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
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February 4, 2010
US and Chile Sign New Income Tax Treaty on 2/4/10
If approved by the U.S. Senate, this treaty would be the first bilateral income tax treaty between the United States and Chile and would be only the second U.S. tax treaty with a South American country.
Provisions of the new tax treaty with Chile include:
Reductions in source-country withholding taxes on certain cross-border payments of dividends, interest and royalties;
Rules to determine when an enterprise or an individual of one country is subject to tax on business activities in the other country; and
Rules to enhance the mobility of labor by coordinating the tax aspects of the U.S. and Chilean pension systems.
The new tax treaty also contains other important provisions, including mechanisms through which the U.S. and Chilean tax authorities may collaborate to resolve tax disputes and relieve double taxation; provisions to ensure the full exchange between the U.S. and Chilean tax authorities of information for tax purposes; protections against discriminatory tax treatment; and provisions to ensure that only residents of the two countries enjoy the benefits of the treaty.
December 22, 2009
Tax Rules for International Flight Crews Working and Living Abroad
November 17, 2009
14,700 Total Offshore US Taxpayers Enter Voluntary Disclosure Program
November 6, 2009
New Tax Law Increases Penalties for Late Filing Partnership (1065) and Subchapter S Corporation Returns (1120S)
Civil penalties apply for failure to file a partnership and S corporation returns. The penalty is $89 times the number of partners or shareholders for each month (or fraction of a month) that the failure continues, up to a maximum of 12 months for returns required to be filed after Dec. 31, 2008.
New law. Under the just enacted law, the base amount on which a penalty is computed for a failure with respect to filing either a partnership or S corporation return for a tax year beginning after Dec. 31, 2009, is increased to $195 per partner or shareholder. (Code Sec. 6698(b)(1) and Code Sec. 6699(b)(1), as amended by Act Sec. 16)
RIA observation: Over the fiscal period 2011 to 2019, this provision is projected to raise $642 million (partnership penalties) and $587 million (S corporation penalties).
November 3, 2009
Forbes Magazines 10 Best Places in World to Retire
Forbes has determined the 10 best places in the world to retire outside of the USA. Factors they consider were not limited to taxes. They considered quality of life, health care, and other factors. Some of the countries include France, Australia, Austria, Italy, Thailand, Malaysia, Canada and Panama. Click here to read the article and more about their favorite countries.
October 31, 2009
Individual Income Tax Rates Around the World
We often are asked where is the best country to live and work in to reduce foreign taxes. Wikepedia has a chart showing the various income tax rates for individuals and corporations in various countries. Check it out here. Of course you can always consider Dubai which has no taxes.
Remember, so long as you are a US Citizen or permanent resident you still must file your US form 1040 with the IRS each year and report your worldwide income. Failure to file timely special forms required for foreign financial accounts, foreign corporations, partnerships and trusts, and other related forms can also result in substantial penalties.
Mr. Schulman is pictured. He is the Commissioner in charge at the INTERNAL REVENUE SERVICE and is primarily responsible for the dramatic increase in international tax regulation at that agency.
October 27, 2009
RS Commissioner Doug Shulman's remarks before the AICPA's National Conference on Federal Taxation in Washington, D.C., on Oct. 26, 2009
October 16, 2009
7,500 Give Offshore Tax Data to I.R.S.
Published: October 14, 2009
More than 7,500 American taxpayers have voluntarily disclosed secret offshore accounts to the Internal Revenue Service, which is cracking down on overseas tax evasion, the agency said on Wednesday.
Those who have come forward have provided information about accounts holding from $10,000 to $100 million since the I.R.S. extended a Sept. 23 deadline for participating in the voluntary disclosure program, said Doug Shulman, the I.R.S. commissioner.
People who come forward voluntarily can avoid criminal prosecution and their identities will remain a secret under federal law requiring tax records to be kept confidential.
The partial amnesty ends Thursday and will not be extended a second time, he said.
Americans with undeclared offshore accounts have been under growing pressure since Switzerland agreed Aug. 19 to hand over data to the authorities in the United States on as many as 4,450 UBS accounts. The move was to settle a lawsuit in which the United States had sought information on as many as 52,000 accounts.
“We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers skirt their obligations, Mr. Shulman said in a conference call. “This entire effort is not just about UBS and a single country.”
It is not yet known how much overlap might exist between the names that UBS will eventually provide and the 7,500 people who have come forward to the I.R.S., Mr. Shulman said.
