30. November 2009 by Dan Walkow, CFA, CMT.

You can skip your distribution this year and save on taxes.

If you are at least 70½ years old, you normally must take a taxable distribution from your traditional IRA or employer-provided retirement plan by the end of the year — whether you need the money or not — or face a stiff penalty equal to half of the amount you failed to withdraw. But this year is different. Uncle Sam says you can skip your required minimum distribution for 2009. (Employees who continue working past age 70½ are not subject to mandatory distributions from their company plans until they retire, but they still must take distributions from their IRAs.)

IRA owners who turned 70½ between July 1 and December 31 would normally have to take their first distribution by April 1, 2010. But thanks to the waiver, they can skip that, too, delaying their first mandatory-distribution deadline until December 31, 2010.

Read more here.

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16. November 2009 by Dan Walkow, CFA, CMT.

Canadian tax officials have also been cracking down on charities that use tax shelters. Those shelters have become big business in recent years, pulling in close to $1-billion in contributions in 2007. That represented nearly 12 per cent of all giving in Canada.

Many shelters operate on a so-called “buy low, donate high” basis. For example, some shelters used to buy massive amounts of artwork at a discount, have it appraised for a much higher amount and then donate the art to a charity. Participants in the shelter would receive a charitable tax receipt based on the appraisal value.

The Canada Revenue Agency (CRA) has been cracking down on these shelters, arguing they are tax dodges that serve no charitable purpose.

Last year, for example, the CRA shut down International Charity Association Network (ICAN), which issued more than $400-million worth of tax receipts in one year. CRA alleged ICAN was a tax shelter that provided inflated tax receipts to donors and offered few if any charitable services. Tax officials are now auditing more than 34,000 Canadians who participated in a related ICAN donation program.

Same old same old. Governments structure a tax incentive to encourage cash flow to a program or sector such as real estate investments, charities, oil and gas etcetera and usually sooner rather than later the “sharpies” come out of the woodwork.

It if sounds like it is too good to be true, it always is……

See full story here.

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14. November 2009 by Dan Walkow, CFA, CMT.

Gold and silver receive special treatment in the tax code. Considered collectibles, not capital assets, they don’t qualify for the maximum 15% tax rate on long-term capital gains. Instead, gains on the sale of gold and silver investments, including gold- and silver-backed ETFs, and gold bullion and coins (except certain U.S.-issued coins), are taxed at a maximum rate of 28% when such investments have been held for more than a year. When these assets are held for less than one year, gains are taxed as ordinary income.

See more here on how Gold and Silver investments are taxed in the USA. Barrons by subscription. Click here.

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31. October 2009 by Dan Walkow, CFA, CMT.

For all the bluster about cracking down on Americans who hide money overseas, the U.S. turns a virtual blind eye to foreign tax cheats who are parking money in the U.S. banking system. In particular, the U.S. effectively serves the role of Switzerland for Mexico, which suffers from rampant tax evasion — rates go as high as 70% among professionals and small businesses, and 40% among larger businesses. Much of the estimated $42 billion a year of illicit funds flowing out of Mexico each year (not including drug cartel money) ends up in U.S. banks, according to Global Financial Integrity, an advocacy group in Washington.

It’s not that the U.S. has no policies in place to stem the flow of illicit monies into the U.S. banking system. American banks are in fact required to file suspicious activity reports (SARs) for cash deposits over $10,000 or when they detect deposit patterns in lower amounts, known as “structuring.” The problem is that the U.S. government is overwhelmed by more than a million of these reports a year. Computers can detect some irregularities, but these need to be combed through carefully by 85 SAR review teams — combining FBI, IRS, DEA and U.S. Attorneys — across the country. That’s why, says international white collar crime lawyer Bruce Zagaris, “U.S. officials have practically begged banks to call them when they have something really good.”

This could change significantly with a seemingly simple regulatory adjustment, which Mexico has requested: they want the same information-exchange arrangement that Washington exclusively has with Canada, which automatically reports interest income paid by U.S. banks to Canadian account holders.

Look for even tigher reporting regulations and make absolutlely sure you file reports and disclosures to the IRS in a timely fashion.. Read More here.

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28. October 2009 by Dan Walkow, CFA, CMT.

A wealthy accountant who provided extensive help in the tax evasion probe of Swiss bank UBS AG was sentenced to a year of house arrest Wednesday after admitting he concealed about $6-million (U.S.) in assets from the IRS.Steven Michael Rubinstein, 55, was the first U.S. citizen charged in the probe. U.S. District Judge Marcia Cooke said his prosecution sent a message around the globe about the risks of hiding assets in offshore accounts — and that he deserved credit for helping U.S. investigators find more tax cheats and crooked bankers within UBS and other institutions in Switzerland and elsewhere. Read more here.

