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May 28, 2015

Form BE10 - Form Required by Bureau of Economic Analysis of Department of Commerce for those who own 10% or more of a foreign corporation

Dear Clients,

Please see below link regarding a potential disclosure requirement for 2014 with the Bureau of Economic Analysis. As a courtesy, we are making you aware of the potential requirement. This is not a tax-related filing but is a survey that is required whenever a U.S. person owns 10% or more of any business enterprise overseas. The form is due May 29th5 but you can file an extension.  June 30.


Our firm does  not plan to get involved in these filings as a rule; however, if any of you need help we can see what we can do. If you are conservatively minded you should file the form to avoid any exposure to possible penalties.

May 21, 2015

Tax Benefits for US Expats Available for College for themselves and Children

There are credits and deductions for many expatriates and residents if they go to college or send their
children to college. Do not overlook these possible tax credits and deductions when doing your return.

READ MORE ABOUT COLLEGE EDUCATION BENEFITS FOR EXPATS AND THEIR CHILDREN HERE 

May 11, 2015

DIRECTIONS FOR FILING FBAR (FORM 114) FOREIGN FINANCIAL ACCOUNT REPORT ON LINE - THIS IS DUE 6/30/15 FOR 2014

You can download step by step directions for filing the Form 114 (FBAR) to report your foreign financial accounts HERE   If you need help filing this form or want a CPA/Attorney  to file the form for you email us at ddnelson@gmail.com.   Also if you have questions on whether or not you should file the form or need to file ones for past years (the statute of limitations is six years which means if you are required to file the form you should file the past six years) please contact us. www.usexpatattorneycpa.com 

Time Sets Forth Taxpayer Characteristic of Those Most Likely To Be Audited

Those most likely to be audited by the IRS include the following individuals:


  • People who show more than $10 million in income or NO income at all!
  • People who file International Tax returns and show International Activies on Their Return
The IRS is using various laws and other techniques to locate the  Seven Million Americans who live outside the US.  It appears that over half of those individuals are still not filing annual tax returns as required by law.  If you do file, you do not get doubled tax since you get credit for taxes you pay to foreign countries which directly offset your US income tax on the same income.

There are special reporting forms for US bank accounts, foreign corporations, foreign trusts, foreign partnerships, foreign mutuals funds, etc. Failing to file these forms can result in penalties of $10,000 or more and often the statue of limitations never runs out on the IRS's ability to audit your return if you fail to file these required forms.

Let us help you catch up and enter the programs which currently exist and may be terminated any day by the IRS which reduce or eliminate many penalties for failing to file or filing late.  Email us at ddnelson@gmail.com.  We offer all clients the absolute  legal privacy  of Attorney/Client privilege if required.  Don D. Nelson, Attorney at Law, CPA.




Time Magazine Article on Taxpayers Most Likely to be Audited

Americans Surrendering Their US Citizenship At an All time High

It is getting more complicated daily to surrender your US Citizenship.  It is a two step process. The legal side is with the State Department and costs $2,350 plus you must fill out their forms.  Part two requires that you file final tax returns with the IRS and file a special form that states all of your assets.  If your total net worth on surrender exceeds $2,000,000 or includes certain types of items, you may have to pay an exit tax on the current fair market value of some or all of those assets.  Also if your total assets exceed $2,000,000US you may also be subject to restrictions and conditions on visits to the US after surrender and gifts and inheritances left to US beneficiaries or relatives.

You must have filed the last five years tax returns and your  the amount of tax you have paid during those past five years on your income must be below a certain amount to qualify to get rid of your citizenship without tax penalties

Proper tax planning  will often reduce or eliminates many of these potential IRS tax problems. We have advised or assisted over 100 individual citizens or green card holders (long term ones are subject to the same rules) with the process and often saved them hundreds of thousands of dollars in taxes.Email us if you need assistance or help with the complex process and planning it out.


