New Tax Law Changes for 2013

What's New

Future developments. For the latest information about the tax law topics covered in this publication, including information about any tax legislation, go to www.irs.gov/pub17.

Additional Medicare Tax. Beginning in 2013, a 0.9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than:

• $125,000 if married filing separately,
• $250,000 if married filing jointly, or
• $200,000 for any other filing status.

See Form 8959 and its instructions.

Net Investment Income Tax. Beginning in 2013, you may be subject to Net Investment Income Tax (NIIT). The NIIT is 3.8% of the smaller of (a) your net investment income or (b) the excess of your modified adjusted gross income over:

• $125,000 if married filing separately,
• $250,000 if married filing jointly or qualifying widow(er), or
• $200,000 if any other filing status.

See Form 8960 and its instructions.

Change in tax rates. The highest tax rate is 39.6%. For more information, see the 2013 Tax Computation Worksheet or the 2013 Tax Rate Schedules near the end of this publication.

Tax rate on net capital gain and qualified dividends. The maximum tax rate of 15% on net capital gain and qualified dividends has increased to 20% for some taxpayers. See chapter 16.

Medical and dental expenses. You can deduct only the part of your medical and dental expenses that is more than 10% of your adjusted gross income (7.5% if either you or your spouse is age 65 or older). See chapter 21.

Personal exemption amount increased for certain taxpayers. Your personal exemption is increased to $3,900. But the amount is reduced if your adjusted gross income is more than:

• $150,000 if married filing separately,
• $250,000 if single,
• $275,000 if head of household, or
• $300,000 if any other filing status.

Limit on itemized deductions. You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than:

• $150,000 if married filing separately,
• $250,000 if single,
• $275,000 if head of household, or
• $300,000 if any other filing status.

Same-sex marriages. If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. See chapter 2.If you meet certain requirements, you may be able to file amended returns to change your filing status for some earlier years. For details on filing amended returns, see chapter 1.

Health flexible spending arrangements (FSAs). You cannot have more than $2,500 in salary reduction contributions made to a health FSA for plan years beginning after 2012. See chapter 5.

Expiring credits. The plug-in electric vehicle credit and the refundable part of the credit for prior year minimum tax have expired. You cannot claim either one on your 2013 return. See chapter 37.

Ponzi-type investment schemes. There are new rules for how to claim a theft loss deduction on Form 4684 due to a Ponzi-type investment scheme. See chapter 25.

Home office deduction simplified method. If you can take a home office deduction, you may be able to use a simplified method to figure it. See Publication 587.

Standard mileage rates. The 2013 rate for business use of your car is increased to 56½ cents a mile. See chapter 26.The 2013 rate for use of your car to get medical care is increased to 24 cents a mile. See chapter 21.The 2013 rate for use of your car to move is increased to 24 cents a mile. See Publication 521, Moving Expenses.

Reminders

Listed below are important reminders and other items that may help you file your 2013 tax return. Many of these items are explained in more detail later in this publication.

Enter your social security number (SSN). Enter your SSN in the space provided on your tax form. If you filed a joint return for 2012 and are filing a joint return for 2013 with the same spouse, enter your names and SSNs in the same order as on your 2012 return. See chapter 1.

Secure your tax records from identity theft. Identity theft occurs when someone uses your personal information, such as your name, SSN, or other identifying information, without your permission, to commit fraud or other crimes. An identity thief may use your SSN to get a job or may file a tax return using your SSN to receive a refund. For more information about identity theft and how to reduce your risk from it, see chapter 1.

Taxpayer identification numbers. You must provide the taxpayer identification number for each person for whom you claim certain tax benefits. This applies even if the person was born in 2013. Generally, this number is the person's social security number (SSN). Seechapter 1.

