Move Your Business Abroad and Reduce or Eliminate Your US Taxes!

By Don D. Nelson, International Tax Attorney at Law

You can operate your sole proprietorship or corporate  business from a foreign country and secure terrific US tax advantages.  Depending on the country you chose, you may reduce your living expenses, and improve your lifestyle. We have helped hundreds of small business owners move their businesses abroad to achieve the maximum US tax savings and achieve an improved lifestyle. As an attorney and partner in a CPA firm we can offer you international legal and tax expertise which is difficult to find except with the largest and most expensive international law and accounting firms.

You can take advantage of the US offshore tax breaks with all types of businesses including almost all internet based businesses, programming, consulting, employee recruiting businesses, and many other types of  businesses.  What are the US tax advantages?

For 2016 there is a $101,300 exclusion for both you and your spouse(who also gets an exclusion) from US income taxes on the salary you earn abroad from your business operated abroad if you qualify under the physical presence test or the bonafide residence test.You get to deduct part of your  foreign housing costs (the foreign housing exclusion or housing deduction) abroad including rents paid, utilities, and maintenance on your personal residence.

You can claim credits against your US tax for all or part of the foreign income taxes you might have to pay on your income.Your can eliminate your US social security or self employment tax burden.With the proper structure you can still maintain a US business address and keep your US phones.You can set up US pension plans for shelter any earnings in excess of your foreign earned income exclusion.

You can use a foreign corporation to shelter your business income from US tax until the funds are paid out to you as a salary or as dividends.You can stop paying expensive taxes to a US state in most situations.Deduct on your tax return the expenses of moving yourself and your business abroad.We can help you avoid tax and compliance mistakes which can cost you tens of thousands of dollars in penalties and interest.If you plan to move your business abroad, or are thinking about it, contact us for help structuring the move for the best US tax  and legal advantages.  

We can help you determine the best US and foreign entities to use and structure the business for the ultimate US tax advantages. We can work with a CPA or Attorney in the country you wish to locate to help you also achieve the optimum results in your new country of residence.

With the proper planning you can achieve in most situations significant tax savings relocating your business and your family.  Please email or call us secure our expert assistance. We have been helping expats with their foreign businesses and relocation for over 35 years. Email: ddnelson@gmail.com. web: www.taxmeless.com

Red Flags That Trigger IRS Audits

Read below from MSN MONEY:

http://www.msn.com/en-us/money/taxes/top-15-red-flags-triggering-an-irs-tax-audit/ar-BBq2UAJ?li=BBnb7Kz#page=1

US Expatriate Tax Rules Every Expat Living Abroad Needs to Know

By. Don D. Nelson, International Tax Attorney

• Though most foreign assets are reportable on various specialized forms filed with your US tax return (5471, 8865, 114,.8938, etc) If you own foreign real estate and title is in your own name (or a Fideicomiso in Mexico) 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 (Form 8621). 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 file Form 2555 to get this exclusion.

• 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.  (Form 1116)

• 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. (Form 5471)

• 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. Claim treaty benefits on form 8833.

• 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.Go to this link to read more about the "Streamlined Program." https://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures

• 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 thisl form or filing it late can result in penalties of $10,000 US or more.  File your form 114 at :  
                                                       http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

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. Because he is an attorney at law, you get the abolute confidentiality of "attorney-client privilege."  when you talk with him. 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. 

US Expatriate Tax Return IRS Statute of Limitations on IRS Action Against Taxpayers

IRS Statute of Limitations for US expatriates living abroad.

1. Fail to file a return for any tax year that one is due on your worldwide income?  The statute of limitations nevers runs out to assess taxes for that year.  The IRS can come after you 10 years from now and assess taxes if you never filed the required return or forms.

2. Fail to pay taxes on past filed returns or assessed by the IRS?  The normal statute of limitations is 10 years from the date of assessment and filing a tax lien (that may be a later date from the date you filed the return) to collect tax. However, if you leave the country or the tax is assessed while you are outside the USA, that statue of limitations is put on hold until you return to the USA when it starts to run again. WHEN YOU OWE TAXES AND ARE OUTSIDE THE USA THE STATUTE OF LIMITATIONS TO COLLECT THOSE TAXES NEVER RUNS OUT.

3. Failed to file Foreign Bank Account Reporting Forms (FBAR or now form 114)?  The statute of limitations to assess penalties for failing to file is 6 years from the due date of each years forms.

4. 3 years from date return is filed is normal statute of limitations for assessing additional taxes on your filed return. 6 years from date return filed your return if you omitted 25 percent or more of gross income.

5. The statute never runs out if you fail to file forms 5471, 8938 8865, or 3520 --3520A. The penalties for not including these forms with your return can be $10,000 or more.

6. Criminal Tax Evasion - the statute for possible criminal prosecution is most often 6 years, but there are exceptions.

7. The statute of limitations for IRS action for civil fraud (this means assessment of  the 75% civil fraud  monetary penalty against a taxpayer) is indefinite and never runs out.  Therefore if you cheat on your tax return you are never safe.

