U.S. Travel Restrictions Implementation and Guidance.

Critical Dates and Times for Affected Foreign Nationals

 

The Department of Homeland Security press release published on Thursday, June 29 confirms that travel restriction provisions were officially in effect on June 29 at 8 P.M. EDT.  Affected individuals from the following six countries include: Iran, Libya, Somalia, Syria, Sudan, and Yemen; Iraq is no longer included as a restricted country.

This implementation date is important because it represents the date by which foreign nationals outside the U.S. must have been issued a valid visa (or other valid travel document, per DOS) in order to be exempt from the travel restrictions (assuming no other exception applies).

Per DHS, the travel restrictions will apply to all foreign nationals from the six designated countries (and their derivatives) who:

Are outside the United States as of June 26, 2017; and

Did not have a valid visa at 5 PM EST on January 27, 17; or Did not have a valid visa as of 8 PM EDT on June 29, 17.

DHS also clarified that previously issued visas will not be revoked as a result of the policy, including those visas issued during the 72-hour implementation window following the Supreme Court’s decision but prior to the travel restriction’s implementation. Finally, persons holding a valid visa on June 29, whether single or multiple-entry, are eligible to re-apply for visas even after their current visa expires.

In addition to the specific carve-outs provided by E0-2 and the Supreme Court decision, DHS clarified that any individual seeking admission as a refugee who was formally scheduled for transit by DOS before 8 PM EDT on June 29, 2017 is exempt from the restriction; and after 8 PM on that day, any first-time refugees who are issued travel documents are deemed to be cleared for travel and are likewise exempt. 

Finally, DHS explicitly stated that persons present in the United States (specifically those who were admitted to or paroled in) as of June 26, 2017 are exempt and will also be eligible to seek visas in the future, even while the travel restrictions are ongoing.

 

Defining “Close Family Relationship”

The Supreme Court decision exempted from the travel restrictions those foreign nationals who could demonstrate a credible, close family relationship to an individual in the U.S., but did not offer any insight into how that term should be interpreted. DHS listed a closed group of qualifying family relationships in its press release; permitting a group that is somewhat broader than what constitutes an “immediate relative” in standard immigration practice, but that is also much narrower than what most persons intuitively understand to be a close family relationship.

DHS will recognize all of the following relationships as “close family relationships” for purposes of the exception:

Parents

Parents-in-law

Spouses

Children

Adult sons or daughters

Fiancé(e)s

Sons- and Daughters-in law

Siblings (including half siblings)

Step relationships of the above.

 

DHS went further to state, explicitly, that the following relationships are not qualifying:

Grandparents

Grandchildren

Aunts and uncles

Nieces and nephews

Cousins

Brothers- and sisters-in-law

Any other “extended” family members not listed above.

 

Civil documents like birth and marriage certificates will presumably be enough to show that a close relationship exists without having to examine the bona fides of that relationship on a case by case basis.

 

Department of State Cable Provides Glimpse into Visa Issuance During the Term of the Travel Restriction

The DOS cable, which offers insight into the restriction’s implementation (but should not be construed as the agency’s official public guidance), states that persons seeking a nonimmigrant visa other than a B, C-1, D, I, or K will be exempt from the EO by virtue of their visa classification, which inherently establishes the requisite relationship to a U.S. entity. A similar approach will be taken with family-based visas where the qualifying relationship is inherent in the petition.  This clarification signals DOS’s sensibleness in applying the exemption created by the Supreme Court, and places no further evidentiary requirements on applicants to qualify for the exemption.  An applicant for an L-1A visa, for example, is deemed to have established the requisite relationship to a U.S. entity by virtue of the fact that an employer filed a petition on the foreign national’s behalf.

Likewise, employment-based immigrant visa applicants from one of the six countries will in most cases be able to rely on the visa classification itself, in tandem with a job offer, to establish a qualifying relationship to a U.S. entity. The DOS cable is careful to exclude self-petitioners lacking job offers from such automatic exemptions.  For example, the EB-1 visa petition for persons of extraordinary ability permits individuals to self-petition, with or without a job offer from a U.S. company; these individuals will not enjoy the same treatment as their counterparts in other employment-based visa categories where U.S. employers are involved in the petitioning process. Presumably, such EB-1 visa applicants will be afforded an opportunity to evidence the requisite relationship to a U.S. entity by other means, and their eligibility for a visa and admission determined on a case-by-case basis.

The cable and other available resources further indicated the following:

Diversity Visa applicants from one of the six designated countries, including those scheduled for an interview before the restriction went into effect, must qualify for an exemption or waiver or will otherwise be refused a visa;

High-level government officials traveling on official business who do not qualify for an A or G visa (and are therefore not explicitly eligible for a waiver under EO-2) will likely be able to satisfy the “in the national interest” and “undue hardship” requirements by virtue of their title and qualify for a waiver, barring anything specific to their situation that gives rise to concern;

Department of State’s procedures if and when encountered by foreign nationals affected by the Ban.

Moving forward, visa interviews will still be scheduled for persons from the six designated countries, but applications will be adjudicated as follows:

First, consular officers will determine if the national is eligible for a visa in the ordinary course before reaching the exemptions and waivers of under EO-2.

If the foreign national qualifies for a visa but for the Travel Restrictions, officers will then determine if the national meets any of the exemptions or qualifies for a waiver, and deny or issue visas accordingly.

Trump's Changes to U.S. - Cuba Deal Might be Headed Our Way Soon.

In June, President Donald Trump announced a cancelation to the post-December 14, 2014 U.S. policy towards Cuba. While speaking before prominent members of the Cuban American community in Miami in June, President Trump stated he is “canceling the last administration’s completely one-sided deal with Cuba,” with changes to take effect once the regulations are officially issued by the different U.S. government departments. The department of Treasury, along with its Office of Foreign Assets Control (OFAC), as well as the Department of Commerce, will be among the departments having 30 days to review the changes the President has provided. After the 30 day review, the departments begin drafting the new regulations; as such, it may be months before the new regulations take effect.   

Some of the policy’s most noteworthy changes will likely result in U.S. business entities and individuals not being able to engage in lawful commercial transactions with Cuban entities that are related to the Cuban military, intelligence, or security services; and also requiring Americans that were able to travel to Cuba under an individual people to people general license on their own, to once again travel solely in group people to people travel, which requires a tour operator.

Again, none of the potential changes would become effective until the regulations are issued by the respective departments. It should also be noted that any changes to the regulations would most likely be prospective, and thus will not affect existing contracts and licenses given to U.S. businesses.

However, while President Trump has claimed he is “canceling” the engagement between the United States and Cuba, many of President Barak Obama’s 2014 policy changes will remain unaffected. For example, the U.S. embassy in Havana will remain open, as will the Cuban embassy in Washington, D.C.

Similarly, commercial flights and cruise ships will continue to be able to travel to the island; likewise, the $2,000.00 limit on remittances that can be sent to nonfamily members in Cuba, as well as the change to allow travelers to carry as much as $10,000.00 to Cuba will also remain unaffected.

Notably, President Trump did not reverse Obama’s elimination of the “wet foot, dry foot” policy – the policy that previously gave Cubans a special status and authorization to stay when they reached the United States, and has also not changed regulations restricting the types of good Americans can take out of Cuba, including the country’s popular rum and cigars.

How to Plan for Business Needs Under President Trump's Immigration Reform.

While immigration policy is still uncertain, businesses’ needs remain a prevalent. While it may still be necessary to rely on immigration into the U.S. to meet demands, businesses must stay up-to-date on executive orders regarding immigration.

In addition to President Trump’s executive order restricting the entry of individuals from certain countries, President Trump also released the ‘Buy American, Hire American’ Executive Order on April 18; focusing partly on the H-1B Visa program; a popular option for highly skilled workers. The Executive Order directs agencies to review the program to ensure the most skilled and highly paid beneficiaries receive a visa under that category. In addition to Executive Orders, businesses should also remain current on legislation coming from Congress. Multiple bills underway focus on the H-1B program. Employers with international offices should also keep track of any changes arising under the L-1 intracompany transfer program.

Most importantly, however, employers should be reviewing current I-9 policies to ensure full compliance with immigration laws. All employers must complete Form I-9 for new hires, verifying the eligibility of an employee to work in the U.S.; regardless of an employee’s citizenship. Failure to comply results in penalties ranging from $300.00-$3,000.00 per violation. Employers can reduce their overall liability by conducting I-9 audits regularly, while implementing new hire procedures and handbook policies that help ensure standardized compliance.

Given the tumultuous state of the country’s current immigration policies, Employers should prepare for delays, audits, and site visits; while remaining current on policy reform and ready for any potential changes to the immigration policies currently in place.

The Importance of a Prenuptial Agreement.

A prenuptial agreement is an agreement between two people to be wed, that deals with the financial consequences of their marriage ending.

All marrying couples have a “prenuptial agreement” – it is known as “divorce law,” and it depends upon the state in which the divorce is to take place. However, a lot of people are unhappy with the way divorce law works, and prefer to take control of their lives, rather than leave it in the hands of the government.

Getting a prenuptial agreement is particularly important in Florida, due to the protections the State affords to spouses and ex-spouses, as the case may be.

Although a prenuptial agreement may never be necessary, it is an indispensable agreement to have in place for the following reasons:

1.       There is a significant financial disparity between the spouses.

2.       If you plan to quit your job to raise children. Quitting your job will negatively impact your income and your wealth. A prenuptial agreement can ensure that the financial burden of raising the children is shared fairly by both partners.

3.       You own part (or all) of a business. Without a prenuptial agreement, when your marriage ends, your spouse could end up owning a share of your business. Your business partners may not want this to happen. A prenup can ensure that your spouse does not become an unwanted partner in your business.

4.       A spouse plans on remarrying. When a spouse remarries, the legal and financial concerns are often very different than in the first marriage. There may be children from a previous marriage, support obligations, and a home or other significant assets at stake. A prenuptial agreement can ensure that when you pass away, your assets are distributed according to your wishes, and that neither your first family, nor your new family are cut off.

5.       To prevent your spouse from overturning your estate plan. A prenuptial agreement can ensure that your estate plan works, and, for instance, ensure that a specific heirloom remains in your family, or that family inheritances remain within the designated beneficiaries.

Points 4 and 5 are principally significant here in the State of Florida, given Florida’s elective share. Florida’s elective share is a broad and encompassing option under the Florida Statute that allows the surviving spouse to bypass his/her widow/widower’s will and elect to take a percentage of the widow/widower’s estate. It is essentially almost impossible to disinherit a spouse in Florida. Florida’s elective share allows the surviving spouse to take 30% of the decedent spouse’s estate. If there are not sufficient assets to satisfy the elective share, the surviving spouse may even be entitled to have the share satisfied through property transferred by the decedent to the extent that at the time of his or her death (a) the decedent possessed the right to, or enjoyed the possession of, the income or principal from the property, or (b) the principal of the property could be distributed or appointed to or for the benefit of the decedent in the discretion of the Trustee.

As such, even in situations where a prenuptial agreement would seem pointless, it could prove beneficial in the long run. What is more, a prenuptial agreement is revocable and modifiable and can always be changed to reflect the parties’ current requirements.

