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November 23, 2014

Examples of Willful and Nonwillful FBAR (form 114) Excuses

Following article gives excellent FBAR excuse guidance

rhttp://intltax.typepad.com/intltax_blog/2014/11/willful-vs-non-willful-fbar-violations.html

November 11, 2014

When is Social Security Taxable to Those Retired Abroad or Expatriates

Read the following ARTICLE FROM USA TODAY to find out when your social security is taxable. 

Remember, to collect social security you must pay in a minimum amount and qualify. Go to the Social Security Administration Website to find out how much you must pay in, your possible benefits, and collecting social security while living abroad or after surrendering your green card or citizenship.  That website is at www.ssa.gov 

November 8, 2014

Obamacares Impact on US Expats Explained

It may be surprising, but Americans overseas may not actually be exempt from Obamacare’s provisions. Obamacare, or the Affordable Care Act, is a new initiative created to ensure that every American has proper health care coverage. There are ‘minimum essential requirements’ that your plan must meet in order to satisfy Obamacare’s provisions and the Act applies to all US citizens, regardless of where they live. So depending on your personal circumstances, you may be required to purchase an acceptable policy. Those who don’t comply are subject to an Obamacare tax on their Federal tax returns.  Read more from Costa Rican News

November 6, 2014

What Unwillful excuse to use for the IRS when entering the Streamlined Program or Offshore Disclosure Programs?

Read this excellent article on writing your "Unwillful excuse" when entering the Streamlined  or Offshore Disclosure Program to file the various international tax forms which you failed to file in earlier years.

http://www.forbes.com/sites/irswatch/2014/08/08/am-i-non-willful-under-the-ovdp-streamlined-procedures/

If you need help with the forms or filing your Offshore Disclosure or Streamlined Filing email us at ddnelson@gmail.com. We have assisted hundreds of clients with these complicated forms and procedures with great success.

Wyoming Deemed Best of Income Tax Free States

If you are a nonresident or expatriate and need to set up a US corporation for your business, Wyoming is a good choice. Other states that are  state income tax fee and excellent include Nevada, Washington, Florida and Texas.  Operating the US side of your business in one of these states can save you having to pay state taxes.

Read more about Wyoming below:

http://tucson.com/ap/commentary/wyoming-the-fairest-of-the-low-tax-states/article_dcab31e2-289d-5998-84db-08fef5ddfd78.html

November 1, 2014

Some Nonresidents with U.S. Assets Must File Estate Tax Returns


Deceased nonresidents who were not American citizens are subject to U.S. estate taxation with respect to their U.S.-situated assets. 
U.S.-situated assets include American real estate, tangible personal property, and securities of U.S. companies. A nonresident’s stock holdings in American companies are subject to estate taxation even though the nonresident held the certificates abroad or registered the certificates in the name of a nominee.
Exceptions: Assets that are exempt from U.S. estate tax include securities that generate portfolio interest, bank accounts not used in connection with a trade or business in the U.S., and insurance proceeds.
Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation. Executors for nonresident estates should consult such treaties where applicable.
Executors for nonresidents must file an estate tax return, Form 706NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States, if the fair market value at death of the decedent's U.S.-situated assets exceeds $60,000. However, if the decedent made substantial lifetime gifts of U.S. property, and used the applicable $13,000 “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required even if the value of the decedent’s U.S. situated assets is less than $60,000 at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts). See Unified Credit (Applicable Credit Amount) Section in Publication 559, Survivors, Executors, and Administrators, and the Form 706NA Instructions for more information.
American citizens are subject to U.S. estate taxation with respect to their worldwide assets. An estate tax return, Form 706, United States Estate (and Generation-Skipping) Tax Return, Estate of a citizen or resident of the United States, is required for a deceased American citizen, if the fair market value at death of the decedent's worldwide assets exceeds the "unified credit exemption" amount in effect on the date of death. However, if the U.S. citizen made substantial lifetime gifts, and used the applicable “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required even if the value of the decedent’s worldwide assets is less than the “unified credit exemption” amount at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts). To determine the “unified credit exemption” amount for American citizens for any particular year, refer to the Instructions to Form 706 or to Publication 559, Survivors, Executors, and Administrators.
The Internal Revenue Service may collect any unpaid estate tax from any person receiving a distribution of the decedent’s property under transferee liability provisions of the tax code.

