Basic Questions and Answers on Form 8938 (rev 6/7/12) | ||
|
US IRS rules, regulations and laws, for US Citizens, Americans, green card holders, and nonresidents living abroad or moving to the US or out of the US.... valuable information on IRS rules concerning U.S. expatriates and their tax returns, and tax planning.... by an experienced International Tax Attorney
Search This Blog
June 20, 2012
IRS Adds 9 More Questions and Answers on Form 8938 - Reporting Foreign Financial Assets
Reporting Foreign Financial Accounts Due Date for Form TDF 90-22.1 (FBAR) is 6/29/12 or 6/30/12
Your TDF 90-22.1 (FBAR form) where you must report to the IRS your foreign bank and financial accounts must arrive at the designated address by 6/29/12 or be filed on line no later than 6/30/12. No extensions are allowed. You must report accounts owned by you or that you have signature authority or control over.
This form must be filed for your 2011 foreign financial accounts highest balances during 2011 exceed $10,000 US. Therefore, you need to combine these highest balances to determine if you need to file this form. Foreign financial accounts (but not limited to these) which must be on the form include:
- Bank and savings accounts
- Stock Brokerage Accounts
- Pension plans
- Cash surrender value in foreign life insurance and annuities
- Gold held by another company or person for safe keeping.
Best to file the form Certified mail with return receipt so you have proof of filing or by DHL, UPS, or Fed Exp.
If you are required to file this form, you may also be obligated to file Form 8938 with your personal US tax return.
Link to download paperTDF 90.22.1(FBAR): http://www.irs.gov/pub/irs-pdf/f90221.pdf
Link to file TDF 90-22.1 on line: http://bsaefiling.fincen.treas.gov/Enroll_Individual.html
Potential Penalties for Not Filing or Filing Late:
The following chart highlights the civil and criminal penalties that may be asserted for not complying with the FBAR reporting and recordkeeping requirements.
Violation
|
Civil Penalties
|
Criminal Penalties
|
Comments
|
---|---|---|---|
Negligent Violation | Up to $500 | N/A | 31 U.S.C. § 5321(a)(6)(A) 31 C.F.R. 103.57(h) |
Non-Willful Violation | Up to $10,000 for each negligent violation | N/A | 31 U.S.C. § 5321(a)(5)(B) |
Pattern of Negligent Activity | In addition to penalty under § 5321(a)(6)(A) with respect to any such violation, not more than $50,000 | N/A | 31 U.S.C. 5321(a)(6)(B) |
Willful - Failure to File FBAR or retain records of account | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. | Up to $250,000 or 5 years or both | 31 U.S.C. § 5321(a)(5)(C) 31 U.S.C. § 5322(a) and 31 C.F.R. § 103.59(b) for criminal. The penalty applies to all U.S. persons. |
Willful - Failure to File FBAR or retain records of account while violating certain other laws | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. | Up to $500,000 or 10 years or both | 31 U.S.C. § 5322(b) and 31 C.F.R. § 103.59(c) for criminal The penalty applies to all U.S. persons. |
Knowingly and Willfully Filing False FBAR | Up to the greater of $100,000, or 50 percent of the amount in the account at the time of the violation. | $10,000 or 5 years or both | 18 U.S.C. § 1001, 31 C.F.R. § 103.59(d) for criminal. The penalty applies to all U.S. persons. |
Civil and Criminal Penalties may be imposed together. 31 U.S.C. § 5321(d). |
June 4, 2012
IMPORTANT US INTERNATIONAL TAX FORM DUE DATES
- Form TDF 90-22.1 (FBAR FORM) where you report details of your foreign financial accounts, including bank accounts, stock brokerage accounts, pension plans, etc. is must be received by the IRS by 6/30/12. No extension can be granted. Penalty for filing late can be $10,000 or more.
- Expat tax returns (if you lived abroad on 4/17/12) are due on 6/15/12 for 2011. You can obtain a further extension by filing form 4868 prior to that date. This does not extend the due date of any taxes you owe which must have been paid by 4/17/12 to avoid late payment penalties and interest.
