Tax Deadline for Citizens Living Abroad

Posted on June 12, 2014 by Kursti Nakagawa

Tax Deadline for Citizens Living Abroad – The tax filing deadline for United States citizens living abroad is on the horizon. That deadline is June 15^th (pushed to June 16^th for 2014). This automatic two month tax extension is granted to all overseas residents and does not require an extension request. The only condition for claiming the extension is for the taxpayer to attach a written statement when the return is submitted stating that both the primary residence and main place of business are outside of the country.

If a taxpayer residing abroad is unable to file a tax return within the automatic two month extension period, they must then file a written request to gain an additional four month extension. Although neither a late filing penalty nor a late payment penalty will be assessed on any returns covered by these extension periods, interest will normally accrue on any tax amount owed. As is true for taxpayers residing within the United States, all tax returns for United States citizens residing outside the county must be filed by the October 15^th tax extension deadline.

The United States is one of a few countries that requires its citizens living abroad to pay income taxes. This filing requirement applies to any United States citizen who earns more than $10,000 ($20,000 for a joint return) in any given year. Although rule applies even when some or all of the income is earned outside the country, certain income earned from foreign sources is exempt from taxation. In addition, taxpayers can sometimes claim a tax credit on their United States tax return for taxes paid outside of the county.

On top of filing an income tax return, United States citizens residing abroad are required to submit an FBAR Report if they hold foreign assets in excess of $10,000. Although the deadline for submitting the FBAR Report to the United States Department of Treasury is June 30^th, some of the information contained in the report is required for the tax return due two weeks earlier. Ownership in foreign businesses and holdings of other foreign assets must be itemized on the FBAR Report while Income from these same sources is required for the income tax return.

If you are a United States citizen residing abroad, our tax settlement professionals can help you evaluate and meet your tax filing requirements. The CPAs and Enrolled Agents at Professional Tax Resolution are experts in the area of foreign tax compliance and can help you evaluate your foreign income reporting requirements. Our experienced tax settlement professionals offer a free, no obligation consultation to answer any tax question or to discuss tax resolution optionsfor a tax debt you are unable to pay. For more information about out full range of tax services, call us at 877.889.6527 or visit our website at www.professionaltaxresolution.com.

Out with the Old……Extended Tax Provisions 2014

Posted on January 14, 2014 by Kursti Nakagawa

Extended Tax Provisions 2014 – It is common knowledge that tax law is constantly changing and it seems that Tax Year 2014 will be no exception. Every year the government makes some changes to the tax code in an attempt to make it fit the current economic climate. These changes include doing away with existing tax laws, initiating new laws and either renewing temporary tax provisions or allowing them to expire. When the American Taxpayer Relief Act was signed into law in January of 2013, it established some new tax laws as well as extending some temporary provisions through the end of the year. Fifty-five of those temporary provisions expired on December 31^st. Although some of those measures are sure to be renewed, there is no telling which ones that will be or when the renewals will take place.

Listed below are a few of the changes that are on the books for Tax Year 2014:

Affordable Health Care Penalty Taxpayers who fail to buy a health insurance plan before the enrollment deadline of March 31, 2014 will be assessed a penalty equal to either 1% of the yearly household income or a set amount for each uninsured individual or family, whichever is higher. The penalty will be due with the filing of the 2014 tax return.
Joint Tax Returns for Same-Sex Couples Starting in 2014 with returns, same sex couples will file their federal tax returns either jointly or as married filing separately, regardless of whether they live in a state that recognizes same-sex marriage. However, if they live in a state that does not recognize same-sex unions they will have to file separate state returns as single taxpayers.
Regulation of Tax Preparers A final decision on the regulation of professional taxpayers will probably be made some time in 2014. The IRS wants tax preparers who are not already licensed CPAs, Enrolled Agents or attorneys to be required to pass a competency exam and complete continuing education hours. However, a lawsuit has been filed against the IRS with reference to this issue and an appellate court decision is now pending.
Tax Brackets and Personal Exemption Income tax brackets have been widened for 2014 and the personal exemption amount has been increased slightly, from $3900 to $3950.

