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June 27, 2013

FBAR Must be filed On Line by June 30, 2013 for 2012 - On Line Form Has a Flaw which may cause trouble

The FBAR form (TDF 90-22.1) (report of foreign bank and financial accounts) must be filed by 6/30/13 on line to avoid potentially horrendous penalties.  The process is fairly simple, but has one glitch. After you
register, and are given access to the form (which looks just like the paper form), to finally submit the form you must enter a PIN number which the screens says was sent to you by email (at your the email address you gave when you registered). That statement often is not true. Many have never received a pin number by email and you cannot file the form without the  8 digit PIN number.

You can get your pin number by going back to the main screen and looking at the left hand column for the link there that mentions PIN in its description.  Click on that link and you can then receive a new PIN number and then go back to the submission screen, enter it, and you are done. Be certain to print out your proof of filing and keep track of your user name and password for next year.  This handy hint may save you 40 minutes or more waiting on the help line for them to explain to you that the website is not correct and then tell you where to find the PIN number.

The link to register to file your FBAR on line is at:

After June, paper form filings will not be allowed. If you try to file on paper, your form must arrive by 6/28/13.  Unlike tax forms, date of postmark does not count!

June 25, 2013

Frequently Asked Questions (FAQs) About International Individual Tax Matters

The IRS has put together a list of the most common questions they receive from US Citizens and Nonresidents living abroad about their US tax returns and rules.  Click on the heads to each section to go to the questions set forth below it.

General FAQs
  1. I’m a U.S. citizen living and working outside of the United States for many years.  Do I still need to file a U.S. tax return?
  2. I pay income tax in a foreign country.  Do I still have to file a U.S. income tax return even though I do not live in the United States?
  3. What is the due date of a U.S. income tax return?
  4. I just realized that I must file U.S. income tax returns for prior years.  How many years back do I have to file?
  5. What is the status of my refund?
  6. I have completed my tax return and I have a balance due. How do I pay the tax liability?
  7. How can I get a transcript for current or previous years?
  8. Now that I live overseas, how can I find a tax preparer?
Mailing Addresses
  1. What is the correct mailing address to file a Form 1040 from overseas?
  2. What is the correct mailing address to file a Form 1040NR?
Filing Status and Dependents
  1. I am a U.S. citizen married to a nonresident alien. What is my filing status and can I claim an exemption for my foreign spouse?
  2. I am a U.S. taxpayer residing abroad and I have a child who was born abroad. Can I claim my child as a dependent on my tax return?
Exchange Rates
  1. When converting foreign currency to U.S. currency for purposes of filing a U.S. tax return, what foreign currency exchange rate should I use?
  1. I took a position on my income tax return based on a U.S. income tax treaty. However, I received a letter indicating that my treaty-based position is invalid.  What can I do?
  2. What is the meaning of a notice I recently received from the IRS that says I owe a whole lot more money for my 2005 tax return that I already filed?
  3. How does the U.S. Internal Revenue Service (IRS) calculate interest and penalties?
Green Card Holders
  1. What are my responsibilities as a green card holder if I have been absent from the United States for a long period of time?
  2. I was a long-term resident of the United States prior to surrendering my green card. What is my U.S. tax filing obligation?
  3. I am a green card holder.  May I claim residence in a foreign country under a tax treaty and obtain benefits under the tax treaty?
Foreign Earned Income Exclusion (Form 2555)
  1. What deductions and/or credits am I allowed on my U.S. income tax return as a U.S. citizen living and working in a foreign country?
  2. If my foreign earned income is below the foreign earned income exclusion threshold amount, am I still required to file a U.S. individual income tax return?
  3. Do I need to have a tax home in a foreign country in order to claim the foreign earned income exclusion?
  4. I have been working abroad for many years and claiming the Foreign Earned Income Exclusion using a Form 2555. I claim the Physical Presence test every year. Can you explain the difference between the so-called Physical Presence test and the Bona Fide Residence test?
  5. Can foreign pensions be excluded on Form 2555?
  6. What is the difference between Forms 2555 and 2555-EZ?
  7. When am I required to use of the Foreign Earned Income Tax Worksheet when calculating my U.S. income tax?
Expatriation: Former Citizens and Long-term Permanent Residents
  1. What is the purpose of Form 8854, Initial and Annual Expatriation Information Statement, and where can I get the form?
  2. I terminated my U.S. resident alien status (gave up my green card) and was told that I may still need to furnish some documents to the IRS. Can you please explain?
Application for IRS Individual Tax Identification Number (ITIN) – Form W-7
  1. Who needs to apply for an Individual Taxpayer Identification Number (ITIN)?
  2. When and how do I apply for an Individual Taxpayer Identification Number (ITIN)?
  3. I am a nonresident alien living in a foreign country and I will receive U.S. source royalty income.  Do I need to obtain an ITIN?
  4. I am a nonresident alien in a foreign country. I was notified that I inherited some money in the United States. The executor requests that I provide a tax identification number. Is it sufficient to provide them with a foreign tax identification number?
  5. I sent in an ITIN application with a Form W-7 and a notarized copy of my foreign passport. However, my application was not accepted due to the notarized copy. Why was the notarized copy not accepted?
Withholding on Income from U.S. Sources
  1. What is the purpose of the Form W-8 BEN?
  2. I am a US citizen residing abroad. I file my U.S. federal income tax return every year using my permanent foreign address. I just received a letter from my U.S. bank along with a Form W-8BEN. Does this form apply to me?
  3. I’m a nonresident alien and received a Form 8288-A from the settlement title company or attorney who handled the sale of real property located in the United States that I owned for many years. Why did I get it and how does it affect me?
  4. As a nonresident alien, do I need to report gambling winnings from the United States? If so, how do I report such winnings?
Reporting of Foreign Financial Accounts
  1. I was reading the 1040 booklet in the section that covers Schedule B and I saw something that talks about reporting my Foreign Bank Accounts to the IRS. Is that something that affects me and is there something that I should do?
Top Frequently Asked Questions for U.S. Aliens and Citizens Living Abroad

