Estate and Gift Tax Planning for US Nonresidents with US Real Estate and Other US assets

Nonresidents are taxed differently on their property located in the USA than those who are citizens or permanent residents.  They do not get the same exemptions and credits and can without proper planning end up paying a lot of estate or gift taxes.

The table below shows when the IRS considers US property owned by nonresidents to be subject to estate taxes (paid upon death of the nonresident) and gift taxes (when US property and assets are transferred without consideration) during the nonresidents life.
                                                                                   ESTATE TAX                     GIFT TAX

		Estate Tax		Gift Tax
Property Type		Yes	No	Yes		No
Tangible Personal Property in U.S. (e.g., artwork, jewelry)		X		X
Currency in U.S. Safe Deposit Box		X		X
Cash Deposits in a U.S. Bank			X	X
U.S. Real Estate		X		X
Non-U.S. Real Estate			X			X
U.S. Stocks		X				X
Non-U.S. Stocks			X			X
U.S. Government and Corporate Bonds			X			X
U.S. States/Muni Bonds		X				X
U.S. Partnership/LLC Interest		Depends (a)				X
Retirement Plans			X	N/A
Life Insurance Cash Value		X				X
Life Insurance Death Benefits			X			X

(a) The law is not clear and interpretations go both ways with respect to US situs of assets and situs of acutal partnership or LLC interest.

The table below shows the differences between estate and gift taxes paid by a citizen or permanent resident from that which is paid by a nonresident (NRA) including tbe differences in exemptions, and other rules.

	U.S. Person				NRA
Estate Tax Exemption Amount	$5,430,000 per person				$60,000 per person
Top Estate and Gift Tax Rate	40%				40%
Lifetime Gift Tax Exemption Amount	$5,430,000 per person				$0
Annual Gift Tax Exclusion Amount	$14,000 per donee				$14,000 per donee
Gift Splitting Between Spouses	Yes, if both spouses are U.S. people				No
Marital Deduction for Lifetime Gifts	Unlimited if recipient spouse is a U.S. citizen				$147,000 per year if recipient spouse is a non-U.S. citizen4
Marital Deduction for Testamentary Bequests	Unlimited if recipient spouse is a U.S. citizen				$0, if recipient spouse is a non-U.S. citizen, unless assets are held in a Qualified Domestic Trust
Gift Tax Exclusion for Direct Payment of Medical and Education Expenses	Yes				Yes
Portability of Decedents Exemption	Yes				No

If you are a nonresident and need estate tax or gift tax planning for your US assets contact us at ddnelson@gmail.com. 

Most Popular Cities and Jobs for Expats Working Abroad

https://blog.linkedin.com/2016/07/28/Most-Popular-Cities-and-Jobs-for-Americans-Working-Abroad

What facts do I need to include in completing the narrative statement of facts portion of the Form 14653?

Provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Include the whole story including favorable and unfavorable facts.

Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required information returns, including FBARs.
Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it. And explain your contacts with the account/asset including withdrawals, deposits, and investment/management decisions. Provide a complete story about your foreign financial account/asset.

The following points address common situations that may apply to you

We realize that many taxpayers failed to acknowledge their financial interest in or signature authority over foreign financial accounts on Form 1040, Schedule B. If you (or your return preparer) inadvertently checked “no” on Schedule B, line 7a, simply provide your explanation.

We realize that some taxpayers that owned or controlled a foreign entity (e.g., corporation, trust, partnership, IBC, etc.) failed to properly report ownership of the entity or transactions with the foreign entity. If you (or your return preparer) inadvertently failed to report ownership or control of the foreign entity or transactions with the foreign entity, explain why and include your understanding of your reporting obligations to the IRS and to foreign jurisdictions.

If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. Also provide background such as how you came into contact with the advisor and frequency of communication with the advisor.

If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.

Owe Taxes? These Tips Can Help

Owe Taxes? These Tips From IRS Can Help

Better Pay Your Mexican Taxes on your Mexican Rental Income

Under Mexican law,  all income generated from properties located within Mexican territory is subject to taxation, even if the owners are foreigners and even if all funds are collected in accounts located outside Mexico.   For many years it has been a major issue for both Mexican tax authorities and individuals attempting to comply.  For years a Federal Taxpayer ID was required to file and pay the tax.   In order to obtain this tax ID one needed to be a resident of Mexico.    This was lose-lose for both the authorities and the foreigners who were willing to pay but baffled by the issues involved to “get legitimate”.

After more than five years of Settlement Company® dialogue with Mexican tax officials, a resolution was made in which the foreign property owner could appoint a Mexican company to pay his or her taxes and dispense with all other formalities.  This has become reality!   Mexican authorities are now looking seriously to collect this long-neglected source of tax revenue and foreigners not only are lining up to pay but also to receive the receipts for payment of the taxes which can then be credited against taxes paid in their native country under the terms of the NAFTA treaty.  Remember! no double taxation is permitted under the terms of the treaty!

