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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

August 9, 2020


 A. THE IMMIGRATION & NATIONALITY ACT  Section 349(a)(5) of the Immigration and Nationality Act (INA) (8 U.S.C. 1481(a)(5)) is the section of law governing the right of a United States citizen to renounce abroad his or her U.S. citizenship. That section of law provides for the loss of nationality by voluntarily and with the intention of relinquishing nationality: "(5) making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state, in such form as may be prescribed by the Secretary of State."

B. ELEMENTS OF RENUNCIATION A person wishing to renounce his or her U.S. citizenship must voluntarily and with intent to relinquish U.S. citizenship: appear in person before a U.S. consular or diplomatic officer, in a foreign country at a U.S. Embassy or Consulate; and sign an oath of renunciation Renunciations abroad that do not meet the conditions described above have no legal effect. Because of the provisions of Section 349(a)(5), U.S. citizens can only renounce their citizenship in person, and therefore cannot do so by mail, electronically, or through agents. In fact, U.S. courts have held certain attempts to renounce U.S. citizenship to be ineffective on a variety of grounds, as discussed below. Questions concerning renunciation of U.S. citizenship in the United Statespursuant to INA section 349(a)(6) must be directed to United States Citizenship and Immigration Services (USCIS) of the Department of Homeland Security. 

 C. REQUIREMENT - RENOUNCE ALL RIGHTS AND PRIVILEGES A person seeking to renounce U.S. citizenship must renounce all the rights and privileges associated with such citizenship. In the case of Colon v. U.S. Department of State, 2 F.Supp.2d 43 (1998), the U.S. District Court for the District of Columbia rejected Colon’s petition for a writ of mandamus directing the Secretary of State to approve a Certificate of Loss of Nationality in the case because, despite his oath of renunciation, he wanted to retain the right to live in the United States while claiming he was not a U.S. citizen. 

 D. DUAL NATIONALITY / STATELESSNESS Persons intending to renounce U.S. citizenship should be aware that, unless they already possess a foreign nationality, they may be rendered stateless and, thus, lack the protection of any government. They may also have difficulty traveling as they may not be entitled to a passport from any country. Statelessness can present severe hardships: the ability to own or rent property, work, marry, receive medical or other benefits, and attend school can be affected. Former U.S. citizens would be required to obtain a visa to travel to the United States or show that they are eligible for admission pursuant to the terms of the Visa Waiver Program. If unable to qualify for a visa, the person could be permanently barred from entering the United States. If the Department of Homeland Security determines that the renunciation is motivated by tax avoidance purposes, the individual will be found inadmissible to the United States under Section 212(a)(10)(E) of the Immigration and Nationality Act (8 U.S.C. 1182(a)(10)(E)), as amended. Renunciation of U.S. citizenship may not prevent a foreign country from deporting that individual to the United States in some non-citizen status.

 E. TAX & MILITARY OBLIGATIONS /NO ESCAPE FROM PROSECUTION Persons who wish to renounce U.S. citizenship should be aware of the fact that renunciation of U.S. citizenship may have no effect on their U.S. tax or military service obligations . You must file special forms and final tax returns with the IRS to avoid having to file taxes in the future. In addition, the act of renouncing U.S. citizenship does not allow persons to avoid possible prosecution for crimes which they may have committed or may commit in the future which violate United States law, or escape the repayment of financial obligations, including child support payments, previously incurred in the United States or incurred as United States citizens abroad.

 F. RENUNCIATION FOR MINOR CHILDREN/INDIVIDUALS WITH DEVELOPMENTAL OR INTELLECTUAL DISABILITIES Citizenship is a status that is personal to the U.S. citizen. Therefore parents may not renounce the citizenship of their minor children. Similarly, parents/legal guardians may not renounce the citizenship of individuals who lack sufficient capacity to do so. Minors seeking to renounce their U.S. citizenship must demonstrate to a consular officer that they are acting voluntarily, without undue influence from parent(s), and that they fully understand the implications/consequences attendant to the renunciation of U.S. citizenship. Children under 16 are presumed not to have the requisite maturity and knowing intent to relinquish citizenship; children under 18 are provided additional safeguards during the renunciation process, and their cases are afforded very careful consideration by post and the Department to assess their voluntariness and informed intent. Unless there are emergent circumstances, minors may wish to wait until age 18 to renounce citizenship.

