Search This Blog

February 21, 2012

Quick US Tax Facts for Expatriate Business Entrepreneurs Abroad

Your earnings from Self employment or Wages (paid by a US employer or one abroad) may be eligible for the $92,900 Foreign Earned Income Exclusion if you qualify. The same is true for wages earned by your spouse. You can be paid a salary from your own US Corporation to work abroad and if you satisfy the requirements still use this exclusion on your personal tax return.
  • You can take a credit for foreign taxes you pay on your personal income to your foreign residence country which will in most situations offset your US tax on that income taxed on your US form 1040.
  • If you foreign financial assets exceed , you must file form 8938 each year with your US tax return or be subject to a large penalty.
  • You must file a US tax return each year on your worldwide income.
  • If you operate your business through a foreign corporation, LLC, partnership, etc. you are required to file special forms with you US tax return (5471,8865, )
  • If you are an independent contractor under the laws of the foreign country in which you work, you will have to pay US self employment tax (social security) on your net profit unless you live in one of the few countries that have a Social Security agreement with the US.
  • If the combined balances in your foreign bank accounts, financial accounts, pension plans (including cash surrender value to foreign life insurance) ever during the year exceed $10,000US you must file the FBAR form by 6/30 following the end of the calendar year or may be liable for a $10,000 penalty for late filing or non filing.
  • If you purchase a foreign mutual fund (or have substantial investments in a foreign corporation) you own a Passive Foreign Investment Company and must file a special form each year to report your income or risk adverse US tax consequences when you finally sell out.
  • Generally contributions by you or your employer to foreign pension plans (similar to US 401Ks) are taxable on your US return (unless there is a treaty exemption) and you must report the earnings each year. Also, you may have to file form 3520 and 3520A to report that pension fund to the IRS.
  • You can open a US IRA or 401k (if self employed) if your taxable earnings from employment exceed the foreign earned income exclusion amount (not to exceed your earnings that exceed that amount.
  • If you claim the foreign earned income exclusion you can deduct your housing expenses in excess of up to . This maximum ceiling amount varies by country and can go as high in Hong Kong. Housing expenses include rent, utilities, repairs, maintenance, taxes and house cleaning.
  • You can elect with respect to certain legal business entities in most countries to have that entity treated for US tax purposes as a flow through. That means the net income (or loss) of the foreign entity will flow through to your personal US tax return. This allows you to benefit from losses and avoid paying taxes twice on that income. Such an election also allows you to claim any foreign taxes paid by the foreign entity as tax credits on your personal tax return offsetting the US taxes on that income.
  • Most allowances for education, housing, transportation, etc. that are not taxable to you in many foreign countries are taxable to you on your US tax return.
  • There are no restrictions on taking money abroad, opening a business, buying real estate or bringing money back to the US so long as you file the proper reporting forms with the IRS.
  • If you are a US Citizen, per manent resident, or green card holder you assets abroad are still subject to US gift and estate taxes if applicable.
  • If you are married to a US nonresident spouse, and live outside of the USA, you do not have to include their earnings, assets, etc., on your IRS tax filings.
    · Download your 2011 US tax return questionnaire prepared expressly for Americans living in Abroad HERE.

 Don  D. Nelson, CPA, Attorney (Kauffman Nelson LLP) has been assisting US Citizens , Permanent Residents and nonresidents in over 40 countries around the world with their US tax planning, tax return preparation, and other tax / legal matters for 20 plus 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. His main office is at 34145 Pacific Coast Highway #401, Dana Point, California 92629 USA.

Our Tax Services Include

  • US Expatriate and International Tax Return Preparation.
  • US Nonresident return preparation.
  • Review of IRS International Tax Forms Prepared by you or your tax preparer.
  • Preparing and filing tax returns for past years – Our “Catch Up” tax service.
  • Surrender of US Citizenship or Green Card Tax Planning and Assistance.
  • International Business Tax Planning and compliance.
  • IRS Offshore Voluntary Disclosure Reprsentation and filing.
  • IRS Audit Representation with respect to Expatriate and International Tax Issues

Mini Tax Consultations are available for you to discuss your situation with Don your personally and secure his counsel resolving your tax problems and future tax planning by phone or email. No personal visit is required. All consultations are subject to the absolut privacy and confidentiality of Attorney-client privilege. LEARN MORE HERE.

No comments: