more info Menu

Expat Tax Blog

Nov 29

Top U.S. House tax writer floats tax bill on retirement plans, IRS

by julie

A Republican Kevin Brady who will soon step down as chairman of the U.S. House of Representatives tax committee late on Monday released a sweeping, nearly 300-page tax bill that he said would affect Americans’ retirement savings, numerous business tax breaks and redesign the Internal Revenue Service.

As a result of November elections, Brady is expected to be replaced as committee chairman in January by Democratic Representative Richard Neal.

The 297-page text of the bill covers tax breaks for fuel cell cars, energy efficient homes, race horses, mine safety equipment, auto race tracks and many other items, as well as retirement savings plans such as 401(k)s and individual retirement accounts (IRAs).

According to Brady, the bill also “includes some time-sensitive technical corrections” to the 2017 bill that Trump signed into law.

Original Story at Reuters.

Nov 17

Who are the big (tax) winners ahead of the 2018 filing year?

by julie

US Government wins

The majority of individuals filing US tax returns will pay more tax after the Tax Reform. The tax increase will affect US citizens, green card holders, as well as non-resident aliens with income from US sources. However, certain categories of individual taxpayers will see a reduction in tax.

And the winners are…

Very low-income taxpayers come out on top


  • Married couple
  • No children
  • Combined income of $43K.

In 2017, the couple would have paid $2,400 tax on this income. In 2018, they will pay zero tax.

Before the reform, a 10% tax was assessed on taxable income from the first dollar. Under the new rules, the 10% bracket was eliminated. The 12% tax bracket starts from taxable income of $19,050. As a result, this couple will pay no federal tax at all. After the standard deduction of $24K, their taxable income will be $19K, which is below the lowest tax bracket.

If they have children they will receive $2K credit per child instead of $1K they would have received before the reform and they are eligible for the Earned Income Credit (EIC) on top of that.

Whole Story at TFX.

Nov 16

Extra, Extra, time to renew your ITIN!

by julie

Is your ITIN set to expire?

9XX-73-NNNN or 9XX-75-NNNN – Does your ITIN look like this? It may be expiring on Dec 31 2018 .

All ITINs issued before 2013 with middle digits of 73, 74, 75, 76, 77, 81, or 82 (Example: (9XX-73-XXXX) are set to expire on December 31, 2018. Additionally, unused ITIN (not used on a federal tax return at least once in the last 3 years) will also expire.

Do not wait to receive a nastygram – if you utilize an ITIN on your returns (for yourself or dependents), it’s time to renew – notify your tax preparer to file Form W-7 for you.

What is an ITIN and do you need one?

If you don’t have an SSN and are not eligible to receive one, you need an ITIN to file a tax return in the US (it is how the IRS identifies you or your spouse/dependent) As noted above, millions of ITINS expire each year and must be renewed with the IRS. Renewal is done by filing form W-7. If you have an SSN, you do not need an ITIN. However, your dependents may require an ITIN.

Note, last year’s tax reform has potential credits available to dependents without a SSN, but with an ITIN.

Whole Story at TFX.

Sep 26

Mail Bag #16: Delaware Partnership, ​State tax obligations, German with US K-1, Pension on FBAR, Retirement rollovers, US Visits 35

by julie

Delaware Partnership

I have the opportunity to invest in a Delaware limited partnership that will in-turn invest in a Swedish corporation (a tech startup). The DE partnership will have a minority stake in the business (I’m not sure how much) and a board seat on the Swedish co. But me, personally, I will have no control, will be a tiny indirect investor in the Swedish co (less than 5%) and my investment in the DE partnership is completely passive (I have no control rights)

As a limited partner in DE LP you will receive Sch K-1 like from other partnership and will report it on your annual tax return. The fact that DP partnership invest in a foreign company will be reflected on partnership tax return but you personally are not responsible for that filing.

State tax obligations

I am an American living permanently in NZ . I have no financial or property connection in my former state of Colorado. All my finances and property are in NZ. I am choosing to ignore the possibility of owing state taxes there. I haven’t lived there for over 18 years. I am about to retire this year and plan to stay in NZ. I filed tax returns with your company for the streamlining process a couple of years ago to get caught up on my previously non filed federal tax returns. I am up to date with my federal tax filing. Am I at risk of penalties with Colorado, considering my circumstances?

From the CO Dept of Revenue:

Living Out of the Country

Individuals who abandon their Colorado domicile and become permanent residents of a foreign country no longer have to file Colorado returns. However, they would have to file a Colorado tax return as a nonresident if they had Colorado-source income (e.g., rental income). Such individuals bear the burden of proving their abandonment of Colorado residency. Continued Colorado residency will be presumed if the individual has not severed all Colorado connections; for example, if the individual still carries a Colorado driver license, votes in Colorado by absentee ballot, and/or still owns a home in Colorado, or returns to Colorado. Thus, you may not file CO state return yet be prepared to provide the proof your abandonment of CO residency should the CO state tax department ever contact you.

Whole Story at TFX.

Sep 16

OVDP Ending – Streamlined Procedure still ideal amnesty program

by julie

OVDP Ending – non-event for most expats

The famed OVDP program is nearing its end on Sep 28, 2018. We at TFX have not been fans of OVDP because of the draconian penalties attached, as well as the high compliance fees (read: lawyer fees)  instead of providing an optimal scenario for the taxpayer. The only time we recommended pursuing the program as an option is when the IRS had already started a civil investigation, which is not relevant for 98% of delinquent expats.

Streamlined Program – best option

Although OVDP is ending, they have kept alive the Streamlined Foreign Offshore Program. This program has several key features which made it a far more attractive option than OVDP.

Whole Story at TFX.