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June 5, 2021

US Social Security Administration Has Three Offices in Mexico to Help Expats Living in Mexico

If you reside in Mexico and have questions regarding services provided by the Social Security Administration (SSA), you must contact the SSA Federal Benefits Unit (FBU) located in Mexico. For more information on their services and how to contact them, please visit their webpage at:

For comprehensive information on SSA’s services abroad, please visit SSA’s webpage Service Around the World.

If you are already receiving SSA benefits payments, there will be no change in the method of distribution of those payments.

Need help with your US taxes, past due taxes, IRS collection matters, US estate planning contact a US Attorney with 30 years experience assisting expats in Mexico.  Email. Or send a whats app to 18185199219.


The IRS has begun issuing notice CP508C to taxpayers with “seriously delinquent” tax debt and the service has resumed its program of notifying the State Department of taxpayers’ unpaid federal debts.

The U.S. Department of State generally will not renew a passport or issue a new passport to taxpayers after receiving a certification of “seriously delinquent” tax debt from the IRS, and they may revoke or place limitations on current passports. Generally, you can use your passport until you’re notified by the U.S. Department of State that it’s taking action to revoke or limit your passport.

Once a taxpayer receives the notice CP508C, they have 30 days to dispute the notice. Taxpayers are cautioned to retain the notice until the issue is resolved. The IRS contact number is in the top right-hand corner of the CP508C notice. If the debt has already been satisfied, the taxpayer will need to have proof of payment available.

Seriously Delinquent Tax Debt - Seriously delinquent tax debt is an individual's unpaid, legally enforceable federal tax debt totaling more than $54,000 (including interest and penalties) for which:
  • Notice of federal tax lien has been filed and all administrative remedies under the Internal Revenue Code have lapsed or been exhausted, or 
  • levy has been issued. 
The seriously delinquent tax debt amount that triggers the IRS to notify the State Department is inflation adjusted, so the $54,000 amount applies to 2021 and will no doubt increase for 2022.

Getting the Certification Reversed – Once IRS has certified the “seriously delinquent” tax debt to the U.S. Department of State the IRS will reverse the certification when:
  • The tax debt is fully satisfied or becomes legally unenforceable. 
  • The tax debt is no longer seriously delinquent. 
  • The certification is erroneous. A previously certified debt is no longer seriously delinquent when: 
  • The taxpayer and the IRS enter into an installment agreement allowing the debt to be paid over time. 
  • The IRS accepts an offer in compromise to satisfy the debt. 
  • The U.S. Department of Justice enters into a settlement agreement to satisfy the debt. 
  • Collection is suspended because the taxpayer requests innocent spouse relief
  • The taxpayer makes a timely request for a collection due process hearing in connection with a levy to collect the debt.
Additionally, a certified debt is no longer seriously delinquent for any taxpayer:
How long will it take to get a certification reversed? Once the tax problem with the IRS has been resolved in one of the instances included above, the IRS will, within 3 days, reverse the certification and provide notification to the U.S. Department of State.

If a taxpayer is already overseas when the State Department takes action to revoke or limit the taxpayer’s passport, the agency will either limit the passport only for return travel to the U.S. or issue a limited passport that only permits return travel.


April 9, 2021

FBAR Form 114 Filing Deadline has not been extended - but there is an automatic Extension

With the extension of the individual filing deadline to May 17, 2021, practitioners have been asking if the FBAR filing deadline was also extended. The assumption for many was that, because the FBAR filing deadline has been adjusted to match the individual filing deadline, the FBAR deadline would be extended too. Today the IRS has stated that the extension of the federal income tax filing due date and other tax deadlines for individuals to May 17, 2021, does not affect the FBAR requirement. (IR-2021-83) However, keep in mind that taxpayers are allowed an automatic extension to October 15 if they fail to meet the FBAR annual due date of April 15. You don’t need to request an extension to file the FBAR.

IF you need help with your FBAR or catching up with past unfiled FBAR forms, contact us. There are procedures to avoid the $10,000 late filing penalty if you file the form properly. Remember if your combined highest balances in foreign bank accounts  (or other financial accounts in your congtrol) ever exceed $10,000 (even if just for a day) you must file the form. The form must be filed in your sign on someone elses account or corporate accounts also.  Email us at
.  Skype: dondnelson

February 10, 2021

A Mini Consultation is Now Available with A US Tax Attorney and Partner in a US CPA Firm about your Expat, Nonresident or International Tax Matters

 If you have specific expat, international or nonresident, tax questions on your personal situation and need to discuss it with an US expatriate international tax expert, with the protection of  Attorney-Client privilege, you can request a "Mini Consultation."   The fee is  $300 US for up to 30 minutes of Mr. Nelson's professional legal tax advice over the phone, skype, zoom or email.  We are virtual and no need to visit our office.

 If  you send us an outline of your situation, facts and questions in advance, we prepare in advance and this time is extremely productive and usually resolves all of your questions  within the time allowed. We can find a solution to your US or US State tax problems.

And remember as a partner in a US CPA firm we can also prepare the returns, forms, and amended returns to solve your tax problems.  We are a one stop solution and make the entire process simple and easy.  Our specialty if fiing past due returns and assisting nonresidents with the tax aspects of owning US real estate.