- Forms 5471 (foreign corporations), 8865 (foreign partnerships), 8858 (Disregarded Entity), and 8621 (Passive Foreign Investment Company- usually foreign mutual funds) are all due on the due date including extensions thereof of your personal tax return. Most of these forms provide for a possible $10,000 penalty for filing late.
- If you have not filed these forms for many years (and were required to file) now may be a good time to file all those past years forms because the 2012 Voluntary Offshore Disclosure Program is still in effect and sometimes under that program you may be able to file these forms late and secure reduced or no penalties at all!
If you have prepared these forms yourself and are not sure if you have done so correctly, we do offer a service where we review your self prepared forms and provide you with written comments and suggested corrections. These forms can all be downloaded at www.irs.gov.
May 27, 2012
IRS Chart Comparing What to Include on Form 8938 and on FBAR Form (TDF 90-22.1)
The link below leads to the IRS Comparison Chart showing what types of assets to include on Form 8938 and the FBAR form (TDF 90-22.1) or on both. Both of these forms must be filed for 2011 if applicable or you risk a $10,000 penalty for each for failing to report foreign financial assets and foreign financial accounts. If you need us to fill of these forms for you or review the form you self prepared for completeness and correctness, we do provide that service.
LINK TO IRS CHART
Email US for help
LINK TO IRS CHART
Email US for help
US Expatriates Can Avoid Paying State Income Taxes with Proper Planning
Many US expats wish to maintain a US mailing address or home in the US , or US state drivers license, etc. but do not want to risk having to pay any state income taxes (there is no Federal requirement that you maintain a state tax domicile if you live and work outside of the US). You should check the tax laws in your state of residency to see what difficulties you may encounter trying to stop paying state income taxes when you do chose to live and work abroad. Many states have laws which attempt to keep their residents paying state income taxes (even though an ex resident may have moved their residence abroad) while other states make it easy to stop paying state tax. California, Virginia, New Mexico and a few other states are those that make it difficult to stop paying state income tax when you change your domicile to one outside of the US.
One easy solution you can use to attempt to avoid paying state income taxes when living and working abroad, is to move your US address, tax domicile, voter registration, drivers licenses, etc. a state with no personal income taxes. The US states which do not have personal individual income taxes. Those include:
One easy solution you can use to attempt to avoid paying state income taxes when living and working abroad, is to move your US address, tax domicile, voter registration, drivers licenses, etc. a state with no personal income taxes. The US states which do not have personal individual income taxes. Those include:
|
May 23, 2012
IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start
|
May 13, 2012
10 IRS Rules for Stress-Free Foreign Financial Accounts
See the article HERE from Forbes Magazine for these ten rules: Remember financial accounts also include foreign pension accounts, gold held in another's vault, foreign contracts you are collecting payments and interest on, cash surrender value of foreign life insurance, positive balances (you are owed the money) in foreign credit cards, foreign stock broker accounts, and any other manner of foreign financial asset. Interesting enough it does not include real estate if held in your own name. All of these items must also be included in Form 8938 if you are required to file.
Interestingly enough foreign real estate only has to be reported as a foreign assets if you hold it in a foreign corporation, partnership, LLC, or trust. If you hold it in your own name and do not rent it out, you do not have to tell the government anything about it. This also holds true with respect to gold, cash, diamonds, etc. located abroad and kept in your matters or personal foreign safe.
Interestingly enough foreign real estate only has to be reported as a foreign assets if you hold it in a foreign corporation, partnership, LLC, or trust. If you hold it in your own name and do not rent it out, you do not have to tell the government anything about it. This also holds true with respect to gold, cash, diamonds, etc. located abroad and kept in your matters or personal foreign safe.
May 11, 2012
Number of Expats Filing FBAR Forms More than Doubles Per New York Times
The increased pressure from the IRS has produced big results. The numbers of Americans filing the Report of Foreign Bank and Financial Accounts, or FBAR, soared from 276,386 in 2009 to 618,134 in 2011 (failure to file, the IRS warns, “subjects a person to a prison term of up to 10 years and criminal penalties of up to $500,000”).
