Covid Tax Return Deadlines and Other IRS and State Covid Tax Changes

Current government and IRS pronouncements are not clear whether the automatic extension of time to file your tax returns and pay taxes without penalties apply to US expatriates living and working abroad (normal tax return due date for expatriates is 6/15/20). This may be clarified in the future, but in the interim if you are an expatriate you may want to pay all taxes by 4/15/20 to avoid interest.

The automatic extension until July 15,2020 under the COVID tax bill does not currently appear to include an automatic extension of time to file certain special reporting forms such as 5471, 3520, etc. Therefore, it is best until this is clarified that you file an IRS extension request for any returns that include these forms or the forms by the previous regular due date.

1040-NR returns which were previously due on April 15 (i.e. if there were wages paid) those returns have been extended to July 15, 2020.

The recent COVID tax bill includes outright payments of amounts to each taxpayer if their 2019 earnings (or 2018 if 2019 has not yet been filed) do not exceed certain amounts. SEE THE EXACT RULES FOR THE PAYMENT

If you have not filed your US return for 2018 and 2019 yet, you may want to file them immediately so the stimulus payment referred to in the previous paragraph will be made to you. If you have not filed for 2018, no payment will be made. If you wait too long, the stimulus might not be available. Note that if your 2019 income is lower than 2018 you may want to file in order to show eligibility.

Whether tax income limits for these cash payments apply to your expatriate income after deducting the foreign earned income exclusion or before is not certain at this time

For those who file state returns, many states including California have extended the due date your 2019 state tax return to match the July 15, 2020 federal deadline. Many also do not require payment of the taxes due until that date.

Email our tax CPAs and Attorneys for assistance and with your questions.

NEW TAX FILING DEADLINES AND RULES - COVID-19 US TAX LAW CHANGES

Dear Expat, Clients and Friends

Right now, your highest priority is the health of those you love and yourself. But if you have time to read about some non-medical but important matters related to the health crisis, here is a summary of IRS action already taken and federal tax legislation already enacted to ease tax compliance burdens and economic pain caused by COVID-19 (commonly referred to as Coronavirus).

I’ll be sending you summaries of additional developments as they take place. 

Filing and payment deadlines deferred. After briefly offering more limited relief, the IRS almost immediately pivoted to a policy that provides the following to all taxpayers—meaning all individuals, trusts, estates, partnerships, associations, companies or corporations regardless of whether or how much they are affected by COVID-19:

1. For a taxpayer with a Federal income tax return or a Federal income tax payment due on April 15, 2020, the due date for filing and paying is automatically postponed to July 15, 2020, regardless of the size of the payment owed.
2. The taxpayer doesn’t have to file Form 4686 (automatic extensions for individuals) or Form 7004 (certain other automatic extensions) to get the extension.
3. The relief is for (A) Federal income tax payments (including tax payments on self-employment income) and Federal income tax returns due on April 15, 2020 for the person’s 2019 tax year, and (B) Federal estimated income tax payments (including tax payments on self-employment income) due on April 15, 2020 for the person’s 2020 tax year.
4. No extension is provided for the payment or deposit of any other type of Federal tax (e.g. estate or gift taxes) or the filing of any Federal information return.
5. As a result of the return filing and tax payment postponement from April 15, 2020, to July 15, 2020, that period is disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the postponed income tax returns or pay the postponed income taxes. Interest, penalties and additions to tax will begin to accrue again on July 16, 2020.

Favorable treatment for COVID-19 payments from Health Savings Accounts. Health savings accounts (HSAs) have both advantages and disadvantages relative to Flexible Spending Accounts when paying for health expenses with untaxed dollars. One disadvantage is that a qualifying HSA may not reimburse an account beneficiary for medical expenses until those expenses exceed the required deductible levels. But IRS has announced that payments from an HSA that are made to test for or treat COVID-19 don’t affect the status of the account as an HSA (and don’t cause a tax for the account holder) even if the HSA deductible hasn’t been met. Vaccinations continue to be treated as preventative measures that can be paid for without regard to the deductible amount.

Tax credits and a tax exemption to lessen burden of COVID-19 business mandates. On March 18, President Trump signed into law the Families First Coronavirus Response Act (the Act, PL 116-127), which eased the compliance burden on businesses. The Act includes the four tax credits and one tax exemption discussed below.

...Payroll tax credit for required paid sick leave (the payroll sick leave credit). The Emergency Paid Sick Leave Act (EPSLA) division of the Act generally requires private employers with fewer than 500 employees to provide 80 hours of paid sick time to employees who are unable to work for virus-related reasons (with an administrative exemption for less-than-50-employee businesses that the leave mandate puts in jeopardy). The pay is up to $511 per day with a $5,110 overall limit for an employee directly affected by the virus and up to $200 per day with a $2,000 overall limit for an employee that is a caregiver.

