Do I need to file Form 8938, “Statement of Specified Foreign Financial Assets”? |
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March 11, 2012
Form 8938 - Report of Foreign Financial Assets - Read when to file and what to file for here.
March 8, 2012
IRS Crackdown on Canadian US Expatriates Described
The 2011 tax year may be a pivotal one for many U.S. citizens living abroad, including the roughly one million living in Canada, as the Internal Revenue Service moves towards enforcing reporting guidelines and compliance rules for its expatriates.
The United States requires all of its citizens file a tax return on global income regardless of where they live or for how long, even if no money is owed to the IRS. That applies to dual U.S.-Canadian citizens living here — even those who might have moved to Canada as a baby and never returned to their country of birth, let alone ever earned any income in the U.S. READ MORE HERE IN CBC NEWS.
March 7, 2012
US EXPATRIATE TAX RETURN DUE DATES FOR 2011
Expatriates who live and work abroad on April 16th, 2012, receive an automatic extension of time to file their US income tax returns until June 15th, 2012. They do not need to even file an extension request. If additional time is required after that date they can obtain a further extension by filing form 4868 by June 15th, which will extend their return until 10/15/12. Therefore, it may be be possible to get a further extension until 12/15/12 by filing a letter request with the IRS.
Regardless of any extensions you receive or apply for as an expat, any taxes that are due for 2011 must be paid by 4/16/12 in order to avoid interest and penalty assessments for paying any taxes due at a later date. It is important (if you return is not completed yet) to file your expat extension by 6/15/12 since that will stop the IRS of assessing the largest penalty which is 5% (of the tax due with the return) per month up to a maximum of 25% (of the tax due with the return) for filing your return late.
Your FBAR form TDF 90-22.1 (filed to report foreign bank and financial accounts) must be filed no later than June 30, 2012 for the 2011 Calendar year. That form is filed separately from your tax return and cannot be extended beyond that date.
Most of the other special forms filed to report your offshore activities such as 8938, 5471, 3520, 8865, etc., due on the extended due date of your personal tax return. The one exception is Form 3520A( filed for foreign trusts and Mexican Fideicomisos) is due 3/15/12 for 2011, but can be extended with Form 7004 to September 15, 2012.
Regardless of any extensions you receive or apply for as an expat, any taxes that are due for 2011 must be paid by 4/16/12 in order to avoid interest and penalty assessments for paying any taxes due at a later date. It is important (if you return is not completed yet) to file your expat extension by 6/15/12 since that will stop the IRS of assessing the largest penalty which is 5% (of the tax due with the return) per month up to a maximum of 25% (of the tax due with the return) for filing your return late.
Your FBAR form TDF 90-22.1 (filed to report foreign bank and financial accounts) must be filed no later than June 30, 2012 for the 2011 Calendar year. That form is filed separately from your tax return and cannot be extended beyond that date.
Most of the other special forms filed to report your offshore activities such as 8938, 5471, 3520, 8865, etc., due on the extended due date of your personal tax return. The one exception is Form 3520A( filed for foreign trusts and Mexican Fideicomisos) is due 3/15/12 for 2011, but can be extended with Form 7004 to September 15, 2012.
February 26, 2012
Green Card Holders Can Now Be Deported for Tax Fraud says Supreme Court
The Supreme Court and statutes state that aggravated fraud is any fraudulent act that involves $10,000 or more. It should be noted that the IRS, if almost all circumstances, can proceed with criminal tax fraud charges for almost any violation of the IRS tax code. This decision could have consequences for all Green Card holders who fail to report their foreign bank accounts, foreign income, foreign corporations, foreign partnerships, foreign trusts, etc.
READ THE SUPREME COURTS DECISION IN KAWASHIMA ET UX. v. HOLDER, ATTORNEY
GENERAL HERE.
February 22, 2012
Be Careful Who You Trust - They May Decide to be an IRS Informant for a Big Reward
In 2010 7,577 Cases were submitted and the IRS paid out over $18 million in rewards. The information received from Whistle blowers results in collection of more than $464 million in taxes. Often it is wise to have an attorney represent you if you decide to inform on another taxpayer to protect your interests. Read more about the program HERE.
