Tax Relief Blog

U.S. Citizens Residing in Canada Liable for AMT Based on Foreign Tax Credit Limitation (Jamieson, CA-DC)

Married U.S. citizens residing in Canada were liable for the alternative minimum tax (AMT) because the amount of foreign tax credits they could claim was limited by Code Sec. 59(a)(2) (prior to repeal by the American Jobs Creation Act of 2004 (P.L. 108-357)) and was not offset by additional credits under the U.S.-Canada Convention With Respect to Taxes on Income and on Capital. Applying the last-in-time rule, the AMT foreign tax credit limitation under Code Sec. 59(a)(2) was the last expression of sovereign will and took precedence over the treaty, to the extent of any conflict between them.

The couple’s argument that the government could reconcile the treaty and the statute by allowing taxpayers to claim foreign tax credits after calculating the entire U.S. tax liability, including AMT, was rejected. This interpretation restricted the scope of Code Sec. 59(a)(2) to taxpayers who worked in a foreign country that did not have a treaty with the U.S. limiting double taxation. To the extent that there was any ambiguity as to whether Code Sec. 59(a)(2) applied to taxpayers in countries with which the Unites States has double taxation treaties, the Technical and Miscellaneous Revenue Act of 1988 (P.L. 100-647) clarified that Congress intended for Code Sec. 59(a)(2) to supersede existing treaty provisions prohibiting double taxation.

The following is a summary of the most important tax developments that have occurred in the past three months that may affect you, your family, your investments, and your livelihood. Please call us at 877-788-2937 for more information about any of these developments and what steps you should implement to take advantage of favorable developments and to minimize the impact of those that are unfavorable.

IRS has issued additional guidance on the waiver of 2009 required minimum distributions (RMDs). It provides transition relief through Nov. 30, 2009, so that a plan won’t be treated as having an operational failure for allowing waivers of 2009 RMDs and related payments before being amended, and rollover relief for 2009 RMD waivers and related payments. In general, retirement plan or IRA withdrawals that were made despite the 2009 RMD waiver won’t face tax if rolled over to a retirement plan within 60 days. Similar rules apply to IRAs. The new guidance includes an extension of the 60-day rollover period to Nov. 30, 2009, for certain distributions. The rollover relief gives older taxpayers an unusual opportunity to correct an inadvertent mistake that otherwise would unnecessarily increase their taxable income for 2009. It also give some individuals a “retroactive” chance to reduce their tax bill if their financial circumstances have improved during the course of 2009.

The Administration has issued a barrage of guidance designed to increase retirement savings. Three revenue rulings, four notices, and new IRS website explanations make it easier for employers to provide for automatic retirement plan enrollments and automatic contribution increases, permit unused leave to be converted into retirement savings, give employees a clearer understanding of rollover options, and permit income tax refunds to be used to purchase U.S. Savings Bonds. The new developments will, to be sure, make it easier for employers to offer automatic enrollments, and enhance the chances that taxpayers won’t spend their lump-sum payouts. However, the real trail blazers are the ruling that permits the dollar value of unused paid time off to be contributed to a 401(k) plan, and Treasury’s new policy of allowing taxpayers to funnel tax refunds directly into U.S. Savings Bonds.

Method Man Talks About Tax Evasion Arrest

WATCH IT! The IRS might be looking for you fo rback taxes too!

Interest expense deduction of foreign corporations

Mike Habib, EA

TD-9465, provides final regulations under section 882(c) of the Internal Revenue Code (Code) concerning the determination of the interest expense deduction of foreign corporations engaged in a trade or business within the United States. These final regulations conform the interest expense rules to recent U.S. Income Tax Treaty agreements and adopt other changes to improve compliance.

IRS Issues Guidance on 2009 Required Minimum Distribution Waiver

Mike Habib, EA

The Internal Revenue Service today provided guidance for retirement plan administrators, plan participants and retirees regarding recent legislation affecting required minimum distributions. The Worker, Retiree, and Employer Recovery Act of 2008 waives required minimum distributions for 2009 from certain retirement plans.

Tax Relief Services for Union Members

We represent Union members before the IRS and their respective States in regards to tax matters such as back taxes, tax problem resolution, stopping wage garnishments, tax relief services, and IRS tax audits.

If you are a Union member of any of the following organizations and currently experiencing a tax problem, you will get a special discount on our trusted Union member all-inclusive tax relief services.