Due to the increase IRS pressures, a growing number of Americans living abroad are renouncing once-valued U.S. passports and Citizenship. Some 1,780 people gave up U.S. nationality last year, eight times the 2008 level and the largest number in more than a decade.
Due to the increase IRS pressures, a growing number of Americans living abroad are renouncing once-valued U.S. passports and Citizenship. Some 1,780 people gave up U.S. nationality last year, eight times the 2008 level and the largest number in more than a decade.
In 2001, the IRS had only 13 agents in its international operations unit, and none specifically targeting what it calls “global high wealth.” By 2011, there were 71 for global high wealth — and 856 for international operations, up from 259 just a year before. The IRS in March announced it was going to hire 300 more international agents.
Read more about the IRS and the pressures it is putting on expats IN THIS ARTICLE FROM THE NEW YORK TIMES.
May 10, 2012
YOUR US INCOME and TAXES MAY GO UP ON 1/1/13
Unless Congress takes action and passes new tax law (and that will not happen until after the Presidential election , a tax Bomb will go off on January 1, 2013 which could cause you adverse consequences.
- The Lowest income tax rate jumps from 10% to 15%
- The top tax rate climbs from 35% to 39.6%
- Long-term capital gains tax rate climbs from 15% to 20%
- Dividends will be taxed at substantially higher rates
- The 2% payroll tax credit expires, and much more...
- The lifetime estate and gift tax exemption will decrease from $5 million to $1 million
Now is the time to do your income and estate tax planning in the event Congress does not take any action to stop these increases. We can help. www.TaxMeLess.com
May 8, 2012
2012 Foreign Earned Income Exclusion Increased By IRS
The IRS for 2012 has increased the Expatriate Foreign Earned Income Tax Exclusion to $95,900. This could save single person (without any available tax credits) up to an additional.$616 in US taxes on their 2012 return over what they might pay on the same foreign earned income on their 2011 return.
Remember an an expatriate living abroad on 4/17/12 you got an automatic extension to file your return until 6/15/12. You can get a further extension to file the return until 10/15/12 by filing form 4868 prior to 6/15. If you owe any taxes at that time interest and penalties will continue to accrue (at a rather low rate) until those taxes are paid. Remember form TDF 90-22.1 (FBAR) must be filed to report your foreign financial accounts by 6/30/12 for 2011. It cannot be extended for any reason.
This combined with the fact the IRS increases the foreign housing exclusion or deduction each year for expats will provide additional benefits to those who live and work abroad for 2012. It just keeps getting better for expatriates so long as all of the special reporting forms (with high penalties for not filing) such as TDF 90-22.1, 8938, 3520, 8865, 5471, etc. are all filed in a timely manner. It is noteworthy that none of these forms are actual forms that produced more taxes, they are strictly informational and if filed, will result in no adverse consequences to the expat taxpayer. Read more on our website at www.TaxMeLess.com
Remember an an expatriate living abroad on 4/17/12 you got an automatic extension to file your return until 6/15/12. You can get a further extension to file the return until 10/15/12 by filing form 4868 prior to 6/15. If you owe any taxes at that time interest and penalties will continue to accrue (at a rather low rate) until those taxes are paid. Remember form TDF 90-22.1 (FBAR) must be filed to report your foreign financial accounts by 6/30/12 for 2011. It cannot be extended for any reason.
This combined with the fact the IRS increases the foreign housing exclusion or deduction each year for expats will provide additional benefits to those who live and work abroad for 2012. It just keeps getting better for expatriates so long as all of the special reporting forms (with high penalties for not filing) such as TDF 90-22.1, 8938, 3520, 8865, 5471, etc. are all filed in a timely manner. It is noteworthy that none of these forms are actual forms that produced more taxes, they are strictly informational and if filed, will result in no adverse consequences to the expat taxpayer. Read more on our website at www.TaxMeLess.com
May 2, 2012
Wealthy Americans Line Up to Forfeit Passports in Zurich - Businessweek
Excellent article from Business Week about all of the US Taxpayers surrendering their US Citizenship. It does not include in the total tally all of the US Green Card holders who have surrendered there permanent residency under a similar program for those individuals READ BUSINESSWEEK ARTICLE HERE.
Our firm has advised or assisted in excess of one hundred Citizens or Green Card holders with the tax requirements of surrendering their US Tax Status over the past few years and we get inquiries daily. It is a two STEP process. The first STEP is easy. You must have citizenship in another country, pay the US State Department $450, and fill out forms and go through an exit interview.
The second STEP requires that you file a final "Dual Status" us tax return, and Form 8854 which gives the IRS information on your worldwide asset value on the date your surrendered your status. If the value of your worldwide assets exceed a certain amount, you may owe taxes on the gain you may have in those assets. Visit our website if you need more information on the process and tax aspects at www.TaxMeLess.com or www.expatattorneycpa.com. We can advise you on the process and your situation with the protection of the attorney-client privilege privacy rules.
Our firm has advised or assisted in excess of one hundred Citizens or Green Card holders with the tax requirements of surrendering their US Tax Status over the past few years and we get inquiries daily. It is a two STEP process. The first STEP is easy. You must have citizenship in another country, pay the US State Department $450, and fill out forms and go through an exit interview.
The second STEP requires that you file a final "Dual Status" us tax return, and Form 8854 which gives the IRS information on your worldwide asset value on the date your surrendered your status. If the value of your worldwide assets exceed a certain amount, you may owe taxes on the gain you may have in those assets. Visit our website if you need more information on the process and tax aspects at www.TaxMeLess.com or www.expatattorneycpa.com. We can advise you on the process and your situation with the protection of the attorney-client privilege privacy rules.
April 22, 2012
Tax Planning for Acquiring US Citizenship or a Green Card (Permanent Residency)
Those who acquire US permanent residency and/or US Citizenship often are caught by surprise when it comes time to sell assets (property or stocks or ?) owned before they became US taxpayers. They often erroneously assumed the assets they owned before becoming US taxpayers will have a tax basis equal to the value of those assets on the date they became US taxpayers. THIS IS NOT CORRECT.
Under US tax law including Court Decisions, even though an asset was acquired many years before becoming a US taxpayer (Citizen or tax resident) the tax basis for determining gain or loss is the original cost basis of the property (or if inherited the fair market value of the property when it was inherited). That means when the asset does not get a revised basis on the date of becoming a US taxpayer and US taxes will be paid on appreciation of the asset prior to the date the individual became a US taxpayer.
What to do? Before becoming a US taxpayer, consider selling your highly appreciated assets to avoid paying US taxes on the gain that occurred prior to that date.
The one exception to the rule stated above, is when you Surrender your Citizenship or Long Term Tax Residency, for the purposes of determining if you have to pay an exit tax on form 8854, your tax basis IS the fair market value of the property or asset on the date you first became a Long Term Resident or Citizen.
Under US tax law including Court Decisions, even though an asset was acquired many years before becoming a US taxpayer (Citizen or tax resident) the tax basis for determining gain or loss is the original cost basis of the property (or if inherited the fair market value of the property when it was inherited). That means when the asset does not get a revised basis on the date of becoming a US taxpayer and US taxes will be paid on appreciation of the asset prior to the date the individual became a US taxpayer.
What to do? Before becoming a US taxpayer, consider selling your highly appreciated assets to avoid paying US taxes on the gain that occurred prior to that date.
The one exception to the rule stated above, is when you Surrender your Citizenship or Long Term Tax Residency, for the purposes of determining if you have to pay an exit tax on form 8854, your tax basis IS the fair market value of the property or asset on the date you first became a Long Term Resident or Citizen.
April 17, 2012
Mitt Romney - 10 Ways to Stiff the IRS and Pay Less than the Average US Taxpayer
Here are the ten ways Mitt Romney avoids paying high taxes. Unfortunately these methods are not available to the average taxpayer and most are reserved exclusively for the Upper One Percent of taxpayers. Mother Jones has done an outstanding job of analyzing Mitt's tax return and the loopholes he uses to avoid paying US taxes.
