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April 26, 2017

EXPATRIATES WHO OWE LOTS OF BACK TAXES CAN DO AN OFFER IN COMPROMISE WITH THE IRS

Taxpayers living abroad and in the US who have a tax debt they cannot pay may have heard that they can settle their tax debt for less than the full amount owed. It’s called an Offer in Compromise.
Before applying for an Offer in Compromise, here are some things to know:
  • In general, the IRS cannot accept a settlement offer if the taxpayer can afford to pay what they owe. Taxpayers should first explore other payment options. A payment plan is one possibility. Visit IRS.gov for information on Payment Plans – Installment Agreements.
  • A taxpayer must file all required tax returns first before the IRS can consider a settlement offer. When applying for a settlement offer, taxpayers may need to make an initial payment. The IRS will apply submitted payments to reduce taxes owed.
  • The IRS has an Offer in Compromise Pre-Qualifier tool on IRS.gov. Taxpayers can find out if they meet the basic qualifying requirements. The tool also provides an estimate of an acceptable offer amount. The IRS makes a final decision on whether to accept the offer based on the submitted application.
  • Taxpayers wishing to file for an Offer in Compromise should visit IRS website’s Offer in Compromise page for more information. There taxpayers can find step-by-step instructions as well as the required forms. Taxpayers can download forms anytime at www.irs.gov/forms or call 800-TAX-FORM (800-829-3676) and ask for Form 656-B, Offer in Compromise booklet.
Additional IRS Resources:
IRS YouTube Videos:
If you need help or assistance we can help. Email us at ddnelson@gmail.com 

April 24, 2017

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 

April 18, 2017

US Tax Extension Deadlines




Who Needs to File a US tax Return?
Not everyone is required to file a tax return. The requirement to file depends on a person’s income, filing status, age and whether they can be claimed as a dependent on someone else’s return.  Even if you live and work abroad you must file a US tax return even though you earn nothing in the USA. Anyone not sure whether they need to file a return should see Do I Need to File a Tax Return or refer to Publication 17,   If you are an expatriate read publication 54. Your Federal Income Tax for Individuals,on IRS.gov.

Extensions of Time to File
Taxpayers who are not ready to file by the deadline should request an extension of time to file. The deadline for thos living in the US is April 18 and if you live and work abroad June  15th. An extension using form 4868 gives the taxpayer until Oct. 16 to file but does not extend the time to pay. Penalties and interest will be charged on all taxes not paid by the April 18 filing deadline (and this includes expatriates even though their return is not due until June 15th.

Expatriates can by letter secure an additional extension after applying for a regular extension until December 15th. They can also extend beyond that time using IRS form 2350     if they need additional time to qualify for the foreign earned income exclusion physical presence test.


IRS will automatically process an extension of time to file when taxpayers select Form 4868 and they are making a full or partial federal tax payment using IRS Direct Pay, the Electronic Federal Tax Payment System or by paying with a credit or debit card by the April due date. There is no need to file a separate Form 4868 extension request when making an electronic payment and indicating it is for an extension.
Taxpayers also can complete and mail in Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, to get a six-month extension.

Taxpayers Who Can’t Pay
Taxpayers should file by the deadline, even if they can’t pay, or pay as much as possible and ask the IRS about payment options. By filing a tax return, even without full payment, taxpayers will avoid the failure-to-file penalty. This penalty is assessed when the required return is not filed by the due date or extended due date if an extension is requested.

The failure-to-file penalty is generally 5 percent per month and can be as much of 25 percent of the unpaid tax. The penalty for returns filed more than 60 days late can be $205 or 100 percent of the unpaid tax.

The failure-to-pay penalty, which is the penalty for any taxes not paid by the deadline, is ½ of 1 percent of the unpaid taxes per month and can be up to 25 percent of the unpaid amount. Taxpayers must also pay interest on taxes not paid by the filing deadline.


April 8, 2017

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

April 2, 2017

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.

References/Related Topics


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.

March 23, 2017

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   



March 11, 2017

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.


March 10, 2017

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:
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:
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 

March 8, 2017

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



February 28, 2017

Surrendering US Citizenship or Greencard? Here is How it Works

Read the following article from Forbs Magazine.  We have advised or represent dozens of US Citizens on the tax aspects of surrender, prepared the forms, etc. We have also assist long term US permanent residents with the tax matters involved with the surrender their green cards We can help you.  Email us at ddnelson@gmail.com 

FORBES MAGAZINE ARTICLE ON EXIT TAX ON SURRENDERING CITIZENS


February 22, 2017

CAPITAL GAINS AND LOSSES FOR EXPATRIATES AND US NONRESIDENTS, ETC.

When a person sells a capital asset, the sale normally results in a capital gain or loss. A capital asset includes inherited property or property someone owns for personal use or as an investment.
Here are 10 facts that taxpayers should know about capital gains and losses:
  1. Capital Assets. Capital assets include property such as a home or a car. It also includes investment property, like stocks and bonds.
  2. Gains and Losses. A capital gain or loss is the difference between the basis and the amount the seller gets when they sell an asset. The basis is usually what the seller paid for the asset. For details about inherited property, see IRS Publication 544IRS Publication 550 and IRS Publication 551.
  3. Net Investment Income Tax. Taxpayers must include all capital gains in their income. Capital gains may be subject to the Net Investment Income Tax if the taxpayer’s income is above certain amounts. The rate of this tax is 3.8 percent. For details, visit IRS.gov.
  4. Deductible Losses. Taxpayers can deduct capital losses on the sale of investment property but can’t deduct losses on the sale of property they hold for their personal use.
  5. Limit on Losses. If a taxpayer’s capital losses are more than their capital gains, they can deduct the difference as a loss on their tax return. This loss is limited to $3,000 per year, or $1,500 if married and filing a separate return.
  6. Carryover Losses. If a taxpayer’s total net capital loss is more than the limit they can deduct, they can carry it over to next year’s tax return.
  7. Long and Short Term. Capital gains and losses are either long-term or short-term. It depends on how long the taxpayer holds the property. If the taxpayer holds it for one year or less, the gain or loss is short-term.
  8. Net Capital Gain.  If a taxpayer’s long-term gains are more than their long-term losses, the difference between the two is a net long-term capital gain. If the net long-term capital gain is more than the net short-term capital loss, the taxpayer has a net capital gain.
  9. Tax Rate. The tax rate on a net capital gain usually depends on the taxpayer’s income. The maximum tax rate on a net capital gain is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gain.
  10. Forms to File. Taxpayers often will need to file Form 8949, Sales and Other Dispositions of Capital Assets. Taxpayers also need to file Schedule D, Capital Gains and Losses, with their tax return.
For more on this topic, see Schedule D instructions. Taxpayers can visit IRS.gov to get tax forms and documents anytime.

When you need professional assistance email us at ddnelson@gmail.com or visit our website at www.taxmeless.com 

February 17, 2017

Look out for these crooked Tax Scams

Here is a recap of this year's "Dirty Dozen" scams that are currently being used against honest taxpayers:

Phishing: Taxpayers need to be on guard against fake emails or websites looking to steal personal information. The IRS will never initiate contact with taxpayers via email about a bill or refund. Don’t click on one claiming to be from the IRS. Be wary of emails and websites that may be nothing more than scams to steal personal information. (IR-2017-15)

Phone Scams: Phone calls from criminals impersonating IRS agents remain an ongoing threat to taxpayers. The IRS has seen a surge of these phone scams in recent years as con artists threaten taxpayers with police arrest, deportation and license revocation, among other things. (IR-2017-19)

Identity Theft: Taxpayers need to watch out for identity theft especially around tax time. The IRS continues to aggressively pursue the criminals that file fraudulent returns using someone else’s Social Security number. Though the agency is making progress on this front, taxpayers still need to be extremely cautious and do everything they can to avoid being victimized. (IR-2017-22)

Return Preparer Fraud: Be on the lookout for unscrupulous return preparers. The vast majority of tax professionals provide honest high-quality service. There are some dishonest preparers who set up shop each filing season to perpetrate refund fraud, identity theft and other scams that hurt taxpayers. (IR-2017-23)

Fake Charities: Be on guard against groups masquerading as charitable organizations to attract donations from unsuspecting contributors. Be wary of charities with names similar to familiar or nationally known organizations. Contributors should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities. IRS.gov has the tools taxpayers need to check out the status of charitable organizations. (IR-2017-25)

