Olivier Wagner | TaxConnections

09 Nov 2023

The Complete Guide For Submitting Form 14653 For The Streamlined Program

As a U.S. expat, understanding your tax obligations is essential. Form 14653 plays a key role for those considering the IRS Streamlined Foreign Offshore Procedures. In this guide, we’ll simplify Form 14653, ensuring you can confidently navigate the Streamlined Program to address your tax compliance issues. Dive in to learn more and achieve seamless tax compliance.

At 1040 Abroad, we value transparency in our pricing. That’s why our Streamlined Compliance Package includes the certification statement (Form 14653) at no extra cost. With our flat fee policy, you’re assured of no hidden charges or additional costs for any extra forms required. Our goal is to provide comprehensive, worry-free support as you navigate your tax obligations

What Is IRS Form 14653?

IRS Form 14653, also known as the “Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures,” is a form used by U.S. expats and Green Card Holders residing abroad to certify that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct.

This form is part of the Streamlined Foreign Offshore Procedures, which offer a way for U.S. expatriates to become compliant with their U.S. tax obligations if they haven’t been willfully avoiding these responsibilities without risking any penalties.

What Is “Non-Willfull” Conduct?

Written by Olivier Wagner | Posted in Form 14653 • Non-Willful Conduct • Streamlined Compliance Filing Procedures

07 Nov 2023

Navigating International Remote Work: Tax Implications For Employers

Introduction

Following covid 19 when remote work became commonplace, or the only way to work, the concept of remote work has allowed employees to work from virtually anywhere. While this flexibility can be a win-win for both employers and employees, it also introduces complex tax considerations, particularly when employees are working from international locations. In this blog post, we will delve into the tax implications for employers of letting their employees work remotely in international locations, addressing potential dangers and offering solutions to minimize tax liabilities.

Ultimately, much of the exposure can be limited by restricting employees’ movement to countries that have a tax treaty and a social security totalization agreement with the country of origin, and fall within the parameters of that tax treaty.

Company Registration / Sales Tax / Corporate Income Tax

Company registration: By having a presence in given country, the corporation might be required to register itself with the local authorities. As these vary widely country to country, I will not get into specifics.

Sales tax: When employees work in a foreign country, it can create a nexus for the employer, potentially triggering the duty to collect and remit sales tax on goods or services sold in that area.

Corporate income tax: Tax treaties would exempt the corporation from paying corporate income tax to the foreign country if it doesn’t have a permanent establishment in that country.

A dependent agent (such as an employee), when acting on behalf of an enterprise, can create a permanent establishment if they have the authority to conclude contracts or regularly habitually perform activities on behalf of the employer. However, merely having an employee working in a foreign country does not automatically trigger PE status.

Income Tax Withholdings In Foreign Countries

Written by Olivier Wagner | Posted in Tax Implications Of Remote Work

02 Nov 2023

FBAR Compliance: From Requirements To Submission

Navigating the world of taxes as a U.S. citizen overseas? Then you’ve likely come across the term FBAR – the Foreign Bank Account Report. We recognize that for U.S. expats, tax compliance goes beyond ticking boxes on forms. It’s about truly grasping your obligations and rights in foreign lands. At 1040 Abroad, our mission is to offer crystal-clear insights that enable you to act confidently. Rest assured, we won’t use scare tactics. Instead, consider us your trusted companion on this journey to compliance.

What Is FBAR?

FBAR stands for Foreign Bank Account Report, a disclosure requirement mandated by the United States Treasury Department. It is officially known as FinCEN Form 114 and is separate from your income tax return. The FBAR is designed to provide the U.S. government with information about financial accounts held by U.S. persons in foreign countries.

Who Needs To File An FBAR?

If you’re a U.S. individual or entity—be it a citizen, resident, or any form of business organization like an LLC or trust—you’re obligated to file an FBAR. The criteria are straightforward:

1) You must have either financial interest or control (like signature authority) over one or more financial accounts situated outside the U.S.

2) The combined value of these accounts must have exceeded $10,000 at any point during the year you’re reporting. It doesn’t matter if the account generated taxable income; its foreign location alone makes it subject to FBAR.

Common Exceptions To The Rule

Written by Olivier Wagner | Posted in FBAR Compliance

20 Oct 2023

How Far Back Can The IRS Audit?

Navigating the labyrinthine world of U.S. taxes, including federal tax returns and individual tax returns, is challenging enough when you’re stateside. For U.S. expatriates, the complexity can multiply. One question that often looms large is, “How far back can the IRS audit?” Understanding the rules, statute of limitations, and exceptions surrounding IRS audits is crucial for maintaining compliance and peace of mind. Generally, the IRS has a three-year window to audit your tax returns, but as you’ll see, there are exceptions.

