Tag Archives: GOP tax

Provocative International Tax Planning News for Small Business

International tax planning is going “crazy” with the 2018 GOP tax law.  International tax avoidance has never been more legal.  The tax savings have never been so Big!  It is time for you invest money with your international tax accountant and upgrade your plan.   

International tax planning and strategy

Applying for an IRS ruling on your international tax planning will save you taxes in the long run.

Fantastic IRS International Gift Tax Plan

This IRS internal letter on this link. Fantastic legal tax avoidance for the foreign person with family in the U.S. is explained in this letter. Alien’s estate tax exemption is only $60,000.

Amazing IRS Avoidance of  state income taxes  with this new IRS  designer  Nevada trust.  IRS tells how to use a Nevada trust to avoid state income taxes. Here’s what’s happeningon this link.   

New- Department of the Treasury letter to the U.K. tax authorities on U.S.  tax planning for UK and EU companiesHere is the letter from the U.S. to the U.K. 

Be an IRS tax planning wizard with our new custom Google search, on this link.  This custom search reads 300,000 pages deep inside the IRS’s website and the tax court’s website.  It is free!.  Find the answers to your tax question quickly and accurately.

18th Century Supreme Court case destroys IRS tax penalty law. Using this case, the Tax Court gave the IRS a significant defeat.  Here is what happen.   The Supreme Court is the “Law of the Land.”  It rules over the IRS and Congress.   

It works both ways.  The blog on this link explains the  Supreme Court Doctrine used by the IRS to blow up an offshore life insurance plan.

offshore trust, foreign trust, nevada trust, estate planning trust, esbt,

Since the Middle Ages, the wealthy have capitalized on trusts to avoid paying taxes. During the Great Crusades, upon the death of a knight, his entire estate went to the king.    Nine hundred years later, things have not changed much except the ‘King” takes only half.

Trusts are the most efficient tax tool. International tax planning should start with a Nevada trust to own a  foreign company.  Learn trust tax planning and asset protection in this easy to read blog post.    It has the blueprint for successful trust tax planning.   Get the IRS memo on asset protection and tax planning with an offshore trust on this blog post.

internet tax planning, saving taxes, cloud tax planning

Saving taxes with the offshore cloud computer. 

Cloud tax planning. Learn how businesses are using the cloud to avoid taxes on this link. 

E-commerce companies are avoiding state income taxes and in some cases deferring U.S. taxes.

Here is how it works.  A computer service that can provide a service (such as a tax research program) or a product (such as music, e-books, video) has special sourcing rules.  The income can be foreign source income when the computer server in a foreign country. 

Is the U.S. a tax haven for citizens of the UK, Sweden, Belgium, Canada, Luxembourg, and Austria?  Yes, says the IRS in its Publication.  Learn the magic Tax Treaty words for these lucky citizens of The UK, Sweden, Belgium, Canada, Luxembourg, Austria on this link.

New- 2018 International Tax Code for Small Business Importing, Exporting & Ecommerce

The International Tax Code for Small Business Importing, Exporting & Ecommerce just got much much better.  The new GOP Tax Act  allow small business to avoid U.S. income taxes on their foreign source income. 

So now, the new challenge (and maybe the only challenge) is designing the business activity to have foreign income.

For some businesses it is not difficult. For other business it will be almost impossible.  This blog post has the basic concepts.   Please use these concepts, below, as a discussion point with your CPA and/or attorney.  Also, you can learn about some easy foreign corporation tax planning on this link.

Small business international tax plan will include a foreign corporation.  E-commerce businesses will want a tax haven corporation.  My two favorites are the Isle of Man and the British Virgin Islands.    The two countries have different economic systems that will affect your choice.

The international tax code has little effect on your choice.    The new  international tax code allow small business to avoid U.S. income taxes on their foreign source income.   The  international tax code does not care where the foreign corporation is formed.

If Europe is your market, then the Isle of Man is best.  The BVI is the best for markets other than Europe.  The reason is the VAT (value added tax).  This tax is in all of Europe, the U.K. and Canada. Compliance is easier in the Isle of Man.  Also, the Isle of Man has solid electrical grid.

The BVI has good corporate laws.  However,  you do not want to place your computer server in the BVI.  Their electric grid is not dependable.

The new  international tax code is dependent upon foreign source income. I have the general rules below (each rule has exceptions so consult your CPA or contact me at [email protected]).

Summary of the General Source Rules for Income of  Foreign Corporations and Nonresident Aliens.

 Item of income

   Factor determining source

Salaries, wages, other compensationWhere services performed
Business income: 
 Personal servicesWhere services performed.  This includes some E-commerce websites providing information or a service.
 Sale of inventory—purchasedWhere sold.  One of the key points is where the change of title to the inventory occurs. Contact your CPA.
 Sale of inventory—producedAllocation – this law is more complex.  Contact your CPA or me. 
InterestResidence of payer
DividendsWhether a U.S. or foreign corporation*
RentsLocation of property
Royalties: 
 Natural resourcesLocation of property
 Patents, copyrights, etc.Where property is used
Sale of real propertyLocation of property
Sale of personal propertySeller’s tax home (but see this special IRS report on  Personal Property, for exceptions)
Pension distributions attributable to contributionsWhere services were performed that earned the pension. See the new IRS tax planning on this link.
Investment earnings on pension contributionsLocation of pension trust.  The IRS just issued a new tax savings ruling on this topic on this link.
Sale of natural resourcesAllocation based on fair market value of product at export terminal. For more information, see section 1.863-1(b) of the regulations.
*Exceptions include: a) Dividends paid by a U.S. corporation are foreign source if the corporation elects the American Samoa economic development credit. b) Part of a dividend paid by a foreign corporation is U.S. source if at least 25% of the corporation’s gross income is effectively connected with a U.S. trade or business for the 3 tax years before the year in which the dividends are declared.

