|International Tax Services
the last few years, I've gotten more and more client inquiries about
saving taxes with some kind of offshore arrangement. People call me
because I've written a number of articles about offshore taxes in
relation to asset protection trusts. The author of a popular book on
offshore subjects asked me to review his book (prior to publication)
with respect to the tax issues and he include information about me in
the book. That led to more inquiries after the book was published.
the past few years, I've devoted the bulk of my time as a tax
consultant dealing with various offshore related issues. Each new client
has led me into some new area of inquiry and research, which has led to
more articles which generated more client inquiries that resulted in
new areas of research. I didn't plan to become an offshore tax
specialist, but my subscribers and clients have been pulling me in that
you want to save taxes by going offshore, I'll save you some time.
Don't call me if you are looking for someone to help you to play "hide
and seek" with the IRS. If any promoter wants you to engage in any
strategy that doesn't involve complete disclosure to the IRS, and
whatever other government agencies may requires such disclosure, run for
the nearest exit because it's virtually certain to be illegal.
If anyone is trying to
sell you on a package deal with a significant price tag, you should
seriously consider getting a second opinion.
Offshore Tax Consulting Services (Second Opinion)
you are looking for ways to save taxes by playing the tax game within
the rules, I can probably help you. Chances are you can do as much or
more to save taxes with U.S. tax planning as with offshore tax
If you are interested in going offshore for asset protection or
international diversification and want a tax advisor to help you be sure
you are doing what the law requires, I'll probably be glad to help you.
If you have an export business and are looking for some tax breaks, I
can probably help you.
If you want to create a division of your business that only conducts
business outside the U.S., there might be a way that you could defer
some taxes from the profits on that business.
If you want to create an international "dynasty" trust to avoid multiple
generations of estate taxes, I can probably help you with the tax
been a growing interest in offshore tax planning. Perhaps it's because
the world is getting much smaller, very quickly.
world wide web and the other elements of the internet are having a
profound impact on how much people in different countries communicate
with each other. It's now possible to communicate almost instantly with
people half way around the globe and get an answer in the blink of an
eyelash. Web pages give people in other countries exposure to each
other, without ever having to spend the time or money to travel to far
been said that Americans are among the most provincial people in the
world. I certainly know that as a resident of the "heartland" of the
U.S., I have had little direct exposure to people and the cultures of
the rest of the world. But that's changing for me and for the rest of
the world. As more Americans become better acquainted with people in
other countries, more U.S. citizens will become interested in financial
arrangements outside the U.S. They may decide to open a foreign bank
account. Perhaps they will decide to form a business alliance with a
business from another country. Some Americans will decide to set up an
asset protection trust in a jurisdiction with laws that are more
favorable to a defendant than the laws of the U.S.
the barriers to investment, banking and business outside the U.S.
diminish, those Americans who choose to invest or to do business abroad
will find themselves needing some help with the insanely complicated
U.S. tax laws that apply to international transactions. Most likely,
the taxpayer's tax preparer or public accountant won't be familiar with
the many special sections of the tax law that apply to those who do
business or who invest outside the U.S. Generally, this kind of
expertise is only available at the big international CPA firms. The
trouble is, these firms mostly cater to the large international
corporations and their executives. They aren't always eager to spend the
time with individual investors and small entrepreneurs who only
represent a few hours of billing time.
make no claim to being an "expert" on international tax laws. Like most
public accountants, I have largely ignored this part of the U.S. tax
code - until 1994. Since then, I've begun to learn as much as I can
about the subject because I perceive there will be a growing need for
tax advisors who are able to help people who have financial involvements
outside the U.S. If your local tax preparer isn't willing to take the
time (on his dime) to become familiar with these tax rules and if you
can't get one of the big accounting firms to take you on as a client,
give me a call. I don't have all the answers to every offshore tax
question, but I'm working on it.
teamed up with J. Richard Duke, an attorney and law professor who
devotes nearly all of his time to international tax law services, to
write an extensive seminar reference manual for our seminars -- which we
call the Offshore Tax Boot Camp. The manual is a 575 page introduction
to the subject of international tax law.
Duke provides legal services relating to international tax law and I
provide tax accounting services relating to international transactions
by U.S. persons or U.S. transactions by foreign persons.
There are severe
penalties for failing to file certain offshore tax forms - even if you
don't owe any taxes from your offshore activity.
