A Hard Hitting Exposé: What the Hell Are the Gift and Estate Tax Rules After Tax Reform?

The Tax Cuts and Jobs Act, signed into law in December 2017, approximately doubled the federal gift and estate tax basic exclusion amount to $11.18 million in 2018 (adjusted for inflation in later years). After 2025, the exclusion is scheduled to revert to its pre-2018 level and be cut approximately in half. Otherwise, federal gift and estate taxes remain the same.

Gift tax. Gifts you make during your lifetime may be subject to federal gift tax. Not all gifts are subject to the tax, however. You can make annual tax-free gifts of up to $15,000 per recipient. Married couples can effectively make annual tax-free gifts of up to $30,000 per recipient. You can also make unlimited tax-free gifts for qualifying expenses paid directly to educational or medical service providers. And you can make deductible transfers to your spouse and to charity. There is a basic exclusion amount that protects a total of up to $11.18 million (in 2018) from gift tax and estate tax. Transfers in excess of the basic exclusion amount are generally taxed at 40%.

Estate tax. Property you own at death is subject to federal estate tax. As with the gift tax, you can make deductible transfers to your spouse and to charity; there is a basic exclusion amount that protects up to $11.18 million (in 2018) from tax, and a tax rate of 40% generally applies to transfers in excess of the basic exclusion amount.

Portability. The estate of a deceased spouse can elect to transfer any unused applicable exclusion amount to his or her surviving spouse (a concept referred to as portability). The surviving spouse can use the unused exclusion of the deceased spouse, along with the surviving spouse’s own basic exclusion amount, for federal gift and estate tax purposes. For example, if a spouse died in 2011 and the estate elected to transfer $5 million of the unused exclusion to the surviving spouse, the surviving spouse effectively has an applicable exclusion amount of $16.18 million ($5 million plus $11.18 million) to shelter transfers from federal gift or estate tax in 2018.

You should hire SELIG & Associates

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To schedule a legally privileged consultation with a Federal Tax Practitioner and licensed Attorney call Selig & Associates directly (212) 974-3435.

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We practice before the Internal Revenue Service (“IRS”) the New York State Department of Taxation and Finance (“NYS”) the Department of Justice Tax Division (“DOJ”) and the Defense Office of Hearings and Appeals (“DOHA”).

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We solve Tax Problems including Tax Crimes, Tax Evasion, Failure to File a Tax Return and Criminal Non-Filing, Filing False Tax Returns, Installment Agreements, Partial Payment Agreements, Audits, Sales Tax Controversies, Wage Garnishments, Bank Levies, Seizure of Property, Innocent Spouse Relief, Trust Fund Recovery Penalty, Payroll Taxes, Statute of Limitations, Offer in Compromise ("OIC"), Administrative Appeals, Collection Due Process Hearings ("CDP") and most other tax matters. 

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Connecticut Resident Sentenced to Prison for Concealing Assets in Swiss Accounts: He should have hired SELIG & Associates

Tax Problems Solved 

Failed to Report Foreign Financial Accounts with Value Exceeding $28 Million A Greenwich, Connecticut, man was sentenced to six months in prison today for failing to report over $28 million in funds he maintained in Swiss bank accounts to the Department of Treasury, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia, and Chief Don Fort, IRS Criminal Investigation (IRS CI).  In pronouncing the sentence, U.S. District Court Judge Brinkema took into consideration Kim’s cooperation with the government, which occurred for more than a five-year span.

According to documents and other information provided in court, Hyong Kwon Kim, a citizen of South Korea and, since 1998, a legal permanent resident of the United States, resided in Massachusetts and later in Connecticut.  Kim, a sophisticated business executive who ran family businesses with operations in the United States and internationally, inherited tens of millions of dollars that he stashed in secret accounts at Credit Suisse, its subsidiaries, and another Swiss bank.  Kim deliberately violated the U.S. bank secrecy laws by failing to report his foreign financial accounts to the Treasury Department.  U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR, disclosing the account.