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14. October 2009 by Dan Walkow, CFA, CMT.

Heads up for Canadian Pensioners. The rules are changing.

Deferring collection of your Canadian Pension Plan benefits could pay off financially under proposed changes to the CPP rules, but first it’s important to undertake the somewhat morbid task of figuring out how long you expect to live.

The proposed changes, which will begin to be phased in in 2011 if they’re approved by Parliament and the provincial governments, aim to provide retirees and older workers with greater flexibility and more choice.

If implemented, the changes would increase or decrease pension adjustments for people who choose to receive their CPP benefits either earlier or later than the normal collection age of 65. Read full story here.

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13. October 2009 by Dan Walkow, CFA, CMT.

Many Americans dread April 15, the deadline for filing their income tax returns. But some well-heeled people are trembling over another looming tax day: Oct. 15.

Thursday is the deadline for Americans to come clean about the money they have hidden offshore, in places like Swiss bank accounts. No one can say with certainty how much money is out there — the accounts are secret — but the hoard may be tens of billions of dollars.

Several thousand wealthy people have come forward, hoping to avoid large fines or possibly even prison. But many others are still weighing their options. The choice is stark: They can confess and pay the penalties, or gamble that they will not get caught. With the deadline only days away, tax lawyers say they are being inundated by anxious clients.

Read the full story here.

This is an American story but I would not get to comfortable as a Canadian as one should expect to see similar actions from the CRA.

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26. August 2009 by Dan Walkow, CFA, CMT.

One place the agency may be increasing its focus on is hedge funds, or at least, U.S. investors in off-shore hedge funds.

“Expect U.S. investors in off-shore hedge funds in places like the Cayman Islands, who failed to properly report earnings to the IRS, to be the next target of U.S. tax authorities,” said Shahzad Malik, partner at TroyGould in Los Angeles. “There are indications that the U.S. may be taking steps to target off-shore hedge funds by asking them about their U.S. partners and investigating their earnings.”

One indication for Malik that the IRS may be stepping up its enforcement of U.S. tax avoiders that are investors in off-shore hedge funds relates to a filing certain investors must make. The Treasury department has long required certain types of investors with foreign bank accounts and off-shore mutual funds to file a so-called “Report of Foreign Bank and Financial Accounts,” also known as an FBAR. Until recently, tax attorneys have generally understood that FBARs did not need to be filed by U.S. investors who owned interests in off-shore hedge funds.

US persons with foriegn bank or financial accounts want to pay attention here and file accordingly. Read the full story here.

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22. August 2009 by Dan Walkow, CFA, CMT.

The release of the names of persons who hid money in off-shore accounts by UBS is now takings on momentum with Canada joining the fray this week. The IRS has been speaking out on the topic saying that they will not stop at Swiss bank accounts only but will open up to other jurisdictions such as Hong Kong.

Meanwihle as names become public other creditors and ex-wives are lining up.

In Time:

It’s not just the U.S. government that wants to get its hands on the list of Americans who hold secretive Swiss bank accounts. Ex-wives, creditors and former business partners are also salivating over the idea that a settlement between the U.S., the Swiss government and a Swiss bank may lead to the public disclosure of as many as 4,450 U.S. individuals that used the foreign bank accounts to hide money. Prominent New York City divorce lawyer Raoul Lionel Felder says he is already getting calls from clients who want to know what they can do to get their portion of the money they always suspected their ex–loved one had tucked away overseas. Read more.

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21. August 2009 by Dan Walkow, CFA, CMT.

Canada’s rules on how it goes after tax cheats need to be seriously revamped if the Canada Revenue Agency is to have any hope of successfully prosecuting people who hide money in tax-haven banks, said Jean-Pierre Blackburn, the National Revenue Minister.

As it stands, the CRA does not have the ability to compel banks to report when account holders send money out of the country “but we should have that information that Mr. X or Madam Z did that,” Mr. Blackburn said in a telephone interview. “We need that information but we don’t have it. We need changes in the law.”

Led by the United States offshore investors who parked money in off shore tax havens are being hunted down and prosecuted. Fines, backtaxes, penalties and in some cases jail time. BUT NOT IN CANADA.

Swiss-based UBS Bank has been forced to supply the IRS in the United States with thousands of names of accounts and US persons who held accounts offshore. An amnesty program allows US persons to come forward, pay a reduced penalty but escape jail time.

Sleeping at the switch, the Canadian government is late to this party. Canadian offshore investors have been able to stay under the radar. HOWEVER don’t expect it to last much longer, Canada will fall in line with the US and make a big deal out of offshore tax cheats. It you stashed the cash offshore its time to find a tax person to dig you out of this looming probem.

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