If you have a rental property in Mexico contact us for details.   ddnelson@gmail.com

Expats should include their pets in estate plan

A majority of American households today make pets a part of the family. More and more, people want to see pets provided for even after the passing of the human members of the family. In the past,

inadequacies with the law made this impossible. However, now almost every State allows for trusts to be established solely for the benefit of caring for a pet after its family has passed on. Paramount to the trust is not only providing the financial means to care for the pet but to also lay out the wishes of the pet’s owner to ensure the level of care the trust is intended to provide. That is why this trust not only provides for a trustee but also the role of an enforcer to make certain the owner’s wishes are being respected.

Make the effort to remember your pets when creating your estate planning – they may live longer than you!  Need help. Contact us at ddnelson@gmail.com or visit our website www.taxmeless.com 

FBAR FORM 114 DEADLINE FOR FILING IS JUNE 30TH

The deadline for filing  the 2015 form 114 to report your foreign bank and other financial accounts is coming up on June 30th.  The form must be filed on line and cannot be extended for any reason. Read more details in this article from Forbes Magazine.

If your foreign asset values exceed a certain amount you may also have to file form 8938 with your tax return. The penalty for failing to file that form is $10,000.  That form (if required) must be filed even though you also reported on Form 114.

If you have questions on these forms or on other foreign asset reporting IRS rules, you can request a mini consultation by emailing us ddnelson@gmail.com.

US Expatriate Tax Return Due Date Deadlines

Several tax return deadlines are coming up very soon. Failure to meet these deadlines or file extensions can result in substantial penalties and other problems.

• June 15, 2016: US Expat Tax Tax Return Deadline (without  applying for an extension)

This is the US expat deadline and also the deadline to file an additional extension until October 15. Remember that if you are required to file FATCA Form 8938 (to report your foreign assets), it must be filed along with your US expat tax return. If you file for an extension, the extension applies to Forms 5471, 8865, and  8938, as well.

.

• June 30, 2016: Foreign Bank Account Report (FBAR) Filing Deadline

Form FinCEN 114 must be filed online using the BSA e-filing system. It is filed on line only and can easily be done by you if you are good with computers. No further extensions can be granted. Failure to timely file can result in a $10,000 penalty..

• October 17, 2016: Final US Expat Tax Deadline

If you filed an extension prior to June 15th using form 4868 and marking the expat box  this is your final deadline. Normally the deadline is October 15th, but due to it falling on a Saturday the tax deadline is extended.  You can get a further extension if necessary by following the required procedure and sending a letter to the IRS which can give you until December 15, 2016 to file your return. This additional extension is discretionary with the IRS.

If you need help email us at ddnelson@gmail.com or for additional information visit our website at www.taxmeless.com 

I

WHEN THE IRS CALLS, DON'T BE FOOLED... IT MOST LIKELY IS SOMEONE ELSE

The Internal Revenue Service has some advice for taxpayers this April Fool’s Day that  may prevent them from being the victim of a tax scam: Don’t be fooled by scammers. Stay safe and be informed. Here are some of the most recent IRS-related scams to be on the lookout for:

Telephone Scams. Aggressive and threatening phone calls by criminals impersonating IRS agents remain an ongoing threat. The IRS has seen a surge of these phone scams in recent years as scam artists threaten taxpayers with police arrest, deportation, license revocation and more. These con artists often demand payment of back taxes on a prepaid debit card or by immediate wire transfer. Be alert to con artists impersonating IRS agents and demanding payment.

Note that the IRS will never:

• Call to demand immediate payment over the phone or call about taxes owed without first having mailed you a bill.
• Threaten to immediately bring in local police or other law enforcement groups to have you arrested for not paying.
• Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
• Require you to use a specific payment method for your taxes, such as a prepaid debit card.
• Ask for credit or debit card numbers over the phone or threaten to bring in local police or other law enforcement groups to have you arrested for not paying.

Scammers Change Tactics. The IRS is receiving new reports of scammers calling under the guise of verifying tax return information over the phone. The latest variation on this scam uses the current tax filing season as a hook. Scam artists call saying they are from the IRS and have received your tax return, and they just need to verify a few details to process it. The scam tries to get you to give up personal information such as a Social Security number or personal financial information, such as bank numbers or credit cards.

Tax Refund Scam Artists Posing as TAP. In this new email scam targeting taxpayers, people are receiving emails that appear to come from the Taxpayer Advocacy Panel, a volunteer board that advises the IRS on issues affecting taxpayers. They try to trick you into providing personal and financial information. Do not respond or click the links in these emails. If you receive an email that appears to be from TAP regarding your personal tax information, forward it to phishing@irs.gov.

Email, Phishing and Malware Schemes. The IRS has seen an approximate 400 percent surge inphishing and malware incidents so far in the 2016 tax season.

The emails are designed to trick taxpayers into thinking these are official communications from the IRS or others in the tax industry, including tax software companies. The phishing schemes can ask taxpayers about a wide range of topics. Emails can seek information related to refunds, filing status, confirming personal information, ordering transcripts and verifying PIN information.

Variations of these scams can be seen via text messages, and the communications are being reported in every section of the country.