Celebrating #SmallBusinessWeek - Why Your Business Needs an Operating Agreement.

April 30, 2017-May 6, 2017 is being celebrated as #SmallBusinessWeek. If you operate a small business, here are a few tips to keep in mind:

Advantages of an Operating Agreement:

       The Operating Agreement outlines the structure of your business. If there are multiple owners, the Operating Agreement will clearly assign a percentage of the business to each owner, and specify what each owner’s share of the profit is. A well-written Operating Agreement is an effective way to avoid expensive legal disputes during the lifetime of your business; without it, your business will be governed by the default operating rules based on your business’ structure. In addition to including information about how profits will be divided, your operating agreement could have information about holding meetings, making decisions, and individual member’s responsibilities. The Operating Agreement can also define what happens in the event of a partner’s death.

Essential Elements of an Operating Agreement:

Ownership Division:  Your Operating Agreement should specify how the percentage of ownership of the business is based; whether it be based on financial contributions, or other factors. Also, be sure to specify whether the percentage of ownership is directly reflected in the pay each owner receives, and/or by the percentage of management influence; as indicated by each member’s percentage interest in the company, for instance.

Payments: Your Operating Agreement should clearly indicate how losses and gains are to be handled, and whether partners are to be paid in the form of cash distributions or company shares. Payouts can be a complex taxation issue for both the partners, and the business; this aspect of the Operating Agreement benefits from the input of an accountant or a lawyer.

Business Management: The Operating Agreement ought to specify how the business will be managed. For example, in the Operating Agreement you may designate who will be responsible for certain elements of the operation, who will have the final decision, what percentage of members are needed to make what kind of decisions, etc.

Plan for Unexpected Events that Could Change the Structure of the Company:  An Operating Agreement is most effective when it takes into account most of the eventualities that might arise, especially those that are a threat to the company. For instance, your Operating Agreement should specify what would happen if there is a death of a partner, if a partner wishes to sell his or her share, or if the company is dissolved. The companies’ Operating Agreement is most effective when it accounts for contingencies that might arise.

       Every business should have an Operating Agreement; even in situations where partners trust each other enough to believe it would be unnecessary. An Operating Agreement is a simple method to avoid legal disputes, and to help clarify elements of the operation, management capacities, and the division of ownership. Even if you believe an Operating Agreement is excessive, it is always a wise decision to create one for your company. Likewise, if your business already has an Operating Agreement, but you believe it may be out of date, and/or it does not reflect your current circumstances, it might be time to update the agreement.

Estate-Planning Practices that Can Avoid Future Disputes.

They say money changes people. Instances of family strains resulting from will contests have become common place. Interestingly, a shared notion surrounding these sorts of family quarrels echo sentiments sounding of, “never in our family”. Again, money changes people; the mere prospect of money can sometimes bring out the worst in individuals. The irony in this is that at the end of litigation, the estate’s assets are generally a fraction of what they were before the process began. Litigating the validity of a will is costly; requiring heavy discovery, which is likely to result in numerous and costly fees – in addition to the resulting breakdown of the familial relationship. As such, even when it is believed that no amount of money could create friction between relatives, it would be wise to implement certain preventative measures to ensure family unity and peace after your death.

1.      Insert a “No-Contest” clause or Nominal Bequest.

Including a nominal bequest can help to avoid a dispute, since the inclusion of such bequest removes the possibility of speculation that the omission of a beneficiary was not intentional. Under Florida Stat. 732.517, no contest clauses are unenforceable in Florida. However, a nominal bequest helps clarify the testator’s intent.

Even so, if a “no contest” clause is enforceable in a jurisdiction, including the clause even when a will contest seems highly unlikely, may prove beneficial. A “no-contest” clause generally provides that a bequest will fail if the beneficiary initiates or participates in a will contest. In other words, the beneficiary must either accept the will as it is, or risk losing any benefits received under it. The clause can be an effective deterrent to a will contest, but only if the potential will contestant has something to lose. For instance, a beneficiary given a more substantial inheritance may be more hesitant to bring the contest for fear of losing the gift; while a beneficiary who receives only a nominal bequest, has very little to lose by bringing a will contest.

Using a “no-contest” clause, while including a nominal bequest in the same testament could prove effective in deterring family disputes. This is especially true in situations where an older will happens to be probated in a jurisdiction rendering “no-contest” clauses unenforceable; since often, both family situations and state statutes change, rendering older wills subject to new circumstances.

2.      Verbalize Your Wishes Verbally, to Relatives and Expected Beneficiaries Now. 

Creating testamentary documents can understandably feel like a private endeavor, but keeping testamentary wishes a secret from relatives might lead to unintended confusion and hurt feelings after your death.

People who are blindsided might suspect they were inadvertently omitted, or that you were unduly influenced by someone else, such as a caregiver or spouse. Announcing your wishes to loved ones while you are alive gives you the opportunity to explain your actions. Verbalizing wishes makes it clear that your decisions are yours alone; and makes them more difficult to contest successfully. It also gives people more time to come to terms with the circumstances and can add context, which might help defuse any resentment.

3.      Have a Doctor Verification of Your Mental Health. 

For a will to be valid, the individual executing it must have sufficient mental competence to make his or her own decisions. If disgruntled heirs can raise doubts as to whether you had capacity, they could persuade a court to disregard your wishes.  To eliminate this possibility, older clients could include a doctor’s note confirming their mental capacity with the will. Even if you do not show signs of cognitive decline, you should err on the side of caution.

4.      Self-Proving Affidavit. 

A self-proving affidavit is a sworn statement attached to a will, signed by the testator and his or her witnesses, that attests to the validity of the will. Although, it is not necessary to include a self-proving affidavit - since a properly written, signed, and witnessed will is legal without it- including one may help the probate process proceed easier, and uncontested.

Typically, witnesses sign the self-proving affidavit at the same time they sign the will itself, immediately after watching the will-maker sign the affidavit.

5.      Avoid Undue Influence Possibilities.

One of the foremost attacks to a will may be invalidation due to undue influence or coercion; thus, it is important to protect a will from such claims. One suggestion might be to consult with your attorney without family members or other intended beneficiaries. Another recommendation might be to prepare a letter discussing your desires and what you wish to accomplish in the will. For example, if one child or beneficiary is particularly aggressive, you might prepare a letter stating that it is your desire to benefit each of your children/beneficiaries equally, and that if the will to be probated appears to conflict with such intent, it should be presumed to be the product of undue influence, unless prepared by your usual attorney, and accompanied by a clear statement indicating otherwise.

Proactive implementation of some of the above practices could help avoid unnecessary and unfounded family quarrels; preserving family ties and estate assets.

Top Five Green Card Renewal Questions.

When Should a Green Card be Renewed?

Permanent resident cards (green cards) are valid for just ten years. Therefore, the right time to apply for renewal is roughly five (5) to six (6) months from the date on which the card will expire. Applications for green card renewal must not be filed before six months from the date of expiry, which is too early; such applications may be rejected and returned to the applicant.  However, an immigrant’s permanent resident status will not be lost if green card renewal is not done. But the law requires all immigrants to hold valid resident cards at all times.

How to Renew Green Card if Outside the United States?

If you are outside the United States and your green card will expire within 6 months (but you will return within 1 year of your departure from the United States and before the card expires), you should file for your renewal card as soon as you return to the United States. If, however, you are outside of the United States when the card expires and you had not applied for the renewal card prior to your departure, you should contact the nearest U.S. Consulate, USCIS office, or U.S. port of entry before attempting to file Form I-90 for a renewal green card.

Can Conditional Permanent Residents Renew Their Green Cards Using Form I-90?

Green cards with conditions are not renewable. Conditional card holders can get their lost or mutilated green cards replaced by filing Form I-90. But if their cards are set to expire, they will have to get the conditions on their cards removed by filing Form I-751, Petition to Remove Conditions on Residence and not file Form I-90.

How Long Does it Take to Renew a Green Card?

U.S. Citizenship and Immigration Services (USCIS) generally takes anywhere between three (3) to five (5) months to process and decide on green card renewal applications.

However, it should be noted that applications filed with errors will take longer than the standard 3-5-month period. Mistakes in applications can be costly, and will result in delays. It is wise to prepare Form I-90 online, referring to step by step instructions, if not seeking legal help to renew, to avoid mistakes and delays.

Can Permanent Residents Avoid the Green Card Renewal Process?

Yes, if they apply for U.S. citizenship. Those who have already been legal permanent residents for five (5) or more years may be eligible for U.S. citizenship; and can apply for citizenship instead of renewing their green cards. Citizenship is not like the green card status that requires the holder to go through the renewal process every decade. U.S. citizenship status is for life and does not need renewal. Green card holders can check if they are eligible and apply for U.S. citizenship by filing Form N-400, Application for Naturalization.

Small Business Tax Tips.

While tax planning for your business is a constant process that changes with time and growth of the company, these are certain recommendations that will likely remain significant and helpful throughout the development of your enterprise:

1.      Keep complete and accurate records.

Keeping proper records all year will help ensure your company’s taxes are accurately filed. Make sure to keep your receipts and accounts complete and accurate, particularly if you intend to claim an expense as a tax deduction. Additionally, keeping several hard copies, and backing up electronic records are necessary to ensure there are no gaps in the record throughout the year, and that you can wholly substantiate your expenses. As such, with the possibility of any business being audited, it is important to have complete records, to be able to prove the business is allowed certain deductions.

 

2.      Clearly understand who is an employee, and who is an independent contractor, and properly classify them as such.

For federal employment tax purposes, the usual common law rules are applicable to determine whether a worker is an independent contractor or an employee. Under the common law, you must examine the relationship between the worker, and the business. You should consider all evidence of the degree of control, and independence in this relationship. The facts that provide this evidence fall into three categories – Behavioral Control, Financial Control, and the Relationship of the Parties.

Behavioral Control covers facts that show if the business has a right to direct and control what work is accomplished and how the work is done, through instructions, training, or other means.

Financial Control covers facts that show if the business has a right to direct or control the financial and business aspects of the worker's job. This includes:

         The extent to which the worker has unreimbursed business expenses;

The extent of the worker's investment in the facilities or tools used in performing services;

The extent to which the worker makes his or her services available to the relevant market;

         How the business pays the worker; and

         The extent to which the worker can realize a profit or incur a loss.

Relationship of the Parties covers facts that show the type of relationship the parties have. This includes:

          Written contracts describing the relationship parties intended;     

Whether the business provides the worker with employee-type benefits, such as insurance, a pension plan, vacation pay, or sick pay;

         The permanency of the relationship; and

The extent to which services performed by the worker are a key aspect of the regular business of the company.

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. However, if you have reasonable basis for not treating an independent contractor as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker.

 

3.      Determine whether offering “fringe benefits” such as health, vision, and child care assistance may help you save money.

Generally, if an employer pays the cost of a health insurance plan for his/her employees, including an employee’s spouse and dependents, the employer’s payments are not wages and are not subject to Social Security, Medicare, FUTA taxes, or federal income tax withholding.  Generally, this exclusion also applies to qualified long-term care insurance contracts.  However, the cost of health insurance benefits must be included in the wages of S corporation employees who own more than two percent of the S corporation (two percent shareholders).