May 8, 2015

IF ABROAD AND CANNOT USE US POST OFFICE - WHERE AND HOW TO SEND IN TAX RETURNS TO IRS


Print - Click this link to Print this page

Submission Processing Center Street Addresses for Private Delivery Service 

Private Delivery Services should deliver returns to only the following Submission Processing Center street addresses: (Fed Exp and UPS do not deliver to PO Boxes)
Austin - Internal Revenue Submission Processing Center 3651 S IH35,
 Austin TX 78741
Cincinnati - Internal Revenue Submission Processing Center  201 West Rivercenter Blvd.,
 Covington, KY 41011
Fresno - Internal Revenue Submission Processing Center 5045 East Butler Avenue,
 Fresno, CA 93727
Kansas City - Internal Revenue Submission Processing Center 333 W. Pershing,
 Kansas City, MO 64108
Ogden - Internal Revenue Submission Processing Center 1973 North Rulon White Blvd.
 Ogden, UT 84404

Send your returns to the submission processing center designated for your type of return: Where to File Tax Returns - Addresses Listed by Return Type

PRIVATE DELIVERY SERVICES SHOULD NOT DELIVER RETURNS TO IRS OFFICES OTHER THAN THOSE DESIGNATED ABOVE
THE IRS HAS ALSO RECENTLY STATED ALL RETURNS SHOULD BE SENT IN BY UPS OR FEDERAL EXPRESS. IT IS NO LONGER RECOMMENDING YOU USE DHL DUE TO ITS CUTBACK IN US SERVICES


April 20, 2015

When if Failing to File an FBAR (form 114 - foreign account report) WillFul or Unwillful

The penalty for willfully failing to file the FBAR is the greater of $100,000 or 50% of the account balance at time of violation.  The penalty for a non-willful violation is up to $10,000.  The documents released in late 2014 by the IRS list some of the items that the IRS considers when determining whether an FBAR violation was willful:
Factors supporting a willful FBAR penalty:
  • Opened the foreign bank account
  • Owner of, or a financial interest in, the foreign account
  • Tax non-compliance
  • Did not seek advice, or relied upon the advice of a promoter, foreign banker, or other unqualified tax professional.
  • Violations persist after notification of FBAR reporting requirements
  • Foreign account not disclosed to return preparer
  • No business reason for the foreign account
  • No family or business connection to the foreign country
  • An offshore entity owns the account
  • Previously-filed FBARs do not include all foreign accounts
  • Illegal income in the foreign account
  • Participated in an abusive tax avoidance scheme
Factors not supporting a willful FBAR penalty:
  • Inherited the foreign bank account
  • Only signature authority over the foreign bank account
  • Tax compliance
  • Relied upon the advice of a tax return preparer, a CPA, an attorney, or another
    qualified tax professional.
  • Full compliance after notification of FBAR reporting requirements
  • Foreign account disclosed to return preparer
  • Business reason for the foreign account
  • Family or business connection to the foreign country
  • Person owns the account in his name
This week a district court held that the $10,000 per year penalty was valid and did not result in excessive penalties or denial of due process when the taxpayer had originally marked the Schedule B with a NO stating he had no foreign bank accounts when he actually did and had them for some time.  The amount kept abroad  in foreign banks was approximately $300,000.  The Court apparently felt that marking the box on Schedule B with a NO  was not unwillful.
The FBAR statute does not define what constitutes a separate FBAR "violation."  See 31 U.S. Code § 5321(a)(5).  Therefore,  the IRS could impose multiple FBAR penalties per year.  The documents released by the IRS use the example of an individual who failed to file the FBAR for three years to report two foreign accounts.  The IRS examiner would have the discretion to assert either (i) 6 violations, one per account per year, (ii) 3 violations, one per FBAR, or (iii) one violation for the entire three year period. The document  does state that "assertion of multiple penalties and the assertion of separate penalties for multiple violations with respect to a single FBAR form should only be taken in the most egregious cases." 

