When Must a US taxpayer or Expatriate File Forms 114 and 8938?

When is a US Taxpayer required to disclose offshore accounts on an FBAR and IRS Form 8938? While many US taxpayers and expatriates have come to understand the requirements of the FinCEN Form 114 or FBAR, a surprising number still need to understand the risk they are taking when they fail to disclose offshore financial accounts, assets, and income.

Read More in the article from JD Supra

We are attorney/CPAs experts on US International Taxation.  Visit our website at www.taxmeless.com or email ustax@hotmail.com.   Our whatsapp us number is 818-519-9219. Kauffman Nelson LLP.

US Expatriate Tax Rules for Those Living and Working Outside of the USA.

Tax rules for US expatriates living abroad can be complex and depend on various factors such as income sources, residency status, and specific tax treaties between the US and the country of residence. Here's an

overview:

1. Foreign Earned Income Exclusion (FEIE)**: One of the primary benefits for US expatriates is the FEIE, which allows qualifying individuals to exclude a certain amount of their foreign earned income from US taxation. For tax year 2023, the maximum exclusion amount is $112,000 per qualifying individual.

2. Foreign Tax Credit (FTC)**: If you pay foreign taxes on income that is also subject to US taxation, you may be eligible for a foreign tax credit. This credit can reduce your US tax liability on that income. 

3. Foreign Housing Exclusion or Deduction**: Expatriates may also qualify for a housing exclusion or deduction to help offset the cost of housing abroad. This can be claimed in addition to the FEIE.

4. Tax Treaties**: The US has tax treaties with many countries to avoid double taxation and provide certain exemptions. These treaties can affect how income is taxed and which country has the primary right to tax specific types of income.

5. Filing Requirements**: US citizens and green card holders living abroad are generally required to file US tax returns if their income exceeds certain thresholds, regardless of where the income was earned. There are specific forms, such as the Form 1040 and Form 2555 (for the FEIE), that may need to be filed.

6. Reporting Foreign Accounts**: US expatriates are required to report their foreign bank accounts and other financial assets if they exceed certain thresholds. This is done through the Foreign Bank Account Report (FBAR) and Form 8938.

7. Social Security and Medicare Taxes**: US citizens working abroad may still be subject to Social Security and Medicare taxes, depending on their employment situation and the country they're residing in.

8. State Taxes**: While living abroad, US expatriates may still be liable for state taxes, depending on the state's rules regarding residency and taxation.

It's essential for US expatriates to understand their tax obligations and take advantage of available benefits to minimize their tax liability while remaining compliant with US tax laws. Consulting with a tax professional who specializes in expatriate taxation is highly recommended to ensure compliance and maximize tax benefits.  Contact Kauffman Nelson CPAs and Attorney if you need assistance.  Email: ddnelson@gmail.com . We have been doing expatriate and international taxes for over 30 years for over 800 clients located abroad.   US Phone 949-480-1235.  Whatsapp 818-519-9219.

What happens if you don't do your taxes on time or never ?

Not filing your tax return or paying your taxes on time or at all can lead to serious consequences, including:

• Penalties for late filing: The IRS will issue a Failure to File Penalty of 5% of the unpaid taxes you owe for each month or partial month that your tax return is late, unless you are also issued a Failure to Pay Penalty in the same month. In that case, the Failure to File Penalty may be reduced by the amount of the Failure to Pay Penalty for that month. The penalty will not, however, exceed 25% of the taxes you owe. 
• Penalties for late payment: The IRS will issue a Failure to Pay Penalty of 0.5% of the amount of tax owed after the due date and for each month or partial month the tax remains unpaid. The penalty will not, however exceed 25% of the taxes you owe.
• Interest charges: Not paying your taxes on time can lead to penalties and interest charges on the amount owed. Interest may accrue on the unpaid tax owed up until the date of payment in full. The interest rate is based on the federal short-term rate plus 3% and is adjusted quarterly.
• Legal consequences: Continuing to ignore your tax responsibilities can lead to wage garnishments, tax liens and levies, and even imprisonment.

