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Expat Tax Blog

Nov 4

IRS Relief For Former Citizens

by julie

Relinquishing United States citizenship is a serious matter, and involves decisions that are irrevocable. Of course, there are tax implications to doing this as well. Anyone considering this is encouraged to speak with a specialized legal professional prior to making final decisions. The IRS has procedures to handle these matters. To aid in decision making, below is some information about tax compliance and how to avoid becoming a “covered expatriate”.


United States citizenship is defined by the US Constitution in the Fourteenth Amendment, where it states that “all persons born or naturalized in the United States” are United States citizens. While there are exceptions for high-level diplomats, everyone born within the US becomes a US citizen at birth. Similarly, people born to US citizens outside of the United States are almost always US citizens.

There are some United States citizens who are not even aware of their citizenship status because they were born to foreign parents in the US, or to US citizens outside of the United States. Even if they are aware of their citizenship status, they may not be aware of the tax implications. Every United States citizen, no matter where they live, must report their income and pay taxes on all of the money they earn everywhere in the world, even on foreign assets.

The Foreign Account Tax Compliance Act, commonly known as FATCA, became law in 2010. This act requires financial institutions throughout the world to determine if their clients are United States citizens, and report information to the Internal Revenue Service about their account. If their financial institution determines a customer is a US citizen, that customer must either provide their Social Security Number or provide documentation to counter that determination if they are not a US citizen. This is usually all done via a customer self-certification at the time of account opening.

Whole Story at TFX.

Oct 2

IRS grants relief for U.S. persons who own stock in certain foreign corporations

by julie

On Tuesday the Department of the Treasury and the IRS issued Revenue Procedure 2019-40 and proposed regulations that provides relief to certain U.S. persons owning stock in certain foreign corporations.

The Revenue Procedure limits the inquiries required by U.S. persons to determine whether certain foreign corporations are controlled foreign corporations (“CFCs”).

The proposed regulations provide additional relief to taxpayers affected by the repeal of section 958(b)(4).

The repeal of section 958(b)(4) was part of the Tax Cuts and Jobs Act. For more information about this and other TCJA provisions, visit IRS.gov/taxreform.

Original Story at TFX.

Sep 19

Tax Reform for US Expats

by julie

For many years, virtually everyone recognized the look of the iconic tax return form – the Form 1040. It was complicated, yet consistent. But that changed with the passage of the Tax Cuts and Jobs Act – the most significant tax reform to occur in over 30 years.

The 2018 tax season introduced the postcard sized Form 1040 for some taxpayers, but for others this new form only moved questions from the Form 1040 to new attachments and schedules. Many taxpayers and tax professionals were upset that it didn’t get simpler, only different.

The 2019 Tax Draft

The IRS has released a draft of the 2019 Form 1040, and it is once again different. While some of the 2018 changes to the form remain, you will notice that it has returned to a more familiar look and feel. Some of the changes for 2019 include:

  • Income and tax deductions are on the first page
  • Capital gains and losses are on the first page rather than on a schedule
  • Better description of the requirement to name the spouse who is filing separately or a non-dependent child if filing as head of household
  • The Earned Income Credit and the Additional Child Tax Credit sections are highlighted. Incidentally, if you are an expat be sure to claim your Additional Child Tax Credit.
  • Foreign addresses are now entered on the main form instead of in Schedule 6
  • The checkbox to note your health insurance coverage is not on the form since it is not required any longer

Whole Story at TFX.

Aug 26

British citizens born in US risk having UK bank accounts frozen

by julie

Many British citizens born in the US but who left when only a few months or years old have a risk that their bank accounts in Britain can be frozen because of intense pressure by US tax authorities on UK banks.

British banks are afraid of fines from US regulators if they continue to serve US citizens but fail to share information with the IRS.

But this leaves thousands of ‘accidental Americans’ born in the US but left as toddlers, in a near-impossible situation.

The pensioner in Cambridge said accidental Americans like herself should not be the target of Fatca trawls of foreign bank accounts.

According to the European Banking Federation, there are nearly 300,000 accidental Americans in the EU.

Original Story at the Guardian.

Aug 14

Taxpayers with expiring ITINs should renew them now

by julie

Taxpayers with expiring individual taxpayer identification numbers (ITINs) should renew their number ASAP, before the end of this year. In that case, they can avoid unnecessary delays related to their tax refunds next year.

These ITINs expire on December 31, 2019:

– Those not used on a federal tax return at least once in the last three consecutive years.
– Numbers with middle digits 83, 84, 85, 86 or 87 not already renewed.
– Taxpayers whose ITIN is expiring and who expect to have a filing requirement in 2020 must renew their number. Others don’t need to take any action.

To renew an ITIN (PDF), a taxpayer must complete a Form W-7 and submit all required documentation. They don’t need to attach a tax return. However, taxpayers must note why they need an ITIN on the W-7.

There are three ways taxpayers submit the renewal application:

– Mail the form to the IRS address listed on the Form W-7 instructions.
– Work with a Certified Acceptance Agent authorized by the IRS to help taxpayers.
– Make an appointment at an IRS Taxpayer Assistance Center to have each applicant’s identity authenticated in person.

Original Story at IRS.