It was early on a Monday morning, and I dragged myself in after a long weekend of reg. buzzing and Code section perusing. I was not looking forward to the day. I played a message on my answering machine that made me want to return home and crawl back into bed. It was left in the middle of the previous night by a crazed and panicked client living in Norway. She had just gotten a CP15 Notice from the IRS that said she had been charged a penalty in the amount of $10,000 under Section 6677 of the Internal Revenue Code (IRC) for failure to file Form 3520-A, under the requirements of IRC Section 6048(b).

The client was the owner of a foreign trust, and I knew we had properly filed Form 3520, “Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.” Foreign trusts with U.S. owners have the responsibility to file Form 3520-A, “Annual Information Return of Foreign Trust With a U.S. Owner,” which few of them do. So since IRC Section 6048(b) requires the owner of a foreign trust to ensure that this happens, we attached “substitute” Form 3520-A to Form 3520, in accordance with the instructions to Form 3520. Form 3520 and the attached substitute Form 3520-A were filed in August, but we had filed an automatic extension for the client’s tax return, which, according to the instructions to Form 3520, also extended the filing date for Form 3520.

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IRS Is Ending Its Offshore Voluntary Disclosure Program

The IRS is ending the Offshore Voluntary Disclosure Program (OVDP) this September 28th. This program has given U.S. taxpayers an opportunity to come forward with ‘previously undisclosed foreign income, accounts or assets with the promise and certainty that they will not face criminal prosecution.

Since the program’s inception in 2009, over 56,000 US taxpayers have paid over $11.1 billion in back taxes, interest, and penalties through the OVDP, but the number of participants has steadily declined over the past few years – from 18,000 in 2011 down to only 600 in 2017.

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Just when I was planning on publishing my post on foreign free lance income and tax consequences- the big news headline of 2017 dropped! Today special prosecutor, Robert Mueller brought charges against Manafort & Gates for money laundering and foreign bank accounts among any other things. While those fireworks continue and you think that you may not be in the same league as them, let me assure you that many U.S. citizens who live abroad and have freelance income do not understand its tax implications.

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Hale Stewart, Tax Advisor

As I have documented previously, there are several cases where courts have ruled against the grantors of a foreign asset protection trust, thereby nullifying the asset protection benefit. In this post, I want to briefly sum up the judicial reasoning used by the courts to thwart these trusts.

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Ephraim Moss

Following the trend of the past several years, the Tax Court continues to review foreign earned income exclusion cases at a relatively high rate. In most of the recent cases, the Tax Court has denied the FEIE claims on a number of different grounds.

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Ephraim Moss

In today’s age of “digital nomads,” working remotely overseas has become increasingly popular. More companies are adding remote working options in order to benefit from a broader talent pool and give employees more lifestyle choices.

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Manasa Nadig

Having moved around a lot growing up, I think I have had the most unique of experiences and, learnt to assimilate wherever I am, and to make connections with people. But of course, I never saw it as an advantage while I was still little. Having to say goodbye to friends more often than not and starting over in a new place was painful. Even with all the worldwide turmoil these days, travel continues to fascinate me. My husband and I would like to travel a lot when we are retired, which definitely differs from moving house from place to place, and that brings us to today’s topic.

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Ephraim Moss

Since their inception in 2009, the IRS tax amnesty programs have been fairly successful in encouraging delinquent taxpayers to come forward and disclose their offshore activities to the IRS. As the IRS receives more bank account information from foreign institutions however, it may begin to revisit amnesty applications to see whether the bank account info provides evidence that forgiven taxpayers did not in fact qualify for amnesty.

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John Dundon

The following was prepared by IRS Employees Bethany Barclay, Technical Specialist LB&I Division & Tracy McFee, CPA Technical Specialist LB&I Division regarding Foreign Earned Income Exclusion (FEIE).

Tracy and I met as guest panelists on the hit TV Show Tax Talk Today: Aliens, Immigration, and Taxes—Navigating the Shoals and I’ve grown to truly appreciate her knowledge base and skill set. She is a respectable public servant who I thank for allowing me to share her efforts in this venue.

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John Dundon Enrolled Agent

With all the political rhetoric about borders and boundaries circulating these days by “news media” outlets, the fact of the matter is US Taxpayers are increasingly working and living abroad everyday.

With that trend comes the fact that taxpayers and tax practitioners alike find it difficult navigating the shoals of Foreign Earned Income Exclusions (FEIE) reported on Form 2555 and Foreign Tax Credits (FTC) reported on Form 1116 causing all sorts of brain damage along the way.

Today’s post dives into Foreign Tax Credit (FTC).

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John Richardson BNN

The following is a response to comments made about an article written by Rachel Heller on medium.com titled, “Why I renounced my US citizenship (Hint: it’s not because I’m avoiding taxes!).” The article was well written, interesting and attracted responses from Homeland Americans. (It was reproduced here and attracted even more comments.) The comments from U.S. residents demonstrated again that they do NOT understand the problems experienced by Americans abroad.

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