Kim conspired with a host of foreign enablers, including Dr. Edgar H. Paltzer, his Swiss attorney who pleaded guilty in 2013 in the Southern District of New York, and bankers to conceal his assets and income in Swiss accounts held in his own name, the name of a relative, and in the names of sham corporate entities.  Kim schemed with Paltzer and his bankers to structure financial transactions in a manner that allowed him to utilize the funds in the United States, while concealing his ownership and control of the offshore funds.  For example, Kim had checks issued to third parties in the United States in order to purchase a luxury home in Greenwich, Connecticut, a waterfront vacation retreat in Chatham, Massachusetts, and jewelry adorned with multi-carat diamonds, emeralds, and rubies.  In order to conceal his ownership of the vacation home, Kim and Paltzer created a sham entity to hold title to the home.  Kim and Paltzer acted as if Kim rented the home from a fictitious owner.

In 2008, as Credit Suisse closed accounts held in the names of sham entities owned by persons residing in the United States, Kim refused to bring his assets to the United States.  Instead, he transferred his assets to another Swiss bank.  Kim send coded messages from the United States to his Swiss banker in order to maintain control of his account.

Kim ultimately brought his assets to the United States by paying a Swiss jeweler millions of dollars for a ring with a 13.9 carat sapphire and three loose diamonds totaling 13 carats.

Along with failing to report his foreign accounts, Kim also filed false income tax returns for 1999 through 2010 with the IRS, failing to report investment income and failing to disclose the earnings from his holdings in the offshore accounts.

In addition to his term of incarceration, U.S. District Court Judge Brinkema ordered Kim to pay a fine of $100,000 and $243,542 in restitution to the IRS.  Kim, in accordance with his plea agreement, also paid a civil penalty of over $14 million dollars to the U.S. Treasury for his willful failure to file, and willfully filing false, FBARs.  

Principal Deputy Assistant Attorney General Zuckerman, U.S. Attorney Boente and IRS CI Chief Fort commended special agents of IRS CI, who investigated the case, and Senior Litigation Counsel Mark F. Daly and Trial Attorney Robert J. Boudreau of the Tax Division and Assistant U.S. Attorney Mark Lytle of the Eastern District of Virginia, who prosecuted this case.

Are you in Trouble with the IRS?

Successful Civil and Criminal Tax Representation Selig & Associates practices before the Internal Revenue Service (“IRS”) the New York State Department of Taxation and Finance (“NYSDTF”) the Department of Justice Tax Division (“DOJ”) and the Defense Office of Hearings and Appeals (“DOHA”). *To schedule a FREE legally privileged consultation with a licensed Federal Tax Practitioner and Attorney call Selig & Associates directly (212) 974-3435

Proven Results Selig & Associates successfully resolves IRS & NYS tax problems including: Tax Crimes; Tax Evasion; Failure to File a Tax Return and Criminal Non-Filing; Filing False Tax Returns; Installment Agreements; Partial Payment Agreements; IRS Audits; Sales Tax Audits; Sales Tax Controversies; Wage Garnishments; Bank Levies; Seizure of Real Property; Innocent Spouse Relief; Trust Fund Recovery Penalty; Payroll Taxes; Workers Compensation Insurance Audits ("Workers Comp"); Statute of Limitations; Offer in Compromise ("OIC"); Administrative Appeals; Collection Due Process Hearings ("CDP") and most other tax matters. *To schedule a FREE legally privileged consultation with a licensed Federal Tax Practitioner and Attorney call Selig & Associates directly (212) 974-3435

This Day in History: Pro Bono Attorney Prevails (Tax Crimes, Restitution & Repayment) SELIG Saves the Day

UPDATE: Last week, we reported on a confounding case that could have tested the patience of Job. Thankfully, commonsense prevailed and justice was [eventually] served. In the instant matter, the State erroneously assessed a tax liability on an Attorney’s Escrow Account. Unfortunately, the Tax Agent assigned to this debacle didn’t know (and didn’t want to know) what an escrow account is. Rather, he insisted that the taxpayer was obligated to pay taxes on every dime deposited. Moreover, they were going to suspend our client’s drivers’ license if he didn’t start paying. Finally out of desperation we contacted the Taxpayers Advocates Office and after presenting all of the material facts and circumstances, which included supporting documentation and affidavits, the Advocates Office interceded on our behalf and this morning at 11:37am the [erroneous debt] was discharged in plenary.

