2023 Tax Extensions for US Expatriates and Other Beneficial Special Rules for US Expatriates

 The Internal Revenue Service reminds taxpayers living and working outside the U.S. to file their 2023 federal income tax return by Monday, June 17, 2024. This deadline applies to both U.S. citizens and resident aliens abroad, including those with dual citizenship.

This deadline does not apply to taxpayers who live or have a business in Israel, Gaza or the West Bank, and certain other taxpayers affected by the terrorist attacks in the State of Israel. They are granted relief until Oct. 7, 2024, to both file and pay most taxes due. For more information, check out Notice 2023-71PDF.

Taxpayers unable to file their tax returns by the June deadline can request a further extension to file, but not pay, until Oct. 15.

Qualifying for the June 17 extension

If a taxpayer is a U.S. citizen or resident alien residing overseas or is in the military on duty outside the U.S., on the regular due date of their return, they are allowed an automatic 2-month extension to file their return without requesting an extension. If they use a calendar year, the regular due date of their return is April 15, and the automatic extended due date would be June 15. Because June 15 falls on a Saturday this year, the due date is delayed until the next business day, June 17.

A taxpayer qualifies for the June 17 extension to file and pay if they are a U.S. citizen or resident alien, and on the regular due date of their return:

• They are living outside the United States and Puerto Rico and their main place of business or post of duty is outside the United States and Puerto Rico, or

• They are in military or naval service on duty outside the United States and Puerto Rico.

Qualifying taxpayers should attach a statement to the return indicating which of these two situations applies.

File to claim benefits

Many taxpayers living outside the U.S. qualify for tax benefits, such as the foreign earned income exclusion and the Foreign Tax Credit, but they are available only if a U.S. return is filed.

In addition, the IRS encourages families to check out expanded tax benefits, such as the Child Tax Credit, Credit for Other Dependents and Credit for Child and Dependent Care Expenses and claim them if they qualify. Though taxpayers abroad often qualify, the calculation of these credits differs depending upon whether they lived in the U.S. for more than half of 2023. For more information, see the instructions to Schedule 8812, Credits for Qualifying Children and Other Dependents, and the instructions to Form 2441, Child and Dependent Care Expenses.

Reporting required for foreign accounts and assets

Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B, Interest and Ordinary Dividends, to their Form 1040 series tax return. Part III of Schedule B asks about the existence of foreign accounts such as bank and securities accounts and usually requires U.S. citizens to report the country in which each account is located.

In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Specified Foreign Financial Assets. Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. For details, see the instructions for this form.

Reporting foreign financial accounts to Treasury

Certain foreign financial accounts, such as bank accounts or brokerage accounts, must be reported by electronically filing Form 114, Report of Foreign Bank and Financial Accounts (FBAR), with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN). The FBAR requirement applies to anyone with an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2023.

The IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is available only through the Bank Secrecy Act E-Filing System. The deadline for filing the annual FBAR is April 15, 2024. However, FinCEN grants those who missed the April deadline an automatic extension until Oct. 15, 2024. There’s no need to request this extension. See FinCEN’s websitePDF for further information.

Report in U.S. dollars

Any income received or deductible expenses paid in foreign currency must be reported on a U.S. tax return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.

Both FINCEN Form 114 and IRS Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction. Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign currency and currency exchange rates.

Making tax payments

To ensure tax payments are credited promptly, the IRS urges taxpayers to consider the speed and convenience of paying their U.S. tax obligation electronically. The fastest and easiest way to do that is via their IRS Online Account, IRS Direct Pay and the Electronic Federal Tax Payment System (EFTPS). These and other electronic payment options are available at IRS.gov/payments.

Reporting for expatriates

Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the U.S. during 2023 must file a dual-status alien tax return and attach Form 8854, Initial and Annual Expatriation Statement. A copy of Form 8854 must also be filed with the IRS by the due date of the tax return (including extensions). See the instructions for this formPDF and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.

Extensions beyond June 17

Taxpayers who can’t meet the June 17 due date can request an automatic extension to Oct. 15 by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS encourages anyone needing the additional time to make their request electronically. Several electronic options are available at IRS.gov/extensions.

Businesses that need more time must file Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information and Other Returns.

IF YOU OWE THE IRS MONEY AND ARE LATE IN PAYING HAS THE POWER TO SUSPEND OR TAKE AWAY YOUR US PASSPORT

 If you owe the IRS money (and are very late in paying)  can legally request the US State Department not renew it or suspend your US passport.  They also have in the past requested US Customs and Border agents to take your passport away from you when taxes are due and not paid.  They will let you into the country but you cannot leave until you clear up your debt to the IRS.  The rules are set forth HERE.