The I.R.S. will open offices in Beijing, Panama City and Sydney in connection with the investigation, which has revealed accounts held in 70 countries and on every continent except Antarctica, he said. The agency also intends to add about 800 employees in the next year and add staff to eight existing overseas offices, including Hong Kong and Barbados.
October 1, 2009
Congressional report focuses on international tax avoidance and evasion:
September 21, 2009
IR-2009-84 - IRS ANNOUNCES EXTENSION OF OFFSHORE VOLUNTARY DISCLOSURE PROGRAM DEADLINE TO 10/15/09
BLOOMBERG, AP AND NY TIMES CLAIM IRS HAS EXTENDED OFFSHORE VOLUNTARY DISCLOSURE PROGRAM UNTIL 10/15/09
August 28, 2009
TAX AGENCIES TRACING TAX DODGERS ON LINE
August 15, 2009
Taxpayers Struggle to Come Clean After IRS To Get Secret accounts of UBS
August 12, 2009
Swiss Reach Deal with IRS - How Many Accounts will be Revealed is Unknown
August 10, 2009
IRS ANNOUNCES FURTHER CHANGES IN TDF 90-22.1 FILING REQUIREMENTS
The Treasury Department intends to issue regulations clarifying the FBAR filing requirements. The administrative relief granted by Notice 2009-62 provides time for the Treasury Department to consider comments, that are solicited in the Notice, on specific issues related to such filing requirements. Please access a copy of Notice 2009-62
August 5, 2009
IRS OFFSORE VOLUNTARY DISLCOSURE DEAL ENDS 9/23/09
A lot of Gringos living and working in Mexico have not been filing their US Income Tax Returns as required by U.S. Tax law. The Brits, Canadians and many those from many other countries in world, the U.S. Requires you file returns yearly no mater where you live or work in the world so long as you are a U.S. Citizen.
Some have put off their returns so long, that they are now afraid to surface and file them. Often that is an unfounded concern since due to the US foreign earned income exclusion and foreign tax credits, when many years past due returns are filed, no tax is found to be due anyway.
To try to bring U.S. Expatriates out of the closet, in March the IRS announced the Offshore Voluntary Disclosure Program which allows those who have not filed returns or who have filed returns and not included their foreign source income to correct these errors and have some certainty of what might happen when they do file those returns. Entering this program will avoid criminal action and will also set a predetermined limit on the amount of penalties which may be imposed.
Though the IRS envisions the program will mostly be used by wealthy taxpayers hiding assets and income abroad, unfortunately due to the its requirements it does immediately affect the average American working or operating a small business in Mexico.
The program is extremely complex and therefore cannot be fully explained with this article, but we will try to cover some of the major points. More details are available using the internet links set forth later below.
The general requirements:
File last six years previously unfiled tax returns or amend your last six years tax returns to include all foreign source income.
These returns should include all previously unfiled foreign tax forms required under us tax law such as those for foreign bank and financial accounts (TDF 90-22.1), foreign corporations (Form 5471), foreign partnerships, foreign LLCS, foreign investment companies, and foreign trusts or fideicomisos (Form 3520 and 3520A)(Mexican real estate trusts required by Mexican law). There are other US foreign tax forms too numerous to mention which also have high penalties for non filing.
Pay all taxes, penalties and interest due on unpaid taxes
Follow certain filing procedures requiring an anouncement you plan to participate in the program.
In lieu of paying the extremely high penalties for failure to file the special foreign tax forms mentioned above, pay a penalty of 20% of the highest balance in all foreign bank and financial accounts during the year with the highest combined balances during that 6 year period. This is often much less than the year penalty for failing to file the form. For example the penalty for failure to file the foreign bank and financial account form (TDF 90-22.1) is $10,000 per year or more.
If you have reported all foreign income (including interest, dividends, corporate income, rents, etc) in your previously filed your tax returns for the past six years, but failed to include all of the special foreign forms (some of which are mentioned above) you are required to now file those forms with an amended return, and also include a reasonable excuse for your failure to file those forms and in most situations no penalties or additional taxes will be imposed. The IRS has failed to define what an acceptable reasonable excuse would be.
If your foreign activities have produced no taxable income during the past six years and you now file all required foreign forms that were previously omitted with amended returns for those years, no additional tax or penalties will be charged if you attach a reasonable excuse for failing to file the required foreign bank account report, foreign corporation report, foreign trust form (fideicomiso), etc.