When people click on these email links, they are taken to sites designed to imitate an official-looking website, such as IRS.gov. The sites ask for Social Security numbers and other personal information, which could be used to help file false tax returns. The sites also may carry malware, which can infect your computer and allow criminals to access your files or track your keystrokes to gain information.

If you get a ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on IRS.gov.

Additional IRS Resources:

• IRS Releases the “Dirty Dozen” Tax Scams for 2016

IRS YouTube Video:

• Tax Scams - English | Spanish | ASL

Podcasts:

• Tax Scams -  English | Spanish

US EXPATRIATES - HOW DO YOU KNOW WHEN YOUR ARE COMMITTING TAX FRAUD SUBJECT TO CIVIL AND CRIMINAL PENALTIES?

The Courts have developed a nonexclusive list.of factors, or "badges of fraud," that demonstrate fraudulent intent with respect to US income taxes (or the failure to pay those taxes).  If your situation involves some of the following you are at risk. The civil and criminal penalties can be extreme

• Understating income,
• Maintaining inadequate records,
• Implausible or inconsistent explanations of behavior,
• Concealment of income or assets,
• Failing to cooperate with tax authorities,
• Engaging in illegal activities,
• Lack of credibility of the taxpayer's testimony,
• Filing false documents,
• Failing to file tax returns,
• Failing to make estimated payments, and
• Dealing in cash.

A taxpayer's background, level of education, and relative business sophistication are also rely evant considerations as they inform the court about the taxpayer's ability to understand the transactions and issues at hand. 

If you wish to discuss your situation and find ways out of potential expensive and criminal situations we can help. As an attorney our consultations provide the complete confidentiality and privacy of "attorney client privilege."  Email

 for phone phone consultation with Don D. Nelson, who is a an admitted attorney in US Tax Court at ddnelson@gmail.com. 

US Expatriates Who Are Self Employed May Save Taxes With The Home Office Deduction

As an expatriate ifyou use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes.
Simplified Option
For taxable years starting on, or after, January 1, 2013 (filed beginning in 2014), you now have a simpler option for computing the business use of your home (IRS Revenue Procedure 2013-13, January 15, 2013). The standard method has some calculation, allocation, and substantiation requirements that are complex and burdensome for small business owners. This new simplified option can significantly reduce recordkeeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses.
Regular Method
Taxpayers using the regular method (required for tax years 2012 and prior), instead of the optional method, must determine the actual expenses of their home office. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Generally, when using the regular method, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.
Requirements to Claim the Deduction
Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:
1. Regular and Exclusive Use.
You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.
2. Principal Place of Your Business.
You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.
Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.
Additional tests for employee use. If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:
Your business use must be for the convenience of your employer, and
You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.
If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.

9 Tax Return Items That Will Cause An IRS Audit

MONEY Magzine has a very good article if you want to avoid an IRS audit which is expensive, times consuming and very stressful.  If you get an audit notice make certain to get a tax professional to represent you.  Why?  Because if the IRS agents asks you a question when you represent yourself you may more may not answer it to your benefit.  If you have a representative, the Agent must ask your representative and the your CPA or attorney can always stall and tell the agent they must ask their client. That gives everyone time to craft the best answer and make sure the wrong answer is not given to the agent.   READ MORE HERE

IRS URGES AMERICANS TO COME CLEAN FAST BEFORE THEY GO THRU PANAMA PAPERS

The IRS also encouraged any U.S. citizens and companies that may have money in offshore accounts to contact the agency now before any possible illegal activity on their part is identified. According to media reports, the documents contain information on potentially thousands of U.S. citizens and firms that have at least an indirect connection to offshore accounts affiliated with Mossack Fonseca. Many other firms provide similar services, and the Treasury Department estimated last yearthat more than $300 billion dollars of illicit proceeds are generated in the United States annually, with criminals using such companies here and abroad to launder funds.

What Foreign Taxes Qualify for the Foreign Tax Credit.... and other rules on foreign tax credits

Generally, the following four tests must be met for any foreign tax to qualify for the credit:

1. The tax must be imposed on you
2. You must have paid or accrued the tax
3. The tax must be the legal and actual foreign tax liability
4. The tax must be an income tax (or a tax in lieu of an income tax)

Tax Must Be Imposed on You

You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U.S. possession. For example, a tax that is deducted from your wages is considered to be imposed on you.

Foreign Country

A foreign country includes any foreign state and its political subdivisions. Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit.

U.S. Possessions

For foreign tax credit purposes, all qualified taxes paid to U.S. possessions are considered foreign taxes.  For this purpose, U.S. possessions include Puerto Rico and American Samoa.

Tax Must Be Paid Or Accrued

You can claim a credit only if you paid or accrued the foreign tax to a foreign country or U.S. possession.

