clients with respect to this informal negotiation to resolve a dispute. If you are unsuccessful at this step of dispute resolution, we can take the next step together. I’ll discuss the second step of dispute resolution in my next blog entry.

Boilerplate Revisited

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My previous blog entry was devoted to a brief explanation of the use of boilerplate in contracts. I explained some of the basics about some boilerplate provisions, and showed why they made a difference.

Some boilerplate can be enforceable, and, in at least one instance, may, or may not, be enforceable. In my previous blog entry, I discussed the choice of location where a suit must be filed, and the consequences that may flow from such a choice. I said that big companies usually succeed in getting the location near them. But my comments on location should be examined further.

Boilerplate: Location

There is a diversity of citizenship in some suits. All this means is that the parties are located in different states. These diversity suits are occasionally filed in federal, not state, court.

Sometimes, an argument gets advanced that the choice of location provision can be ignored by a federal judge, and that the judge can determine where the suit should be located. The reasons might include fairness to the parties and convenience, in the sense that all of the evidence and witnesses are located in one place, which is not the big company’s location, but the small company’s location. The federal appeal courts are divided as to whether the judge has that power.

If, in your case, the judge has that discretion, the choice of location clause in your contract may not be enforceable.

Perry Pumps Up Austin F1 Race in Italy

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In an effort to not only learn more about Formula 1 racing, but to drum up business for Texas overseas, Governor Rick Perry spent the weekend in Italy.  Perry met with both government and business leaders during the TexasOne funded seven-day trip.  According to Perry in a September 10 teleconference with the media, it turned out to be a “valuable and extraordinary trip.”

Governor Perry met with Italian Prime Minister Mario Monti and Israeli President Shimon Peres to discuss investment and trade with Texas.  He also spoke at the 38th Annual Ambrosetti Intelligence on the World, Europe and Italy Forum on September 7 to promote Texas’ business opportunities.  Perry attended the Formula One Italian Grand Prix on September 9 to get an idea of what residents can expect when the Grand Prix comes to Austin in November.  He compared the intensity of the Italian Grand Prix crowd to that of Texas die hard football fans. The governor also said that because the European economy is stifled at this time, many businesses are looking to Texas as an attractive alternative.

Formula One is the highest class of single-seater auto racing sanctioned by the FIA.  The F1 season consists of a series of races known as Grand Prix that are held on purpose-built circuits and also on public roads throughout the world.   Formula One cars are among the fastest circuit-racing cars in the world, reaching speeds up to 210 mph.  In 2010, Formula One had a total global television audience of 527 million people.

Formula One’s economic effect and jobs creation in the U.S. is significant.  Its high profile and popularity make the organization a merchandising environment, which results in great investments from sponsors and budgets in the hundreds of millions for the constructors.  The 2012 Formula One U.S. Grand Prix is scheduled at the COTA facility under construction southeast of Austin on November 16-18.  Once fully operational, The United States Grand Prix events should attract about 1.2 million visitors each year, with an expected total spending of $400-500 million in 2012.

Judge to Rule Against Las Brisas Air Permit

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The Las Brisas Power Plant proposed location in Corpus Christi projects creating almost 4,000 jobs over the 4-5 year construction period in Refinery Row. In addition to creating jobs Las Brisas would generate $900 million in local spending and $400 million in local tax revenue. Residents in the Refinery Row district in Corpus Christi are mostly low-income, minority populations; however, the plant is facing opposition from Refinery Row residents, city officials, and business leaders. Despite being supported by the Central Bend Labor Council, the South Texas Chapter of the Associated General Contractors of America and the Port of Corpus Christi. Business leaders in the area state that Corpus Christi is taking striding steps in becoming a more sustainable community and creating further associations with coal and petroleum coke industries would be a detrimental to the development process.

Texas District Court Judge Stephen Yelenosky cited Monday that he plans to rule against the air permit for Las Brisas power plant. The ruling is based on a lawsuit proposed by environmental groups wanting to reverse the permit. Judge Yelenosky concerns are directed three major aspects of the permit. Texas Commission on Environmental Quality did not require sufficient technology to tolerate Las Brisas fuel source. They did not make compliance with National Ambient Air Quality Standards. Further, the permit did not prove accountability for storage and transportation of petroleum coke at the Las Brisas plant. It has not been determined if the ruling will require a reversal of the permit or a reversal and remand of permit for the plant.

