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Archive for Expatriate

What US Expats Who Receive Form W-9 from a Foreign Bank Should Do

Hugo Lesser, Tax Advisor

Over the last few years, millions of US expats have been asked by their foreign banks and investment firms to fill out IRS form W-9. Receiving form W-9 often causes surprise or alarm. While there’s no need to panic, there are a number of things that expats should know if they receive form W-9, to ensure that they don’t create any problems in the future. Read more

Filing IRS Back Taxes for US Expat Americans

Hugo Lesser, Tax Advisor
American expats are still required to file a US federal tax return to the IRS. As expats also have to comply with the tax rules in the country where they live, it’s counterintuitive but nonetheless important that they file US taxes too.
Taxing US citizens abroad, or Citizenship (rather than Residence) Based Taxation, dates back to the Civil War, but until recently the IRS was powerless to enforce expat taxes, so few expats filed.

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Americans Who Have Renounced Their Citizenship Heading for Record Year

Ronald Marini, Tax Advisor

As many as 1,400 Americans have renounced their citizenship in the third quarter of 2017, according to US Treasury Department data. The trend suggests the total for 2017 will be more than 6,800, which is 26% above the 2016 total and 56% higher than 2015.

Americans are on pace to renounce their citizenship in record numbers in 2017, according to the latest quarterly report from the Treasury Department.

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International Tax Reform & Can Wealthy Americans Move to Virgin Islands and Not Pay Federal Capital Gains Tax?

William Byrnes, Tax Advisor

The Senate Finance Committee Modified Mark has published the modification to source rules involving possessions; the following is a description and analysis of the proposal:

The proposal modifies the sourcing rule in section 937(b)(2) by modifying the U.S. income limitation to exclude only U.S. source (or effectively connected) income attributable to a U.S. office or fixed place of business. The proposal also modifies section 865(j)(3) by providing that capital gains income earned by a U.S. Virgin Islands resident shall be deemed to constitute U.S. Virgin Islands source income regardless of the tax rate imposed by the U.S. Virgin Islands government.

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Claiming the Foreign Earned Income Exclusion when Filing a Late Return – What US Expats Need to Know

Hugo Lesser, Tax Advisor

The Foreign Earned Income Exclusion lets US expats exclude the first around $100,000 (the exact figure rises a little each year) of their earned income from US taxes.

It’s a great choice for many expats who earn less than this threshold, and sometimes a good option for expats who earn above the threshold too.

To claim the Foreign Earned Income Exclusion, expats have to file form 2555 with their annual US tax return. Form 2555 requires expats to prove that they live abroad.

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Top Year-End Tax Planning Strategies for US Expats in 2017

Hugo Lesser, Tax Advisor

Year-end tax planning is slightly different this year due to the proposed changes to the tax system. Despite this uncertainty however, there is still plenty that expats can do before the holidays to make their lives easier in 2018. They can even save some money, too!

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Trump Tax Reform Bill Analysis – What Does It Mean For US Expats?

Hugo Lesser, Tax Advisor

On November 2nd, the House of Representatives unveiled the first draft of the Trump Tax Reform Bill. Here we look at how it will affect expats.

Citizen Based Taxation and FATCA 

There is no mention in the draft Tax Reform Bill of any change to citizen based taxation for individuals, or of repealing FATCA.

It is proposed that corporations are only taxed on their US profits (rather than globally), as taxing corporations globally has (conversely to expectations) reduced government revenue, as globally operating firms have simply relocated to other countries with more favorable tax regimes.

Despite ACA (American Citizens Abroad) lobbying to make a similar change away from global taxation for expat individuals, there is no mention of this in the draft bill. Read more

What US Expats Can Learn From the Paul Manafort Indictment

Hugo Lesser, Tax Advisor

President Trump’s former campaign manager Paul Manafort, along with his associate Richard Gates, were indicted last week, with a long list of criminal charges filed against them.

The charges include engaging in conspiracies against the United States and to launder money, making false statements, acting as an unregistered foreign agent, and failing to report foreign bank and financial accounts.

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What Can We Learn From Paul Manafort’s Tax Problems?

Clinton Donnelly, Tax Advisor

What will the IRS do with Paul Manafort if the special prosecutor’s allegations are true? On October 30, 2017, the special prosecutor released an indictment against Paul Manafort, former campaign manager for President Trump, related to his actions as an unregistered agent of the Ukraine government. The prosecutors allege that Manafort had opened 16 foreign companies and conspired to money launder over $18 million of payment through these companies.

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US Expats Renouncing American Citizenship – What You Need to Know

Hugo Lesser, Tax Advisor

Americans living abroad are still required to file a US tax return, reporting their worldwide income, as well as obey the tax rules in the country where they live.

Many US expat have settled abroad permanently though, and they justifiably wonder why they must continue filing a US tax return every year, even if they don’t pay any US taxes because they claim one or more of the exemptions available to expats, such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, when they file.

As a result, many US expats consider renouncing their American citizenship.

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Top 3 Reasons US Expats Should Catch Up With Their IRS Tax Filing Using the Streamlined Procedure

Hugo Lesser, Tax Advisor

Living abroad is an incredible adventure that inevitably broadens our horizons and minds, thanks to the perspective we gain from living in a foreign country and experiencing a new culture.Living abroad is an incredible adventure that inevitably broadens our horizons and minds, thanks to the perspective we gain from living in a foreign country and experiencing a new culture.

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2018 IRS Income Tax Deduction And Exclusion Rates – What US Expats Need to Know

Hugo Lesser, Tax Advisor

The IRS has announced the annual inflation adjustments for over 50 tax provisions for the 2018 tax year. In this article we’ll look at how some of those provisions will affect expats. It’s worth bearing in mind though that some of the new adjustments announced may never happen, assuming that the Trump Tax Reform Plan is passed before it’s time to file 2018 tax returns. Assuming that they do though…

The IRS has announced the annual inflation adjustments for over 50 tax provisions for the 2018 tax year. In this article we’ll look at how some of those provisions will affect expats. It’s worth bearing in mind though that some of the new adjustments announced may never happen, assuming that the Trump Tax Reform Plan is passed before it’s time to file 2018 tax returns. Assuming that they do though…

Standard Deduction & Personal Exclusion
American expats find themselves in the almost unique position of having to file US taxes even if they live abroad. This is because the US taxes based on citizenship rather than on where someone lives. As such the Standard Deduction and Personal Exclusion Rates are as relevant to expats as they are to Americans living Stateside.

The standard deduction for married expats filing jointly will rise from $12,700 in 2017 to $13,000 for tax year 2018. For single taxpayers and married individuals filing separately, the standard deduction will rise from $6,350 in 2017 to $6,500 in 2018, and for heads of households, the standard deduction will rise from $9,350 in 2017 to $9,550 for tax year 2018.

The personal exemption for tax year 2018 will rise from $4,050 to $4,150. The exemption is subject to a phase-out that begins with adjusted gross incomes of $266,700 ($320,000 for married couples filing jointly). It phases out completely at $389,200 ($442,500 for married couples filing jointly.)

It’s worth noting though that the Trump Tax reform plan proposes scrapping the personal exemption altogether and increasing the standard deduction to compensate, so it may well be that the figures currently proposed for 2018 never actually happen. The Foreign Earned Income Exclusion is one of the primary exemptions that expats can claim to prevent them paying US taxes on their income earned abroad, assuming they can prove that they live abroad by using either the Bona Fide Residence Test or the Physical Presence Test.

It is normally a good option for expats who earn less than around $100,000 and who pay a lower rate of income tax (or no income tax) abroad.

The exact amount of earned income that expats can exclude though rises a little each year in line with inflation, and the 2018 amount will rise from $102,100 in 2017 to $104,100 in 2018.

Retirement plan limitations and estate tax exclusion
Retiring abroad has never been more popular, however expats who have retired abroad or are thinking about retiring abroad should remember to consider the tax implications, both US and foreign, as part of their planning.

In 2018, employees who participate in 401(k), 403(b), most 457 plans will see the annual contribution limit rise from $18,000 to $18,500.

The basic estate tax exclusion will also rise in 2018, to $5,600,000 (from $5,490,000 in 2017).

Expats who need to catch up with their US tax filing
More and more expats who weren’t aware that they were required to file US taxes from abroad are choosing to catch up by using the Streamlined Procedure IRS amnesty program. The Streamlined Procedure requires expats to file their last 3 tax returns and last 6 FBARs (as appropriate), and self certify that their previous failure to file wasn’t willful evasion.

The Streamlined Procedure offers expats a way to catch up without facing any IRS penalties.

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