11 Illegal Tax Deductions

No, You Can't Deduct That: 11 Tax Deductions That Can Get You in Trouble http://www.inc.com/kimberly-weisul/eleven-questionable-tax-deductions.html

Tips for U.S. Taxpayers with Foreign Income

Did you live or work abroad or receive income from foreign sources in 2013? If you are a U.S. citizen or resident, you must report income from all sources within and outside of the U.S. The rules for filing income tax returns are generally the same whether you’re living in the U.S. or abroad. Here are seven tips from the IRS that U.S. taxpayers with foreign income should know:

1. Report Worldwide Income.  By law, U.S. citizens and resident aliens 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 file Schedule 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. Consider the Automatic Extension.  If you’re living abroad and can’t file your return by the April 15 deadline, you may qualify for an automatic two-month filing extension. You’ll then have until June 16, 2014 to file your U.S. income tax return. This extension also applies to those serving in the military outside the U.S. You’ll need to attach a statement to your return to explain why you qualify for the extension.

4. 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 $97,600 of your wages and other foreign earned income in 2013. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.

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

You can get more on this topic in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. IRS forms and publications are available on IRS.gov. 

Additional IRS Resources:

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

The best resource is Kauffman Nelson LLP. We prepare returns for expats and nonresidents and have done so for over 30 years.  We know the law and we know the the forms.  Want a consultation?  Email ddnelson@gmail.com  and ask for Don Nelson, Attorney, CPA.

IRS DECIDES TO TAX BITCOIN LIKE PROPERTY

From USA TODAY IRS: Bitcoin is not currency The federal government will tax digital money such as Bitcoin like property, not currency, the IRS said Tuesday in its first significant guidance on the virtual coin. Although Bitcoin may operate like coin and paper currency and can be used to pay for goods and services, no country accepts it as "legal tender," the Internal Revenue Service said in its notice. "Virtual currency is treated as property for U.S. federal tax purposes," the notice said. "General tax principles that apply to property transactions apply to transactions using virtual currency." The guidance means that wages paid in Bitcoin are subject to federal income tax withholding and payroll taxes and must be reported on W-2 forms. Businesses that accept Bitcoin for goods and services will be taxed on the fair market value of the Bitcoin payment as part of their gross income, the IRS said. The fair market value would be calculated as the U.S. dollar value on the date payment was received. http://usat.ly/Qcwsiz Get USA TODAY on your mobile device: http://www.usatoday.com/mobile-apps

New China tax Residency Requirements for US Expats Explained

http://www.china-briefing.com/news/2014/03/18/china-expat-tax-filing-and-declarations-for-2013-income.html

TAX RULES FOR CHILDREN WITH INVESTMENT INCOME

You normally must pay income tax on your investment income. That is also true for a child who must file a federal tax return. If a child can’t file his or her own return, their parent or guardian is normally responsible for filing their tax return.

Special tax rules apply to certain children with investment income. Those rules may affect the tax rate and the way you report the income.

Here are four facts from the IRS that you should know about your child’s investment income:

1. Investment income normally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust.

2. Special rules apply if your child's total investment income is more than $2,000. Your tax rate may apply to part of that income instead of your child's tax rate.

3. If your child's total interest and dividend income was less than $10,000 in 2013, you may be able to include the income on your tax return. If you make this choice, the child does not file a return. See Form 8814, Parents' Election to Report Child's Interest and Dividends. 

4. Children whose investment income was $10,000 or more in 2013 must file their own tax return. File Form 8615, Tax for Certain Children Who Have Investment Income, along with the child’s federal tax return.

Starting in 2013, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax. NIIT is a 3.8% tax on the lesser of either net investment income or the excess of the child's modified adjusted gross income that is over a threshold amount. Use Form 8960, Net Investment Income Tax, to figure this tax. For more on this topic, visit IRS.gov.

For more on this topic, see Publication 929, Tax Rules for Children and Dependents. Visit IRS.gov to get this booklet and IRS forms.

Simplified Home Office Deduction Explained By IRS

http://content.govdelivery.com/accounts/USIRS/bulletins/aba73d?reqfrom=share

Are You Inviting An Audit?

http://triblive.com/mobile/5740073-96/irs-business-audit

PROBLEMS WITH FOREIGN PENSION PLANS

Excellent article  from Forbes.  http://www.forbes.com/sites/janetnovack/2014/03/06/pensions-create-yet-another-tax-trap-for-u-s-expatriates/

600,000 Dollars in Cash Hidden in Foreign Bank Causes Taxpayer to Go to Prison

California Taxpayer put earnings in Swiss Bank and did not file Fbar sentenced to prison for one year and pays over $500,000 in penalties and taxes. Read more below

http://www.imperialvalleynews.com/index.php/news/california-news/7369-california-man-sentenced-to-prison-for-failure-to-report-foreign-bank-accounts-held-at-ubs.html

Bank deal fallout: ‘Chaotic’ US tax stampede overwhelms specialists - swissinfo.ch

Bank deal fallout: ‘Chaotic’ US tax stampede overwhelms specialists - swissinfo.ch  We can help you no matter where you are in the world prepare past tax returns and enter the IRS Offshore Disclosure Program, Streamlined Program or Regular Disclosure Program.  Visit our website at www.TaxMeLess.com for more information or email me at ddnelson@gmail.com  When offer our clients the absolute confidentiality and privacy of Attorney-Client Privilege.

