News

Eileen Gu is an American-born athlete who lives in California and is competing for China in this year’s winter Olympics. She recently won a gold medal but that’s not the only reason she’s in the spotlight.

Apparently, China law doesn’t permit dual-citizenship and that has led to questions about the current status of her U.S. citizenship.

Renouncing one’s U.S. citizenship has substantial non-financial repercussions. It can also trigger big tax costs, especially for high-net-worth individuals. So, careful consideration and advanced planning with a specialized tax advisor is critical to avoid costly missteps.

This article by Jay Busbee of Yahoo! Sports highlights some of the key implications of renouncing U.S. citizenship.

If there were ever a time to file income tax returns electronically, it’s now. If you must file a document with the IRS in paper form or correspond with them, get it right the first time. Failure to do so can lead to costly penalties due to processing delays.

Check out this great article by Aaron Lorenzo from Politico on the current state of backlogged work at the U.S. Internal Revenue Service and the potential relief that may be coming.

PwC recently announced the pending sale of its global mobility practice to Clayton, Dubilier & Rice (CD&R), one of the oldest private equity firms in the world. The price tag? A mere $2.2 billion dollars.

While the possibility of a sale has been known for some time – and won’t be completed until calendar year 2022 – the official announcement is akin to a shift in one of the earth’s tectonic plates for professionals working in the global mobility industry.

What does this mean for PwC’s clients? Its client-serving professionals? How are its competitors likely to react?

Who knows? But here are some initial thoughts you may want to consider.

What is Global Mobility:

Global Mobility is a niche industry comprised of a broad array of service providers who help companies deploy their employees to other countries efficiently and effectively – for either short or long durations of time.

The tax, immigration and other law-based services required to support a mobile workforce are typically provided by professional services firms including Big 4 firms, most regional professional services firms and highly-specialized firms like Zander Sterling.

Zander Sterling’s Initial Thoughts to Consider:

• PricewaterhouseCoopers is a multinational professional services network of firms, operating as partnerships under the PwC brand. PwC’s member firms in 40 or so countries have their own global mobility practices.

If we assume the sale includes all mobility practices globally, then extracting the entire practice unit’s people, processes, technology, legal agreements, HR systems, etc. and re-establishing them in a new, stand-alone business will be a daunting undertaking.

Execution by both PwC and the new company that’s being created by CD&R will be critical over what will likely be a protracted transition period. Failure to deliver would place retention of strategic clients at risk.

• The Big 4 firms provide employees with outstanding opportunities for professional and personal growth that can’t be replicated elsewhere. How will PwC’s global mobility professionals react to the news that the fundamental structure of the firm they joined has changed? Will they be patient enough to see how things turn out or will they leave? And if employees leave, what will that mean to client service?

• Private equity firms typically run very lean, technology-leveraged operations in order to achieve their targeted rate of return on investment. What will “lean” look like in the context of highly-complex professional services such a global mobility? What will the new company’s culture be like?

For employees, career paths coupled with related compensation and benefits packages will be different than what is customarily offered by large professional services firms. Will the “new deal” for employees be effective at attracting and retaining the best and brightest talent? What are the implications if it isn’t?

For clients, will the deployment of client-facing, technology-enabled solutions be accelerated? Probably. Will new solutions be developed that provide the type of fully-integrated experience desired by companies that have a large number of internationally mobile employees? Perhaps. But that’s a complex and expensive order to fill.

• Companies that have a small number of globally mobile employees typically don’t provide the monetary and strategic value desired by Big 4 professional service firms. Will the new company’s approach be different or will such client companies be viewed as diluting the company’s ability to properly serve its mission-critical accounts?

• Since the passage of Sarbanes-Oxley and similar anti-fraud laws globally, professional services firms like PwC have been effectively prohibited from providing global mobility services to the firm’s publicly traded audit clients. And pressure by regulators around the world to eliminate potential conflicts-of-interest continues.

By divesting of its global mobility unit, PwC eliminates potential regulatory pitfalls. For the newly formed global mobility entity, the regulatory shackles will no longer apply and it will be well-positioned to provide an expanded array of non-attest services to companies that were once “off limits”. I suspect this point is quite alarming to the mobility practices at other Big 4 firms.

• Will EY, Deloitte and KPMG follow PwC’s example and divest their respective global mobility practices? To whom would they sell their practices, a private equity firm? What if one or more of these firms sold their mobility practices to the new company being formed by CD&R? Can you say “juggernaut”?

• Until the COVID-19 pandemic took hold of the world, the global mobility industry experienced year-over-year growth due to the increasing number of companies that had their talent working internationally. The pandemic, however, placed an unprecedented stranglehold on the industry via shelter-in-place mandates and other travel restrictions.

As these restrictions lift, companies anticipate a resurgence in the mobility of their personnel. It appears CDR believes them and its sizable investment will bolster the new company’s ability to compete in the global mobility space.

• CPA firms such as PwC have restrictions on the type of entity they can be and the services they may provide.