Inflated Refund Claims: Taxpayers should be on the lookout for anyone promising inflated refunds. Be wary of anyone who asks taxpayers to sign a blank return, promises a big refund before looking at their records or charges fees based on a percentage of the refund. Fraudsters use flyers, advertisements, phony storefronts and word of mouth via community groups where trust is high to find victims. (IR-2017-26)

Excessive Claims for Business Credits: Avoid improperly claiming the fuel tax credit, a tax benefit generally not available to most taxpayers. The credit is usually limited to off-highway business use, including use in farming. Taxpayers should also avoid misuse of the research credit. Improper claims often involve failures to participate in or substantiate qualified research activities and/or satisfy the requirements related to qualified research expenses. (IR-2017-27)

Falsely Padding Deductions on Returns: Taxpayers should avoid the temptation to falsely inflate deductions or expenses on their returns to pay less than what they owe or potentially receive larger refunds. Think twice before overstating deductions such as charitable contributions and business expenses or improperly claiming credits such as the Earned Income Tax Credit or Child Tax Credit. (IR-2017-28)

Falsifying Income to Claim Credits: Don’t invent income to erroneously qualify for tax credits, such as the Earned Income Tax Credit. Taxpayers are sometimes talked into doing this by con artists. Taxpayers should file the most accurate return possible because they are legally responsible for what is on their return. This scam can lead to taxpayers facing large bills to pay back taxes, interest and penalties. In some cases, they may even face criminal prosecution. (IR-2017-29)

Abusive Tax Shelters: Don’t use abusive tax structures to avoid paying taxes. The IRS is committed to stopping complex tax avoidance schemes and the people who create and sell them. The vast majority of taxpayers pay their fair share, and everyone should be on the lookout for people peddling tax shelters that sound too good to be true. When in doubt, taxpayers should seek an independent opinion regarding complex products they are offered. (IR-2017-31)

Frivolous Tax Arguments: Don’t use frivolous tax arguments to avoid paying tax. Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims even though they have been repeatedly thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes. The penalty for filing a frivolous tax return is $5,000. (IR-2017-33)

Offshore Tax Avoidance: The recent string of successful enforcement actions against offshore tax cheats and the financial organizations that help them shows that it’s a bad bet to hide money and income offshore. Taxpayers are best served by coming in voluntarily and getting caught up on their tax-filing responsibilities. The IRS offers the Offshore Voluntary Disclosure Program  to enable people to catch up on their filing and tax obligations. (IR-2017-35)

Need help or opinion. Email us at ddnelson@gmail.com

February 13, 2017

IF YOU OWN RENTAL PROPERTY IN ANYWHERE IN MEXICO YOU ARE REQUIRED TO PAY THESE MEXICAN TAXES

Mexico Income Tax

Mexico Value Added Taxes – IVA (16%)   if the unit is furnished*
*IVA is paid by tenant but collected and declared by the owner.

Many nonresidents of Mexico have never paid any taxes on their rental income from properties owned in Mexico.  This is a violation of Mexican tax law.  The Mexico tax code clearly states that these Mexican taxes must be paid on rental income from apartments, houses, and commercial property. Failure to do so can result (and has resulted ) in substantial penalties and legal problems with the Mexican tax authorities.

It is now easy for you to pay these taxes and avoid problems if even if you do not have a Mexican tax identification number.   The Settlement Company® has developed a simple and easy procedure  which will allow you to be tax compliant on your rental income. You do not have to suffer the consequences of failing to pay. Email or phone us now to learn more and to get started.

The Good News:  The IVA you pay in Mexico is deductible on your US tax return and the income taxes you pay in Mexico can offset your US  taxes on the same income dollar for dollar.  You will not be double taxed.

Visit this website for more information and to learn  the rules at: www.RentalTaxMexico.com

Email us with questions at ddnelson@gmail.com

February 3, 2017

IRS NEW AUDIT TARGEST FOR 2017 INCLUDE INTERNATIONAL AND EXPATRIATE TAX ISSUES

The 6 IRS International audit campaigns or areas the division plans to target for 2017 include:

  • declines and withdrawals from the offshore voluntary disclosure program;
  • related-party transactions;
  • repatriation of income from overseas locations;
  • foreign companies doing business in the United States that are not filing appropriately;
  • transfer pricing associated with inbound distribution of goods from related parties outside the United States;
  • losses claimed in excess of basis in S corporations.
If you need assistance with these items to make certain you are handling it correctly or wish to correct prior to audit, please ask us.  If you are audited we can represent you against the IRS.  Email us at ddnelson@gmail.com  or skype us at; dondnelson.

