2022 Fast Tax Facts for US Expatriates and Green Card Holders Living and Working Abroad

 2022 Fast Tax Facts  for  US Expatriates and Green Card Holders

  Living and Working Abroad

Kauffman Nelson LLP CPAS - Don D. Nelson , Attorney,   Charles Kauffman  CPA

If you are a US Citizen or green card holder you must file a US tax return every year unless

your taxable income is below a certain threshold.  Even if your income is below that threshold,

you may still be required to file certain forms to report foreign assets, etc. Failure to file these

forms can result in severe IRS penalties If you do not itemize your health, tax, interest, charitable

and miscellaneous deductions you get a standard deduction of $12,950 if single or filing as

married filing separately or $25,900 if you file jointlywith your spouse. 

As a US expatriate living and working abroad 4/18/2023 your 2022 tax return is automatically

extended until 6/15/23  but any taxes due must be paid by 4/18/23  to avoid penalties and interest.

The return can be further extended until 10/15/2023 if the proper extension form is filed. An even

further extension until December may be available if the proper letter is sent to the IRS.

For 2022 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from

wages or self employment) of $112,000 but this exclusion is only available if you file a tax return.

You must qualify under one of two tests to take this exclusion: (1) bona fide resident test or

(2) physical presence test. You can read more about how to qualify in IRS Publication 54. This

exclusion only applies to income taxes and does not apply to US self- employment tax

(social security plus medicare).  Your spouse who lives works abroad with you will also be

able to use this exclusion against any earned income they have abroad.

You can lose this exclusion if you file your return more than 18 months late.

The exclusion can only be claimed on filed tax return and does not apply if you fail to

file a tax return.

If you receive a gift or inheritance of $100,000 or more during 2022 from a nonresident

individual or nonresident corporation you must file form 3520 to report that gift. If you fail

to file that form you will incur substantial penalties and taxes. .

If your foreign earnings from wages or self -employment exceed the foreign earned income

exclusion you can claim a housing expense for the rent, utilities and maintenance you pay if

those amounts that exceed a minimum non-deductible amount.   There is a limit to the housing

amount and in certain “high-cost” locations there is a higher amount of housing expense which

can be considered. (For “high-cost” country limitations see Form 2555 instructions).

You get credits against your US income tax obligation for foreign income taxes paid to a

foreign country but you must file a US tax return to claim these credits. This avoids double

taxation of the same income. Value added taxes paid to foreign countries are not eligible

for this credit.

If you own 10% or more of a Foreign corporation or Foreign partnership (LLC) you must

file special IRS form 5471 or 8865,  or incur substantial penalties which can be greater

including criminal prosecution if the IRS discovers you have failed to file these forms.

If you create a foreign trust or are a beneficiary of a foreign trust you may be obligated

to file forms 3520 and /or 3520A each year to report those activities or be subject to

severe penalties of $10,000 US or more Foreign foundations and nonprofits which indirectly

benefit you may be foreign trusts in the eyes of the IRS.

Your net self-employment income in a foreign country (earned as an independent

contractor or in your own sole proprietorship) is subject to US self-employment tax

(medicare and social security) of  15.3%  which cannot be reduced or eliminated by the

foreign earned income exclusion or foreign tax credits. The one exception is if you live

in one of the very few countries that have a social security agreements with the US and

you pay the equivalent of social security in that country. 

Forming the correct type of foreign corporation and making the proper US tax election

(to cause the income and foreign taxes  the foreign corporation pays to flow through to your

personal US tax return) with the IRS for that corporation may save you significant income taxes

and avoid later adverse tax consequences. You need to investigate this procedure before you

actually form that foreign because it can be difficult to make that election later and only certain

types of foreign business entities are eligible to make this election.

If at any time during the tax year your combined highest balances in your foreign bank and

financial accounts (when added together) ever equal or exceed $10,000US you must file

a FBAR form 114 with the IRS by October 15, 2023 for the 2022 calendar year or incur a

penalty of $10,000 US or more including criminal prosecution. Foreign financial accounts

often include accounts when you sign on for a foreign corporation, foreign partnerships

foreign pension plans, stock brokerage accounts, and cash surrender value of foreign life

insurance.  This form does not go in with your personal income tax return and  can only be

filed separately on the web at:

http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

The IRS gets lists of Americans applying or renewing for US passports or entering the country.

