The term international tax planning was introduced by the Internal Revenue Service (IRS) in its Tax Compliance and International Tax Planning publication in January 2020. In this publication, it is discussed that international tax planning is the implementation of tax laws and regulations which are not applicable to domestic taxpayers. The term international tax planning or international tax laws was first used by the United States government in 1970 to describe its domestic tax planning practices.
Today, international tax planning is an important element of international tax compliance developed to implement directives of several tax jurisdictions after the 2020 global economic recession. Tax planning helps taxpayers to reduce their tax liability while avoiding tax evasion.
Some of the international tax laws have been incorporated into domestic tax laws to encourage taxpayers to choose a more flexible approach to taxation. In other cases, the IRS has limited tax planning options for international tax compliance and in many cases, the tax laws are applied uniformly throughout the world to encourage international taxpayers.
Under the U.S. Internal Revenue Code (IRC), taxpayers who work overseas are usually subject to a higher tax rate than domestic taxpayers because the foreign jurisdiction’s tax laws are based on its own tax system and may be less favorable to American taxpayers. While it is true that a majority of the world’s population lives in countries with very different tax systems, some jurisdictions have tax treaties with the U.S. such as the Convention on Mutual Administrative Assistance in Tax Matters (CMAT).
Many taxpayers have discovered that the U.S. has not been willing to extend tax treaties and tax relief programs to the rest of the world. This has created a situation where some taxpayers choose to incorporate in a foreign country to minimize their own taxes, but then live under the jurisdiction’s tax laws and pay the full amount of income taxes, even if they are employed in the United States. Other taxpayers choose to incorporate in another country to gain access to foreign-based tax shelters, such as tax treaty provisions.
In order to provide a better option for U.S. taxpayers working abroad, there are now a number of federal tax treaties and tax relief programs that offer relief from U.S. taxes to those working in the U.S. and abroad.
A number of tax planning resources exist which address the complexities of U.S. tax law, including publications, training courses, seminars, webinars, videos, workshops, seminars, and telephone counseling. It is recommended that taxpayers seek the advice of qualified professional tax professionals and/or tax attorneys. When considering tax planning, tax advice, tax professionals suggest that it be sought in person from qualified tax professionals.
Taxation is a complex subject requiring a thorough understanding of the laws and policies related to it. A knowledgeable professional attorney can answer questions regarding specific statutes and regulations as well as offer strategies for minimizing your tax liability while maximizing your overall tax return.
One of the most important aspects of the tax planning process is developing an IRS strategy. This includes researching current IRS policy and procedures to understand how to file tax returns, hire the appropriate people for filing, and budget your finances. A knowledgeable professional will help you avoid common mistakes and help you achieve your tax planning goals.
If you decide to use a tax advisor, you should be aware that a tax professional should be someone you can trust. In addition to being able to provide advice and guidance, he or she should be able to assist you with filing the correct forms and properly prepare your returns. He or she should be familiar with the IRS rules and procedures.
He or she should also be familiar with the laws of the state in which you reside. The tax professional should be able to advise on how to deal with the IRS if you face problems, including the types of tax returns that may help you minimize or eliminate your tax liabilities.
You should also be cautious about hiring a tax attorney, especially if your state does not allow the practice. A qualified professional tax advisor will not recommend that you commit a criminal offense by failing to pay your taxes or commit fraud.