The Department of Labor's Health Benefits Under the Consolidated Omnibus Budget Reconciliation ACT (COBRA) provides information on the rights and protections that are afforded to workers under COBRA. Certain individuals who are eligible for COBRA continuation health coverage, or similar coverage under state law, may receive a subsidy for 65 percent of the premium. Employers may recover the subsidy provided to assistance-eligible individuals by taking the subsidy amount as a credit on its quarterly employment tax return. For more information see:

Help Employers Claim COBRA Medical Coverage Credit on Payroll Tax Form;

COBRA Health Insurance Continuation Premium Subsidy;

COBRA: Answers for Employers

 

4.      Keep business and personal expenses separate. Make sure to maintain separate checking accounts, and credit cards for your business and personal expenses.

 

5.      Look at the Small Business Jobs Act, signed into law in 2010. The law has nearly 20 initiatives aimed at decreasing the tax burden and providing savings for small businesses.

 

Keep in mind these tax tips are limited, and very general in scope; every business is unique and requires specialized analysis for efficient tax planning.

Why U.S. Tax Person's Should Voluntarily File FBARs.

       Filing FBARs voluntarily should be a priority to any individual U.S. tax person who has unreported offshore accounts. What is more, filing one’s 2016 FBARs are easier, and more convenient than ever due to a change in regulation and due date. However, it should be noted that 2016 FBARs will be due several months earlier, with a new submission date of April 18, 2017, aligning with the tax return date.  

       Voluntary disclosure programs were designed for taxpayers potentially at risk of criminal liability and/or substantial civil penalties due to a non-willful failure to report foreign financial assets, and pay taxes due on those unreported assets; before the Internal Revenue Service (IRS) discovers the violation, and imposes any applicable penalties.  

       In addition to complying with the filing requirements, and paying any additional tax, interest and any applicable penalties due, the taxpayer must sign a statement certifying that:

                 1. He or she is eligible for the streamlined procedure(s); 

                 2. All required FBARs have been filed; and

                 3. The failure to fulfill the reporting obligations were not due to willful conduct.   Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

       You must file an FBAR if:

1.       You are a United States “person” (this can include residents in the United States on a visa);

2.       You had signatory authority, or a financial interest over any financial account (including a trust, mutual fund, bank or brokerage account) in a foreign country or jurisdiction; and

3.       The total of all such foreign accounts exceeded $10,000.00, if even for a day, in a given year.

       Reporting obligations under FBARs include taxpayers who are legally residing in the United States on a visa, in addition to United States citizens. Additionally, reporting obligations may fall on an individual who is named as a joint owner on the account, even if the other joint owner has a legal claim to the funds. What is more, merely having signatory authority, or the ability to withdraw or transfer funds from an overseas account in excess of $10,000.00 can result in an FBAR reporting obligation. The FBAR is an annual report that must be electronically filed with the Department of Treasury on or before April 15th (April 18, 2017) of the year following the calendar year being reported. Extensions up to October 15th are now permitted for FBAR submissions.

       Civil penalties for failing to file an FBAR, and/or disclose the foreign accounts can be significant. The IRS can impose a $10,000.00 penalty for each non-willful violation of the FBAR requirement; where a person who willfully fails to file an FBAR may be penalized to the greater of $100,00.00 or 50% of the account’s highest balance. Furthermore, criminal penalties for a willful failure to file can reach $250,000.00, 5 years in prison, or both. Civil and criminal FBAR penalties may be imposed together; and as a matter of law the IRS has 6 years to assert an FBAR penalty.

       Taxpayers with undisclosed foreign accounts should voluntarily disclose the violations because it will enable them to become compliant; avoiding substantial civil penalties, and generally eliminating the risk of criminal prosecution. Making a voluntary disclosure can also provide the opportunity to calculate, with some certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS, and the imposition of substantial penalties; including the fraud penalty, the foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in searching out the identities of those with undisclosed foreign accounts; and this information has increasingly become more available to the IRS through FATCA, and tax treaties.

Recent Release of Minor Changes to U.S. FATCA Regulations.

         The IRS and U.S. Treasury released final temporary, and proposed information reporting and withholding regulations on December 30, 2016. While most of the changes are believed to be positive, many believe the relief provisions should be interpreted with caution and reservation.

           The general rule under chapter three is that a withholding agent must withhold 30 percent of some U.S. source payments to a foreign person unless it can rely on documentation corroborating that the payment was made to a U.S. person or a beneficial owner that is a foreign person entitled to a reduced rate of withholding. Withholding on payments to a foreign person is not required when the foreign person assumes withholding as a qualified intermediary, a U.S. branch of a foreign person, or as a withholding foreign partnership or trust.

            However, the modified rules applicable to qualified intermediaries results in more stringent requirements applicable to qualified intermediary agreements; containing a modified standard of knowledge aligning with the reason-to-know standard adopted in regulations, along with revised documentation requirements and presumption rules to align with inter-governmental agreement requirements.  Finally, the term of validity for a qualified intermediary agreement was extended to six calendar years, from the three years provided in the proposed agreement.  The updated final qualified intermediary agreement is effective beginning January 1, 2017.

            Also, the new rules requiring withholding agents to collect a foreign TIN could prove problematic. Under previous rules, if a withholding agent did not provide a foreign TIN on a Form W-8BEN (individuals) or W-8BEN-E, the withholding agent could consider the form valid; however, under the new regulations, the absence of a foreign TIN could result in an invalid W-8BEN or BEN-E starting January 1, 2018, unless the account holder provides an explanation for not having a foreign TIN.