They will compare these lists with those who are filing US income tax returns and take action

against those who do not file US returns but are US residents or citizens.

Often due to foreign tax credits and the foreign earned income tax expats living abroad

who file all past year unfiled tax returns end up owing no or very little US taxes.

The IRS has a special program which will help you catch up if you are in arrears which will

reduce or possibly eliminateall potential penalties for failing to file the required foreign

asset reporting forms. We can direct you to the best program for your situation, prepare

the returns and forms and represent you before the IRS.

Beginning in 2011 a new law went into effect which requires all US Citizens report

all of their worldwide financial assets with their personal tax return if in total the value

of those assets exceed certain minimum amounts starting at $50,000. Failure to file that

form 8938 on time can result in a penalty of $10,000. The form is complex and has

different rules that apply to you if you live abroad or live in the US. This form is

required in addition to the FBAR form 114.

Certain types of income of foreign corporations are immediately taxable on the

US shareholder's personal income tax return. This is called Subpart F income. The rules are

complex and if you own a foreign corporation you need to determine if these rules apply to

you when you file the required form 5471 for that corporation. For 2018 a new tax was

enacted with the acronym of GILTI tax. This may or may not cause an owner of

a  Controlled Foreign Corporation (CFC) to owe taxes on the income it

does not distribute to its owners. This GILTI tax applies to 10% or more

owners of CFCs. 

If you own investments in a foreign corporation or own foreign mutual fund shares you

may be required to file the IRS form 8621 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.

There are many more special tax laws too numerous to mention here that apply to expatriates,green card holders. nonresidents and US  taxpayers with foreign assets, businesses, etc.

  Please consult with Kauffman Nelson LLP  if you have other offshore tax planning or return

filing questions.

Download your   2022 Expatriate Tax Questionnaire at www.taxmeless.com. 

Send us your completed questionnaire and we will immediately provide you with a flat fee

quote for preparing your return(s). 

Don D. Nelson, US Tax Attorney, Charles Kauffman CPA,

Kauffman Nelson, LLP, CPAs
Huntington Beach, California USA
US Phone: (949) 480-1235, US Fax: (949) 606-9627
Email:ddnelson@gmail.com or ustax@hotmail.com
Skype address: dondnelson   whatsapp:  818-519-9219 (US)
Website: www.taxmeless.com 

Visit our International Tax Blog for the Latest Expat and International Tax

Developments atwww.usexpatriate.blogspot.com    /   http://us-mexicantax.blogspot.com

We have been preparing tax returns and assisting US clients located in over 123

countries around the world for over 30 years. We also assist US Nonresidents

meet their US tax obligations and return filing requirements. Email, skype or phone

us for immediate assistance. 

ARE YOU NOW CONFUSED OR HAVE SPECIFIC QUESTIONS?

WE OFFER MINI TAX CONSULTATIONS BY PHONE, SKYPE OR EMAIL: The mini

consultations(with attorney client privilege) to answer your tax questions and

resolve yourtax issues. Email ddnelson@gmail.com to learn more or request a

consultation

For additional useful information and tax assistance go to our website at.

www.TaxMeLess.com

Disclaimer and Conditions: The information contained herein is general in nature and is not to be construed

or relied on as tax or legal advice with respect to you individual tax situation or questions. Your use of this

does not create an attorney/CPA client relationship between you and this firm. You must retain competent

CPA and Attorney counsel to advise you on your particular situation.

Access Your IRS tax account online

Access your individual account information including balance, payments, tax records and more.

Sign in to your Online Account

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View Your Balance

• View the amount you owe and a breakdown by tax year

Make and View Payments

• Make a payment from your bank account or by debit/credit card
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• View 5 years of payment history, including your estimated tax payments
• View any pending or scheduled payments

View or Create Payment Plans

• Learn about payment plan options and apply for a new payment plan
• View details of your payment plan if you have one

Manage Communication Preferences

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Access Tax Records

• View key data from your most recently filed tax return, including your adjusted gross income, and access transcripts
• View information about your Economic Impact Payments
• View information about your advance Child Tax Credit payments
• View digital copies of certain notices from the IRS

View Tax Pro Authorizations

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Other ways to find your account information

• You can request an Account Transcript by mail. Note that each Account Transcript only covers a single tax year, and may not show the most recent penalties, interest, changes or pending actions.
• If you're a business, or an individual who filed a form other than 1040, you can obtain a transcript by submitting Form 4506-T, Request for Transcript of Tax Return.
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Need tax help from professional expert CPAs and Attorney?  Email us at ustax@hotmail.com or text or whatsapp to 1818 529 9219.

Guidance on Crowdfunding and Taxes for your US taxes

Crowdfunding has become one of the most popular ways to raise money for charities, businesses, and people enduring hardships. Depending on a variety of circumstances, money raised through a crowdfunding campaign may be either taxable or non-taxable.

In many cases, if people donate to a crowdfunding campaign and receive nothing in return, the IRS treats the donations as gifts. Therefore, the person who receives the funds may exclude them from their gross income for tax purposes. Also, if you organize a crowdfunding campaign for someone else’s benefit, you may exclude the funds raised from your own income, as long as you do not keep any of the money for yourself.

However, there are situations where funds received through crowdfunding are taxable, such as when an employer contributes to a campaign for an employee. Taxpayers generally must also report income received via crowdfunding if contributors get goods or services in exchange for their donations.

If the funds raised exceed $600 or contributors receive goods or services, you may get a Form 1099-K from the crowdfunding website.

We are experts on all aspects of Expatriate and US International Taxation including your crowd funding activies. Email us at taxmeless@gmail.com.  We are available for telephone and whatsapp tax consultations including US business law as it relates to international business.

IRS PENALTY RELEIF FOR RETURNS FILED IN 2019 AND 2020

The IRS is providing penalty relief to certain taxpayers who filed their 2019 and/or 2020 tax returns late. The penalty relief also extends to certain domestic and international information return filers.

Who qualifies for relief? For income tax filers to qualify for this penalty relief, any “eligible income tax return” must be filed on or before September 30, 2022.

Note. For those with an outstanding 2019 or 2020 income tax return, if they file it before September 30, 2022, they won’t have to pay the failure-to-file penalty.

Read More about the details here    Need help catching up with unfiled past US tax returns for the IRS or any state. Contact us by email at ddnelson@gmail.com 

G TO IRS (THIS INCLUDES FOREIGN PENSIONS, STOCK ACCOUNTS, ETC.) ON FORM 114 FBAR

Many United States taxpayers have foreign bank and financial accounts that they are obligated to report. However, many of these foreign account owners fail to report it, which is why the FBAR, also known as FinCEN Form 114, was created. 

The FBAR assists the U.S in identifying undeclared income and overseas accounts. “Every U.S citizen has an obligation towards the state. Failure to meet with those requirements can result in sever penalties.

The FBAR objective is to notify the Internal Revenue Service (IRS) of any accounts or other assets that taxpayers have outside of the United States. The IRS here assists in enforcing FBAR compliance and assessing and enforcing foreign account penalties against taxpayers who fail to comply with any FBAR rules.

Essential Facts About FBAR filing For 2022

While completing United States tax returns is a well-known need for Americans living overseas, many overlook the Foreign Bank Account Report (FBAR). Failure to file the FBAR can attract the IRS investigation and severe penalties. Here are vital points to note about FBAR filing to ensure you stay compliant and off the IRS hit list:

#1. Deadline For FBAR Filing

The annual filing deadline for the FBAR is April 15. If unable to file the form by the FBAR filing date, an automatic FBAR extension until October 15 will be granted. If you need to file the form after October 15, you must meet particular requirements to extend the deadline.

#2. Which Accounts Must Be On The FBAR?

