Moving To Canada? Here Are Your Tax Consequences

March 1, 2017 Shamsey Oloko Leave a comment FATCA, FBAR, Foreign Earned Income, Foreign Financial Account, Foreign Housing Exclusions & Deductions, Foreign Tax Credit, Tax Evasion, Tax Information Exchange Agreement

After the presidential election, some citizens planned on renouncing their citizenship and moving abroad to Canada, or elsewhere. It would be interesting to survey those who stated this proposition to see if they followed through on their promise (or threat).

The Immigration and Nationality Act applies to U.S. citizens who exercise the right to voluntarily renounce their U.S. citizenship. However, potential relocating Americans must realize that renouncing American citizenship has profound implications on any future return to the United States. Why? Signing an oath of renunciation is an irrevocable act for Americans over the age of 18. Despite this serious implication, the number of individuals that renounced their citizenship in 2015 was eighteen times as many Americans that renounced their citizenship in 2008, which set yet another record for the third consecutive year.

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What Is Foreign Earned Income Under The Tax Code?

November 11, 2016 Shamsey Oloko Leave a comment FATCA, FBAR, Foreign Earned Income, Foreign Housing Exclusions & Deductions

IRC § 911(b)(1)(A) provides the definition of “foreign income.” For tax purposes, this provision is important because If certain requirements are met, a taxpayer may qualify for the foreign earned income, foreign housing exclusions and the foreign housing deduction. Under certain circumstances, the value of meals and lodging provided to a taxpayer by an employer may also be excluded from income.

U.S. citizens or a resident aliens of the United States living abroad are taxed on their worldwide income. However, they may qualify to exclude from income up to an amount of their foreign earnings that is adjusted annually for inflation. In 2015, this amount was $100,800. Additionally, certain foreign housing amounts may be excluded or deducted.

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Claiming The Foreign Tax Credit With Or Without Filing Form 1116

November 8, 2016 Shamsey Oloko Leave a comment FATCA, FBAR, Foreign Earned Income, Foreign Tax Credit

Form 1116 relates to foreign tax credits, which are intended to affect taxpayers living abroad. These credits benefit foreign taxpayers by reducing the double tax burden that arises when foreign source income is taxed by both the United States and the foreign country where the taxpayers’ income originates.

The foreign tax must meet four tests to qualify for the foreign tax credit:

The tax must be a legal and actual foreign tax liability;
The tax must be imposed on the taxpayer claiming the credit;
The taxpayer must have paid or accrued the tax; and

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A $10,000 Penalty May Await You If You Fail To File Form 5471 Or 5472

September 27, 2016 Shamsey Oloko Leave a comment FATCA, FBAR, Foreign Financial Account

I.R.C. § 6038 requires U.S. taxpayers to file Form 5471 (Information Return of U.S. Persons With Respect to Certain Foreign Corporations) with their tax returns. The reporting requirements of § 6038, as well as § 6046, require Form 5471 to be filed by certain U.S. persons who are officers, directors, or shareholders in certain foreign corporations.

A person required to file Form 5471 who fails to file the form, or files a late or incomplete form, subjects himself to steep monetary penalties. Also, the statute of limitations on assessment for the taxpayer’s entire return remains open until three years after the required information is submitted to the IRS.

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A Primer on Foreign Tax Credit

September 23, 2016 Shamsey Oloko Leave a comment FATCA, FBAR, Foreign Financial Account, Foreign Tax Credit

U.S. taxpayers that have paid or accrued foreign taxes to a foreign country or U.S. possession, while subject to U.S. tax on the same income, may be able to take either a credit or an itemized deduction for these payments for foreign taxes. The foreign tax credit intends to reduce the double tax burden that would otherwise arise when foreign source income is taxed by both the United States and the foreign country from which the income is derived.

