Know Your Acronyms -- Ignorance of international tax rules is no excuse.


Globalization is forcing many businesses and individuals to seek economic opportunities outside their home countries. This applies to businesses large and small. In fact, according to the Small Business Administration, since 2003, exporting activity by small businesses has increased by about 80 percent to account for approximately 30 percent of the United States’ export revenues. When an American 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. What many businesses may be unprepared for, however, is the United States 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 abbreviations and acronyms listed above. These international tax rules are some of the most complicated in the Internal Revenue Code and, unfortunately, the Internal Revenue Service’s 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 noncompliance are severe.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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