Foreign source income. If you are a U.S. citizen with income from sources outside the United States (foreign income), you must report all such income on your tax return unless it is exempt by U.S. law. This is true whether you live inside or outside the United States and whether or not you receive a Form W-2 or Form 1099 from the foreign payer. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties). If you live outside the United States, you may be able to exclude part or all of your foreign source earned income. For details, see Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.

Foreign financial assets. If you had foreign financial assets in 2013, you may have to file Form 8938 with your return. Checkwww.IRS.gov/form8938 for details.

Automatic 6-month extension to file tax return. You can use Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, to obtain an automatic 6-month extension of time to file your tax return. See chapter 1.

Include your phone number on your return. To promptly resolve any questions we have in processing your tax return, we would like to be able to call you. Please enter your daytime telephone number on your tax form next to your signature and occupation. If you are filing a joint return, you can enter either your or your spouse's daytime phone number.

Payment of taxes.  You can pay your taxes online, by phone, or by check or money order. You can make a direct transfer from your bank account or use a credit or debit card. If you e-file, you can schedule an electronic payment. See chapter 1.

Faster ways to file your return. The IRS offers fast, accurate ways to file your tax return information without filing a paper tax return. You can use IRS e-file (electronic filing). See chapter 1.

Free electronic filing. You may be able to file your 2013 taxes online for free. See chapter 1.

Change of address. If you change your address, you should notify the IRS. See Change of Address in chapter 1.

Refund on a late filed return. If you were due a refund but you did not file a return, you generally must file your return within 3 years from the date the return was due (including extensions) to get that refund. See chapter 1.

Frivolous tax returns. The IRS has published a list of positions that are identified as frivolous. The penalty for filing a frivolous tax return is $5,000. See chapter 1.

Filing erroneous claim for refund or credit. You may have to pay a penalty if you file an erroneous claim for refund or credit. See chapter 1.

Privacy Act and paperwork reduction information.  The IRS Restructuring and Reform Act of 1998, the Privacy Act of 1974, and the Paperwork Reduction Act of 1980 require that when we ask you for information we must first tell you what our legal right is to ask for the information, why we are asking for it, how it will be used, what could happen if we do not receive it, and whether your response is voluntary, required to obtain a benefit, or mandatory under the law. A complete statement on this subject can be found in your tax form instructions.

Customer service for taxpayers. You can set up a personal appointment at the most convenient Taxpayer Assistance Center, on the most convenient business day. See How To Get Tax Help in the back of this publication.

Preparer e-file mandate. Most paid preparers must e-file returns they prepare and file. Your preparer may make you aware of this requirement and the options available to you.

Treasury Inspector General for Tax Administration.  If you want to confidentially report misconduct, waste, fraud, or abuse by an IRS employee, you can call  1-800-366-4484 (call  1-800-877-8339 if you are deaf, hard of hearing, or have a speech disability, and are using TTY/TDD equipment). You can remain anonymous.

2013. IRS MEDICARE TAX ON INVESTMENT INCOME EXPLAINED

https://www.youtube.com/watch?v=KKw7n3wS58U&feature=youtube_gdata_player

Expats - IRS Finally Tries to Make It Easier for You to Find Answer`

The IRS has released an International, Nonresident and Expatriate tax index.  They call it Tax Map.  Hopefully it will answer your questions... but those answers may not be understandable.  That is where you may still need a US International Tax Expert.  You can go to the Tax Map here.

Topics covered run from Alien Departure Permits to Working Abroad.  If you need further help email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.  where many of these complex tax issues are simplified.

The latest expat and international developments are immediately posted at our blog: www.usexpatriate.blogspot.com 

What to do when you have an undisclosed foreign account

What to do when a client has an undisclosed foreign account from the Journal of Accountancy. An excellent article with lots of good tips on how to handle the situation with the IRS

What is Correct FBAR Statute of Limitations? 6 years or ???

You still may not be safe after six years.  Closing the foreign account and not filing could make things worse!  Read more below:

http://www.forbes.com/sites/robertwood/2013/12/17/whats-the-fbar-statute-of-limitations/

IRS NEW INTERNATIONAL TAX INDEX FOR ALL ANSWERS?

