Statute of Limitations for Expatriates Living Outside the USA

IRS Statute of Limitations for expatriates.

1. Fail to file a return for any tax year that one is due on your worldwide income?  The statute of limitations nevers runs out to assess taxes for that year.

2. Fail to pay taxes on past filed returns or assessed by the IRS?  The normal statute of limitations is 10 years from the date of assessment and filing a tax lien (that may be a later date from the date you filed the return) to collect tax. However, if you leave the country or the tax is assessed while you are outside the USA, that statue of limitations is put on hold until you return to the USA when it starts to run again.

3. Failed to file Foreign Bank Account Reporting Forms (FBAR or now form 114)?  The statute of limitations to assess penalties for failing to file is 6 years from the due date of each years forms.

4. 3 years from date return is filed is normal statute. 6 years from date return filed if you omitted 25 percent or more of gross income.

5. The statute never runs out if you fail to file forms 5471, 8865, or 3520 --3520A.

Read more at www.taxmeless.com

Top Ten Tax Facts if You Sell Your Home

Do you know that if you sell your home and make a profit, the gain may not be taxable? These rules apply even if your primary home is located abroad. That’s just one key tax rule that you should know. Here are ten facts to keep in mind if you sell your home this year.

1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.

2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details see Publication 523, Selling Your Home.

3. The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.

6. Generally, you can exclude the gain from the sale of your main home only once every two years.

7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.

9. If you sell your main home at a loss, you can’t deduct it.

10. After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, to do this.

Delinquent FBAR Submission Procedures

Taxpayers who do not need to use either the OVDP (described in section 1 above) or the Streamlined Filing Compliance Procedures (set forth in section 2 above) to file delinquent or amended tax returns to report and pay additional tax, but who:

(1) have not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114, previously Form TD F 90-22.1),
(2) are not under a civil examination or a criminal investigation by the IRS, and
(3) have not already been contacted by the IRS about the delinquent FBARs

should file the delinquent FBARs according to the FBAR instructions and include a statement explaining why the FBARs are filed late.  All FBARs are required to be filed electronically at FinCen.  On the cover page of the electronic form, select the reason for filing late.  If you are unable to file electronically, you may contact FinCEN's Regulatory Helpline at 1-800-949-2732 or 1-703-905-3975 (if calling from outside the United States) to determine possible alternatives to electronic filing.  
The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.

FBARs will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.

Delinquent International Information Return Submission Procedures

Taxpayers who do not need to use the OVDP (described in section 1 above) or the Streamlined Filing Compliance Procedures (set forth in section 2 above) to file delinquent or amended tax returns to report and pay additional tax, but who:

(1) have not filed one or more required international information returns,
(2) have reasonable cause for not timely filing the information returns,
(3) are not under a civil examination or a criminal investigation by the IRS, and
(4) have not already been contacted by the IRS about the delinquent information returns

should file the delinquent information returns with a statement of all facts establishing reasonable cause for the failure to file.  As part of the reasonable cause statement, taxpayers must also certify that any entity for which the information returns are being filed was not engaged in tax evasion.  If a reasonable cause statement is not attached to each delinquent information return filed, penalties may be assessed in accordance with existing procedures.

All delinquent international information returns other than Forms 3520 and 3520-A should be attached to an amended return and filed according to the applicable instructions for the amended return.  All delinquent Forms 3520 and 3520-A should be filed according to the applicable instructions for those forms.  A reasonable cause statement must be attached to each delinquent information return filed for which reasonable cause is being requested.

Information returns filed with amended returns will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.

Pilots..IRS Tax Return Problems

Pilots, flight attendants and those that work on ships have complex US tax returns if they work abroad. Read more:

http://money.cnn.com/2014/07/01/pf/expat-taxes-irs/

Foreign Bank and Financial Account Forms Must Be Filed On Line by 6/30/14

Who Must File an FBAR by 6/30/14

United States persons are required to file an FBAR if:

1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. The aggregate value of all foreign financial accounts (this includes banks, stock brokerage accounts, cash surrender value of foreign life insurance, foreign pension plans in most situations) exceeded $10,000 US dollars at any time during the 2013 calendar year to be reported.

