by Catherine | Feb 26, 2015 | IRS |
As an American living abroad, you may receive a Refund from the Child Tax Credit if you have a qualified child. That’s right, a refund from the IRS, even if you didn’t pay any tax in. Here’s what you need to know: Amount. The child tax credit may reduce your income tax by up to $1,000 per qualifying child you are eligible to claim on your tax return. Additional Child Tax Credit. If you qualify, you could get a refund even if you owe no tax with the Additional Child Tax Credit. Qualifications. For this credit, a qualifying child must pass several tests. Age test. The child must be under 17 years of age at the end of 2014. Relationship test. The child must be your son, daughter, stepchild, foster child, adopted child, brother, sister, stepbrother, or stepsister or descendant of these individuals. Joint return test. The child cannot file a joint return for the year, unless the only reason filing is to claim a refund. Citizenship test. The child must be a US Citizen, US National, or U.S. Resident Alien. Residence test. In most cases, the child must have lived with you for more than half of 2014. Limitations. The child tax credit is subject to income limitations. The limitations may reduce or eliminate your credit depending on your filing status and income. If you have questions about the Child Tax Credit or any other questions about US taxes for Americans living abroad, please contact me for assistance. Unless the above message (“this message”) expressly provides that the statements contained therein (“the statements”) are intended to constitute written tax...
by Catherine | Feb 15, 2015 | IRS |
Superannuation As an American living and working in Australia, it’s important to understand what to do with Super when reporting your earnings on your US Tax return. What category for Super Guarantee Contribution (SGC)? Keep in mind the IRS does NOT recognize Your Super as a retirement fund. It is viewed as earned income and must be reported on your US Tax Return. That’s the Bad News. The Good News is the tax withheld from your Super Account can be used as Foreign Earned Income Credit on Form 1116. You must file a U.S. Income tax return to take advantage of this credit. It is not provided automatically. All earnings in your Super Fund(s) – dividends, interest, rental income – must also be reported on your U.S. tax return. If you have a Self Managed Super Fund – there may be reporting issues of a Foreign Trust (topic for another day). Remember also to include your Super Accounts on your FBAR report to the US Treasury. While Superfunds earned the right not to report directly to the IRS via FATCA, you are still required to report any accounts in Foreign (non-U.S.) banks and institutions with an accumulated balance of $10,000 USD or more. It is highly important your accounts are reported accurately on FBAR now that IDES reporting has begun. As with any article written about U.S. tax, this is not advice. If you have questions regarding Super, or any other US tax reporting issues, please Get In...
by Catherine | Feb 14, 2015 | IRS |
Tax Payer did not file a tax return for 2010. When is the last date the IRS can assess tax? A. The tax may be assessed at any time B. On April 15, 2013 C. On December 31, 2013 D. On December 31, 2020 Correct Answer: A Explanation: In most cases, the IRS has three years from the due date of the return or the date actually filed (whichever is later) to assess any additional taxes that may be owed. This is known as the Statute of Limitations. The clock starts ticking once your tax return is filed with the IRS. Late filing is better than No Filing. File US Tax Return Many benefits such as the Refundable Child Tax Credit, are lost if your U.S. Tax Return is not filed within 3 years of Due Date. Beneficial calculations, such as using Foreign Earned Income Exclusion (FEIE) are not automatically applied to your situation. In order to use favorable calculations, you must file your US tax return. The IRS generally has 10 years from the date of assessment to collect a timely assessed tax liability. In the case of failure to file a return, the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time. Do you have a change in your circumstances? Will you begin receiving Social Security benefits? Will an inheritance be coming your way? Did you clean out your IRA for a down payment on a house? These types of activities attract attention from the IRS. It’s not too late to file...
