New Form 5472 Filing Requirements for Foreign-Owned U.S. Disregarded Entities (“FOUSDEs”) - International Tax Blog

Foreign owned US disregarded entities (LLCs) must now file form 5472 and report  on their assets and activities. Previously this was not a requirement and a a nonresident individually owned  US LLC with only income from outside the US did not in many situations have to filed anything with the IRS.  The penaltty for not filing this form is $10,000. Read more below.

New Form 5472 Filing Requirements for Foreign-Owned U.S. Disregarded Entities (“FOUSDEs”) - International Tax Blog

If you need help filing this form or information on it email us at ddnelson@gmail.com 

7 reasons the IRS might audit you

7 reasons the IRS might audit you

Cut IRS Audit Risk, Extend your April 18 IRS Tax Deadline To October 16

The IRS keeps secret what could cause your return to be audited (other than computer audits caused by omission of w2, 1099 or other items reported to the IRS separately from your return). However, after over 30 years of preparing tax returns and observing the results it does seem clear that extending your tax return using Form 4868 does appear to reduce your chance of audit.

 Several years ago an IRS agent confidentially to us that returns are audited in the order they are picked for audit (filing early or on time would cause your return to be picked first) and those filed later under extension are not as likely to be audited because the limited audit staff might not get around to auditing those returns filed undertension because they are busy with returns filed earlier in the year.

Read more in the Forbes article below.

Cut IRS Audit Risk, Extend April 18 Tax Deadline To October 16

If you have questions, are being audited or ? email us at ddnelson@gmail.com

Everything You Wanted to Know About Expat Foreign Earning Income Exclusion (IRC 911)

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If live and work abroad, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction.

If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ($92,900 for 2011, $95,100 for 2012, $97,600 for 2013, $99,200 for 2014 and $100,800 for 2015). In addition, you can exclude or deduct certain foreign housing amounts.

You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer. Refer to Exclusion of Meals and Lodging in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, and Publication 15-B, Employer's Tax Guide to Fringe Benefits for more information

Foreign earned income elgible for exclusion does include wages (even if paid from US employer) or self employment income and does not include the following amounts:

• Pay received as a military or civilian employee of the U.S. Government or any of its agencies
• Pay for services conducted in international waters (not a foreign country)
• Pay in specific combat zones, as designated by an Executive Order from the President, that is excludable from income
• Payments received after the end of the tax year following the year in which the services that earned the income were performed
• The value of meals and lodging that are excluded from income because it was furnished for the convenience of the employer
• Pension or annuity payments, including social security benefits

Self-employment income: A qualifying individual may claim the foreign earned income exclusion on foreign earned self-employment income.  The excluded amount will reduce the individual’s regular income tax, but will not reduce the individual’s self-employment tax.  Also, the foreign housing deduction – instead of a foreign housing exclusion – may be claimed.  Unless the country you work in has an agreement with the US  Social Security Admnistration you will have the pay US self employment tax (social security plus medicare) on your net profit. The foreign earned income exclusion does not apply to the self employment tax.

Figuring the tax: Beginning with tax year 2006, a qualifying individual claiming the foreign earned income exclusion, the housing exclusion, or both, must figure the tax on the remaining non-excluded income using the tax rates that would have applied had the individual not claimed the exclusions.

• Requirements
• Can I Claim the Exclusion or Deduction?
• Tax Home In A Foreign Country
• Bona Fide Resident test
• Physical Presence Test
• Exceptions to Tests
• Figuring The Exclusion
• Choosing The Exclusion
• Revocation
• Which Form to File
• Foreign Housing Exclusion or Deduction
• Individual Retirement Arrangements
• Extension to Claim Foreign Earned Income Exclusion
• Application of Foreign Earned Income Exclusion and the Combat Zone Exclusion to Civilian Contractors Working in Combat Zones (PDF)

References/Related Topics

• Form 2555, Foreign Earned Income
• Form 2555-EZ, Foreign Earned Income Exclusion
• Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return
• Form 2350, Application for Extension of Time to File U.S. Income Tax Return
• Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
• U.S. Citizens and Resident Aliens Abroad

Need more information or wish to discuss your situation, or need help with the preparation of your expat tax return or catching up for past unfiled years, then email us at ddnelson@gmail.com or go to our website at www.taxmeless.com for more information. We have been assisting expats with their US taxes for over 30 years.