What type of legal entity will CD&R’s new company be? The type of entity chosen will have a direct impact on the services it may provide and the manner in which it may provide them. Proper entity selection can also enable a more cohesive global operating model than the current independent partnership structure under which PwC currently operates.

What scope of services will it provide? Will it be limited to those historically provided by PwC (doubtful) or be expanded to include services such as global payroll management, relocation management, or professional employer services?

How this event – and other reactive ones certain to follow – will ultimately re-shape the global mobility landscape is anyone’s guess, but it will be an interesting journey along the way.

The FinCen Form 114 (aka, FBAR) has been around for decades. On it’s surface, this important annual disclosure appears harmless enough since it generally requires U.S. citizens and resident aliens to annually report their foreign financial accounts when certain conditions are met.

But don’t be fooled.

The FinCEN Form 114 is managed by the Financial Crimes Enforcement Network; a bureau of the United States Department of the Treasury. FinCEN’s charter is to collect and analyze financial transaction information in order to combat financial crimes such as money laundering and terrorist financing. The Form 114 is one of the tools this bureau utilizes to gather information required to perform its duties.

Even though the Internal Revenue Service assist FinCEN with the collection of penalties associated with non-compliance, the FBAR Form itself is not tax assessing.

In a recent court case (U.S. vs. J. Boyd, 03.24.2021), a taxpayer had fourteen financial accounts in the United Kingdom from which she received interest and dividends. She failed to report this income on her personal income tax returns and failed to disclose her foreign financial accounts. In order to correct her mistakes, she participated in the IRS’s Offshore Voluntary Disclosure Program and submitted an FBAR listing her multiple foreign accounts. Amended income tax returns were also submitted to include the missing interest and dividend income.

Upon examination of FBARs submitted by the taxpayer, the IRS concluded that she had committed thirteen non-willful violations of the FinCEN 114/FBAR reporting requirements – one for each account not disclosed in a timely manner (i.e., it did not assess a penalty on one of her accounts). The taxpayer disagreed stating only a single violation had occurred because the penalty related to the timely filing of the FinCen Form 114/FBAR itself, not each account separately. The government then sued the taxpayer for non-willful civil penalties totaling US$47,279 plus related late-payment penalties and interest. The district court agreed with the government. The taxpayer appealed the decision.

In a case of first impression, the Ninth Circuit Court of Appeals examined the relevant statutory language and regulatory history for reporting a relationship with a foreign financial agency and concluded that it authorizes a single non-willful penalty for the failure to file a timely FBAR. When challenged by the IRS, the court noted that it found nothing in the statute or regulations to suggest that the penalty can be calculated on a per-account basis for a single non-willful failure to timely file an FBAR.

As a result, the taxpayer’s failure to timely file her FBAR resulted to one non-willful violation (not thirteen) and the maximum penalty could not exceed US$10,000.

AS OF APRIL 7, 2020

INDIVIDUAL TAXPAYERS RESIDING WITHIN THE U.S.
As part of the U.S. federal government’s COVID-19 pandemic containment response, the U.S. Treasury Department and Internal Revenue Service recently announced that the Federal April 15, 2020 filing due date for individual income tax returns has been automatically extended to July 15, 2020.

No extension form is required to be filed and a taxpayer doesn’t have to be impacted by COVID-19 to qualify.

Taxpayers may also defer Federal income tax payments that are normally due on April 15, 2020 to July 15, 2020 without interest and penalties, regardless of the amount owed.

INDIVIDUAL TAXPAYERS RESIDING OUTSIDE OF THE U.S.
For U.S. citizens & resident aliens who have their tax home and abode outside the U.S. and Puerto Rico on April 15, the normal Federal tax return filing due date is also April 15 each year, even though they may qualify for the automatic 2-month extension to June 15. Because the normal tax return filing due date is April 15, 2020, the special COVID-19 automatic extension to July 15, 2020 also applies to this group of taxpayers.

Such taxpayers may also defer Federal income tax payments that are normally due on April 15, 2020 to July 15, 2020 without interest and penalties, regardless of the amount owed.

MOST U.S. STATES PROVIDE SIMILAR RELIEF
While the Federal automatic extensions are a welcomed relief for taxpayers whose lives have been severely disrupted by the COVID-19 virus, they do not apply to U.S. State income tax filings or payments of tax owed.

Instead, each U.S. State has been left to decide whether or not to modify its tax return filing and payment due dates. As of today, most states have modified their income tax return filing and payment due dates. You should check with your tax professional or visit your state’s website for the most current information.

FREQUENTLY ASKED QUESTIONS (FAQs)
The IRS has established a special page for frequently asked questions related to income tax filing and payment due dates. You may access it by clicking the link below.

CONSULT YOUR TAX PROFESSIONAL
The content of this article is strictly informational. It is not intended to be used and should not be used as tax advice. You should consult with your tax advisor for the most up-to-date information applicable to your situation.

Zander Sterling, LLC is currently seeking an experienced U.S. expatriate / foreign national Client Serving Associate to join our growing team.