by Catherine | Jan 12, 2015 | IRS |
This is a significant advance in the implementation of FATCA. The IRS news release reposted (in part) below: IRS Launches International Data Exchange Service; Supports Reporting under FATCA and Intergovernmental Agreements IR-2015-01, Jan. 12, 2015 WASHINGTON — The Internal Revenue Service announces the opening of the International Data Exchange Service (IDES) for enrollment. Financial institutions and host country tax authorities will use IDES to securely send their information reports on financial accounts held by U.S. persons to the IRS under the Foreign Account Tax Compliance Act (FATCA) or pursuant to the terms of an intergovernmental agreement (IGA), as applicable. More than 145,000 financial institutions have registered through the IRS FATCA Registration System. The U.S. has more than 110 IGAs, either signed or agreed in substance. Financial institutions and host country tax authorities will use IDES to provide the IRS information reports on financial accounts held by U.S. persons. “The opening of the International Data Exchange Service is a milestone in the implementation of FATCA,” said IRS Commissioner John Koskinen. “With it, comes the start of a secure system of automated, standardized information exchanges among government tax authorities. This will enhance our ability to detect hidden accounts and help ensure fairness in the tax system.” (emphasis added) Where a jurisdiction has a reciprocal IGA and the jurisdiction has the necessary safeguards and infrastructure in place, the IRS will also use IDES to provide similar information to the host country tax authority on accounts in U.S. financial institutions held by the jurisdiction’s residents. Using IDES, a web application, the sender encrypts the data and IDES encrypts the transmission pathway to protect...
by Catherine | Nov 14, 2014 | IRS |
2015 Tax Season “Worst Filing Season” IRS Commissioner John Koskinen warned that half the people trying to get through to the IRS by phone may not get through. “Phone service could plummet to 53%” he told an audience of tax practitioners at the AICPA National Tax Conference in Washington, D.C. Which is down from an already unacceptable 72% during the 2014 filing season. FATCA Withholding This will be the first filing season with FATCA (Foreign Account Tax Compliance Act) Withholding. Under FACTA, to avoid being withheld upon, foreign financial institutions (FFIs) may register with the IRS and agree to report to the IRS certain information about US held accounts. FFIs with the agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments, if the payees do not comply with FATCA. US Taxpayer Advocate National Taxpayer Advocate, Nina Olson expects that implementation of FATCA will cause trouble this filing season. Taxpayers trying to get a refund back in a timely manner could be an issue. “If they are overseas, who are they going to call? There’s not a toll free number,” Olson said. US Tax Consult If you’re experiencing any difficulties as you work through the maze that is the IRS tax code and your responsibilities, let’s...
by Catherine | Nov 4, 2014 | IRS |
Back Taxes? If you haven’t filed your US tax return in a few years, it’s time to get back on track. If you’re a US Citizen or Green Card holder just living your life, you may not have been aware of the need to file a tax return with the IRS. You may be entitled to tax credits that result in the IRS owing you a tax refund. If the IRS does owe you a refund, you only have three years from the date your return was due to file and claim that money. You won’t have to worry about penalties for not filing if you’re entitled to a refund, because those penalties only apply if you owe taxes. American living in Australia – no worries Most Americans living in Australia pay more tax to the ATO then would be required if living in the US – and don’t owe any tax to IRS. There is no penalty for failure to file if you are due a refund. But if you wait to file a return or otherwise claim a refund, you risk losing your refund altogether. You must file an original return within three years of its due date to claim your refund in most instances. Failure to File with IRS If you owe taxes and have not filed a timely return, you may be subject to the failure to file penalty, unless you can show reasonable cause for failing to file timely. If you are required to file a return, but you cannot pay all of the tax due on your return, the IRS may be able...
by Catherine | Oct 12, 2014 | IRS |
American living abroad and sweating the October 15 tax filing deadline? Here is a possible solution. You may be able to qualify for a further extension of time for filing your 2013 tax return — to December 15, 2014. Summary For American taxpayers living abroad, if you want to get a filing deadline of December 15, 2014 for your 2013 Form 1040, do this: On or before June 15, 2014, file Form 4868. On or before June 15, 2014, pay whatever tax you have to pay for 2013, along with that Form 4868 you are filing. On or before October 15, 2014, write a letter and mail it to the IRS. File your 2013 Form 1040 on or before December 15, 2014 with all proof of mailing and copy of the letter (step 3) Provided you completed steps 1 and 2 in a timely manner, for Americans living in Australia, you can gain an additional 2 months to file (not an extension to pay any tax owing) by following the steps outlined below: Write a Letter to IRS From the Internal Revenue Service, Treasury: 1.6081-1 Application For Extension Of Time— ….taxpayers may apply for an extension in a letter that includes the information required by this paragraph. Except as provided in § 301.6091-1(b) of this chapter (relating to hand-carried documents), the taxpayer should make the application for extension to the Internal Revenue Service office where such return, statement, or other document is required to be filed. Except for requests for automatic extensions of time to file certain returns provided for elsewhere in this chapter, the application must be in...