            Additionally, some changes were made to the foreign financial institution (‘FFI’) agreements for purposes of FATCA withholding and reporting obligations. Changes were made to the FFI agreement mainly to align with subsequent changes to IRS regulations, such as the withholding and reporting rules applicable to U.S. branches that are not U.S. persons. The FFI agreement also contains new certification requirements applicable to FFIs attempting to terminate an FFI agreement, and clarifies that obligations imposed with respect to the period the agreement was in force survive the termination of the agreement.

Possible Immigration and Tax Reform Policies and Effects Under Trump.

          Although the true nature and effects of President-Elect Donald Trump’s reforms cannot be known until they are implemented, or at the very least, concretely and succinctly proposed, it is nevertheless important to remain mindful of the direction in which the President-Elect intends on steering the Country; heedfully keeping up to date on potential policy reforms, and thinking through how the plan can be implemented, all the while formulating constructive contingency plans.

IMMIGRATION POLICY REFORM

          The President-Elect will most likely tackle and overturn the policy known as DACA, Deferred Action for Childhood Arrivals, and the similar and corresponding policy, DAPA, for undocumented parents of American citizens. Both policies were implemented by President Obama by Executive Action in 2012; and consequently, can easily be overturned.

          Although the President-Elect has shied away from his tough stance on “all illegal immigrants” (now claiming to only go after those who have committed crimes), he has steadfastly maintained his position regarding overturning DACA, DAPA, and “catch and release” policies (not to detain immigrants while they wait for their cases to be processed).

          Additionally, Mr. Trump has stated his desire to increase the number of U.S. Immigrant and Custom Enforcement agents in an effort to “immediately” move out or detain criminal aliens. However, it is unlikely that any of these potential policy changes will (i) take effect “immediately” and; (ii) result in mass deportations. For these reforms to be sustainably implemented, the Department of Homeland Security would need to have the proper funding, and/or infrastructure (which it currently does not) to deport and/or detain all the immigrants that are thought to be here illegally.

          What is more, the lack of funding available to even begin to conceptualize how to implement these reforms makes the even more financially burdensome notion of the wall on the border of Mexico even less likely; not to mention the logistical complications that are certain to arise when erecting a barrier wall across the length of the border.

          In brief, it is highly unlikely that our government will act in a way that would result in so drastic an effect that results would be seen “immediately”. On the contrary, it is likely the government will allow individuals who have at least started the immigration process to be grandfathered-in; honoring the immigration policies in place at the time the individual started the process to citizenship, even if there is significant immigration reform in the interim. Nonetheless, legal aliens are advised to maintain their legal status, and avoid any criminal infractions; considering that legal immigrants without any criminal records, who maintain their legal status are likely at the lowest risk of being impacted by future reforms.

TAX REFORM

          The proposed Trump Plan aims at revising and updating both the individual and corporate tax codes. The President-Elect’s Treasury pick, Steve Mnuchin, has stated that the majority of the tax cuts will serve middle income individuals, stating that “only reductions in upper income taxes will be offset by less deduction, so that there will not be an absolute tax cut for the upper class.”

Individual Income Tax

Tax Rates

          The proposed Trump Plan will aim to reduce the current seven tax brackets, down to three brackets. The rates and breakpoints are as shown below. Low-income Americans will have an effective income tax rate of 0%. 

               Brackets & Rates for Married-Joint filers:
               Less than $75,000: 12%
               More than $75,000, but less than $225,000: 25%
               More than $225,000: 33%
                  *Brackets for single filers are ½ of these amounts

          The proposed Trump Plan will retain the existing capital gains rate structure (maximum rate of 20 percent) with tax brackets shown above. Carried interest will be taxed as ordinary income.

          Under the proposed Trump Plan, the 3.8 percent Obamacare tax on investment income will be repealed, as will the alternative minimum tax.

Deductions

          The proposed Trump Plan intends on increasing the standard deduction for joint filers to $30,000.00, from $12,600.00, and the standard deduction for single filers will be $15,000.00. The personal exemptions will be eliminated as will the head-of-household filing status.

          In addition, the proposed Plan will cap itemized deductions at $200,000.00 for Married-Joint filers or $100,000.00 for Single filers.

Death/Estate Tax

           The proposed Plan will repeal the so-called “death tax,” or estate-tax. However, capital gains held until death, and valued at over $10 million will be subject to tax. To prevent abuse, contributions of appreciated assets into a private charity established by the decedent, or the decedent’s relatives will be disallowed.

Business Tax

          The proposed Trump Plan will attempt to lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. This rate is available to all businesses, both small and large, that want to retain the profits within the business.

          It will aim to provide a deemed repatriation of corporate profits held offshore at a one-time tax rate of 10 percent, payable over 10 years. The plan would attempt to eliminate most corporate tax expenditures, except for the Research and Development credit. Firms engaged in manufacturing in the United States would be able to elect to expense capital investments, and lose the deductibility of corporate interest expenses. An election once made could only be revoked within the first 3 years of the election; if revoked, returns relating to prior years would need to be amended to show the revised status. After 3 years, the election would be irrevocable.

          Large reductions in the corporate rate, and the repeal of deferral would likely reduce the incentive for companies to recharacterize their domestic income as foreign-source to avoid U.S. tax. The lower corporate tax rate would also decease the incentive for a U.S. corporation to move its tax residence overseas.

          Mr. Trump’s proposed tax reform plan has been thought to boost incentives to work, save, and invest, all while potentially simplifying the tax code. Additionally, by lowering the marginal tax rates and further limiting or repealing expenditures, it would likely reduce incentives and opportunities to engage in wasteful tax avoidance. The plan is thought to likely cut taxes on households at every income level. The fundamental concern with the plan, however, is that barring extraordinarily large cuts in government spending, the proposed plan would likely reduce the federal revenue based on taxed receipts in unsustainable portions.