                     If  you’re  in Trouble with the IRS or State - call Selig & Associates today.

Tax Crime? Tidbit of the Day

Like it or not, criminal restitution and civil tax liability are separate and distinct. And to the paying-party, this unpleasant little distinction is a pricy proposition. If you’re in trouble with the IRS or State, you probably want to just “get on with your life” Well Sunshine, here’s a word to the wise - you’d better look before you leap. 

IRC Section 6201(a)(4)(A) expounds upon this  “distinction” viz. requiring the Secretary to collect the amount of restitution ordered pursuant to 18 U.S.C. § 3556 in the same manner "as if such amount were such tax."

The distinction between criminal restitution and tax liability frequently becomes an issue when a Tax Return Preparer is convicted of preparing false returns (in violation of 26 U.S.C. § 7206(2) and is ordered to pay restitution determined by the tax owed by his clients. Nota bene, the Tax Return Preparer will never (try as some may) become civilly liable for the taxes attributable to someone else, a/k/a the coconspirator or so-called self-proclaimed  aggrieved party .

Restitution is determined under the Mandatory Victim Restitution Act of 1996, Pub. L. No.1 04-132, § 204(a), 111 Stat. 1227 (1996) (codified as amended at 18 U.S.C. § 3663(A)), This applies to certain tax cases and directs that the amount of restitution is generally the amount of property taken from the victim (an actual loss to the government in a tax case) under 18 U.S.C. § 3663A(b)(1)(A) and (B), whereas restitution ordered pursuant to a plea agreement may be "to the extent agreed to by the parties in a plea agreement" for any amount greater or less than the loss attributable to the criminal offense. 18 U.S.C. § 3663(a)(3).

Definition of a 'Tax Cheat'

An individual (or group) who, through fraud, dishonesty or avoidance, does not pay the amount of tax that would be obligated if tax rules were properly followed. A tax cheat may improperly use tax shelters or purposefully miscategorize earnings and expenses under the pretense that the government will not miss the lost revenue because of the obligation's size relative to all taxes collected. Those found to be cheating on their taxes may be subject to fines, penalties or imprisonment.

If  you’re  in Trouble with the IRS or State - call Selig & Associates today.

Slam Dunk the Funk – IRS seizes Passports – Martial Law to Follow

WASHINGTON — The Internal Revenue Service today strongly encouraged taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.

This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.” These new procedures implement provisions of the Fixing America’s Surface Transportation (FAST) Act, signed into law in December 2015. The FAST Act requires the IRS to notify the State Department of taxpayers the IRS has certified as owing a seriously delinquent tax debt. See Notice 2018-1. The FAST Act also requires the State Department to deny their passport application or deny renewal of their passport. In some cases, the State Department may revoke their passport.

Taxpayers affected by this law are those with a seriously delinquent tax debt.  A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.

There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:

• Paying the tax debt in full
• Paying the tax debt timely under an approved installment agreement,
• Paying the tax debt timely under an accepted offer in compromise,
• Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
• Having requested or have a pending collection due process appeal with a levy, or
• Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

A passport won’t be at risk under this program for any taxpayer: 

• Who is in bankruptcy
• Who is identified by the IRS as a victim of tax-related identity theft
• Whose account the IRS has determined is currently not collectible due to hardship
• Who is located within a federally declared disaster area
• Who has a request pending with the IRS for an installment agreement
• Who has a pending offer in compromise with the IRS
• Who has an IRS accepted adjustment that will satisfy the debt in full

For taxpayers serving in a combat zone who owe a seriously delinquent tax debt, the IRS postpones notifying the State Department and the individual’s passport is not subject to denial during this time.