IRS Tax Map http://taxmap.ntis.gov/taxmap/

12 Countries to Exchange Taxpayer Info With IRS

See list of countries and details of agreements below

http://mobile.businessweek.com/news/2013-12-16/12-agreements-signed-to-help-u-dot-s-dot-fight-offshore-evasion-taxes

US EXPAT ARE STILL SUBJECT TO ESTATE & GIFT TAXES

Read below. As an expat you must include your assets everywhere in the world. Gifts include those made abroad.  Green card holders living abroad are not covered by these rules and will owe US estate taxes on US based assets exceeding $60,000 in total value.

http://www.timesdispatch.com/business/investment/time-to-check-the-list-for-financial-and-estate-planning/article_d9aa1b36-595b-5072-8360-5fe54d0dacab.html?mode=jqm

2014- Four Estate Planning Tips You Need to Know

http://www.fool.com/how-to-invest/personal-finance/taxes/2013/12/11/estate-tax-in-2014-4-things-you-need-to-know.aspx

What To Do When Your Foreign Banks Asks Questions

What To Say When (Not If) Your Offshore Bank Asks, 'Are You Compliant With IRS?' http://www.forbes.com/sites/robertwood/2013/12/04/what-to-say-when-not-if-your-offshore-bank-asks-are-you-compliant-with-irs/

IRS COLLECTING PENALTIES FOR LATE FILED FORMS 5471- INFORMATION REPORTS ON FOREIGN CORPORATIONS

Read more in article from Accounting Today. http://www.accountingtoday.com/news/IRS-Gets-Better-Assessing-Penalties-Late-Reporting-Foreign-Corporations-68888-1.html

US Signs FATCA Agreements With Cayman Islands, Costa Rica

Read More Here.  US Signs FATCA Agreements With Cayman Islands, Costa Rica  Time to start reporting your Costa Rica or Cayman Island Bank and Financial Accounts before it is too late. If you need to catch up email us.

CANADIAN BANKS WILL HELP US IRS NAIL TAX CHEATS

Canadian banks to be compelled to share clients' info with U.S. http://www.cbc.ca/m/touch/politics/story/1.2437975

What does Green card and Citizenship surrender have to do with it? Tina Turner Knows

U.S. Citizens Renouncing Skyrocket--- and thats now called the  Tina Turner effect.

In the past many  months we have assisted  and advised over one  hundred US Citizens or Green Card holder surrender their US status which also relieves them of having to file any future US tax returns. The
hardest part is that you must first acquire citizenship in another country.  It is a two part process with part one involving the US State Department and part two involving the IRS.

If you live abroad, and have dual citizenship and want to learn more, email me at ddnelson@gmail.com

Read More in Forbes about Surrendering your US Status

Hunt for US Tax Evaders Widens

From USA TODAY Hunt for offshore tax evaders widens Feds expand hunt for offshore tax evaders http://usat.ly/1cleDlK

Penalty for failure to get health insurance

How Big Is The Penalty If You Don't Get Health Insurance? http://www.forbes.com/sites/beltway/2013/11/07/how-big-is-the-penalty-if-you-dont-get-health-insurance/

IRS BASIC TAX GUIDE FOR US GREEN CARD HOLDERS & PERMANENT RESIDENTS

The IRS has produced publication 4588 which give US tax guidance to Green Card holders  (or permanent residents without Green Cards) and how effectively surrender their Green Card for tax  READ IT AND DOWNLOAD IT HERE

purposes.

If you are a Green Card holder or permanent resident and need help with your income taxes or with respect to the dual status tax return and Form 8854 which may be due when you surrender it, we can help. We have helped in excess of one hundred clients do so to date.  Email us at ddnelson@gmail.com or visit our website at www.taxmeless.com. 

