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Virginia La Torre Jeker
Many Americans living and working overseas are involved in charitable causes. The question often arises whether US expats living abroad can obtain the tax benefit for a charitable contribution deduction? The answer depends on various factors, including those discussed below.
Where is the Charity Organized or Created?
The mere fact that a United States taxpayer is living abroad will not prevent the taking of a charitable deduction on the tax return. The more critical consideration involves where the charity is created to which he is making the contribution. Under the US tax laws governing charitable deductions, the organization must be “created or organized in the United States or Read More
What is a “Sailing Permit”?
A Certificate of Compliance, or “Sailing Permit,” is a tax form that a foreign (non-US) individual must file with the IRS to demonstrate that he/she has paid all applicable U.S. taxes before departing the United States. The purpose of the “sailing permit” is to establish whether a departing foreign national owes any tax dollars to the US government before he leaves the country. Foreign executives and professionals working temporarily in the US can potentially be a large source of revenue for the US’ ailing fisc. The envisioned procedure was set to be easily administered. Prior to departure, the foreigner was to report to an IRS office and submit a preliminary tax computation, as well as pay the amounts due. The person Read More
France just hopped on the FATCA express November 14, becoming the 10th nation to sign an Intergovernmental Agreement (IGA) with the United States. FATCA, as the “Foreign Account Tax Compliance Act” is commonly called, was enacted in 2010, but has been implemented in stages. It has seen several delays and while many hold hope it will never be finally implemented, all indications are that FATCA’s momentum is unstoppable.
Generally, FATCA requires foreign (non-US) financial institutions (FFI) to sign an agreement with the US government to report information about accounts held by US persons or accounts held by foreign entities in which US persons have a substantial interest. If the FFI Read More
Commencing January 1, 2014, the “Affordable Care Act”, more derisively known as “OBAMACARE” will require that Americans carry so-called “minimum essential health coverage” (basically, health insurance) or suffer payment of a tax penalty. The provision applies to any individual who is a United States citizen or who qualifies as US “resident” for federal income tax purposes (e.g., a green card holder or one who meets the so-called “substantial presence” test). The rules apply to those individuals of all ages, including children. The married couple or adult who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have the required health coverage or if an exemption does not apply.
An important exemption exists for certain US persons who are living and working abroad if Read More
Just about everyone reading this blog is aware that the Internal Revenue Service has made international tax enforcement a top priority and that it is attempting to flush out taxpayers hiding assets offshore or earning unreported foreign income. One of the weapons available to the IRS is Form 926 “Return by a U.S. Transferor of Property to a Foreign Corporation”. In the wake of the UBS banking scandal, the IRS made significant changes to Form 926, requiring a greater amount of information than ever before. This is further discussed below.
What is Form 926? When is it Required?
US persons (e.g., US citizens, US green card holders) must make an information report to the IRS when making certain transfers to foreign (non-US) corporations. Specifically, when a US person transfers (or is treated under the tax rules as having transferred) property to a foreign corporation in certain “non-recognition” transactions (e.g., a contribution of capital to the company) a Form 926 must be filed and attached to that year’s income tax return. This is so, whether or not the property has appreciated in value. If cash is transferred to the corporation instead of property, the Form 926 must be filed when the cash transfers exceed US$100,000 over a 12-month period; or, regardless of amount, if immediately after the cash transfer, the transferor holds more than 10% of the total voting power or total value of the foreign corporation. Read More
Fear And Terror Caused by America – FATCA is Here to Stay
FATCA Express Leaves the Station – Coming Soon to Your Hometown
Yesterday the Department of the Treasury and the United States Internal Revenue Service (IRS) issued Notice 2013-69 for foreign financial institutions (FFIs) to comply with the information reporting and withholding tax provisions of the Foreign Account Tax Compliance Act (FATCA). The US Congress enacted FATCA in 2010 as the ultimate method to identify US persons using foreign accounts and entities to evade US taxes. Back in 2010, very few believed that FATCA would survive. Indeed, its implementation has been delayed several times. Now, however, FATCA is rapidly becoming the global standard to stop offshore tax evasion. We are seeing many other countries implementing FATCA wannabe laws and applauding the US model. The Treasury Department has now signed nine so-called Intergovernmental Agreements (IGAs), negotiated 16 agreements in substance, and is engaged in FATCA bargaining discussions with many more countries. All aboard the FATCA Express! Read More
Many non-US persons have children, grandchildren and succeeding generations who are US citizen or resident individuals. The foreign person often wishes to create a trust for, or implement some other form of estate plan that will benefit these US individuals, whether during the lifetime of the foreign person or upon his or her death. When US individuals are to be the beneficiaries of such planning, extreme care must be taken so as not to run afoul of the numerous US tax rules that can result in harsh taxation to the US beneficiary who receives distributions from a foreign (non-US or “non-domestic”) trust. The creation of a so-called “Dynasty Trust” may be of benefit in some cases and can assist in the saving of significant US tax dollars.