SOME AMERICANS ARE SURRENDERING THEIR CITIZENSHIP TO AVOID FILING US TAX RETURNS
Read the Reuters article here on the large number of Americans surrendering their US Citizenship to avoid having to file tax returns etc. Their actions are not necessarily to avoid US income taxes since many will then be Citizens of countries with much higher tax rates than the USA. Many feel that it is not the high tax burden, but what you get for it that is the true measure of a good tax system. We have helped or advised hundreds of US Citizens and Green Card holders with respect to the surrender of their US tax status. If you are interested go to our website at www.taxmeless.com to learn more of the details.
April 7, 2012
Latest IRS Guidance on When to File Forms 8938 and TDF 90-22.1 (FBAR)
The IRS has just published further information on when to file forms 8938 (to report foreign financial assets) and TDF 90-22.1 (FBAR) to report foreign financial accounts. Their guidance clarifies when foreign currency and precious metals located in foreign countries must be reported. The Chart is easy to understand and can be read HERE.
If you wish assistance in preparing these forms or wish to have your own self prepared forms reviewed by an expert contact us.
If you wish assistance in preparing these forms or wish to have your own self prepared forms reviewed by an expert contact us.
April 4, 2012
TIPS FOR US EXPATRIATES ON PAYING QUARTERLY ESTIMATED TAXES
You may need to pay estimated taxes to the IRS during the year if you have income that is not subject to withholding and will not be completely offset by foreign tax credits or the foreign earned income exclusion. Your first quarterly estimated is due on 4/17/12 for 2012.
These six tips explain estimated taxes and how to pay them.
1. If you have income from sources such as self-employment, interest, dividends, alimony, rent, gains from the sales of assets, prizes or awards, then you may have to pay estimated tax.
2. As a general rule, you must pay estimated taxes in 2012 if both of these statements apply: 1) You expect to owe at least $1,000 in tax after subtracting your tax withholding (if you have any) and tax credits, and 2) You expect your withholding and credits to be less than the smaller of 90 percent of your 2012 taxes or 100 percent of the tax on your 2011 return. Special rules apply for farmers, fishermen, certain household employers and certain higher income taxpayers.
3. For Sole Proprietors, Partners and S Corporation shareholders, you generally have to make estimated tax payments if you expect to owe $1,000 or more in tax when you file your return.
4. To figure your estimated tax, include your expected gross income, taxable income, taxes, deductions and credits for the year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, for this. You want to be as accurate as possible to avoid penalties. Also, consider changes in your situation and recent tax law changes.
5. The year is divided into four payment periods, or due dates, for estimated tax purposes. Those dates generally are April 15, June 15, Sept. 15 and Jan. 15 of the next or following year.
6. Form 1040-ES, Estimated Tax for Individuals, has everything you need to pay estimated taxes. It includes instructions, worksheets, schedules and payment vouchers. However, the easiest way to pay estimated taxes is electronically through the Electronic Federal Tax Payment System, or EFTPS, at www.irs.gov. You can also pay estimated taxes by check or money order using the Estimated Tax Payment Voucher or by credit or debit card.
For more information on estimated taxes, refer to Form 1040-ES and its instructions and Publication 505, Tax Withholding and Estimated Tax. We can help you compute your 2012 estimated taxes and send you the necessary forms to make the payments.
NOTE: Remember that expats living abroad on 4/17/12 get an automatic extension of time to file their US tax returns until 6/15/12, but if they will owe taxes they must pay in the tax by 4/17/12 in order to avoid penalties and interest.
March 26, 2012
WHAT ARE YOUR CHANCES OF BEING AUDITED BY THE IRS?
IRS has issued its annual data book, which provides statistical data on its fiscal year (FY) 2011 activities. The data book provides valuable information about how many tax returns IRS examines (audits) and what categories of returns IRS is focusing resources on, as well as data on other enforcement activities such as collections. The figures and percentages in this article compare returns filed in calendar year 2010 and audited in FY 2011 to returns filed in calendar year 2009 and audited in FY 2010.
