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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Is FATCA Aimed At Resident Americans, Residents Of Other Countries, Or Both? (Part 3 - Notice 2023-11)

Summary – The Reader’s Digest Version …

Although FATCA was clearly motivated by the behaviour of US citizens resident in the United States, Treasury did NOT interpret the “purpose” as being limited to prevent abuses by “residents of the United States”. Rather Treasury appears to have interpreted the purpose of FATCA (very broadly) to target residents of other countries.

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Deficiency For Disallowed American Opportunity Credit

Vassiliades v. Comm’r, T.C. Memo. 2023-1 | January 9, 2023 | Panuthos, J. | Dkt. No. 12283-20S.

Summary: This case involves whether taxpayers are allowed to claim the American Opportunity Credit (AOC) on their federal income tax return. In 2018, the IRS disallowed the AOC claimed by John M. Vassiliades and Eliza Ortizluis Vassiliades (Vassiliades) on their 2018 federal income tax return. Mr. Vassiliades has a daughter (AM) from a prior relationship, who lived in London and was enrolled in postsecondary education at the University College London (UCL). Mr. Vassiliades made several wire transfers to his daughter in an account in the UK to pay for school tuition, fees, and other expenses. Vassiliades claimed AM as a dependent in their 2018 tax return. Additionally, under Form 8863 Education Credits they claimed the AOC, consisting of a refundable education credit and a refundable credit regarding qualified education expenses paid during AM’s enrollment at UCL for 2018. However, Vassiliades did not receive a Form 1098-T, Tuition Statement, from the University for such year.

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Tax Director - International Job

Tax Director – International Tax Software (Remote Role)

(This is an ideal opportunity for a Tax Partner, International or Tax Director, International in a public accounting firm or corporation who enjoys international taxation and keeping up to date on tax legislation. Our client has plenty of clients utilizing their technology platform. You never have to bill clients again as this is not a public accounting firm. This is a very exciting opportunity to stay on top of international tax and be the person that keeps people informed on tax law changes and technology platform up to date. Very generous salary offered.)

TaxConnections Executive Search Services division has been retained to conduct a search for a Tax Director – International Tax Software for a privately held company headquartered in the United States with more than one hundred employees working remotely. This software company creates and licenses cutting-edge, innovative tax technology that is utilized by more than 1000 companies worldwide.  They are a leading global tax technology company committed to providing high value, affordable tax research, management, and solutions by combining technology with tax expertise to deliver optimal international tax solutions.

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Virtual Tax Office At TaxConnections

There is no denying the impact of the government shutdowns due to a global virus. However, it is during times like this that people make changes in their personal and professional lives. The focus of this article are the changes made in the world of the tax profession. Given the advances in technology and what is known as early adopters of technology, the focus of this article is an example of an early adopter of technology in the tax profession.

As you read this post you will think of more ideas and we welcome your comments on what you experienced as early adopters of technology in the tax profession. Throughout the year, I will write articles about the early adopters of new technology we discovered in the tax profession. You will learn specifically about tax professionals who joined our tax professional platform and the technical gifts they share with clients all over the world.

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IRS Postpones Implementation of $600 Form 1099-K Reporting by a Year

As a result of taxpayer confusion, lack of clear guidance, concerns about the existing backlog, and impact on the upcoming filing season, industry and stakeholders urged the IRS to postpone the implementation of the new reporting requirements of the Forms 1099-K. Good news: The IRS listened, and on Friday, December 23, the IRS issued Notice 2023-10 delaying the requirement for electronic payment networks to report transactions over $600 to the IRS on a Form 1099-K, Payment Card and Third Party Network Transactions, until 2024.
Key Points:

  • The IRS is delaying lowering the threshold for Form 1099-K reporting by a year. The $20,000 and 200 transactions thresholds remain in place through December 31, 2023.
  • The rules for reporting income are not changing. Anybody receiving taxable income paid through third-party networks must still track and report their taxable income.

Why does this matter for taxpayers?

A Form 1099-K is an information form typically provided to freelancers or small business owners who receive payments of income from a client via a third-party payment system (e.g., Venmo, PayPal, or Cash App) and it is often considered self-employment income. However, with the convenience of Venmo, PayPal, or Cash App, many individuals pay personal expenses as well as payments associated with goods and services with these apps.

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Tax Director - International Tax Software (Remote Opportunity)

Tax Director – International Tax Software (Remote Role)

TaxConnections Executive Search Services division has been retained to conduct a search for a Tax Director – International Tax Software for a privately held company headquartered in the United States with more than one hundred employees working remotely. This software company creates and licenses cutting-edge, innovative tax technology that is utilized by more than 1000 companies worldwide.  They are a leading global tax technology company committed to providing high value, affordable tax research, management, and solutions by combining technology with tax expertise to deliver optimal international tax solutions.

Given the advances in globalization, tax departments of multinational enterprises (MNEs) benefit greatly from their fully integrated software solutions. The company provides tax relevant workflow solutions that can be accessed by all stakeholders. They are powered by a comprehensive international tax research platform that tracks the tax laws of 195 countries and can be customized to an MNEs global footprint.