Current Status of Opting Out of IRS Voluntary Offshore Disclosure Program

If you have not filed required FBARs, 5471, 3520 and other foreign asset reporting forms with the IRS for past years the IRS recommends you enter the 2012 Offshore Voluntary Disclosure Program.  However, in many instances that 27.5% penalty seems excessive for the value of the assets involved.  The IRS says at any time you can opt out of the program which means your past filings or amendments will be sent immediately to audit who can assess a smaller amount of penalty or a greater amount of penalties than provided for in the Offshore Disclosure Program.

There is no written and very little reported information on what happens to those taxpayers who Opt Out of the Offshore Disclosure Program.  BNA, a leading tax publisher for tax professionals, has in the following article reported the current status of Opting Out.  READ THE ARTICLE HERE

If you need to discuss your alternatives and the possible consequences of filing past year foreign assets reporting forms and the related income we can help.  Email us at ddnelson@gmail.com

US Nonresidents Purchasing US Investment Property- IRS Tax Rules

US real estate can be a great investment and produce income as rental.  In most situations you can even obtain very favorable income tax treatment.  As a nonresident there are no restrictions on owning US real property for personal or rental purposes.

The Good Tax News:

• No restrictions on US nonresidents investing in US rental properties.  Nonresidents income tax on the investment is the same as that paid by US residents if they make the proper election to have the rental treated as doing business in the US.
• Residential rentals are depreciated over a 27.5 year period.  You must allocated the purchase price between the building (which can be depreciated) and the land which cannot be
  
  depreciated. The depreciation taken each year reduces your taxable income from the property.
• You must file form 1040NR with the IRS each year and a state income tax return if the property is located in a state with income taxes (which is most likely).
• If you wish to sell your original rental and trade into another one you are eligible to do so tax free if you qualify under the IRC 1031 tax free exchange rules. The new rental must still be located in the US.  You cannot tax free exchange into a rental property outside of the US.

The Bad News (with  possible solutions):

• If the nonresident dies while owning the property the fair market value of the property will be subject to US estate tax to the extent it exceeds $60,000.    However, the property will then have a new stepped up basis for US income tax purposes equal to the fair market value on the estate tax return.  There are ownership methods  using foreign trusts or corporations which  can be used to avoid the estate tax.

We can advise you on all the  US tax aspects  ( and most legal and financial questions) involved in the purchase of real estate or businesses in the US while you are a nonresident.  Email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.com or www.expatattorneycpa.com.

US Expats and the Affordable Care Act (Obamacare) Requirements

We have had many questions from US expats whether or not they are going to have to purchase health insurance that qualifies under the Affordable Care Act (Obama care) or be penalized if they do not.

There is one safe harbor where you will not have to take any action.  If you are eligible to take the IRC 911  foreign earned income exclusion (Form 2555) either as a bonafide resident of a foreign country or under the physical presence test, you are specifically exempted from the health
insurance requirements of the Act.

Also, if you are working abroad but covered by the Group plan of your US employer or covered by medicare you are exempt from the Affordable Care Act.

Those who only work temporarily abroad for a few months and then return to the US are not exempted from the Acts requirements and must obtain health insurance or suffer penalties

Nonresidents who are not in the US long enough to become permanent residents (usually 183 days or more) are not required to obtain health coverage.

HSBC DEPOSITOR FOUND GUILTY ON FAILURE TO FILE FBARS AND SHOW TAXABLE INCOME FROM DEPOSITS

Read all details including a copy of the courts guilty verdict in the Federal Tax Crimes Blog by Jack Townsend.

Avoid these problems by catching up now. After IRS contacts you, it is too late to apply for the amnesty allowed in the Offshore Disclosure Program.  We can help

US SOCIAL SECURITY FOR THOSE OUTSIDE OF THE US AND US NONRESIDENTS

Sometimes there are problems receiving social security when you are outside the US or a nonresident of the US living in  another country.  The Social Security Administration has published a great pamphlet setting forth the rules.  They also are good at answering questions when you phone the SSA.  Their website is at www.ssa.gov.   The Pamphlet setting forth those rules can be Downloaded  HERE.