Special Rules Applicable to Gifts or Bequests from Covered Expatriates

U.S. citizens and long-term residents who relinquished their U.S. citizenship or ceased to be U.S. lawful permanent residents (green card holders) on or after June 17, 2008, and who meet specific average tax or net worth thresholds on the day prior to their expatriation are considered “covered expatriates” – subject to IRC section 877A. See Expatriation Tax for more information on covered expatriates.
U.S. citizens and residents who receive gifts or bequests from covered expatriates under IRC 877A may be subject to tax under new IRC section 2801, which imposes a transfer tax on U.S. persons who receive gifts or bequests on or after June 17, 2008, from such former U.S. citizens or former U.S. lawful permanent residents.
In addition, covered expatriates under IRC 877A are not considered U.S. expatriates for purposes of Form 706NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States.

October 27, 2014

5 Biggest Tax Differences Between LLCs and Corporations

Read article from Entrepreneur Magazine:  http://www.entrepreneur.com/article/238844

If you need a US corporation or LLC for your expat or International business that is our specialty. Email. ddnelson@gmail.com.

October 9, 2014

IRS Continues to Prosecute for Failing to File FBAR (form 114) forms and Collect Large Penalties

Howard Bloomberg, a forensic account and certified fraud examiner of Atlanta, Georgia, pleaded guilty on Friday to failing to file a Foreign Bank Account Report (FBAR) for the year 2008. Mr. Bloomberg opened a bank account at UBS AG in July 1997. The value of Mr. Bloomberg’s account increased to approximately $930,000 in 2001, and he routinely wired funds from the UBS account to his U.S. accounts. He closed the UBS account in April 2008 and wired the balance of over $540,000 to the U.S.
For having admitted to not filing the 2008 FBAR, Mr. Bloomberg has agreed to pay a penalty of $278,397, representing 50% of highest balance in 2008, and file accurate FBARs from 1997 to 2008. At sentencing, currently scheduled for December, Mr. Bloomberg faces a maximum of five years’ imprisonment and 3 years’ supervised release. According to the U.S. Attorney for the Northern District of Georgia, Sally Quillian Yates:

October 7, 2014

IRS Simplifies Procedures for Favorable Tax Treatment on Canadian Retirement Plans and Annual Reporting Requirements


The Internal Revenue Service today made it easier for taxpayers who hold interests in either of two popular Canadian retirement plans to get favorable U.S. tax treatment and took additional steps to simplify procedures for U.S. taxpayers with these plans.

As part of this, the IRS provided retroactive relief to eligible taxpayers who failed to properly choose this benefit in the past. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.

Under this change, many Americans and Canadians with registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRAs) and 401(k) plans. In general, U.S. citizens and resident aliens qualify for this special treatment as long as they filed and continue to file U.S. returns for any year they held an interest in an RRSP or RRIF and include any distributions as income on their U.S. returns.
The change relates to a longstanding provision in the U.S.-Canada tax treaty that enables U.S. citizens and resident aliens to defer tax on income accruing in their RRSP or RRIF until it is distributed. Otherwise, U.S. tax is due each year on this income, even if it is not distributed.

In the past, however, taxpayers generally would get tax deferral by attachingForm 8891 to their return and choosing this tax treaty benefit, something many eligible taxpayers failed to do. Before today’s change, a primary way to correct this omission and retroactively obtain the treaty benefit was to request a private letter ruling from the IRS, a costly and often time-consuming process.

Many taxpayers also failed to comply with another requirement; namely that they file Form 8891 each year reporting details about each RRSP and RRIF, including contributions made, income earned and distributions made. This requirement applied regardless of whether they chose the special tax treatment. The IRS is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present.

The revenue procedure does not modify any other U.S. reporting requirements that may apply under the Bank Secrecy Act (BSA) and section 6038D. SeeFinCEN Form 114 due by June 30 of each year, and Form 8938 attached to a U.S. income tax return for more information about the reporting requirements under the BSA and section 6038D. Different reporting thresholds and special rules apply to each of these forms.
Further details on today’s change can be found in Revenue Procedure 2014-55, posted on IRS.gov.

September 26, 2014

US Expatriate Mini Consultations and Reviews of Self Prepared Returns - Offshore Disclosure and Citizenship Surrender

What our CPA/Law Firm can do for US expatriates:

1. We  can review your self prepared expat returns or special international tax forms and provide you with suggestions, comments and corrects. This will help avoid potential IRS audits or problems.

