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April 26, 2010

502 Expats Renounce Their US Citizenship in fourth quarter of 2009

According to government records, 502 expatriates renounced U.S. citizenship or permanent residency in the fourth quarter of 2009 — more than double the number of expatriations in all of 2008. And these figures don't include the hundreds — some experts say thousands — of applications languishing in various U.S. consulates and embassies around the world, waiting to be processed. While a small number of Americans hand in their passports each year for political reasons, the new surge in permanent expatriations is mainly because of taxes. Click on the Banner to this article to go to the Time Magazine Article.

Our firm has helped scores of Expats with the Tax Planning and Special Tax Forms Required to successfully surrender Citizenship and stop paying US Taxes. Visit our website at for more.

April 22, 2010

Fast Facts on US Expatriate Taxation and International Tax Preparation

·         If you are a US Citizen you must file a US tax return every year unless your income is less than $ 9,350  (for 2009 and lower for earlier years) or have self employment-independent contractor  net income of more than $  400 US per year.  You are taxable on your world wide income regardless of whether you filed a tax return in your country of residence.
·         As an US expatriate living abroad on 4/15, your 2009 tax  return is automatically extended until 6/15 but any taxes due must be paid by 4/15 to avoid penalties.  The return can be further extended until 10/15/10 if the proper extension is filed.
·         For 2009 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from wages or self employment) of $91,400, but this exclusion is only available if you file a tax return.
·         If your spouse works and lives abroad, and is qualified, she can also get at $91,400 foreign earned income exclusion.
·         You get credits against your US income tax obligation for taxes paid to foreign country but you must file a return to claim these credits.
·         If you own 10% or more of a  foreign  corporation, LLC or partnership or are a beneficiary of a Foreign Trust such as a  Fideicomiso in Mexico, you must file special IRS forms each year or incur substantial penalties which can be greater including criminal prosecution if the IRS discovers you have failed to file these forms.
·         Your net self employment income or independent contractor income  is subject to US self employment tax of 15.3% (social security) which cannot be reduced or eliminated by the foreign earned income exclusion unless you work in one of the few countries the US Social Security Administration has a social security agreement with.  If you live in one of those countries you must secure a required certificate to prove your exemption from US self employment tax.
·         If at any time during the tax year your combined highest balances in your  foreign bank and financial accounts such as brokerage accounts, etc. (when added together) ever equal or exceed $10,000US you must file a FBAR form with the IRS by June 30th for the prior calendar year or incur a penalty of $10,000 or more including criminal prosecution. This form does not go in with your personal income tax return and is filed separately at a separate address.
·         We understand the foreign income tax laws and can coordinate your US taxes with those you pay in your foreign country of residence to help you achieve the optimum tax strategy.
·         In the past year the IRS has hired more than 800 new employees to audit, investigate and discover Americans living abroad who have failed to file all necessary tax forms.
·         Often due to foreign tax credits and the the foreign earned income exclusion expats living abroad  when filing  all past year unfiled tax returns and end up owing no or very little US taxes.
·         Beginning in 2010 a new law is in effect which requires all US Citizens report all of their world wide financial assets if in total the value of those assets are $50,000 or more.  Congress has left it up to the IRS to define what is a “financial asset.”
·         Income from certain types of foreign corporations are immediately taxable on the US shareholder's personal income tax return.  If your corporation only provides your personal services to customers you may have a Foreign Personal Holding Company which would cause all income to be immediately taxable to you.
·         If you own investments in a foreign corporation or own foreign mutual fund shares you may be required to file the IRS forms for owning part of a Passive Foreign Investment Company (PFIC) or incur additional, taxes and penalties for your failure to do so. A PFIC is any foreign corporation that has more than 75% of its gross income from passive income or 50 percent or more of its assets produce or will produce passive income.
·         The IRS is now matching up your US passport with your US tax records and now knows if  you  have not been filing all required US tax returns while you are living  in Mexico.  The IRS recently sent Agents to Australia and China to locate bank accounts owned by Americans who are not reporting the income and ownership on the required IRS forms.
·         Download your 2009 US tax return questionnaire drafted expressly for Americans living in Mexico at
 Don  D. Nelson, Attorney, CPA has been assisting US Citizens and Permanent Residents in over 40 countries around the world with their US tax planning, tax return preparation, and other tax / legal matters for 20 years. He offers his clients attorney-client privilege which is not available from other tax accountants. He has helped hundreds of US expatriates around the world “catch up” filing their past late returns most often with little or no tax cost to you the delinquent taxpayer. Don has written expatriate and International tax articles for the Gringo Gazette and for  for the last eight years. His main office is at 34145 Pacific Coast Highway #401, Dana Point, California 92629 USA.  Visit his website at or . Email Don at US Phone 949-481-4094 or US fax 949-218-6483.  Our phone in Mexico is 52 624 131-5228, Skype address: dondnelson.

Our Tax Services Include

ü  Tax Return Preparation – current and past years
ü  All state returns
ü  US Tax Forms for Fideicomisos and Mexican Corporations
ü  IRS Collection and Audit Representation
ü  International Tax Planning & Strategies
ü  US and International Estate Planning
ü  Formation of US Corporations, LLCs, Limited Partnerships and Trusts in Nevada, California and other states
ü  US Citizenship Expatriation (Never have to pay US income taxes again)
ü  IRS and State Offers in Compromise and Payment Plans

Mini Tax Consultations are available for you to discuss with Don your personal tax situaton and secure his counsel resolving your tax problems  by phone or email. No personal visit is required.

April 16, 2010

IRS Increased its Audits of Small Companies Through Return per Audit Hour is only 1/8th of Return When Auditing Large Companies

The Internal Revenue Service (IRS) has reduced the number of hours agents spend auditing corporations with assets of $250 million or more by one-third since 2005 and increased the number of hours spent on audits of companies with assets of less than $10 million by 30 percent, according to a report bythe Transactional Records Access Clearinghouse (TRAC), a nonpartisan research group affiliated with Syracuse University 
This trend in IRS priorities will not yield greater revenue gains. Data show that audits of larger corporations produce significantly higher returns per audit hour – $9,354, for audits of large corporations compared to $1,025 for small to mid-size companies. Revenue per audit hour for large companies increased from $6,594 in the five-year period revenue from audits of small to mid-size companies actually decreased in 2009 from the $1,294 reported for 2005.
IRS statistics show 94 percent of tax underreporting comes from large companies, with only 6 percent coming from small companies, the study reports.
The authors of the study, TRAC co-directors Susan Long and David Burnham, find that that the current political context makes this shift even more puzzling. "The dramatic collapse in the auditing of those corporations with assets of $250 million or more has occurred during a period of increasing national concerns about growing federal deficits, growing public distrust of big business, and intense worry about the extent of white collar crime personified by executives like the investment adviser, Bernard Madoff."

April 7, 2010

U.S. begins new wave of UBS client tax fraud and evasion cases

 U.S. prosecutors are beginning a new wave of UBS-related tax-evasion cases against individuals ahead of the April 15 tax-filing deadline, sources familiar with the proceedings said on April 6, 2010. The first case in the new round of prosecutions  intended to create a splash of media attention before tax day  was filed on Tuesday in the U.S. District Court for the Southern District of Florida, where many of the cases have been prosecuted, according to court documents. The sources, who were not authorized to comment on the record, said cases coming within days will charge individuals with evading U.S. taxes by using accounts at the Swiss bank and will be prosecuted in New York City and elsewhere.

The government has secured eight guilty pleas so far from UBS clients since the bank admitted that it helped taxpayers avoid U.S. taxes. UBS last year paid the government $780 million and gave information about 250 accounts to the U.S. authorities. UBS AG client Paul Zabczuk of Woodlands, Texas, pleaded guilty to failing to account for funds held in a UBS account in Switzerland. Also last year, UBS settled the government's civil case against it and agreed to hand over 4,450 more client names, though that deal is tied up in legal wrangling in Switzerland.

The Internal Revenue Service and its lawyers want to make a "big splash" to remind people of their duty to report offshore income, one source said. The cases prosecuted so far involved UBS clients with accounts in the range of $10 million and less. Two sources said some of the new cases would be within that range. On April 5, Commissioner Shulman said the agency is still sifting through an additional 15,000 records it received from individuals who took part in an IRS amnesty program for offshore income that ended last year. The agency is looking for patterns in the records to identify other banks and advisers that helped wealthy individuals avoid taxes. That area will be "the next wave," of the investigation, Shulman said, without naming other banks.