 

E-2 Visas.

The E-2 visa is a non-immigrant visa. Many countries have treaties with the United States permitting legal non-immigrant status in the U.S. for an investor or trader, or their employees. Both the person receiving the visa (and their employer, if any) must be a national of a country that has such a treaty with the United States.

The investor must make a substantial investment in the United States whereby he or she will own at least 50% of an enterprise that is of benefit to persons other than the investor and his family. The investor’s 50% ownership of the investment/enterprise can be a business the investor starts, or an existing business in which he/she purchases at least a 50% interest. If the investment is owned by a corporation or partnership, majority ownership must be in hands of treaty nationals.

The E-2 investor visa is reserved for nationals of treaty countries. In addition, the families (spouse and unmarried children who are under the age of 21) of the principal investor can obtain derivative E-2 visas. The visa can also be extended to the employees of the actual investor if the employees meet certain requirements.

In order to secure an E-2 visa, it is helpful to have relevant business experience. However, if an applicant has a good business plan that clearly outlines the businesses goals, including operations, marketing, and finances showing precise planning and preparation, an applicant might be able to overcome the deficit of lack of experience. Additionally, ownership of assets will help to show that the applicant has the required funds for an E-2 visa. Loans secured using personal assets might also qualify as a legitimate source of funds.

Initially, a two year visa is granted to persons coming to the United States in the E category. However, this period can be extended in increments of up to two (2) years for each extension, as long as the underlying investment is in existence and the E-2 enterprise remains operational. Although there is no maximum time limit on how long an E-2 nonimmigrant can stay in the United States, they must maintain their intention to depart the country upon the expiry of their then current E-2 visa.

You Too Can Claim "Donald Trump-Like" Tax Deductions.

     The U.S. tax code has long included rules that allow a business to claim its excess losses (losses that exceed its current income) in a current year and then deduct those excess losses on tax returns of past and future years. However, you do not have to be a billionaire (or even a millionaire) to use the NOL rule -- it can work for ordinary taxpayers and small-business owners, too. Here is how:

Small-business Owners:

If you have a business for which your deductions are more than your income for a particular year, you may be able to claim a NOL. If the business loss is more than you can claim for a particular year (because the loss reduced your income to zero), you are generally required to carry back the entire amount of the NOL to the two prior tax years and file amended returns with these new deductions.

If all of the NOL cannot be used against income in the two carry-back years, the remaining NOL is carried forward until it is depleted, for up to the next 20 years.

This is not a secret loophole for the rich, and, it is perfectly legal. The rules for deducting NOL’s are spelled out in IRS publication 536, and any business owner with a good tax adviser will know about this tax-reduction strategy if it’s applicable.

Sole Proprietors and LLC’s:

Small-business owners who use a sole proprietorship can also deduct any net loss from their business (calculated on Schedule C) from their other income on their individual tax return. If the small business is a limited liability company, an S corporation or a partnership, losses that are passed through the business entity to the individual can also be deducted.

Investors:

Any individual who has invested in mutual funds, stocks and bonds in a taxable account and has realized a loss in excess of their capital gains in a particular year should also be familiar with the NOL concept. Investors are allowed to deduct up to $3,000 of their excess losses (realized in taxable accounts) against income in the current year, and they can carry forward and deduct the excess losses in future years until the losses are offset by gains or other income (up to the $3,000 limit against income).

       As Judge Billings Learned Hand famously argued: “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.”

 

September 2016 Federal Tax Deadline.

September 15Individuals:

Form 1040.    This form is due on the 15th day of the 4th month after the end of your tax year. Form 4868 is used to request an extension of time to file Form 1040.

Estimated tax payments (Form 1040-ES).   Payments are due on the 15th day of the 4th, 6th, and 9th months of your tax year and on the 15th day of the 1st month after your tax year ends.

Make a payment of your 2016 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2016.

 

September 15Corporations:

File a 2015 calendar year income tax return (Form 1120) and pay any tax, interest, and penalties due. This due date applies only if you timely requested an automatic 6-month extension. Deposit the third installment of estimated income tax for 2016. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

Estimated tax payments.   Payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.

Form 7004 is used to request an extension of time to file Form 1120 or Form 1120S.

 

September 15S Corporations:

File a 2015 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you timely requested an automatic 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1. Also, keep in mind, Form 2553 is the required form to be used when electing S corporation treatment. It is due no more than two months and 15 days after the beginning of the tax year the election is to take effect or at any time during the preceding tax year.

Estimated tax payments.   Payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year.

      Form 7004 is used to request an extension of time to file Form 1120 or Form 1120S.

 

      September 15Partnerships:

     File a 2015 calendar year return (Form 1065). This due date applies only if you were given an additional 5-month                   extension.

Form 1065:   This form is due on the 15th day of the 4th month after the end of the partnership's tax year.  Provide each partner with a copy of their Schedule K-1 (Form 1065) or substitute Schedule K-1 (Form 1065) by the 15th day of the 4th month after the end of the partnership's tax year. Form 7004 is used to request an automatic 6-month extension of time to file Form 1065.

Form 1065-B (electing large partnerships):   This form is due on the 15th day of the 4th month after the end of the partnership's tax year. Provide each partner with a copy of their Schedule K-1 (Form 1065-B) or substitute Schedule K-1 (Form 1065-B) by the first March 15 following the close of the partnership's tax year. This due date for filing Schedule K-1 (Form 1065-B) applies even if the partnership requests an extension of time to file Form 1065-B. Form 7004 is used to request an automatic 6-month extension of time to file Form 1065-B.

Why Your Small Business Needs an Operating Agreement.