Expats Press Capitol Hill for Tax Reforms
A nonprofit group American Citizens Abroad representing the interests of U.S. citizens living overseas met with congressional staffers to push for a residence-based taxation system. READ MORE HERE IN ACCOUNTING TODAY NEWS RELEASE
February 21, 2012
Quick US Tax Facts for Expatriate Business Entrepreneurs Abroad
QUICK
TAX FACTS FOR US EXPATRIATES WITH BUSINESSES ABROADBy
Don D. Nelson, CPA, Attorney, International Tax Expert
Your
earnings from Self employment or Wages (paid by a US employer or one
abroad) may be eligible for the $92,900 Foreign Earned Income
Exclusion if you qualify. The same is true for wages earned by your
spouse. You can be paid a salary from your own US Corporation to
work abroad and if you satisfy the requirements still use this
exclusion on your personal tax return.
- You can take a credit for foreign taxes you pay on your personal income to your foreign residence country which will in most situations offset your US tax on that income taxed on your US form 1040.
- If you foreign financial assets exceed , you must file form 8938 each year with your US tax return or be subject to a large penalty.
You must file a US tax return each year on your worldwide income.- If you operate your business through a foreign corporation, LLC, partnership, etc. you are required to file special forms with you US tax return (5471,8865, )
- If you are an independent contractor under the laws of the foreign country in which you work, you will have to pay US self employment tax (social security) on your net profit unless you live in one of the few countries that have a Social Security agreement with the US.
- If the combined balances in your foreign bank accounts, financial accounts, pension plans (including cash surrender value to foreign life insurance) ever during the year exceed $10,000US you must file the FBAR form by 6/30 following the end of the calendar year or may be liable for a $10,000 penalty for late filing or non filing.
- If you purchase a foreign mutual fund (or have substantial investments in a foreign corporation) you own a Passive Foreign Investment Company and must file a special form each year to report your income or risk adverse US tax consequences when you finally sell out.
- Generally contributions by you or your employer to foreign pension plans (similar to US 401Ks) are taxable on your US return (unless there is a treaty exemption) and you must report the earnings each year. Also, you may have to file form 3520 and 3520A to report that pension fund to the IRS.
- You can open a US IRA or 401k (if self employed) if your taxable earnings from employment exceed the foreign earned income exclusion amount (not to exceed your earnings that exceed that amount.
- If you claim the foreign earned income exclusion you can deduct your housing expenses in excess of up to . This maximum ceiling amount varies by country and can go as high in Hong Kong. Housing expenses include rent, utilities, repairs, maintenance, taxes and house cleaning.
- You can elect with respect to certain legal business entities in most countries to have that entity treated for US tax purposes as a flow through. That means the net income (or loss) of the foreign entity will flow through to your personal US tax return. This allows you to benefit from losses and avoid paying taxes twice on that income. Such an election also allows you to claim any foreign taxes paid by the foreign entity as tax credits on your personal tax return offsetting the US taxes on that income.
- Most allowances for education, housing, transportation, etc. that are not taxable to you in many foreign countries are taxable to you on your US tax return.
- There are no restrictions on taking money abroad, opening a business, buying real estate or bringing money back to the US so long as you file the proper reporting forms with the IRS.
- If you are a US Citizen, per manent resident, or green card holder you assets abroad are still subject to US gift and estate taxes if applicable.
- If you are married to a US nonresident spouse, and live outside of the USA, you do not have to include their earnings, assets, etc., on your IRS tax filings.· Download your 2011 US tax return questionnaire prepared expressly for Americans living in Abroad HERE.
------------------------------
Don D. Nelson, CPA, Attorney (Kauffman Nelson LLP) has been assisting US Citizens , Permanent Residents and nonresidents in over 40 countries around the world with their US tax planning, tax return preparation, and other tax / legal matters for 20 plus years. He offers his clients attorney-client privilege which is not available from other tax accountants. He has helped hundreds of US expatriates around the world “catch up” filing their past late returns most often with little or no tax cost to you the delinquent taxpayer. His main office is at 34145 Pacific Coast Highway #401, Dana Point, California 92629 USA.
- Email Don at ddnelson@gmail.com.
- US Phone 949-481-4094 or US fax 949-218-6483.
- Don's skype name is: dondnelson.
Our Tax Services Include
- US Expatriate and International Tax Return Preparation.
- US Nonresident return preparation.
- Review of IRS International Tax Forms Prepared by you or your tax preparer.
- Preparing and filing tax returns for past years – Our “Catch Up” tax service.
- Surrender of US Citizenship or Green Card Tax Planning and Assistance.
- International Business Tax Planning and compliance.
- IRS Offshore Voluntary Disclosure Reprsentation and filing.
- IRS Audit Representation with respect to Expatriate and International Tax Issues
Mini Tax Consultations are available for you to discuss your situation with Don your personally and secure his counsel resolving your tax problems and future tax planning by phone or email. No personal visit is required. All consultations are subject to the absolut privacy and confidentiality of Attorney-client privilege. LEARN MORE HERE.
February 20, 2012
QUICK U.S. TAX FACTS FOR EXPATRIATES AND AMERICANS LIVING ABROAD
·
If you are a US Citizen you must file a US tax return every
year unless your income is less than
$ 9,500 (for 2011
and lower for earlier years) or have self employment-independent
contractor net income of more than $ 400 US per year.
You are taxable on your world wide income and required to report it
regardless of whether you filed a tax return in your country of
residence.
·
As an US expatriate living abroad on 4/15, your 2011 tax
return is automatically extended until 6/15 but any taxes due must be
paid by 4/15 to avoid penalties. The return can be further
extended until 10/15/12 if the proper extension is filed. You may
even be able to get a further extension until 12/15if you send the
IRS the proper letter.
·
For 2011 if you are a qualified expatriate you get a foreign
earned income exclusion (earnings from wages or self employment) of
$92,900, but this exclusion is only available if you file a tax
return.
·
If your spouse works and lives abroad, and is qualified, she
can also get at $92,900 foreign earned income exclusion. A foreign
housing deduction or exclusion is also available if you earn in
excess of the foreign earned income exclusion. This amount varies by
country.
·
You get credits against your US income tax obligation for the
taxes paid to a foreign country on that same income but you must file
a return to claim those credits.
·
If you own 10% or more of a foreign corporation,
LLC or partnership or are a beneficiary of a Foreign Trust such as a
Fideicomiso in Mexico, you must file special IRS forms each year or
incur substantial penalties which can be greater including criminal
prosecution if the IRS discovers you have failed to file these forms.
·
Your net self employment income or independent contractor
income is subject to US self employment tax of 15.3% (social
security) which cannot be reduced or eliminated by the foreign earned
income exclusion unless you work in one of the few countries the US
Social Security Administration has a social security agreement with
and pay social security to those countries. If you live in one of
those countries you must secure a required certificate to prove your
exemption from US self employment tax.
·
If at any time during the tax year your combined highest
balances in your foreign bank and financial accounts such as
brokerage accounts, cash surrender value of foreign life insurance
policies, foreign pensions, etc. (when added together) ever equal or
exceed $10,0US you must file a FBAR form with the IRS by June 30th
for the prior calendar year or incur a penalty of $10,000 or more
including criminal prosecution. This form does not go in with your
personal income tax return and is filed separately to a different
address.
·
In
the several past year the IRS has hired more than 2,000 new employees
to audit, investigate and discover Americans living abroad who have
failed to file all necessary tax forms.
·
Often due to foreign tax credits and the the foreign earned
income exclusion expats living abroad when filing all
past year unfiled tax returns and end up owing no or very little US
taxes.
·
Beginning in 2011a new law is in effect which requires all US
Citizens report all of their world wide financial assets if in total
the value of those assets are $50,000 or more on form 8938.