Bank accounts and financial accounts such as securities accounts (brokerage accounts and securities derivatives), foreign pensions/retirement accounts, and investment accounts must all be on the FBAR. Furthermore, cash-value insurance policies (including whole life insurance), mutual funds or similar pooled assets, and any other accounts held by a foreign financial institution must also be on the FBAR.

Certain accounts, however, are not required to file an FBAR. Accounts managed by the United States Military financial institution, owned by an international financial institution or a government body, and held in an individual retirement account on your behalf are exempted. Also exempt are Correspondent or Nostro accounts, accounts held in a retirement plan on your behalf, as well as accounts held in a trust for which you are a beneficiary.

#3. Who Is Required To File An FBAR?

It is important to note who must file an FBAR. People who are required to file an FBAR include the following:

• An individual from the United States: According to the FBAR rules, any individual or company that fulfills the definition of a United States person is under obligation to file an FBAR. Citizens, residents, corporations, partnerships, limited liability companies, trusts, and estates are all considered United States persons for FBAR reporting purposes. Furthermore, if a non-U.S. citizen passes either the green card or significant presence tests (two criteria used to assess a taxpayer residency status), they are considered a resident. 

As a result, if you have a financial interest in or any authority signature over one or more financial accounts situated outside of the United States, you are obligated to file an FBAR. Even if the account generates no taxable income during the year, it must be in the report.

Another requirement for completing an FBAR is that the total value of all of your overseas financial accounts exceeds $10,000 at any point during the calendar year. The total value refers to the overall worth of all accounts. In other words, even if no single account in the year reaches $10,000 in value and the overall amount of all your accounts is more than $10,000 at any time, you must still file this form.

• If you have signature authority over an account: the FBAR form is not just for account holders who control the account. It also applies to filers with signing authority, which means that the taxpayer does not have to own the funds in the overseas accounts to be required to file the FBAR form. Even if their designation is a signee on the overseas account, the taxpayer must file the FBAR.
• Minors are Also Allowed to File: minors are not exempt from filling out the FBAR form. As a result, if your young child has enough foreign account balances to reach the FBAR filing threshold, they must still submit the FBAR.

#4. What Happens If You Miss the FBAR Deadline?

The repercussions of missing the FBAR deadlines are severe. Failure to file the FBAR can result in hefty penalties and fines that can be expensive.

Even if the failure was due to an honest misunderstanding of the laws, civil fines for non-willful FBAR infractions could be as high as $13,481 per violation. The penalty for intentional violations of the FBAR can be up to $134,806 or 50% of the account total per violation. Along with civil penalties, criminal punishments can include fines of up to $500,000 and imprisonment for close to ten years.

How To File The FBAR

Unlike your federal tax return, FBAR filings are submitted to the United States Department of Treasury, specifically FinCen, rather than the Internal Revenue Service. The FBAR is not sent via mail. Instead, it is done electronically through the BSA E-Filing System of the Financial Crimes Enforcement Network.

It is possible to have someone else file the FBAR on your behalf. You must, however, file FinCEN Report 114a, Record of Authorization to File FBARs Electronically. This form is not part of your FBAR submission. Instead, make a copy of it and retain it to give to the IRS if necessary.

How to Meet Up With FBAR Compliance

While many taxpayers comply with their obligations voluntarily, some do not. There is a wide range of civil and criminal sanctions on non-compliant taxpayers; failure to cooperate voluntarily may result in incarceration, fines, and other penalties.

If you have willfully failed to comply with tax or tax-related duties, making a voluntary disclosure could be a way to remedy your non-compliance and avoid criminal prosecution. Voluntary disclosure is not the only option for taxpayers who are yet to file their FBARs on time. Streamlined Filing Procedures, DIIRSP, DFSP, and other IRS programs are also available.

If you are out of compliance, you must talk with an experienced attorney before making any affirmative declarations to the IRS.