What are the chances of being audited? Of the 140,837,499 total individual income tax returns with a filing requirement, 1,564,690 were audited. This works out to roughly 1.1%, the same as the rate for the previous year.
Only 25% of the individual audits were conducted by revenue agents, tax compliance officers, tax examiners and revenue officer examiners. That's higher than the 21.7% figure for the previous year. The 75% balance of the audits were correspondence audits, down from 77.1% for the previous year.
Following are selected audit rates for individuals.
- For business returns other than farm returns showing total gross receipts of $100,000 to $200,000, 4.3% of returns were audited in FY 2011, down from 4.7% in FY 2010.
- For business returns other than farm returns showing total gross receipts of $200,000 or more, 3.8% of returns were audited in FY 2011, an increase from 3.3% in FY 2010.0.
- For returns showing total positive income of $200,000 to $1 million, 3.2% of returns not showing business activity were audited, and 3.6% of returns showing business activity were audited. The audit rate for such returns was higher than the 2.5% and 2.9% respective rates for the previous year.
- For FY 2011, the audit rate for returns with total positive income of $1 million or more was 12.5%, close to forty nine percent higher than the 8.4% rate for FY 2010.
Not surprisingly, examination coverage increased for higher income earners. For example, the percentage was 1% for those returns with adjusted gross income (AGI) between $100,000 and $200,000 (up from .71% for FY 2010), and 2.66% for those with $200,000 to $500,000 of AGI (up from 1.92% for FY 2009). Exam coverage jumped to 11.8% for those with at least $1 million but less than $5 million of AGI (up from 6.67% for FY 2010). Similarly, coverage increased for those with at least $5 million but less than $10 million of AGI, as well as for those with AGI of $10 million or more.
Select audit rates for business returns were as follows:
- For all corporate returns other than Form 1120S, 1.5%, versus 1.4% for the year before.
- For small corporations with balance sheet returns showing total assets of: $250,000 to $1 million, 1.6%; $1–$5 million, 1.9%; and $5–10 million, 2.6%. For FY 2010, the percentages were, respectively, 1.4%, 1.7%; and 3%.
- For partnership and S corporation returns, the audit rate was .4%, the same as for the year before. This would seem to make filing Sub S returns and LLC's which file partnership returns a good strategy to avoid audits.
Math errors on individual returns. Of the roughly 6.6 million math error notices that IRS sent out relating to the 2010 return, 49.5% were attributable to the making work pay credit (MWPC), which was a refundable tax credit based on earned income and was available to taxpayers in 2009 and 2010.
Of the total math error notices, 14.1% were for tax calculation/other taxes (which includes errors related to self-employment tax, alternative minimum tax, and household employment tax), 7.2% related to exemption number/amount, 6.1% related to the EITC, 6.2% related to the standard/itemized deduction(s), and 2.2% related to the child tax credit.
Penalties. In FY 2011, IRS assessed 28.75 million civil penalties against individual taxpayers, up from 27.1 million civil penalties assessed in the previous year. Of the FY 2011 assessments, the “top three” penalties in percentage terms were 58.6% for failure to pay, 25.6% for underpayment of estimated tax, and 13% for delinquency. On the business side, there were a total of 1,080,027 civil penalty assessments (down from 1,145,931 for the year before), and the “top three” penalties in percentage terms were 55% for delinquency, 24% for failure to pay, and 18.4% for estimated tax.
Offers-in-compromise. In FY 2011, 59,000 offers-in-compromise were received by IRS (versus 57,000 for FY 2010), and 20,000 were accepted (14,000 for the year before).
Criminal cases. IRS initiated 4,720 criminal investigations in FY 2011. There were 3,410 referrals for prosecution and 2,350 convictions. Of those sentenced, 81.7% were incarcerated (a term that includes imprisonment, home confinement, electronic monitoring, or a combination thereof). By way of comparison, in FY 2010, IRS initiated 4,706 criminal investigations, there were 3,034 referrals for prosecution, and there were 2,184 convictions. Of those sentenced, 81.5% were incarcerated.
