Expats - Retirement Costs Many Do Not Think About

Click here to see retirement costs you may not have considered in your retirement plan   If you plan to retire abroad, planning will help since every year various foreign locations become more expensive and the cost to retire may increase. Let help with your estate or retirement plan abroad (taking into account US tax and estate law) call us at ddnelson@gmail.com.

IRS International Tax Topic Index Will Answer Most Expat and International Tax Questions

The International Tax Topic Index is a gateway into IRS Tax Map specifically designed for taxpayers with international filing requirements. IRS Tax Map gathers all information about a topic in one place and contains topics from across the IRS.

You can find international topics using search or the  link below below. Use the search box on the left navigation bar to search all topics in Tax Map including international topics.

LINK TO IRS INTERNATIONAL TAX TOPICS INDEX

If you need further help with any question or assistance contact  our firm Kaufman Nelson LLP for assistance from an Attorney, CPA with over 30 years experience.  Ask for a mini consultation.  Email us at ddnelson@gmail.com 

Six IRS Tax Tips about Reporting Foreign Income

Are you a U.S. citizen or resident who worked abroad last year? Did you receive income from a foreign source in 2014? If you answered ‘yes’ to either of those questions here are six tax tips you should know about foreign income:

1. Report Worldwide Income.  By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

2. File Required Tax Forms.  You may need to fileSchedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. See IRS.gov for more information.

3. Review the Foreign Earned Income Exclusion. If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $99,200 of your wages and other foreign earned income in 2014. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.  On top of that amount you may also be eligible for the foreign housing exclusion or deduction if you earn in excess of the foreign earned income exclusion.

4. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.

5. Tax Filing Extension is Available.  If you live outside the U.S. and can’t file your tax return by April 15, you may qualify for an automatic two-month extension of time to file. That will give you until June 16, 2015, to file your U.S. tax return. This extension also applies to those serving in the military outside the U.S. You will need to attach a statement to your return explaining why you qualify for the extension.

6. Get  Tax Help.  Check the international services Web page for the types of help the IRS provides. 

For more on this topic refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. 

If you are preparing your own return and have questions, we can provide you with the answers in a mini consultation. Or if you want your return reviewed prior to filing with the IRS, we can do that too.  And of course, we also prepare expatriate, nonresident and international tax returns.  We have over 30 years experience preparing expatriate and nonresident tax returns. We are the experts you need.

Email for assistance at ddnelson@gmail.com 

Additional IRS Resources:

• Taxation of U.S. Resident Aliens
• Publication 514, Foreign Tax Credit for Individuals
• International Taxpayers

IRS Required Withholding on Payments to Foreign Companies and Individuals

U.S. Tax Withholding on Payments to Foreign Persons U.S. source income paid to foreign individuals amounts to $140 billion each year. Most types of U.S. source income paid to a foreign person are subject to a withholding tax of 30%, although a reduced rate or exemption may apply if stipulated in the applicable tax treaty.

General Rule

In general, a person that makes a payment of U.S. source income to a foreign person must withhold the proper amount of tax, report the payment on Form 1042-S and file a Form 1042 by March 15 of the year following the payment(s).

Withholding Agent

The person making the payment is considered to be the withholding agent. You are a withholding agent if you are a U.S.or foreign person that has control of any item of income of a foreign person that is subject to withholding.

A withholding agent may be an:

• Individual
• Corporation
• Partnership
• Trust
• Association
• Nominee (under section 1446 of the Code) or
• Any other entity, including any foreign intermediary, foreign partnership, or U.S. branch of certain foreign banks and insurance companies.

 As a withholding agent, the payer is personally liable for any tax required to be withheld and which the payer fails to withhold. 

A payment to a foreign person is subject to withholding if it is from sources within the United States, and it is either:

• Fixed or determinable annual or periodical ( FDAP) income, or
• Certain gains from the disposition of timber, coal, and iron ore or from the sale or exchange ofintangible property (such as patents or copyrights)

Examples of FDAP income subject to withholding include (but are not limited to):

• Compensation for personal services
• Dividends
• Interest
• Pensions and Annuities
• Alimony
• Real property income (such as rents).
• Royalties   
• Taxable scholarships and fellowship grants

Withholding Agent Obligations

When you make a payment of U.S. source income to a foreign person or entity you are normally required to withhold U.S. income tax at a rate of 30% and report it on Forms 1042-S and 1042 by March 15 of the year following the payment(s).