READ MORE OF THE RULES HERE

3% Tax Imposed on Expat Rentals in Abu-Dhabi

READ MORE.   http://www.gulfbusiness.com/articles/country/united-arab-emirates/abu-dhabi-introduces-3-tax-on-expat-property-rentals/

Link To Pay IRS Taxes On Line

https://www.irs.gov/Payments

US Expats Can Avoid Paying US Taxes

Read More in The Street  http://www.thestreet.com/story/13519656/1/expats-may-be-able-to-avoid-paying-u-s-income-taxes-say-experts.html

Tax Freedom Day is April 24 this year

Read more     http://www.valuewalk.com/2016/04/tax-freedom-day-2016-arrives-april-24/

Luxembourg Leaks: tax Tricks of the Trade

US Expats - Filing Too Late Can Cause you to Lose the Foreign Earned Income Exclusion

The foreign earned income exclusion is not automatic. US expats must file returns to claim it. If you file your return for any year late (more than 18 months), the IRS can deny the exclusion (and you would have to pay tax on your entire income--- but could still take foreign tax credits) if you owe taxes with the return. If your never file a return the statute of limitations for the IRS to assess taxes or require a return never expires!

Need help catching up or filing your return?  Need US International, Expatriate or Nonresident tax assistance. Go to www.TaxMeLess.com.  We offer all of your clients the absolute privacy of attorney-client privilege. We have over 30 years specialized experience in expatriate and nonresident US taxation.

Home Office Deduction for US Expatriate Taxpayers

If you use your home for business when working abroad, you may be able to deduct expenses for the business use of your home. If you qualify, you can claim the deduction whether you rent or own your home. You may use either the simplified method or the regular method to claim your deduction. Here are six tips that you should know about the home office deduction:

1. Regular and Exclusive Use. As a general rule, you must use a part of your home regularly and exclusively for business purposes. The part of your home used for business must also be:

Your principal place of business, or
A place where you meet clients or customers in the normal course of business, or
A separate structure not attached to your home. Examples could include a garage or a studio.
2. Simplified Option. If you use the simplified option, multiply the allowable square footage of your office by a rate of $5. The maximum footage allowed is 300 square feet. This option will save you time because it simplifies how you figure and claim the deduction. It will also make it easier for you to keep records. This option does not change the rules for claiming a home office deduction.

3. Regular Method. This method includes certain costs that you paid for your home. For example, if you rent your home, part of the rent you paid may qualify. If you own your home, part of the mortgage interest, taxes and utilities you paid may qualify. The amount you can deduct usually depends on the percentage of your home used for business.

4. Deduction Limit. If your gross income from the business use of your home is less than your expenses, the deduction for some expenses may be limited.

5. Self-Employed. If you are self-employed and choose the regular method, use Form 8829, Expenses for Business Use of Your Home, to figure the amount you can deduct. You can claim your deduction using either method on Schedule C, Profit or Loss From Business. See the Schedule C instructions for how to report your deduction.

6. Employees. You must meet additional rules to claim the deduction if you are an employee. For example, your business use must also be for the convenience of your employer. If you qualify, you claim the deduction on Schedule A, Itemized Deductions.

For more on this topic, see Publication 587, Business Use of Your Home. You can view, download and print IRS tax forms and publications on IRS.gov/forms anytime.  Have questions write us for help at ddnelson@gmail.com or visit our website for a wealth of information at www.TaxMeLess.com

Do You Need Additional Time To Get Your 2015 US Tax Return Done?

The April 18 tax deadline is coming up. 2015 Expat returns are due June 15. If you need more time to file your taxes, you can get an automatic six-month extension from the IRS. Here are five things to know about filing an extension:

1. Use IRS Free File to file an extension. You can use IRS Free File to e-file your extension request for free. Free File is only available through IRS.gov. You must e-file the extension request by midnight April 18. If you do request an extension, come back to Free File to prepare and e-file your taxes for free. You can access the program at any time through Oct. 17.

2. Use Form 4868. You can also request an extension by filling out Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You must mail this form to the IRS by April 18. Form 4868 is available on IRS.gov/forms. You cannot extend the Form 114 FBAR deadline which is June 30.

3. More time to file is not more time to pay. An extension to file will give you until Oct. 17 to file your taxes. It does not, however, give you more time to pay your taxes. Estimate and pay what you owe by April 18 to avoid a potential late filing penalty. You will be charg  ed interest on any tax that you don’t pay on time. You may also owe a penalty if you pay your tax late. Interest is normally charged on any unpaid tax.

4. IRS Direct Pay. Pay your tax with IRS Direct Pay. Visit IRS.gov/directpay to use this free and secure way to pay from your checking or savings account. You also have other electronic payment options. The IRS will automatically process your extension – and you don’t have to file a separate request -- when you pay electronically. You can pay online or by phone.

5. IRS helps if you can’t pay all you owe. If you can’t pay all the tax you owe, the IRS offers you payment options. In most cases, you can apply for an installment agreement with the Online Payment Agreement application on IRS.gov. You may also file Form 9465, Installment Agreement Request. If you can’t make payments because of financial hardship, the IRS will work with you.

Reporting Foreign Income: Six Tax Tips from www.taxmeless.com

Did you receive income from a foreign source in 2015? Are you a U.S. citizen or resident who worked abroad last year? If you answered ‘yes’ to either of those questions, here are eight tips to keep in mind about foreign income:

1. Report Worldwide Income. By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts and foreign bank and securities accounts.