Expats Use IRS Form 673 to Reduce Taxes Withheld From Your Wages

Why let the IRS hold your money all year and not get it back until you file your tax return. If you are an expatriate and claim the foreign earned income exclusion (filing form 2555 or 2555 EZ), housing exclusion  you can file Form 673 with your US employer and reduce your tax withholding during the year to the actual amount you may owe at the end of the year or to nothing if you expect to owe the IRS no taxes at all.

You can download this form at https://www.irs.gov/pub/irs-pdf/f673.pd.  If you need help determining the tax you will owe (if any) as an expatriate living abroad, we can help with that determination. Contact us at ddnelson@gmail.com   

Expats that Owe the IRS a Lot of Taxes, Can Make a Deal and Reduce or Eliminate the Balance Due

If you owe the IRS a lot of past taxes, you can do an offer in compromise and reduce or eliminate the balance due. To proceed, you must have filed all of your tax returns and be current on this years required tax payments (if any).  The process can be complex and many firms advertise on TV to help you make a deal with the IRS, and do not deliver but do take your money. The IRS on the webpage set forth below has a question and answer procedure where you can determine if you qualify and how much you can reduce the taxes due.  IRS WEBSITE WITH OFFER IN COMPROMISE CALCULATOR

Remember if you owe the IRS more than $50,000 in back taxes they can have your passport taken away when you enter the US from abroad. You can only get it back after you resolve the problem with the IRS.

If you need help or professional assistance, email us at ddnelson@gmail.com.

Instructive Videos and Links for Expat and International US Taxpayers

Three new videos are now available on the IRS YouTube page, and several more of interest to taxpayers abroad will be released in coming weeks. Now available are:

• International Taxpayers--Filing Requirements. Learn about the requirements for filing an individual income tax return including income limits while living abroad.
• International Taxpayers--Foreign Earned Income Exclusion. Find out who is eligible, what income qualifies and how to claim the exclusion.
• International Taxpayers--Individual Taxpayer Identification Number (ITIN). This video helps non-U.S. citizens determine if they need an IRS-issued tax reporting number, known as an ITIN, and how to apply for one.

Upcoming videos will deal with the foreign tax credit, filing status for a U.S. taxpayer married to a foreign spouse and an introduction to the IRS web site for international taxpayers.

The IRS has also added two new international tax topics to Tax Trails, the agency’s interactive online tool that helps taxpayers get answers to their general tax questions.

The new topics are:

• Am I Required to File a U.S. Individual Income Tax Return (for U.S. Citizens/Resident Aliens Living Abroad and Nonresident Aliens)?
• Filing Status of a U.S. Citizen or Resident Alien Married to a Nonresident Alien.

The International Taxpayers page on IRS.gov is packed with information designed to help taxpayers living abroad, resident aliens, nonresident aliens, residents of U.S. territories and foreign students. Among other things, the web site features a directory of overseas tax preparers.

This is all very complex and often confusing. If you need professional help email us at ddnelson@gmail.com for professional CPA and tax attorney assistance.  We have been doing US International taxes and US expatriate and Nonresident taxes for over 30 years.  Visit our website at www.TaxMeLess.com 

RED FLAGS THAT WILL CAUSE AN IRS AUDIT OF EXPAT OR INTERNATIONAL US TAX RETURNS

Many things may cause your US tax return to be audited. As an expat, in addition to the items list in the article below some items that will cause an audit are:

a. Ownership of a foreign mutual fund and failure to file the special forms required for foreign passive investment companies.
b. Ownership of foreign partnerships and foreign corporations in which you own the majority interest.
c Large. Inheritances or gifts received from nonresident donors when you fail to file form 3520 to report those gifts or inheritances.
d. Unusually large income from outside the US with unusually large deductions offsetting most of that income so little tax is paid.  This might not cause an audit if your paid substantial foreign income taxes abroad and you are claiming a foreign tax credit to offsett your US tax on that income.
e. Other audit triggers from the Huffington Post.


Remember they can audit your return up to three years after it is filed and up to six years if you omitt 25% of your income.  If you want to avoid IRS audits or need representation when the IRS does audit your expat or international tax return email us at : ddnelson@gmail.com