April 16, 2015

IRS CRIMINAL PRIORITIES AND PROSECUTION RATE IN 2014

IRS  2014 Investigative Priorities: Criminal Investigation’s highest priority is to prosecute the following tax crimes:

  Identity Theft Fraud
  Return Preparer Fraud ; Questionable Refund Fraud
  International Tax Fraud
  Fraud Referral Program
  Political/Public Corruption
  Organized Crime Drug Enforcement Task Force (OCDETF)
  Bank Secrecy Act and Suspicious Activity Report (SAR) Review Teams
  Asset Forfeiture
  Voluntary Disclosure Program
  Counterterrorism and Sovereign Citizens FY14 Business Results:

In 2014 there were only 4,297criminal investigations initiated by the IRS and out of this there were only 3,110 criminal convictions..  This is from a total US population of approx 330 million people. Therefore, you have to be a pretty bad person or a special target for the IRS to even bother with seeking criminal prosecution.

If you are one of those pretty bad persons, email us at ddnelson@gmail.com for help.

April 13, 2015

IRS REPORTING REQUIREMENTS FOR THOSE WITH FOREIGN ASSETS

The Internal Revenue Service  today reminded U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during all or part of 2014, that they may have a U.S. tax liability and a filing requirement in 2015.
Most People Abroad Need to File
A filing requirement generally applies even if a taxpayer qualifies for tax benefits, such as the foreign earned income exclusion or the foreign tax credit , that substantially reduce or eliminate their U.S. tax liability. These tax benefits are not automatic and are only available if an eligible taxpayer files a U.S. income tax return.
The filing deadline is Monday, June 15, 2015, for U.S. citizens and resident aliens whose tax home and abode are outside the United States and Puerto Rico, and for those serving in the military outside the U.S. and Puerto Rico, on the regular due date of their tax return. To use this automatic two-month extension, taxpayers must attach a statement to their return explaining which of these two situations applies. See U.S. Citizens and Resident Aliens Abroad for details.
Nonresident aliens who received income from U.S. sources in 2014 also must determine whether they have a U.S. tax obligation. The filing deadline for nonresident aliens can be April 15 or June 15 depending on sources of income. See Taxation of Nonresident Aliens on IRS.gov.
Special Reporting for Foreign Accounts and Assets
Federal law requires U.S. citizens and resident aliens to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts. In most cases, affected taxpayers need to complete and attach Schedule B to their tax return. Part III of Schedule B asks about the existence of foreign accounts, such as bank and securities accounts, and usually requires U.S. citizens to report the country in which each account is located.
Taxpayers with an interest in, or signature or other authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014 must file with the Treasury Department a Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). It is due to the Treasury Department by June 30, 2015, must be filed electronically and is only available online through the BSA E-Filing System website. For details regarding the FBAR requirements, see Report of Foreign Bank and Financial Accounts (FBAR).
In addition, certain taxpayers may also have to complete and attach to their return Form 8938, Statement of Foreign Financial Assets.  Generally, U.S. citizens, resident aliens and certain nonresident aliens must report specified foreign financial assets on this form if the aggregate value of those assets exceeds certain thresholds. See the instructions for this form for details.
IRS Simplifies Reporting for Canadian Retirement Accounts
The IRS has eliminated a special annual reporting requirement that has long applied to taxpayers who hold interests in either of two popular Canadian retirement plans. This is part of an IRS change announced in October making it easier for taxpayers with these plans to get favorable U.S. tax treatment. As a result, many Americans and Canadians with registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) no longer need to file Form 8891 each year reporting details on these plans. This change does not affect any other reporting requirements that may apply, such as FinCEN Form 114 and Form 8938.
Report in U.S. Dollars
Any income received or deductible expenses paid in foreign currency must be reported on a U.S. return in U.S. dollars. Likewise, any tax payments must be made in U.S. dollars.
Both Form 114 and Form 8938 require the use of a Dec. 31 exchange rate for all transactions, regardless of the actual exchange rate on the date of the transaction.  Generally, the IRS accepts any posted exchange rate that is used consistently. For more information on exchange rates, see Foreign Currency and Currency Exchange Rates.
Expatriate Reporting
Taxpayers who relinquished their U.S. citizenship or ceased to be lawful permanent residents of the United States during 2014 must file a dual-status alien return, attaching Form 8854, Initial and Annual Expatriation Statement. A copy of the Form 8854 must also be filed with Internal Revenue Service Philadelphia, PA 19255-0049, by the due date of the tax return (including extensions). See the instructions for this form and Notice 2009-85, Guidance for Expatriates Under Section 877A, for further details.
For more and help go to www.taxmeless.com.  Email  ddnelson@gmail.com

