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Expat Tax Blog

Aug 21

How to use Head of Household Status to File your Taxes

by julie

The head of household filing status is one that few people understand. But it is important to understand all of your filing options to minimize the taxes you owe. If you meet the criteria to qualify, head of household status can result in lower taxes than single status. To qualify, a taxpayer must:

  • Be unmarried during the tax filing year
  • Have a dependent or qualifying child
  • Pay over half of the expenses of the household

As with many tax issues, there are specific definitions for some of these that are important to understand when deciding if you qualify for head of household status. These are explained in more detail below.

Original Stort at TFX.

Jul 9

Five Things You Thought You Knew About Cryptocurrency and Taxes

by julie

In the world of cryptocurrency, there are many myths floating around about taxes that simply are not true. We discuss them below.

Number 1

Many people believe that cryptocurrency gains or losses are not taxable if they were incurred due to an exchange between two different currencies. Additionally, many were under the impression that this was specifically true for exchanges prior to January 1st of 2018.

The truth is that every time a cryptocurrency is sold, whether it is exchanged for another cryptocurrency or for fiat money, the transaction must be reported and the loss or gain calculated for tax reporting.

Additional confusion was caused by the tax law the President signed in December of 2017. The new tax law stipulates that like-kind exchanges under section 1031 only applies to real property starting on January 1, 2018. But, neither the old tax law nor the new tax law ever treated cryptocurrency in a way that qualified it as a like-kind exchange.

Number 2

Another myth is that if cryptocurrency is stored on an exchange or in a cryptocurrency wallet, but is not sold and exchanged for fiat money, it is not a taxable event. But, the IRS explained in Notice 2014-21 that any cryptocurrency received as payment must be reported at its fair market value in dollars on the date it was received. This amount becomes the basis for calculations of gains or losses in the future.

Whole Story at TFX.

Jul 4

IRS launches international initiative to hunt down cryptocurrency tax fraudsters

by julie

IRS has allied with tax authorities from Australia, Canada, the Netherlands, and the UK to fight tax crime and money laundering with cryptocurrency and other financial assets.

The joint efforts — named ‘Joint Chiefs of Global Tax Enforcement (J5)’ — will comprise of six agencies from the five countries which will share information and intelligence, conduct joint investigations, and attempt to improve operational capability to grow international crime enforcement efforts.

It is worth noting that authorities all across the globe have increased their efforts in fighting cryptocurrency related crimes.

Authorities in both the US and Europe recently seized millions of dollars in cryptocurrencies in raids against drug sellers on the dark web. The US Department of Justice is also currently probing cryptocurrency market manipulation.


Original Story at TNW.

Jun 28

Expatriation — Am I exempt? Exit Tax & Renunciation Process are two separate things!

by julie

Parse the instructions carefully

IRS Publication 519 provides a long list of exceptions titled: Exception for dual-citizen and certain minors. The next line, although not bolded and less exciting, is arguably more important as it indicates what the exception is referring to!

“The exceptions listed here refer to being exempt from the Exit Tax – not the process of expatriation, which no one is exempt from.”

What if I am a minor who left the US at birth – am I not exempt from the renouncing process?

Correct — unfortunately you must go through the same process as full grown gainfully employed adults.

Even if you are a minor US citizen, you must still file form 8854 to expatriate. Until you do so you will remain a US tax resident (even if you have no requirement to file at the moment). In order to file 8854, you must also certify that you are up to date on your last 5 year tax returns.

In sum – do not make the mistake of assuming that you are not required to go through the process. In order to give up your US citizenship and US tax filing requirements for the future, you must still file 5 years of tax returns (even with no income to declare), along with form 8854.

Whole Story at TFX.

Jun 4

What is a Teacher or Trainee for Tax Purposes?

by julie

Teacher Or Trainee?

A person who is in the US temporarily under either a “Q” or “J” visa, and is not a student, and who is substantially compliant with that status’ requirements, is considered a trainee or teacher. Substantial compliance with that status is considered to be not having engaged in any activities prohibited by immigration law that could cause loss of that nonimmigrant status.

In other words, “Teacher or Trainee” includes any non-student, nonimmigrant who is temporarily in the United States using a “Q” or “J” visa. As examples, this includes au pairs, physicians, summer camp employees, scholars, and cultural visitors.


Immediate Family is Also Included

If someone holds the status of “Teacher or Trainee”, their immediate family (spouse and any unmarried children) are also exempt whether by adoption or by blood – but their nonimmigrant statuses must be dependent on, or derived from, the exempt person’s nonimmigrant status. There are three requirements for unmarried children to qualify:

  • They must not be members of a different household
  • They must regularly reside in the household of the exempt person
  • They must be less than 21 years old

Immediate family doesn’t include employees, servants, or attendants.

Whole Story at TFX.