2. File Required Tax Forms. You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. Visit IRS.gov for more information.

3. Review the Foreign Earned Income Exclusion.  If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $100,800 of your wages and other foreign earned income in 2015. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.

4. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.

5. Additional Child Tax Credit. You cannot claim the additional child tax credit if you file Form 2555, Foreign Earned Income, or 2555-EZ, Foreign Earned Income Exclusion.

6. Tax Filing Extension is Available.  If you live outside the U.S. and can’t file your tax return by the April 18 due date, you may qualify for an automatic two-month extension until June 15. This extension also applies to those serving in the U.S. military abroad. You will need to attach a statement to your tax return explaining why you qualify for the extension.

For more on this topic refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. You can get all IRS tax products on IRS.gov/forms.

Need to discuss how to handle your expat or foreign taxes with respect to US taxation... both planning and resolving past problems. Email us at ddnelson@gmail.com and find lots of answers at www.taxmeless.com 

Move Your Business Abroad and Reduce or Eliminate Your US Taxes!

By Don D. Nelson, International Tax Attorney at Law

You can operate your sole proprietorship or corporate  business from a foreign country and secure terrific US tax advantages.  Depending on the country you chose, you may reduce your living expenses, and improve your lifestyle. We have helped hundreds of small business owners move their businesses abroad to achieve the maximum US tax savings and achieve an improved lifestyle. As an attorney and partner in a CPA firm we can offer you international legal and tax expertise which is difficult to find except with the largest and most expensive international law and accounting firms.

You can take advantage of the US offshore tax breaks with all types of businesses including almost all internet based businesses, programming, consulting, employee recruiting businesses, and many other types of  businesses.  What are the US tax advantages?

For 2016 there is a $101,300 exclusion for both you and your spouse(who also gets an exclusion) from US income taxes on the salary you earn abroad from your business operated abroad if you qualify under the physical presence test or the bonafide residence test.You get to deduct part of your  foreign housing costs (the foreign housing exclusion or housing deduction) abroad including rents paid, utilities, and maintenance on your personal residence.

You can claim credits against your US tax for all or part of the foreign income taxes you might have to pay on your income.Your can eliminate your US social security or self employment tax burden.With the proper structure you can still maintain a US business address and keep your US phones.You can set up US pension plans for shelter any earnings in excess of your foreign earned income exclusion.

You can use a foreign corporation to shelter your business income from US tax until the funds are paid out to you as a salary or as dividends.You can stop paying expensive taxes to a US state in most situations.Deduct on your tax return the expenses of moving yourself and your business abroad.We can help you avoid tax and compliance mistakes which can cost you tens of thousands of dollars in penalties and interest.If you plan to move your business abroad, or are thinking about it, contact us for help structuring the move for the best US tax  and legal advantages.  

We can help you determine the best US and foreign entities to use and structure the business for the ultimate US tax advantages. We can work with a CPA or Attorney in the country you wish to locate to help you also achieve the optimum results in your new country of residence.

With the proper planning you can achieve in most situations significant tax savings relocating your business and your family.  Please email or call us secure our expert assistance. We have been helping expats with their foreign businesses and relocation for over 35 years. Email: ddnelson@gmail.com. web: www.taxmeless.com

Red Flags That Trigger IRS Audits

Read below from MSN MONEY:

http://www.msn.com/en-us/money/taxes/top-15-red-flags-triggering-an-irs-tax-audit/ar-BBq2UAJ?li=BBnb7Kz#page=1

US Expatriate Tax Rules Every Expat Living Abroad Needs to Know

By. Don D. Nelson, International Tax Attorney

• Though most foreign assets are reportable on various specialized forms filed with your US tax return (5471, 8865, 114,.8938, etc) If you own foreign real estate and title is in your own name (or a Fideicomiso in Mexico) and do not rent out the property, there is no reporting required on your US tax return or for that matter any other reporting due the US Government.

• Foreign mutual funds (and most foreign money market funds) require filing of another special form with your tax return (Form 8621). If you do not file this form and make elections to report the income each year, you are penalized with higher taxes and interest when you finally sell your foreign mutual fund. These rules were put in many years when Congress was convinced by US Mutual Fund companies that there business would be hurt unless investment in foreign mutual funds was made unfavorable for tax purposes.

• The 2015 the $100,800 US foreign earned income exclusion applies to earned income (wages or self employment) income earned abroad if you meed the physical presence test or bonafide resident test. You can see if you qualify in IRS Publication 54. It is not automatic and can only be claimed on your US tax return. The IRS can deny this exclusion if you file your return more than 18 months late. This exclusion does not apply to rental income, dividends, interest or capital gains or any income other than earned income. You file Form 2555 to get this exclusion.

