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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.
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.
March 17, 2012
Senate Expected to Pass Bill that would Revoke Passports of Seriously Delinquent US Taxpayers
| Pay the IRS or Lose Your Passport |
The Senate has unanimously approved a provision to a highway transportation bill that would revoke the passports of people with seriously delinquent tax debts. This addition to the bill would allow the State Department to deny, revoke or limit a passport for any individual whom the Internal Revenue Service has certified as having a “seriously delinquent tax debt” in excess of $50,000.
A seriously delinquent tax debt would be one for which a notice of a federal tax lien or a notice of a levy has been filed. An exception is allowed when the debt is being paid in a timely manner under an agreement with the IRS, or if collection on the debt has been suspended because of a collection due process hearing or other relief has been requested or is pending.
The Senate is expect to vote on the overall bill and pass it later this week.The House is will take up the bill in the coming weeks
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March 16, 2012
Expats Protest Tax Treatment of US Taxpayers Abroad
Last December, National Taxpayer Advocate Nina Olson described her concerns in her annual report to Congress and later sent a rarely used Taxpayer Advocate Directive to Shulman (see Taxpayer Uncertainty Prompts Citizenship Renunciations). Olson, who heads the Taxpayer Advocacy Service, argued that IRS examiners treated some taxpayers unfairly who had come forward under the 2009 program to voluntarily declare previously undisclosed bank accounts to the IRS. She said the IRS had subjected them to a “one size fits all” regime and rescinded some of the claims midstream that would have qualified for reduced penalties by way of “reasonable cause” (see Groundhog Day for IRS Voluntary Disclosure Do-over). READ MORE HERE
March 11, 2012
Form 8938 - Report of Foreign Financial Assets - Read when to file and what to file for here.
Do I need to file Form 8938, “Statement of Specified Foreign Financial Assets”? |
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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.
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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.
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