When Tax Professionals Disagree

Walter B. Wriston (former CEO of Citicorp): “All the Congress, all the accountants and tax lawyers, all the judges, and a convention of wizards all cannot tell for sure what the income tax law says.”

Applying US tax law to “foreign” legal structures is problematic.1 This is one of the great frustrations of trying to comply with the US system of citizenship based taxation (and one of the reasons why this extraterritorial application of US law should be carefully considered by all countries who negotiate tax treaties with the US). Inevitably there will be differences of opinion as to how US law applies to particular foreign income or taxes – and these differences will lead to different US tax treatment of the same or similar items. There may be no single “right” answer, and we (or the tax professional we have hired) will have to choose how to interpret US tax law to determine our US tax liability on our foreign (home) income. Understanding how our local law meshes with the structures defined in the US tax code is the first step.

In Australia, we have two advantages relative to much of the rest of the world (especially those which are not part of the Commonwealth). First, our laws are written in English. While there are several Aussie colloquialisms that differ in meaning from American English, our laws and other formal writing are written in language that is mostly the same as US English (with a few extra vowels here and there, and the occasional “zed” that has been replaced by an “s”). Second, our legal system is derived from the British system, so many of the underlying principles are at least similar between the two countries. Even so, there are differences.

Continue reading “When Tax Professionals Disagree”

A bit of publicity…

For those who are not following the Facebook group, I was a guest on a video podcast produced by IRS Medic:

Please share this link with anyone who might be interested.

Questions for the ATO

Another year, another deadline. The ATO has until 30 September to hand over another tranche of Australian bank details to the IRS under the FATCA IGA. Last year they were almost a week early when they handed over details of more than 30,000 accounts containing more than $5 billion for an average balance greater than $160,000. What will they send this year? Continue reading “Questions for the ATO”