aicpa annual congress presentation

New US International Reporting Requirements

AICPA PFP12 Jan. 2011

Prof. William H. Byrnes &Prof. Stephen Polak

International Tax & Financial Services Graduate Program

Compliance Topics Foreign Account Tax Compliance Act (FATCA) Qualified Intermediary Regime (before and after UBS) (QI) 1099 major change Jan 1, 2011 reporting for expenditures of $600

or more within a year with any person Report of Foreign Bank and Financial Accounts Form TD F 90-22

(FBAR) Currency Transaction Reports FINCEN Form 104 Report of International Transportation of Currency or Money

FINCEN Form 105 Patriot Act - Suspicious Activity Reports (SARS) for foreign tax

evasion … see Pasquantino v. United States (2005)

FACTA in brief

Foreign Financial Institution (FFI) provide IRS any US persons invested in accounts outside the US

Foreign entities provide IRS any US substantial (10%) owners information (0% if invest vehicle)

All FFIs and FEs with payments from US Requires Sec. 1471(b) agreement with IRS

– (like Sec. 1441 QI agreement but more bite)

FACTA in brief

Requires 30% w/h on all US source income including all types of sales if no agreement with IRS

Reverse onus – burden on FFI / FE to prove not USAll persons must prove to FFI / FE NOT a US person,

otherwise a US person – UBO standardFFI / FE must EDD the non-US personsJan 1, 2013 (b/c hundreds of thousands of new

FATCA agreements)

FACTA in brief

Excluded from reporting by FFIs & FEs– Public listed companies– Individual Retirement Plans in rare situations– Banks– REIT– TEOs– ECI

FACTA in brief

Report must contain– Name / address / TIN– Account No(s) / Balance(s)– Gross transactions (receipt/dep/payment/withdrawal)

Can elect to report like US-FI (1099s)Or w/h and close account

FACTA in brief

Penalties– Personal liability for w/h tax (x2)– 40% of w/h accuracy related penalty– 75% of w/h if civil fraud– Lack of w/h = “uncertain tax position” FASB No. 48

QI differences

QI differencesExpanded application of reporting

– (names + specific account in(s)/out(s))Look throughExpanded application of reporting persons Expanded application of reportable transactionsFFI cannot determine customer w/h poolsOnly approx. 5,500 QI v. 100,000s of FFIs and FEs

FIRPTA

See IRS website http://www.irs.gov/businesses/small/international/article/0,,id=120943,00.html

Form 1099-S, Proceeds From Real Estate Transactions

Form 8288-A

Other Survey TopicsFBARCurrency Transaction ReportsReport of International Transportation of Currency or

MoneySuspicious Activity Reports (SARs)

… see Pasquantino v. United States (2005)1099 major changeCredit card merchant 1099

Typologies & Trends Part ISecurities

Trade Based

Counterfeit Trade

Sports Clubs (and Equestrian)

Typologies & Trends Part IIChild Pornography & Human Trafficking

Government Contracting / Bribery / PEPs

Internet Based Market Systems – Amazon, E-Bay, Second-Life & World of Warcraft

Topic II: I - Securities

If incidence of Opaqueness relative to Transparency; with higher Liquidity is an indicator for Launderer, then Securities

• GEM, AIM, B®IC

• Hedge Funds

• Audit firms, banks, law firms = $100B in tax losses = $T alleged w/o business purpose and w/o risk, IMAGINE what launders can do…

Topic II: I – Trade Based

Transfer Pricing

L.A. goods hP a USA

Dump (harm market price& higher risk detection)

Smurf purchases to avoid CTRs

Switzerland USA $31B

Russia USA $9B

Topic II: I – Counterfeit Trade

• 2% - 7% of World Trade $200B - $650B

• CF currency

• CF goods perceived by BRIC as less harmful than drugs

This weakness in perception can allow substantial $ flows from other crimes

(B movie industry)

Topic II: I - Equestrian

Equestrian > Hollywood Economic Impact = $25B / $100B indirect

# of Americans Involved = 7.1 Million# of Full-Time Jobs = 1.4 Million

# of Horses = 6.9 Million

Total Taxes Paid = $1.9 Billion

Topic 2: II - Trends

• Child Pornography & Human Trafficking

• Government Contracting / Bribery / PEPs

• Internet Based Market Systems

• Amazon & E-Bay

• Second-Life (Direct) & World of Warcraft (3rd Party)

Predictive Modeling

• Neural Networks

• Concept Mapping

• Evolutionary Programming = Genetic Algorithms

http://amlsample.googlepages.com/Securities_and_Trade_ML.html

Contact Us for Further Details

See my daily tax and wealth management blogs –http://www.advisorfyi.com

Contact the International Tax and Financial Services graduate program http://www.tjsl.edu/

Contact me http://profwilliambyrnes.com/about-2/