• You must report your rental net income in from your Mexican real estate on your US return and you may also owe taxes on it in the country in which it is located  even if you are not a resident. The Mexican income tax can be claimed as a credit directly offsetting any US income tax you owe on the rental income.  (Form 1116)

• If you own 10% or more of a foreign corporation you may have to file form 5471 with your US tax return if required by the rules governing that form. Failure to file that form in a timely manner may result in the IRS assessing a $10,000 US penalty for failure to file even if you owe no taxes. (Form 5471)

• The US has a tax treaty with approximately 66 countries. It also has in the past year entered into an OECD agreements with over 36 countries who have agreed to exchange income tax information with the other. At some point in the future what you do offshore  will not stay in offshore and visa versa due to these new OCED agreements. Claim treaty benefits on form 8833.

• If as a US Citizen you have lived and worked in abroad for a while and not filed your US tax return, the IRS currently has a “streamlined program” that may allow you to catch up by filing only the past 3 years US tax returns and past six year FBAR (foreign bank account reports). They will not penalize you under that program for failing to file FBAR forms or other foreign reporting forms. They have stated they may discontinue this program at any time. Now is the time to surface with the IRS and avoid potentially huge penalties.Go to this link to read more about the "Streamlined Program." https://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures

• FBAR (foreign bank account reporting forms) must be filed each year with US Treasury if at any time during the calendar year your combined highest balances in your foreign financial accounts exceeds $10,000 US. This form must be filed on line. Foreign accounts include foreign pension plans, cash surrender value in foreign insurance, foreign brokers accounts, and even gold if held for you in a foreign country a custodian. Failure to file thisl form or filing it late can result in penalties of $10,000 US or more.  File your form 114 at :  
                                                       http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Don D. Nelson is a US tax attorney who has been assisting Americans everywhere in the World for over 25 years with their US tax returns and tax planning. Because he is an attorney at law, you get the abolute confidentiality of "attorney-client privilege."  when you talk with him. He is also a partner in Kauffman Nelson LLP, Certified Public Accountants. His website is located at www.TaxMeLess.com. His tax blog has the lastest tax developments of interest to those abroad at www.usexpatrate.blogspot.com.His email address is ddnelson@gmail.com. He can be reached at his US phone number 949-480-1235. 

US Expatriate Tax Return IRS Statute of Limitations on IRS Action Against Taxpayers

IRS Statute of Limitations for US expatriates living abroad.

1. Fail to file a return for any tax year that one is due on your worldwide income?  The statute of limitations nevers runs out to assess taxes for that year.  The IRS can come after you 10 years from now and assess taxes if you never filed the required return or forms.

2. Fail to pay taxes on past filed returns or assessed by the IRS?  The normal statute of limitations is 10 years from the date of assessment and filing a tax lien (that may be a later date from the date you filed the return) to collect tax. However, if you leave the country or the tax is assessed while you are outside the USA, that statue of limitations is put on hold until you return to the USA when it starts to run again. WHEN YOU OWE TAXES AND ARE OUTSIDE THE USA THE STATUTE OF LIMITATIONS TO COLLECT THOSE TAXES NEVER RUNS OUT.

3. Failed to file Foreign Bank Account Reporting Forms (FBAR or now form 114)?  The statute of limitations to assess penalties for failing to file is 6 years from the due date of each years forms.

4. 3 years from date return is filed is normal statute of limitations for assessing additional taxes on your filed return. 6 years from date return filed your return if you omitted 25 percent or more of gross income.

5. The statute never runs out if you fail to file forms 5471, 8938 8865, or 3520 --3520A. The penalties for not including these forms with your return can be $10,000 or more.

6. Criminal Tax Evasion - the statute for possible criminal prosecution is most often 6 years, but there are exceptions.

7. The statute of limitations for IRS action for civil fraud (this means assessment of  the 75% civil fraud  monetary penalty against a taxpayer) is indefinite and never runs out.  Therefore if you cheat on your tax return you are never safe.

8. If you owe $50,000 or more the IRS can have your passport taken away when you enter the US.

As a Tax Attorney, you can talk with us without fear of anything you say being used against you due to the rule of  "attorney - client privilege."

Read more at www.taxmeless.com. or email us with questions at ddnelson@gmail.com.

IRS ONLY ANSWERS 38% OF PHONE CALLS

Have tax questions or problems?  You have a 38% chance the IRS will help. They have now admitted that only 38% of the phone calls to them last year were answered. The rest must have been left on indefinite hold.  It will likely be worse this year due to budget cuts and the IRS having to deal with all of the new ACA health care taxes, etc.

What to do?  Go to www.taxmeless.com for www.expatattorneycpa.com to find lots of answers. If you need specific help with your situation email us at ddnelson@gmail.com and a mini consultation can be set up by phone, skype or ? to answer your questions and help you plot the best course of action.

US EXPATS CLICK LINK BELOW TO REGISTER TO VOTE FOR PRESIDENT

REGISTER TO VOTE FOR THE FUTURE PRESIDENTIAL ELECTION even though you live and work abroad and have no state of current residency.

(Click)

10 Countries With No Income Tax on Individuals - And More With Low Rates

Read more here and plan your offshore tax future. We can help coordinate these tax savings with your US tax filing obligation.  Www.taxmeless.com

Watch Out for IRS Scams and alleged IRS Con Men - Emails and Telephone Calls

Scams using the IRS as a lure continue. They take many different forms. The most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too.