 G. IRREVOCABILITY OF RENUNCIATION Finally, those contemplating a renunciation of U.S. citizenship should understand that the act is irrevocable, except as provided in section 351 of the INA (8 U.S.C. 1483), and cannot be canceled or set aside absent a successful administrative review or judicial appeal. Section 351(b) of the INA provides that an applicant who renounced his or her U.S. citizenship before the age of eighteen (or lost citizenship related to certain foreign military service under the age of 18) can have that citizenship reinstated if he or she makes that desire known to the Department of State within six months after attaining the age of eighteen. See also Title 22, Code of Federal Regulations, section 50.20. See also Section 50.51 of Title 22 of the Code of Federal Regulations regarding the administrative review of previous determinations of loss of U.S. citizenship. Renunciation is the most unequivocal way by which a person can manifest an intention to relinquish U.S. citizenship. 

In addition to the legal rules set forth above, you must also separately comply with the IRS rules to achieve your goal of no longer filing US tax returns and paying US taxes. Those rules are complex and require filing the form 8854 along with a final tax return. We have counsel hundred of clients in this procedure and assisted them filing the required forms with great success for over 10 years. Contact us if you need assistance and help. We are CPAs and Attorneys and can provide you with ALL of the expertise you need.  Our next blog post will discuss the Tax requirements adn rules. EMAIL US WITH QUESTIONS FOR FOR HELP

August 6, 2020

Here’s what expat taxpayers need to know about the home office deduction

The home office deduction allows qualifying taxpayers to deduct certain home expenses on their tax return. With more people working from home than ever before, some taxpayers may be wondering if they can claim a home office deduction when they file their 2020 tax return next year.  

Here are some things to help taxpayers understand the home office deduction and whether they can claim it:

  • Employees are not eligible to claim the home office deduction. 
  • The home office deduction Form 8829 is available to both homeowners and renters.
  •  There are certain expenses taxpayers can deduct. They include mortgage interest, insurance, utilities, repairs, maintenance, depreciation and rent.
  • Taxpayers must meet specific requirements to claim home expenses as a deduction. Even then, the deductible amount of these types of expenses may be limited.
  • The term "home" for purposes of this deduction:
    • Includes a house, apartment, condominium, mobile home, boat or similar property.
    • Also includes structures on the property. These are places like an unattached garage, studio, barn or greenhouse.
    • Doesn’t include any part of the taxpayer’s property used exclusively as a hotel, motel, inn or similar business.
  •  There are two basic requirements for the taxpayer’s home to qualify as a deduction:
    • There must be exclusive use of a portion of the home for conducting business on a regular basis. For example, a taxpayer who uses an extra room to run their business can take a home office deduction only for that extra room so long as it is used both regularly and exclusively in the business.
    • The home must be the taxpayer’s principal place of business. A taxpayer can also meet this requirement if administrative or management activities are conducted at the home and there is no other location to perform these duties. Therefore, someone who conducts business outside of their home but also uses their home to conduct business may still qualify for a home office deduction.
  • Expenses that relate to a separate structure not attached to the home will qualify for a home office deduction. It will qualify only if the structure is used exclusively and regularly for business.
  • Taxpayers who qualify may choose one of two methods to calculate their home office expense deduction:
    • The simplified option has a rate of $5 a square foot for business use of the home. The maximum size for this option is 300 square feet. The maximum deduction under this method is $1,500.
    • When using the regular method, deductions for a home office are based on the percentage of the home devoted to business use. Taxpayers who use a whole room or part of a room for conducting their business need to figure out the percentage of the home used for business activities to deduct indirect expenses. Direct expenses are deducted in full.
  • Contact us at if you need assistance or further information. We are one of the most experienced international and expatriate CPA firms and Attorneys on the Web. Visit our website at 

July 14, 2020

IRS gives tips on filing, paying electronically and checking refunds online; 2019 tax returns and payments due July 15