by Catherine | Oct 9, 2014 | IRS, News |
Same-Sex Marriage in more US States The Supreme Court in Washington, D.C. on Monday, October 6, 2014 turned away appeals from five states seeking to prohibit same-sex marriages. As October began, a total of 19 states had legalized same-sex marriages, before the Supreme Court decision on Monday to deny the appeals from: Virginia, Utah, Oklahoma, Indiana, and Wisconsin. A day later, a three-judge panel of the 9th US Circuit Court of Appeals in San Francisco ruled the bans in Idaho and Nevada violated the constitution and cannot be enforced, adding to a growing list of states where same-sex unions are now legal. Rulings by the court are binding on all states in it’s region including three states that do not permit gay marriage, Arizona, Montana and Alaska. IRS and Same-Sex Marriage The IRS recognized same-sex marriage on Federal Tax returns beginning September 16, 2013. Treasury Secretary Jacob Lew said the rules provide “clear, coherent tax-filing guidance for all legally married same-sex couples.” This guidance clarified that same-sex couples that are legally married in any state or foreign jurisdiction are considered married for federal tax purposes—irrespective of where they now live. This guidance defines “state” to include any territory or possession of the United States and “any foreign jurisdiction having the legal authority to sanction marriages.” The term “marriage” does not include domestic partnerships, civil unions, and other similar formal relationships under state law. To determine marital status based on the current state of residence would create a compliance disaster. This uniform guidance from the IRS provided welcome clarification regarding who will be considered married under federal law. Treasury-Internal Revenue Service...
by Catherine | Sep 30, 2014 | IRS, News |
Tax filing extension expires on October 15. More than a quarter of the nearly 13 million taxpayers who requested an automatic six-month extension this year have yet to file. “If you still need to file, don’t forget that you can still use IRS e-file through October 15,” said IRS Commissioner John Koskinen. “Many people may not realize they can still file their tax return for free through the IRS Free File program available on IRS.gov. Even if you’re filing in the final days, e-file remains easy, safe and the most accurate way to file your taxes.” Taxpayers with extensions should file their returns by Oct. 15, even if they can’t pay the full amount due. Doing so will avoid the late-filing penalty, normally five percent per month, that would otherwise apply to any unpaid balance after Oct. 15. However, interest, currently at the rate of 3 percent per year compounded daily, and late-payment penalties, normally 0.5 percent per month, will continue to accrue. If you need to file you’re 2013 tax return, and would like to use e-file, contact me. I offer e-file services. ...
by Catherine | Sep 30, 2014 | IRS, News |
In US Tax Court – Topsnik v IRS, it was determined that a US Lawful Permanent Resident (LPR) or Green Card Holder, must continue to file taxes with the IRS unless or until their Green Card is Revoked. Specifically, form I-407 must be filed with the INS. Mr. Topsnik applied for his Green Card in 1977. He began a business in California in 1986. He then sold his interest in the business in 2004, taking a down payment and installments through 2009. He filed a tax return for 2004 and 2005 (both years late) but did not file from 2006 – 2009 so the IRS created tax returns on his behalf. Mr. Topsnik retained his LPR status until November 20, 2010, when he abandoned it by filing a U.S. Citizenship and Immigration Services (USCIS) Form I-407, Abandonment of Lawful Permanent Resident Status, on which he stated that his “intended or actual permanent residence abroad” would be in the Philippines, and he surrendered his green card to the USCIS. A U.S. resident alien is taxable by the United States on his worldwide taxable income. According to the findings of the court “Lawful permanent resident.–(1) Green card test. A lawful permanent resident is an individual who has been lawfully granted the privilege of residing permanently in the United States as an immigrant in accordance with the immigration laws. Resident status is deemed to continue unless it is rescinded or administratively or judicially determined to have been abandoned.” Section 7701(b)(6) also concerns the duration of an individual’s status as an LPR and provides as follows:- 20 – (6) Lawful permanent resident.–For purposes of this subsection, an...
