Get an early start on your 2016 taxes!

Attention all American expats and greencard holders: The IRS begins accepting returns on January 23, 2017. While the actual return due date is April 18* (the IRS provides a automatic 2-month filing extension for US expats, but this extension does not apply to tax payment obligations – interest begins accruing on any tax due after the regular April deadline), it is always best to get started as early in the season as possible in case there are any unanticipated complexities in your tax situation, and of course to beat the busy season rush.

*The filing deadline for 2016 tax returns is April 18, 2017, as the usual April 15 date falls on a Saturday, and the 17th (Mon) is a legal holiday in the District of Columbia.


What are Totalization Agreements, and do they cover income as well as social security/pension payments?

Totalization Agreements are formal agreements between the US and foreign countries to avoid double taxation of income through social security taxes. The Agreements only apply to the imposition of social security tax. If you are self-employed, your self-employment income is eligible for foreign earned income exclusions if you can satisfy the required conditions, but you are still subject to US self-employment tax (i.e. social security tax). However, if you are residing in a country that has a totalization agreement with the US and are subject to social security tax in that country on your self-employment income, you can be exempt from US self-employment tax. List of countries with signed Agreements with the United States.


Selling in house in China – Do I have to pay tax on capital gains?

(from our FAQ for expat tax filers)
Question: We recently sold our home in China at a considerable profit. Will we have capital gains tax obligations on the U.S. side?
Answer: In addition to potential capital gain exclusions on sale of primary residences, the U.S.-PRC Tax Treaty stipulates that capital gains derived from the sale of real estate (i.e. real property) may only be subject to capital gains tax in the contracting state (in this case, China). However, tax treaty wording can be quite complicated and often requires a tax professional’s input to determine whether or not it is applicable under each set of individual circumstances.

Ask an Expert: I have not filed federal tax returns for several years. Will I have to pay any penalties when filing?

(from our FAQ for expat tax filers)
Question: I have not filed federal tax returns for several years. Will I have to pay any penalties when filing for multiple years?
Answer: Not necessarily. If you have not filed and do not have any taxable income (e.g. under the threshold of the Foreign Income Exclusion for all tax years), then neither penalties nor interest will be applied. If you do owe tax, then you may be eligible for the Streamlined Foreign Offshore Procedures, under which you would be able to avoid non filing and/or late filing penalties and only have to file for three years (but you would still owe interest on any unpaid tax). However, it is always best to file your returns on time every year. Many Americans are not aware that they are still required to file even though they may be well under the threshold allowed under the Foreign Income Exclusion – in fact, you have to file in order to be able to apply the exclusion.

Is the U.S. getting ready to raise taxes for the rich?

As an increasingly large portion of Americans feel that “the rich” need to pay more tax, and the likelihood of an increase may be looming on the horizon. And how will things change with the upcoming election? With Hillary? Trump?

Read the full article at The Atlantic’s website.

Source: The Atlantic Website (www.theatlantic.com)



How the U.S. became one of the world’s biggest tax havens

The Washington Post

Contrary to popular belief, notorious tax havens such as the Cayman Islands, Jersey and the Bahamas were far less permissive in offering the researchers shell companies than states such as Nevada, Delaware, Montana, South Dakota, Wyoming and New York, the researchers found. But one of the least recognized facts about the global offshore industry is that much of it, in fact, is not offshore. Indeed, some critics of the offshore industry say the U.S. is now becoming one of the world’s largest “offshore” financial destinations.

Source: The Washington Post

Business man working with laptop on the small island on the sea

Business man working with laptop on the small island on the sea

Website (www.washingtonpost.com)

October 15 US Tax Deadline is Near Do Not Miss It

Just 10 days remain before the October 15 tax filing deadline, so if you haven’t filed yet, it’s definitely time to do so now! If you aren’t sure why you should not let this deadline pass, here are a couple of very good reasons.

Why you shouldn’t miss October 15

Penalties and interest charges are assessed against taxpayers who file late or not at all. Your extension was granted as extra time to file your tax return, but not extra time to pay the balance due. There are two penalties:  Failure to File and Failure to Pay.
If you filed an extension for your 2014 taxes, October 15th is the deadline to avoid a very stiff penalty. The Failure to Filepenalty runs 5.0% per month plus interest on any balance due.
Failure to Pay penalty is the other one. Just remember you have to be paid-in-full by October 15.
While there is no penalty for Failure to File if you are due a refund, you cannot obtain a refund without filing a tax return. If you wait too long, you run the risk of losing it. In cases where a return is not filed, you generally have up to three years to claim a refund.

Filing Is Easy

Capital Tax has the experience, knowledge and expertise to guide you through the complexities in US income taxes. Use our Contact/Quote Request form right away to get started.
Don’t miss this deadline; the headache and extra financial costs aren’t worth it. Get your tax return filed so you can move on with your life.

Pay Your Taxes or Lose Your Passport!

This month the U.S. Congress is putting into effect a new law that empowers the government to revoke passports of citizens who refuse (or somehow neglect) to pay their taxes. According to various sources, this law also gives the U.S. State Department the right to deny tax scofflaws new passports.

If you are in arrears to the tune of $50,000 or more, (including penalties and interest), then your passport may soon be rendered meaningless. The law basically allows for the denial or, as mentioned, the actual revocation of passports for taxpayers who owe Uncle Sam.

The law officially takes effect in January and is a rider to the overall highway funding bill. It is estimated that getting tough with tax delinquents will bring in an additional $398 million over the next decade.

If you are an American who is living and working abroad, this may be particularly troublesome as you, likely, would prefer to someday return home. However, in 2014 there were almost 900,000 notices sent by the U.S. Internal Revenue Service to U.S. citizens living abroad and, should you be one of them, you might find yourself stuck in a legal limbo. Didn’t get any such notice? Well, you’re not off the hook. If you have not received a letter or some kind of notification you are still accountable. Citizens living abroad often may not get the IRS letter as the system does not allow for the best of communication with expats.

This issue will potentially affect so much of an expats life. Expats need their passports for such normal activities as banking, reserving a hotel room and even registering a kid for his or her school. This is not something to ignore as the long arm of U.S. law is extending ever further into the lives of those, who in the past, have managed to avoid paying their taxes.

There are some small exceptions. For example, if you are an American who is venturing forth for humanitarian service, you may be able to receive an exception even if you are behind on tax payments. This new rule is also not applicable to those who are on an IRS payment plan or who are in court contesting a tax case.

The bottom line: You, as an expat citizen living and working abroad, are fully responsible for and accountable to the timely and full payment of taxes owed. There are few hiding place in this increasingly interconnected world, (mail from the IRS notwithstanding)…

IRS Releases Draft FATCA Form For Comment


The United States Internal Revenue Service (IRS) has released, for public review and comment, the draft form that will enable foreign financial institutions (FFIs) to register under the Foreign Account Tax Compliance Act (FATCA).

Source: Tax News – GLOBAL TAX NEWS (Tax-News.com)