ATTORNEY HOLDING LL.M. MASTER OF LAWS TAXATION & CPA.
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ATTORNEY HOLDING LL.M. MASTER OF LAWS TAXATION & CPA.
Tax law is complex. Tax attorney ALENA MILES offers legal tax solutions
OUTBOUND TAXATION - U.S. INDIVIDUALS
OUR SERVICES AND WHAT WE CAN OFFER
Foreign Earned Income Inclusion & Foreign Tax Credit Analysis: We can assist with calculations to optimize your tax liability.
FATCA & FBAR: We can assist with FATCA & FBAR compliance and delinquent filings.
Exit Tax Calculation & Assessment: We can assist with determining proper status and calculations.
U.S. INDIVIDUALS WITH FOREIGN INCOME
If you are a U.S. individual living abroad and earning foreign income, which may include wages, passive income (interest and dividends), business income, etc. you should consider various options to take advantage of tax deductions and credits.
One of the options is Foreign Earned Income Exclusion where a portion or all foreign income can be excluded if you meet eligibility via filing Form 2555 Foreign Earned Income.
Another option is to claim Foreign Tax Credit, which is credit on your U.S. tax return against U.S. tax liabilities for certain foreign income tax you paid to foreign government.
Typically, taxpayers go through comparison each year to analyze which option is better for them.
For example, if you are U.S. individual living in Dubai with foreign-earned income (wages, bonus, salary, professional fees, other compensation), and you meet certain tests like the tax home test and either the bona fide residence test or the physical presence test, you should consider taking advantage of side-by-side comparison of your options to minimize tax liability.
OUR SERVICES AND WHAT WE CAN OFFER
U.S. INDIVIDUALS RENOUNCING OR LOSING U.S. CITIZENSHIP CHOOSING TO EXPATRIATE
If U.S. individual relinquishes U.S. citizenship or ended residency (expatriated) on or after June 17, 2008, Form 8854 Initial and Annual Expatriation Statement may need to be filed by expatriates to certify compliance with tax obligations in the 5 years before expatriation and to comply with their initial and annual information reporting obligations under section 6039G.
If you did not properly comply with your compliance obligations timely, alternative means for satisfying the tax compliance certification process for citizens who expatriate after March 18, 2010 may be available. These are not automatically granted, and you must meet eligibility requirements to take advantage of relief procedures.
ADDITIONAL REPORTING
Form 3520 Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts is an informational form where US Taxpayers may need to report transactions with certain foreign trusts, ownership of foreign trusts, and receipt of large gifts. Generally, fines for non-compliance are greater than $10,000 or 5%-35% of gross value of unreported property/assets/distributions, which can be sizable. Be aware of this compliance requirement if it applies to you.
Form 3520A, Annual Information Return of Foreign Trust With a U.S. Owner is an annual informational return to file by a trustee if foreign trust has at least one US owner. This reporting obligation is ultimately targeting disclosure to the IRS of any foreign financial accounts, and penalties can be draconian. It can be the greater $10,000 or 5% of gross value of the foreign trust’s assets as owned by a U.S. and additional separate 5% penalty. Be aware of this compliance requirement if it applies to you.
FBAR - FOREIGN BANK AND FINANCIAL ACCOUNTS
The FBAR (FinCEN Form 114) is not filed with the IRS rather with Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury. It is generally due April 15th with automatic extension until October 15th. For example, similar to your income tax return due dates, the calendar year 2023 Form 114 return is due April 15, 2024 with automatic extension until October 15, 2024.
A U.S. person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.
Penalty for non-compliance or incorrect reporting is steep. Generally, penalty is up to $10,000 per violation, however, if it is a willful violation, penalty is draconian at greater $100,000 or 50% of account balance.
If you have delinquent reporting to catch up with, there are options like delinquent FBAR submission procedures.
We can assist with compliance, review, or catching you up with delinquent filings if you meet certain requirements.
FATCA
Form 8938 Statement of Foreign Financial Assets is a compliance obligation to report your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold. It is filed with the IRS, unlike FBAR FINCen 114.
Also, unlike FBAR reporting, foreign stock or securities not held in a financial account and foreign partnership interests may need to be included with 8938, something important to be aware of.
Typically, Form 8938 is attached to your annual return and due on the date of that return, including any applicable extensions.
We can assist with compliance, review, or catching you up with delinquent filings if you meet certain requirements.
NEXT STEPS
Our attorney can assist with evaluating and optimizing your options.
This website is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of an attorney/client relationship.
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