The tax credit corresponding with the EPSLA mandate is a credit against the employer’s 6.2% portion of the Social Security (OASDI) payroll tax (or against the Railroad Retirement tax). The credit amount generally tracks the $511/$5,110 and $200/$2,000 per-employee limits described above. The credit can be increased by (1) the amount of certain expenses in connection with a qualified health plan if the expenses are excludible from employee income and (2) the employer’s share of the payroll Medicare hospital tax imposed on any payments required under the EPSLA. Credit amounts earned in excess of the employer’s 6.2% Social Security (OASDI) tax (or in excess of the Railroad Retirement tax) are refundable. The credit is electable and includes provisions that prevent double tax benefits (for example, using the same wages to get the benefit of the credit and of the current law employer credit for paid family and medical leave). The credit applies to wages paid in a period (1) beginning on a date determined by IRS that is no later than April 2, 2020 and (2) ending on December 31, 2020.

...Income tax sick leave credit for the self-employed (self-employed sick leave credit). The Act provides a refundable income tax credit (including against the taxes on self-employment income and net investment income) for sick leave to a self-employed person by treating the self-employed person both as an employer and an employee for credit purposes. Thus, with some limits, the self-employed person is eligible for a sick leave credit to the extent that an employer would earn the payroll sick leave credit if the self-employed person were an employee.

Accordingly, the self-employed person can receive an income tax credit with a maximum value of $5,110 or $2,000 per the payroll sick leave credit. However, those amounts are decreased to the extent that the self-employed person has insufficient self-employment income determined under a formula or to the extent that the self-employed person has received paid sick leave from an employer under the Act. The credit applies to a period (1) beginning on a date determined by the IRS that is no later than April 2, 2020 and (2) ending on December 31, 2020. 

...Payroll tax credit for required paid family leave (the payroll family leave credit).  The Emergency Family and Medical Leave Expansion Act (EFMLEA) division of the Act requires employers with fewer than 500 employees to provide both paid and unpaid leave (with an administrative exemption for less-than-50-employee businesses that the leave mandate puts in jeopardy). The leave generally is available when an employee must take off to care for the employee’s child under age 18 because of a COVID-19 emergency declared by a federal, state, or local authority that either (1) closes a school or childcare place or (2) makes a childcare provider unavailable. Generally, the first 10 days of leave can be unpaid and then paid leave is required, pegged to the employee’s pay rate and pay hours. However, the paid leave can’t exceed $200 per day and $10,000 in the aggregate per employee.

The tax credit corresponding with the EFMLEA mandate is a credit against the employer’s 6.2% portion of the Social Security (OASDI) payroll tax (or against the Railroad Retirement tax). The credit generally tracks the $200/$10,000 per employee limits described above. The other important rules for the credit, including its effective period, are the same as those described above for the payroll sick leave credit.

...Income tax family leave credit for the self-employed (self-employed family leave credit). The Act provides to the self-employed a refundable income tax credit (including against the taxes on self-employment income and net investment income) for family leave similar to the self-employed sick leave credit discussed above. Thus, a self-employed person is treated as both an employer and an employee for purposes of the credit and is eligible for the credit to the extent that an employer would earn the payroll family leave credit if the self-employed person were an employee.

Accordingly, the self-employed person can receive an income tax credit with a maximum value of $10,000 as per the payroll family leave credit. However, under rules similar to those for the self-employed sick leave credit, that amount is decreased to the extent that the self-employed person has insufficient self-employment income determined under a formula or to the extent that the self-employed person has received paid family leave from an employer under the Act. The credit applies to a period (1) beginning on a date determined by IRS that is no later than April 2, 2020 and (2) ending on December 31, 2020. 

...Exemption for employer’s portion of any Social Security (OASDI) payroll tax or railroad retirement tax arising from required payments. Wages paid as required sick leave payments because of EPSLA or as required family leave payments under EFMLEA aren’t considered wages for purposes of the employer’s 6.2% portion of the Social Security (OASDI) payroll tax or for purposes of the Railroad Retirement tax.

IRS information site. Ongoing information on the IRS and tax legislation response to COVID- 19 can be found here.

I will be pleased to hear from you at any time with questions about the above information or any other matters, related to COVID-19 or not. I wish all of you the very best in a difficult time.  Email us at TAX ASSISTANCE BY CPAS AND ATTORNEYS   Also visit our website at www.taxmeless.com for a wealth of information.  

IRS and International Tax Agencies Fight Global Tax Evasion

Many countries are now banding together to locate and prosecute global tax evaders through J5 and the OCED to work together to mutual catch the evaders and report to countries who may be owed taxes by the evaders.  Therefore if you are paying taxes in the country you live in but not paying taxes in another country (such as the USA) where you should, you now run the risk of being turned in to the IRS.

READ MORE HERE

For 2019 You Will Not Have to report Vitural Currency held in an Offshore Account on Form 114 - This Rule May Change in the Future

For this year the FinCEN has stated: “Currently the FBAR (Form 114) regulations do not define virtual currency held in an offshore account as a type of reportable account. For this reason, at this time, virtual currency held in an offshore account is not reportable on the FBAR.” 