Many hundreds of expat taxpayers located everywhere in the world  have used "Mini Consultations" to resolve their tax problems and issues.  US Phone (949) 480-1235. US Fax (949) 606-9627 skype address dondnelson.  Whatsapp No.  1(818) 519-9219.   Visit our website at 

We look forward to resolving your tax problems and/or  preparing your  US return. Thank you. Don

February 1, 2021

US Tax Brackets - Tax Tips for Gig Work - Upcoming Tax Deadlines


2021 Adjustments to Tax Brackets and Deductions

The IRS recently released a list of federal income tax adjustments for 2021. The most important changes include higher standard deductions and higher income limits for common tax rates. Standard Deduction Increases The standard deduction for individual ...

Tax Tip: Tracking Income and Expenses for “Gig” Work

With working from home becoming more common in 2020 & 2021, many people are taking on freelance or “gig” work to supplement their incomes. Whether you rely on gig work as your primary income source ...

Upcoming Tax Deadlines

February Day 01 Businesses - Give annual information statements to recipients of certain payments you made during 2020. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be issued electronically with ..

Call or email us for help with you personal return, business returns, expatriate, international and nonresident tax returns and planning. We have over 30 years experience. Email Us

US Phone 949-480-1235. Skype: dondnelson

January 12, 2021


If you are a US Citizen or green card holder you must file a US tax return every year unless your taxable income is below a certain threshold. Even if your income is below that threshold, you may still be required to file certain forms to report foreign assets, etc. Failure to file these forms can result in severe IRS penalties. If you do not itemize your health, tax, interest, charitable and miscellaneous deductions you get a standard deduction of $12,400 if single or filing as married filing separately or $24,800 if you file jointly with your spouse.

As a US expatriate living and working abroad 4/15/,21 your 2020 tax return is automatically extended until 6/15/21 but any taxes due must be paid by 4/15/20 to avoid penalties and interest. The return can be further extended until 10/15/21 if the proper extension form is filed. An even further extension until December may be available if the proper letter is sent to the IRS.

For 2020 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from wages or self employment) of $107,600, but this exclusion is only available if you file a tax return. You must qualify under one of two tests to take this exclusion: (1) bonafide resident test or (2) physical presence test. You can read more about how to qualify in IRS Publication 54. This exclusion only applies to income taxes and does not apply to US self-employment tax (social security plus medicare). You spouse who lives and works abroad with you will also be able to use this exclusion against any earned income they have abroad. You can lose this exclusion if you file your return more than 18 months late. The exclusion can only be claimed on filed tax return and does not apply if you fail to file a tax return.

If you receive a gift of $100,000 or more during 2020 from a nonresident individual or nonresident corporation you must file form 3520 to report that gift. If you fail to file that form you will incur substantial penalties. .

If your foreign earnings from wages or self -employment exceed the foreign earned income exclusion you can claim a housing expense for the rent, utilities and maintenance you pay if those amounts that exceed a minimum non-deductible amount. There is a limit to the housing amount and certain “high-cost” locations there is a higher amount of housing expense which can be considered. (For “high-cost” country limitations see Form 2555 instructions).

You get credits against your US income tax obligation for foreign income taxes paid to a foreign country but you must file a US tax return to claim these credits. This avoids double taxation of the same income.

If you own 10% or more of a Foreign corporation or Foreign partnership (LLC) you must file special IRS forms, or incur substantial penalties which can be greater including criminal prosecution if the IRS discovers you have failed to file these forms.

If you create a foreign trust or are a beneficiary of a foreign trust you may be obligated to file forms 3520 and /or 3520A each year to report those activities or be subject to severe penalties. Foreign foundations and non-profits which indirectly benefit you may be foreign trusts in the eyes of the IRS.

Your net self-employment income in a foreign country (earned as an independent contractor or in your own sole proprietorship) is subject to US self-employment tax (medicare and social security) of 15.3% which cannot be reduced or eliminated by the foreign earned income exclusion or foreign tax credits. The one exception is if you live in one of the very few countries that have a social security agreement with the US and you pay the equivalent of social security in that country.

Forming the correct type of foreign corporation and making the proper US tax election (to cause the income and foreign taxes the foreign corporation pays to flow through to your personal US tax return) with the IRS for that corporation may save you significant income taxes and avoid later adverse tax consequences. You need to take investigate this procedure before you actually form that foreign because it can be difficult to make that election later and only certain types of foreign business entities are eligible to make this election.

If at any time during the tax year your combined highest balances in your foreign bank and financial accounts (when added together) ever equal or exceed $10,000US you must file a FBAR form 114 with the IRS by October 15, 2021 for the 2020 calendar year or incur a penalty of $10,000 or more including criminal prosecution. Foreign financial accounts often include accounts in you sign on for a foreign corporation, foreign partnerships foreign pension plans, stock brokerage accounts, and cash surrender value of foreign life insurance. This form does not go in with your personal income tax return and can only be filed separately on the web at:

The IRS gets lists of Americans applying or renewing for US passports or entering the country. They will compare these lists with those who are filing US income tax returns and take action against those who do not file US returns but are US residents or citizens.