Be wary if you get an out-of-the-blue phone call or automated message from someone who claims to be from the IRS. Sometimes they say you owe money and must pay right away. Other times they say you are owed a refund and ask for your bank account information over the phone. Don’t fall for it. Here are several tips that will help you avoid becoming a scam victim.

The real IRS will NOT:

• Call you to demand immediate payment. The IRS will not call you if you owe taxes without first sending you a bill in the mail.
• Demand tax payment and not allow you to question or appeal the amount you owe.
• Require that you pay your taxes a certain way. For example, demand that you pay with a prepaid debit card.
• Ask for your credit or debit card numbers over the phone.
• Threaten to bring in local police or other agencies to arrest you without paying.
• Threaten you with a lawsuit.

If you don’t owe taxes or have no reason to think that you do:

• Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.
• You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" to the comments of your report.

If you think you may owe taxes:

• Ask for a call back number and an employee badge number.
• Call the IRS at 800-829-1040. IRS employees can help you.

In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real.  The scammers’ goal is to lure victims to give up their personal and financial information. If they get what they’re after, they use it to steal a victim’s money and their identity.

If you get a ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

More information on how to report phishing or phone scams is available on IRS.gov.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

Additional IRS Resources:

• Identity Protection Tips
• Identity Protection Home Page 

IRS YouTube Videos:

• Tax Scams – English | Spanish | ASL 
• Phishing-Malware – English | Spanish | ASL
• IRS Efforts On Identity Theft – English | Spanish | ASL
• IRS ID Theft FAQ – Going After the Bad Guys – English | Spanish |ASL

IRS Podcasts:

• Tax Scams – English | Spanish
• ID Theft: Protect Yourself from Identity Theft – English | Spanish
• IRS ID Theft FAQ – Going After the Bad Guys – English | Spanish

Foreign Earned Income Exclusion (form 2555) for Pilots, Airline Crews and Sailors

Many US expatriates live abroad and work for international airlines or shipping companies.  If their planes and ships spend a lot of time traveling in International Waters (parts of the Ocean which do not belong to a country) when they attempt to claim the foreign earned income exclusion ($100,800) for their wages on their tax return they will have a surprise if they are audited.  It is probable they may get audited because the IRS makes them targets for audits when they show themselves as pilots, sailors, etc.

Time spend working on planes or ships while traveling across international waters does not count as working in a foreign country. Therefore the money earned while in International Waters is fully taxable the same as if you were living in the USA.  None of it is excludable.

If you are audited by the IRS they will want to see logs, and other proof showing how many hours were earned while over international waters and use those figures to pro-rate any exclusion you may be claiming between work in foreign countries and work over the ocean.  If you are not keeping such records you should since you as the taxpayer have the burden of proof.

Also, it would only be possible if you are a full time pilot or seaman to claim the exclusion for part of your income if you use the bonafide residence test on form 2555.  Need help with an audit or determining the rules that apply to your situation. Email us at ddnelson@gmail.com and visit our website at www.TaxMeLess.com  for more information.

IRS Filing and Payment Dates for Expatriates

Filing Deadlines

Default rule: April 15. If your “tax home” or “abode” is in the United States your filing deadline is April 15. This is the default rule.Automatic extension: June 15. If your “tax home” or “abode” is outside the United States, your deadline for filing your income tax return is June 15. This is automatic and you do not need to file anything to get it.Normal extension: Use Form 4868 (whether you qualify for the June 15 deadline or not) to make extend the filing deadline to October 15.Extra extension: Another extension is possible for some people — to December 15.Foreign Earned Income Exclusion. For people who need time in order to qualify for the foreign earned income exclusion, Form 2350 allows you to select your own filing deadline to achieve that goal.

Payment Deadlines

Default rule: The tax due on your tax return is payable on or before April 15.Some people: If you qualify for the June 15 extended deadline to file your tax return, you can pay your tax — without late payment penalties — on or before June 15. However, you will owe interest on the tax due, from April 15 until the day you pay the tax. No further extension of the payment due date is possible.

Filing Deadlines

The filing deadline rules are not too difficult to understand — after you ignore the confusing instructions for Form 4868.

Standard Rule: April 15

The standard rule is that you must file your income tax return on or before April 15. IRC § 6072(a).

IRS STREAMLINED COMPLIANCE PROCEDURES FORM 14653 NOW REQUESTS MORE INFORMATION THAN OLD FORM.

Form 14653 ( used then a taxpayer has not filed for many years forms required to report foreign  assets, bank accounts, foreign corporations, foreign trusts, etc) in which you must explain the reasons you did not willfully fail to file your tax forms reporting foreign assets has now been expanded to request much more information from applicants. Failure to use the new form asking this information may cause problems with your application which needs to be accompanied with last three year incorrect or past due returns and 6 year past  due amended or original FBAR forms (Form 1140  It now requests the following;


1. Provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Include the whole story including favorable and unfavorable facts. 