Qualifying Foreign Taxes

Taxpayers may only claim a credit for foreign taxes that are imposed by a foreign country or U.S. possession. The tax must meet four tests to qualify for the credit:

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A Comparison of Form 8938 and FBAR Requirements, Part 2

September 20, 2016 Shamsey Oloko Leave a comment FATCA, FBAR

Form 8938 refers to the Statement of Specified Foreign Financial Assets while FinCEN Form 114 refers to an FBAR or Report of Foreign Bank and Financial Accounts. U.S. taxpayers that own foreign assets need to distinguish the requirements related to both of these forms. The following is the second part of a blog that compares Form 8938 and FBAR requirements.

What is reported?

The maximum value of specified foreign financial assets is reported on Form 8938. These assets include financial accounts with foreign financial institutions and certain other foreign non-account investment assets. The maximum value of financial accounts maintained by a financial institution physically located in a foreign country is reported on an FBAR.

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A Comparison of Form 8938 and FBAR Requirements, Part 1

September 19, 2016 Shamsey Oloko Leave a comment FATCA, FBAR

Form 8938 refers to the Statement of Specified Foreign Financial Assets while FinCEN Form 114 refers to an FBAR or Report of Foreign Bank and Financial Accounts. U.S. taxpayers that own foreign assets need to distinguish the requirements related to both of these forms. The following is the first part of a blog that compares Form 8938 and FBAR requirements.

*Who must file these forms?

U.S citizens, resident aliens, and certain non-resident aliens that have an interest in specified foreign financial assets and meet the reporting threshold must file Form 8938. U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold, must file an FBAR.

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What You Need To Do If You Haven’t Been Filing FBARs

August 11, 2016 Shamsey Oloko Leave a comment Delinquent Taxes, FATCA, FBAR

Taxpayers are required to file an FBAR (Report of Foreign Bank and Financial Accounts) if they had a financial interest in or signature authority over at least one financial account located outside of the United States; and the aggregate value of all of these foreign financial accounts exceeds $10,000 at any time during the calendar year for which the taxpayer is reporting.

The FBAR is a calendar year report and must be filed on or before June 30 (with no extensions granted) of the year following the calendar year being reported. But what do you do if you are required to file FBARs and you haven’t been filing them? An experienced tax professional like one of the many at the Thorgood Law Firm can help all taxpayers resolve their problems with delinquent FBARs.

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Increased Compliance – Record High Fbars Were Filed In 2015

May 5, 2016 Shamsey Oloko Leave a comment FATCA, FBAR, Filing Status, Foreign Financial Account, Form 1040, Income Tax, Representation, Tax Evasion, Taxable Income

Do you live abroad? Do you own an asset or bank or investment account that had an accumulated value or total exceeding $10,000 at any time in 2015 (or any year)? If so, you are required to file a Report of Foreign Bank and Financial Reports (FBAR). Thus, if an asset was valued at, or an account totaled, $10,001 for just one day, an FBAR is due and must be filed. The Treasury Department’s Financial Crimes Enforcement Network (FinCen) received a record high 1,163,229 FBARs in 2015. What is surprising is that FinCen data shows that FBAR filings have grown an average of 17 percent per year during the last five years. Over 90,000 taxpayers filed FBARs in 2015.

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A Primer for US Taxpayers Residing Abroad

March 23, 2016 Shamsey Oloko Leave a comment Child Tax Credit, FATCA, FBAR, Filing Status, Foreign Financial Account, Foreign Tax Credit, Fraudulent Return, Frivolous Return Program, Income Exclusions, Tax Evasion, Tax Fraud, Tax Treaty, Travel Expenses

Here’s a primer for United States taxpayers residing abroad:

U.S. citizens must file a tax return. Any U.S. citizen who earns income of any kind is obligated to file a U.S. tax return every year, no matter where he or she resides in the world. Many Americans, living abroad and in the U.S., find it unfair that the United States is the only country that requires citizens to file tax returns whether or not they are earning income on U.S. shores. This is a leading reason why some Americans are renouncing their U.S. citizenship.

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