by Catherine | Feb 20, 2016 | IRS |
Top Twelve Investment Mistakes Made By Americans Abroad David Kuenzi, CFP®, Founding Partner, Thun Financial Advisors (www.thunfinancial.com) 1) Buying foreign mutual funds. Foreign mutual funds may seem attractive to an American living abroad. However, in the view of the IRS, a foreign mutual fund is considered a Passive Foreign Investment Company (PFIC) and is a tax nightmare for U.S. tax filers. If you are a U.S. citizen or a U.S. permanent resident who has been living and working outside the U.S. and investing your savings through a non-U.S. financial institution, you need to understand PFICs quickly. PFICs are subject to special, highly punitive tax treatment by the U.S. tax code. Not only will the tax rate applied to these investments be much higher than the tax rate applied to a similar or identical U.S. registered investments, but the cost of required accounting/record-keeping for reporting PFIC investments on IRS Form 8621 can easily run into the thousands of dollars per investment each year. 2) Doing Nothing. Many American expats find themselves so overwhelmed by the complex rules and many horror stories they have heard about investing while living abroad that they are cowered into taking no action at all. However, remaining in cash will not provide for a comfortable retirement for yourself or a college education for your kids. Investing efficiently and compliantly while living abroad can be daunting, but it does not have to be overwhelming. A little research can go a long way. Qualified advisors can be found. Do not give up. This is too important. 3) Not understanding the underlying currency exposures of their portfolio. Expat...
by Catherine | Feb 6, 2016 | IRS, News |
This post courtesy of IRS News Release: “Hiding Money or Income Offshore Resides on the IRS ‘Dirty Dozen’ List” IR-2016-17, Feb. 5, 2016 WASHINGTON — The Internal Revenue Service today said avoiding taxes by hiding money or assets in unreported offshore accounts remains on its annual list of tax scams known as the “Dirty Dozen” for the 2015 filing season. “Our continued enforcement actions should discourage anyone from trying to illegally hide money and income offshore,” said IRS Commissioner John Koskinen. “We have voluntary options to help taxpayers get their taxes and filing obligations in order.” Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 54,000 disclosures and we have collected more than $8 billion from this initiative alone. The IRS conducted thousands of offshore-related civil audits that have produced tens of millions of dollars. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions. The IRS remains committed to our priority efforts to stop offshore tax evasion wherever it occurs. Even though the IRS has faced several years of budget reductions, the IRS continues to pursue cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on U.S. soil. Through the years, offshore accounts have been used to lure taxpayers into scams and schemes. Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime, but many of these schemes peak during filing season as people prepare their returns or hire people to help with their taxes. Illegal scams...
by Catherine | Jan 16, 2016 | IRS |
Non-US Author, do I need an ITIN? I am a resident from Australia and I have no ties (work or personal) to the USA. I would like to publish my books on Amazon KDP, Createspace, Smashwords, etc. and complete my tax interview. But the form requires me to provide a US ITIN. Is this really required? Please advice, thanks! Maybe not! On Form W-8 BEN, you may submit your non-US tax identification number if there’s a tax treaty with your country. For Australia, use your TFN (Tax File Number) and claim a reduced tax withholding rate for royalties – per the US/Australia tax treaty. Also the tax interview on Amazon KDP, Createspace, etc will complete Form W-8 BEN for you. Amazon and Smashwords are required by law to withhold 30% of the royalties earned by non-US authors unless there’s a US tax treaty in place for reduced withholding rates. Australia is one of those countries and the Royalties withholding rate is 5%. If you do not have a tax file number for some reason, you will have to get an ITIN or EIN. Sometimes an ITIN (Individual Taxpayer Identification Number) is required for withholding after you’ve reached a certain threshold of sales. The ITIN is often confused with a SSN because it is exactly the same format, but it begins with a ‘9’. If you’ve had withholding at 30%, you’ll want to file a US tax return to claim any refund owing. You’ll require an ITIN to complete Form 1040NR. This form can be obtained from the IRS Forms & Publications page. All this US tax stuff is confusing and could...
by Catherine | Jan 2, 2016 | IRS |
Expats: 10 tax tips for 2016 Expats here’s a list of 10 facts you need to know when filing your 2015 US tax return. Filing season opens January 19. Do you really need to file US taxes? If you’re an American with income in excess of your filing threshold (converted to USD), the answer is YES! What about the Earned Income Exclusion you ask? You must file to claim it. Tax Identification Number. Did you get married in 2015? Even if your spouse is not an American, you can still claim their personal exemption on your Married Filing Separate tax return – but you need to apply for an Individual Tax Identification Number (ITIN) for your spouse. New Baby ? Depending on your circumstances, a child born abroad may be eligible for a social security number – or not. Either way, you’ll need a Tax ID Number (TIN) to claim your dependent on your US tax return. Filing Status – consider your options: Married to Non-Resident Alien (NRA) Spouse? Could file Married Filing Separate or Married Filing Jointly, and report worldwide income, consider your personal goals. Married to NRA spouse with child(ren) – could be Head of Household or Married Filing Separate. Personal exemption has been increased to $4,000 up from $3950. Physical Presence Test or Bona Fide Residence to qualify for Foreign Earned Income Exclusion (FEIE). For 2015, FEIE has reached 6 figures – $100,800 (up from $99,200 in 2014) Foreign Tax Credit (FTC) – apply tax paid to foreign country to your IRS tax Extension – Expats have an automatic extension to June 15, 2016 to file...
by Catherine | Dec 30, 2015 | IRS |
Taxpayer Bill of Rights The tax code includes numerous taxpayer rights, but they are scattered throughout the code, making it difficult for people to track and understand. Similar to the U.S. Constitution’s Bill of Rights, the Taxpayer Bill of Rights contains 10 provisions. They are: The Right to Be Informed The Right to Quality Service The Right to Pay No More than the Correct Amount of Tax The Right to Challenge the IRS’s Position and Be Heard The Right to Appeal an IRS Decision in an Independent Forum The Right to Finality The Right to Privacy The Right to Confidentiality The Right to Retain Representation The Right to a Fair and Just Tax System The rights have been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. Millions of these mailings go out each year. The new version has been added to IRS.gov, and print copies will start being included in IRS correspondence in the near future. PATH Act The PATH Act, passed recently includes provision for the Tax Commissioner to ensure that IRS employees are familiar with and act in accordance with the Taxpayer Bill of Rights. In addition, taxpayers who have been victimized by the IRS, for example through the unauthorized disclosure of private tax information, to find out basic facts, such as whether the case is being investigated or whether the case has been referred to the Justice Department for prosecution. Taxpayer Advocate Service The IRS released the Taxpayer Bill of Rights following extensive discussions with the Taxpayer Advocate Service, an independent office inside the...