100th Anniversary of the US Income Tax

About 100 years ago in 1913 Congress and the states approved the 16th amendment  to the US constitution which created the US income tax.   Prior to that the US Supreme Court had held that the income tax was not Constitutional.

In 1913, the tax code consisted of 400 pages, but by 2012 the tax code was over 73,608 pages.  The US has gone form a simple system to a very complex unfriendly system.

But having some sort of taxation goes back to the country's beginning. From 1791 to 1802, the government was supported by tax revenue from the sale of such items as liquor, tobacco, sugar, property sold at auction and even through the sale of slaves.

The high cost of the War of 1812 saw the first sales tax on gold, silverware, jewelry and watches. But by 1817, Congress eliminated all taxes and relied on tariffs from imported goods for revenues.

It was in 1862, to fund the Civil War, that Congress enacted the first income tax. Anyone making between $300 to $10,000 a year paid a rate of 3 percent. That tax ended soon after the war.

Congress also established the Internal Revenue Service at the same time, which had much the same power and authority then as it does now.

Jumping to 1894, Congress passed the first peacetime income tax law, but a year later the Supreme Court declared it unconstitutional. The court said that taxes on rents and real estate income had to be divided among the states according to population, which the law did not allow.

But the court did make a crucial statement in its ruling. It said that Congress had the right to impose a direct income tax—and that led to the passage of the 16th Amendment on October 4, 1913.

Voluntary Regular Disclosure of Foreign Bank Accounts Goes Bad

http://www.forbes.com/sites/irswatch/2013/09/26/zwerner-answers-doj-effortsto-collect-multiple-50-percent-civil-fbar-penalties/

Disclose Your Foreign Financial Accounts or Else!

FATCA's Bleak Choices For Accounts, Income, Disclosure Read More in This Forbes Article

We have assisted, advised and represented hundreds of taxpayers disclose their foreign bank and financial accounts to the IRS.  If you need experienced attorney/CPA representation email us 

See tax reasons Why Americans Surrender Citizenship

Americans turn in passports as new tax law hits.  ~   Read the whole story here from CNN Money

Our firm has advised or represented over a hundred clients to date in this process!

Foreign Retirement Plans to Register & Report US Citizens Accounts to IRS.

Read more in Bloomberg's Business Week Article HERE

REDUCE YOUR IRS PENALTIES - Read their manual

Read the IRS Manual on Taxpayer Penalties HERE

Email us if you need experienced tax professional representation against the IRS

IRS SAYS ALL SAME SEX MARRIAGES OK FOR FEDERAL TAX PUPOSES

IRS Rules All Legal Same Sex Marriages Will Be Recognized For Federal Tax Purposes Read More Here

Better Hurry Up And Report Your Foreign Accounts!

Every American With Money Abroad--Anywhere Abroad--Is Impacted By Massive Bank Deal READ MORE HERE

FBAR NEW FILING METHOD PUZZLE?

Foreign Bank Accounts, IRS, FinCEN & Catch-22 http://www.forbes.com/sites/robertwood/2013/08/20/foreign-bank-accounts-irs-fincen-catch-22/

Expatriate ( surrender us citizenship) to save taxes

http://www.forbes.com/sites/robertwood/2013/08/12/thousands-leave-u-s-over-taxes-5-rules-if-youre-tempted/

FBAR form TDF 90-22.1 replaced by FinCen Report 114

The FBAR form TDF 90-22.1 that US taxpayers must use to report their foreign bank and other financial accounts (usually including foreign stock brokerage accounts and pension plans) has been renamed as FinCen Report 114.  It now must be filed on line and cannot be filed on paper.  The renumbering of the form will only ad to the confusion many taxpayers have concerning the filing requirements for this form and when they must file it.

