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Expat Tax Blog

Mar 24

IRS expands penalty waiver for those whose tax withholding and estimated tax payments fell short in 2018; key threshold lowered to 80 percent

by julie

IRS provided additional expanded penalty relief to taxpayers whose 2018 federal income tax withholding and estimated tax payments fell short of their total tax liability for the year.

The IRS is lowering to 80 percent the threshold required to qualify for the relief (before it was 85 percent, the usual percentage is 90 percent).

This means that the IRS is now waiving the estimated tax penalty for any taxpayer who paid at least 80 percent of their total tax liability during the year through federal income tax withholding, quarterly estimated tax payments or a combination of the two.

Today’s revised waiver computation will be integrated and reflected in the forthcoming revision of the instructions for Form 2210, Underpayment of Estimated Tax by Individuals, Estates, and Trusts.

Taxpayers who have already filed for tax year 2018 but qualify for this expanded relief may claim a refund by filing Form 843, Claim for Refund and Request for Abatement and include the statement “80% Waiver of estimated tax penalty” on Line 7.  This form cannot be filed electronically.


Original Story at IRS website.

Feb 21

WSJ Tax Guide 2019: Tax Rates and Brackets

by julie

The tax overhaul altered rates and brackets, but not as much as some proposed. Instead, the major changes affecting Americans often stem from such provisions as the expanded standard deduction or child tax credit.

Lawmakers also switched to a less generous method for calculating inflation adjustments to tax brackets and other key provisions. The inflation adjustments to tax brackets and other key provisions will now be done using the typically slower-moving chained consumer-price index instead of a traditional method of inflation known as the CPI-U. This will cost Americans $133.5 billion over a decade.

As before the overhaul, the tax code has seven income brackets. The rate changes expire at the end of 2025, but the change to the inflation adjustment is permanent.

The overhaul dropped the top rate from 39.6% to 37%. The lowest rate remains 10%, which takes effect at the first dollar of taxable income.

The guide is available here.

Original Story at WSJ.

Feb 14

When Will You Get Your Tax Refund?

by julie

With the partial government shutdown, a new tax reform law passed, and the different tax forms resulting from it, this tax season most likely will be a little tricky. Despite these changes and obstacles, the IRS says that the tax season will be relatively normal, including the timing of tax refunds.

Based on information published by the IRS, the following chart shows likely dates for the receipt of tax refunds.

These dates should be close, but many factors can affect them. According to the IRS, 90% of refunds are processed in under 21 days, although many taxpayers report that less complex returns with no mistakes or other problems usually received them in under 2 weeks.

Also keep in mind that if you claimed either the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC), there is a hold. The IRS is required to wait until the middle of February to start issuing refunds for tax returns where these credits are claimed. This means that these refunds are not likely to be received before February 27th (for direct deposits).

Whole Story at TFX.

Jan 30

Planning Opportunities to Minimize Tax Impact of GILTI

by julie

Intro reading

We’ve written a bevy of articles on the impact of tax reform on owners of non-US corporations. Here are a few articles that will provide context for the below. Please peruse our site for more information, as well.

1. Transition Tax is not the same thing as GILTI Tax

2. Revised Form 5471; 2017 Tax Reform Impact on Tax Compliance Continues

3. Tax Reform for individuals with foreign corporations – Extended effect of Sec 962 Election

Controlled Foreign Corporation to Partnership or Disregarded Entity

One option is to change a foreign corporation’s status from a Controlled Foreign Corporation (CFC) to a foreign partnership or foreign disregarded entity, thus no longer subject to GILTI.  To process this change, an election is completed on Form 8832 and generally must be made no later than 75 days after the date from which the election requested to be effective.

As a result, all income from the foreign entity will flow through to the owner(s), and therefore could be subject to US taxation each year, but taxes paid or accrued will become eligible for credit (such credit is unavailable to individuals under GILTI).

Whole Story at TFX.

Jan 25

Does the IRS consider Foreign Insurance Coverage Minimum Essential Health Coverage?

by julie

Confusion around Healthcare ‘approval’ by the IRS

There has been some confusion around whether or not the IRS considers non-US plans approved in meeting the minimum essential healthcare coverage as required by the Affordable Care Act.

This confusion stems from the fact that the Center for Medicare and Medicaid services https://www.cms.gov has provided approval status for certain foreign plans. From the standpoint of a US taxpayer residing abroad, this is a red herring – we do not recommend pursuing this route on your tax returns.

Regardless of the approval status for certain foreign plans by CMC, we do not advise giving away the foreign exemption and insisting that you are covered through a qualified foreign plan. There is nothing for you to gain, yet the risk of problems with the IRS is material.

Whole Story at TFX.