Tag Archives: IRS audit

How to Start a Business in the United Kingdom Headquartered in London

England is a great place to create a U.K. company to start an internet or cloud based business such E-commerce or another web app.

United Kingdom claims U.S. LLC is a tax haven company

United Kingdom is beating America as the better business country

With the exit from the European Union, Britain has been able to have its own tax policy.  The U.K. plans to reduce its corporate tax rate from 20% to 17%.   Unlike the U.S., the U.K. does not have a state income tax.

E-commerce and other cloud-based business have a special tax planning advantage by being in the U.K.   The U.K.’s income tax treaties with Western Europe  and the United States will remain even after the British Exit

Hosting your  Ecommerce business on a computer server in the U.K. can avoid income taxes in Western Europe.

The key is to keep your inventory in the U.K. or to sale web based intangible assets.

For example, if your site is a similar to Travelocity, the site is providing a service (similar to a travel agent).  Service income is sourced where the service provider (you computer server) is located at the time the service is provide.

The same result applies if you are selling a product like an E-book, a video or music or providing a big data service.

In many cases, your U.K. corporation will avoid both  U.S. income taxes and state income taxes.

Here is the best business and tax structure for an Ameican doing business in the United Kingdom.

The first goal of a business structure is to protect the owner’s assets.  At the end of the 1800s, corporations were invented.   Corporations exist only because a government allows them.  Capitalist need corporations to take a limited amount of risk.

The problem for Americans is that we are starting to use limited liability companies.   U.K. courts may not accept an American LLC as an entity that protects the LLC’s owner from the LLC’s debts.

Thus, a corporation is my favorite choice for doing business in the U.K.  If you use an American corporation, you have a choice of being taxed under two different parts of the U.S. tax laws.

In the U.K., you have no choice.  The corporation pays the U.K. tax.  For tax planning, I prefer the U.S. corporation to open a branch in the U.K.

A U.K. Branch allows for large tax saving because of the “foreign tax credit” and the U.K. Tax Treaty.

Your U.S. income tax is reduced by the income tax paid by the corporation to the United Kingdom.  In effect, you get a full refund for the foreign income taxes.

Another choice is to create a U.K. corporation.   The advantage is a deferral of U.S. income taxes on your foreign (U.K. or EU) profits.     However, there is a tax cost.  You will not be allowed the foreign tax credit for the foreign income taxes paid by the U.K. company. `

The other issue of a U.K. company is the cost of filing an IRS information return.  This return is Form 5471.  The Form is complicated because of the many tax saving elections that you can make.    While the cost of this return is about $5,000, the tax savings are in the $10,000s of thousands.

If you need help in deciding which business entity is best or in preparing the Form 5471, then please, give me, Brian Dooley, CPA, MBT a call at 949-939-3414. 

Learn How to Pay Less Tax with Tax Talk on Blog Tax Radio

Listen to provocative and innovative tax planning on my radio show, Tax Talk. We support a subscription-free internet content supported by advertising.  

Each episode as a 60-second commercial by the company hosting our radio show.

The first episode is the new IRS designer trust… designed by the IRS to screw your state out of state income taxes.  California tax planners and New York tax planners can use this new Nevada self-directed trust to save state income taxes.

Next, Protecting yourself from the IRS’s Big Brother Supercomputer exposes the IRS “financial DNA” of each of us stored in its new Big Data computer.

Find Additional Business Podcasts with Provocative Tax Planning on BlogTalkRadio.

If you need to up the quality of your tax planning, then contact me, Brian Dooley, CPA, MBT, at [email protected]

Protecting Yourself from the New IRS Big Brother SuperComputer & Its “Artificial Intelligence”

big brother, IRS spying, IRS audit,

IRS spying includes license plate recognition. Stores, tolls, hotels and any other place that has a surveillance camera has been added to IRS Big Data Supercomputer.
Learn how to protect yourself with this episode of Tax Talk.

The Internal Revenue Service is using and storing license-plate recognition on its new Supercomputer and cell phone tracking (a new stealth program called “Stingray”).

The website of “TLOxp” is on the left.  I just had a demonstration and it is really Big Brother.  Tolls and parking lots (with a camera) feed pictures of your license plate into this computer. 

The Government uses Stingray to trick your cell phone to ping off a device other than a cell phone tower.  This technology can record numbers for a phone’s incoming and outgoing calls.

Then, the IRS supercomputer can cross-reference this information with your cell phone records, your Facebook postings and Instagram’s.

Bloomberg News reported that the IRS and other government agencies have been collecting this data since 2012 when the IRS installed its Supercomputer.

The IRS Robot is farming eBay, LinkedIn, and Facebook, Yelp, and all social media. It saves your Internet searches.  In some cases, the robot saves your emails.  

 It has access to every social media posting going back to 2008.  Deleting your posts does not make them go away. They are stored up to six years on this Big Data Supercomputer (six years is the maximum period for a tax audit).

 The IRS has bragged that their computer can make DNA blueprint of each of our behavior.

The IRS  Supercomputer reads all 200 million e-Filed returns in just ten hours.   

Learn how to protect yourself and how to “game” the IRS robot auditor with this episode of Tax Talk. 

Tax Planning with the 2017 IRS Audit Guide for Family Partnerships and LLCs

saving taxes, how to save taxes, tax planning,

Saving taxes by requesting a private letter ruling from the IRS National Office.

 Great Tax Teams make extensive use of related and family-owned partnerships, LLCs and corporation to save taxes.   Knowing what the IRS is hunting for will help you to avoid the tax traps that many tax advisers miss.  

I found an internal IRS report to its auditors on auditing family partnerships including family LLCs.  The report is below in blue print. 

If you are interested in exploring an IRS guarantee of your tax planning, then visit our website to learn about an IRS private letter ruling.  Here is a link to our site.

Table of Contents

  • Introduction

    Issue A: Income Shifting Using Family Partnerships (Author note: a great tax planning method for international tax and estate taxes)
    Capital Is Not a Material Income-Producing Factor
    Capital Is a Material Income Producing Factor
    Issue B: Family Partnerships And Transfer Taxes (Author’s note: i.e. gift tax, estate tax, and generation-skipping tax).
    Examination Techniques
    Supporting Law
    Resources

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IRS is Gunning for Small International Businesses with Bad Bookkeeping

International tax planning and strategy

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

IRS National Office international tax specialist, Anne P. Shelburne, Esq. knows her stuff.  She knows that the Achilles’ heel for small business is that they go “cheap” on bookkeeping.

The best international tax plan crumbles without “books and records” (the term used in the tax law) to support the plan.

This is great for her because, as you will read below, she informs the IRS auditors and special agents that all income is U.S. source unless the taxpayer can prove the amount is foreign source.  That is right.  You lose and they (the IRS wins).  In America, when it comes to civil tax audits, you are guilty!  You have the burden to prove your innocence.

There are other reasons for good bookkeeping.  Here are a two:
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