The good news is that the IRS actually does try to help those who come forward on their own and, in many cases, is willing to work something out. We are US CPAs and Attorney. Email us at ddnelson@gmail.com or whatsapp at 1818-519-9219.  

The 10 Cheapest Countries Where You Can Buy Citizenship or Residency For as Low as $19,000

 From entrepreneur Magazine:  

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Find the country you can live in and save taxes. We can help you save on your US taxes if you live  abroad either as retired person or business.  Email us at ddnelson@gmail.com for more. We have been assisting expats with their US taxes and moving abroad for over 30 years.  Kauffman Nelson LLP, CPAs and Attorney at Law.  Whatsapp  1818 519 9219.

2023 Tax Extensions for US Expatriates and Other Beneficial Special Rules for US Expatriates

 The Internal Revenue Service reminds taxpayers living and working outside the U.S. to file their 2023 federal income tax return by Monday, June 17, 2024. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

This deadline does not apply to taxpayers who live or have a business in Israel, Gaza or the West Bank, and certain other taxpayers affected by the terrorist attacks in the State of Israel. They are granted relief until Oct. 7, 2024, to both file and pay most taxes due. For more information, check out Notice 2023-71PDF.

Taxpayers unable to file their tax returns by the June deadline can request a further extension to file, but not pay, until Oct. 15.

Qualifying for the June 17 extension

If a taxpayer is a U.S. citizen or resident alien residing overseas or is in the military on duty outside the U.S., on the regular due date of their return, they are allowed an automatic 2-month extension to file their return without requesting an extension. If they use a calendar year, the regular due date of their return is April 15, and the automatic extended due date would be June 15. Because June 15 falls on a Saturday this year, the due date is delayed until the next business day, June 17.

A taxpayer qualifies for the June 17 extension to file and pay if they are a U.S. citizen or resident alien, and on the regular due date of their return:

• They are living outside the United States and Puerto Rico and their main place of business or post of duty is outside the United States and Puerto Rico, or

• They are in military or naval service on duty outside the United States and Puerto Rico.

Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies.

File to claim benefits

Many taxpayers living outside the U.S. qualify for tax benefits, such as the foreign earned income exclusion and the Foreign Tax Credit, but they are available only if a U.S. return is filed.

In addition, the IRS encourages families to check out expanded tax benefits, such as the Child Tax Credit, Credit for Other Dependents and Credit for Child and Dependent Care Expenses and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of 2023. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents, and the instructions to Form 2441, Child and Dependent Care Expenses.

Reporting required for foreign accounts and assets

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B, Interest and Ordinary Dividends, to their Form 1040 series 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.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. For details, see the instructions for this form.

Reporting foreign financial accounts to Treasury

Certain foreign financial accounts, such as bank accounts or brokerage accounts, must be reported by electronically filing Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The FBAR requirement applies to anyone with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2023.

The IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the Bank Secrecy Act E-Filing System. The deadline for filing the annual FBAR is April 15, 2024. However, FinCEN grants those who missed the April deadline an automatic extension until Oct. 15, 2024. There’s no need to request this extension. See FinCEN’s websitePDF for further information.

Report in U.S. dollars

Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both FINCEN Form 114 and IRS Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign currency and currency exchange rates.

Making tax payments

To ensure tax payments are credited promptly, the IRS urges taxpayers to consider the speed and convenience of paying their U.S. tax obligation electronically. The fastest and easiest way to do that is via their IRS Online Account, IRS Direct Pay and the Electronic Federal Tax Payment System (EFTPS). These and other electronic payment options are available at IRS.gov/payments.

Reporting for expatriates

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2023 must file a dual-status alien tax return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with the IRS by the due date of the tax return (including extensions). See the instructions for this formPDF and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Extensions beyond June 17

Taxpayers who can’t meet the June 17 due date can request an automatic extension to Oct. 15 by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS encourages anyone needing the additional time to make their request electronically. Several electronic options are available at IRS.gov/extensions.

Businesses that need more time must file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns.