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Archive for Alicea Castellanos

Second Citizenships And Golden Passports: Do You Have A Backup Plan?

Second Citizenships And Golden Passports: Do You Have A Backup Plan?

An increasing number of wealthy Americans are seeking second citizenships for themselves and their families. They’re motivated by a mix of rational risk management, shadowy survivalism and a desire to escape what they fear will be confiscatory taxes on the wealthy. Whether they call it an “exit plan” or “backup plan,” wealthy Americans are dropping impressive amounts of money to secure a guaranteed path out of the U.S. for themselves and their families should the need arise.

The global COVID-19 pandemic catalyzed a surge of interest in second citizenships. Americans who thought they could flee from the virus by traveling to their refuge properties in, say, New Zealand, got a rude wake-up call when the pandemic hit. New Zealand, like many other countries, promptly closed their borders to nonresidents.

Hence the increasing interest in the benefits of a “golden passport,” a non-U.S. passport acquired either through a citizenship by descent or citizenship by investment (CBI) program. When the time comes, a golden passport ensures passport holders can enter freely and without visas into the country issuing the passport.

Citizenship By Descent

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Foreign Accounts Penalty Case Heads To Supreme Court

Foreign Accounts Penalty Case Heads To Supreme Court

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Tax filing – and penalties – for foreign accounts may soon be the subject of a major legal decision.

The U.S. Supreme Court plans this fall to hear Bittner v. U.SThis case presents a conflict over statutes under the Bank Secrecy Act (BSA). The question is whether a “violation” under the BSA is the failure to file an annual FBAR no matter the number of foreign accounts or whether there is a separate violation for each account that isn’t properly reported.

The 1970 BSA initially charged the U.S. Treasury Department with collecting information from U.S. persons who have financial interests in or signature authority over financial accounts maintained with financial institutions outside the U.S. In 2003, the Treasury delegated enforcement to the Internal Revenue Service. Although only willful violations were initially subject to penalty, Congress amended the act in 2004 to include penalties for non-willful violations.

Regulations require filing a single annual FBAR for anyone with an aggregate balance over $10,000 in foreign accounts. The penalty for non-willful violation is up to $10,000.

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Key Tax Provisions Of The Inflation Reduction Act Of 2022

Key Tax Provisions Of The Inflation Reduction Act Of 2022

The Inflation Reduction Act (IRA), signed into law on August 16, 2022, includes tax provisions affecting businesses, individuals, the clean-energy industry, healthcare, and more. Let’s take a look:

Businesses

Sec. 461(l) Business Loss Limitation. The pass-through tax deduction for small business owners (sole proprietorships, some limited liability companies, partnerships, and S-corporations) was enacted under tax reform (TCJA of 2017). The tax break limited individuals from taking more than $250,000 ($500,000 for married taxpayers filing jointly) of business losses to offset nonbusiness income. In effect for tax years 2021 through 2026, it has been extended through 2028.

Research Credit Against Payroll Taxes. For tax years beginning after December 31, 2022, the limitation amount increases by $250,000 to $500,000 for the Sec. 41(h) research credit against payroll tax for small businesses . The first $250,000 of the credit limitation will be applied against the FICA payroll tax liability. The second $250,000 of the limitation will be applied against the employer portion of Medicare payroll tax liability.

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How You Can Lose A Passport Due To Tax Debt

How You Can Lose A Passport Due To Tax Debt

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If you owe enough in delinquent American federal taxes, the U.S. government can take your passport.

The Internal Revenue Service certifies “seriously delinquent” tax debt to the U.S. State Department. This is an individual’s unpaid, legally enforceable federal tax debt, including interest and penalties, that totals more than $55,000 (that amount is adjusted yearly for inflation).

The State Department generally will not issue a passport to you after receiving certification from the IRS, denying your passport application or revoking your current passport. If you’re overseas, the State Department may issue you a limited validity passport good only for direct return to the United States.

How you’re informed

The IRS will send you Notice CP508C when it certifies you to the State Department. (The IRS will send the notice by regular mail to your last known address. Your power of attorney will not receive a copy of the notice.)

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IRS Waives Penalties For Some International And Late Tax Returns

IRS Waives Penalties For Some International And Late Tax Returns

This blog post is provided in 4 different languages including English, Spanish, Portuguese, and Turkish thanks to TaxConnections member Alicea Castellanos. TaxConnections welcomes members who desire to post tax blogs in multiple languages since our distribution channels and readers span more than 125 countries globally.

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The IRS is offering new relief for certain penalties, including international information return penalties for tax returns for 2019 and 2020. But the deadline to take advantage is just days.

The IRS is offering pandemic-related relief for certain penalties, including those for international information returns (IIRs), with respect to tax returns for 2019 and 2020. The catch: The returns must be filed no later than this Sept. 30.

The IRS Notice, “Penalty Relief for Certain Taxpayers Filing Returns for Taxable Years 2019 and 2020,” also provides relief from certain information return penalties regarding taxable year 2019 returns that were filed on or before Aug. 1, 2020, and taxable year 2020 returns that were filed on or before Aug. 1, 2021.

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U.S. Poised To Get Tougher On Crypto Investments

U.S. Tougher Policies On Cryptocurrency

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U.S. agencies and lawmakers are finally shaping policies concerning cryptocurrency. The result could change investors’ options significantly.

Cryptocurrency has offered a lot to investors – including sky-high returns amid a lack of regulation. In what experts claim might stabilize crypto’s market and protect its investors, the digital asset’s Wild West days may be ending in the U.S.

Right now, regulatory control differs across American federal government agencies; cryptocurrency is treated as “property” for tax purposes, resembling in many ways stock. Some say cryptocurrency reporting also resembles a Foreign Bank Account Report in that both are priorities for IRS attention and both require care in reporting.

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How You Can Lose A Passport Due To Tax Debt

How You Can Lose A Passport Due To Tax Debt

If you owe enough in delinquent American federal taxes, the U.S. government can take your passport.

The Internal Revenue Service certifies “seriously delinquent” tax debt to the U.S. State Department. This is an individual’s unpaid, legally enforceable federal tax debt, including interest and penalties, that totals more than $55,000 (that amount is adjusted yearly for inflation).

The State Department generally will not issue a passport to you after receiving certification from the IRS, denying your passport application or revoking your current passport. If you’re overseas, the State Department may issue you a limited validity passport good only for direct return to the United States.

How you’re informed

The IRS will send you Notice CP508C when it certifies your to the State Department. (The IRS will send the notice by regular mail to your last known address. Your power of attorney will not receive a copy of the notice.)

Before denying a passport, the State Department will hold your application for 90 days to allow you to resolve incorrect certification issues, or to make full payment or arrange a payment plan or Offer in Compromise with the IRS.

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Foreign Accounts Penalty Case Heads To Supreme Court

Foreign Accounts Penalty Case Heads To Supreme Court

Tax filing – and penalties – for foreign accounts may soon be the subject of a major legal decision.

The U.S. Supreme Court plans this fall to hear Bittner v. U.SThis case presents a conflict over statutes under the Bank Secrecy Act (BSA). The question is whether a “violation” under the BSA is the failure to file an annual FBAR no matter the number of foreign accounts or whether there is a separate violation for each account that isn’t properly reported.

The 1970 BSA initially charged the U.S. Treasury Department with collecting information from U.S. persons who have financial interests in or signature authority over financial accounts maintained with financial institutions outside the U.S. In 2003, the Treasury delegated enforcement to the Internal Revenue Service. Although only willful violations were initially subject to penalty, Congress amended the act in 2004 to include penalties for non-willful violations.

Regulations require filing a single annual FBAR for anyone with an aggregate balance over $10,000 in foreign accounts. The penalty for non-willful violation is up to $10,000.

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Retirement Plan Options For American Expats

Expat Retirement Plans

As with most financial planning issues for Americans living abroad, retirement planning options can be more limited and more complex than they are when living in the U.S. In most cases, the familiar U.S. employer-sponsored retirement plans like 401(k)s are not available to expats. Foreign employers cannot offer them since they are required to be set up in the U.S., and most U.S. employers don’t offer them, primarily because the company uses a foreign business entity for tax purposes.

What options does that leave to the American living overseas and trying to save for retirement? IRAs, SEP IRAs and Solo 401(k)s for the self-employed, U.S. brokerage accounts, and on a limited basis, tax- deferred annuities, can all proved to be useful tools for American expats to save for retirement. I’ll discuss IRAs, SEP IRAs, and Solo 401(k)s here.

Many Americans think that they cannot continue to contribute to an IRA once they move outside of the U.S., but they can if they have unexcluded earned income. To be clear, it does not matter if it is foreign- sourced or U.S.-sourced income, just that it is unexcluded and earned.

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J5 Joint Chiefs Of Global Tax Enforcement In Action

J5 Joint Chiefs Of Global Tax Enforcement In Action

The Joint Chiefs of Global Tax Enforcement (J5) commended a decision announced by Puerto Rico’s financial institution regulator. The move to suspend the operations of a financial institution in Puerto Rico follows a global effort launched by J5 two years ago.

The Office of the Commissioner of Financial Institutions (OCIF) of Puerto Rico issued a Cease and Desist order and suspended the operations of Euro Pacific International Bank. The action was commended by the J5, who had, two years prior, conducted a global day-of-action to put a stop to the suspected facilitation of offshore tax evasion and money laundering by the bank.

Known as Operation Atlantis, the 2020 day-of-action was the first major operational activity for the J5. During the day of action, each country independently executed enforcement actions consistent with the legal requirements in their countries. These actions included intelligence and information gathering, search warrants, interviews, production orders and subpoenas.

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