Key Position Details:
• Serve as contact point for all clients to help ensure their requests are addressed in a timely manner.
• Perform administrative tasks as needed to support firm’s client services and internal initiatives.
• Organize and manage all tax compliance administrative duties including tax season kick-off activities, engagement letters,
client communications, tools and status reports, etc.
• Coordinate and track the status of authorized services with non-U.S. network firms.
• Prepare tax compliance work papers in accordance with firm policies and procedures.
• Assemble and process tax returns and other compliance deliverables.
• Monitor and consistently enhance the firm’s tools and processes that support the client experience.
• Support marketing activities, including website, social media and industry events.
• Support sales efforts.
• Part-time (24 hours per week). Could also be structured as a seasonal position if desired.
• Outstanding year-round work schedule flexibility and work/life balance.
• Position is based in Indianapolis, Indiana, USA.
• Competitive compensation and benefits.
• Estimated start date: January 1, 2020.

Minimum Candidate Requirements:
• 2-3 years relevant administrative assistance (or equivalent) experience.
• Strong writing and verbal communication skills.
• Excellent work ethic, self-motivated, honest and ethical.
• Professional behavior and appearance.
• Ambitious, self-motivated and comfortable with ambiguity.
• Require minimal supervision after initial direction provided.
• Outstanding interpersonal skills; proven ability to work effectively in a team-based environment and across different cultures.
• Enjoy and thrive in a fast-paced, entrepreneurial environment.
• Proficient with MS Office suite of tools.
• Experience supporting corporate global mobility programs preferred.

All interactions will be kept confidential.

If you are interested in this opportunity, please apply via ZipRecruiter by clicking the link below.

Zander Sterling, LLC is featured in the November issue of Carmel Monthly Magazine!

Zander Sterling is featured in the November issue of Zionsville monthly magazine!

The IRS is modifying the design of Form 1040, U.S. Individual Income Tax Return.

A recently released draft is the second major overhaul in two years of this widely-used income tax declaration. Fortunately, the changes should be well-received by taxpayers and tax service providers.

The most recent round of draft changes brings welcomed consolidation of key information into fewer schedules. While the 2018 Form 1040 included 6 supporting schedules, the 2019 draft form only includes 3 schedules.

The reduction in schedules has been accomplished by relocating information previously on a schedule to the main body of Form 1040 and consolidating the remaining schedules as follows:

Schedule 1 – Additional income and adjustments to gross income,

Schedule 2 – Additional taxes (combines information on 2018 schedules 2 and 4) and,

Schedule 3 – Additional credits and payments (combines information on 2018 schedules 3 and 5).

The draft form may be viewed by clicking the link below.

The HR Indiana Conference is one of the largest regional human resources conferences in the United States. It offers world-renowned keynote speakers, three days of educational sessions, networking opportunities and exposure to the latest HR products and services.

Multiple representatives from Zander Sterling will be there to discuss tax challenges related to managing a globally mobile workforce. Please stop by our booth in the exhibit hall and introduce yourself! We would love to meet you!

Learn more about this outstanding event by clicking the link provided below.

Hope to see you soon!

Form 1040 is changing again for 2019.

After going to great strides to reduce the main U.S. Individual Income Tax Return to a postcard size document, the IRS is once again modifying Form 1040.

Key changes include moving the signature box to page 2, spaces for entering spouse and dependent names, all income lines are now listed on page 1, removal of the checkbox for health care coverage since that’s no longer mandatory, separate lines for a variety of credits, and some other “housekeeping” adjustments.

Overall, we believe the revisions create a more cohesive and logical flow of the key income, deductions and credits.

What do you think?

You can see the draft form by clicking the link below.

When someone mentions the IRS, the typical reaction is a visceral one of dread or fear.  And deservedly so because of the reputation the IRS has created for itself.  Remarkably, even people from other countries are aware of the not-so-friendly IRS.  Yes…things have really become that bad.

But here’s a little bit of hope.  With the passage of the Taxpayer First Act, Congress has undertaken actions to begin addressing the systemic challenges that exist within the IRS.

Check out this nice summary of some of the key improvements we can all expect in the near future.

Nearly 2 million Individual Taxpayer Identification Numbers (ITINs) are set to expire at the end of 2019.  That’s a huge number.  And with the IRS being a bit short-handed these days, it makes sense that they are encouraging affected taxpayers to renew their ITIN early.

Everything you need to know regarding how to renew an ITIN can be found here.  Check it out and take action now if needed.  You’ll be glad you did come tax time.

Want assistance with your ITIN renewal?  Please contact us.

As a result of the sweeping tax law changes brought about by the 2017 Tax Cuts and Jobs Act, the IRS is revising Form W-4 -Employee’s Withholding Allowance Certificate.

While this may sound simple, creating a form that provides simplicity, accuracy and privacy for employees while simultaneously minimizing the administrative burden for employers and payroll processors is anything but simple.

President Trump continues to examine and revamp the U.S. immigration system.  He’s searching for the right person to lead the charge.  Here’s a peek into who he’s considering for the role.