If you owe past taxes or tax returns we can help you avoid problems that may arise when you return to

visit the US.  We have helped hundreds of taxpayers catch up and enter the IRS Streamlined Program. We can also assist you with an offer in compromise to reduce the amount of tax owed or a payment plan to pay your taxes off over time.

Our firm of attorney and CPAs have over 30 years experience in US expatriate, International and Nonresident taxation.

You may owe the IRS and not even know it!  It is your legal obligation to keep them informed of any moves or new addresses. They are not responsible for keeping track of you or for poor mailing service.

Email us for help: ddnelson@gmail.com   Visit our website at www.taxmeless.com   Our US phone number is 949-480-1235

NEW LAW WILL REQUIRE TAXPAYERS TO REVEAL TRUE OWNERSHIP OF CORPORATIONS AND LLCS OR PAY SUBSTANTIAL PENALTIES

A new law that's taking effect next year is going to require millions of small businesses to begin filing disclosures about their true ownership with the Treasury Department or face stiff penalties, and most are unaware of it.

As a result of the Corporate Transparency Act of 2021, corporations, LLCs and other entities formed under state law (domestic reporting companies) or similar entities formed under foreign law and registered to do business in the U.S. (foreign reporting companies) must report their beneficial ownership to FinCEN — the Treasury Department's Financial Crimes Enforcement Network. 

The reason is that kleptocrats, human rights abusers and other corrupt actors have used complex and opaque corporate structures, including shell companies, to hide and launder the proceeds of their corrupt activities. 

Need help with your LLC and Corporate filings or tax planning for the future. Email us to set up a consultation EMAIL FOR TAX HELP

NEW REPORTING NEXT YEAR FOR CORPORATIONS, LLCS AND FOREIGN CORPORATIONS

A new law that's taking effect next year is going to require millions of small businesses to begin filing disclosures about their true ownership with the Treasury Department or face stiff penalties, and most are unaware of it.

As a result of the Corporate Transparency Act of 2021, corporations, LLCs and other entities formed under state law (domestic reporting companies) or similar entities formed under foreign law and registered to do business in the U.S. (foreign reporting companies) must report their beneficial ownership to FinCEN — the Treasury Department's Financial Crimes Enforcement Network. 

The reason is that kleptocrats, human rights abusers and other corrupt actors have used complex and opaque corporate structures, including shell companies, to hide and launder the proceeds of their corrupt activities. 

Expats Working Abroad May Be Able to Deduct Their Rent from their earnings.

 US expatriates working abroad may be able to deduct their rent if their income exceeds the current foreign earned income exclusion ($112,000 for 2022). The rent has to exceed a certain minimum amount which is often set by the country you live in.  If your an expat and need to take advantage of this special rule on your US tax return CONTACT US FOR ASSISTANCE.  Visit our website at www.taxmeless.com for a lot of expat taxation information that you may find useful.  

US Expatriate Taxation - Everything You Need to Know from 30 year CPAs and Attorney Experts

 Expatriate taxation for US citizens are complicated. You must file a US expat tax return no matter where you live and work in the world each year so long as you earned in excess of a certain amount. Failure to file can result in substantial penalties and interest and possible criminal prosecution.

Learn all of the rules and regulations at our website www.taxmeless.com   At our website you can download a 2022 tax questionnaire which you can use for the current year and any past unfiled returns. Contact us with your questions and inquiries by email HERE.   Our whatsapp number in the US is 818-519-9219.  

One more thing, if you owe the IRS more than $50,000 they can seize your US passport when you enter back into the US. We can help you resolve this problem before it happens.

DOWNLOAD YOUR 2022 EXPAT TAX QUESTIONNAIRE

DOWNLOAD YOUR 2022 EXPAT FAST TAX FACT SHEET

There are hundreds of IRS forms and schedules — that may apply to US expatriates living abroad and nonresidents

Some of the many expat and nonresident forms include the following. Many forms require 5 or more hours to complete - if filled out by an average taxpayer. We can reduce your time and save money.