Often due to foreign tax credits and the foreign earned income tax expats living abroad who file all past year unfiled tax returns end up owing no or very little US taxes. The IRS has a special program which will help you catch up if you are in arrears which will reduce or possibly eliminate all potential penalties for failing to file the required foreign asset reporting forms. We can direct you to the best program for your situation, prepare the returns and forms and represent you before the IRS.

Beginning in 2011 a new law went into effect which requires all US Citizens report all of their worldwide financial assets with their personal tax return if in total the value of those assets exceed certain minimum amounts starting at $50,000. Failure to file that form 8938 on time can result in a penalty of $10,000. The form is complex and has different rules that apply to you if you live abroad or live in the US. This form is required in addition to the FBAR form 114.

Certain types of income of foreign corporations are immediately taxable on the US shareholder's personal income tax return. This is called Subpart F income. The rules are complex and if you own a foreign corporation you need to determine if these rules apply to you when you file the required form 5471 for that corporation. For 2018 a new tax was enacted with the acronym of GILTI tax. This may or may not cause an owner of a Controlled Foreign Corporation (CFC) to owe taxes on the income it does not distribute to its owners. This GILTI tax applies to 10% or more owners of CFCs.

If you own investments in a foreign corporation or own foreign mutual fund shares you may be required to file the IRS form 8621 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.

There are many more special tax laws too numerous to mention here that apply to expatriates, green card holderd. nonresidents and US taxpayers with foreign assets, businesses, etc. Please need to consult with Kauffman Nelson LLP if you have other offshore matters to be certain what is required to be filed.

Download your 2020 Expatriate Tax Questionnaire HERE Send us your completed questionnaire and we will immediately provide you with a flat fee quote for preparing your return(s).

Don D. Nelson, US Tax Attorney, Charles Kauffman CPA, Kauffman Nelson, LLP, CPAs
Huntington Beach, California USA
US Phone: (949) 480-1235, US Fax: (949) 606-9627
Email: or
Skype address: dondnelson

Visit our International Tax Blog for the Latest Expat and International Tax Developments at /

We have been preparing tax returns and assisting US clients located in over 123 countries around the the world for over 35 years. We also assist US Nonresidents meet their US tax obligations and return filing requirements. Email, skype or phone us for immediate assistance.

ARE YOU NOW CONFUSED? WE OFFER MINI TAX CONSULTATIONS BY PHONE, SKYPE OR EMAIL: The mini consultations (with attorney client privilege) to answer your tax questions and resolve your tax issues. Email us: to learn more or request a consultation

For additional useful information and tax assistance go to our website at.

December 30, 2020



Foreign Earned Income Exclusion – 2020 ‐ $107,600   

Gift Tax Annual Exclusion to non‐citizen spouse ‐ $157,000   

Foreign housing base amount (amount of foreign housing not deductible) ‐ $17,216   

Reportable gift threshold from foreign partnership or corporation for reporting on Form 3520

‐ $16,649   

Foreign housing expense (rent and utility) cap ‐ $32,280 unless you are in a high‐cost housing

location as defined by IRS. To see table of high cost housing locations and the relevant cap ‐  see

here (Section 3):

Regime for those who have ownership interests in non‐US corporations ‐ Global Intangible

Low‐Taxed Income (GILTI). These rules will cause or have caused many shareholders of non‐ U.S.

corporations to now be subject to tax even if they were not before. Service companies and similar

companies with very limited depreciable assets will most certainly be subject to GILTI and be

required to recognize the corporate earnings as income on the U.S. personal tax return. Please

contact us if you need planning or information on this taxation regime.

One must report overseas assets owned by businesses as well as individuals. So, the reporting

requirements are increasing and the penalties for failure to report continue to be harsh. Not all

foreign holdings must be reported. If, for example, you hold stock in a foreign company through a

U.S. broker, those holdings do not have to be separately reported. However, if you hold any other

types of foreign assets, including bank accounts and securities accounts, please let us know in

your questionnaire. If you have any doubt as to whether any of your assets are foreign, please

discuss those assets with us. Again, this year we will need information on a business’ foreign

holdings as well.


As year-end approaches it is a good time to think about planning moves that may help lower your

tax bill for this year and possibly next. Year-end planning for 2020 takes place during the COVID-19

pandemic, which in addition to its devastating health and mortality impact has widely affected

personal and business finances. New tax rules have been enacted to help mitigate the financial

impact of the disease, some of which should be considered as part of this years' planning, most

notably elimination of required retirement plan distributions, and liberalized charitable deduction


Major tax changes from recent years generally remain in place, including lower income tax rates,

larger standard deductions, limited itemized deductions, elimination of personal exemptions, an

increased child tax credit, and a lessened alternative minimum tax (AMT) for individuals; and a major

corporate tax rate reduction and elimination of the corporate AMT, limits on interest deductions,

and generous expensing and depreciation rules for businesses. And non-corporate taxpayers with

certain income from pass-through entities may still be entitled to a valuable deduction.

Despite the lack of major year-over-year tax changes, the time-tested approach of deferring income

and accelerating deductions to minimize taxes still works for many taxpayers, as does the bunching

of expenses into this year or next to avoid restrictions and maximize deductions.