8. If you owe $50,000 or more the IRS can have your passport taken away when you enter the US.

As a Tax Attorney, you can talk with us without fear of anything you say being used against you due to the rule of  "attorney - client privilege."

Read more at www.taxmeless.com. or email us with questions at ddnelson@gmail.com.

IRS ONLY ANSWERS 38% OF PHONE CALLS

Have tax questions or problems?  You have a 38% chance the IRS will help. They have now admitted that only 38% of the phone calls to them last year were answered. The rest must have been left on indefinite hold.  It will likely be worse this year due to budget cuts and the IRS having to deal with all of the new ACA health care taxes, etc.

What to do?  Go to www.taxmeless.com for www.expatattorneycpa.com to find lots of answers. If you need specific help with your situation email us at ddnelson@gmail.com and a mini consultation can be set up by phone, skype or ? to answer your questions and help you plot the best course of action.

US EXPATS CLICK LINK BELOW TO REGISTER TO VOTE FOR PRESIDENT

REGISTER TO VOTE FOR THE FUTURE PRESIDENTIAL ELECTION even though you live and work abroad and have no state of current residency.

(Click)

10 Countries With No Income Tax on Individuals - And More With Low Rates

Read more here and plan your offshore tax future. We can help coordinate these tax savings with your US tax filing obligation.  Www.taxmeless.com

Watch Out for IRS Scams and alleged IRS Con Men - Emails and Telephone Calls

Scams using the IRS as a lure continue. They take many different forms. The most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too.

Be wary if you get an out-of-the-blue phone call or automated message from someone who claims to be from the IRS. Sometimes they say you owe money and must pay right away. Other times they say you are owed a refund and ask for your bank account information over the phone. Don’t fall for it. Here are several tips that will help you avoid becoming a scam victim.

The real IRS will NOT:

• Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
• Demand tax payment and not allow you to question or appeal the amount you owe.
• Require that you pay your taxes a certain way. For example, demand that you pay with a prepaid debit card.
• Ask for your credit or debit card numbers over the phone.
• Threaten to bring in local police or other agencies to arrest you without paying.
• Threaten you with a lawsuit.

If you don’t owe taxes or have no reason to think that you do:

• Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
• You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" to the comments of your report.

If you think you may owe taxes:

• Ask for a call back number and an employee badge number.
• Call the IRS at 800-829-1040. IRS employees can help you.

In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real.  The scammers’ goal is to lure victims to give up their personal and financial information. If they get what they’re after, they use it to steal a victim’s money and their identity.

If you get a ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

• Identity Protection Tips
• Identity Protection Home Page 

IRS YouTube Videos:

• Tax Scams – English | Spanish | ASL 
• Phishing-Malware – English | Spanish | ASL
• IRS Efforts On Identity Theft – English | Spanish | ASL
• IRS ID Theft FAQ – Going After the Bad Guys – English | Spanish |ASL

IRS Podcasts:

• Tax Scams – English | Spanish
• ID Theft: Protect Yourself from Identity Theft – English | Spanish
• IRS ID Theft FAQ – Going After the Bad Guys – English | Spanish

Foreign Earned Income Exclusion (form 2555) for Pilots, Airline Crews and Sailors

Many US expatriates live abroad and work for international airlines or shipping companies.  If their planes and ships spend a lot of time traveling in International Waters (parts of the Ocean which do not belong to a country) when they attempt to claim the foreign earned income exclusion ($100,800) for their wages on their tax return they will have a surprise if they are audited.  It is probable they may get audited because the IRS makes them targets for audits when they show themselves as pilots, sailors, etc.

Time spend working on planes or ships while traveling across international waters does not count as working in a foreign country. Therefore the money earned while in International Waters is fully taxable the same as if you were living in the USA.  None of it is excludable.

If you are audited by the IRS they will want to see logs, and other proof showing how many hours were earned while over international waters and use those figures to pro-rate any exclusion you may be claiming between work in foreign countries and work over the ocean.  If you are not keeping such records you should since you as the taxpayer have the burden of proof.

Also, it would only be possible if you are a full time pilot or seaman to claim the exclusion for part of your income if you use the bonafide residence test on form 2555.  Need help with an audit or determining the rules that apply to your situation. Email us at ddnelson@gmail.com and visit our website at www.TaxMeLess.com  for more information.

IRS Filing and Payment Dates for Expatriates

Filing Deadlines

Default rule: April 15. If your “tax home” or “abode” is in the United States your filing deadline is April 15. This is the default rule.Automatic extension: June 15. If your “tax home” or “abode” is outside the United States, your deadline for filing your income tax return is June 15. This is automatic and you do not need to file anything to get it.Normal extension: Use Form 4868 (whether you qualify for the June 15 deadline or not) to make extend the filing deadline to October 15.Extra extension: Another extension is possible for some people — to December 15.Foreign Earned Income Exclusion. For people who need time in order to qualify for the foreign earned income exclusion, Form 2350 allows you to select your own filing deadline to achieve that goal.

