Cathay Pacific to Withhold US Taxes From Pilots Wages Paid Abroad

Foreign companies such as Cathay Pacific have now decided to comply with US IRS instructions to withhold US taxes (and remit to the IRS) from US Citizens working abroad.  Foreign companies are going to be doing this in the future to avoid penalties which could be imposed against them by the IRS if they do business in the USA.



See Article with more details  In South China Morning Post

IRS Taxpayer Service Hits All Time Low for 2016

Don't count on the IRS for help this year. Only 38 percent of phone inquiries get answered. There are 15,000 fewer employers and the organization is suffering from a huge budget cuts.  The good news is that your chance of audit is about 1 percent and with respect to expatriate and international taxes the very few IRS personnel have any expertise.

The IRS keeps coming up with new forms, new rules and new procedures. Therefore, complying with your tax filing obligations and planning is becoming more complex daily and they are no longer there to help.

So when you have questions on your nonresident, expatriate or international US taxes this year, you may want to consider asking the expert CPAs and Attorneys at our firm.  We offer a mini consultation by phone, email, whatsapp, or skype that allocates up to 1/2 hour of time to answer your questions and help you with a tax strategy for your particular situation.  Write us to request a mini consultation

READ MORE ABOUT IRS BUDGET CUTS AND POOR SERVICE

Stronger Dollar Makes It Good Time to Buy in Mexico

The Street Article on Strengthening US Dollar and Good Time to Buy Real Estate in Mexico:

http://www.thestreet.com/story/13424393/1/strengthening-dollar-makes-it-a-good-time-to-buy-in-mexico.html

The IRS is watching You...so pay up!

Read more in New York Times Article

7 Things You Need to Know About US Gift Tax While Living Abroad or as a Nonresident Owning US Assets

One great technique to get assets out of your estate to save income taxes and to save estate taxes is to give gifts to another.  Here are seven things you need to know about US gift taxes and reporting of foreign gifts you might receive.

1. If you give any individual (resident or nonresident) less than $14,000 US during a calendar year you do not have to file a Gift Tax Return form 709.
2. If you give any individual more than $14,000 US (this includes cash and value of property, assets, intangibles, etc) you need to file a gift tax return with the IRS which is due 4/15 following end of Calendar year.  This includes gifts of assets located outside of the USA.
   
3. If your gift exceeds the $14,000, you may need to file the return but probably do not owe taxes since you have a combined lifetime gift/estate tax exclusion of $5.43  million.  The excess value of the gift above the $14,000 will be offset by this lifetime exclusion.  If you use up this exclusion on gifts while you are alive it will not be available for use by your estate after your death.
4. Contributions to IRS recognized charities are not the type of gift subject to gift tax
5. If you as a citizen or permanent resident receive $100,000  in fair market value of assets  as a gift or inheritance in one calendar year (total for year from one individual or related individuals) you must file form 3520. If the gift is from a foreign corporation or LLC .you must file that form  if the total gifts received  during the year exceeds  $15,601. If you receive any amount from a foreign trust you must file the form 3520.  The form must be filed on 4/15  following the end of the calendar year. Failure to do so can subject you to a substantial monetary penalty.
6. Nonresidents are subject to gift taxes for transfer of assets located in the USA.  Therefore best to make gifts if you are a nonresident from assets located outside of the USA. A nonresident must pay gift tax on any gift of US located property of more than $14,000 to a single person per year. This figure is an aggregate of all gifts during the year.
7. If you receive anything in return (including services, etc) it is not a gift.  Also reciprocal gifts are also disallowed for US gift tax exemption purposes ( i.e. you give $14,000 to my kid and then I will give  $14,000 in return to your kid).

There are more gift rules applicable to special situations not mentioned here such as  those covering gifts to US persons after you have surrendered your citizenship or long term green card.  You should consult an gift tax expert before you make any gift that might be subject to tax to be certain there are not special rules that may surprise you when it becomes time to report the gift to the IRS.  If you need help email us at ddnelson@gmail.com or phone (US) 949-480-1235.

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CONGRESS HAS EXTENDED YOUR TAX BREAKS - READ MORE ABOUT SOME OF THEM

Click on this link to read more about some of the more common tax laws that have just been extended by Congress.  This does not include all of the huge tax breaks given to large companies.  Let us know if you need our help.

TO DOWNLOAD A COMPLETE PDF FILE WITH ALL CHANGES INCLUDING BRIEF EXPLANATIONS PLEASE CLICK HERE. 