·
Income from certain types of foreign corporations are
immediately taxable on the US shareholder's personal income tax
return. If your corporation only provides your personal
services to customers you may have a Foreign Personal Holding Company
which would cause all income to be immediately taxable to you.
Income may also be immediately taxable when the income is from
investments, rents, etc. This is call “Subpart F” income.
·
If you own investments in a foreign corporation or own a
foreign mutual fund shares you may be required to file the IRS forms
for owning part of a Passive Foreign Investment Company (PFIC) or
incur additional, taxes and penalties for your failure to do so. A
PFIC is any foreign corporation that has more than 75% of its gross
income from passive income or 50 percent or more of its assets
produce or will produce passive income.
·
The IRS is now matching up your US passport with your US tax
records and knows if you have not been filing all
required US tax returns while you are living Abroad. The
IRS will shortly start matching up information received from Foreign
Banks with US tax returns and required FBAR forms. If you have not
been reporting, now is the time to start.
· Download your 2011 US tax return questionnaire prepared expressly for Americans living in Abroad HERE.
------------------------------
Don D. Nelson, CPA, Attorney (Kauffman Nelson LLP) has been assisting US Citizens , Permanent Residents and nonresidents in over 40 countries around the world with their US tax planning, tax return preparation, and other tax / legal matters for 20 plus years. He offers his clients attorney-client privilege which is not available from other tax accountants. He has helped hundreds of US expatriates around the world “catch up” filing their past late returns most often with little or no tax cost to you the delinquent taxpayer. His main office is at 34145 Pacific Coast Highway #401, Dana Point, California 92629 USA.
- Email Don at ddnelson@gmail.com.
- US Phone 949-481-4094 or US fax 949-218-6483.
- Don's skype name is: dondnelson.
Our Tax Services Include
- US Expatriate and International Tax Return Preparation.
- US Nonresident return preparation.
- Review of IRS International Tax Forms Prepared by you or your tax preparer.
- Preparing and filing tax returns for past years – Our “Catch Up” tax service.
- Surrender of US Citizenship or Green Card Tax Planning and Assistance.
- International Business Tax Planning and compliance.
- IRS Offshore Voluntary Disclosure Reprsentation and filing.
- IRS Audit Representation with respect to Expatriate and International Tax Issues
Mini Tax Consultations are available for you to discuss your situation with Don your personally and secure his counsel resolving your tax problems and future tax planning by phone or email. No personal visit is required. All consultations are subject to the absolut privacy and confidentiality of Attorney-client privilege. LEARN MORE HERE.
February 19, 2012
HOW TO AVOID AN IRS EXPATRIATE TAX AUDIT
Though in the past very few expatriate
tax returns were ever audited by the IRS, the level of audits now and
in the future are going to increase significantly. Listed below are
some tips you can use when you expatriate tax return is prepared
which will reduce the chance it will be audited.
- If you have any unusual items of income or expense on your return attach a footnote explaining that item. An explanation may head off the audit.
If you file special foreign forms such as 5471, 8865, TDF 90-22.1, etc. make certain they are filled out correctly and in full. Failure to due so will cause the IRS to inquire further.- Do not attach items to your return which are not required by the IRS such as earnings statements from foreign employers, investment statements, supporting bills, etc. Attaching these items may raise questions.
- Only fill in the portions of Form 2555 that are required for the Foreign Earned Income Exclusion type you claimed.
- Try extending your return to 10/15. Though the IRS does not admit it, many tax experts feel that returns that are extended and not filed until the last minute are not audited as often as those filed by the normal due date.
- Report all foreign bank accounts, financial accounts, foreign income, etc. The IRS will shortly be receiving reports from foreign banks and other financial decisions which they will match with your return and the TDF 90-22.1 (FBAR) forms that you file.
- File tax returns for all tax years even if you earning are below the minimum required for filing. This not only causes the 3 year statute of limitations to run out but avoids IRS inquiries in later years about unfiled US tax returns.
- The foreign tax credit Form 1116 is complex. If you are not certain it is completed correctly, best to get an expert to review it to make certain there are no issues.