2. If you are moving abroad, need to understand your personal expatriate tax or US international tax situation, we offer a mini consultation with an attorney that can give you guidance and resolve your questions. This consultation is subject to attorney/client privilege and its totally confidential.

3. Considering giving up your US Citizenship?  We have assisted over a hundred clients with this process and can provide you with guidance on all aspect of the legal and tax requirements, including assisting with the special required tax forms.

4. Haven't been filing your tax returns or special foreign tax forms (FBAR, Foreign Corp, etc) while living abroad?  Omitted your foreign income or failed to disclose foreign bank accounts to the IRS. We can help with the expertise and confidentiality of an Attorney/CPA.  We provide you with complete legal tax advice and can prepare all of the returns necessary to enter the IRS Offshore Disclosure Program or the new Streamlined Disclosure Programs (that can significantly reduce your penalties).

Email us if you need help at ddnelson@gmail.com or visit our websites at www.TaxMeLess.com or www.expatattorneycpa.com  

September 21, 2014

2014 California Tax Rates and Other Information

Many of our expat clients also pay taxes in California due to real estate, businesses, etc located in that state.  We also have many clients who have moved to California from abroad. The link below leads to a complete chart of the 2014 California Tax Rates and Other Information.

LINK TO 2014 CALIFORNIA TAX INFORMATION

September 9, 2014

IRS OVDP vs. Streamlined: What To Do?

Read the great article below from Forbes in you are not certain whether to enter the  IRS Streamlined
 program or the Offshore Voluntary Disclosure Program (OVDP).   Due to the new rules in the Streamlined program many can now enter that program which has significantly lower monetary penalties and much less paperwork.

Link to Forbes Article:  http://www.forbes.com/sites/irswatch/2014/07/07/irs-ovdp-vs-streamlined-what-to-do/

The disadvantage of the Streamlined Program is that it does not protect you from criminal prosecution and if you are rejected, your entire situation may be sent to the audit department and regular penalties may then be imposed which can be very high.

We have advised or represented in excess of a hundred clients in connection with the Streamlined program or the Offshore Voluntary Disclosure Program. We can advise you which program is best for you after you read the article above.


September 2, 2014

STATE DEPARTMENT RAISES FEE TO SURRENDER CITIZENSHIP

The US State Department has raised the fee they charge (for their costs) to surrender Citizenship from $450 to $2,350 effective 9/6/14.  If you are born here it costs nothing to become a citizen. This fee is in addition to the time and expense you must incur to file necessary forms with the IRS.

August 1, 2014

Statute of Limitations for Expatriates Living Outside the USA

IRS Statute of Limitations for expatriates.

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.

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.

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. 6 years from date return filed if you omitted 25 percent or more of gross income.

5. The statute never runs out if you fail to file forms 5471, 8865, or 3520 --3520A.

Read more at www.taxmeless.com

July 21, 2014

Top Ten Tax Facts if You Sell Your Home

Do you know that if you sell your home and make a profit, the gain may not be taxable? These rules apply even if your primary home is located abroad. That’s just one key tax rule that you should know. Here are ten facts to keep in mind if you sell your home this year.

1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.

2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details see Publication 523, Selling Your Home.

3. The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.

6. Generally, you can exclude the gain from the sale of your main home only once every two years.

7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.

9. If you sell your main home at a loss, you can’t deduct it.

10. After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, to do this.

July 12, 2014

Delinquent FBAR Submission Procedures


Taxpayers who do not need to use either the OVDP (described in section 1 above) or the Streamlined Filing Compliance Procedures (set forth in section 2 above) to file delinquent or amended tax returns to report and pay additional tax, but who:

(1) have not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114, previously Form TD F 90-22.1),
(2) are not under a civil examination or a criminal investigation by the IRS, and
(3) have not already been contacted by the IRS about the delinquent FBARs

should file the delinquent FBARs according to the FBAR instructions and include a statement explaining why the FBARs are filed late.  All FBARs are required to be filed electronically at FinCen.  On the cover page of the electronic form, select the reason for filing late.  If you are unable to file electronically, you may contact FinCEN's Regulatory Helpline at 1-800-949-2732 or 1-703-905-3975 (if calling from outside the United States) to determine possible alternatives to electronic filing.  
The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.

