Archive for Olivier Wagner

IRS Releases A New Program: Tax Relief Procedures For Certain Former United States Citizens Without Risking Any Penalties

IRS Releases A New Program: Tax Relief Procedures For Certain Former United States Citizens Without Risking Any Penalties

The IRS released a new program that allows former U.S. citizens to become compliant with the U.S. tax law without risking any penalties – Relief Procedures For Certain Former Citizens. If you only recently found out about your tax filing obligation to the U.S./your second citizenship and you’re contemplating renouncing it, this program might be for you.

In this article, we will explore relief procedures available to former U.S. citizens, as well as the eligibility requirements for this new amnesty program. Credit attribution for this article is given to Kasia Strzelczyk who is an Enrolled Agent with 1040 Abroad.

What Are The Relief Procedures For Certain Former Citizens The IRS Offers?
The United States is one of the only two countries that taxes their citizens and permanent residents (green card holders) on their worldwide income. It means that even if you live and work abroad, you still need to report all your foreign source income and file a U.S. tax return each year.

Unfortunately, this also applies to Accidental Americans – people who weren’t even aware they are considered U.S. citizens according to the United States immigration law. They might have received their U.S. citizenship at birth or through a U.S. citizen parent. The good news is, there is a way to become compliant and avoid all the penalties, charges for late filing, and other less favorable tax implications. And if one chooses to give up their U.S. passport, he/she can do so now too.

Background
Back in 2019, the Internal Revenue Service announced the opening of a new tax amnesty program called Relief Procedures for Certain Former Citizens. Amnesty programs are created to encourage indebted taxpayers to come forward and declare their tax liabilities. In return, they guarantee not to impose punishments on those unpaid taxes, and may even allow criminal offenses to go without prosecution.

Relief procedures for certain former American citizens is a program designed to address the concerns of accidental Americans. The program is aimed at tax-delinquent U.S. citizens who renounced (or intend to renounce) their American citizenship without facing back taxes and penalties.
These procedures cover individuals only. Trusts, corporations, partnerships, and other types of taxpayers are not eligible for the amnesty program.
These procedures are limited to taxpayers who have been out of compliance due to non-willful conduct. Non-willful conduct is a result of negligence, mistake, or a good-faith misunderstanding of the requirements of the law. In short, this means that you didn’t deliberately dodge your federal tax obligations.

Relief Available Under This Program
If you qualify for the new program, you will not owe any taxes, penalties, or interest to the United States. You will also not be considered a “covered expatriate”, allowing you to avoid the Exit Tax as well.
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Written by | Posted in IRS New Tax Relief Program • Relief Procedures For Certain Former Citizens

FBAR And FATCA: Reporting Foreign Accounts As A U.S. Expat

FBAR And FATCA: Reporting Foreign Accounts As A U.S. Expat

Confused about the difference between FATCA and FBAR? Don’t get caught in the crossfire of incorrect filings and penalties. As an expat, it’s essential to understand the Foreign Bank Account Report and FATCA Form 8938 – the two most common forms you may need to file if you have money in foreign financial accounts. This blog post will guide you through the basics of FBAR and FATCA, provide tips for ensuring compliance, and highlight common mistakes to avoid.

WHAT IS FBAR, AND WHO IS REQUIRED TO FILE IT?
An FBAR is a report that must be filed with the U.S. Treasury Department by certain U.S. persons who have a financial interest in or signature authority over foreign financial accounts. FBAR stands for “Report of Foreign Bank and Financial Accounts.” The purpose of the FBAR is to help the U.S. government identify and combat money laundering, terrorist financing, and other financial crimes. By requiring U.S. persons to report their foreign financial accounts, the U.S. government can better track the flow of money into and out of the United States.

WHAT IS FBAR REPORTING THRESHOLD?
The threshold for filing an FBAR is generally met if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. However, there are some exceptions and special rules that may apply depending on the specific circumstances.

You’ll be required to file FBAR if all of the following are true:
● You’re a U.S. citizen, permanent resident, or domestic business entity
● You own, control, or have signature authority over a foreign bank account/s and/or other foreign financial accounts.
● The combined value of those foreign financial accounts exceeded $10,000 at any point during the tax year.
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Written by | Posted in FATCA Reporting • FBAR

FBAR vs Form 8938: A Side-by-Side Comparison

FBAR vs Form 8938: A Side-by-Side Comparison

When it comes to reporting foreign financial accounts as a US taxpayer abroad, there are two main forms to consider: FBAR and Form 8938. While they share many similarities, there are key differences between these two forms that can make a big difference in your reporting obligations and potential penalties for non-compliance.

In this blog post, we’ll provide a side-by-side comparison of FBAR and Form 8938 to help you understand the similarities and differences between the two forms, and make an informed decision about which one to use for reporting your foreign accounts. Let’s dive in!

What is the difference between Form 8938 and FBAR?

Form 8938 Vs. FBAR
Who must file? Specified individuals (US citizens, resident aliens, and certain non-resident aliens) and domestic entities that have an interest in specified foreign financial assets and meet the reporting threshold. US persons (US citizens, resident aliens, trusts, and estates) that have an interest in foreign financial accounts and meet the reporting threshold.

Does it include US territories? No, it doesn’t include US territories(Puerto Rico, American Samoa, Guam, The United States Virgin Islands, and The Northern Mariana Islands) Yes, resident aliens of US territories and US territory entities are subject to FBAR reporting.

What’s the reporting threshold?
Reporting thresholds vary by residency and filing status (Refer to the section above that covers FATCA reporting requirements). The aggregate value of all foreign financial accounts exceeds $10,000.

What is reported?
The maximum value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets. The maximum value of financial accounts maintained by a financial institution physically located in a foreign country.

How are maximum account or asset values determined and reported?
Fair market value in US dollars in accord with the Form 8938 instructions for each account and asset reported; convert to US dollars using the end of the taxable year exchange rate and report in US dollars. Use periodic account statements to determine the maximum value in the currency of the account; convert to US dollars using the end of the calendar year exchange rate and report in US dollars.
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Written by | Posted in FBAR Filing • FBAR vs Form 8938

The U.S.-Japan Tax Treaty: A Comprehensive Guide

The U.S.-Japan Tax Treaty: A Comprehensive Guide

US-Japan Income Tax Treaty is a bilateral agreement between the US and Japan that aims to eliminate double taxation and prevent tax evasion on income earned by individuals and businesses in both countries. The treaty is officially called the Convention between the United States of America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. As you may agree, the official name is pretty long and a bit too complicated. To avoid potential confusion, we will refer to it US-Japan Tax Treaty. When referring to both US and Japan, we will use the term contracting states.

Background And History Of The U.S.-Japan Tax Treaty
Aside from improving the business climate, the principal purpose of international tax agreements between the US and a foreign country is to reduce or eliminate double taxation, and to prevent tax evasion. The US-Japan Tax Treaty is no exception.

This treaty has a long history of evolution as one of the first international tax treaties that the US ever signed. It has undergone several updates and amendments over the years to reflect changes in tax laws and economic conditions in both countries. The first version of the treaty was signed back in 1954 and was followed by updated versions in 1972 and 2003. The most recent amending protocol was signed by both governments on January 24, 2013.

While Japan ratified the Protocol in 2013, it was ratified by the US almost six years later, in July 2019. This amended protocol introduced a number of changes to the treaty:

-General withholding tax exemption for interest and a broader withholding tax exemption for certain dividends
-The introduction of mandatory binding arbitration under the mutual agreement procedure (MAP).
-Reinforcement of Assistance in the Collection of Taxes.
-Each Contracting State has an obligation to notify each other of any substantial changes in their tax laws, or any changes that affect their obligations under the applicable Treaty.

Key Points & Benefits Of The U.S.-Japan Tax Treaty
The amended Japan-US tax treaty entered into force in 2019, after Japan and the US officially exchanged instruments of ratification. The treaty provides several benefits for individuals and businesses in both countries:
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Written by | Posted in Expatriate Taxpayers • The U.S. - Japan Treaty For Expatriates

What Expatriates Need To Know: How U.S. Inheritance Tax Laws Might Impact Your Inheritance/Estate/Gift Tax

What Expatriates Need to Know: How U..S Inheritance Tax Laws Might Impact Your Inheritance/Estate/Gift Tax

A Guide To US Gift and Estate Tax For U.S. Expatriates

Are you worried about paying inheritance/estate/gift tax in the United States and your country of residence? In this guide, we’ll discuss what the inheritance tax is when it’s taxable and what tax obligation you might have in relation to inheriting an estate.

Losing a loved one is often an emotionally charged and complicated process. Things can get even more complicated by different laws and regulations if you’re inheriting property from someone who lives overseas or you reside abroad. It’s important to understand how US inheritance tax laws might impact you.

What Is An Inheritance? What is the Estate Tax?
The term “inheritance” refers to the transfer of wealth from a deceased person to his or her heirs. This includes real estate, stocks, bonds, cash, bank accounts, retirement plans, life insurance policies, etc. The estate tax is a state tax that you pay when you receive money or property from the estate of a deceased person.

What Is an Estate?
In the United States, a deceased person’s estate is a legal entity created after his/her passing. It is usually responsible for collecting the deceased person’s worldwide assets, paying off any outstanding debts, and distributing the rest among the deceased person’s beneficiaries. The estate includes everything the deceased person owned, whether real or personal property, tangible or intangible, anywhere in the world. The Estate tax is a tax on the estate (the property, money, and possessions) of someone who’s died.

How Much Can a U.S. Citizen Inherit Tax-Free?
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Written by | Posted in Inheritance Tax

A Guide To Recovery Rebate Credit For U.S. Expatriates

A Guide To Recovery Rebate Credit For U.S. Expats

If you’re one of the many U.S. expats who are owed stimulus money, you can still claim it through Recovery Rebate Credit. As the matter of fact, 2023 is the last year to get all the stimulus checks you might have missed! It will either boost the amount of your tax refund or reduce the taxes you owe to the IRS. Either way – you win! Don’t miss out on the opportunity to get the money you’re entitled to. Keep reading to find out how the credit works and what makes you eligible to qualify.

What is Recovery Rebate Credit?
Recovery Rebate Credit is part of the Covid-19 Economic Relief program. The credit makes it possible for those who didn’t receive Economic Impact Payments (also known as stimulus payments) to claim their missing money. So if you were eligible for stimulus payments but did not receive them (or you received a partial payment), you can claim them through Recovery Rebate Credit on your tax return.

How to claim Recovery Rebate Credit
Getting your Recovery Rebate Credit is not too complicated. You just need to file the right tax return and you’re good to go. For stimulus payments made in 2020 that you haven’t already received, you can claim the Recovery Rebate Credit on your 2020 tax return. And for payments made in 2021, you will need to file a 2021 tax return.

Even If you don’t usually file taxes but are otherwise eligible for stimulus checks, you will still need to file in order to get your money. And keep in mind – 2023 is the last year to do it! If you need any help along the way, don’t hesitate to reach out to us.

Recovery Rebate Credit vs Stimulus Checks
To put it simply – stimulus payments were actually just advanced payments of the tax credit. The U.S. government provided them in response to COVID-19, aiming to get money into the hands of taxpayers as fast as possible, without having to wait for them to file their tax returns.

In total, three rounds of stimulus checks have been paid out. The amounts you were eligible to receive varied depending on your filing status and other factors.

Recovery Rebate Credit 2020
The first and the second stimulus checks were advance payments of the 2020 Recovery Rebate Credit claimed on a 2020 federal tax return. They were sent out in 2020 and early 2021. Here’s how much the first 2 rounds of Stimulus Checks are worth:
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Written by | Posted in Recovery Rebate Credit • U.S. Expats

A Guide To ITIN Renewal For Taxpayers: How To Avoid Delays

A Guide To ITIN Renewal For Taxpayers: How To Avoid Delays

An Individual Taxpayer Identification Number (ITIN) is a unique identification number assigned by the Internal Revenue Service (IRS) to individuals who are required to have a taxpayer identification number but do not have, or are not eligible to obtain, a Social Security Number (SSN). The ITIN is used for tax purposes and is required for certain tax-related transactions. However, ITINs are assigned for a specific period and need to be renewed periodically to maintain their validity.

If an ITIN is not used on a federal tax return at least once in the last three consecutive years, it will expire. Additionally, ITINs that have the middle digits of 78 or 79 will expire at the end of 2021. It’s important to renew the ITIN in a timely manner to avoid any delays or complications when filing taxes or carrying out other tax-related transactions.

This guide will walk you through the renewal application process of your ITIN. From determining if your ITIN needs to be renewed, to gathering the necessary documentation, and submitting the form and federal tax return. By following this guide, you can ensure that your ITIN renewal process is smooth and without any delays.

How to renew your ITIN?
To renew an ITIN (Individual Taxpayer Identification Number), individuals must complete and submit Form W-7 to the Internal Revenue Service (IRS), along with the necessary documentation and a federal income tax return. Here is a step-by-step guide on how to renew an ITIN:

Determine if your ITIN needs to be renewed: An ITIN is valid for a specific period of time. If it has not been used on a tax return for at least three consecutive years, it will expire.

Gather the necessary documentation: Depending on your citizenship and residency status, you may need to provide proof of identity and foreign status. Examples of accepted documents include a passport, birth certificate, or national identification card.
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Written by | Posted in Expatriate Taxes • TaxConnections • Taxpayer ITIN Renewals

Being An Accidental American: A Tax Perspective

Being An Accidental American: A Tax Perspective

While being an American citizen comes with many privileges, it also comes with a host of tax obligations. This is where things get tricky for accidental Americans – people unaware of their U.S. citizenship. In recent years, the issue of accidental Americans has garnered attention due to the increasing global mobility and their potential to face significant financial consequences in the United States.

In this article, we will explore the challenges they are facing and discuss strategies for avoiding the tax implications of accidental citizenship.

Who Is an Accidental American?

An accidental American is a term used to describe someone who holds dual citizenship in the United States and another country, but is unaware of their U.S. citizenship status. They may have acquired U.S. citizenship even if they have never lived in the States or have only spent a limited amount of time in the country. For many accidental Americans, the discovery of their citizenship comes as an unpleasant surprise – often through a realization of the tax filing obligations to the United States.

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Written by | Posted in Accidental Americans

IRS Amnesty Programs For Accidental Americans And Other Late Filers

IRS Amnesty Programs for Accidental Americans and other late filers

The post was written by Kasia Strzelczyk of the 1040 Abroad Team.

It doesn’t come as a surprise that the IRS will be filling the budget hole in 2023 by cracking down on non-compliant U.S. citizens living abroad. Even expats that didn’t know about their debt may face some serious penalties and fines. To address your tax issues and take control of the situation – start learning about Tax Amnesty Programs the IRS offers. These procedures can help you come clean about your U.S. taxes while escaping all undesirable consequences.

What is a tax amnesty program?

The IRS is aware that many American Expats don’t know about their filing obligation to the U.S. The tax amnesty programs can be seen as a way to “clean the slate” and start fresh with regard to tax compliance. It allows delinquent taxpayers to pay their debt in exchange for avoiding severe tax penalties, and interest too.

Most expats who find themselves in the position of not having satisfied their U.S. tax obligations may feel as if fixing the situation is daunting. Contrary to popular belief, the financial consequences of your failure to file before may not be as severe as one might expect.

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Written by | Posted in Accidental Americans • U.S. Citizens Living Abroad And Taxes

U.S. Expat Tax Deadlines For 2023: What You Need To Know

U.S. Expat Tax Deadlines For 2023: What You Need To Know

With so much going on in our lives, it’s easy to get distracted and forget to pay attention to important things – like filing taxes on time.

Missing your deadline can result in some dire consequences, so we decided to help you out! Here’s a list of all the important dates and other useful information to help US expats stay on track with their taxes in 2023.

US Expat Tax Return Deadline For 2023

Residents of the United States are required to file a Federal Tax Return by April 18, 2023. One perk of being a US expat is that you’re given an extended deadline to file your tax return. That means that all US citizens living abroad will be granted an automatic two-month extension to June 15, 2023.

In case you’re worried about getting your taxes done by June 15, you can request an additional 6-months extension. Contact us today if you think you require more time to file your U.S. Expat Tax Return, and we’ll file an extension for you free of charge.

Due Dates For American Expats

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Written by | Posted in U.S. Expat Tax Deadlines

Guide To Renunciation Of U.S. Citizenship Abroad

Guide To Renunciation Of U.S. Citizenship Abroad

In this guide, we’ll discuss everything you need to know about the process of renouncing your U.S citizenship, how to book an appointment, waiting times you might expect, forms you need and how to complete them, interview tips and we’ll discuss the most common concerns US citizens have when renouncing your US citizenship. Everything we refuse to charge additional fees for because we believe that you can do it all yourself.

We understand that renouncing US citizenship is a life-altering decision that comes with an enormous amount of stress, doubt, and anxiety. We get many requests each week to help people prepare for their renunciation appointment.

We firmly believe that equipt with the knowledge you’re about to process, you can eliminate the stress and ease your anxiety. In fact, the process is simpler than you might think. At the end of the day, it is your right to decide whether you consider yourself to be a US citizen or not.

Renunciation Process

Section 349(a) of the Immigration and Nationality Act (INA) (8 U.S.C § 1481) governs the right of a U.S.citizent to renounce his or her U. S. citizenship. A person loses his/her U.S. citizen status if he/she voluntarily gives up his/her U. S. citi­zenship with the intent of relinquishing his/her U.S. citizenshi­p, making a formal renunciation before a diplomatic or consular officer of the United States in a foreign state.

In order for you to legally renounce your U.S. citizenship, you must:

1) appear in person before a U.Ss consular or diplomatic officer
2) in a foreign country at a U.S. Embassy or Consulate; and
3) sign an oath of renunciation

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Written by | Posted in Renounce U.S. Citizenship • TaxConnections

Guide To U.S. Inheritance And Estate Tax For US Expats

Guide To U.S. Inheritance And Estate Tax For US Expats

Are you worried about paying inheritance tax in the United States and your country of residence? In this guide, we’ll discuss what the inheritance tax is when it’s taxable and what tax obligation you might have in relation to inheriting an estate.

Losing a loved one is often an emotionally charged and complicated process. Things can get even more complicated by different laws and regulations if you’re inheriting property from someone who lives overseas or you reside abroad. It’s important to understand how US inheritance tax laws might impact you.

What Is Inheritance Tax?

The term “inheritance” refers to the transfer of wealth from a deceased person to his or her heirs. This includes real estate, stocks, bonds, cash, bank accounts, retirement plans, life insurance policies, etc. Inheritance tax is a state tax that you pay when you receive money or property from the estate of a deceased person.

What Is an Estate?

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Written by | Posted in U.S. Expats • U.S. Inheritance And Estate Tax
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