Final Thought

It is your responsibility as a United States citizen to file the FBAR. The only safe approach to avoid IRS penalties and fines is to ensure compliance with the FBAR standards. It does not cuase you to pay taxes. It is legal to have accounts in any foreign country so long as you comply with the reporting rules   EMAIL US FOR HELP

iF YOU OWN A FOREIGN CORPORATION BETTER FILE BEFORE THE IRS DISCOVERS YOU HAVE NOT TO AVOID HUGH PENALTIES

 If you own 10% or more of a foreign corporation you may be obligated to file form 5471 with your tax return. This includes foreign etntities that own real estate or businesses.  If US persons own 50% or more you may also be subject to the GILTI TAX  which can cause you to pay US income taxes on your share of the corporate income even though it is not distributed to you. The penalty for failing to file this form is $10,000 per year but if you file before the IRS discovers your error, there is a procedure where that penalty can be waived.

We can help you compete this complex form (even if you prepare your own tax return) and with catching up with the IRS to avoid penalties. EMAIL US FOR HELP   

IRS Increases Standard Auto Mileage Deduction Amount due to Price of Gasoline

Fueled by rising gas prices, the optional standard mileage rate will jump for the rest of this year, effective July 1. 

For the second half of 2022, the standard mileage rate for business travel will be 62.5 cents per mile, up 4 cents from the rate effective at the start of the year, the IRS announced.

The new rate for deductible medical or moving expenses for active-duty members of the military will be 22 cents for the remainder of 2022, up 4 cents from the rate at the start of the year. The 14 cents-per-mile rate for charitable organizations, set by statute, remains unchanged.

Get an automatic six more months to file; Expats can Even get a longer Period of time to file

WASHINGTON — The Internal Revenue Service reminds taxpayers that if they’re unable to file their tax return by this year’s April 18 deadline, there’s an easy, online option to get more time to complete their return.

Taxpayers who need more time to complete their return can request an automatic six-month extension to file. An extension allows for extra time to gather, prepare and file paperwork with the IRS; however, taxpayers should be aware that:

• An extension to file their return doesn’t grant them an extension to pay their taxes,
• They should estimate and pay any owed taxes by their regular deadline to help avoid possible penalties and
• They must file their extension no later than the regular due date of their return.

E-File an extension form for free
Individual tax filers, regardless of income, can use IRS Free File to electronically request an automatic tax-filing extension. The fastest and easiest way to get an extension is through IRS Free File on IRS.gov. Taxpayers can electronically request an extension on Form 4868. Filing this form gives taxpayers until Oct. 17to file their tax return. To get the extension, taxpayers must estimate their tax liability on this form and should timely pay any amount due.

Get an extension when making a payment
Other fast, free and easy ways to get an extension include using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card or digital wallet. There’s no need to file a separate Form 4868 extension request when making an electronic payment and indicating it’s for an extension. The IRS will automatically count it as an extension.

Important reminders on extensions
The IRS reminds taxpayers that a request for an extension provides extra time to file a tax return, but not extra time to pay any taxes owed. Payments are still due by the original deadline. Taxpayers should file even if they can’t pay the full amount. By filing either a return on time or requesting an extension by the April 18 filing deadline, they’ll avoid the late-filing penalty, which can be 10 times as costly as the penalty for not paying.

Taxpayers who pay as much as they can by the due date, reduce the overall amount subject to penalty and interest charges. The interest rate is currently four percent per year, compounded daily. The late-filing penalty is generally five percent per month and the late-payment penalty is normally 0.5 percent per month.

The IRS will work with taxpayers who cannot pay the full amount of tax they owe. Other options to pay, such as getting a loan or paying by credit card, may help resolve a tax debt. Most people can set up a payment plan on IRS.gov to pay off their balance over time.

Other automatic extensions
Certain eligible taxpayers get more time to file without having to ask for extensions. These include:

• U.S. citizens and resident aliens who live and work outside of the United States and Puerto Rico get an automatic 2-month extension to file their tax returns. They have until June 15 to file. However, tax payments are still due April 18 or interest will be charged.
• Members of the military on duty outside the United States and Puerto Rico also receive an automatic two-month extension to file. Those serving in combat zones have up to 180 days after they leave the combat zone to file returns and pay any taxes due. Details are available in Publication 3, Armed Forces’ Tax Guide.
• When the President makes a disaster area declaration, the IRS can postpone certain taxpayer deadlines for residents and businesses in the affected area. People can find information on the most recent tax relief for disaster situations on the IRS website.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states.

