Reducing or Eliminating 951a GILTI Tax on Conrolled Foreign Corporations

Many clients want to reduce or eliminate the new tax for 2018 and beyond on the undistributed earnings of their controlled foreign corporations (over 50% ownership in the hands of US taxpayers). This replaces the old regime where profits left in foreign corporations (except in certain specific types of situations) are not taxed until distributed as dividends or wages.

The new  IRS Section 951a is complex and often hits  US owners of small foreign corporations. The tax on the earnings which are deemed distributed actually is assessed on the 1040 (or other US tax form) of the owner of the corporation though a deemed distribution (Subpart F) which is included with the shareholders other income.  READ MORE ABOUT HOW TO AVOID  OR REDUCE THE GILTI 951A TAX HERE

If you own a controlled  foreign corporation we can provide you with guidance and help you eliminate or reduce this new tax on deemed distributions of its profits.  Email us at taxmeless@gmail.com with your questions or for help.   Don Nelson, Tax Attorney

EXPATRIATE AND NONRESIDENT BUSINESS EXPENSES WHEN SELF EMPLOYED ABROAD

When you are self employed and have your own business abroad most of the same rules apply that apply when  in the USA.  Many overlook deductions and expenses which may reduce your taxable income and social security payments to US (if required).  Some of the expense rules applicable to your US income tax return may be different than those in the country in which you operate your business.   See below for guidance.

Business expenses. Business expenses are usually deductible if the business operates to make a profit. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that’s common and accepted in the trade or business. A necessary expense is one that’s helpful and appropriate for the trade or business. An expense doesn’t have to be indispensable to be considered necessary. Business expenses include:

• Business use of a home – If a taxpayer uses part of their home for business, part of their home expenses may be deductible. These expenses may include mortgage interest, insurance, utilities, repairs and depreciation. Alternatively, a simplified method is available for figuring this deduction. Special rules and limits apply. See Publication 587 for details. 
• Business use of a car – If a taxpayer uses their car in their business, they can deduct car expenses. If they use it for both business and personal purposes, they must divide expenses based on actual mileage. For details, including special recordkeeping rules, see Publication 463.
• Meals and entertainment – In general, taxpayers can deduct 50 percent of the cost of business meals if the taxpayer -- or an employee of the taxpayer --is present and the food or beverages aren’t lavish or extravagant.
• Rent expense – In general, a taxpayer can deduct rent as an expense only if the rent is for property used in their trade or business. If they have or will receive equity in or title to the property, the rent is not deductible.
• Interest – Business interest expense is an amount charged for the use of money a taxpayer borrowed for business activities. Limits and special rules may apply. See basic questions and answers about the limitation on the deduction for business interest expense for more information.
• Taxes – A taxpayer can deduct various federal, state, local, and foreign taxes directly attributable to their trade or business as business expenses.

Publication 535, Business Expenses, has more information about these and other deductible business expenses, including employee related expenses such as employees’ pay, retirement plans and insurance.

You may owe US self employment tax (medicare and social security) on your net business income if the US does not have a social security agreement with the country you live in or if you are not paying into that countries social security system. Many countries do not have such agreements with the US.

We can help with your nonresident, international and expatriate tax planning, tax returns and IRS issues, audits, payment plans and citizenship surrender. Email us at Expatriate Tax Help Now.   US Tel. 949-480-1235

PAY YOUR ITS INCOME TAXES ON LINE DIRECTLY FROM YOUR BANK ACCOUNT WHEN YOU ARE AN EXPAT LIVING ABROAD

If you owe taxes as an expat mailing a check to the IRS often is not the answer. The following video from the IRS shows how to pay the IRS by direct deposit, credit card or debit card.  Listen to the IRS video explaining payment methods here:  https://youtu.be/drh1UUCMMLk

Another method which can be used to pay from foreign bank accounts is the IRS wire transfer. Read more about this method and how to do it HERE.

Many states including California have on line portals to allow payments without sending checks directly from your bank account.

Of course the CPAs and Attorneys at TaxMeLess are always there to help you with your expatriate, nonresident and international tax return forms, payments plans and citizenship surrender (stop paying US taxes forever).  You can email us by clicking HERE