January 29, 2017

DO NOT Purchase Foreign Mutual Funds - Or You May Have to File Form 8621 Which Could Take you 48 hours

If you live abroad, or in the USA, do not make the mistake of purchasing a foreign mutual fund.  Why?  Such You must file as separate form for each foreign mutual fund each year.  If the aggregate value of your PFIC stocks are less than $25,000 if filing as single for $50,000 if fiing jointly you are excepted from filing.  There are other exceptions but they are complex and you should read 8621 Instructions to see if your particular situation is excepted.

The IRS estimates it could take 48 hours to analyze the data, analyze the law and then complete the form for just one foreign mutual fund investment (if not excepted from filing). You can  only guess the amount professional tax return preparers will charge to complete these forms.

What is solution to avoid this horrendous tax return problem?  Only purchase foreign stocks directly owned in your own name since these are treated the same as US stocks and the purchase, sale and reporting would be the same as for US stocks. An alternative is to purchase US mutual funds that invest in foreign stocks (these are not considered PFICs) and again treated the same on your tax return as a US stock.

January 26, 2017

Social Security - When Retiring Abroad In What Countries Can You Continue to Receive Benefits?

If you are retiring abroad and want to collect social security, sometimes there are restrictions and limits imposed by the social security administration. READ MORE ABOUT THE RULES HERE.


January 23, 2017

2016 Fast Tax Facts for US Expatriates and Green Card Holders Living and Working Abroad


If you are a US Citizen you must file a US tax return every year unless your taxable income is less than
$20,700 - for a joint return or $ 10,350 - for a single return or married filing separately (these amounts are for 2016 and are lower for earlier tax years) or have self employment-independent contractor net self employment income of more than $ 400 US per year.You are taxable on your worldwide income regardless of whether you filed a tax return in your country of residence. You must file a tax return each year if you income exceeds the amounts stated above even if you owe no tax. There is an additional dependents deduction of $4,050 for each child (subject to citizenship and other requirements).

As a US expatriate living and working abroad 4/15/17, your 2016 tax return is automatically extended until 6/15/17 but any taxes due must be paid by 4/15/17 to avoid penalties and interest. The return can be further extended until 10/15/17 if the proper extension form is filed. An even further extension until December may be available.

For 2016 if you are a qualified expatriate you get a foreign earned income exclusion (earnings from wages or self employment) of $101,400, but this exclusion is only available if you file a tax return. You must qualify under one of two tests to take this exclusion: (1) bonafide resident test or (2) physical presence test. You can read more about how to qualify in IRS Publication 54. This exclusion only applies to income taxes and does not apply to US self employment tax (social security plus medicare). You spouse who lives and works abroad with you will also be able to use this exclusion against any earned income they have abroad. You can lose this exclusion if you file your return more than 18 months late. The exclusion can only be claimed on filed tax return and does not apply if you fail to file a tax return

For 2016 if you qualify for the entire year for the foreign earned income exclusion (form 2555) you will be excluded from having to comply with the health insurance rules (or possible penalties) of Obamacare (ACA). These rules are complex and should be reviewed if you do not qualify for the expat exclusion for the entire year of 2016

If your foreign earnings from wages or self employment exceed the foreign earned income exclusion you can claim a housing expense for the rent, utilities and maintenance you pay if those amounts that exceed a minimum amount of $16,800 (for an entire year) up to a maximum amount which varies by your foreign country of residence.(For country limitations see Form 2555 instructions)

You get credits against your US income tax obligation for foreign income taxes paid to a foreign country but you must file a US tax return to claim these credits. This avoids double taxation of the same income.

If you own 10% or more of a Foreign corporation or Foreign partnership (LLC) you must file special IRS forms or incur substantial penalties which can be greater including criminal prosecution if the IRS discovers you have failed to file these forms.

If you create a foreign trust or are a beneficiary of a foreign trust you may be obligated to file forms 3520 and /or 3520A each year to report those activities or be subject to severe penalties. Foreign foundations and non-profits which indirectly benefit you may be foreign trusts in the eyes of the IRS.