We have compiled a list of actions based on current tax rules that may help you save tax dollars if

you act before year-end. Not all actions will apply in your situation, but you (or a family member)

will likely benefit from many of them. We can narrow down the specific actions that you can take

once we meet with you to tailor a particular plan. In the meantime, please review the following list

and contact us at your earliest convenience so that we can advise you on which tax-saving moves to


Year-End Tax Planning Moves for Individuals

... Higher-income earners must be wary of the 3.8% surtax on certain unearned income. The surtax is

3.8% of the lesser of: (1) net investment income (NII), or (2) the excess of modified adjusted gross

income (MAGI) over a threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for

a married individual filing a separate return, and $200,000 in any other case). As year-end nears, a

taxpayer's approach to minimizing or eliminating the 3.8% surtax will depend on his estimated MAGI

and NII for the year. Some taxpayers should consider ways to minimize (e.g., through deferral)

additional NII for the balance of the year, others should try to see if they can reduce MAGI other

than NII, and other individuals will need to consider ways to minimize both NII and other types of

MAGI. An important exception is that NII does not include distributions from IRAs and most other

retirement plans.

... The 0.9% additional Medicare tax also may require higher-income earners to take year-end action.

It applies to individuals whose employment wages and self-employment income total more than a

threshold amount ($250,000 for joint filers, $125,000 for married couples filing separately, and

$200,000 in any other case). Employers must withhold the additional Medicare tax from wages in

excess of $200,000 regardless of filing status or other income. Self-employed persons must take it

into account in figuring estimated tax. There could be situations where an employee may need to

have more withheld toward the end of the year to cover the tax. For example, if an individual earns

$200,000 from one employer during the first half of the year and a like amount from another

employer during the balance of the year, he or she would owe the additional Medicare tax, but

there would be no withholding by either employer for the additional Medicare tax since wages from

each employer don't exceed $200,000.

... Long-term capital gain from sales of assets held for over one year is taxed at 0%, 15% or 20%,

depending on the taxpayer's taxable income. If you hold long-term appreciated-in-value assets,

consider selling enough of them to generate long-term capital gains that can be sheltered by the 0%

rate. The 0% rate generally applies to the excess of long-term capital gain over any short-term

capital loss to the extent that, when added to regular taxable income, it is not more than the

maximum zero rate amount (e.g., $80,000 for a married couple). If the 0% rate applies to long-term

capital gains you took earlier this year for example, you are a joint filer who made a profit of $5,000

on the sale of stock held for more than one year and your other taxable income for 2020 is $75,000

then try not to sell assets yielding a capital loss before year-end, because the first $5,000 of those

losses won't yield a benefit this year. (It will offset $5,000 of capital gain that is already tax-free.)

... Postpone income until 2021 and accelerate deductions into 2020 if doing so will enable you to

claim larger deductions, credits, and other tax breaks for 2020 that are phased out over varying

levels of adjusted gross income (AGI). These include deductible IRA contributions, child tax credits,

higher education tax credits, and deductions for student loan interest. Postponing income also is

desirable for taxpayers who anticipate being in a lower tax bracket next year due to changed

financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income

into 2020. For example, that may be the case for a person who will have a more favorable filing

status this year than next (e.g., head of household versus individual filing status), or who expects to

be in a higher tax bracket next year.

... If you believe a Roth IRA is better than a traditional IRA, consider converting traditional-IRA

money invested in any beaten-down stocks (or mutual funds) into a Roth IRA in 2020 if eligible to do

so. Keep in mind, however, that such a conversion will increase your AGI for 2020, and possibly

reduce tax breaks geared to AGI (or modified AGI).

... It may be advantageous to try to arrange with your employer to defer, until early 2021, a bonus

that may be coming your way. This could cut as well as defer your tax.

... Many taxpayers won't be able to itemize because of the high basic standard deduction amounts

that apply for 2020 ($24,800 for joint filers, $12,400 for singles and for marrieds filing separately,

$18,650 for heads of household), and because many itemized deductions have been reduced or

abolished. Like last year, no more than $10,000 of state and local taxes may be deducted;

miscellaneous itemized deductions (e.g., tax preparation fees and unreimbursed employee

expenses) are not deductible; and personal casualty and theft losses are deductible only if they're

attributable to a federally declared disaster and only to the extent the $100-per-casualty and 10%-

of-AGI limits are met. You can still itemize medical expenses but only to the extent they exceed 7.5%

of your adjusted gross income, state and local taxes up to $10,000, your charitable contributions,

plus interest deductions on a restricted amount of qualifying residence debt, but payments of those

items won't save taxes if they don't cumulatively exceed the standard deduction for your filing

status. Two COVID-related changes for 2020 may be relevant here: (1) Individuals may claim a $300

above-the-line deduction for cash charitable contributions on top of their standard deduction; and

the percentage limit on charitable contributions has been raised from 60% of modified adjusted

gross income (MAGI) to 100%.

Some taxpayers may be able to work around these deduction restrictions by applying a bunching

strategy to pull or push discretionary medical expenses and charitable contributions into the year

where they will do some tax good. For example, a taxpayer who will be able to itemize deductions

this year but not next will benefit by making two years' worth of charitable contributions this year,

instead of spreading out donations over 2020 and 2021. The COVID-related increase for 2020 in the

income-based charitable deduction limit for cash contributions from 60% to 100% of MAGI assists in

this bunching strategy, especially for higher income individuals with the means and disposition to

make large charitable contributions.

... Consider using a credit card to pay deductible expenses before the end of the year. Doing so will

increase your 2020 deductions even if you don't pay your credit card bill until after the end of the


... If you expect to owe state and local income taxes when you file your return next year and you will

be itemizing in 2020, consider asking your employer to increase withholding of state and local taxes

(or pay estimated tax payments of state and local taxes) before year-end to pull the deduction of

those taxes into 2020. But remember that state and local tax deductions are limited to $10,000 per

year, so this strategy is not good to the extent it causes your 2020 state and local tax payments to

exceed $10,000.

... Required minimum distributions (RMDs) that usually must be taken from an IRA or 401(k) plan (or

other employer-sponsored retirement plan) have been waived for 2020. This includes RMDs that

would have been required by April 1 if you hit age 70½ during 2019 (and for non-5% company

owners over age 70½ who retired during 2019 after having deferred taking RMDs until April 1

following their year of retirement). So if you don't have a financial need to take a distribution in

2020, you don't have to. Note that because of a recent law change, plan participants who turn 70½

in 2020 or later needn't take required distributions for any year before the year in which they reach

age 72.

... If you are age 70½ or older by the end of 2020, have traditional IRAs, and especially if you are

unable to itemize your deductions, consider making 2020 charitable donations via qualified

charitable distributions from your IRAs. These distributions are made directly to charities from your

IRAs, and the amount of the contribution is neither included in your gross income nor deductible on

Schedule A, Form 1040. However, you are still entitled to claim the entire standard deduction.

(Previously, those who reached reach age 70½ during a year weren't permitted to make

contributions to a traditional IRA for that year or any later year. While that restriction no longer

applies, the qualified charitable distribution amount must be reduced by contributions to an IRA that

were deducted for any year in which the contributor was age 70½ or older, unless a previous

qualified charitable distribution exclusion was reduced by that post-age 70½ contribution.)

... If you are younger than age 70½ at the end of 2020, you anticipate that you will not itemize your

deductions in later years when you are 70½ or older, and you don't now have any traditional IRAs,

establish and contribute as much as you can to one or more traditional IRAs in 2020. If these

circumstances apply to you, except that you already have one or more traditional IRAs, make

maximum contributions to one or more traditional IRAs in 2020. Then, in the year you reach age

70½, make your charitable donations by way of qualified charitable distributions from your IRA.

Doing this will allow you, in effect, to convert nondeductible charitable contributions that you make

in the year you turn 70½ and later years, into deductible-in-2020 IRA contributions and reductions of

gross income from later year distributions from the IRAs.

... Take an eligible rollover distribution from a qualified retirement plan before the end of 2020 if

you are facing a penalty for underpayment of estimated tax and having your employer increase your

withholding is unavailable or won't sufficiently address the problem. Income tax will be withheld

from the distribution and will be applied toward the taxes owed for 2020. You can then timely roll

over the gross amount of the distribution, i.e., the net amount you received plus the amount of

withheld tax, to a traditional IRA. No part of the distribution will be includible in income for 2020,

but the withheld tax will be applied pro rata over the full 2020 tax year to reduce previous

underpayments of estimated tax.

... Consider increasing the amount you set aside for next year in your employer's health flexible

spending account (FSA) if you set aside too little for this year and anticipate similar medical costs

next year.

... If you become eligible in December of 2020 to make health savings account (HSA) contributions,

you can make a full year's worth of deductible HSA contributions for 2020.

... Make gifts sheltered by the annual gift tax exclusion before the end of the year if doing so may

save gift and estate taxes. The exclusion applies to gifts of up to $15,000 made in 2020 to each of an

unlimited number of individuals. You can't carry over unused exclusions from one year to the next.

Such transfers may save family income taxes where income-earning property is given to family

members in lower income tax brackets who are not subject to the kiddie tax.

... If you were in federally declared disaster area, and you suffered uninsured or unreimbursed

disaster-related losses, keep in mind you can choose to claim them either on the return for the year

the loss occurred (in this instance, the 2020 return normally filed next year), or on the return for the

prior year (2019), generating a quicker refund.

... If you were in a federally declared disaster area, you may want to settle an insurance or damage

claim in 2020 in order to maximize your casualty loss deduction this year.

Year-End Tax-Planning Moves for Businesses & Business Owners

... Taxpayers other than corporations may be entitled to a deduction of up to 20% of their qualified

business income. For 2020, if taxable income exceeds $326,600 for a married couple filing jointly,

$163,300 for singles, marrieds filing separately, and heads of household, the deduction may be

limited based on whether the taxpayer is engaged in a service-type trade or business (such as law,

accounting, health, or consulting), the amount of W-2 wages paid by the trade or business, and/or

the unadjusted basis of qualified property (such as machinery and equipment) held by the trade or

business. The limitations are phased in; for example, the phase-in applies to joint filers with taxable

income between $326,600 and $426,600, and to all other filers with taxable income between

$163,300 and $213,300.

Taxpayers may be able to achieve significant savings with respect to this deduction, by deferring

income or accelerating deductions so as to come under the dollar thresholds (or be subject to a

smaller phaseout of the deduction) for 2020. Depending on their business model, taxpayers also

may be able increase the new deduction by increasing W-2 wages before year-end. The rules are

quite complex, so don't make a move in this area without consulting your tax adviser.

