Expat Tax Blog
Putting some earnings away to save for retirement is common throughout the world. But for US citizens, as well as
permanent residents, who live abroad, the world of retirement accounts and pensions is hard to navigate because of complicated Internal Revenue Service regulations. Any type of foreign account, including pensions and retirement accounts, can be either a significant benefit, or a tax nightmare.
Whole Story at TFE.
A 71 years old US, UK and Israeli citizen Dan Horsky pleaded guilty to his role in a financial fraud conspiracy involving a foreign bank account containing more than $200 million. As part of his plea agreement, Horsky paid a civil penalty of $100 million to the U.S. Treasury for failing to file and filing false Foreign Bank and Financial Accounts.
According to the statement of facts filed with the plea agreement, Horsky was employed for over 30 years as a professor of business administration at a university in New York. In approximately 1995, Horsky began investing in numerous start-up businesses through financial accounts at various offshore banks, including one bank in Zurich, Switzerland. One of these start-up businesses was Company A. Horsky’s investments in Company A ultimately resulted in approximately $80 million in net proceeds from the sale of Company A’s stock. However, Horsky only disclosed and paid taxes on approximately $7 million. By 2008, Horsky’s account contained nearly $200 million. From 2008 through 2014, Horsky filed false individual income tax returns and failed to disclose his income from, beneficial interest in, and control over his Zurich-based bank accounts.
Horsky faces a maximum penalty of five years in prison when sentenced on Feb. 10, 2017. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes, as the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.
Original Story at US Department of Justice.
Q: Is the status of my residency for tax reasons identical to my status for immigration?
A: These types of residency status are completely separate and may be different. It is possible to be a resident from a tax perspective, but remain an alien from an immigration standpoint. Persons in the United States on temporary visas could be, from a tax perspective, resident aliens, non-resident aliens, non-resident aliens who can choose to be treated as residents for tax reasons, or dual-status aliens.
Q: Will I always be a resident from a tax perspective if I’m a permanent resident from an immigration perspective?
A: Immigration laws consider an immigrant to be a permanent resident when they have been granted the privilege of living permanently within the U.S. Generally, this corresponds to having been issued a green card (which is actually pink) by the US Citizenship and Immigration Services (USCIS). From a tax perspective, permanent residents are considered U.S. residents as of the day they are present within the United States as a permanent resident. So, in the 1st year of residency – assuming they were first a nonresident – they will be considered dual-status aliens for purposes of taxes. Dual-status aliens are not allowed to file jointly, usually can’t claim exemptions for dependents, and are not allowed to claim a standard deduction.
Resident taxpayers are required to report all income worldwide. Once a taxpayer becomes a resident for the full year, they are allowed to claim credits and deductions available to all United States citizens. Full-year residents can file any applicable tax form – 1040EZ, 1040A, or 1040 – and can file joint returns with their spouses if married. The form instructions will explain this in more detail. Even resident taxpayers might be able to claim benefits under any tax treaties with their home country.
Whole Story at TFE.
1. Does the U.S. citizen residing abroad need to have foreign health coverage in order to qualify for the ACA exemption?
– No, presence of foreign health coverage is not necessary.
2. Does the U.S. citizen/green card holder with foreign health coverage provided by foreign employer or through the public health system must prove that foreign coverage meets the ACA standards for the essential minimum coverage?
– No, the scope and quality of foreign coverage is not taken into consideration and does not affect the ACA exemption. Exemption is purely based on the assessment of time spent outside of the US.
Whole Story at TFE.
Tax and retirement planning is a very complex process that often involves accountants, finance professionals, and lawyers. But, cross-border issues make this even more complex, especially when the US-Canada tax treaty is involved and how it treats investment plans like the TFSA, RRSP, and some pensions.
Below, we’ll discuss some recent developments surrounding these issues in international tax law, plus provide guidance in retirement planning, which is a grey area.
Whole article at TFE.