What is a Dynasty Trust? How Does it Work?
In the past, many US States had laws in place that prevented a trust from continuing its existence through multiple levels of generations. This law was known as the “Rule Against Perpetuities.” This Rule was designed to prevent rich families from tying up family assets in trusts that continued through many generations of heirs. The Rule Against Perpetuities has been changed in many States, and as a result, the so-called “Dynasty Trust” appeared. Read More
The IRS has been embarking on a new initiative: Track down and catch US Gift Tax evaders who have transferred real property to family members any time since 2005 without paying Gift Taxes owed. The IRS estimates that between 60% and 90% of taxpayers that transfer real property to family members fail to file and pay Gift Tax. In an attempt to raise desperately needed funds for the US Treasury, IRS started its Gift Tax compliance program in earnest by using the increasingly more popular tax enforcement tool called the “John Doe” summons.
Use of the John Doe Summons
When the IRS issues a “John Doe” summons to a party (most of us are now very familiar with this powerful tool due to the robust enforcement actions against the Swiss banking industry) it essentially compels that party to produce information requested by the IRS. The summons does not identify the persons with respect to whose tax liability it is issued since the IRS would not have the taxpayers’ names. In the Gift Tax Compliance Program, the IRS has been issuing John Doe summonses to State property tax authorities or State real property title offices. The summons typically requests identification of transferors of real property who did not charge the recipient at all or only charged a nominal price. Typically these are gifts of real property made between family members and in the usual case, Gift Tax was never paid on the transfer. Read More
If you hold a US Green Card, you can be deported for willfully filing a false tax return (or for aiding and abetting the filing of a false tax return), and, perhaps for willfully failing to file a so-called FBAR. The United States Supreme Court issued a decision on this very matter just last year.
Summary of Kawashima v. Holder
• A Japanese resident alien couple were convicted under the US tax laws for willfully filing a false tax return or aiding and abetting the filing of such a return
• They appealed their deportation under the Immigration and Nationality Act (8 U.S.C. §1227(a)(2)(A)(iii)) as aliens who had been convicted of a so-called “aggravated felony” based on their conviction.
• The United States Supreme Court, held that the crime of willfully making and subscribing a false tax return and the crime of willfully aiding and assisting the preparation of a false tax return are deportable offenses under the Immigration and Nationality Act. Read More
What Every American Investor Must Know
Many American investors are confused by sales pitches of expat investment advisors who are unfamiliar with United States tax laws. While it is true that no tax may be payable in the fund’s jurisdiction (Isle of Man, Guernsey or the UAE, for instance), significant US taxes are payable by the American owner. Confusion abounds when Americans invest in foreign mutual funds, life policies, savings plans, portfolio bonds and similar fund arrangements as compared to when they invest in US-based funds.
Generally, with a US fund virtually all of the income and the gains are distributed annually to investors and reported directly on their US tax returns. The fund sends both the investor and the IRS a form 1099 detailing the shareholder’s income earned in the fund. Foreign investment vehicles are not subject to this kind of disclosure. The American investor must flounder along and determine the proper US tax treatment of his investment.
The US tax laws are clearly designed to deter US persons from investing in offshore funds, whether the investment is made directly or indirectly (e.g., through a BVI company, non-US trust etc.). They prevent the income or gains from escaping US taxation and, impose harsh sanctions on the US investor eliminating any possible tax deferral. Read More
What if Someone Dies Owning an Undeclared Financial Account?
What Should The Heirs Do?
Henry Seggerman has first-hand experience with this type of situation. Without hesitation, my guess is that he’ll tell you to get the Estate into the IRS Offshore Voluntary Disclosure Program (“OVDP”). Henry is the son of a prominent New York businessman who passed away. Henry was named executor of his father’s estate, valued in excess of $24 million. Unfortunately, over half of this wealth, however, was maintained in secret and undeclared foreign bank accounts located in Switzerland and other jurisdictions. The father worked with his Swiss lawyer and other parties, arranging for over $12 million in the undeclared accounts to be left to his surviving spouse and five of his children, including Henry.
Henry’s position as executor charged him with various responsibilities, including filing an estate tax return for his deceased father. Henry signed the estate tax return for his father’s estate falsely underreporting its assets by over $12 million. Generally speaking one can say that an executor of an estate steps into the shoes of the deceased. Henry not only did that, he went a step further and perpetuated the fraud of the deceased. While this may possibly have pleased the deceased, it certainly did not please the Internal Revenue Service or the Department of Justice.
In order to access the undisclosed funds, the Swiss lawyer assisted Henry and three of his siblings (Suzanne Seggerman, Yvonne Seggerman, and Edmund Seggerman), in creating undisclosed Swiss bank accounts to hold the hidden money that they had inherited from their father. In order to tap the funds, Henry and his brother worked together, transferring funds from the brother’s Swiss account to a bank account for a foundation controlled by Henry. Henry then transferred the funds into the United States, in the guise of loan repayments. Read More