Michael Bolton sings an Emotional Song to the IRS

Go to the last 1/2 of this Video to see Michael Boltons emotional IRS song.

March 30, 2015

Expats - Retirement Costs Many Do Not Think About

Click here to see retirement costs you may not have considered in your retirement plan   If you plan to retire abroad, planning will help since every year various foreign locations become more expensive and the cost to retire may increase. Let help with your estate or retirement plan abroad (taking into account US tax and estate law) call us at ddnelson@gmail.com.

March 26, 2015

IRS International Tax Topic Index Will Answer Most Expat and International Tax Questions

The International Tax Topic Index is a gateway into IRS Tax Map specifically designed for taxpayers with international filing requirements. IRS Tax Map gathers all information about a topic in one place and contains topics from across the IRS.
You can find international topics using search or the  link below below. Use the search box on the left navigation bar to search all topics in Tax Map including international topics.
If you need further help with any question or assistance contact  our firm Kaufman Nelson LLP for assistance from an Attorney, CPA with over 30 years experience.  Ask for a mini consultation.  Email us at ddnelson@gmail.com 

March 23, 2015

Six IRS Tax Tips about Reporting Foreign Income

Are you a U.S. citizen or resident who worked abroad last year? Did you receive income from a foreign source in 2014? If you answered ‘yes’ to either of those questions here are six tax tips you should know 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 fileSchedule 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. See 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 $99,200 of your wages and other foreign earned income in 2014. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.  On top of that amount you may also be eligible for the foreign housing exclusion or deduction if you earn in excess of the foreign earned income exclusion.
4. Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.
5. Tax Filing Extension is Available.  If you live outside the U.S. and can’t file your tax return by April 15, you may qualify for an automatic two-month extension of time to file. That will give you until June 16, 2015, to file your U.S. tax return. This extension also applies to those serving in the military outside the U.S. You will need to attach a statement to your return explaining why you qualify for the extension.
6. Get  Tax Help.  Check the international services Web page for the types of help the IRS provides. 
For more on this topic refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. 
If you are preparing your own return and have questions, we can provide you with the answers in a mini consultation. Or if you want your return reviewed prior to filing with the IRS, we can do that too.  And of course, we also prepare expatriate, nonresident and international tax returns.  We have over 30 years experience preparing expatriate and nonresident tax returns. We are the experts you need.
Email for assistance at ddnelson@gmail.com 


Additional IRS Resources:


March 17, 2015

Only 11% of Americas Living Abroad Are Filing the FBAR form 114 to Report their Foreign Financial Accounts

The U.S. State Department estimates that 7.2 million U.S. citizens live abroad, many of whom surely have reportable bank accounts, yet only a total of 825,000 FBAR reports were filed for 2012.  We can help you catch up by entering special programs such as the IRS Streamlined Program or Offshore Disclosure program which will reduce or eliminate your penalties for failing to file FBAR forms (114) or forms 5471, or 8865, etc.