The penalty for not filing Forms 1042-S and1042 when due (including extensions) is usually 5% of the unpaid tax for each month or part of a month the return is late, but not more than 25% of the unpaid tax. Additional penalties apply for failure to provide complete and correct information or if you fail to provide a complete and correct statement to each recipient. The maximum penalty is $100,000 per year.

More detailed information on this subject can be found in the links below. Contact us if you need more information for your particular situation.  ddnelson@gmail.com 

Links:    

1042   Annual withholding tax return for US Source income of foreign persons

1042-S.  Foreign persons U.S. source income subject to withholding

Non Resident Alien Withholding  Information from www.irs.gov

Publication 515   Withholding of tax on nonresident aliens and foreign entities

The Best and Worst States to be a Taxpayer

Read this link to see the best and worst states to live in as a taxpayer. As an expat there is not law that says you must have a state of residency or file state tax returns. However, some states including California, Virginia, Alabama, New Mexico and others have state laws that make it very difficult to give up your state tax domicile even if you move abroad permanently.  We can help with this process of abandoning tax domicile in those states. 

15 Ways to Invite an IRS Audit

Click this link from Forbes Magazine. Everything is true and if you do any of the items listed you will be audited. We can help you avoid audits or beat the IRS if your are audited. Kauffman Nelson LLP, Attorneys and CPAs.

Great Presentation on US Expatriate Taxes Presented by Don D. Nelson, Attorney, CPA

LINK TO POWER POINT SLIDES ON FBAR FILING AND EXPATRIATE TAX POWERPOINT PRESENTATION http://www.slideshare.net/dondnelson/intercam-presentation-pv-214-9

OPTIONS AVAILABLE TO OFFSHORE US TAXPAYERS FROM IRS

The IRS has prepared several documents that help explain those requirements, including FS-2011-13 and the U.S. Citizens and Resident Aliens Abroad page on IRS.gov. Situations of taxpayers with offshore compliance issues vary widely given the complexity of this area of tax law.  Taxpayers that recently learned of these tax requirements have many options are available outside of the normal filing process to help them get current with their tax obligations.  A number of the common situations and potential solutions are outlined below.

The IRS recommends taxpayers to consult with their professional tax advisor in determining which option is the most appropriate given their facts and circumstance.  We at www.TaxMeLess.com have helped over a hundred clients catch up with the IRS.  If you need to talk about this email us at ddnelson@gmail.com .  We are both attorneys and CPAs. As attorneys we can offer you  complete attorney client privilege (and all of its confidentiality and privacy) on all information we discuss. Regular accountants cannot provide you with that privilege and the IRS can force them to reveal information.

Situation	Compliance Option
Taxpayers who have properly reported all taxable income but recently learned that he/she should have been filing FBARs in prior years to report a personal foreign bank account or to report signature authority over bank accounts owned by an employer.	Taxpayers who reported, and paid tax on, all their taxable income for prior years but did not file FBARs, should file the delinquent FBAR reports according to the instructions (send to Department of Treasury, Post Office Box 32621, Detroit, MI 48232-0621) and attach a statement explaining why the reports are filed late. The IRS will not impose a penalty for the failure to file the delinquent FBARs if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.
Taxpayers who only have certain delinquent information returns, but no tax due.	A taxpayer who has failed to file tax information returns, such as Form 5471 for controlled foreign corporations (CFCs) or Form 3520 for foreign trusts but who has reported, and paid tax on, all their taxable income with respect to all transactions related to the CFCs or foreign trusts, should file delinquent information returns with the appropriate service center according to the instructions for the form and attach a statement explaining why the information returns are filed late. (The Form 5471 should be submitted with an amended return showing no change to income or tax liability.) The IRS will not impose a penalty for the failure to file the delinquent Forms 5471 and 3250 if there are no underreported tax liabilities and you have not previously been contacted regarding an income tax examination or a request for delinquent returns.
Non-resident U.S. taxpayers with delinquent returns with low risk factors (including tax owed less than $1,500/year).	Filing Compliance Procedures for Non-Resident U.S. TaxpayersNon-resident U.S. taxpayers should file delinquent tax returns, including delinquent information returns, for the past three years; delinquent FBARs for the past six years; and additional required information regarding compliance risk.  Payment of any federal tax and interest due must accompany the submission.
Taxpayers with undisclosed foreign accounts and unreported income.  Taxpayers seeking protection from criminal prosecution.	Offshore Voluntary Disclosure ProgramThe Offshore Voluntary Disclosure Program (OVDP) offers a civil settlement structure in which taxpayers pay an offshore penalty in lieu of a number of other penalties that may be assessed in cases of offshore noncompliance.  The OVDP also offers protection from criminal prosecution.  In order to participate in the OVDP, taxpayers must first request acceptance into the program.  Once they have been preliminarily accepted, taxpayers must submit certain information including eight years of amended tax returns, FBARs, and information returns as well as information about their offshore accounts.  In addition, taxpayers must submit full payment of the tax and interest due, and certain penalty amounts.  Taxpayers who have entered OVDP who disagree with the application of the offshore penalty given the facts and circumstances of their case may elect to opt out of the civil settlement structure of the program.  In such situations, the IRS will determine if penalty mitigation is appropriate.