Offshore Tax Forms I Can Help You To
are a few of the tax reporting requirements you must satisfy if you go
prepared to assist taxpayers with the preparation of these forms,
without having to be involved in the preparation of the rest of their
federal return or their state income tax returns.
- Form 3520 must be filed when you create or add to a
foreign grantor trust.
- Form 3520-A must be filed every year if you have created
a foreign trust.
- Form 5471 may be required if you or your foreign trust
have an interest in a foreign corporation.
- Form 8621 must be filed if you or your offshore trust or
a controlled foreign corporation have an interest in any offshore mutual
fund or similar entity.
- Form 8865 may be required if you or your foreign trust
have an interest in a foreign partnership or LLC.
the information from these forms feed into ther individual,
partnership, trust or corporate tax returns and can be prepared
independently from the rest of the return. In most cases, I can
probably do the job for abut half to one-third of what a local tax
preparer would have to charge if they were to charge for the full amount
of the time they would have to spend to become familiar with the
instructions and to actually prepare the forms. If they don't charge for
the time they spend, then they will be losing money because of doing
that work. I don't believe they will want to do that unless they are
desperate to keep your business.
Years ago, the Congress
passed a law requiring the IRS to estimate the amount of time that is
required for taxpayers to complete each of the different tax forms. The
IRS now publishes that information with the instructions to each form.
They break it down between their estimate of the time that is required
for continuing record keeping, the time required to read the
instructions and the time required to actually prepare the form and mail
it to the IRS. Here are their estimates for the forms listed above.
I've shown the time in hours and fractions of hours rather than in
hours and minutes.
|5471 (Excluding Schedules)
|8621 (For each separate mutual fund)
|8865 (Draft - no estimate at this time)
If these figures are accurate and if your accountant charges $100 an
hour, it would cost you about $1,100 for form 3520 and about $230 for
form 3520-A. However, the form 5471 (absent the schedules) would cost
you $5,900 and each form 8621 would cost you $767.
haven't been able to find any "inside" information as to how the IRS
comes up with these estimates, but I find that most of their
estimates are usually understated in terms of the time required for the
record keeping and learning about the law. They seem to be overstated in
terms of the time required to actually prepare the form if all the
necessary figures are available and if the preparer has a computer
system to help with the preparation process. These time estimates are
also heavily affected by the size of the reporting entity and the
volume of transactions that must be summarized and reported.
estimates for the record keeping time would represent the time you or
your company accountant would have to spend (on average) to organize and
summarize your information in the manner required to complete the
forms. If you give all the figures to a tax preparer at the end of the
year, these time estimates could serve as a benchmark to estimate
the hours the preparer will have to spend to organize the raw data into
the format required. By way of example, both form 5471 and 8865 require
that the corporation or partnership records be maintained using
Generally Accepted Accounting Principles (GAAP) rather than a cash
method of accounting or a hybrid method. This can add substantially to
the time required to adjust the raw data into the form required.
on the time I've already spent reading the law to understand these
forms, I would have to say that the IRS estimates are preposterous
understatements for everything except form 5471. However, if someone
were to approach the instructions for that form with no background in
the subject, it might take 27 hours (or more) to learn how to prepare
the form. If your tax preparer has never had to prepare these forms
before, you should be prepared to pay for the time they will need to
learn how to do that. If you out-source the preparation work to a
professional who is familiar with the forms, you should not have to pay
for that time - but you should expect to pay more per hour. (Blatant
actual preparation time depends greatly on whether the form is being
prepared by hand or by a computer. It seems these estimates are an
average. I have not found any of the major tax preparation programs for
tax professionals that include these forms - but there are some
specialty programs available for those preparers who do more than a few
of these forms each year. If your preparer has to buy the stand-alone
software just to do this work for you, you will most likely be asked to
pay for the software and to pay for the time required for your preparer
to learn how to use it. If you out-source this work to a professional
who does a number of these you should not have to pay for the cost of
the software or the time required to learn how to use it. (Another
you hire me to do this work for you, I will charge you for the actual
preparation time and will not charge you for the cost of the software or
the time that I had to spend to learn how to use it. That's the good
'bad news" is that I probably charge more per hour than your local tax
preparer. That's how I get compensated for the time I spend on learning
how to prepare the forms and the time and money I spend on the special
purpose software. Also, if the information you provide me isn't
organized as required to prepare the forms, I will also have to charge
for the time to do that for you.