If you don’t file your tax returns, the statute of limitations never starts, allowing the IRS to audit the return at any time in the future. This is particularly important for U.S. expats who might assume they’re exempt from filing because they’re living abroad.

What Is The Statue Of Limitations?

The term “statute of limitations” refers to the time frame within which the IRS is legally allowed to audit your tax returns for potential errors, omissions, or fraud. This period is generally three years from the date you filed your return or the due date of the return, whichever is later. After the statute of limitations expires, the IRS generally can’t question the information you’ve reported on your individual income tax return, or your filing history, or request additional documentation.

Taxpayers generally have three years from the date they filed their original tax return to claim a refund.

What Happens When You Don’t File Your Tax Returns?

Written by Olivier Wagner | Posted in Audit

29 Sep 2023

Expatriates – How To File An Extension For Your Income Tax Return Due October 15th

Expatriates - Beat October 15th Tax Deadline

Tax season is a stressful time for many, but it can be especially daunting for U.S. expats living abroad. Navigating the complexities of foreign income, tax treaties, and deadlines can be overwhelming. If you’re an expat stressing about the upcoming October 15 tax deadline, you’re not alone—and we’re here to help.

The purpose of this article is to simplify the process for you. We’ll provide a straightforward, step-by-step guide on how to prepare your own additional extension letter to the IRS, effectively extending your filing deadline for your federal tax return to December 15. And the best part? If you find yourself stuck or in need of professional guidance, our firm offers this service absolutely free of charge.

So, let’s dive in and demystify the process, shall we?

WHEN ARE TAXES DUE WITH AN EXTENSION?
The regular deadline for filing individual income tax returns for U.S. expats is June 15. However, if you file for an extension, you will have until October 15 to submit your tax return. Additionally, you can file for a second extension that will extend the deadline to December 15.

WHY IT MATTERS
Missing the October 15 deadline can result in a late filing penalty, which is separate from any late payment penalties that may have started accruing from the original April 15 payment deadline. Here’s what you need to know:

Late Filing Penalties: The IRS imposes a penalty for filing your federal income tax return after the October 15 deadline. This can be as much as 5% of the unpaid taxes for each month your return is late, up to a maximum of 25%.
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Written by Olivier Wagner | Posted in Expatriates- How To File An Extension

20 Sep 2023

Form 3520-A Explained: The Ultimate Resource For US Expats

Navigating the complexities of U.S. tax compliance and international taxation can be challenging, especially for U.S. expatriates. One form that often goes unnoticed but carries significant penalties for non-compliance is Form 3520-A. In this article, we’ll delve into what Form 3520-A is, who needs to file it, and the penalties for failing to do so.

WHAT IS FORM 3520-A?
Form 3520-A, also known as the “Annual Information Return of Foreign Trust With a U.S. Owner,” is a tax form required by the Internal Revenue Service (IRS) to report information about foreign trusts. If you are a U.S. person who is treated as the owner of any part of the assets of a foreign trust, you are obligated to ensure that this form is filed annually as part of your income tax return.

WHO MUST FILE FORM 3520-A?
The responsibility for filing Form 3520-A generally falls on the trustee of the foreign trust. However, if the foreign trust does not have a U.S. agent, the U.S. owner must ensure that the form is filed. A U.S. owner is defined as a U.S. person, including foreign persons who are treated as the owner of any part of the assets of a Foreign Grantor Trust under the grantor trust rules.

WHEN IS FORM 3520-A DUE?
Form 3520-A must be filed by the 15th day of the 3rd month following the end of the trust’s tax year, usually March 15th for calendar year taxpayers. This is a crucial 3520-A filing requirement that many expats are unaware of, leading to hefty penalties.
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Written by Olivier Wagner | Posted in Form 3520-A • TaxConnections

12 Sep 2023

Understand Form 5471 And Controlled Foreign Corporations (CFC)

Controlled Foreign Corporations (CFCs) are a hot topic for U.S. expats who own or are considering owning a foreign company abroad. Understanding the U.S. tax implications of a CFC is crucial for compliance and optimal tax planning. This article aims to provide a comprehensive overview of what a CFC is, the benefits, and the tax obligations under U.S. law, focusing on the Internal Revenue Code (IRC) sections relevant to CFCs in the United States.