The IRS Data Book can be viewed at http://www.irs.gov/pub/irs- soi/11databk.pdf. IR-2012-36 can be viewed athttp://www.irs.gov/newsroom/ article/0,,id=255853,00.html.
March 22, 2012
US Tax Return Foreign Currency Conversion Methods Approved by IRS
|
March 21, 2012
IRS Putting Together "SWAT" Team To Go After Transfer Pricing Cheats
Transfer pricing is a booming field of global tax law strategies. It involves multinational corporations that are constantly moving goods, services and assets from one subsidiary to another in different countries, and how they account for these "transfers." By carefully manipulating the pricing of such moves, companies can effectively shift profits to low-tax countries from high-tax ones, lowering their overall tax costs.
Small US Entrepreneurs with operations abroad and foreign corporations also take advantage of this procedure as well as the giant corporations. The IRS is forming a task force in order to be certain reasonable profits are taxed in the US rather than transferred to low tax or no tax countries and thus escape US taxation. A good example is Apple which has accumulated Sixty Billion Dollars in Cash abroad (in low tax or no tax countries) and will not remit it to the US which would subject it to US taxes, though they would get a credit for any taxes it did pay (if any) on those funds in other countries.
March 19, 2012
Tax Tips for US Expatriates Living Abroad
Seven tax tips for US Expatriates for their 2011 taxes.
1. Filing deadline U.S. citizens and resident aliens residing overseas or those serving in the military outside the U.S. on the regular due date of their tax return have until June 15, 2012 to file their federal income tax return. To use this automatic two-month extension beyond the regular April 17, 2012 deadline, taxpayers must attach a statement to their return explaining which of the two situations above qualifies them for the extension.
2. World-wide income 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.
3. Tax forms In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Certain taxpayers may also have to fill out and attach to their tax return the new Form 8938, Statement of Foreign Financial Assets. Some taxpayers may also have to file Form TD F 90-22.1 with the Treasury Department by June 30, 2012.
4. Foreign earned income exclusion Many Americans who live and work abroad qualify for the foreign earned income exclusion. If you qualify for tax year 2011, this exclusion enables you to exempt up to $92,900 of wages and other foreign earned income from U.S. tax. This exclusion does not apply to interest, dividends, social security, capital gains, etc.
5. Credits and deductions You may be able to take either a credit or a deduction for income taxes paid to a foreign country or a U.S. possession. This benefit is designed to lessen the tax burden that results when both the U.S. and another country tax income from that country.
2. World-wide income 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.
3. Tax forms In most cases, affected taxpayers need to fill out and attach Schedule B, Interest and Ordinary Dividends, to their tax return. Certain taxpayers may also have to fill out and attach to their tax return the new Form 8938, Statement of Foreign Financial Assets. Some taxpayers may also have to file Form TD F 90-22.1 with the Treasury Department by June 30, 2012.
4. Foreign earned income exclusion Many Americans who live and work abroad qualify for the foreign earned income exclusion. If you qualify for tax year 2011, this exclusion enables you to exempt up to $92,900 of wages and other foreign earned income from U.S. tax. This exclusion does not apply to interest, dividends, social security, capital gains, etc.
5. Credits and deductions You may be able to take either a credit or a deduction for income taxes paid to a foreign country or a U.S. possession. This benefit is designed to lessen the tax burden that results when both the U.S. and another country tax income from that country.
6. Other Forms Required If you own a foreign corporation, a foreign trust, a foreign LLC, or are a member of a foreign partnership you have to file special forms or you may incur huge penalties for failing to file those forms. If you own a foreign mutual fund, you must file as an owner of a Passive Foreign Investment Company or suffer adverse tax consequences on your US taxes.
7. Failure to File Returns Many expatriates file returns in their resident country,and then believe they do not have to file in the US. This IS NOTcorrect. If you are a green card holder or US Citizen you must always file a US tax return each year if you earn above a minimum amount (which varies per year). Until you file a return the statute of limitations for failing to file (and assessments by the IRS) never runs out.
Subscribe to:
Posts (Atom)