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Tag Archive for IRS

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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What Are the Implications for Partnerships and Partnership Taxation Under the Republican Proposals for Tax Reform?

William Byrnes, Tax Advisor

Charles Lincoln, Esq. (LL.M. International Tax) authors this article analyzing from an international tax law perspective, what might be the effects of the new proposed partnership rules in the US?

Partnerships are a complex combination of sole proprietorship rules, corporate rules, and financial accounting rules—the tax consequences are outlined primarily in Subchapter K of the US Internal Revenue Code.[1] Partnerships often involve individuals and individuals with corporations acting as partners engaging in business. However, when comparing the US approach to partnerships, there can be differences—especially in the concept of opaque and flow entity through taxation. Opaque is when the profits are taxed at the corporate entity level and flow through is when the profits are taxed at the individual level.

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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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IRS Policy Needs to Reflect the Reality of Retirement for Today’s Taxpayers

Nina Olson, Taxpayer Advocate

Unlike private creditors, the IRS has wide discretion to exercise its administrative levy powers. Internal Revenue Code (IRC) § 6331(a) says the IRS can generally “levy upon all property and rights to property.” The IRS must make notice and demand for payment and in most instances provide collection due process (CDP) rights prior to levy. And under IRC § 6334, the IRS is prohibited from levying on certain sources of payments, such as unemployment benefits and child support. But overall, the IRS can cast a large net when it chooses to levy a taxpayer’s property, including funds in retirement accounts.
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Early Christmas Gift Announcement: US Overseas Taxpayers Subject to Three New IRS Scrutiny Campaigns & Audits Next Year

William Byrnes, Tax Advisor

Since the enactment of FATCA, US persons (citizens and green card holders) overseas have, via lobbying efforts, requested relief from the additional tax compliance burdens placed upon them that appear to be increasing their costs of living overseas (which is generally more expensive than living in the USA anyway).

Their arguments fall into the following three: (1) generally, they file foreign tax returns and pay local tax preparation services but must also pay an additional $2,000- $3,000 for a US tax preparation service specialized in foreign residence; (2) generally the foreign income exclusion and foreign tax credit wash out the U.S. tax burden but for anomalies in definitions between retirement plans that cause undue burden on foreign residents US persons; and (3) US persons must pay more for financial services because they have become the pariah of the financial world.

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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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IRS Has Not Yet Released Date For Accepting 2017 Tax Returns

Barry Fowler, Tax Advisor

It seems that a whole lot of taxpayers are anxious to get their taxes in to the IRS!

I’ve never seen the IRS issue a statement that they have yet to determine the date when they will be accepting tax returns; however, they’ve done just that this year.

Below, I outline various reasons that could be responsible for this sudden frantic rush:

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Green Card Holder Pleads Guilty of Failing to File FBAR and Report UBS Account, Will Pay More than Half the Assets in FBAR and Tax Penalties

William Byrnes, Tax Advisor

A Greenwich, Connecticut man pleaded guilty October 26, 2017, to failing to report funds he maintained in foreign bank accounts to the Department of Treasury, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia, and Chief Don Fort, IRS Criminal Investigation.

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IRS’ Information Reporting Program Advisory Committee Issues Annual Report Recommending FATCA Delays

William Byrnes, Tax Advisor

The Information Reporting Program Advisory Committee (IRPAC) has issued its annual report for 2017, including numerous recommendations to the Internal Revenue Service on new and continuing issues in tax administration. The report includes a discussion on how to improve some processes, such as for penalties, abatement requests and levies, as well as business master file entity addresses. The report also recommended enhancements to Form W-9 and the truncation of Social Security numbers on Form W-2, IRC § 6050S and Form 1098-T reporting.

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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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IRS Should Identify Potentially Frivolous Positions in the Letters It Mails To Taxpayers

Nina Olson, Taxpayer Advocate

In the early 1980’s, Congress became concerned with the rapid growth of deliberate defiance of the tax laws by taxpayers objecting to the payment of tax on frivolous grounds or through reliance on obviously unsupportable tax positions. As a result, Congress passed Internal Revenue Code (IRC) § 6702, which, as currently formulated, generally imposes an immediately assessable $5,000 penalty on tax returns adopting a position that the IRS has identified as frivolous or reflecting a desire to delay or impede the administration of Federal tax laws. This penalty, however, was primarily intended to address “protest” returns and was not aimed at taxpayers who were unintentionally non-compliant, such as in the case of innocent mathematical or clerical errors. The goal was to establish a regime that discouraged obstructive returns, but not one that adopted punitive measures against potentially good-faith taxpayers.

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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.

Have a question? Contact Katelynn Minott

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