Patrick McCormick, a partner in Culhane Meadows’ Philadelphia office, was recently interviewed for an article by TheStreet which explores how you can avoid the red flags that the IRS looks for when deciding to audit individuals and businesses.
Here are some excerpts from Patrick’s interview:
An audit from the IRS is not only stressful, but also time-consuming, especially if your record-keeping is not up to par.
Exercising restraint in writing off expenses and deductions and losses for 2019 can help you avoid the wrath of Uncle Sam.
Seeking the help of a tax professional can lower your taxable income legally.
Invest in Assets that Produce Passive Income
Taxpayers who are not residing in the U.S. but still have American-sourced income should structure their investments “so that their individual identity is never revealed,” said Patrick McCormick, a partner in the Philadelphia office of Culhane Meadows whose practice focuses on international taxation for high net-worth individuals and corporations.
“Non-residents can do this by investing only in assets which produce passive income, which under normal circumstances, means they don’t need to file a U.S. tax return,” he said. “Those with income tax filing requirements can avoid disclosure by incorporating their U.S. interests, which also protects them from future transfer tax exposure.”
U.S. taxpayers holding interests in foreign corporations controlled by American taxpayers are subject to onerous tax requirements. Failure to file information returns exposes an individual to $10,000 in annual penalties, and the statute of limitations for their income tax return remains open until the information form is filed, McCormick said.
“Given the complexity of reporting here, the IRS does offer options to retroactively cure prior failures with little or no penalty – being proactive about curing prior failures is critical to minimize ramifications,” McCormick said.
The complete article can be found here.
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