However for the future you need to follow this issue since the FINCEN position on virtual currency accounts is very likely to change at some point.

You can find FinCEN’s letter of January 22, 2020 in Appendix III of the Government Accountability Office report Virtual Currencies: Additional Information Reporting and Clarified Guidance Could Improve Tax Compliance .

We can help you with your Form 114 fiing, questions and other international and expat tax questions.  Email us at ddnelson@gmail.com and go to our website at www.taxmeless.com 

Your Heirs Will be Liable to FBAR Penalties if You Do Not Resolve filing FBARS and the penalties While you Are Alive

If you do not file your Form 114 (FBAR) reporting your foreign bank and financial accounts, you can be penalized severely and so can your heirs after your death.

Read case law below about the penalty for failure to file FBARS passing on to the taxpayer heirs:

In United States v. Schoenfeld (M.D. Fla. 3:16-cv-1248-J-34PDB), by order dated 9/25/18, here, the Court held (p. 37) that the "the Court finds that the Government's claim did not abate upon Steven Schoenfeld's death."  The reasoning for the holding is found at pp. 24-36.  The first 24 pages include a short one-page introduction and then 23 pages disposing of procedural issues arising from the death of the person putatively liable that the Government sued after he had died but without knowledge of his death.  

In this case the Court holds that  that the FBAR civil willful penalty survives death.  The Court does a good job of developing and resolving the issue. 

There are procedures available that may let you file Form 114 (FBAR form) while you are still alive and avoid or reduce penalties.  Don't leave this burden to your heirs. Email us for help at ddnelson@gmail.com  and read more on our website at www.taxmeless.com.  We are an expert on this issue.

Criminal Penalites Imposed for Faiing to FIle Tax Returns as an Expatriate or Taxpayer. - How to avoid this problem

A taxpayer that willfully attempts to evade paying income taxes is subject to criminal and civil penalties. The type of fraud will determine the applicable penalty. The following are some examples of possible punishments for specific types of tax fraud. Remember a delinquent taxpayer expat or nonresident, can never be certain if the IRS will not view their actions as beyond negligent but intentional fraud. Therefore, file your past due returns before the IRS finds you first.  Filing yourself before being caught is viewed as indicative of no criminal intent.

• Attempt to evade or defeat paying taxes: Upon conviction, the taxpayer is guilty of a felony and is subject to other penalties allowed by law, in addition to (1) imprisonment for no more than 5 years, (2) a fine of not more than $250,000 for individuals or $500,000 for corporations, or (3) both penalties, plus the cost of prosecution.

• Fraud and false statements: Upon conviction, the taxpayer is guilty of a felony and is subject to (1) imprisonment for no more than 3 years, (2) a fine of not more than $250,000 for individuals or $500,000 for corporations, or (3) both penalties, plus the cost of prosecution .

• Willful failure to file a return, supply information, or pay tax at the time or times required by law. This includes the failure to pay estimated tax or a final tax, and the failure to make a return, keep records, or supply information. Upon conviction, the taxpayer is guilty of a misdemeanor and is subject to other penalties allowed by law, in addition to (1) imprisonment for no more than 1 year, (2) a fine of not more than $100,000 for individuals or $200,000 for corporations, or (3) both penalties, plus the cost of prosecution .

     Information you give your CPA and tax preparers  is not privileged and cannot be protected from the IRS or other law enforcement agencies. When you use a Attorney you get the benefit of "attorney/client" privilege and information you give your attorney is protect from the IRS and law enforcement.  If you feel you might have criminal tax problems, best to talk first with an attorney.

Get Legal Help with Your Income Tax Problems avoid these criminal consequences.  We are CPAs and attorneys with over 35 years experience with US international, expatriate and nonresident taxation. We can solve your tax  problems before it becomes necessary to hire a criminal attorney.  Email us at ddnelson@gmail.com  and visit our website at www.taxmeless.com. 

Estate Planning for US Expatriates and US Nonresidents with US Assets

If you are an expatriate with foreign assets, US assets  or a nonresident of the US with US assets you

need to look into estate planning to reduce probate costs, make certain your assets go to the heirs you desire, and  reduce possible US estate taxes.  If you have assets located outside the US, you need to have attorneys prepare a will in that country to make certain those foreign assets go to the desired beneficiaries upon your death.

We can help with your US estate planning if you are an expatriate, resident or nonresident.

READ MORE  DETAILS HERE

IRS STREAMLINED PROGRAM- CATCH UP FILING YOUR RETURNS AND AVOID MOST PENALTIES

Purpose of the streamlined procedures

The streamlined filing compliance procedures describe below are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The streamlined procedures are designed to provide to taxpayers in such situations with

• a streamlined procedure for fling amended or delinquent returns, and
• terms for resolving their tax and penalty procedure for filing amended or delinquent returns, and
• terms for resolving their tax and penalty obligations.