IRS Examining Foreign Life Insurance and Other Products to Discover Hidden Foreign Assets and Income

The Wall Street Journal articles indicates the IRS is now getting smarter. They are starting to examine offshore insurance products owned by US taxpayers. These policies are often used to hide foreign assets and foreign income not being reported on the tax returns of their US owners.  If you have cash surrender value or assets in a foreign life insurance policy you are required to show that policy on your US FBAR each year and may be required to report the income. It would also go on form 8938 if you are required to file that form.  If the policy holds foreign mutual funds you may be required to file the form reporting Passive Foreign Investment Companies also to avoid adverse tax consequences.

READ ARTICLE HERE

Rules for each State on How to Stop Filing and Paying State Income Taxes when an Expat Moves Abroad.

Great article from BNA including a chart listing tax laws and rules for each state in the US stating their individual rules (vary a lot from state  to state) on how to successfully terminate your state tax domicile when moving abroad. The chart at the end is a great reference tool to use when you want to stop paying state income taxes when you move to live and work abroad.  DOWNLOAD PDF ARTICLE HERE

If you need guidance on how to avoid paying state income taxes after moving abroad we can put together a strategy for you.  Email us at ddnelson@gmail.com

Where Offshore Tax Form Evaders Live and Keep Their Foreign Accounts

From Forbes.  Looks like if you live in California or New York you are primary suspect based on IRS statistics.  http://www.forbes.com/sites/ashleaebeling/2014/02/20/gao-report-where-offshore-tax-evaders-live-and-bank/

5 Most Tax Friendly States For Expats or Nonresidents to Locate a U S Business

Read the following link. Wyoming is no. 1. We recommend Nevada for ease of operation. Its no. 3.

http://www.dailyfinance.com/2014/02/15/the-5-most-tax-friendly-states-for-running-a-busin/

FBAR and Form 8938 Presentation in Puerto Vallarta & Melaque Mexico

US Expat Foreign Bank, Financial & Asset Reporting Guidance from dondnelson

Estate Planning Tips For Expats from Motlley Fool

http://www.fool.com/investor-alert/1255/estate-planning-loopholes-dont-let-uncle-sam-inher/?iid=61836479&vsaid=7123&email=ddnelson%40gmail.com&dest_url=%2Finvestor-alert%2F1255%2Festate-planning-loopholes-dont-let-uncle-sam-inher%2F&src=eunlinsbr0860003

4 Common Myths About Taxes

From USA TODAY 4 common myths about taxes It's not that surprising that there's a lot of misinformation out there about taxes. The U.S. tax code is over 4 million words long and not one of us has the time to go through it all. Most of us treat the tax code like the monster it is, interfacing with it only from a distance and once a year paying homage to it in the form of a tax return. Since there's so much to know about taxes and so little willingness to learn about them, people sometimes make assumptions about how the system works that turn out to be false. These bits of false information sometimes take on a life of their own and, unfortunately, become common knowledge. This is problematic because a misunderstanding of how the tax system works can have consequences — most personal financial planning requires a basic, and reality-based, understanding of how taxes work. Otherwise, you could find yourself owing a lot more money than you expected — or, at least, worrying about irrelevant details when you should be relaxing. http://usat.ly/1lPpttt Get USA TODAY on your mobile device: http://www.usatoday.com/mobile-apps

US EXPATRIATE AND INTERNATIONAL TAX EXPERT ATTORNEY CPA TO SPEAK AT FREE PUBLIC SEMINAR ON FEBRUARY 12, 2014 IN PUERTO VALLARTA, MEXICO

FATCA AND IRS REPORTING FOR DUMMIES - INVESTING IN MEXICO MADE EASY

INTERCAM GRUPO FINANCIERO will Present a Seminar on February 12, 2014 in Puerto Vallarta at the Hotel Marriott Casa Magna featuring Don D. Nelson, US Attorney and CPA.  He is a US expatriate and international tax expert who has been assisting Americans in Mexico for over 23 years.  The seminar will be at 6pm.

He will speak on:

• IRS filing requirements for reporting Mexican and other foreign financial accounts and how to avoid penalties for failing to file in a timely manner.
• The new form 8938 required to report Mexican and other foreign financial assets
• The new on line filing requirements for FBAR (foreign bank account reporting).  Yes you can no longer file on paper.
• IRS Reporting for Mexican Businesses, Corporations, and real estate.
• What to do if you have not been filing your US tax returns or foreign assets reporting forms and how to reduce or avoid the high penalties that may be imposed.
• Current IRS audit procedures and policies for expatriates.
• And he will answer your other questions on US taxation of those who live and work in Mexico

Don's informative and useful tax websites are located at www.TaxMeLess.com and www.Expatattorneycpa.com

Contact intercam at 52-322-2090696 to reserve your space.

Mr. Nelson will also be presenting a seminar in Melaque  the next evening. Intercam can provide you with more information on that seminar.

IRS TAXES CANNOT BE AVOIDED BY MOVING ABROAD

Read why 6.3 million Americans living abroad still must file a US tax return each year.  http://finance.yahoo.com/news/non-us-residents-abroad-must-file-income-taxes-195444214.html

INTERNATIONAL TAX RATES AROUND THE GLOBE

Click here for a great graphic with the international tax rates around the world (both corp and individual) including other interesting facts from INTERNATIONAL RELATIONS ON LINE.  You can use it to plan where to locate your business and personal affairs.

Need more information on US International Taxation, email us ddnelson@gmail.com or view more information at TAXMELESS.COM