FBAR extended deadline just days away

The IRS Has Extended Your Filing Deadline for Overseas Accounts — But You Must Act Now

The good news is that the IRS has granted U.S. citizens and residents an automatic extension to file Reports of Foreign Bank and Financial Accounts (FBARs).

But just because the IRS has already granted you an FBAR extension if you haven’t already filed one, you are still on the hook. You now only have a few days to meet the deadline, and by not complying, the IRS has become less tolerant for late filers (more on that below).

The IRS instituted the automatic extension after moving the original filing deadline ahead this year by three months to April 15. It did this largely to bring the filing deadline in sync with that of the annual tax filings season for U.S. federal income taxes.

Specific to an extension for FBARs, the IRS says it has sought to implement the filing statute with a “minimal burden to the public” and has granted “filers failing to meet the FBAR annual due date of April 15 an automatic extension to October 15 each year.  Accordingly, specific requests for this extension are not required.”

Why Me?

The IRS says all “U.S. persons” with individual or combined financial holdings outside of the U.S. and its territories totalling $10,000 or more at any time during the year must file an FBAR.

A “U.S. person” includes:

-U.S. citizens and residents.

-corporations, partnerships, or limited liability companies, founded or operated in the U.S.;

-trusts or estates formed under the laws of the United States.

Key Takeaway

In other words, the October 15 filing day for FBARs has become the real deadline. But what also matters is the IRS has signaled it will be less lenient for late filers than it was in the past. Before, you could file an FBAR late after the original June 15 deadline with little to no risk of penalties if you could come up with a reasonable explanation for filing late. A “reasonable” excuse, according to the IRS, was that “information from foreign financial institution was not available by the due date.”

But the IRS’ previously leniency for filing FBARs has been replaced with a new due date with stricter implications. The October 15 deadline is indeed an extension of the official April 15 due date, but the IRS will likely be unforgiving if you file after October 15. A mere “non-willful” late filing could trigger a penalty of $10,000, for example.

The time to file is thus now if you haven’t done so already.

Questions? Contact our team of tax professionals for a Free Consultation.

Tax filing due date 2 weeks away

Expat tax filing deadline less than 2 weeks away!

If you are an expat tax filer and not already working with one of our CPA’s and/or need more time to complete your 2016 return, we can assist to file an extension until October 16th – but the request must be submitted to the IRS by June 15th!

If you do owe taxes for the 2016 tax year, it’s important to note that the extension does not apply to tax obligations – interest started accruing on any tax due after the regular April deadline.

To get started on filing an extension, simply send us a note and someone from our team will be in touch ASAP to advise regarding next steps.


IRS to Expats: Pay Now or Risk Losing Your Passport

The IRS set to begin revoking passports for unpaid tax bills.

The IRS had indicated it is ready to make good on its threat last year to begin revoking or refusing to renew U.S. passports as a means to collect unpaid taxes.

While the IRS has not started referring unpaid tax debt totaling $50,000 or more to the U.S. State Department for collection, it is scheduled to begin doing so in the coming weeks. Under USC-7345 (“Revocation or denial of passport in case of certain tax delinquencies”), the IRS may notify the U.S. State Department of “individuals with seriously delinquent tax debt.” It defines “seriously delinquent” as “an individual’s unpaid, legally enforceable federal tax debt totaling more than $50,000.” The State Department can then refuse to renew or revoke your passport except for return travel to the U.S.

According to the IRS’s website, the $50,000 threshold mentioned above includes interest and penalties. However, it specifically excludes non-delinquent debt, such as tax payments paid on time under an installment agreement or as part of an offer the IRS has made.

Having your passport revoked is obviously something you don’t want as an expat American. These inconveniences include being unable to open a bank account, check into a hotel, sign a rental agreement, or do something as simple as signing up for a mobile phone plan.

And, as we mentioned in our previous article, you could be on the hook for a delinquent tax bill and not even know it. This is because not having received a letter from the IRS does not mean you don’t owe the tax. For example, it is not uncommon for an expat returning home or filing a return to find out they had been already been “notified” of an audit by a letter they never received or that mysteriously got lost in the mail.

Bottom line: you should file your taxes now if you haven’t already before it’s too late. The writing is on the wall with the recently introduced FATCA, tax treaties (often including tax information exchange agreements (TIEAs)), and implementation of the OECD’s The Automatic Exchange of Information (AEOI).

But the good news is that the IRS’s Streamlined Foreign Offshore Procedure is a great way to start. Your tax advisor can let you know if you qualify or not for the program with just a simple assessment of your case.

One thing to keep in mind is that you cannot currently be under an audit to become eligible for the Streamlined Foreign Offshore Procedure. This means you need to file before you get that dreaded letter in the mail from you friends at the IRS.

IRS’ more aggressive initiatives to collect unpaid tax bills should have many law-abiding U.S. taxpayers concerned. But contacting your tax advisor today can go a long way in helping you to sleep better tonight.

-Eric la Cara

Tax changes for expats

Taxes for US expats – President Trump’s Tax Proposals

American expat tax filers are understandably concerned about their annual U.S. tax filing obligations. But now, they have something else to think about: what changes may lie ahead with President Trump’s clear plans to implement across-the-board tax cuts for both individuals and corporations? And how, if at all, might expats benefit? While many of the changes are still in the planning phase, here are a few possibilities, based on recent statements by President Trump and his team:

1. Simplification. By “simplify” does President Trump mean to really “reduce” taxes? One important potential change is President Trump’s plan to reduce the total number of tax brackets for individuals from seven to three. The new brackets would then be 12, 25, and 33 percent. Also, the net investment income tax (NIIT), which was included as part of the Patient and Affordable Care Act, will likely be eliminated. This would thus allow these new tax brackets – along with the relatively lower tax rates for dividends and capital gains – to represent actual tax rates and not ones with tack-ones such as NIIT.

2. Elimination of Estate or “Inheritance” Tax. Currently, estate tax is imposed on estates with total value exceeding $5.45 million (or $10.9 for married couples), and there are no separate taxes owed for unrealized capital gains within the portfolio at the time of death. President Trump’s proposal would effectively eliminate estate taxes, but with one key twist: tax could be imposed on unrealized gains for those estates exceeding a $10 million threshold.

3. What this means for expats. Generally speaking, the tax changes under President Trump’s proposal could decrease taxes for those in higher tax brackets but potentially increase taxes for those in lower-income ranges. As most expats qualify for the Foreign Income Exclusion (FIE) in the amount of $101,300 for the 2016 tax year filed in 2017, the ultimate effect could mean a lower tax bill for those with income levels exceeding the FIE for 2017 and beyond. This would especially be the case for those with tax obligations on unearned, or passive income, such as interest, dividends, and capital gains.

-by Eric la Cara


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.

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)…