• In general, taxpayers behind on their tax obligations should come forward and pay what they owe or enter into a payment plan with the IRS. Frequently, taxpayers qualify for one of several relief programs, including the following:
• Taxpayers can request a payment agreement with the IRS by filing Form 9465. Taxpayers can download this form from IRS.gov and mail it along with a tax return, bill or notice. Some taxpayers can use the online payment agreement to set up a monthly payment agreement for up to 72 months.

Honest Tax Advocates To schedule a FREE legally privileged consultation with a licensed Federal Tax Practitioner and Attorney call Selig & Associates directly (212) 974-3435

Successful Tax Representation We practice before the Internal Revenue Service (“IRS”) the New York State Department of Taxation and Finance (“NYSDTF”) the Department of Justice Tax Division (“DOJ”) and the Defense Office of Hearings and Appeals (“DOHA”). *To schedule a legally privileged consultation call Selig & Associates directly (212) 974-3435 

Proven Results  We successfully resolve: Tax Crimes; Tax Evasion; Failure to File a Tax Return and Criminal Non-Filing; Filing False Tax Returns; Installment Agreements; Partial Payment Agreements; IRS Audits; Sales Tax Audits; Sales Tax Controversies; Wage Garnishments; Bank Levies; Seizure of Real Property; Innocent Spouse Relief; Trust Fund Recovery Penalty; Payroll Taxes; Workers Compensation Insurance Audits ("Workers Comp"); Statute of Limitations; Offer in Compromise ("OIC"); Administrative Appeals; Collection Due Process Hearings ("CDP") and most other tax matters. *To schedule a legally privileged consultation call Selig & Associates directly (212) 974-3435

Professional Service Guaranteed We meet with our clients personally. We return telephone calls promptly, answer emails and provide regular updates and status reports. *To schedule a legally privileged consultation call Selig & Associates directly (212) 974-3435

We Settle Commercial & Residential Property Damage Claims for Top Dollar David Selig PA and Attorney Dorin successfully settle residential and commercial property insurance claims, including business interruption, burglary, fire, windstorm and losses caused by water damage. *For a free consultation call David Selig directly (212) 974-3435

Will a False Sexual Harassment Claim Destroy Your Business in 2018? We provide legal, insurance and other asset protection strategies for Business-Owners and Medical Service Providers. *To schedule a consultation or a comprehensive evaluation of your existing plan call Selig & Associates directly (212) 974-3435 

EVERYTHING YOU WANTED TO KNOW ABOUT SEX a/k/a "S CORPORATIONS" BUT WERE AFRAID TO ASK: Tax Problems Solved SELIG & Associates

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income at the entity level.

To qualify for S corporation status, the corporation must meet the following requirements:

• Be a domestic corporation
• Have only allowable shareholders
• May be individuals, certain trusts, and estates and
• May not be partnerships, corporations or non-resident alien shareholders
• Have no more than 100 shareholders
• Have only one class of stock
• Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations).

In order to become an S corporation, the corporation must submit Form 2553 Election by a Small Business Corporation (PDF) signed by all the shareholders. See the Instructions for Form 2553 (PDF) for all required information and to determine where to file the form.

Emergency, Evening and Early Morning Appointments Available  

For a Personal and Legally Privileged Consultation in our New York City Offices call (212) 974-3435 Payroll Taxes, Trust Fund Recovery Cases, Income and Sales Tax Controversies. We negotiate Payment Plans, compromise Tax Debts, and resolve all Civil and Criminal tax issues, including Innocent Spouse Relief and Separation of Liability. Selig & Associates provides the most aggressive Tax Representation allowed by law.