2 Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required information returns, including FBARs.

3 Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it. And explain your contacts with the account/asset including withdrawals, deposits, and investment/ management decisions. Provide a complete story about your foreign financial account/asset. If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice.

4  If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.

If you need help catching up with past unfiled foreign asset reporting forms you may be qualified for the streamlined program.  We can help you come into compliance and reduce or eliminate some very heavy monetary penalties.  Email us at ddnelson@gmail.com or go to www.taxmeless.com 

Dept of Justice to Go After Fbar Criminals

There will be no letup in the federal government's ongoing campaign targeting U.S. taxpayers who hide foreign accounts and attempt to evade U.S. tax obligations, a key Justice Department (DOJ) official said on Jan. 29. In 2016, tax professionals will see "additional civil enforcement actions and ongoing and new criminal investigations and prosecutions," Caroline Ciraolo, acting assistant attorney general for DOJ's Tax Division, told participants at the American Bar Association's Tax Section midyear meeting. According to Ciraolo, taxpayers who have participated in IRS voluntary disclosure programs may be contacted and interviewed by the agency and DOJ as part of their ongoing cooperation. "Taxpayers who filed returns and FBARs [Report of Foreign Bank and Financial Accounts] pursuant to the streamlined filing procedures or the Delinquent International Information Return or FBAR submission procedures should be very concerned if they falsely claimed to have engaged in non-willful conduct or acted with reasonable cause," Ciraolo said. In addition, "financial institutions and individuals who have facilitated the concealment of offshore accounts and the evasion of U.S. tax obligations would be well advised to anticipate an investigation and consider voluntarily disclosing any criminal activity to the department before they become the subject of an investigation," she said. Ciraolo noted that over the past year, her division has bolstered its staffing with the addition of 80 attorneys who are receiving the appropriate training. Ciraolo's complete prepared remarks can be viewed atjustice.gov/opa/speech/acting-assistant-attorney-general-caroline-d-ciraolo-delivers-remarks-american-bar

US NEW SECRET TAX HAVEN FOR REST OF WORLD

Read more in Bloomberg:

http://www.bloomberg.com/news/articles/2016-01-27/the-world-s-favorite-new-tax-haven-is-the-united-states

5 Essential US Expatriate Estate Planning Steps

1. US Expatriates do need to plan for both their foreign assets and US assets in the event of their demise.  The US does look at your worldwide assets and if their values exceed approximately 5.45 million dollars you must file an estate tax return and may owe US estate taxes.

2. Also, if you give gifts of either foreign property or assets located in the US in excess of $14,000 per year per donee you must file a US gift tax return, though it is likely you may not owe any US gift taxes due to the lifetime exclusion mentioned above for estate and gift taxes.

3. In the US you may need a will, power of attorney and a trust to properly dispose of your assets locate there and void expensive and long probates. The trust in large estates may also reduce you estate taxes.

4. If you wish your children to live in the US, your US will can be used to appoint guardians for your children (while they are still minors) and guardians for their assets (this can also be done in the trust you establish).

5. Where your US estate plan documents will effectively pass on your assets located in other countries if subject to each countries laws and a local attorney in each country should be consulted to confirm whether the US documents will be honored or separate wills, etc. must be executed for each country to meet local requirements.

We can help you put together your US estate plan, and often prepare all necessary documents and assist you with coordinating your plan with counsel in your country of residence.  If you require assistance please email me at ddnelson@gmail.com

Cathay Pacific to Withhold US Taxes From Pilots Wages Paid Abroad

Foreign companies such as Cathay Pacific have now decided to comply with US IRS instructions to withhold US taxes (and remit to the IRS) from US Citizens working abroad.  Foreign companies are going to be doing this in the future to avoid penalties which could be imposed against them by the IRS if they do business in the USA.



See Article with more details  In South China Morning Post

IRS Taxpayer Service Hits All Time Low for 2016

Don't count on the IRS for help this year. Only 38 percent of phone inquiries get answered. There are 15,000 fewer employers and the organization is suffering from a huge budget cuts.  The good news is that your chance of audit is about 1 percent and with respect to expatriate and international taxes the very few IRS personnel have any expertise.

The IRS keeps coming up with new forms, new rules and new procedures. Therefore, complying with your tax filing obligations and planning is becoming more complex daily and they are no longer there to help.

So when you have questions on your nonresident, expatriate or international US taxes this year, you may want to consider asking the expert CPAs and Attorneys at our firm.  We offer a mini consultation by phone, email, whatsapp, or skype that allocates up to 1/2 hour of time to answer your questions and help you with a tax strategy for your particular situation.  Write us to request a mini consultation

READ MORE ABOUT IRS BUDGET CUTS AND POOR SERVICE

Stronger Dollar Makes It Good Time to Buy in Mexico

The Street Article on Strengthening US Dollar and Good Time to Buy Real Estate in Mexico:

http://www.thestreet.com/story/13424393/1/strengthening-dollar-makes-it-a-good-time-to-buy-in-mexico.html

The IRS is watching You...so pay up!

Read more in New York Times Article