If you have questions about changes to the tax code for 2014 or need help resolving a tax debt that you are unable to pay, our experienced professionals can provide you with the help you are looking for. Visit us today at www.professionaltaxresolution.com to find out more about our services or call us at 877.889.6527 to set up a free, no obligation consultation. With over 16 years in the business of resolving tax debt, we have the experience to know which settlement option will be the best fit for your specific set of circumstances.

The Consequences of FBAR Noncompliance

Posted on November 19, 2013 by Kursti Nakagawa

FBAR Changes…

Things are changing as the consequences of the FBAR Noncompliance are becoming stricter. Up to this point, the sentencing of offshore tax evaders has been fairly lenient. Although judges must attempt to follow sentencing guidelines written to ensure consistent punishment for defendants convicted of similar crimes, they have been given considerable leeway. Within these guidelines, the judges in these cases have been weighing such factors as the amount of financial loss or gain involved, whether the tax evader has assumed responsibility for the crime and whether they have provided information that has helped to build a case against others. They have also taken into account the defendant’s age, health and previous contributions to society. The following high profile cases shed some light on what type of sentences have recently been handed out to individuals who have been found guilty of concealing foreign income and assets:

Richard Werdiger – Seller of Diamonds and Jewelry

The offense: Richard Werdiger concealed more that $7 million in various offshore accounts between 2000 and 2008. During this time, the accounts earned more than . (https://www.leankitchenco.com/) 3 million which left him with a back tax balance of $400,000 by the time he was prosecuted.

The sentence: Because Werdiger failed to qualify for the Limited Amnesty Program offered by the IRS, the judge rejected his leniency plea and sentenced him to a year and a day in prison. He was also assessed a $3.8 million dollar civil penalty and a $50,000 fine.

Michael Canale – Army Surgeon

The offense: Michael Canale inherited a UBS bank account in 2000. By subsequently filing false tax returns and taking unreported cash withdrawals with the assistance of a Swiss financial advisor, he avoided paying over $200,000 in taxes.

The sentence: In April of this year, a judge sentenced Canale to 6 months in prison although he could have been given as much as 30 months.

Michael Reiss – Breast Cancer Researcher

The offense: Michael Reiss failed to declare offshore bank accounts in addition to changing banks and filing false FBAR reprots to hide more than $2.6 million in offshore assets.

The sentence: Although Reiss could have been sentenced to up to 37 months in prison according to sentencing guidelines, he was only required to serve one day. In addition, he was given three years of probation and required to perform 30 hours per week of community service during this time.

At the time of this writing, Ty Warner, Creator of Beanie Babies, is awaiting sentencing on charges similar to those described above. On October 2^nd, Mr. Warner pleaded guilty to offshore tax evasion. The extent of his wrongdoing includes unlawfully sheltering over $100 million in various Swiss bank accounts, filing a false tax return in 2002, underreporting his income by over $24 million between 1999 and 2007 and failing to file a Report of Foreign Bank and Financial Accounts (FBAR). He currently owes over $5.6 million in back taxes together with a civil penalty of $53.6 million. Based on precedent, it will be interesting to see what sentence the judge hands down.

If you need FBAR services, including help with current FBAR reporting or the filing of delinquent FBAR reports, the CPAs, Enrolled Agents and Tax Attorneys at Professional Tax Resolution can provide you with the help you are looking for. Contact us today to ensure that you meet the current requirements for the reporting of your foreign assets and income. For more information about this or other tax settlement services, visit us at www.professionaltaxresolution.com or call us at 877.889.6527 or to receive a free, no obligation consultation.

Family Finances: Tax Settlement, Innocent Spouse Relief, and Injured Spouse Relief

Posted on October 24, 2013 by Kursti Nakagawa

Family Finances

A recent study by Fidelity Investments revealed that individuals often lack adequate knowledge of family finances. The results of the study showed that a surprising number of marriage partners have insufficient information about important financial matters such as insurance policies, investment accounts, physical assets, beneficiary designations and income taxes, among other things. While this lack of awareness may not be a problem when life is going smoothly, it can have unforeseen consequences there is a bump in the road. In the face of a death, a divorce or a sudden disability, a spouse who does not have a satisfactory understanding of family finances can find themselves at a serious disadvantage.