The Internal Revenue Service today reminded taxpayers with a filing requirement to file an accurate tax return on time even if a balance due can’t be paid in full. The deadline to submit 2019 tax returns is July 15, 2020, for most people. Members of the military serving overseas may have more time.  An extension can be filed using form 4868 available on line.
File electronically to avoid most common errors
Filing electronically and choosing direct deposit remains the fastest and safest way to file an accurate income tax return and receive a refund. Filing electronically reduces tax return errors as the tax software does the calculations, flags common errors and prompts taxpayers for missing information.
An inaccurate tax return can delay a refund.
Some common errors to avoid include:
  • Missing or inaccurate Social Security numbers. Enter each name and SSN exactly as printed on the Social Security card.
  • Incorrect filing status. The Interactive Tax Assistant on can help taxpayers choose the correct status. Tax software also helps prevent these mistakes.
  • Math errors. Tax preparation software does all the math automatically. Math errors are common on paper returns.
  • Figuring credits or deductions incorrectly. Taxpayers should follow the instructions carefully, and double check the information they enter when filing electronically. The IRS Interactive Tax Assistant can help determine if a taxpayer is eligible for certain tax credits.
  • Unsigned returns. Both spouses must sign if filing jointly. Taxpayers can avoid this error by filing their return electronically and digitally signing it. Exceptions may apply for military families if a spouse is serving overseas.
  • Filing with an expired individual taxpayer identification number.
In most cases, tax software helps to reduce or eliminate these. Find complete details on all the benefits of filing electronically, including IRS Free File, commercial tax prep software or an authorized e-File provider from the “File” page on
Checking on refunds
The IRS is processing electronic and paper tax returns and issuing refunds. The IRS normally issues most refunds in less than 21 days. Taxpayers who mailed a tax return will experience a longer wait time. There is no need to mail a second tax return or call the IRS. “Where’s My Refund?”  on is the most convenient way to check the status of a refund. It has a tracker that displays progress through three phases: (1) Return Received; (2) Refund Approved; and (3) Refund Sent.
All that is needed to use “Where’s My Refund?” is the taxpayer’s Social Security number, tax filing status (such as single, married, head of household) and exact amount of the tax refund claimed on the 2019 tax return. It is updated no more than once every 24 hours, usually overnight, so there’s no need to check the status more often.
Taxpayers should file now, schedule full or partial tax payments up to the July 15 due date
Taxpayers can pay online, by phone or with their mobile device and the IRS2Go app. When paying federal taxes electronically taxpayers should remember:
  • Electronic payment options are the optimal way to make a tax payment.
  • They can pay when they file electronically using tax software online. If using a tax preparer, taxpayers should ask the preparer to make the tax payment through an electronic funds withdrawal from a bank account.
  • IRS Direct Pay allows taxpayers to pay online directly from a checking or savings account for free.
  • Taxpayers can choose to pay with a credit card, debit card or digital wallet option through a payment processor. The processor may charge a fee. No fees go to the IRS.
  • The IRS2Go app provides the mobile-friendly payment options, including Direct Pay and payment processor payments on mobile devices.
  • Taxpayers may also enroll in the Electronic Federal Tax Payment System and have a choice of paying online or by phone by using the EFTPS Voice Response System.
Can’t pay a tax bill?
Everyone should file their 2019 tax return by the July 15 tax filing deadline regardless of whether or not they can pay in full. Taxpayers who owe and can’t pay all taxes due have options including: 
  • Online Payment Agreement — Most individual taxpayers and many business taxpayers may qualify to use Online Payment Agreement to set up a payment plan. Taxpayers can setup a plan on in a matter of minutes. Setup fees may apply for some types of plans.
  • Delaying Collection — If the IRS determines a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves. In light of COVID-19, IRS postponed many compliance efforts until July 15 or later under the People First Initiative.
  • Offer in Compromise (OIC) — Taxpayers who qualify enter into an agreement with the IRS that settles their tax liability for less than the full amount owed.
Find more information on when, how and where to file see Tax Information for Individuals.
Need an extension of time to file a 2019 tax return?
Those who need more time to prepare their 2019 federal tax return can apply for an extension of time to file.  An extension of time to file does not grant an extension of time to pay taxes owed.  File an extension request, estimate and pay any owed taxes by the July 15 deadline to avoid possible penalties.
Individual tax filers, regardless of income, can use Free File to electronically request an automatic tax-filing extension. Filing this form gives the taxpayer until Oct. 15 to file a return. To get the extension, the taxpayer must estimate their tax liability on this form and pay any amount due
Taxpayers can also get an extension by paying all or part of their estimated income tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or a credit or debit card. This way they won’t have to file a separate extension form and will receive a confirmation number for their records.
Check withholding
The IRS encourages taxpayers to do a Paycheck Checkup as soon as possible to avoid having too much or too little tax withheld this year. Too much normally results in a refund while too little lends itself to taxes owed next year. Taxpayers should check their withholding each year and when life changes occur, such as marriage, childbirth, adoption or buying a home.
The IRS Tax Withholding Estimator is an excellent tool to help people plan and make any needed tax withholding adjustments.