January 17, 2017
January 13, 2017
IRS Makes it Costly to Make a Late Flow Through or Disregarded Entity Election if Not Filed TImely for Foreign Entities
- Taxpayers with gross income of under $250,000 will have a 9% increase --- from $2,200 to $2,400
- Taxpayers with gross income greater than $250,000 and less than $1 million will have a 17% increase --- from $6,500 to $7,600
- Taxpayers with gross income greater than $250,000 and less than $1 million will have a 2% increase --- from $9,800 to $10,000
January 11, 2017
The new annual due date for filing Reports of Foreign Bank and Financial Accounts (FBAR) for foreign financial accounts is April 15. This date change was mandated by the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, Public Law 114-41 (the Act). Specifically, section 2006(b)(11) of the Act changes the FBAR due date to April 15 to coincide with the Federal income tax filing season. The Act also mandates a maximum six-month extension of the filing deadline. To implement the statute with minimal burden to the public and FinCEN, FinCEN will grant filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year. Accordingly, specific requests for this extension are not required. (Please note: The due date for FBAR filings for foreign financial accounts maintained during calendar year 2016 is April 18, 2017, consistent with the Federal income tax due date.)
January 7, 2017
In addition to the foreign earned income exclusion, you can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country and you qualify for the exclusions and deduction under either the bona fide residence test or the physical presence test.
The housing exclusion applies only to amounts considered paid for with employer-provided amounts, which includes any amounts paid to you or paid or incurred on your behalf by your employer that are taxable foreign earned income to you for the year (without regard to the foreign earned income exclusion). The housing deduction applies only to amounts paid for with self-employment earnings.
Your housing amount is the total of your housing expenses for the year minus the base housing amount. The computation of the base housing amount (line 32 of Form 2555) is tied to the maximum foreign earned income exclusion. The amount is 16% of the maximum exclusion amount (computed on a daily basis), multiplied by the number of days in your qualifying period that fall within your tax year.
Housing expenses include your reasonable expenses actually paid or incurred for housing in a foreign country for you and (if they lived with you) for your spouse and dependents. Consider only housing expenses for the part of the year that you qualify for the foreign earned income exclusion.
Housing expenses do not include expenses that are lavish or extravagant under the circumstances, the cost of buying property, purchased furniture or accessories, and improvements and other expenses that increase the value or appreciably prolong the life of your property.
You also cannot include in housing expenses the value of meals or lodging that you exclude from gross income (under the rules for the exclusion of meals and lodging), or that you deduct as moving expenses.
Also, for purposes of determining the foreign housing exclusion or deduction, your housing expenses eligible to be considered in calculating the housing cost amount may not exceed a certain limit. The limit on housing expenses is generally 30% of the maximum foreign earned income exclusion, but it may vary depending upon the location in which you incur housing expenses. The limit on housing expenses is computed using the worksheet on page 3 of the Instructions for Form 2555.
Additionally, foreign housing expenses may not exceed your total foreign earned income for the taxable year. Your foreign housing deduction cannot be more than your foreign earned income less the total of your (1) foreign earned income exclusion, plus (2) your housing exclusion.
Although the foreign housing exclusion and/or the deduction will reduce your regular income tax, they will not reduce your self-employment tax.
Your housing expenses may not exceed a certain limit. The limit on housing expenses varies depending upon the location in which you incur housing expenses. The limit on housing expenses is computed using the worksheet on page 3 of the Instructions for Form 2555.
The foreign housing exclusion or deduction is computed in parts VI, VIII, and IX of Form 2555. Please refer to the Instructions for Form 2555 and chapter 4 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Need help with your expat return? Email us at email@example.com
December 30, 2016
Don’t Miss Filing Deadlines Related to Foreign Income and Assets or These Great Informational Videos
o FBAR mandatory e-filing overview
o Using FinCEN Form 114; and Form 114a
o FBAR filing requirements
o FBAR filing exceptions
o Special filing rules
o Administrative guidance
- Comparison of Form 8938 and FBAR Requirements
- International Taxpayers
- International Tax Topic Index
- FBAR Reference Guide
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- IRS Tax Map
- Treasury Department End-of-Year Exchange Rates
December 21, 2016
- Make use of tax deferral strategies using retirement plans - Maximize 401(k) contributions, IRA contributions, or (if applicable) plans you have set up for your small business. There are special rules on making IRA contributions for expats so ask us if you are unfamiliar with those rules.
- Reduce your taxable income in 2016 – maximize itemize deductions (such as charitable contributions), consider purchases for your business which could be a Section 179 deduction in 2016, etc.
- Consider making tax payments before April 18, 2017 if you plan to extend your filing. This can avoid penalty and interest charges.
- Partnerships have changed from April 15 to March 15
- C Corporation due dates changed from March 15 to April 15
Married filing joint
Less than $75,000
Less than $37,500
More than $225,000
More than $112,500
- Personal and dependent exemptions would be eliminated
- The head of household filing status would be eliminated; and
- The standard deduction would be increased to $30,000 to joint filers, and $15,000 for single filers (this may significantly reduce the number of taxpayers who itemized deductions).