2015 US IRS Health Care Coverage Exemptions for Expats

Read exemptions in link below:

https://www.healthcare.gov/health-coverage-exemptions/forms-how-to-apply/

IRS CAN NOW REVOKE YOUR PASSPORT IF YOU OWE PAST TAXES

The IRS can now cause your passport to be revoked if you owe $50,000 or more US taxes. Expats and Green Card holders in this situation need to resolve unpaid taxes before returning to US or they may not be able to leave later (without a passport).

Time to consider a payment plan, offer in compromise, or offshore disclosure and streamlined programs.

Read more in article below.

http://www.forbes.com/sites/robertwood/2015/12/04/irs-power-over-passports-signed-into-law/

EIGHT IRS TAX FACTS FOR AMERICANS LIVING AND WORKING ABROAD

By. Don D. Nelson, International Tax Attorney

• Though most foreign assets are reportable on various specialized forms filed with your US tax return,. If you own foreign real estate and title is in your own name (or a Fideicomiso) and do not rent out the property, there is no reporting required on your US tax return or for that matter any other reporting due the US Government.

• Foreign mutual funds (and most foreign money market funds) require filing of another special form with your tax return. If you do not file this form and make elections to report the income each year, you are penalized with higher taxes and interest when you finally sell your foreign mutual fund. These rules were put in many years when Congress was convinced by US Mutual Fund companies that there business would be hurt unless investment in foreign mutual funds was made unfavorable for tax purposes.

• The 2015 the $100,800 US foreign earned income exclusion applies to earned income (wages or self employment) income earned abroad if you meed the physical presence test or bonafide resident test. You can see if you qualify in IRS Publication 54. It is not automatic and can only be claimed on your US tax return. The IRS can deny this exclusion if you file your return more than 18 months late. This exclusion does not apply to rental income, dividends, interest or capital gains or any income other than earned income.

• You must report your rental net income in from your Mexican real estate on your US return and you may also owe taxes on it in the country in which it is located  even if you are not a resident. The Mexican income tax can be claimed as a credit directly offsetting any US income tax you owe on the rental income. 

• If you own 10% or more of a foreign corporation you may have to file form 5471 with your US tax return if required by the rules governing that form. Failure to file that form in a timely manner may result in the IRS assessing a $10,000 US penalty for failure to file even if you owe no taxes.

• The US has a tax treaty with approximately 66 countries. It also has in the past year entered into an OECD agreements with over 36 countries who have agreed to exchange income tax information with the other. At some point in the future what you do offshore  will not stay in offshore and visa versa due to these new OCED agreements.

• If as a US Citizen you have lived and worked in abroad for a while and not filed your US tax return, the IRS currently has a “streamlined program” that may allow you to catch up by filing only the past 3 years US tax returns and past six year FBAR (foreign bank account reports). They will not penalize you under that program for failing to file FBAR forms or other foreign reporting forms. They have stated they may discontinue this program at any time. Now is the time to surface with the IRS and avoid potentially huge penalties.

• FBAR (foreign bank account reporting forms) must be filed each year with US Treasury if at any time during the calendar year your combined highest balances in your foreign financial accounts exceeds $10,000 US. This form must be filed on line. Foreign accounts include foreign pension plans, cash surrender value in foreign insurance, foreign brokers accounts, and even gold if held for you in a foreign country a custodian. Failure to file this form or filing it late can result in penalties of $10,000 US or more.

Don D. Nelson is a US tax attorney who has been assisting Americans everywhere in the World for over 25 years with their US tax returns and tax planning. He is also a partner in Kauffman Nelson LLP, Certified Public Accountants. His website is located at www.TaxMeLess.com. His tax blog has the lastest tax developments of interest to those abroad at www.usexpatrate.blogspot.com.His email address is ddnelson@gmail.com. He can be reached at his US phone number 949-480-1235.   

Expatriate Foreign Earned Income Exclusion for 2016 Increased

The foreign earned-income exclusion amount under tax code Section 911(b)(2)(D)(i) will increase in 2016 to $101,300 from $100,800, the International Revenue Service said Oct. 21 (Rev. Proc. 2015-53).

Section 911 allows qualified U.S. citizens and residents who work abroad to exclude a certain amount of their foreign-earned income and a portion of their foreign housing expenses from their gross income for U.S. tax purposes. They must meet either a physical presence test or a bona fide residence test. Taxpayers may elect the Section 911 income and housing exclusions even if no foreign taxes were paid on their foreign earnings.

Although employers generally must withhold U.S. federal income taxes from taxable wages paid to U.S. citizens and residents working abroad, the withholding requirements do not apply to wage payments subject to the foreign earned-income and housing cost exclusions claimed by expatriate employees that file Form 673, Statement for Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911, with the employer.