... More small businesses are able to use the cash (as opposed to accrual) method of accounting in

than were allowed to do so in earlier years. To qualify as a small business a taxpayer must, among

other things, satisfy a gross receipts test. For 2020, the gross-receipts test is satisfied if, during a

three-year testing period, average annual gross receipts don't exceed $26 million (the dollar amount

was $25 million for 2018, and for earlier years it was $1 million for most businesses). Cash method

taxpayers may find it a lot easier to shift income, for example by holding off billings till next year or

by accelerating expenses, for example, paying bills early or by making certain prepayments.

... Businesses should consider making expenditures that qualify for the liberalized business property

expensing option. For tax years beginning in 2020, the expensing limit is $1,040,000, and the

investment ceiling limit is $2,590,000. Expensing is generally available for most depreciable property

(other than buildings) and off-the-shelf computer software. It is also available for qualified

improvement property (generally, any interior improvement to a building's interior, but not for

enlargement of a building, elevators or escalators, or the internal structural framework), for roofs,

and for HVAC, fire protection, alarm, and security systems. The generous dollar ceilings mean that

many small and medium sized businesses that make timely purchases will be able to currently

deduct most if not all their outlays for machinery and equipment. What's more, the expensing

deduction is not prorated for the time that the asset is in service during the year. The fact that the

expensing deduction may be claimed in full (if you are otherwise eligible to take it) regardless of how

long the property is in service during the year can be a potent tool for year-end tax planning. Thus,

property acquired and placed in service in the last days of 2020, rather than at the beginning of

2021, can result in a full expensing deduction for 2020.

... Businesses also can claim a 100% bonus first year depreciation deduction for machinery and

equipment bought used (with some exceptions) or new if purchased and placed in service this year,

and for qualified improvement property, described above as related to the expensing deduction.

The 100% write-off is permitted without any proration based on the length of time that an asset is in

service during the tax year. As a result, the 100% bonus first-year write-off is available even if

qualifying assets are in service for only a few days in 2020.

... Businesses may be able to take advantage of the de minimis safe harbor election (also known as

the book-tax conformity election) to expense the costs of lower-cost assets and materials and

supplies, assuming the costs don't have to be capitalized under the Code Sec. 263A uniform

capitalization (UNICAP) rules. To qualify for the election, the cost of a unit of property can't exceed

$5,000 if the taxpayer has an applicable financial statement (AFS; e.g., a certified audited financial

statement along with an independent CPA's report). If there's no AFS, the cost of a unit of property

can't exceed $2,500. Where the UNICAP rules aren't an issue, consider purchasing such qualifying

items before the end of 2020.

... A corporation (other than a large corporation) that anticipates a small net operating loss (NOL) for

2020 (and substantial net income in 2021) may find it worthwhile to accelerate just enough of its

2021 income (or to defer just enough of its 2020 deductions) to create a small amount of net income

for 2020. This will permit the corporation to base its 2021 estimated tax installments on the

relatively small amount of income shown on its 2020 return, rather than having to pay estimated

taxes based on 100% of its much larger 2021 taxable income.

... To reduce 2020 taxable income, consider deferring a debt-cancellation event until 2021.

... To reduce 2020 taxable income, consider disposing of a passive activity in 2020 if doing so will

allow you to deduct suspended passive activity losses.


∙ As of press time, individuals must file returns by April 15, 2021, for the 2020 tax year, unless you

are living abroad on April 15, 2021 and then you have an AUTOMATIC EXTENSION for filing until June

15, 2021.

-Partnerships must file returns by the 15th day of the third month following the close of the

taxable year (March 15 for calendar‐year taxpayers);  

- C corporation returns are generally due by the 15th day of the fourth month following the close

of the taxable year (April 15 for calendar‐year taxpayers);   

 c-S corporation returns will remain due by the 15th day of the third month of the taxable year

(March 15 for calendar‐year taxpayers); and

-W‐2s and 1099s must be filed by January 31, 2020, for the 2020 tax year.  


The ideas discussed in this letter are a good way to get you started with year‐end planning, but

they are no substitute for personalized professional assistance. Please do not hesitate to email us

with questions or for additional strategies on reducing your tax liability. We can then set up a phone, skype

 or whatsapp consultation.  EMAIL US    US Phone 949-480-1235


There is still time to do some year end tax planning to reduce your taxes READ MORE ABOUT HOW TO SAVE HERE  

December 2, 2020

Six tax planning strategies for low-cost-basis cryptocurrency

 Though the following article from the TAX ADVISORY was written for accounts, if you invest in crypto currencies it is a excellent template for planning your crypto transactions. The IRS is currently working
hard on getting on top of all crypto transactions which are required to be reported on your US tax return. For 2020 they will have a yes or no question asking if you own crypto currency.  They can later your answer against you for civil and criminal penalties if they discover you did not answer truthfully.


November 13, 2020

Mexico Taxes on Rentals - What You Must Do If You Own and Rent Proprerty in Mexico

by Linda Jones Neil, Director, the settlement company®

Internet, blog sites, expat groups and Mexican newspapers are full of information and misinformation about foreigners who are renting their homes or condominiums and failing to pay Mexican taxes.  Not only is this a violation of Mexican tax law with severe penalties if discovered, but also it violates the terms of most bank trusts (fideicomisos) and could result in cancellation of the trusts.