December 2, 2016
November 21, 2016
- An employee who believes a bonus may be coming his way may be able to request that his employer delay payment of any bonus until early in the following year. For example, if a bonus would normally be paid on , an employee may ask the employer before to defer any bonus coming his way until . By deferring the bonus, the employee will succeed in having it taxed in 2017. But note that if an employee waits until a bonus is due and payable to request a deferral, the tax on the bonus will not be deferred. Also, if the deferral extends beyond 2-½ months after the close of the tax year, the bonus will be treated as nonqualified deferred compensation (currently includible in income to the extent not subject to a "substantial risk of forfeiture" if the arrangement fails to meet certain distribution, acceleration of benefit, and election requirements).
- Income that a cash basis taxpayer earns by rendering services isn't taxed until the client, patient etc., pays. If the taxpayer (e.g., consultant, business person, medical professional) holds off billing until next year—or until so late in the year that no payment can be received in 2016—he will succeed in deferring taxable income until next year.
- Defer "first year" required minimum distributions (RMDs) from an IRA or 401(k) plan (or other employer-sponsored retirement plan). RMDs from IRAs must begin by April 1 of the year following the year a taxpayer reaches age 70-½. That start date also applies to company plans, but non-5% company owners who continue working may defer RMDs until following the year they retire. Although RMDs must begin no later than following the year in which the IRA owner attains age 70-½, the first distribution calendar year is the year in which the IRA owner attains age 70-½. Thus, if a taxpayer turns age 70-½ in 2016, he can delay the first required distribution to 2017, but if he does so, there will have to take a double distribution in 2017—the amount required for 2016 plus the amount required for 2017. Delaying 2016 distributions to 2017 thus will bunch income into 2017, but that would be beneficial if the taxpayer winds up in a substantially lower bracket that year.
- Defer a traditional IRA-to-Roth IRA conversion until 2017. Such a conversion generally is subject to tax as if it were distributed from the traditional IRA or qualified plan and not recontributed to another IRA. Thus, a taxpayer who plans to make such a conversion should defer doing so if he believes the conversion will face a lower tax next year.
- Net investment income or
- The excess of modified adjusted gross income (MAGI) over the threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 for other taxpayers).
November 12, 2016
VALUE OF ON CAMPUS OR NEARBY HOUSING PROVIDED BY EDUCATIONAL INSTITUTIONS TO EMPLOYEES MAY BE TAX EXEMPT
In general, the value of residential housing furnished by a school to one of its employees is excludable from wages, provided the housing is located on or near campus and the employee pays rent during the calendar year that equals or exceeds 5% of the fair market value of the housing.
If the employee does not pay rent equal to at least 5% of the housing's fair market value, then the difference between the rent paid and the lesser of (1) 5% of the fair market value of the housing and (2) the average rental paid by individuals (other than students or employees) for comparable housing provided by the school is includable in the employee's taxable wages.
If you gave money or property to someone as a gift, you may owe federal gift tax. Many gifts are not subject to the gift tax, but the IRS offers the following eight tips about gifts and the gift tax.
Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you make a gift to someone else, the gift tax usually does not apply until the value of the gifts you give that person exceeds the annual exclusion for the year. For 2011 and 2012, the annual exclusion is $13,000.
Gift tax returns do not need to be filed unless you give someone, other than your spouse, money or property worth more than the annual exclusion for that year.
Generally, the person who receives your gift will not have to pay any federal gift tax because of it. Also, that person will not have to pay income tax on the value of the gift received.
Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. The following gifts are not taxable gifts:
• Gifts that are do not exceed the annual exclusion for the calendar year,
• Tuition or medical expenses you pay directly to a medical or educational institution for someone,
• Gifts to your spouse,
• Gifts to a political organization for its use, and
• Gifts to charities.
You and your spouse can make a gift up to $26,000 to a third party without making a taxable gift. The gift can be considered as made one-half by you and one-half by your spouse. If you split a gift you made, you must file a gift tax return to show that you and your spouse agree to use gift splitting. You must file a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, even if half of the split gift is less than the annual exclusion
You must file a gift tax return on Form 709, if any of the following apply:
• You gave gifts to at least one person (other than your spouse) that are more than the annual exclusion for the year.
• You and your spouse are splitting a gift.
• You gave someone (other than your spouse) a gift of a future interest that he
or she cannot actually possess, enjoy, or receive income from until some time in the future.
• You gave your spouse an interest in property that will terminate due to a future event.
You do not have to file a gift tax return to report gifts to political organizations and gifts made by paying someone’s tuition or medical expenses.
November 2, 2016
October 17, 2016
September 25, 2016
Read the following article. http://www.globalgovernmentforum.com/more-than-100-governments-now-signed-up-to-international-tax-convention/
If you are not filing your US returns time to get started now. We can help.
August 27, 2016
August 10, 2016
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|
|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. Government and Corporate Bonds||X||X|
|U.S. States/Muni Bonds||X||X|
|U.S. Partnership/LLC Interest||Depends (a)||X|
|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.
|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 firstname.lastname@example.org.