FBARs will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.

Delinquent International Information Return Submission Procedures


Taxpayers who do not need to use the OVDP (described in section 1 above) or the Streamlined Filing Compliance Procedures (set forth in section 2 above) to file delinquent or amended tax returns to report and pay additional tax, but who:

(1) have not filed one or more required international information returns,
(2) have reasonable cause for not timely filing the information returns,
(3) are not under a civil examination or a criminal investigation by the IRS, and
(4) have not already been contacted by the IRS about the delinquent information returns

should file the delinquent information returns with a statement of all facts establishing reasonable cause for the failure to file.  As part of the reasonable cause statement, taxpayers must also certify that any entity for which the information returns are being filed was not engaged in tax evasion.  If a reasonable cause statement is not attached to each delinquent information return filed, penalties may be assessed in accordance with existing procedures.

All delinquent international information returns other than Forms 3520 and 3520-A should be attached to an amended return and filed according to the applicable instructions for the amended return.  All delinquent Forms 3520 and 3520-A should be filed according to the applicable instructions for those forms.  A reasonable cause statement must be attached to each delinquent information return filed for which reasonable cause is being requested.

Information returns filed with amended returns will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.

July 2, 2014

Pilots..IRS Tax Return Problems

Pilots, flight attendants and those that work on ships have complex US tax returns if they work abroad. Read more:

http://money.cnn.com/2014/07/01/pf/expat-taxes-irs/

June 29, 2014

Foreign Bank and Financial Account Forms Must Be Filed On Line by 6/30/14

Who Must File an FBAR by 6/30/14

United States persons are required to file an FBAR if:
  1. The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
  2. The aggregate value of all foreign financial accounts (this includes banks, stock brokerage accounts, cash surrender value of foreign life insurance, foreign pension plans in most situations) exceeded $10,000 US dollars at any time during the 2013 calendar year to be reported.
United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.

Exceptions to the Reporting Requirement

Exceptions to the FBAR reporting requirements can be found in the FBAR instructions. There are filing exceptions for the following United States persons or foreign financial accounts:
  • Certain foreign financial accounts jointly owned by spouses;
  • United States persons included in a consolidated FBAR;
  • Correspondent/nostro accounts;
  • Foreign financial accounts owned by a governmental entity;
  • Foreign financial accounts owned by an international financial institution;
  • IRA owners and beneficiaries;
  • Participants in and beneficiaries of tax-qualified retirement plans;
  • Certain individuals with signature authority over, but no financial interest in, a foreign financial account;
  • Trust beneficiaries (but only if a U.S. person reports the account on an FBAR filed on behalf of the trust); and
  • Foreign financial accounts maintained on a United States military banking facility.
Review the FBAR instructions for more information on the reporting requirement and on the exceptions to the reporting requirement.

Reporting and Filing Information

A person who holds a foreign financial account may have a reporting obligation even though the account produces no taxable income. The reporting obligation is met by answering questions on a tax return about foreign accounts (for example, the questions about foreign accounts on Form 1040 Schedule B) and by filing an FBAR.
The FBAR is a calendar year report and must be filed on or before June 30, 2014 for the calendar year 2013 foreign bank and financial account balances. Effective July 1, 2013, the FBAR must be filed electronically through FinCEN’s  BSA E-Filing System. The FBAR is not filed with a federal tax return. A filing extension, granted by the IRS to file an income tax return, does not extend the time to file an FBAR. There is no provision to request an extension of time to file an FBAR.
A person required to file an FBAR who fails to properly file a complete and correct FBAR may be subject to a civil penalty not to exceed $10,000 per violation for nonwillful violations that are not due to reasonable cause. For willful violations, the penalty may be the greater of $100,000 or 50% of the balance in the account at the time of the violation, for each violation.  For guidance when circumstances such as natural disasters prevent the timely filing of an FBAR, see FinCEN guidance,FIN-2013-G002 (June 24, 2013).

U.S. Taxpayers Holding Foreign Financial Assets May Also Need to File Form 8938

Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938Statement of Specified Foreign Financial Assets, which is filed with an income tax return. The new Form 8938 filing requirement is in addition to the FBAR filing requirement. A chart providing a comparison of Form 8938 and FBAR requirements may be accessed on the IRS Foreign Account Tax Compliance Act web page.