United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:

• Certain foreign financial accounts jointly owned by spouses;
• United States persons included in a consolidated FBAR;
• Correspondent/nostro accounts;
• Foreign financial accounts owned by a governmental entity;
• Foreign financial accounts owned by an international financial institution;
• IRA owners and beneficiaries;
• Participants in and beneficiaries of tax-qualified retirement plans;
• Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
• Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
• Foreign financial accounts maintained on a United States military banking facility.

Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.

The FBAR is a calendar year report and must be filed on or before June 30, 2014 for the calendar year 2013 foreign bank and financial account balances. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s  BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.

A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for nonwillful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.  For guidance when circumstances such as natural disasters prevent the timely filing of an FBAR, see FinCEN guidance,FIN-2013-G002 (June 24, 2013).

U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.

IRS NEW 6/18/14 STREAMLINED DISCLOSURE PROGRAM - DETAILS AND PROCEDURES

The information on the program changes are:

• IR-2014-73, June 18, 2014 is read here; announces the changes.
• OVDP 2012 (as changed 6/18/14), read here.
• Streamline Filing Compliance Process (as changed 6/18/14), read here.  This is the description.  There are two types of Streamline filings:  Non-resident and Resident.  The Nonresident program -- referred to as Streamlined Foreign Offshore Procedures -- is described on a web page titled: U.S. Taxpayers Residing Outside the United States, read here. The Resident program -- referred to as Streamlined Domestic Offshore Procedures -- is described on a web page titled U.S. Taxpayers Residing in the United States, read here.
• Delinquent FBAR Submission Procedures (as changed 6/18/14), read here. 
• Delinquent International Information Return Submission Procedures (as changed 6/18/14), read here. (This relates to the Forms required for entities, such as CFC's, trusts,etc.)
• IRS OVDP 2014 FAQs, read here.  Pay attention particularly par. 1.1 on the changes from the original OVDP 2012.
• Transition Rules FAQs, read here.
• Bank and Promoter List, read  here.  This list is the basis for the 50% penalty in OVDP 2014 (See FAQ 7.2 in the OVDP 2014 FAQs, read here.)   

The new procedures are as follows:

1. Foreign residents (requiring only foreign residence in the 3 year period):  File 3 years of delinquent or amended returns and pay tax and interest.  No penalties (including FBAR or miscellaneous) will be assessed.  Must also complete and sign a statement on the Certification by U.S. Person Residing Outside of the U.S. certifying (i) eligibility for the procedure, (ii) filing of all required FBARs, and (iii) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct.

2.  Nonforeign residents (Domestic residents):  Must file 3 years of returns and pay tax and interest.  No penalties other than a 5% miscellaneous penalty on foreign financial accounts only will be assessed.  Must complete and Sign the Certification by U.S. Person Residing in the U.S. that (i) eligibility is met; (ii) all FBARs have been filed; (iii) "the failure to report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct;" and (iv) that the miscellaneous penalty amount is accurate.

Nonwillful conduct for the purposes of #1 and #2 is:  "conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law; 

The taxpayers can be audited under the income tax audit guidelines but will not be automatically audited.

A couple of the material changes to OVDP 2012 are described in par. 1.1 of the FAQs as follows:

• A 50% offshore penalty applies if either a foreign financial institution at which the taxpayer has or had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement has been publicly identified as being under investigation or as cooperating with a government investigation. See FAQ 7.2.
• FAQ 7 has been modified to require that the offshore penalty be paid in full at the time of the OVDP submission.

NEW STREAMLINED OFFSHORE DISCLOSURE REDUCES PENALTIES AND IS EASIER

Read new IRS rules below.

http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures

New Easier IRS Disclosure Rules for Expats and those Living in USA

Read new rules at this link:

http://www.cpapracticeadvisor.com/news/11527344/taxpayers-offered-new-options-in-offshore-voluntary-disclosure-program

Bitcoin Accounts May Now Need to be Reported on FBAR (114) Regardless of Prior IRS Statement!

Read more below. To be safe due to uncertainties list your account!

http://www.bna.com/bitcoin-exchange-accounts-n17179891170/