The results of the recent Fidelity study showed that, while most couples reported that they communicated effectively about financial matters, a much smaller percentage said that they shared daily financial decisions. Less than half of the retired couples surveyed agreed on what type of lifestyle they expected to lead in retirement and only a slightly larger percentage had an acceptable level of information about retirement planning. Moreover, only 28 % of the couples surveyed said that either spouse could single-handedly manage the retirement finances.

Although it is natural to postpone a discussion of family finances when there is no immediate problem, it is important to be prepared for the uncertainty of the future. An unforeseen event can leave either partner with complete financial responsibility. With this in mind, financially responsible couples would be well advised to take the following steps:

Inventory Investment Accounts
Inventory Physical Assets
Prioritize Investments to be Tapped for Retirement
Discuss Income Tax Returns and Related Tax Issues
Prepare Wills with Agreed Upon Financial Conditions

Although the discussion of topics such as those outlined above can be stressful and uncomfortable, not doing so may well leave either spouse in an unfortunate situation. Consider, for example, the spouse who is left with a very aggressive investment portfolio upon his or her mate’s death. If the surviving spouse has no knowledge of the type of investments in the portfolio, they could very well suffer a significant loss if the market suddenly takes a sharp downward turn. Similarly, consider the predicament of a spouse who has no knowledge of his or her mate’s tax obligations. Faced with an unexpected death or divorce, the surviving spouse could be left with a tax debt about which they have no knowledge. Although tax this situation can be handled with a tax settlement agreement in the form of Injured Spouse Relief or Innocent Spouse Relief, it certainly not a situation anyone would chose to face.

If you have questions about Injured Spouse Relief or Innocent Spouse Relief, the CPAs, Enrolled Agents and Tax Attorneys at Professional Tax Resolution can provide you with the answers you are looking for. Visit us today at www.professionaltaxresolution.com for more information about these and other tax settlement options. Complete our online request form or call us at 877.889.6527 to receive a free, no obligation consultation.

Expatriates Renouncing Citizenship

Posted on October 10, 2013 by Kursti Nakagawa

In the face of increasingly strict asset disclosure legislation, more and more United States citizens are renouncing their citizenship in order to avoid potential tax consequences. In the second quarter of this year, the number of expatriates turning in their passports to United States embassies abroad was up almost 500% from that same time period the previous year. Compared to the first half of 2008, the number of renunciations in the first half of 2013 was up over 15 times!

The United States is the only county of the 34 members of the Organization for Economic Development that taxes its citizens no matter where they reside. Although this has been the case for quite some time, the government’s fairly recent crackdown on the reporting of foreign assets and income has made more and more Americans aware of their tax reporting responsibilities. As a result, an increasing number of the 6 million plus individuals residing aboard are apparently deciding that holding their United States citizenship is not worth the financial consequences that come with it.

The campaign to identify and tax the foreign income of United States citizens has slowly gathered force since the terrorist attacks in 2001. Foreign income reporting legislation has been on the books since 1970 when the Bank Secrecy Act of 1970 was passed, requiring the filing if an annual Report of Foreign Bank and Financial Accounts (FBAR). However, the reporting rate has historically been very low and, until recently, little was done to force compliance. All this is has change over the past few years. The government has not only stepped up its efforts to enforce the existing tax laws but has passed new legislation to supplement what was already there.

The most significant development in the area of foreign tax compliance has been the passage of the Foreign Account Tax Compliance Act (FATCA) in March of 2010. This legislation increases the disclosure requirements for United States citizens who have money in overseas accounts and for the banks that hold those accounts. Basically, FATCA requires individuals who have more than $50,000 in foreign assets to report those asserts on Form 8038. It also requires foreign banks to disclose information about their U.S. account holders or face stiff penalties for not doing so. Although the enforcement of FATCA has been postponed until July of 2014, apparently the hassle of increased compliance requirements together with the threat of steeper consequences for noncompliance has caused more and more individuals to think twice about the value of their United States citizenship.

If you have questions about the taxation and reporting of foreign assets or income, the CPAs, Enrolled Agents and Tax Attorneys at Professional Tax Resolution can provide you with the answers you are looking for. Our tax specialists have extensive experience in the area of FBAR reporting and are up to date on the current requirements for FATCA compliance. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527 to receive a free, no obligation consultation.