Advantages of an Operating Agreement:

       The Operating Agreement outlines the structure of your business. If there are multiple owners, the Operating Agreement will clearly assign a percentage of the business to each owner, and specify what each owner’s share of the profit is. A well-written Operating Agreement is an effective way to avoid expensive legal disputes during the lifetime of your business; without it, your business will be governed by the default operating rules based on your business’ structure. In addition to including information about how profits will be divided, your operating agreement could have information about holding meetings, making decisions, and individual member’s responsibilities. The Operating Agreement can also define what happens in the event of a partner’s death.

Essential Elements of an Operating Agreement:

Ownership Division:  Your Operating Agreement should specify how the percentage of ownership of the business is based; whether it be based on financial contributions, or other factors. Also, be sure to specify whether the percentage of ownership is directly reflected in the pay each owner receives, and/or by the percentage of management influence; as indicated by each member’s percentage interest in the company, for instance.

Payments: Your Operating Agreement should clearly indicate how losses and gains are to be handled, and whether partners are to be paid in the form of cash distributions or company shares. Payouts can be a complex taxation issue for both the partners, and the business; this aspect of the Operating Agreement benefits from the input of an accountant or a lawyer.

Business Management: The Operating Agreement ought to specify how the business will be managed. For example, in the Operating Agreement you may designate who will be responsible for certain elements of the operation, who will have the final decision, what percentage of members are needed to make what kind of decisions, etc.

Plan for Unexpected Events that Could Change the Structure of the Company:  An Operating Agreement is most effective when it takes into account most of the eventualities that might arise, especially those that are a threat to the company. For instance, your Operating Agreement should specify what would happen if there is a death of a partner, if a partner wishes to sell his or her share, or if the company is dissolved. The companies’ Operating Agreement is most effective when it accounts for contingencies that might arise.

       Every business should have an Operating Agreement; even in situations where partners trust each other enough to believe it would be unnecessary. An Operating Agreement is a simple method to avoid legal disputes, and to help clarify elements of the operation, management capacities, and the division of ownership. Even if you believe an Operating Agreement is excessive, it is always a wise decision to create one for your company. Likewise, if your business already has an Operating Agreement, but you believe it may be out of date, and/or it does not reflect your current circumstances, it might be time to update the agreement. 

Benefits of Voluntarily Filing Your FBAR Submissions.

      Filing FBARs voluntarily should be a priority to any individual U.S. tax person who has unreported offshore accounts. What is more, filing one’s 2016 FBARs are easier, and more convenient than ever due to a change in regulation and due date. However, it should be noted that 2016 FBARs will be due several months earlier, with a new submission date of April 15th, aligning with the tax return date.  

      First time FBAR filers have more incentive than ever to file their FBARs. The change in regulation can also provide first time filers with relief; the IRS may waive penalties of first time filers who fail to submit their FBARs by April 15th, and who fail to request an extension deadline; which is also now available upon request up to October 15th. However, for relief to be granted, FBARs must be submitted by the extension date of October 15th. The change in regulation is apparently meant to benefit taxpayers by aligning due dates and allowing for an extension; however, it should be noted that this regulation does accelerate the unextended FBAR filing by several months. 

       Voluntary disclosure programs were designed for taxpayers potentially at risk of criminal liability and/or substantial civil penalties due to a non-willful failure to report foreign financial assets, and pay taxes due on those unreported assets; before the Internal Revenue Service (IRS) discovers the violation, and imposes any applicable penalties.  

       In addition to complying with the filing requirements, and paying any additional tax, interest and any applicable penalties due, the taxpayer must sign a statement certifying that:

                 1. He or she is eligible for the streamlined procedure(s); 

                 2. All required FBARs have been filed; and

                 3. The failure to fulfill the reporting obligations were not due to willful conduct.   Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

       You must file an FBAR if:

1.       You are a United States “person” (this can include residents in the United States on a visa);

2.       You had signatory authority, or a financial interest over any financial account (including a trust, mutual fund, bank or brokerage account) in a foreign country or jurisdiction; and

3.       The total of all such foreign accounts exceeded $10,000.00, if even for a day, in a given year.

       Reporting obligations under FBARs include taxpayers who are legally residing in the United States on a visa, in addition to United States citizens. Additionally, reporting obligations may fall on an individual who is named as a joint owner on the account, even if the other joint owner has a legal claim to the funds. What is more, merely having signatory authority, or the ability to withdraw or transfer funds from an overseas account in excess of $10,000.00 can result in an FBAR reporting obligation. The FBAR is an annual report that must be electronically filed with the Department of Treasury on or before April 15th of the year following the calendar year being reported. Extensions up to October 15th are now permitted for FBAR submissions.

       Civil penalties for failing to file an FBAR, and/or disclose the foreign accounts can be significant. The IRS can impose a $10,000.00 penalty for each non-willful violation of the FBAR requirement; where a person who willfully fails to file an FBAR may be penalized to the greater of $100,00.00 or 50% of the account’s highest balance. Furthermore, criminal penalties for a willful failure to file can reach $250,000.00, 5 years in prison or both. Civil and criminal FBAR penalties may be imposed together; and as a matter of law the IRS has 6 years to assert an FBAR penalty.

       Taxpayers with undisclosed foreign accounts should voluntarily disclose the violations because it will enable them to become compliant; avoiding substantial civil penalties, and generally eliminating the risk of criminal prosecution. Making a voluntary disclosure can also provide the opportunity to calculate, with some certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS, and the imposition of substantial penalties; including the fraud penalty, the foreign information return penalties, and an increased risk of criminal prosecution. The IRS remains actively engaged in searching out the identities of those with undisclosed foreign accounts; and this information has increasingly become more available to the IRS through FATCA, and tax treaties.