The Tax Director – International Tax Software will report directly to the CEO who was formerly a Tax Partner, International with a Big Four firm in Silicon Valley.

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C Suite Tax Executive To Lead Software Company (Remote Opportunity)

A software company is searching for a Tax Partner/Principal who wants to retire from public accounting firm early, yet has another chapter in their professional life to accomplish. Our client is searching for a leader to run a company and take it to the next level within 3-5 years. The development of this tax software company has reached a stage where they need a CFO and/or CEO who has experience in raising money to build the sales and marketing team. Another option the Founder is considering is a merger with another tax related company with a proven sales team in place.

What is interesting about this tax centric company is it is a very established brand with a loyal client base. The CEO will retire in 3 years or less or as soon as the new C Suite Executive(s) are ready to lead the company through the next stages of development and growth. The current team is comprised of more than one dozen dedicated consultants who get the work done and a Founder who understands the benefits of bringing the right team forward to move to the next level of success.

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A Definition Of U.S. Citizenship Taxation: How The U.S. Imposes Worldwide Taxation On People Who Live In Other Countries

Prologue

The term “citizenship tax” is abstract and meaningless without context. What does it really mean? In this short post I attempt to describe the defining aspect of US tax residency in simple terms.

Bottom line:

The ONLY contextual meaning of taxing based on citizenship is that it allows the US to impose tax on income earned outside the United States by people who live outside the United States.

Here is why …

What exactly is “citizenship taxation”? How/why does citizenship matter? It’s not what the “treaty partner” countries think!

1. Like all countries the United States imposes worldwide taxation on its residents. Individuals living in the United States will meet the “substantial presence” requirements and are therefore taxable on their worldwide income. Citizenship is irrelevant.

2. Like all countries the United States imposes taxation on income sourced in the United States. Generally the United States will have the first right of taxation and has the ability to withhold tax. Citizenship is irrelevant.

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Trust And Estate Tax Court Case: Taxpayer Fails To File FBARs, Underreports Income And Is Now Deceased. IRS Rules!

IRS Ruled Just in Pursuing Years of Underpayment and Fraud

Long-term inadequate filing of FBARs just lets the IRS loose to pursue fraud – international lack of cooperation and even death notwithstanding, as a recent case shows.

In Estate of Clemons v. Comm’r of Internal Revenue, the U.S. Tax Court has ruled that software entrepreneur Brett Clemons Sr., a holder of overseas accounts, underpaid his tax for several years and that his underpayments were due to fraud.

An American born in Florida, Clemons built a successful programming career and, in the mid-1980s, had started his own company and was soon working as an independent contractor for Hewlett-Packard U.S. By 2001 he was married with two children and opened an account with Union Bank of Switzerland (UBS).

He hid the account from his wife because he intended to get a divorce. The account had several features that helped Clemons (the account’s sole owner and signatory) hide it, and he paid UBS to hold his correspondence and to destroy any unclaimed mail after three years.

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Section 643(b) and Trusts

Recently, there seems to be some confusion regarding section 643(b) of the Internal Revenue Code of 1986, as amended (the “Code”), and its application to trusts. Indeed, that provision—particularly to those not well-versed in federal trust taxation—can confound many. This article seeks to dispel some of the complexity surrounding section 643(b).

The Taxation of Trusts Generally

The federal income taxation of trusts and beneficiaries puzzles even tax professionals. Does the trust pay tax? What about the beneficiaries? What is the difference between a grantor trust and a complex trust? The questions can become endless.

I don’t seek to answer all those here. But I will try to provide some background on certain trust concepts so that you are more familiar with them. First, let’s start off with general concepts associated with the taxation of trusts. In Subchapter J of the Code (which addresses the taxation of trusts), it states in the very first provision: “[t]he tax imposed by section 1(e) shall apply to the taxable income of . . . any kind of property held in trust[.]”[i] That same provision further clarifies that this income includes: (i) income accumulated in trust (even contingent income or income for the benefit of unascertainable persons); (ii) income that a trustee is required distribute to the beneficiaries; and (iii) income that the trustee has discretion to retain in trust.[ii] Accordingly, as a general rule, a trust pays income tax on its activities.

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Non-U.S. Banks May Be Forced To Sever Ties With US Citizen Clients Because Of FATCA (Part 2 – Notice 2023-11)

Introduction – The Readers’ Digest Version

This is Part 2 of a series of posts discussing the world of FATCA and how IRS Notice 2023-11 is likely to impact it. (Part 1 is referenced in the above tweet.) In Part 1 I described how Notice 2023-11 imposes significant additional obligations on both non-US banks and the IGA Model 1 governments. (This post will be best understood by first reading Part 1 and understanding the additional compliance burdens imposed on non-US banks as a result of Notice 2023-11.) The purpose of this post (Part 2) is to suggest that the overall context of FATCA, the FATCA IGAs and US citizenship taxation will incentivize non-US banks to purge US citizen clients. It is reasonable to conclude, that US citizen clients are a clear and present danger to their businesses.

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