Once the foreign banks and insurance companies start sending in data to IRS reporting their US account holders, you may be subject to penalties of $10,000 per year or more for your failure to file. Take action now before it is too late. They will not reduce penalties if they catch you first.  There are also criminal penalties up to five years in jail in addition to the failure to file penalties.


March 15, 2015

IRS Required Withholding on Payments to Foreign Companies and Individuals

U.S. Tax Withholding on Payments to Foreign Persons U.S. source income paid to foreign individuals amounts to $140 billion each year. Most types of U.S. source income paid to a foreign person are subject to a withholding tax of 30%, although a reduced rate or exemption may apply if stipulated in the applicable tax treaty.
General Rule
In general, a person that makes a payment of U.S. source income to a foreign person must withhold the proper amount of tax, report the payment on Form 1042-S and file a Form 1042 by March 15 of the year following the payment(s).
Withholding Agent
The person making the payment is considered to be the withholding agent. You are a withholding agent if you are a U.S.or foreign person that has control of any item of income of a foreign person that is subject to withholding.
withholding agent may be an:
 As a withholding agent, the payer is personally liable for any tax required to be withheld and which the payer fails to withhold. 
A payment to a foreign person is subject to withholding if it is from sources within the United States, and it is either:
  • Fixed or determinable annual or periodical ( FDAP) income, or
  • Certain gains from the disposition of timber, coal, and iron ore or from the sale or exchange ofintangible property (such as patents or copyrights)
Examples of FDAP income subject to withholding include (but are not limited to):
Withholding Agent Obligations
When you make a payment of U.S. source income to a foreign person or entity you are normally required to withhold U.S. income tax at a rate of 30% and report it on Forms 1042-S and 1042 by March 15 of the year following the payment(s).
The penalty for not filing Forms 1042-S and1042 when due (including extensions) is usually 5% of the unpaid tax for each month or part of a month the return is late, but not more than 25% of the unpaid tax. Additional penalties apply for failure to provide complete and correct information or if you fail to provide a complete and correct statement to each recipient. The maximum penalty is $100,000 per year.
More detailed information on this subject can be found in the links below. Contact us if you need more information for your particular situation.  ddnelson@gmail.com 
Links:    
1042   Annual withholding tax return for US Source income of foreign persons
1042-S.  Foreign persons U.S. source income subject to withholding
Non Resident Alien Withholding  Information from www.irs.gov
Publication 515   Withholding of tax on nonresident aliens and foreign entities

March 9, 2015

The Best and Worst States to be a Taxpayer

Read this link to see the best and worst states to live in as a taxpayer. As an expat there is not law that says you must have a state of residency or file state tax returns. However, some states including California, Virginia, Alabama, New Mexico and others have state laws that make it very difficult to give up your state tax domicile even if you move abroad permanently.  We can help with this process of abandoning tax domicile in those states. 

15 Ways to Invite an IRS Audit

February 17, 2015

Filing From Abroad? Use DHL, Fed Exp, or UPS - Use the Following Street Addresses to Assure Delivery

Private Delivery Services should deliver returns to only the following Submission Processing Center street addresses:
Austin - Internal Revenue Submission Processing Center 3651 S IH35,
 Austin TX 78741
Cincinnati - Internal Revenue Submission Processing Center  201 West Rivercenter Blvd.,
 Covington, KY 41011
Fresno - Internal Revenue Submission Processing Center 5045 East Butler Avenue,
 Fresno, CA 93727
Kansas City - Internal Revenue Submission Processing Center 333 W. Pershing,
 Kansas City, MO 64108
Ogden - Internal Revenue Submission Processing Center 1973 North Rulon White Blvd.
 Ogden, UT 84404

Send your returns to the submission processing center designated for your type of return: Where to File Tax Returns - Addresses Listed by Return Type
PRIVATE DELIVERY SERVICES SHOULD NOT DELIVER RETURNS TO IRS OFFICES OTHER THAN THOSE DESIGNATED ABOVE