Don t want to do figure out how to file an extension yourself. We can efile and extension and determine any tax due for you. We can also file any state extensions you may require. Email us for help    We are CPAs and Attorneys who have been preparing expatriate and nonresident and international US taxes for over 30 years. 

YOU NEED A SHAREHOLDERS AGREEMENT FOR YOUR US OR FOREIGN CORPORATION OR LLC

Should there be a shareholders’ agreement in place in addition to a company’s articles of association?

The articles of association are one of the constitutional documents of a company setting out the rules governing the internal affairs of the company. These include, for example, provisions around board meetings, shareholder meetings, directors’ powers and shareholder rights.

In addition to the articles, the shareholders of the company may also choose to enter into a shareholders’ agreement. This is an agreement among the shareholders of the company setting out how the company should be run and the various rights and obligations of the shareholders.

These may sound like fairly similar documents, and they can often overlap. A shareholders’ agreement is not a legal requirement, and companies may choose to rely solely on their articles of association. However, there are a number of benefits to having a separate shareholders’ agreement:

• Shareholder rights are protected. Although the articles of association may provide some protection, having a shareholders’ agreement can provide further clarity and additional provisions on certain matters, both for minority shareholders (e.g. certain decisions requiring unanimous consent, as opposed to a majority decision) and majority shareholders (e.g. drag along provisions whereby majority shareholders can force minority shareholders to sell their shares).
• 
  The agreement can include provisions for dispute resolution, making resolution in the event of a shareholder fall out a more straightforward process.
• The agreement can give shareholders more say in the management of the company. Generally, the directors have the power to manage the day to day activities of the company, however the shareholders’ agreement can set out certain matters that require shareholder approval (often referred to as “reserved matters”).
• In many states, shareholders have limited information rights in respect of the company. However, a shareholders’ agreement can provide for certain company information to be provided to shareholders, such as a copy of each year’s business plan and specific financial information. This is useful for the shareholders to monitor their investment and track the progress of the company.
  
• In order to protect the company in relation to the information rights of shareholders mentioned above, the agreement can include confidentiality provisions. This is key to ensure that any sensitive company information disclosed to shareholders is not shared with third parties. Importantly, this restriction can survive the termination of the shareholders’ agreement. Other restrictions, such as a non-compete clause, may also be included in the agreement.
• Unlike the articles of association, there is no requirement to file a shareholders’ agreement at Companies House (subject to certain exceptions), so the contents of the agreement can remain confidential.

Shareholders’ agreements are commonly seen in joint ventures and investment situations, which involve independent parties coming together to form a commercial arrangement. In these cases the shareholders’ agreement can provide comfort to the shareholders/investors in their new venture by providing for any rights and restrictions as may be necessary. However, shareholders’ agreements can also be useful for other arrangements such as simply setting up a company with more than one shareholder.

If a company determines that a shareholders’ agreement is not necessary, and that the articles of association alone are sufficient, the company should ensure that the articles capture all of the necessary provisions for the management of the company and rights of the shareholders. It is easier to agree all of these things at the outset of any commercial arrangement; quite often shareholders can fall out and reaching agreement at that stage can be more difficult.

We can put together a shareholders agreement for your Corporation or LLC that will protect you as well as the other shareholders.  Email us at: ddnelson@gmail.com. We have over 30 years experience with all aspects of corporate operations and legal matters.

US Expatriate and US Nonresident IRS Tax Payment Methods and How to Pay Over Time, etc.

 The Internal Revenue Service today reminded taxpayers who have a tax bill that there are several ways to make payments, and there are options for many people who can't pay their tax bill in full by April tax deadline.

The deadline to submit 2021 tax returns or an extension to file and pay tax owed this year falls on April 18, instead of April 15, because of the Emancipation Day holiday in the District of Columbia. Taxpayers in Maine or Massachusetts have until April 19, 2022, to file their returns due to the Patriots' Day holiday in those states. Some taxpayers who were victims of a natural disaster have even longer to file their returns.

