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Expat Tax Blog

Dec 6

Are my accounts exempt from FATCA reporting?

by julie

Exemptions are for Foreign Financial Institutions (FFI), not individuals

Our recent article highlighting how tax deferral investments in non-U.S. countries may not receive the same beneficial treatment by Uncle Sam (we highlighted ISAs in the UK, TFSA accounts in Canada, and Aksjesparekonto in Norway). As a followup we received quite a few queries on whether Norwegian IPS (individuell pensjonssparing) accounts are reportable on FBAR/FATCA, as there is a specific clause in the Norway FATCA agreement.

“The following categories of accounts and products established in Norway and maintained by a Norwegian Financial Institution shall not be treated as Financial Accounts, and therefore shall not be U.S. Reportable Accounts or accounts held by a Nonparticipating Financial Institution, under the Agreement:

A. Certain Retirement Accounts or Products

Tax Favorable Pension Schemes (and paid-up policies or pension assets certificates)

covered by section 6-45 of the Norwegian Tax Act.”

As much as we love Norway, this clause is not unique.The U.S. Treasury has a list of exempt accounts for the purposes of FATCA for each country. As referenced above, the list includes for Norway indeed Tax Favorable Pension Schemes covered by section 6-45 of the Norwegian Tax Act.

Whole Story at TFX.

Dec 5

Unit Trusts & Expats – What you need to know

by julie

Tax advice – not financial advice

There are many ways you can invest your money. We are not investment advisors, but we are tax preparers, and just like we won’t wash your car, we will also not provide investment advice as that is outside of our core competency. However, we will provide you with information as to how your investments will be treated by Uncle Sam for the purposes of tax reporting.

Although not the same as a mutual fund in investment terms, for the purpose of the IRS you can think of a Unit Trust as a mutual fund. Similarly, a non-U.S. mutual fund (where most unit trusts lie) – would be subject to the same reporting requirements as a non-U.S. mutual fund — namely PFIC regime.

For simplicity sake – any non-U.S. pooled investment would be subject to PFIC reporting requirements. Similar to a mutual fund, a unit trust fund is an investment by a group – which own the assets underlying the trust.

Whole Story at TFX.

Dec 2

The IRS Has Come Knocking at Bitcoin’s Door

by julie

At a time when regulationsglitchesprice swingsforkshacks, and fraud can’t seem to keep the cryptocurrency-mania down, there’s a new hurdle for it to overcome: the taxman.

Coinbase is one of the largest cryptocurrency exchanges in the world. But it’s also a prime target for the Internal Revenue Service. Last year, the IRS asked a federal judge to order Coinbase to surrender its customer records for the years of 2013-2015 because it suspects many people trading in digital currency aren’t reporting their gains to the government. Coinbase fought the summons, but on Wednesday it lost the battle.

According to Bloomberg:

U.S. Magistrate Judge Jacqueline Scott Corley in San Francisco ruled that the tax agency’s demand for information isn’t overly intrusive. The price of bitcoin has been soaring and crossed $10,000 Tuesday.

Coinbase framed the decision as a “partial victory” in a statement posted to Medium.

Original Story at Gizmodo.


Dec 2

Expatriation: Covered Expats & Deferred Compensation – Form W-8CE

by julie

As you might expect, there are rules and regulations that cover US expatriates. This article will explore some issues that US citizens should be knowledgeable of before deciding to give up their United States citizenship.

The first, and most important, step to take is to ensure you are not going to be considered a “covered expatriate”.

Exit Tax Considerations

If you are labeled a covered expat, one potential consequence is an exit tax that can be imposed. Avoiding being a covered expatriate can take some planning, and some time. One example is using your gift allowance (currently USD 5.49 mil) to reduce net worth to under the USD 2 million limit discussed below. Doing this could delay the point where you can expatriate without significant tax consequences.

How to be non-covered:

If you can answer YES to all of these issues:

1. Net worth below $2 million

2. Tax liability (on average) for the previous 5 years is below USD 162,000

3. Has fulfilled all US tax filing obligations during those same 5 years

4. Filed form 8854 on time with your final tax return for the year of expatriation

Whole Story at TFX.

Nov 28

Selling Bitcoin – Asking For A Friend

by julie

Let’s say you had a friend that wanted to transfer some bitcoin to you to sell on their behalf – what does this mean for your U.S. tax obligations?

In general, the idea of giving property (stocks or other securities, bitcoin, or real property) to another individual temporarily is a bad idea. Beware of “income shifting”.

Let’s examine the various types of transfers. Remember, virtual currency is treated as cash or capital in the US.

Scenario: Individual A (Alison Altuve) wishes to transfer the title on her brokerage account to Individual B (Bruce Breckenridge). Alison then asks Bruce to sell the assets and give the proceeds back to Alison, less tax paid on capital gains.

Payment for goods or services

When transferred between individuals as payment for goods or services, a W-2 or 1099-MISC would be generated just like it would be if payment in exchange for good or services was made with real currency.

Transfer with no interest = Gift. Not a good strategy

As mentioned, virtual currency held for investment is treated as capital asset (stocks, bonds). The transfer of capital assets between two individuals with no interest would be a gift, taxable to the donor and requiring the filing of Form 709 to report the gift (if over $14k). To avoid gift treatment this transfer must have a repayment condition. Gift is a gift only when it is unconditional and may not be taken back.

Whole Story at TFX.