The Deceased at Risk of Identity Theft

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Six individuals may be looking at some hefty fines for tax refund fraud of the departed.  According to the authorities, over 490,000 social security numbers have been stolen from the dead and then collected in the form of their tax refunds.  The way this can take place is through finding the social security numbers of the deceased online, where they are posted after death which is gained by the SFC. The social security administration releases of the departed’s information to hospitals and other organizations. After this, the frauds are able to take care of the rest, claiming the dead parties as a dependent when they file their own taxes.  It is estimated that around 2.5 million departed individuals have their identities stolen each year, in line with that the six people involved in this recent scam executed there 490,000 from between now and 2008. In a recent study done by the Treasury Department, the inspector general of tax administration stated that over the next 5 years the US will distribute over 26 billion dollars to both living and dead fraudulent tax filings.

One way it was stated to keep your departed family safe from such invasions is to keep a close eye on their credit reports and other financial documents, which require a death certificate to verify.

Taking caution with these dealings and having a strong legal backing will help insure the safety of you and your loved ones’ identities.

Guilty: Tax Evasion of Former Police Officer

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Randall Keith Ballard pleaded guilty to one count of tax evasion according to an Information filed in the case. He faces up to three years in federal prison and upwards of $250,000 in fines for federal tax evasion. The guilty plea is part of a plea agreement, for which the details were not released.

Ballard came before United States  Magistrate Judge Dennis Green and admitted his 2010 Federal Income Tax Return had not fully reported the approximately $114,000 he’d received in off-duty private security work.  In his 2010 tax return, he had declared only $40,562.00, rather than the actual $155,289.00 he had earned. As it turns out, he not only did not claim all of his income, he had not actually worked all of the hours he had been paid for.

Ballard had allegedly been employed to watch over the daughter of a wealthy man while she attended college, according to the American-Statesman. The find came as part of an investigation into the police department concerning off-duty employment. Ballard left the police department once the investigation began.  The case was investigated by special agents with the Internal Revenue Service – Criminal Investigation, the Texas Attorney General’s Office and the Austin Police Department. The sentencing date has not been set at this time.

“There were no policy violations among our current employees that were found requiring formal discipline,” stated Austin Police Chief Art Acevedo.

To see the original article from the Statesman, click here.

Southwest Airlines to pay $28,000 for burns from hot chocolate

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Southwest Airlines will pay a child more than $28,000 for burns he suffered from hot chocolate he spilled during a flight.

Port Arthur resident Indria Rice, acting as next of friend of Jaylon Jackson, filed suit against Southwest on Oct. 11, 2011, in Jefferson County District Court, stating it is the company’s fault her son spilled hot chocolate on himself during a flight.

Court records show that a final judgment was entered in the case, stating that the parties had reached a settlement with Southwest agreeing to pay $28,601.26 into the court’s registry as part of the minor’s settlement proceeds. An additional $1,500 was paid for a guardian ad litem fee.

The lawsuit alleged that on Aug. 20, 2010, Jackson was traveling to Houston on Southwest Airlines Flight 322 when he spilled a cup of hot chocolate on himself, allegedly resulting in a second-degree burn to his chest. A second-degree burn is one that raises a blister.

The lawsuit did not list a single act of the negligence and only asserted that Southwest owed Jackson a “duty, which was breached, causing minor plaintiff Jaylon Jackson injury.”

Beaumont attorney Kent Johns of Johns & Johns represents the plaintiffs. Dallas attorney Katherine Staton of Jackson Walker represents the airline. Judge Donald Floyd, 172nd District Court, presided over the case. The case is No. E191-165.

Insurance Provision Limiting Lawsuits to 2 Years Within Date of Loss Should be Void, Class-action States

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Limiting a lawsuit to being filed within two years of an insured loss is unrealistic in light of the actions required leading up to filing suit, three Jefferson County residents state in a putative class action lawsuit against their insurance company.

Percy LeBlanc of Neches Avenue in Port Arthur and Douglas and Sandra Hill of Sunbird Lane in Beaumont stated they had insurance with defendant GeoVera Specialty Insurance Co. The plaintiffs made a claim on the policy after Hurricane Ike struck on Sept. 13, 2008, causing damage to their properties, the complaint filed April 4 in Jefferson County District Court states.