As reflected below, the streamlined filing procedures that were first offered on September 1, 2012 have been expanded and modified to accommodate a broader group of U.S. taxpayers. Major changes to the streamlined procedures include: 

• extension of eligibility to U.S. taxpayers residing in the United States
• Elimination of the $1,500 tax threshold, and 
• elimination of the risk assessment process associated with the streamlined filing compliance procedure announced in 2012.

Eligibility criteria for the streamlined procedures

The modified streamlined filing compliance procedures are designed only for individual taxpayers, including estates of individual taxpayers. The streamlined procedures are available to both U.S. individual taxpayers residing outside the United States and U.S. individual taxpayers residing in the United States. Descriptions of the specific eligibility requirements for the streamlined procedures for both non-U.S. residents (the "Streamlined Foreign Offshore Procedures") and U.S. residents ("Streamlined Domestic Offshore Procedures") are set forth below.

Taxpayers must certify that conduct was not willful. Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, will be required to certify, in accordance with the specific instructions set forth below, that the failure to report all income, pay all tax and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22,1) was due to non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.  READ MORE DETAILS OF THE STREAMLINED PROGRAM HERE

Our firm of CPAs and Attorney have represented and assisted hundreds of individuals enter the Streamlined Program. If you wish to learn more and want help entering the program EMAIL US to set up a consultation.

IF YOU EXPECT A TAX REFUND, DO NOT WAIT TO LONG TO FILE YOUR RETURN OR AMENDED RETURN

Do not wait to long to file an amended tax return or file your original  tax return if you  expect to get a refund.  The IRS has 10 years to  collect taxes you owe but when it comes to refunding your overpayments you have a limited time.

You have  3 years  from the date of the original deadline for your tax return to claim any refund you might be entitled to. Your 2019 tax return is due on April 15, 2020, so you have until April 15, 2023 to file your 2019 tax return and still get any tax refund that's due to you. Just add three years to the filing deadline...unless you paid any taxes that were due on the tax return.

In this case, the statute of limitations would be only two years from the date you paid if this date is later than the three-year due date deadline.  Amended returns claiming additional refunds must be filed with the IRS before the three-year statute of the limitations expires, which would be Oct. 15 if you filed an extension of the prior years return. 

If you need help filing an amended return to get a refund or your original return before the short  IRS refund statute of limitations expires contact us.  We most often can prepare your return in short order before it is too late.  EMAIL US FOR HELP

  

Cheapest States To Retire In USA for Expats returning

Many expats after living and working abroad for many years plan  to retire back in the USA. Marketwatch has done a study which shows the cheapest and most expensive states in which to retire.  Hawaii is the most expensive state with California coming in number 2.  The cheapest state is Mississippi.  READ DETAILS OF STUDY HERE   It will show you the cost of living, etc. for all of the states in the US.

You also need to consider things from your personal income tax point of view. The states that have no income taxes include:

• Texas
• Florida
• Nevada
• Washington
• Alaska
• South Dakota
• Wyoming

Contact us if you have questions or need to know more.   taxmeless@gmail.com  Kauffman Nelson LLP CPAs and Don D. Nelson, Attorney at Law.

When you Own Rental Property Abroad- How to Treat on Your US tax Return

When you own rental property outside of the USA  (which is required to be reported on your US income tax return) you will need to know the following to properly report it on your US taxes:

1. The lifetime its value  is depreciated most often is different from the rate in the USA.
2.  It is reported on Form 1040 schedule E, if it is not owned through a foreign partnership, corporation or foreign trust.
3. If the property is owned through a foreign corporation, trust or partnership special forms must be filed with your US personal tax return such as form 5471, 8865, 3520, etc.  Failure to file one of these forms if  required can result in a penalty of $10,000 or more.
4. The income and expenses of the rental must be reported for taxes in the same manner as a US rental property.
5. You will get a tax credit to offset your US tax on the rental income for income taxes paid the country in which the rental is located.
6. The US income tax rules for the rental apply to the property even though it as a VRBO, ARBNB, or other vacation rental.
7.  You cannot do a 1031 exchange from your rental into a US rental property or exchange a US rental property into a foreign rental property.
8. If you maintain a bank account abroad to collect rent and pay expenses you may be obligated to file Form 114 each year to report that (those) account(s). Failure to report can result in substantial penalties.

If you have questions or need further information EMAIL US FOR ANSWERS  We are US CPAs and Attorney with over 20 years experience in international taxation.

2019 New Tax Law Changes for US Expatriates and Other US Taxpayers

The US expatriate foreign earned income exclusion rises to  $105,900 for 2019  That means if you and  US taxpaying your  both work  you can exclude $211,800 from taxation on your form 1040.  The foreign housing deduction which can be taken on top of the foreign earned income exclusion has also increased and varies by your country of residency.     The amount deductible from foreign earnings  must exceed $16,944 and cannot be more than $31,770  in total.     This amount  can be greater based on the city and country of residency SEE TABLE IN PUBLICATION 54.