Payment Deadlines

Default rule: The tax due on your tax return is payable on or before April 15.Some people: If you qualify for the June 15 extended deadline to file your tax return, you can pay your tax — without late payment penalties — on or before June 15. However, you will owe interest on the tax due, from April 15 until the day you pay the tax. No further extension of the payment due date is possible.

Filing Deadlines

The filing deadline rules are not too difficult to understand — after you ignore the confusing instructions for Form 4868.

Standard Rule: April 15

The standard rule is that you must file your income tax return on or before April 15. IRC § 6072(a).

IRS STREAMLINED COMPLIANCE PROCEDURES FORM 14653 NOW REQUESTS MORE INFORMATION THAN OLD FORM.

Form 14653 ( used then a taxpayer has not filed for many years forms required to report foreign  assets, bank accounts, foreign corporations, foreign trusts, etc) in which you must explain the reasons you did not willfully fail to file your tax forms reporting foreign assets has now been expanded to request much more information from applicants. Failure to use the new form asking this information may cause problems with your application which needs to be accompanied with last three year incorrect or past due returns and 6 year past  due amended or original FBAR forms (Form 1140  It now requests the following;


1. Provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Include the whole story including favorable and unfavorable facts. 

2 Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required information returns, including FBARs.

3 Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it. And explain your contacts with the account/asset including withdrawals, deposits, and investment/ management decisions. Provide a complete story about your foreign financial account/asset. If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice.

4  If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.

If you need help catching up with past unfiled foreign asset reporting forms you may be qualified for the streamlined program.  We can help you come into compliance and reduce or eliminate some very heavy monetary penalties.  Email us at ddnelson@gmail.com or go to www.taxmeless.com 

Dept of Justice to Go After Fbar Criminals

There will be no letup in the federal government's ongoing campaign targeting U.S. taxpayers who hide foreign accounts and attempt to evade U.S. tax obligations, a key Justice Department (DOJ) official said on Jan. 29. In 2016, tax professionals will see "additional civil enforcement actions and ongoing and new criminal investigations and prosecutions," Caroline Ciraolo, acting assistant attorney general for DOJ's Tax Division, told participants at the American Bar Association's Tax Section midyear meeting. According to Ciraolo, taxpayers who have participated in IRS voluntary disclosure programs may be contacted and interviewed by the agency and DOJ as part of their ongoing cooperation. "Taxpayers who filed returns and FBARs [Report of Foreign Bank and Financial Accounts] pursuant to the streamlined filing procedures or the Delinquent International Information Return or FBAR submission procedures should be very concerned if they falsely claimed to have engaged in non-willful conduct or acted with reasonable cause," Ciraolo said. In addition, "financial institutions and individuals who have facilitated the concealment of offshore accounts and the evasion of U.S. tax obligations would be well advised to anticipate an investigation and consider voluntarily disclosing any criminal activity to the department before they become the subject of an investigation," she said. Ciraolo noted that over the past year, her division has bolstered its staffing with the addition of 80 attorneys who are receiving the appropriate training. Ciraolo's complete prepared remarks can be viewed atjustice.gov/opa/speech/acting-assistant-attorney-general-caroline-d-ciraolo-delivers-remarks-american-bar

US NEW SECRET TAX HAVEN FOR REST OF WORLD

Read more in Bloomberg:

http://www.bloomberg.com/news/articles/2016-01-27/the-world-s-favorite-new-tax-haven-is-the-united-states

5 Essential US Expatriate Estate Planning Steps

1. US Expatriates do need to plan for both their foreign assets and US assets in the event of their demise.  The US does look at your worldwide assets and if their values exceed approximately 5.45 million dollars you must file an estate tax return and may owe US estate taxes.

2. Also, if you give gifts of either foreign property or assets located in the US in excess of $14,000 per year per donee you must file a US gift tax return, though it is likely you may not owe any US gift taxes due to the lifetime exclusion mentioned above for estate and gift taxes.

3. In the US you may need a will, power of attorney and a trust to properly dispose of your assets locate there and void expensive and long probates. The trust in large estates may also reduce you estate taxes.

4. If you wish your children to live in the US, your US will can be used to appoint guardians for your children (while they are still minors) and guardians for their assets (this can also be done in the trust you establish).

5. Where your US estate plan documents will effectively pass on your assets located in other countries if subject to each countries laws and a local attorney in each country should be consulted to confirm whether the US documents will be honored or separate wills, etc. must be executed for each country to meet local requirements.

We can help you put together your US estate plan, and often prepare all necessary documents and assist you with coordinating your plan with counsel in your country of residence.  If you require assistance please email me at ddnelson@gmail.com

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.