DOWNLOAD THE INSTRUCTIONS ON HOW TO USE THE NEW ON LINE FORM HERE

In June, the AICPA reported that Financial Crimes Enforcement Network (FinCEN) took a big step forward and began allowing third-party preparers of FBARs to e-file on behalf of account holders.  To facilitate the e-filing of FBARs, FinCEN has released a new FBAR e-filing authorization form.  The new form, FinCEN Form 114a, Record of Authorization to Electronically File FBARs, is to be used by filers who submit FBARs jointly with their spouses, or through third-party preparers.  The form should not be filed with the FBAR but copies of it must be maintained by both the filer and the account holder and made available upon request by FinCEN or the IRS. 

FinCEN is also making technical adjustments to ease FBAR filing and allow for enhancements such as introducing new space on the form for filers to provide reasons for late filing as well as the addition of third party preparer information. In addition, an FBAR batch filing capability is now available for testing. These new capabilities and the ability for filers to test their batch files are available on the BSA E-Filing Test site. Updated FBAR Batch Filing Specifications are also located on the BSA E-Filing Test site. FinCEN anticipates the revised electronic FBAR and batch capability will be available for general use by September 30, 2013.

If you need assistance filing late FBARs (now FINCEN Form 114) please email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.com 

TAX DEDUCTIONS FOR EXPAT PART TIME BUSINESSES

How Not To Run A Side Business: Navigating The Hobby Loss Rules http://www.forbes.com/sites/anthonynitti/2013/07/22/how-not-to-run-a-side-business-navigating-the-hobby-loss-rules/

WHAT IRS LOOKS AT TO DETERMINE IF IT WILL AUDIT YOUR TAX RETURN

Great flow chart graphic (see link below) showing the statistics and criteria for audit by the IRS.  Note that foreign bank accounts are one of the criteria.  The IRS has recently significantly increased teh audits of expatriates living abroad . Those audits are conducted by mail, phone, etc.  You will need written documentation to support anything they question on your return (without written documentation you will lose the deduction).

The IRS will often test your reported income by asking to see your bank statements, etc. to determine how much money is going through those statements and compare it with your reported income. Any difference must be explained.  Your lifestyle (home costs, living expenses, etc) must also be supported by your income or you may have to explain and prove where the additional funds to support it come from.

LINK TO AUDIT CRITERIA AND STATISTICS  http://www.entrepreneur.com/article/227437.

Email us if you need experienced attorney/CPA tax audit representation 

GAO: Foreign account “quiet disclosures” may be much higher than detected

Quite disclosure is when taxpayers with previously unreported foreign bank or financial accounts file amended returns to report the income and file the required FBAR forms (TDF 90-22.1) without going through the several formal IRS offshore disclosure programs.  The IRS does not approve of silent disclosure and has threatened to seek penalties against all taxpayers who try that method of filing past FBAR forms.  The Government Accounting Office has release a report which can be read below about the large number of quiet disclosures that have not yet been discovered by the IRS.

GAO: Foreign account “quiet disclosures” may be much higher than detected

4 Real Life Stories of Individuals Living Abroad who entered the IRS Offshore Disclosure Program

Marie Sapirie in Tax Analysts describes four real life scenarios of taxpayers who entered the IRS Offshore Disclosure program which includes the complications, problems and hardship suffered by these individuals. READ ARTICLE HERE

We have assisted well over a hundred expat US Citizens to date surface with the  IRS and through the complexities of the several programs available.  We can help you.  ddnelson@gmail.com  and www.expatattorneycpa.com 

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:  http://bsaefiling.fincen.treas.gov/Enroll_Individual.html

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!

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?

Notices

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 ddnelson@gmail.com or visit our websites at www.TaxMeLess.com or www.ExpatAttorneyCPA.com .  Skype: dondnelson

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 ddnelson@gmail.com .