Your net self employment income in a foreign country (earned as an independent contractor or in your own sole proprietorship) is subject to US self employment tax (medicare and social security) of 15.3% which cannot be reduced or eliminated by the foreign earned income exclusion. The one exception is if you live in one of the very few countries that have a social security agreement with the US and you pay that countries equivalent of social security. Your investment income (passive income) may also be subject to a 3.8% additional medicare tax if you income as a married filing jointly exceeds $250,000 or $200,000 if filing as single.

Forming the correct type of foreign corporation and making the proper US tax election (to cause the income and foreign taxes the foreign corporation pays to flow through to your personal US tax return) with the IRS for that corporation may save you significant income taxes and avoid later adverse tax consequences. You need to take investigate this procedure before you actually form that foreign because it can be difficult to make that election later and only certain types of foreign business entities are eligible to make this election..

If at any time during the tax year your combined highest balances in your foreign bank and financial accounts (when added together) ever equal or exceed $10,000US you must file a FBAR form 114 with the IRS by October 15, 2017 for the prior calendar year or incur a penalty of $10,000 or more including criminal prosecution. Foreign financial accounts often include foreign pension plans, stock brokerage accounts, and cash surrender value of foreign life insurance. This form does not go in with your personal income tax return and can only be filed separately on the web at: http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

In the past several years the IRS has hired thousands of new employees to audit, investigate and discover Americans living abroad who have failed to file all necessary tax forms. These audits have begun and will increase significantly in the future. The IRS gets lists of Americans applying or renewing for US passports or entering the country. They will compare these lists with those who are filing US income tax returns and take action against those who do not.

Often due to foreign tax credits and the the foreign earned income tax expats living abroad who file all past year unfiled tax returns end up owing no or very little US taxes. The IRS has several special programs which will help you catch up if you are in arrears which will reduce or possibly eliminate all potential penalties for failing to file the required foreign asset reporting forms. We can direct you to the best program for your situation, prepare the returns and forms and represent you before the IRS.

Beginning in 2011 a new law went into effect which requires all US Citizens report all of their world wide financial assets with their personal tax return if in total the value of those assets exceed certain minimum amounts starting at $50,000 . Failure to file that form 8938 on time can result in a penalty of $10,000. The form is complex and has different rules that apply to you if you live abroad or live in the US. This form is required in addition to the FBAR form. 114.

Certain types of income of foreign corporations are immediately taxable on the US shareholder's personal income tax return. This is called Subpart F income. The rules are complex and if you own a foreign corporation you need to determine if these rules apply to you when you file the required form 5471 for that corporation.

If you own investments in a foreign corporation or own foreign mutual fund shares you may be required to file the IRS form 8621 for owning part of a Passive Foreign Investment Company (PFIC) or incur additional, taxes and penalties for your failure to do so. A PFIC is any foreign corporation that has more than 75% of its gross income from passive income or 50 percent or more of its assets produce or will produce passive income.

Download your 2016 US tax return questionnaire prepared expressly for Expatriates at www.TaxMeLess.com Send us your completed questionnaire and we will immediately provide you with a flat fee quote for preparing your return.

Don D. Nelson, US Tax Attorney, Kauffman Nelson, LLP, CPAs
34145 Pacific Coast Highway #601
Dana Point, California 92629 USA

US Phone: (949) 480-1235, US Fax: (949) 606-9627
Email:
ddnelson@gmail.com or ustax@hotmail.com
Skype: dondnelson
Visit our International Tax Blog for the Latest Expat and International Tax Developments at www.usexpatriate.blogspot.com / www.us-mexicotax@blogspot.com

We have been preparing tax returns and assisting US clients located in over 123 countries around the the world for over 35 years. We also assist US Nonresidents meet their US tax obligations and return filing requirements. Email, skype or phone us for immediate assistance. We offer mini consultations (with attorney client privilege) to answer your tax questions and resolve your tax issues.

For additional useful informaton and tax assistance go to www.TaxMeLess.com


Disclaimer and Conditions: The information contained herein is general in nature and is not to be construed or relied on as tax or legal advice with respect to you individual tax situation or questions. Your use of this material does not create any attorney/CPA relationship between you and this firm or any other obligation. You are advised to retain competent tax professionals help with your individual tax matters and for appropriate answers your specific tax questions.