And, many foreigners have found that the best and most direct form to obtain renters for their vacation properties is through the internet…….. think VRBO, Air BnB, HomeAway and many others!   These are the tech platforms.

On June 1 of this year new procedures and regulations came into effect for these tech platforms which aids the Mexican tax authorities in the collection of taxes. Now all tech platforms must collect, and pay to the authorities, the 16% IVA tax.  This is collected from the renters on the amount charged for the rental.   For the non-residents who cannot provide a tax id number, the tech platform must retain and pay 20% of the gross rental amount to the tax collector.   

The Mexican government plans to oversee and catch up with all the tax income that slipped through the holes for so many years!

Because of the pandemic and reduced travel a whole lot of these procedural issues were set aside and not resolved.

Now with property owners looking to rent again, many questions are arising as to how to legally minimize the taxable amount on this income.

It all comes down to the owner’s immigration status.    In a nutshell:

IF YOU ARE A RESIDENT OF MEXICO:  There are two options: 

I. RESIDENTS in MEXICO can obtain their taxpayer identification number, electronic signatures and file taxes monthly using a blind deduction of 35% of income and paying tax on the remainder.   No official receipts (facturas) are required for this tax payer status.   An annual declaration must be filed in addition to monthly declarations.

II. . RESIDENTS in MEXICO can obtain their taxpayer identification number, electronic signatures and file taxes monthly declaring all income and providing official receipts (facturas) for certain allowable deductions.  Tax on a sliding scale is assessed on the profit.  .   An annual declaration must be filed in addition to monthly declarations.

Unless you are bi-lingual and familiar with tax terms it will probably be worthwhile to contract with a Mexican company to assist you in these calculations and payments, even though you are a resident.

FOR THE NON-RESIDENT.   Many owners, however, are NOT residents and, for many reasons, are not able or do not wish to become residents.  Obtaining either temporary or permanent residency is a lengthy process which involves requirements including proving sufficient MINIMUM INCOME to be self-sustaining in Mexico.  Additionally the party considering residency must commit to a MINIMUM STAY in Mexico of 180 days per annum. 

As a non-resident who rents exclusively through the tech platform a flat 20% of all income will be deducted and sent to the authorities, in addition to 16% IVA deducted from his renters as Added Value Tax.   The tech platforms must report and pay this income to the tax authorities. NO RFC or taxpayer identification number is required. No annual declaration need be filed.

NO DOUBLE TAXATION:   Mexico has tax treaties with 32 nations.   Taxes paid in Mexico can be taken as credits in taxpayer’s native country. 

Since each party’s situation may differ, an analysis of individual income and outgo makes sense.   A no cost and no obligation confidential consultation regarding individual circumstances, can be obtained by requesting same from the email addresses listed below.

November 4, 2020

25 Facts You Need to Know about IRS Form 114 - FBAR - And Why You Need to File It!

 Read the 25 facts from LEX here   Need help filing your FBAR form to report foreign bank and financial accounts or need to catch up and avoid the $10,000 per year for not filing, then contact us. We are

attorneys and CPAs with over 20 years practice in International and Expatriate Taxes. Email us at: or go to 

August 31, 2020


General Rules

A U.S. person includes a citizen of the United States, a domestic partnership, a domestic corporation, any estate other than a foreign estate, any trust if a U.S. person exercises primary supervision over the administration of the trust or if one or more U.S. persons have the authority to control all substantial decisions of the trust, and any person that is not a foreign person.

Tax consequences can apply to U.S. persons who are treated as owners of a foreign trust and U.S. persons treated as beneficiaries of a foreign trust, and to the foreign trust itself. There can be income tax as well as transfer tax consequences that should be considered.

In addition to tax consequences, there a number of information reporting rules that can apply to a U.S. person who enters into transactions with a foreign trust or is treated as an owner of a foreign trust under the grantor trust rules of Internal Revenue Code (IRC) sections 671-679, including information reporting on Forms 3520 and 3520-A; on Form 8938, Statement of Specified Foreign Financial Assets; and on FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

This page focuses on information reporting requirements on Forms 3520 and 3520-A (under IRC section 6048), as well basic income tax considerations. 

Income Tax Consequences

  • U.S. owner of a foreign trust - In general, a U.S. person who is treated as the owner of a foreign trust under the grantor trust rules (IRC sections 671-679) is taxed on the income of that trust. IRC section 679 applies specifically in the context of foreign trusts and will treat as an owner of a foreign trust a U.S. person who transfers assets to a foreign trust which has or is presumed to have a U.S. beneficiary. Each U.S. owner of a foreign trust should receive a Foreign Grantor Trust Owner Statement (Form 3520-A, page 3) from the foreign trust, which includes information about the foreign trust income they must report.
  • U.S. beneficiary of a foreign trust – In general, a U.S. beneficiary of a foreign non grantor trust will report its share of foreign trust income.  Depending on whether the U.S. beneficiary is a beneficiary of a grantor or non grantor trust, the beneficiary should receive a Foreign Grantor Trust Beneficiary Statement or a Foreign Non Grantor Trust Beneficiary Statement, which includes information about the taxability of distributions the beneficiary has received.
  • U.S. transferor of assets to a foreign non grantor trust - IRC section 684 requires the recognition of gain on certain transfers of appreciated assets to a foreign trust by a U.S. person.