Also if you failed to file your tax returns, but need to file returns for the period you lived and or worked abroad, and due to the nature of your income and activities have none of the special foreign income tax forms previously mentioned or on the the complete list are required to be filed, you can now file without any fear of the 20% penalty. All that would be owed is any tax due plus normal penalties and interest on that tax due. Form 2555 (to claim the foreign earned income exclusion) and form 1116 (Foreign tax credits) do not trigger the 20% penalty if filed late. However, in certain situations, the IRS can disallow the foreign earned income exclusion if a tax return is filed more than 18 months late and taxes are due with that return.
The IRS has indicated that it is possible after the 9/23/09 deadline for the Program, it will impose all civil, monetary and full criminal penalties against those who have not filed the required foreign income forms or who have failed to report their foreign source income by that deadline. Anyone who thinks they might have problems with nonreported foreign source income, unfiled returns, or unfiled special foreign tax forms should immediately consult with their legal and tax advisors to determine whether they should be participating in the Voluntary Disclosure Program or to file all past unfiled returns.
It should be noted that the IRS has currently been very successful with their program to force foreign banks and other financial institutions to disclose the names, etc. and all US citizens who have accounts. It is presumed they will be matching that data against the tax returns filed by those citizens.
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Relevant Web Links:
Wall Street Journal Article:http://online.wsj.com/article/SB124804796387763807.html
IRS Information:http://www.irs.gov/newsroom/article/0,,id=105689,00.html
Frequently Asked Questions: http://www.taxmeless.com/IRS%20Disclosure.htm
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Don D. Nelson, Attorney, C.P.A has been assisting US Citizens living abroad with their U.S. Income taxes for the past 20 years. His email is donnelsonattycpa@yahoo.com. His website includes a lot more information on the Offshore Disclosure Program and is located at www.TaxMeLess.com . His blog which includes the most current expat developments is at www.usexpatriate.blogspot.com. US phone number is 949-481-4094.
July 2, 2009
IRS VOLUNTARY OFFSHORE DISCLOSURE PROGRAM - ADDITIONAL QUESTIONS ANSWERED ON 6/24/09
June 19, 2009
NEW IRS OFFSHORE VOLUNTARY DISCLOSURE PROGRAM
In late March, 2009 the IRS instituted an offshore voluntary disclosure program and procedures limiting penalties that may be imposed if you have failed to report your offshore corporation, bank accounts, financial accounts, offshore trusts, or other offshore activities that require the filing of special IRS forms. This program will only remain in effect until September 23, 2009 which gives expatriates and others who have not reported foreign income, or filed the necessary IRS forms, a chance to come out into daylight and pay their taxes. If taxpayer fails to follow this procedure they may be liable for much higher penalties, and potential criminal prosecution.
Further descriptions of this program and how to comply are included in the recently released IRS "Frequently asked questions". You must file the last six years tax returns or amend the existing past six years returns if you have failed to report any foreign income on the returns you did file. You must also file the applicable forms including 5471 (foreign corporation), TDF 90-22.1 (foreign financial accounts), Forms 3520 and 3520A (foreign trusts), 926 ( Transfers to foreign corporations) and other forms involved in foreign income.
April 22, 2009
IRS Determines Countries In Which Early Departure Will Not Cause Disallowance of Foreign Earned Income Exclusion
April 17, 2009
US Merchants and Others Using Offshore Credit Card Accounts - Department of Justice is Gunning for You.
The Justice Department has filed a “John Doe” summons with a federal court seeking the credit card records of U.S. merchants hiding money in offshore bank accounts.
The DOJ asked a Denver federal court to approve the summons on one of the nation’s largest payment card processors, First Data Corp. U.S. District Court Judge Robert Blackburn approved the request Wednesday. The Internal Revenue Service claims that First Data active marketed and sold the offshore services to U.S. merchants and their financial advisors to help them hide the proceeds of both brick-and-mortar and Internet sales in offshore bank accounts.
"John Doe" summonses allow the IRS to obtain information about U.S. taxpayers whose identities are not yet known. The information expected in response to the summons will be used by the IRS to identify merchants who use offshore accounts to evade their U.S. tax liabilities.
The petition alleges that the merchants have opened bank accounts in offshore jurisdictions and directed their payment card processor, in this instance First Data, to deposit the proceeds from their debit or credit card transactions directly into the offshore accounts.
The courts have previously approved numerous John Doe summonses on credit card companies and third-party credit card processors, allowing the IRS to identify individuals who were using debit and credit cards issued by offshore banks to evade their taxes. The IRS is also using John Doe summonses to get information on tens of thousands of customers of Swiss bank UBS.