1. Form 1040 – The form every American files during tax season to report income to the IRS.
2. FBAR (FinCEN Form 114) – Your Foreign Bank Account Report, used to report any assets in foreign financial institutions to the Financial Crimes Enforcement Network of the U.S. Treasury.
3. Foreign Earned Income Exclusion Form 2555 – One of two methods for U.S. expats to avoid being double-taxed on income earned abroad.
4. Foreign Tax Credit Form 1116 – One of two methods for U.S. expats to avoid being double-taxed on income earned abroad.
5. FATCA Form 8938 – How you report assets in foreign financial institutions to the IRS.
6. Form 5471 – Informational return for U.S. citizens who are also shareholders, officers, or directors of a foreign corporation.
7. Form 8621 – Informational return for U.S. citizens who are also shareholders of a passive foreign investment company.
8. Form 3520 – Informational return expats use to report certain transactions with foreign trusts, ownerships of foreign trusts, or if you receive certain large gifts from certain foreign persons.

Ready to file or confused about expat tax forms? Get started with Kauffman Nelson LLP CPAs. We have been doing taxes for US expats and nonresidents for over 30 years.  Email us at taxmeless@gmail.com or call 949-480-1235 (this is a US number.  We offer phone consultations  to answer you questions and solve your problems.

Expatriate and Nonresident US Taxpayers should avoid these common mistakes when they file their tax return

Most of the common errors taxpayers make on their tax returns are easily avoidable. By carefully reviewing their return, taxpayers can save time and effort by not having to correct it later. Filing electronically also helps prevent mistakes. Tax software does the math, flags common errors and prompts taxpayers for missing information. It can also help taxpayers claim valuable credits and deductions. Taxpayers who qualify may use IRS Free File to file their return electronically for free.

Here are some of the mistakes to avoid:

• Filing too early. While taxpayers should not file late, they also should not file prematurely. They should wait to file until they’re certain they’ve received all their tax reporting documents, or they risk making a mistake that may lead to a processing delay.

• Missing or inaccurate Social Security numbers. Each SSN on a tax return should appear exactly as printed on the Social Security card.

• Misspelled names. The names of all taxpayers and dependents listed on the return should match the names on their Social Security cards.

• Inaccurate information. Taxpayers should carefully enter any wages, dividends, bank interest and other income they received to make sure they report the correct amounts. This includes any information taxpayers need to calculate credits and deductions.

• Incorrect filing status. Some taxpayers choose the wrong filing status. Publication 501 has detailed information about filing statuses.

• Math mistakes. Math errors are some of the most common mistakes. They range from simple addition and subtraction to more complex calculations. Taxpayers should always double check their math. Better yet, tax prep software will check it automatically.

• Figuring credits or deductions. Taxpayers can make mistakes figuring things like their earned income tax credit, child and dependent care credit and child tax credit. Tax software will calculate these credits and deductions and include any required forms and schedules.

• Incorrect bank account numbers. Taxpayers who are due a refund should choose direct deposit. This is the fastest way for them to get their money. However, taxpayers need to make sure they use the correct routing and account numbers on their tax return.

• Unsigned forms. An unsigned tax return isn't valid. In most cases, both spouses must sign a joint return. Exceptions may apply for members of the armed forces or other taxpayers who have a valid power of attorney.

At Kauffman Nelson LLP CPAs we are experts and will make you tax preparation easy. We prepare over 800 returns for US nonresidents and US expatriates everywhere in the world and have done so for over 25 years.  For tax preparation questionnaires, tax consultations and more information please email us a ddnelson@gmail.com. Thank you. 

US Estate Planning Requirements for Expatriates and Nonresidents with assets located in the USA

 If you are a US expatriate living abroad, you are still subject to US estate tax on your assets no matter where they are located in the world.  Also, even if you are below the estate tax threshold, your US assets will be subject to probate unless proper planning is instituted. Your US assets may be bank accounts, real estate, stock accounts, etc. which are located somewhere in the USA.

For assets located outside the USA, it is best you do a will (or whatever procedure or document is appropriate) for those assets legal under the country of the assets location to make certain those assets will go to your designated heirs.  There are treaties with some countries that provide for honoring foreign wills, but still there are often problems and best to do a local will in the country where you live and where the assets are located.

If you are a nonresident but have assets located in the USA, you can also avoid expensive probate and possible estate taxes by planning in advance and make certain your property goes to the heirs you wish to receive them.

To avoid expensive and time consuming probate and possibly reduce US estate taxes you need to create US Wills, living trusts and other estate planning documents.  Our firm has assisted hundreds of expatriates and clients with their estate planning and are ready to help you. Email us at taxmeless.com or contacts us on whatsapp at 818-519-9219 (a us cel phone number).  We can then set up a personal consultation to help you plan for the disposition of your US assets.

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.