Additional Information

• New Filing Compliance Procedures for Non-Resident U.S. Taxpayers
• 2012 Offshore Voluntary Disclosure Program

-Interests

Heirs Can Be Left With Unpaid Tax Bills to IRS

If you inherit property from someone who owes taxes, you may be liable. Read more in the Forbes Article HERE  The problems are increased when the deceased benefactor has undisclose offshore accounts, etc.  Do your estate planning now, surface with the IRS and avoid this problem.  Email us at ddnelson@gmail.com

Most Expata and Nonresidents May Be Exempt from US Health Care Tax or Required Insurance Coverage

Many  US taxpayers are exempt from Obama Care  (ACA) for 2014.   One exemption is expats who live and work abroad. See below:

Citizens living abroad and certain noncitizens - You are:

• A U.S. citizen or resident who spent at least 330 full days outside of the U.S. during a 12-month period;
• A U.S. citizen who was a bona fide resident of a foreign country or U.S. territory;
• A resident alien who was a citizen of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and you were a bona fide resident of a foreign country for the tax year; or
• Not a U.S. citizen, not a U.S. national, and not an alien lawfully present in the U.S.

To read about the other exemptions  from the US ACA health care law, and tax read the following link  http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/ACA-Individual-Shared-Responsibility-Provision-Exemptions

We are ready to help you with these complex rules. www.TaxMeLess.com   We offer a mini consultation to give you answers to all of your expat and international tax questions. We also offer a service to review self prepared expat returns or foreign tax forms which is much less costly than having us prepare the returns.  Email. ddnelson@gmail.com 

US Expatriates - Every Resource You Need to Know about filing Taxes When Living Abroad

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

When to File

If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return without requesting an extension. For a calendar year return, the automatic 2-month extension is to June 15.  Note that you must pay any tax due by April 15 or interest will be charged starting from April 15.

Where to File

If you are a U.S. citizen or resident alien (including a green card holder) and you live in a foreign country, mail your U.S. tax return to:

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA

Filing Requirements  U.S. Citizens and Resident Aliens Abroad - General InforWmation U.S. Citizens and Resident Aliens Abroad -- Filing Requirements U.S. Citizens and Resident Aliens Abroad -- Extensions of Time to File e-file Filing Prior Year Tax Returns Tax Information for Members of U.S. Armed Forces Tax Information for U.S. Government Civilian Employees Stationed Abroad Taxpayer Identification Number Requirement		U.S. Residency Status Election to Treat Nonresident Spouse as a Resident and File Joint Return Individuals Living or Working in U.S. Possessions U.S. Citizens and Resident Aliens Abroad -- Head of Household
Income Allowances, Differentials, and Other Special Pay Fulbright Grants Hong Kong Scheme 6000 Payments: FAQs Income from Abroad is Taxable U.S. Foreign Service Employees Yearly Average Currency Exchange Rates		Deductions Foreign Earned Income Exclusion Foreign Housing Exclusion Individual Retirement Arrangements and the Foreign Earned Income Exclusion/Deduction Moving Expenses to and from the United States
Credits Foreign Tax Credit Earned Income Tax Credit Rules Education Credits Child and Dependent Care Credit		Other Taxes Expatriation Tax Certification of U.S. Residency for Tax Treaty Purposes Persons Employed Abroad by a U.S. Person Persons Employed by a Foreign Employer Persons Employed by a Foreign Person Persons Employed by a Foreign Government or International Organization Social Security Tax Consequences of Working Abroad Social Security Agreements with Foreign Countries (Totalization Agreements) U.S. Citizens and Resident Aliens Employed Abroad -- Employees Wages Paid to U.S. Citizens and Resident Aliens Employed Abroad
Forms Certain Taxpayers Related to Foreign Corporations Must File Form 5471 Publication 54, Tax Guide for U.S. Citizens and Residents Abroad Publication 519, U.S. Tax Guide for Aliens  When you need more help go to our website at www.TaxMeLess or www.expatattorneycpa.com  We offer a service to review your self prepared return or one prepared by another for correct application of the complex expat and international tax laws. Email ddnelson@gmail.com for more		Resources/Help Frequently Asked Questions (FAQs) About International Individual Tax Matters New Developments in International Taxation