The IRS reminds people to timely file their tax return and pay whatever they can by the filing deadline to avoid late filing and interest penalties.

Sign in to pay and see payment history
Taxpayers can use their Online Account to securely see important information when preparing to file their tax return or following up on balances or notices. Taxpayers can make a same-day payment for a 2021 tax return balance, an extension to file, or estimated taxes, which are all due by April deadline for most taxpayers. They can also view:

• Their Adjusted Gross Income, Economic Impact Payment amounts and advance Child Tax Credit payment amounts needed for their 2021 return,
• Payment history and any scheduled or pending payments,
• Payment plan details and
• Digital copies of select notices from the IRS.

Ways to pay

• Electronic Funds Withdrawal (EFW): This option allows taxpayers to file and pay electronically from their bank account when using tax preparation software or a tax professional. This option is free and only available when electronically filing a tax return.
• Direct Pay: Direct Pay is free and allows taxpayers to securely pay their federal taxes directly from their checking or savings account without any fees or preregistration. Taxpayers can schedule payments up to 365 days in advance. After submitting a payment through Direct Pay, taxpayers will receive immediate confirmation.
• Electronic Federal Tax Payment System: This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll and for more information, taxpayers can call 800-555-4477, or visit eftps.gov.
• Credit card, debit card or digital wallet: Individuals can pay online, by phone or with a mobile device through any of the authorized payment processors. The processor charges a fee. The IRS doesn't receive any fees for these payments. Authorized card processors and phone numbers are available at IRS.gov/payments.
• Cash: For taxpayers who prefer to pay in cash, the IRS offers a way to pay taxes at one of its Cash Processing Companies at participating retail stores. The IRS urges taxpayers choosing this option to start early because it involves a four-step process. Details, including answers to frequently asked questions, are at IRS.gov/paywithcash.

Check or Money Order: Payments made by check or money order should be made payable to the "United States Treasury." To help ensure that the payment gets credited promptly, taxpayers should also enclose a Form 1040-V payment voucher and print on the front of the check or money order: "2021 Form 1040"; name; address; daytime phone number; and Social Security number.

File by April 18, 2022 for most taxpayers
The most important thing everyone with a tax bill should do is file a return by the April 18 due date, for most taxpayers (even if they can't pay in full). Taxpayers may also request a six-month extension to file by October 17, 2022, to avoid penalties and interest for failing to file on time.

Though automatic tax-filing extensions are available to anyone who wants one, these extensions don't change the payment deadline. It is not an extension to pay. Visit IRS.gov/extensions for details.

Usually anyone who owes tax and waits until after that date to file will be charged a late-filing penalty of 5% per month. So, if a tax return is complete, filing it by April 18 is always less costly, even if the full amount due can't be paid on time.

IRS Free File is an easy, quick way to file that is available to eligible individuals and families who earned $73,000 or less in 2021. IRS Free File is available on IRS.gov.

Pay what you can
Interest, plus the late-payment penalty, will apply to any payments made after April 18. Making a payment, even a partial payment, will help limit penalty and interest charges. The fastest and easiest way to pay a personal tax bill is with Direct Pay, available only on IRS.gov. 

The IRS urges taxpayers to first consider other options for payment, including getting a loan to pay the amount due. In many cases, loan costs may be lower than the combination of interest and penalties the IRS must charge under federal law. Normally, the late-payment penalty is one-half-of-one percent (0.5%) per month. The interest rate, adjusted quarterly, is currently 3% per year, compounded daily.

If a loan isn't possible, the IRS can often help.

Online payment plans
Most individual taxpayers qualify to set up an online payment plan with the IRS, and it only takes a few minutes to apply. Applicants are notified immediately if their request is approved. No need to call or write to the IRS. The IRS notes that online payment plans are processed more quickly than requests submitted with electronically-filed tax returns. If a taxpayer just filed their return and knows that they’ll owe a balance, they may be able to set up a payment plan online before they even receive a notice or bill.