FATCA, FBAR, 8938 and Foreign Financial Asset Reporting Seminar in Cabo San Lucas, Mexico on 6/21/13

FATCA and IRS Foreign Asset Reporting Seminar in Cabo San Lucas on 6/21/13 presented by Intercam and Don D. Nelson, Attorney and CPA - READ MORE

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.

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  http://bsaefiling.fincen.treas.gov/Enroll_Individual.html 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. 

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
sent.

 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). 

Will the IRS use the internet, linked in, facebook, etc. to locate expatriate and offshore tax cheaters?

Will the IRS copy the Swedish Tax Agency tactics to find US offshore tax cheaters? They found out about a Swedish taxpayers offshore activities on Linkedin and found  they owed $750,000 in back taxes on unreported income.  The IRS will certainly use this tactic soon, if they have not started already.  READ MORE HERE                             

Offshore Tax Fraud Criminal Captured

The IRS has a long standing policy that if a taxpayer comes forward first (prior to their discovery) and makes them self current with past unfiled returns and unreported income, they will almost always waive criminal prosecution (up to five years in jail). Therefore, based on the information out there on the internet, it is best to come forward before it is too late. We can help. We have advised or assisted hundreds of taxpayers catch up and correct past returns with great success.  Visit our website at www.TaxMeLess.com or email ddnelson@gmail.com.  We offer "attorney-client" privilege for total confidentiality and privacy.

Expatriate Tax Return Due Dates- Nonresident Tax Return Due Dates

 U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return, generally have an automatic two-month extension beyond the regular Apr. 15 deadline to file their returns. The June 15 deadline is extended this year to June 17 since the extended due date falls on a Saturday. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies.

Nonresident aliens who received income from U.S. sources in 2012 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be Apr. 15 or June 17 depending on sources of income.

U.S. citizens and resident aliens are legally required to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.

Certain taxpayers may also have to fill out and attach to their return Form 8938, Statement of Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on Form 8938 if the aggregate value of those assets exceeds certain thresholds.

Separately, taxpayers with foreign accounts whose aggregate value exceeded $10,000 at any time during 2012 must file Treasury Department Form TD F 90-22.1. This is not a tax form and is due to the Treasury Department by June 30, 2013. Treasury encourages taxpayers to file it electronically.

June 17 soon approaching. IRS reminded taxpayers that the filing deadline is Monday, June 17, 2013, for U.S. citizens and resident aliens living overseas, or serving in the military outside the U.S. on the regular due date of their tax return. Taxpayers are reminded to attach to their return the statement described above.

Need help with these filings?. Contact us at ddnelson@gmail.comm or www.TaxMeLess.com 

 

Expatriates Must Substantiate Travel Expenses in Writing to Get a tax Deduction

Many expats deduct travel and entertainment expenses for their businesses on their tax returns. You can only succeed in the event of an IRS audit (which are now becoming common with  respect to US expatriates), if you can prove the amount deducted and the relationship to your business with written records. The rules are simple:

Under Code Sec. 274, heightened substantiation requirements apply to: (1) any traveling expense, including meals and lodging away from home; (2) any item with respect to an activity in the nature of entertainment, amusement, or recreation; (3) any expense for gifts; or (4) the use of “listed property,” such as a passenger automobiles.

When you wish to deduct travel and entertainment expenses, you r must substantiate those deductions by adequate  written records or by sufficient evidence corroborating the taxpayer's own statement: (1) the amount of the expense; (2) the time and place of the travel, use of the property, etc.; (3) the business purpose of the expense, and (4) the business relationship to the taxpayer of the deduction . To do this, a taxpayer must maintain records and documentary evidence that in combination are sufficient to establish each element of an expenditure or use. (Reg. § 1.274-5T(c)(1) and Reg. § 1.274-5T(c)(2) 

We can help if you are audited or planning so you can deduct all of your business expenses. Let us do your expatriate tax return preparation. We have been doing expat returns for over 31 years.  WWW.TaxMeLess.com   or email ddnelson@gmail.com.