READ MORE ABOUT  MANY  OTHER TAX LAW CHANGES AND MODIFICATIONS FOR 2019 

30 YEARS US INTERNATIONAL, EXPAT AND NONRESIDENT EXPERIENCE - US TAX ATTORNEY AND CPAS ARE HERE TO HELP YOU.

Over 30 years of Internatinal Tax and Legal Expertise by CPAs and Attorneys provide you with the answers and guidance you need:

Tax Services

• US Expatriate Tax Planning & Return Preparation 
• International Tax Planning for Corporations, LLCs, Partnerships and Trusts 
• Past Year  Unfiled Returns for  Internal Revenue Service and all States 
• International Estate Planning
• Formation of US Corporations, Limted Liability Companies and Other Entities for use by offshore owners
• US Nonresident Taxation
• Corporate Expatriate Tax Equilization Assistance and Review
• Phone and Email Consulations on all U.S. Tax Matters as affecting those living abroad and offshore.
• Foreign bank and financial account reporting.

Tax Services for those working and residing in Mexico

• Preparation of individual, Expatriations US Returns in coordinateions with Mexican tax law.
• Mexican - US Business, personal and real estate tax planning.
• Preparation of Past Year Unfiled US Tax Returns
• Preparation of special US Tax Forms Required for those owning real estate or operating businesses in Mexico for Mexican Corporations, Fideicomisos, Mexican Bank Accounts, etc.

LEGAL SERVICES AND ENTITY FORMATION

• Formation of Corporations in all US States including California, Nevada, Florida and Washington
• Formation US Limited Liability Companies, Limited Partnerships and Partnerships for California and Nevada
• Planning and advising on best use of US Business Entities to Achieve your Offhshore Business Goals.
• US Estate Planning for Residents and Nonresidents
• U.S. Real Estate Law - Purchases, Sales and Leases
• Nonresident ownership of US Real Estate
• Contract review and Contract Drafting

Email Us with Your Questions and for Tax Return Preparation or Tax Planning

US Citizens Voting in Federal Elections While Living Abroad

Even though you live abroad full time and do not have a state of residence, you can still vote in Federal elections.

Most U.S. citizens 18 years or older who reside outside the United States are eligible to vote absentee for federal office candidates in U.S. primary and general elections. In addition, some states allow overseas citizens to vote for state and local office candidates and referendums. For information about your state, see the Voting Assistance Guide.

In some states, U.S. citizens who are 18 years or older and were born abroad but who have never resided in the United States are eligible to vote absentee. Direct your questions about eligibility to local election officials.

To learn more go to https://travel.state.gov/content/travel/en/international-travel/while-abroad/voting.html  Since you are paying for it as a US taxpayer (though living abroad) you might as well take part in directing the way your US taxes are used.  If you need help with your US taxes or estate planning, EMAIL US.

Expatriates That Owe IRS May Lose Their Passports

Over 8 million Americans are estimated to be living overseas.  Many of those live abroad due to debt and amounts owed the IRS for past taxes.  The IRS has a new program which puts those Americans in jeopardy should they return to the USA for a visit. READ MORE HERE

If you need help catching up with your taxes or entering into an offer in compromise or payment plan with the IRS for past due US income taxes, WE CAN HELP.  Email us with your questions or to set up a mini-consultation to solve your past due tax burden.  EMAIL US

DOWNLOAD YOUR EXPATRIATE TAX PLANNING NEWSLETTER

2019 Year End Tax Planning for US Expatriate Taxpayers and Others

Our year end  2019 Expatriate Tax Planning Letter can be read and downloaded here (pdf file).  Read it to learn of tax law changes for 2019 and possible planning steps you can take before year end to save you money.

If you want to get started early on your 2019 expatriate tax return you can download our 2019 Expatriate Tax Questionnaire HERE. (MS word file )  After you fill it out send it to us for a fee quote and fast preparation.

If you have  US expatriate, international or US nonresident tax questions email us by clicking HERE

Our firm CPAs and Attorney have combined experience in International Taxation of over 60 years. 

Excess Foreign Tax Credits - What to do about it?

If you live in a high tax country as an expatriate and you end up with excess foreign tax credits that cannot be used to offset the tax on the same income on your US Income Tax Return, all is not lost.
Excess foreign tax credits carry over and can be used for 10 years into the future on your returns assuming you do not have enough foreign tax credits to offset the tax on your foreign income.  See the instructions to the IRS foreign tax credit form 1116.

The best solution to recover your foreign taxes when you have excess foreign tax credits, is to move to a low tax country and you can then use them.  A list of countries in the world including the highest personal income tax rate for each country is HERE   You can use this to plan for the future use of excess foreign tax credits that are carried over.

