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.

US Expats Moving Expenses Can No Longer Be Deducted and If Paid for by Employer it is Taxable Income to Recipient

For businesses that have employees, there are changes to fringe benefits that can affect a business’s bottom line and their employee’s tax liabilities. One of these changes is to qualified moving expenses.

Under previous law, payment or reimbursement of an employee’s qualified moving expenses were not subject to income or employment taxes.

Under last year’s tax reform legislation, employers must include all moving expenses, in employees’ wages, subject to income and employment taxes.

Exception

Generally, members of the U.S. Armed Forces can still exclude qualified moving expense reimbursements from their income if:

• They are on active duty
  
• They move pursuant to a military order and incident to a permanent change of station
• The moving expenses would qualify as a deduction if the employee didn’t get a reimbursement

Transition rule

There is a transition rule under the new law. Under this rule, certain payments or reimbursements aren’t subject to federal income or employment taxes. This includes amounts that:

• An employer pays a third party in 2018 for qualified moving services provided to an employee prior to 2018.  
• An employer reimburses an employee in 2018 for qualified moving expenses incurred prior to 2018. 

To qualify for the transition rule, the payments or reimbursements must be for qualified expenses which would have been deductible by the employee if the employee had directly paid them before Jan. 1, 2018. The employee must not have deducted them in 2017.

We can help you with your US Federal and State Tax Returns. We know all of the special rules for US expatriates and the changes made by the recent tax  law.  Email us at taxmeless@gmail.com for assistance and your tax return preparation. We have specialized in expatriates for over 20 years. Download our 2018 tax return questionnaire for expatriates. Send it to us afrter filled out and we will provide you with a fixed fee quote.