New International Tax Report for the GOP Tax Bill

Quietly, the U.S. Senate issued its “International Tax Report”.    The results are shocking.  Half of U.S.  international firms paid no U.S. income tax.  More shocking.  the report provides detail blueprint of  international tax plans that the IRS can’t stop.

Want the full report?  It is on this link, for free.  The International Tax Report is full of tax jargon.  Please don’t toss it aside because you can’t easily understand the report.  Share with your CPA and come up with a plan to take expand part of your business internationally.

Why is this International Tax Report so important?  It is the 2017 GOP Tax Bill.

You see, back in the 1960s, Congress passed laws to limit the tax savings of Big Business.    Of course, in the 1960s, only Big Businesses were outside of the U.S.   And back then, U.S. firms had little global competition.   But not now, the Europe and China are global financial powers.

Countries like the U.K., China, Russia, all of Europe give their businesses a “tax holiday” on foreign profits.  The tax holiday substantially reduces the cost of working capital (which is after tax money).

The GOP Tax Bill eliminated most of the limits from the 1960s.  Now, most types  of foreign income (see this blog on the types of foreign income) are tax free when earned by a foreign corporation.

The International Tax Report is important because it discloses the loopholes that the IRS can’t legally stop.  The International Tax Report was issued by the  Democrats when they thought they were going to win the last Presidential election.     The Democrats were going to close the loopholes in this report.

Instead, the International Tax Report is your (and your CPA) blueprint on legally avoiding tax on offshore income.  If you CPA is not an international tax expert, then contact us for a collaboration engagement.  My email is [email protected]

The International Tax Report Challenge for Small Business

Continue reading

New GOP Tax Savings in Preparing Form 5471 for the Controlled Foreign Corporation

The new  GOP tax bill has created new hidden tax savings.  While preparing Form 5471 for the Controlled Foreign Corporation, you want to make important elections.

Starting in 2018, Form 5471 is full of international tax planning and tax savings.  As you prepare Form 5471, carefully look at the instructions.  They hint at the hidden tax savings. (If this is the first year or a late filing, then please see this link.)

 It is here, in the fine but dull print, that you will find your tax savings.  Preparing Form 5471 for the Controlled Foreign Corporation is an art form.  

For example, did you know that an offshore corporation acting as a captive finance company can avoid U.S. taxes?  

Or that a foreign contract manufacturer related party sales are tax-free?

Or the special foreign investment fund (such as a foriegn ETF) and controlled foriegn corporation tax plan on this link.

Video on Preparing Form 5471 for the Controlled Foreign Corporation

The  video below is from an international tax class that I gave to the California Society of CPAs on preparing Form 5471 for the Controlled Foreign Corporation

If you want to start to save taxes while preparing your Form 5471, then contact me, Brian Dooley, CPA, MBT at [email protected]

Five Best Tax Saving Plans For Small Business Owners

The new GOP tax laws start in 2018. Here are the Five Best Tax Saving Plans For Small Business Owners.  

Saving taxes will require some changes in your entity structure.  You want to focus on the low corporate income tax rate.  However, you need to keep certain assets out of corporations.  These assets are your trade name, trademark, copyrights and patents, if any.

Big Business uses many tax plans that are not well known.   The five best tax saving plans for small business owners are:  

 1.    Have one use the accrual basis of account.   This allows you to avoid taxes on prepayments  (more on this link) and expense costs before they are paid.   Have one entity be a corporation.    Corporations can be taxed as a separate entity (which means they pay their own taxes) or a pass through (by election subChapter S of the tax code).

Each of these corporate taxation methods has a unique advantage.   For a start-up, the separate entity has the benefit of allowing you be late on paying income tax on the profits.  Thus, you have more money to invest in growth.

Have one corporation doing business in a tax-free state such as Nevada.

2.  If you have only part-time employees or no employees, then fund your business  with the little-known tax savings of a solo 401K plan  (more on this link).  This works only if you have no full-time employees.  Big businesses use the ESOP retirement plan.  It is a fantastic tool but most small business can not afford the annual compliance cost.

3.  If you make sales via your website, place your website on a server in a tax-free state (learn more here) Also, have the server and website owned by a corporation in the same state.  If your website sells a service or another intangible item, use a tax haven corporation to own the site.  The server needs to be in the same country as the corporation.

4.  Use an irrevocable non-grantor trust to own any passthrough entities.   Of course, have the trust in a tax-free state such as  Nevada.   A non-grantor trust has almost no audit risks.  This type of a trust files its own tax return (Form 1041) and pay its own taxes.  By moving income to this return, you have a lower “adjusted gross income.”

A lower adjusted gross income allows you larger itemized deductions and more tax credits.  It also reduces your chances of a tax audit.

5.  Don’t rely upon year-end planning.  It is a suckers move.  Usually, you end up spending money to be able for a deduction.  Big Business plans a year in advance and not a month before year end.  Each time they add a product or service, they think about tax planning.   The most effective tax planning looks at income and not expenses.

If you need help creating a strategic tax plan, then contact me, Brian Dooley, CPA, MBT at [email protected]   A recent Government study showed that tax planning businesses are taxed at 14%.  For every one dollar spent in tax planning,  ten dollars are saved in taxes.