US Tax Reporting of Foreign Pension Plans by Expats

Foreign pension plans in almost every situation are not treated the same as US pension plans.  Often the employers contribution and earnings in the account are immediately taxable on your US tax return even though tax deferred in the foreign country of origin.  There are some beneficial exceptions to these rules in the US tax treaties with Canada and the UK.. In most situations you may also have to report the amounts in your foreign pension plan on Form 114 (foreign financial account report) which is filed separately from your US tax return and is due on 6/30 following the end of each calendar year.  READ MORE HERE

TaxPayer Advocate Slams the IRS Offshore Programs as Unfair

The IRS Offshore Voluntary Disclosure Program has unfairly penalized many ordinary citizens and often failed to catch the real offshore cheaters.  It is unfair to most expats and those who are ignorant of the IRS rules ..... primarily due to the IRS's failure to property publish those rules and keep the public informed.  Read more in the Forbes article below;

http://www.forbes.com/sites/robertwood/2015/01/14/national-taxpayer-advocate-slams-irs-offshore-programs-fbar-penalties-demands-change/

When a US Expat is Married to a Nonresident Spouse - Many Planning Opportunities May be Available

If you are married to a nonresident spouse who lives outside of the US, there are potential tax problems, but also many possible planning opportunities that should not be ignored.  You do not have to file a US tax return with your nonresident spouse or report their income. You do not have to report their foreign assets.  Your nonresident spouse can give you unlimited gifts so long as you file the proper form with the IRS to report those gifts (which will avoid any potential penalties). There are more strategies available.  Email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.com 

Read more in the Wall Stree Journal Article Below:

http://blogs.wsj.com/expat/2015/01/12/ask-an-expert-tax-tips-for-u-s-expats-with-non-resident-alien-spouses/

Citizen Renunciation Fee to US Government Up 422%

Read More in Forbe Magazine: http://www.forbes.com/sites/robertwood/2015/01/13/citizenship-renunciation-fee-up-422-with-no-return-just-ask-bitcoin-jesus/

Let us know if you need help with your renunciation of US Citizenship or Long Term Green Card Holder Surrender (8 years). We can help you comply with the Tax Laws and help you plan to avoid the possible tax on appreciated property.  ddnelson@gmail.com 

Don't Expect IRS Help in 2015

With a 17% reduction in budget and 12,000 reduction in employees the IRS will not be there to help. We will be. Go to:  www.Taxmeless.com or email ustax@hotmail.com.com

Read more in time magazine: http://time.com/money/3667380/irs-tax-questions-olson-report/

China Taxes World Wide Income The Same as US .. IRS

Read more in Forbes Article.  China Plans to start enforcing law in 2015.

http://www.forbes.com/sites/taxanalysts/2015/01/13/chinas-fiscal-roadmap-tax-like-america/

The Best Places to Retire 2015

The Best Places to Retire 2015

The Best Places to Retire 2015

The Best Places to Retire 2015

College Savings Plans for Expats & Chidren - IRC 529 Plan

Great tax saving and planning Tool. Read More

http://blogs.wsj.com/expat/2015/01/05/ask-an-expert-tips-for-u-s-expats-using-529-college-savings-plans/