- When audited it is best to retain at expatriate tax professional to deal with the IRS Agent. The IRS agent is a Tax Collector and is not your friend. You may make statements to the agent that can hurt you or expand the scope of the audit. A professional will prevent this from happening.
We can prepare your expatriate tax
return for your or review your self prepared return to assure you it
is prepared correctly. We have been preparing US expatriate and
international tax returns for over 30 years. It is all we do and is
our specialty. Please call or email for further assistance.
Don D. Nelson, C.P.A.,
Attorney
Kauffman Nelson LLP - CPAs
Dana Point, California
92629 USA
US Phone: 949-481-4094 US
Fax 949-218-6483
Websites:
www.TaxMeLess.com
www.expatattorneycpa.com
Latest International Tax
Developments Blog: www.usexpatriate.blogspot.com
February 18, 2012
IRS Exempts 4 countries from Foreign Earned Income Exclusion Rules Time Requirements
The IRS has exempted expats living in Libya, Yeman, Egypt and Syria from certain time requirements under the Foreign Earned Income Exclusion Rules (Form 2555 the current $92,900 earned income exclusion). They have done this since many US expats may have had to abandon their residency due to political turmoil in those countries during 2011.To real full details and the time parameters which apply read the Journal of Accountancy Article HERE
Visit our website at www.TaxMeLess.com for further assistance with your US expat tax return preparation or just to learn more about the various applicable rules and regulations.
February 15, 2012
2012 Proposed New Tax Laws from the President
You can read the 200 pages of proposed new tax laws from the President some of which will not doubt be enacted in 2012 HERE. Better act fast to beat some of these changes which may not be favorable to you.
February 14, 2012
IRS issues housing cost allowances for those working abroad in high-cost areas in 2012
Notice 2012-19, 2012-10 IRB This new Notice provides adjustments to the limitation on housing expenses under the Code Sec. 911 housing cost exclusion for specific locations for 2012.
SEE TABLE WITH ALLOWABLE HOUSING DEDUCTION/ALLOWANCE FOR YOUR COUNTRY OF RESIDENCE.
Download our 2011 Expatriate Tax Questionnaire Here (msword format) and email or fax it back to us for a fee quote subject to your approval.
SEE TABLE WITH ALLOWABLE HOUSING DEDUCTION/ALLOWANCE FOR YOUR COUNTRY OF RESIDENCE.
Background. A qualified individual may elect to exclude from U.S. gross income his foreign earned income and housing cost amount. (Code Sec. 911(a)) Under Code Sec. 911(c)(1), the maximum excludable housing cost amount is calculated by way of a complex formula.
The excludable housing cost amount is the excess, if any, of (1) the individual's allowable housing expenses for the year (i.e., the housing expense limitation) over (2) a base amount. For 2012, a taxpayer's allowable housing expenses, assuming he is eligible for the entire year, generally can't exceed $28,530; subtracting the base amount of $15,216 yields a generally applicable maximum housing amount exclusion of $13,314.
IRS may issue regs or other guidance providing for the adjustment of the maximum allowable housing expense limitation on the basis of geographic differences in housing costs relative to housing costs in the U.S. (Code Sec. 911(c)(2)(B))
Increases for high-cost areas. Notice 2012-19, makes adjustments for housing costs during 2012 in high-cost foreign areas. Specifically, it contains a table that (1) identifies locations within countries with high housing costs relative to U.S. housing costs, and (2) provides an adjusted annual maximum and daily housing expense limitation for a qualified individual incurring housing expenses in one or more specified high-cost localities in 2012 to use (instead of the otherwise applicable annual housing expense limitation of $28,530, or the prorated daily amount) in determining his housing expenses. A qualified individual incurring housing expenses in one or more of the high-cost localities identified in the table for the year 2012 may use the adjusted limit provided in the table (in lieu of $28,530 or the prorated daily amount) in determining his housing cost amount on Form 2555, Foreign Earned Income.
Illustration: A U.S. taxpayer is posted to Hong Kong, China, for all of 2012. His maximum housing cost exclusion is $99,084 ($114,300 full year limit on housing expense in Hong Kong minus $15,216 base amount).