Later, a dispute between the plaintiffs and GeoVera arose and the plaintiffs filed a lawsuit against the defendant. GeoVera, though, has claimed that its insurance policies prohibits its insureds from filing a lawsuit more than two years following a disaster, the complaint states. The plaintiffs claim the provision should be void.

“It is impossible for the cause of action to accrue on the day of the loss, as the contract also requires the insured and the insurer to perform numerous actions before the suit can be filed,” the suit states. “Therefore, the Suit Against Us clause in the GeoVera policy is void because it limits the time to bring the suit to less than two years from the time the cause of action accrues.”

The plaintiffs contend that numerous people throughout Texas are subject to the provisions in the policy. They want to file a class action on behalf of those who have a policy with the provision. The plaintiffs are seeking a declaratory judgment, plus attorneys’ fees, costs and other relief the court deems just.

Gregory F. Cox, Michael R. Ramsey and Katherine D. Ramsey of The Mostyn Law Firm in Beaumont are representing the plaintiffs. The case has been assigned to Judge Bob Wortham, 58th District Court.

Austin Listed in Top Five Markets to Watch

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On behalf of John McDuff, Attorney at Law posted in Business Transactions

Austin, Texas came in second on Price Waterhouse Cooper’s annual ranking of markets to watch in 2012. Washington, D.C. finished in first, with San Francisco, New York City and Boston taking the remaining top five spots.

The report found that Austin has a perfect mix of features necessary to address the realities of the 21st century real estate market and business environment. For example, because the city features such diverse career opportunities – in education, government, medical and high-tech fields – it is insulated from the boom-bust cycles that have plagued other cities. Further, the academic environment buoyed by the University of Texas supports emerging tech companies and helps attract energetic young talent.

The rankings also noted that Austin is an eminently livable city with high quality-of-life measures. Specifically, it noted the city’s 24-hour core and abundance of nightlife options – and cited favorably Austin’s pedestrian-friendly layout and apartment-based neighborhoods.

Starting a Business?

The rankings illustrate what Texans have known for years – Austin is a great place to start a new business. However, starting a business is a challenging endeavor, even in a friendly environment. New business owners would do well to enlist the help of an experienced Austin business transactions lawyer.

An experienced attorney can help with all aspects of business formation, from choosing what form to take – partnership, LLC or even S corporation – to franchise agreements, real estate negotiations and asset purchases. Attorneys can also help with tax compliance and contract disputes.

These issues are too complicated, and too important, for most businesses to handle on their own. Starting a business certainly requires some risk-taking, but owners shouldn’t gamble on their futures by trying to do their business transactions by themselves.

Banks Vow to Lend More to Small Businesses

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On behalf of John McDuff, Attorney at Law posted in Business Transactions

There have been many explanations given as to why the American economy is mired in a prolonged recession. One of the factors often cited as contributing to the length of the economic situation is that banks have tightened lending restrictions and are less willing to lend money to small businesses. Several large banks, many with ties to the Austin area, are vowing to address this factor.

Karen Mills, head of the Small Business Administration, announced in late September that 13 banks have agreed to increase amounts lent to small business over the next three years by $20 billion. This is welcomed news for small businesses that are looking to expand operations or hire more workers and entrepreneurs looking to start new businesses in Texas.

“We know that many small businesses, particularly in traditional underserved communities still face challenges in accessing the capital they need,” stated Mills. “[The commitment to lend] will provide billions of capital to help small businesses all across the country grow and create jobs.”

The 13 banks vowing to increase lending, some of which have locations in the Austin area, include: Wells Fargo, Bank of America, JP Morgan Chase, Citigroup, KeyBank, TD Bank, US Bank, PNC Bank, Regions Bank, M&T Bank, SunTrust Bank, Citizens Financial Group and Huntington Bank.

Small business owners, especially entrepreneurs trying to start a new business venture, should contact an attorney to discuss the business startup process. The process of starting a new business can be complex, and an attorney experienced in helping small business owners can help you start your business on the right foot.

Source: Banks Offer $20B in Help to Small Business