  1. I am a U.S. citizen. If I move to Canada to live and work there as a Canadian permanent resident, do I pay both U.S. and Canadian taxes?
  2. Are the Canada Pension Plan and Canadian Old Age Security benefits taxable? If they are, please tell me where they should be entered on Form 1040.
  3. What is foreign earned income? Is it income paid by a foreign person for working abroad, or is it income paid by a U.S. company for working abroad?
  4. I live in a foreign country. How do I get a social security number for my dependent who qualifies for a social security card?
  5. As a nonresident alien, I'm not subject to social security and Medicare withholding. My employer erroneously withheld these taxes from my pay. What should I do to get a refund of my social security and Medicare taxes?
  6. Are nonresident alien students with F-1 or J-1 visas and employed by a U.S. company required to have federal income taxes withheld from their paychecks?
  7. I am a U.S. citizen working for a U.S. firm in a foreign country. Are any of my wages or expenses tax deductible?
  8. How do I know if the U.S. has an income tax treaty in force with another country?
  9. Do I have to meet the 330-day physical presence test or have a valid working resident visa to be eligible for the foreign earned income exclusion?
  10. Is there an Internet site with the exchange rates to convert foreign currencies to American dollars?
Need further help or explanations?  We have specialized in US Expatriation, International and Nonresident taxation for over 30 years. Email us at or visit our websites at or .  Skype: dondnelson

June 19, 2013

G8 Conference Folows US IRS Lead to Eliminate Tax Evaision and Investment Secrecy Abroad

 The world's rich economies said they would take a tougher stance on fighting money laundering and tax evasion but promised little in the way of specific new action at the end of a two-day summit on Tuesday.

The Group of Eight leaders signed up for a string of aims including improved transparency about who owns shell companies and more information-sharing between tax authorities.

