Previously, we have look at the tax treaty tiebreaker and how it relates to taxation of Subpart F and PFIC income as well as eligibility for streamlined offshore procedures. This is another in a series of posts on the tax treaty tiebreaker (which is a standard provision in most U.S. tax treaties).
The Internal Revenue Code of the United States requires two things:
1. The calculation of taxes; and
2. The reporting of information.
The Internal Revenue Code of the United States is based on three basic principles:
1. A dislike of all things “foreign”. (If you see the word “foreign” a penalty is sure to follow.)
2. A hatred of all forms of non-U.S. “tax deferral”
3. An attempt to stop the “leakage” of “U.S. taxable assets” from the U.S. tax base. (Examples include the U.S. tax treatment of the “alien spouse” and the U.S. S. 877A “Exit Tax” that may be payable when one makes the decision to renounce U.S. citizenship).
Often taxpayers, whether Canadian or U.S. tax filers, are self-preparing their own returns with tax preparation software packages purchased in the market place. Problems arise numerous times in that the taxpayer not being aware of tax law, has omitted to file various required annual foreign information returns. This is likely due to the fact the software is not a professional version and/or the taxpayer-preparer is not reading any of the software return’s diagnostics.
If you are a U.S. expat that has invested or is considering investing in foreign mutual funds, there are a number of serious U.S. tax considerations that you should take into account. These considerations stem mainly from the characterization of most foreign mutual funds as so-called “PFICs” for U.S. tax purposes. They also stem from the fact that, with the advent of FATCA, the IRS is paying closer attention to foreign investments by U.S. persons. In this blog, we introduce you briefly to the world of PFICs and point out some of the specific tax issues associated with PFIC status:
Want Relief From Form 8621? Tax Professionals Love This Free Webinar With CE Credit!
You are invited to join us for a Complimentary Webinar Thursday May 12th at 1:00 EDT on the webinar everyone is talking about which saves a tax preparer 22 hours in preparing a PFIC calculation. While the IRS states it takes 24 hours to prepare Form 8621, we are going to show you how to prepare the form in less Read more
Complimentary Webinar on May 12th 2016 at 1:00PM EDT
TaxConnections highly recommends tax professionals join this free webinar presentation! You will benefit learning how to turn what is a nightmare IRS Form to fill out on PFIC. Mary Beth Lougen and William Kiss present the amazing software and they will even give you a User Read more
Attend Form 8621 Calculation Webinar- Receive 5 Complimentary Calculations For PFIC
In the vast world of US international taxation, computation of the 1291 tax, Mark to Market, and QEF Elections for clients owning Passive Foreign Investment Companies (non-US mutual funds) has become a mainstay and a major headache for most US tax practitioners. The IRS regulations for PFICs are some of the most complicated in the entire US Code. The amount of time spent Read more
Tax Professionals! You Are Invited To A Complimentary Webinar
Reporting Of Passive Foreign Investment Income
The IRS states it takes 24 hours and we have reduced it to one hour preparation time..
Want to learn how? Join us on May 12th 2016 at 1:00PM EST
SEATING LIMITED – 500 TAX PROFESSIONALS Read more
Form 8621 Calculator Dramatically Reduces Preparation Time For Tax Professionals!
As the Internal Revenue Service (IRS) steps up efforts to find delinquent taxpayers around the world, U.S. expats are being forced to complete more and more forms to comply with the U.S. tax obligations. The introduction of the Foreign Account Tax Compliance Act (FATCA) has provided even more strength to the Read more
I understand that if my income is all from Canada I will have no U.S. tax payable, then why is the cost of the U.S. tax preparation so expensive relative to my simple Canadian T1 return?
For most U.S. persons residing in Canada, there may be no tax payable if substantially all of your income is from Canadian sources because of the foreign tax credit mechanism. The annual inflation-adjusted foreign earned income exclusion ($97,600-2013) which is a deduction in arriving at adjusted gross income on the U.S. 1040 tax return, may exclude your T4 or self-employment income from taxation. However leakage may result if income determination for U.S. tax purposes under the IRS Code and Regulations is different from Read more
The PFIC regime was not introduced until 1986. Prior to 1986, U.S. taxation of foreign corporations was strictly tied to control of the corporation held by U.S. persons. This allowed not only the foreign mutual fund to avoid U.S. taxation, but also U.S. persons who invested in the fund. How so?
For starters, the fund itself avoided U.S. taxation because it was a foreign corporation that derived only foreign-source income. The fund was able to avoid the taint of being classified as a controlled foreign corporation, or “CFC” because it was owned by a large number of U.S. and foreign investors, each of whom owned a relatively small percentage.
U.S. investors avoided U.S. taxation in two primary ways. First, the fund paid no dividends. Read more
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Forms Required By #Americansabroad 101 – The Explanation
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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