US Expatriates May Be Eligible for Foreign Earned Income Exclusion Which increases for 2019

The foreign earned income exclusion has gone up for the 2019 tax year.   For the 2018 tax year, the maximum was $103,900. However, the Foreign Earned Income Exclusion 2019 maximum amount has risen to $105,900.  To be eligible to exclude this amount from your US tax return you must be a bonafide resident of a foreign country based on your physical presence for 330 days out of a 12 month fiscal year or be living and working in a foreign country for an entire calendar year.  The specific rules are set for in IRS publication 54.  

In additional to the foreign earned income exclusion an expat can exclude their housing costs so long as they exceeed a minimum amount  (see publication 54) and up to a maximum amount which may vary by country (see publication 54).

You also get a standard deduction of $24,400 if you file a joint return or $12,200 if you file as single. An additional $1,300 is added if you are aged.

We can help you reduce or save taxes you pay the US IRS.  Email us with your questions and help.  Visit our website at www.TaxMeLess.com   We have been assisting US expatriates and US nonresidents living abroad with the US taxes for over 25 years.  Kauffman Nelson LLP, CPAs and attorney.

WORRIED ABOUT IRS CRIMINAL INVESTIGATION? THERE ARE NOT THAT MANY EACH YEAR.

The link below is to the IRS Criminal Investigation Division 2019 Report.  Might be worth reading if you are worried about your situation.  Our of the 330 million plus Americans, the IRS last year only
instituted approx 1500 criminal investigations and less than 1000 resulted in criminal prosecutions.  If it does get that far, it is worth worrying about since they have a 91% conviction rate.

Download the pdf report here.... full of a lot of information that may be useful to you.

If you have personal concerns and was to discuss it with a tax attorney.  We offer mini consultations by phone, skype, whatsapp, etc.  Email us at ddnelson@gmail.com

ACCIDENTAL AMERICANS MAY HAVE PROBLEMS WITH IRS AND LOCAL BANKS UNLESS THEY REMEDY THEIR SITUATION

If you were born in the USA or your parents where US citizens you could be an Accidental American and may have problems soon with the IRS. Most individuals in this situation do not know that even if they never received a social security number or Taxpayer ID number, the IRS can come after them and make it difficult to open a foreign bank account even in the country which they reside.

READ MORE HERE   If you need help because you are an Accidental American we can help.  Email us at TAXMELESS.COM

How Your Wealth Compares with Wealth around the World - from CNBC and Bloomberg

Yesterday statistics for 2018 came out that indicated the one percent wealthy
in the USA are paying taxes at a percentage lower rate than the middle class. None
of recent tax cuts are trickling down to the middle class or  poor.

Yesterday the IRS admitted the mostly audit the lower middle class and poor
because it is easier to collect money than auditing the wealthy. They claimed
that they do not have a staff sophisticated enough to audit the wealthy and stand
up to the high priced tax lawyers and CPAs hired by the wealthy.

Write US if you want assistance with your taxes and to find every break that 
is available fo regular taxpayers.  We are attorney  and CPAs specializing in 
US expatriate, US nonresident and US international tax law. CLICK HERE

CRIMINAL PENALTIES FOR TAX FRAUD FOR EXPATRIATES AND NONRESIDENTS

A taxpayer that willfully attempts to evade paying income taxes is subject to criminal and civil penalties. The type of fraud will determine the applicable penalty. The following are some examples of possible punishments for specific types of tax fraud. Remember a delinquent taxpayer expat or nonresident, can never be certain if the IRS will not view their actions as beyond negligent but intentional fraud. Therefore, file your past due returns before the IRS finds you first.  Filing yourself before being caught is viewed as indicative of no criminal intent.

• Attempt to evade or defeat paying taxes: Upon conviction, the taxpayer is guilty of a felony and is subject to other penalties allowed by law, in addition to (1) imprisonment for no more than 5 years, (2) a fine of not more than $250,000 for individuals or $500,000 for corporations, or (3) both penalties, plus the cost of prosecution.

• Fraud and false statements: Upon conviction, the taxpayer is guilty of a felony and is subject to (1) imprisonment for no more than 3 years, (2) a fine of not more than $250,000 for individuals or $500,000 for corporations, or (3) both penalties, plus the cost of prosecution .

• Willful failure to file a return, supply information, or pay tax at the time or times required by law. This includes the failure to pay estimated tax or a final tax, and the failure to make a return, keep records, or supply information. Upon conviction, the taxpayer is guilty of a misdemeanor and is subject to other penalties allowed by law, in addition to (1) imprisonment for no more than 1 year, (2) a fine of not more than $100,000 for individuals or $200,000 for corporations, or (3) both penalties, plus the cost of prosecution .

Get Legal Help with Your Income Tax Problems avoid these criminal consequences.  We are CPAs and attorneys with over 30 years experience with US international, expatriate and nonresident taxation. We can solve your tax  problems before it becomes necessary to hire a criminal attorney.  Email us at ddnelson@gmail.com .com and visit our website at www.taxmeless.com. 

IRS VIRTUAL CURRENCY REPORTING ENFORCEMENT ACTIONS

The IRS has begun sending letters to taxpayers with virtual currency transactions that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly.