Under pressure from austerity-weary voters, lawmakers have focused increasingly on tax dodges. More than 50 countries have agreed to a new protocol on tax data sharing since 2011.
Cameron said his proposal that firms report profits on a country-by-country basis could help expose corporate profit shifting into low-tax states.

The G8 leaders, meeting in Northern Ireland, said their governments would draw up action plans for collecting and sharing information on who really owns companies, making it harder to set up Russian-doll type structures.

The United States pledged to keep on pressing for legislation to cut down on the criminal use of shell companies.
"The credibility of this depends on the ability of the White House to advance legislation," said Gavin Hayman, director of campaigns at anti-corruption group Global Witness.

The United States pointed out it was planning to require banks to understand who their customers actually are and provide information for law enforcement and tax authorities.

A frequent critic of tax havens, the United States has come under fire from campaigners for the low transparency requirements around ownership of corporate entities registered in some U.S. states such as Delaware.

Tax campaigners had called for companies to be forced to make public their profits, revenues and tax payments for every country where they operate. That could deter accountants from building contrived arrangements to keep tax low. Business groups remained against such a move.

"We continue to have real doubts about the utility of any rules requiring the release of vast amounts of raw data to the public," Andrew Wilson, UK Director of the International Chamber of Commerce said in a statement.
The G8 leaders also called on the Organisation for Economic Co-operation and Development (OECD), which advises rich nations on economic policies, to come up with a way that could require multinational corporations to report profits and tax payments to authorities on a country-by-country basis

Some developing nations complain they struggle to get information about companies' operations in other countries, so the measure could help them cut profit shifting.

The OECD is working on a broader program  to tackle tax avoidance under the auspices of the Group of 20 comprising the leading developed and developing economies.

What is described above at the G8 is the wave of the future. All countries will within the next few years be sharing tax data, etc. with each other. Now is the time to get into legal compliance with your tax filings before it is too late.  If you need help email us at .

June 13, 2013

June 6, 2013

IRS Rules That Fideicomiso's Holding Title to Property in Mexico in most situations are not Foreign Trusts

After 10 years of controversy and refusals to make a ruling, the IRS has finally ruled that most Fideicomiso's in Mexico are not foreign trusts and are not required to file Forms 3520 and 3520A.

Revenue Ruling 2013-14 describes a typical fideicomiso or Mexican Land Trust (MLT) and concludes that the arrangement is not a trust within the meaning of § 301.7704-4(a)   You should read this ruling carefully since it only applies to the situations described therein. If you have Fideicomiso that falls outside the the ones described in this ruling, you may still be a foreign trust under US tax law and be required to file special forms.

Revenue Ruling 2013-14 will be in 2013-26, dated June 24, 2013.

June 5, 2013

FILE YOUR 2012 FBAR (TDF 90-22.1) ON BEFORE 6/28/13 ON LINE

You can file your FBAR form for 2012 on line in order to meet the 6/28/13 filing deadline. Got to to file it.  Print out a copy while there so you have proof it was filed.

The penalty for not filing  this Report of Foreign Bank and Financial Accounts can be $10,000 or more as well as the possibility of criminal prosecution in the event the IRS can show you intentionally did not file the form.  It is not a tax form, but a reporting form with tremendous penalties for not filing. 

June 4, 2013

Accelerated FBAR Filing Deadline in 2013

In general, FBARs must be received by the U.S. Treasury Department by
June 30. Because June 30, 2013, falls on a Sunday, FBAR filers should
plan to have their 2012 FBARs received by Treasury by Friday, June 28,
2013. Unlike income tax filings, the FBAR due date is not extended to the
next business day when the deadline falls on a weekend. In addition,
unlike income tax filings, there is no “mailbox rule” with respect to
FBARs, so the deadline is measured by the date received, not the date

 The FBAR should be delivered to the address shown in the
instructions to the FBAR (Rev. January 2012). A street address is provided
in the FBAR instructions if an express delivery service is used. Although
paper filings still are acceptable for timely filed 2012 FBARs, filings made
after June 30, 2013, are required to be done electronically (using the BSA
E-Filing System).