There are two main types of online payment plans:

• Short-term payment plan – The payment period is 180 days or less and the total amount owed is less than $100,000 in combined tax, penalties and interest. There's no fee for setting one up, though interest and the late-payment penalty continue to accrue.
• Long-term payment plan – Payments are made monthly, and the amount owed must be less than $50,000 in combined tax, penalties and interest. If the IRS approves a long-term payment plan, also known as an installment agreement, a setup fee normally applies. But low-income taxpayers may qualify to have the fee waived or reimbursed. In addition, for anyone who filed their return on time, the late-payment penalty rate is cut in half while an installment agreement is in effect. This means that the penalty accrues at the rate of one-quarter-of-one percent (0.25%) per month, instead of the usual one-half-of-one percent (0.5%) per month.

Taxpayers who do not qualify for an online payment agreement may still be able to arrange to pay in installments.

Other payment options

Some struggling taxpayers may also consider using these other payment options:

Delayed collection
If the IRS determines a taxpayer is unable to pay, it may delay collection until their financial condition improves. However, the total amount owed will still increase because penalties and interest are charged until paid in full. 

Penalty relief
Some taxpayers qualify to have their late-filing or late-payment penalties reduced or eliminated. This can be done on a case-by-case basis, based on reasonable cause. Alternatively, where a taxpayer has a history of compliance, the IRS can typically provide relief under the First Time Abatement program. Visit IRS.gov/penaltyrelief for details.

Offer in Compromise
Some taxpayers qualify to settle their tax bill for less than the full amount due, through an offer in compromise. Though there is typically a $205 non-refundable application fee, it is generally waived for low-income taxpayers and for offers based on doubt as to liability. The Offer in Compromise Pre-Qualifier tool can help determine eligibility for anyone interested in applying.

The IRS reminds taxpayers that they have rights and protections throughout the collection process.

For more information about payments, see Topic No. 202, Tax Payment Options, on IRS.gov.

If you need help with any of these methods of payment, penalty relief, etc., email us for assistance. We know the rules and how they can benefit you  Kauffman Nelson LLP, CPAs and Attorneys.  ustax@hotmail.com

We have been helping US expatriates and nonresidents for over 25 years.

Taxes You May Not Know About

No tax season would be complete without a list of strange  taxes assessed by various states and countries.

• Sliced bagels: New York charges a bagel-cutting tax at 8 cents per sliced or ready-to-eat bagel.
• Decorative pumpkins: In New Jersey, a painted, varnished, or cut pumpkin sold as a decoration is subject to sales tax. Pumpkins used as food are not.
• Tattoos: Arkansas charges sales tax on tattoos, piercings, and electrolysis.
• Everything delicious: Illinois not only applies a candy tax to confections made without flour, but also in Chicago, soda in a can is taxed at a 3% rate but the syrup for fountain soda is taxed at 9%.
• Breakfast cereal: In Canada, breakfast cereal makers are exempt from tax if the cereal contains a free children’s toy … but only if the toy is not “beer, liquor, or wine.” Seems pretty easy to meet that requirement.
• Robots: South Korea has reduced a tax break for companies that have invested in automation that replaces human jobs with machines.
• Unhealthy food: Mexico, Hungary, and India all have junk food taxes that are in place to try to curb unhealthy eating habits.
• Cow flatulence: Ireland, Denmark, and other EU nations tax cattle owners on cow flatulence, due to it being one of the leading contributors to greenhouse gases.

US Expatriate IRS Forms Which May Cause an Audit Unless Prepared Correctly

 As a US expatriate you generally need to file certain special reporting forms with your US tax return. Filing these forms do increase your chance of audit by the IRS. If your return includes any of the following forms, make certain they are filled out correctly to avoid IRS audits:

Form 2555: Foreign Earned Income Exclusion                           

Form 1116: Foreign Tax Credit

Form 8621: Passive Foreign Investment Company (PFIC)

Form 3520 & 3520a: Foreign Trust Reporting

Form 5471: Shareholder of Foreign Corporation

Form 8938: Statement of Specified Foreign Financial Assets

Our firm has assisted US expatriates with their tax returns and inernational tax issues for over 25 years. If you need help with these forms, advice  or need your entire return prepared by experts contact us by email HERE.  We are US attorneys and CPAs.