NOTE: For some locations, the limitation on housing expenses provided in Notice 2012-19, Sec. 3, may be higher than the limitation on housing expenses provided in Notice 2011-18 (for 2011). A qualified individual incurring housing expenses in such a location during 2011 may apply the adjusted limitation on housing expenses provided in Notice 2012-19, Sec. 3, in lieu of the amounts provided in Notice 2011-18 (and as set forth in the Instructions to Form 2555 (2011)).
IRS anticipates that future annual notices providing adjustments to housing expense limits will make a similar election available to qualified individuals that incur housing expenses in the immediately preceding year. For example, when adjusted housing expense limitations for 2013 are issued, it is expected that taxpayers will be permitted to apply those adjusted limitations to the 2012 tax year.
February 13, 2012
IRS KNOWN TO BE INVESTIGATING BANK AND FINANCIAL ACCOUNTS IN THE FOLLOWING NAMED COUNTRIES
Though the IRS tries to keep their investigation into offshore financial accounts held by US taxpayers confidential, it is known that they are investigating bank accounts and other financial accounts owned by US taxpayers, Citizens and Permanent Residents in the following countries:
1. Switzerland
2. Liechtenstein
3. Israel
4. India
5. Singapore
6. Hong Kong
2. Liechtenstein
3. Israel
4. India
5. Singapore
6. Hong Kong
The risk of criminal and/or substantial civil penalties grows greater as the US Internal Revenue Service (IRS) and Department of Justice (DoJ) complete more bank-investigations and as foreign banks continue to co-operate with US government officials.
February 11, 2012
The Offshore Tax Evasion Crackdown Spreads to Other Countries
| 5 Nations Join US In Tax Evasion Crackdown Forbes The law has rankled many in the international community, reaching the long arm of theIRS into foreign countries. In effect, it orders foreign banks how to behave, forcingforeign institutions to do the IRS's dirty work. See Expats Call For FATCA .... If the IRS determines you have income and you have not filed one, they can file a Ghost Return making tax assessments you may not even be aware of until years later. That may be after they have already attached your bank account or levied other assets. The only way to stop this from happening is to file a tax return before they file one for you. You can download our expat tax return questionnaire for 2011 here (msword format) and send it to us for a fee quote subject to your approval. Do not wait until it is too late. Also, keep in mind, the statue of limitations which allows the IRS to assess taxes against you never runs out if you fail to file a tax return for any particular tax year. |
February 4, 2012
Reporting Foreign Financial Assets
For your 2011 Tax Year you may be required to File Form 8938 to Report your foreign financial assets with your tax return. You may also be required to File Form TDF 90-22.1 to report your foreign bank and financial accounts. Sometimes you may be required to file both forms!
CHART SETTING FOR REQUIREMENTS FOR FILING ONE FORM OR IF YOU ARE REQUIRED TO FILE BOTH FORMS FOR 2011
DOWNLOAD FORM 8938
DOWNLOAD INSTRUCTIONS TO FORM 8938
DOWNLOAD FORM TDF 90-22.1 AND INSTRUCTIONS
If you need help with these forms, filing them out, preparation of the forms, or review of the forms you self prepared contact us at ddnelson@taxmeless.com. We have 30 plus years experience preparing these and other complex international tax forms. Download our 2011 expatriate tax questionnaire HERE and send it to us by email or fax for a fee quote.
CHART SETTING FOR REQUIREMENTS FOR FILING ONE FORM OR IF YOU ARE REQUIRED TO FILE BOTH FORMS FOR 2011
DOWNLOAD FORM 8938
DOWNLOAD INSTRUCTIONS TO FORM 8938
DOWNLOAD FORM TDF 90-22.1 AND INSTRUCTIONS
If you need help with these forms, filing them out, preparation of the forms, or review of the forms you self prepared contact us at ddnelson@taxmeless.com. We have 30 plus years experience preparing these and other complex international tax forms. Download our 2011 expatriate tax questionnaire HERE and send it to us by email or fax for a fee quote.
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