Know Your Acronyms — Ignorance of International Tax Rules is No Excuse
Lane Powell Shareholder Paige Davis authored an article in Seattle Business magazine’s June 2012 issue titled “Know Your Acronyms — Ignorance of International Tax Rules is No Excuse.” In the article, Davis discussed understanding U.S. international tax rules, which are some of the most complicated in the Internal Revenue Code.
Globalization is forcing many businesses and individuals to seek economic opportunities outside their home country. This applies to businesses large and small. In fact, according to the Small Business Administration, since 2003, exporting activity by U.S. small businesses has increased by about 80 percent to account for approximately 30 percent of the U.S. export revenues. When a U.S. business decides to distribute its shoes in Germany, it may be prepared to navigate foreign laws and business traditions to reap the benefits of access to a new market; but what many businesses may be unprepared for, however, is the U.S international tax and reporting regime, and dealing with things like “PFICs,” “CFCs,” “FBARs” and “FATCA.”
If you are operating or investing internationally, or intend to, you need to be aware of the U.S. tax and reporting rules associated with the acronyms listed above. The U.S. international tax rules are some of the most complicated in the Internal Revenue Code, and unfortunately, the Internal Revenue Service’s (“IRS”) international tax administration focuses on enforcement, rather than services (or even simple resources), to foster compliance. The IRS continues to list enforcement of the international tax rules as a top priority, and the penalties for non-compliance are severe.