Information Reporting

Form 3520

In general, a Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts is required to be filed when a U.S. person:

  • creates or transfers money or property to a foreign trust or makes a loan to a foreign trust;
  • receives distributions from a foreign trust, receives the uncompensated use of property of a foreign trust, or receives a loan from a foreign trust;
  • is treated as the U.S. owner of a foreign trust under the grantor trust rules; and
  • receives certain large gifts or bequests from foreign persons.

The instructions for Form 3520 include more information about:

  1. who must file a Form 3520;
  2. when and where the Form 3520 must be filed; and 
  3. possible penalties for filing the Form 3520 late or filing incomplete or inaccurate information. 

See Form 3520 filing tips below. See also Gifts from Foreign Persons for information about reporting receipts of certain large gifts or bequests from certain foreign persons.

Form 3520-A

In addition to Form 3520, U.S. persons who are treated as owners of a foreign trust under the grantor trust rules must ensure that the foreign trust timely files a complete and accurate Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner , and furnishes the required annual statements to its U.S. owners and U.S. beneficiaries. If a foreign trust fails to file Form 3520-A, the U.S. owner must: 

  1. complete and attach a substitute Form 3520-A to a timely filed Form 3520, and
  2. furnish the required annual statements in order for the U.S. owner to avoid penalties for the foreign trust’s failure to file a Form 3520-A.

The instructions for Form 3520-A include more information about: 

  1. who must file a Form 3520-A or ensure that a Form 3520-A is filed; 
  2. when and where the Form 3520-A must be filed; and 
  3. possible penalties for filing Form 3520-A late or filing incomplete or inaccurate information. The instructions for Form 3520-A and Form 3520 also provide information about filing a substitute Form 3520-A.

Exceptions to filing Forms 3520 and 3520-A

Forms 3520 and 3520-A are not required to be filed for Canadian registered retirement savings plans (RRSPs) and Canadian registered retirement income funds (RRIFs).  See Rev. Proc. 2014-55 (PDF). In addition, Forms 3520 and 3520-A are not required to be filed for certain tax-favored foreign retirement trusts or tax-favored foreign non-retirement savings trusts, provided that the U.S. owner is an “eligible individual” and the tax-favored foreign trust meets certain requirements. See Rev. Proc. 2020-17 (PDF).  Caution: These exceptions do not affect any reporting obligations that a U.S. person may have to report specified foreign financial assets on Form 8938 or any other reporting requirement, including the requirement to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

Form 3520 and Form 3520-A filing tips to avoid penalties

  • Form 3520
    • File Form 3520 by the 15th day of the fourth month following the end of the U.S. person’s tax year, or April 15th for calendar year taxpayers, subject to any extension of time to file that may apply. If you are a U.S. citizen or resident who lives outside the Unites States and Puerto Rico or if you are in the military or naval service on duty outside the United States and Puerto Rico, then the due date to file a Form 3520 is the 15th day of the 6th month following the end of the U.S. person’s tax year.
    • If an extension was filed with respect to your income tax return, be sure to check Form 3520, Box 1k, and enter the form number of the income tax return to avoid your Form 3520 being treated as filed late.
  • Form 3520-A
    • File Form 3520-A using an Employer Identification Number (EIN) for the foreign trust on Line 1b of the form rather than the U.S. owner’s SSN or ITIN. If the foreign trust does not have an EIN, refer to How to Apply for an EIN.
    • File Form 3520-A by the 15th day of the 3rd month after the end of the trust’s tax year.  An automatic 6-month extension may be granted by filing Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns. Form 7004 must be filed under the foreign trust’s EIN.
    • If the foreign trust will not file a Form 3520-A, the U.S. owner of the foreign trust must file a substitute Form 3520-A by completing a Form 3520-A to the best of their ability and attaching it to a timely filed Form 3520, including extensions (see Form 3520 and Form 3520-A instructions for more information on filing a substitute Form 3520-A). Do not separately file a duplicate Form 3520-A if you are filing a substitute 3520-A.

Other Possible Filing Requirements

Form 1040, Schedule B, Part III, Foreign Accounts and Trusts, must be completed if you receive a distribution from, or were grantor of, or a transferor to a foreign trust.

If you transfer money or property to a foreign trust, you may be required to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

A foreign trust, which is not taxed as a grantor trust, may be required to file a Form 1040-NR, U.S. Nonresident Alien Income Tax Return  to pay U.S. tax on certain U.S. sourced income. See Publication 519, U.S. Tax Guide for Aliens and the instructions for Form 1040-NR for additional information.

You may be required to file Form 8938, Statement of Specified Foreign Financial Assets, to report your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than certain reporting thresholds.

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account each year to the Internal Revenue Service by filing FinCEN Form 114 (formerly TD F 90-22.1), Report of Foreign Bank and Financial Accounts (FBAR).

If you need tax assistance with respect to foreign trust and pension plans from US Attorney and CPAs with the knowledge and expertise on these matters email us HERE