"Taxpayers should take these letters very seriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties," said IRS Commissioner Chuck Rettig. "The IRS is expanding our efforts involving virtual currency, including increased use of data analytics. We are focused on enforcing the law and helping taxpayers fully understand and meet their obligations."

The IRS started sending the educational letters to taxpayers last week. By the end of August, more than 10,000 taxpayers will receive these letters. The names of these taxpayers were obtained through various ongoing IRS compliance efforts.

For taxpayers receiving an educational letter, there are three variations: Letter 6173, Letter 6174 or Letter 6174-A, all three versions strive to help taxpayers understand their tax and filing obligations and how to correct past errors.

Taxpayers are pointed to appropriate information on www.irs.gov, including which forms and schedules to use and where to send them.

Last year the IRS announced a Virtual Currency Compliance campaign to address tax noncompliance related to the use of virtual currency through outreach and examinations of taxpayers. The IRS will remain actively engaged in addressing non-compliance related to virtual currency transactions through a variety of efforts, ranging from taxpayer education to audits to criminal investigations.

Virtual currency is an ongoing focus area for IRS Criminal Investigation.

IRS Notice 2014-21 states that virtual currency is property for federal tax purposes and provides guidance on how general federal tax principles apply to virtual currency transactions. Compliance efforts follow these general tax principles. The IRS will continue to consider and solicit taxpayer and practitioner feedback in education efforts and future guidance.

The IRS anticipates issuing additional legal guidance in this area in the near future. Taxpayers who do not properly report the income tax consequences of virtual currency transactions are, when appropriate, liable for tax, penalties and interest. In some cases, taxpayers could be subject to criminal prosecution.

Article from the TaxBook

Need legal or tax assistance with your vitural currency matters. Email us here.  Visit our website at www.taxmeless.com  We are attorneys and CPAs who specialize in International, Expatriate and Nonresident US taxation.

OUR US TAX INTERNATIONAL, EXPATRIATE AND NONRESIDENT CONSULTING SERVICES

Many clients and potential clients have asked us what other services do we provide other than tax US tax return preparation.  A list of some of those services are included below: 

• Phone and internet  mini -consultations with individual taxpayers  in connection with expatriate, nonresident and international tax planning and questions.
• Phone and internet consultations with CPAs and Enrolled Agents that require advice or consultation on International, Nonresident and Expatriate US tax forms, rules and regulations.
• Assist taxpayers preparing their own tax returns with questions and the preparation of international, nonresident and expatriate tax forms
• Review of your self prepared returns that contain international, expatriate and nonresident tax issues and forms.
• Formation on US corporations, LLCs and Partnerships for expatriates and nonresidents....in most states.
• IRS and State Tax Agency defense against audits and assessments.

Almost no firms offer the combined expertise of CPAs and Attorneys at reasonable fees. Contact with your questions, and for information.  CONTACT US HERE BY EMAIL.  We have been doing nonresident, expatriate and international taxes for over 25 years.  Call us in the US at 949-480-1235.

Are Virtual Currencies such as Bitcoin reportable on FBAR forms (form 114)? - the answer is sometimes yes.

The IRS does not consider virtual currencies such as BItcoin to be the same as cash or money. They consider it to be an asset to be treated for tax purposes much like stock, when purchased, sold or held as an investment.

There are certain situations however when virtual currency is reportable the same as a foreign bank account on the FBAR form 114 which is used to report foreign bank and financial accounts.  Failure to file this form each year can result in penalties of $10,000 or more. There are many reported court cases where the penalties for failing to file this form have resulted in penalties to one taxpayer of many hundreds of dollars or more.

Read more about the rules for reporting your virtual currency  - when to do it and when not -to the IRS HERE.

If you have not been filing this form and think you may be required to do so, and want to avoid the high penalties, need assistance or have questions CONTACT US.  We are CPAs and attorneys that have combined experience of over 60 years with US International Taxation.

What to Look for - US IRS Tax Scams and Con Men

Tax scams with calls, letters, emails, etc. allegedly from the IRS are out of control.  We even get the phone calls and emails here in our offices at Kauffman Nelson LLC.  Many sound authentic but all have the sole intent of cheating you out of your money.  Often the message includes immediate threats of prosecution, etc.  These scam attempts occur not only in the US but wherever Americans live abroad.

Do not give anyone on the phone who claims to be the IRS any financial information, your social security number or any other information that could be used to steal your identity or financial assets.


The IRS will only contact you by mail. If you have any suspicions of about contacts involving your taxes do not respond but contact the IRS directly at the phone numbers listed on the internet or go to their offices.

READ MORE ABOUT THE MANY TAX SCAMS GOING ON HERE

If you need help contact us at taxmeless@gmail.com. We are attorneys and CPAs and know the real IRS when we see it.

