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Expat Tax Blog

Oct 11

Self Employment Tax Considerations For Clergy

by julie

If you are a missionary or clergy working in another country (receiving form 1099 from a church), you may be liable for self-employment tax if your place of employment is in a country without a totalization agreement,

The income should be reported on Schedule C, Form 1040.  If the minister has incurred out of pocket expenses related to this income, they should be reported as expenses on the Schedule C.

Schedule SE will need to be completed to calculate SE tax on the minister’s Form W-2 wages, parsonage and utilities allowance.

This may open you up to self employment tax, which may wind up being greater than the potential social security payments you may receive in the future. This may certainly feel unfair, especially if you are up in age and are donating your time to better causes in the 3rd world – but we are not here to argue fairness, but to help explain your options.

Whole Story at TFX.

Oct 6

IRS Form 8832 and UK Corporations

by julie

Form 8832 is often cited as a source for entity classification. “According to form 8832, the only UK entity classified as a corporation is a public limited company. “ It is important to read between the lines – default entity classification on form 8832 is not all inclusive.

The instructions to form 8832 also contain interesting definitions which we will outline and explain below.

Foreign default rule

Unless an election is made on Form 8832, a foreign eligible entity is:

1. A partnership if it has two or more members and at least one member does not have limited liability.
2. An association taxable as a corporation if all members have limited liability.
3. Disregarded as an entity separate from its owner if it has a single owner that does not have limited liability.

What is a Foreign Eligible Entity?

https://www.irs.gov/irm/part4/irm_04-061-005.html

According to the IRS, a “foreign eligible entity” is generally defined as “an eligible entity that is not created or organized in the U.S. or under the law of the U.S. or any State.“

Now – to determine the classification, the key determinant is whether the members have limited liability.

Whole Story at TFX.

Oct 6

Disaster Relief Deadline & Payment Relief

by julie

If your tax residence is in a disaster area -you should automatically be identified by the IRS and receive automatic extensions for filing as well as payment relief for Q4 2017.

What deadlines are postponed?

The IRS has agreed to postpone certain deadlines for taxpayers who reside or have a business in the disaster area.

  • Most tax returns that have a due date between Aug 23 2017 and Jan 31, 2018 – will receive automatic relief.
  • Types of tax returns: Including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns)

Payment relief

Any payments due between the aforementioned dates will receive relief from penalties and, as long as payment is made before Jan 31, 2018. This affects quarterly estimated tax payments due Sep 15, 2017 and Jan 16, 2018.

Whole Story at TFX.

Oct 5

End of the Social Security number? A White House official thinks so

by julie

According to Rob Joyce, the White House’s cybersecurity coordinator, they are exploring ways to replace Social Security number with a safer system. A possibility can be using cryptographic keys, or a combination of long random numbers, to unlock personal data. The merit of such numbers is that they could be revoked once they are found to be compromised, he said.

“I feel very strongly that the Social Security number has outlived its usefulness,” Mr. Joyce said at a cybersecurity conference hosted by the Washington Post.

The White House official spoke Tuesday morning just as members of Congress grilled former Equifax Chief Executive Richard Smithat House panel hearing, asking questions about how the data breach occurred and how to address cybersecurity risks involving credit-rating firms.

Some Democratic lawmakers are calling for new regulations for the credit-rating industry, including shifting the control of personal data to individuals by allowing them to opt into or opt out of the credit bureaus’ systems.

Original Story at WSJ.

Oct 2

Forms 1065 or 1065-B – Penalty Relief

by julie

On Sep 1, 2017 – the IRS issued information on penalty relief for certain partnerships that failed to file timely tax returns by the new due date, changed in the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015

Buried deep in the long congressional code was a section on change in due dates for certain tax returns – underline added for emphasis – the Partnership date was moved from April 15 to March 15th.

SEC. 2006. TAX RETURN DUE DATES. (a) DUE DATES FOR RETURNS OF PARTNERSHIPS, S CORPORATIONS, AND C CORPORATIONS.— (1) PARTNERSHIPS AND S CORPORATIONS.— (A) IN GENERAL.—So much of subsection (b) of 6072 of the Internal Revenue Code of 1986 as precedes the second sentence thereof is amended to read as follows: ‘‘(b) RETURNS OF PARTNERSHIPS AND S CORPORATIONS.—Returns of partnerships under section 6031 and returns of S corporations under sections 6012 and 6037 made on the basis of the calendar year shall be filed on or before the 15th day of March following the close of the calendar year, and such returns made on the basis of a fiscal year shall be filed on or before the 15th day of the third month following the close of the fiscal year.’’.

As per usual, many people did not notice the changed dates, and the IRS has acknowledged this by allowing penalty abatement for returns & requests for extension of time to file for returns that would have been filed on time (by April 17 in 2017). any partnerships filed their returns or their extension requests for tax year 2016 by the April deadline, and if not for the Surface Transportation Act, these returns and requests for extension of time to file would have been on time.

There are two primary requirements to apply for penalty abatement:

1. The partnership  must have filed the returns with the IRS by the old due dates that would have been timely prior to the 2015 act
2. If return was not filed, but an extension form 7004 was filed by the date that would have been timely prior to the 2015 act.

Whole Story at TFX.