WHAT IS A CONTROLLED FOREIGN CORPORATION?
A Controlled Foreign Corporation is a corporate entity registered and operated in a foreign jurisdiction, where more than 50% of the total combined voting power or value is owned by U.S. shareholders. According to IRC Section 957, U.S. shareholders are defined as U.S. persons who own at least 10% of the foreign entity’s voting shares. This direct ownership is crucial for determining whether a corporation is a CFC under U.S. tax rules.

COMBINED VOTING POWER AND STOCK OWNERSHIP
The term “combined voting power” refers to the total voting rights held by U.S. shareholders in a foreign company. Stock ownership is not just direct but can also be indirect ownership through another entity. Understanding both direct and indirect ownership is crucial for determining CFC status.

FUNCTIONAL CURRENCY AND FINANCIAL STATEMENTS
The functional currency is the primary currency used in the day-to-day operations of the CFC. Financial statements, including balance sheets and income statements, must often be translated into U.S. dollars for reporting purposes.
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Written by Olivier Wagner | Posted in Controlled Foreign Corporation

06 Sep 2023

The Refundable Additional Child Tax Credit Guide For Expats

Navigating the labyrinthine U.S. tax system is challenging enough for American taxpayers living stateside, let alone for those residing abroad. One often-overlooked benefit that can make a significant difference on your expat tax return is the Refundable Additional Child Tax Credit (ACTC). This article aims to provide a comprehensive understanding of this credit, its refundable nature, and why it’s particularly beneficial for U.S. expats.

WHAT IS THE ADDITIONAL CHILD TAX CREDIT (ACTC)?

The ACTC is a tax credit designed to offer financial relief to families with children. Unlike the standard, nonrefundable Child Tax Credit, which requires the taxpayer to have lived in the U.S. for at least six months during the tax year, the ACTC has no such residency requirement. This makes it an invaluable asset for U.S. expats who may not meet the criteria for the standard Child Tax Credit but still have obligations for income taxes to the U.S. government.

For 2023, the refundable portion of this credit is worth up to $1,600 per qualifying child. The beauty of a refundable tax credit like the ACTC is that it not only reduces your tax liability to zero but can also result in a tax refund for the unused portion.

REFUNDABLE VS. NON-REFUNDABLE CREDITS

Tax credits come in two flavors: refundable and non-refundable. A nonrefundable credit, like the standard Child Tax Credit, can reduce your tax liability but won’t result in a tax refund if the credit amount exceeds your tax liability. On the other hand, a refundable tax credit like the ACTC can not only reduce your tax liability to zero but also result in a refund for the unused portion.

For example, if your federal tax return shows a tax liability of $1,000 and you qualify for a $1,400 ACTC, you would not only eliminate your tax liability but also receive a $400 refund from the IRS.
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Written by Olivier Wagner | Posted in Expat Tax Refunds • Expatriate

08 Aug 2023

Managing Taxes In Singapore: An American Expat’s Guide

Living as a US expatriate in Singapore presents a unique set of challenges, especially when it comes to understanding and navigating the tax system. The country’s tax-friendly environment for corporations, featuring a flat corporate tax rate, makes it particularly attractive for business owners and individuals engaging in business operations.

This guide aims to provide a comprehensive overview of the tax obligations for US expats living in Singapore, helping you to better understand your responsibilities and potentially avoid any tax pitfalls related to rental income, employment income, business profits, and more.

UNDERSTANDING TAX RESPONSIBILITIES FOR US EXPATS IN SINGAPORE

The US has a citizenship-based taxation system which means US expats must file a federal income tax return and report their worldwide income annually once their taxable income exceeds the filing threshold regardless of where they reside.

Singapore’s tax system, on the other hand, is territorial, meaning only income earned within the country is subject to tax. Tax obligations in Singapore are determined by one’s tax residency status. Non-resident individuals are only taxed on income earned within Singapore.

HERE’S A QUICK GLANCE AT SOME KEY FACTS:
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Written by Olivier Wagner | Posted in Expatriate Taxes • Singapore

04 Aug 2023

Tax Intelligence Report Introduces: Expatriate Tax Professional Olivier Wagner

This interview is part of TaxConnections Tax Intelligence Report Series as we profile our tax professional members. This week we present Olivier Wagner who has written many helpful articles read by tens of thousands of our readers interested in expatriate taxes. Olivier Wagner, Tax Managing Director, 1040 Abroad, Toronto, Canada is highly knowledgeable and educates taxpayers on expatriate tax matters. This interview provides many valuable links to his writing during this special interview. If you are an expatriate taxpayer you will want to read this interview and access these valuable and educational links.

Kat Jennings: Can You Tell Me How You Got Started Doing Expatriate Tax Returns?
Olivier Wagner: Funny story. I always had the “foreign on my mind”, as I dreamt of leaving France. I was working at Moody’s, the credit rating agency in New York when the 2008 hit, while my position was safe, and I wasn’t concerned about losing my job, the work conditions did get noticeably worse.
I started to dream of working for myself and have a location independent business.

In 2011, I moved to Canada, and I was a US citizen at that point. Given my skill set, I figured that preparing tax returns for US citizens who live outside the US was a good fit. In addition, I figure that my clients would be spread out geographically, which would serve me well in having a location independent business.
In the coming months became an Enrolled Agent, I subsequently became a CPA (New Hampshire) and became fully nomadic from 2016-2018. I am based in Toronto, Canada but I still regularly hit the road.

Kat Jennings:Can You Tell Us About The New IRS Program That Enables Former U.S. Citizens To Become Compliant With U.S. Tax Law Without Risking Any Penalties?
Olivier Wagner: Yes, absolutely. By way of background, people were renouncing without having filed the prior 5 years of tax returns which, wither due to ignorance or defiance. It would by itself make them covered expatriate, subject to the exit tax.
The IRS found it somewhat unfair, for people who are no longer US citizen, have not and possibly never regarded themselves as US citizens.
The requirement is that:
– They are not otherwise covered expatriates
– They never filed US tax returns (hence my comment above)

https://www.taxconnections.com/taxblog/irs-releases-a-new-program-tax-relief-procedures-for-certain-former-united-states-citizens-without-risking-any-penalties/

Written by Olivier Wagner | Posted in Expatriate Taxes

25 Jul 2023

How To File IRS Form 8833: Expert Advice For U.S. Expatriates

WHAT IS FORM 8833?

Form 8833, “Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b),” is a document that individual taxpayers use to disclose their treaty-based position to the IRS providing a reasonable explanation. This form is required if a taxpayer is claiming treaty benefits or taking a treaty position that may affect their federal income tax liability. It is important for dual-resident taxpayers and those earning income in a foreign country to complete this form accurately.

By filing Form 8833, taxpayers can prevent double taxation and ensure that they are properly utilizing the tax treaty provisions between the United States and the foreign country.

WHAT ARE INTERNATIONAL TAX TREATIES?

International tax treaties, also known as tax conventions or double tax treaties, are agreements between two countries that are designed to avoid or mitigate the double taxation of the same income. These treaties typically cover income tax, corporate tax, and other taxes that individuals and businesses may be liable for in both jurisdictions.

The main purpose of such treaties is to determine which of the two contracting states should have the right to tax specific types of income or capital, or whether there should be a division of the taxing rights between the two states. Some common income items that may be subject to a treaty position include dividends, interest, royalties, and periodic income. By disclosing these income items on Form 8833, individuals can claim the applicable tax treaty benefit that reduces their federal income tax liability. When individuals have income from U.S. sources and they are residents of a treaty country, they can claim this treaty benefits on their tax returns.

These treaties also often include provisions for cooperation and information sharing between tax authorities to prevent tax evasion and other forms of tax fraud.

WHO SHOULD FILE FORM 8833?
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Written by Olivier Wagner | Posted in How To File IRS Form 8833

21 Jul 2023

FBAR Deadline 2023 Extension: Key Information For Taxpayers

In this article, we will provide key information for taxpayers regarding the FBAR (Foreign Bank Account Report) deadline extension for the year 2023. The FBAR is an important requirement for U.S. taxpayers who have financial accounts outside of the United States. It is crucial to understand the deadline extension and the necessary steps to comply with the regulations. Let’s dive into the details and ensure you have all the information you need to meet your FBAR obligations.

FBAR DEADLINE 2023 EXTENSION: KEY INFORMATION FOR TAXPAYERS

The FBAR deadline extension for the year 2023 is automatic for taxpayers who reside overseas. They get an additional 6 months to fulfill their reporting obligations. This extension gives individuals who need to file FBAR more time to gather the required information and complete the necessary forms accurately. It is important to note that the extended deadline applies specifically to the FBAR filing and not to other tax-related deadlines.

The US expat deadline for the FBAR filing is October 15, 2023. Taxpayers must ensure that their FBAR reports are submitted on or before this date to avoid penalties and potential legal consequences.

WHO NEEDS TO FILE FBAR?

FBAR filing is mandatory for U.S. taxpayers who meet the reporting threshold set by the IRS. If the total value of your foreign financial accounts exceeds $10,000 at any point during the year, you are required to file an FBAR. This includes individuals with personal accounts as well as those with financial interests in foreign entities.
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Written by Olivier Wagner | Posted in 1040 Abroad • TaxConnections