Reducing or Eliminating 951a GILTI Tax on Conrolled Foreign Corporations

Many clients want to reduce or eliminate the new tax for 2018 and beyond on the undistributed earnings of their controlled foreign corporations (over 50% ownership in the hands of US taxpayers). This replaces the old regime where profits left in foreign corporations (except in certain specific types of situations) are not taxed until distributed as dividends or wages.

The new  IRS Section 951a is complex and often hits  US owners of small foreign corporations. The tax on the earnings which are deemed distributed actually is assessed on the 1040 (or other US tax form) of the owner of the corporation though a deemed distribution (Subpart F) which is included with the shareholders other income.  READ MORE ABOUT HOW TO AVOID  OR REDUCE THE GILTI 951A TAX HERE

If you own a controlled  foreign corporation we can provide you with guidance and help you eliminate or reduce this new tax on deemed distributions of its profits.  Email us at taxmeless@gmail.com with your questions or for help.   Don Nelson, Tax Attorney

EXPATRIATE AND NONRESIDENT BUSINESS EXPENSES WHEN SELF EMPLOYED ABROAD

When you are self employed and have your own business abroad most of the same rules apply that apply when  in the USA.  Many overlook deductions and expenses which may reduce your taxable income and social security payments to US (if required).  Some of the expense rules applicable to your US income tax return may be different than those in the country in which you operate your business.   See below for guidance.

Business expenses. Business expenses are usually deductible if the business operates to make a profit. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that’s common and accepted in the trade or business. A necessary expense is one that’s helpful and appropriate for the trade or business. An expense doesn’t have to be indispensable to be considered necessary. Business expenses include:

• Business use of a home – If a taxpayer uses part of their home for business, part of their home expenses may be deductible. These expenses may include mortgage interest, insurance, utilities, repairs and depreciation. Alternatively, a simplified method is available for figuring this deduction. Special rules and limits apply. See Publication 587 for details. 
• Business use of a car – If a taxpayer uses their car in their business, they can deduct car expenses. If they use it for both business and personal purposes, they must divide expenses based on actual mileage. For details, including special recordkeeping rules, see Publication 463.
• Meals and entertainment – In general, taxpayers can deduct 50 percent of the cost of business meals if the taxpayer -- or an employee of the taxpayer --is present and the food or beverages aren’t lavish or extravagant.
• Rent expense – In general, a taxpayer can deduct rent as an expense only if the rent is for property used in their trade or business. If they have or will receive equity in or title to the property, the rent is not deductible.
• Interest – Business interest expense is an amount charged for the use of money a taxpayer borrowed for business activities. Limits and special rules may apply. See basic questions and answers about the limitation on the deduction for business interest expense for more information.
• Taxes – A taxpayer can deduct various federal, state, local, and foreign taxes directly attributable to their trade or business as business expenses.

Publication 535, Business Expenses, has more information about these and other deductible business expenses, including employee related expenses such as employees’ pay, retirement plans and insurance.

You may owe US self employment tax (medicare and social security) on your net business income if the US does not have a social security agreement with the country you live in or if you are not paying into that countries social security system. Many countries do not have such agreements with the US.

We can help with your nonresident, international and expatriate tax planning, tax returns and IRS issues, audits, payment plans and citizenship surrender. Email us at Expatriate Tax Help Now.   US Tel. 949-480-1235

PAY YOUR ITS INCOME TAXES ON LINE DIRECTLY FROM YOUR BANK ACCOUNT WHEN YOU ARE AN EXPAT LIVING ABROAD

If you owe taxes as an expat mailing a check to the IRS often is not the answer. The following video from the IRS shows how to pay the IRS by direct deposit, credit card or debit card.  Listen to the IRS video explaining payment methods here:  https://youtu.be/drh1UUCMMLk

Another method which can be used to pay from foreign bank accounts is the IRS wire transfer. Read more about this method and how to do it HERE.

Many states including California have on line portals to allow payments without sending checks directly from your bank account.

Of course the CPAs and Attorneys at TaxMeLess are always there to help you with your expatriate, nonresident and international tax return forms, payments plans and citizenship surrender (stop paying US taxes forever).  You can email us by clicking HERE

Big Winners Under New Tax Laws are Millionaire CEOs and Ultra Rich

Forbes Magazine Points Out the the big winners under the tax law are the Millionaire CEOs and Ultra Rich

Reporting Foreign Bank and Financial Accounts, Foreign Assets on your 2018 Tax Return

You may be obligated to report your foreign financial accounts on line using form 114. Failure to do so may cause the IRS to assess penalties of $10,000 or more .... and there are also criminal penalties. Learn more in the Forbes article HERE

Also if you have other types of foreign assets such as foreign corporations, foreign partnerships, foreign LLCS, foreign bonds, stocks, etc. you may be required to file form 8938 with your tax return or incur the same type of penalties.  READ MORE HERE

These rules are complex and compliance with the law is important. We are here to help you with these forms or your entire US resident, US expatriate or US nonresident tax return. Email us at ddnelson@gmail.com . We are US CPAS and Attorneys that deal exclusively with International Tax Issues and Returns.