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Expat Tax Blog

Jan 21

Tax Court bars IRS from collecting under FBAR

by julie

In its first decision of 2018, the Tax Court considered whether the six-year statute of limitations in Code Section 6501(e)(1)(A)(ii) applied to a taxpayer who failed to file FBAR, forms from 2006 through 2008. The court held that the IRS could not go back beyond the general 3-year limitations period.

FBAR requirements have been around since the 1970 Bank Secrecy Act, but it wasn’t until the UBS case in 2009 that they were seriously enforced.

The IRS must generally assess a tax within three years of the date a tax return was due, without extensions, or the date the return was actually filed, whichever is later.

Code Section 6038(D), enacted on March 18, 2010, imposes new reporting requirements for certain specified foreign financial assets. Code section 6501€(1)(A)(ii), also enacted on March 10, 2010, provides a six-year period of limitations if the taxpayer omits from gross income amounts attributable to one or more assets with respect to which information is required to be reported under section 6038(D).

Despite the IRS attempt to draw parallels between Code Section 6038(D) and previously enacted statutes, the Tax Court ultimately determined that the statute being used to assess additional taxes from non-compliant taxpayers with foreign accounts could not be used for tax years prior to 2010 because there was no Code Section 6038(D) filing requirement prior to that year.

As a result of this ruling, the taxpayer ended up owing no additional taxes. Additionally, the decision could potentially prevent the IRS from collecting millions of dollars from other taxpayers in similar situations.

Original Story at Accounting TODAY.

Jan 19

IRS Urges Travelers Requiring Passports to Pay Their Back Taxes or Enter into Payment Agreements; People Owing $51,000 or More Covered

by julie

IRS strongly encourages taxpayers who are seriously behind on their taxes to pay what they owe or enter into a payment agreement with the IRS to avoid putting their passports in jeopardy.

This month, the IRS will begin implementation of new procedures affecting individuals with “seriously delinquent tax debts.

A taxpayer with a seriously delinquent tax debt is generally someone who owes the IRS more than $51,000 in back taxes, penalties and interest for which the IRS has filed a Notice of Federal Tax Lien and the period to challenge it has expired or the IRS has issued a levy.

There are several ways taxpayers can avoid having the IRS notify the State Department of their seriously delinquent tax debt. They include the following:

– Paying the tax debt in full
– Paying the tax debt timely under an approved installment agreement,
– Paying the tax debt timely under an accepted offer in compromise,
– Paying the tax debt timely under the terms of a settlement agreement with the Department of Justice,
– Having requested or have a pending collection due process appeal with a levy, or
– Having collection suspended because a taxpayer has made an innocent spouse election or requested innocent spouse relief.

A passport won’t be at risk under this program for any taxpayer:

– Who is in bankruptcy
– Who is identified by the IRS as a victim of tax-related identity theft
– Whose account the IRS has determined is currently not collectible due to hardship
– Who is located within a federally declared disaster area
– Who has a request pending with the IRS for an installment agreement
– Who has a pending offer in compromise with the IRS
– Who has an IRS accepted adjustment that will satisfy the debt in full

IRS.gov has other tips for taxpayers to catch up on their filing and tax obligations and more information about the revocation or denial of passports because of unpaid taxes.

Original Story at IRS.

Jan 18

Social Security & Expats – Q&A

by julie

Retirees are a large part of our client base and we consistently put out articles relevant to their needs.

We are frequently asked questions about social security and wanted to put together a Q&A covering these topics.

2. What are the important Social Security considerations for retirees who’ve extensively worked abroad, and for those who retire abroad?

If you worked in a country that has a Social Security Totalization Agreement with the US, credits you earned in a foreign country can be combined with your US credits to meet the social security requirements – either in the US, or in your resident country, or in both countries.

Currently, these countries have a Social Security Totalization Agreement with the United States:

 

 

Australia Austria Belgium

 

Canada Chile
Czech Republic Denmark Finland France Germany

 

Greece Ireland Italy Japan South Korea
Luxembourg Netherlands Norway Poland Portugal
Slovak Republic Spain Sweden Switzerland United Kingdom

 

2. Does income earned abroad as a US citizen count towards an earnings history?

No, the amount of income earned abroad does not count towards your US earning history and does not increase the amount of future benefits.

It is only helpful to meet the minimum required threshold of 10 years (40 quarter credits) in order to receive the benefits when you reach the retirement age. To be eligible to have your foreign credits counted, you must have earned at least six credits (generally one and one-half years of work) under the U.S. system. Then you can combine your credits earned in other countries to “fill the gap”.

What counts is “employment credits”.  If time worked abroad qualifies for an employment credit in that country (for example, in the case of Australia it is a credit towards the Old Age pension) – that credit, if necessary, may complement insufficient credit in the US for receiving the Social Security benefits. Ie – if you had 25 credits in the US, and you have 15 credits in Australia, you now have 40.

However, the amount of benefits will not be increased by a single $1, regardless of the amount of income earned abroad.

Working example: if you worked in the US until you were 25 and earned 6 Social security credits, then spent the next 30 years working in the UK, you can combine the credits to receive Social security payments.  If you moved to Hong Kong, which does not have such an agreement, only the credits paid into the US system would count.

Whole Story at TFX.

Jan 17

TFX Support Options 2018

by julie

At TFX customer service is not an afterthought – it’s the core of how we deliver service to clients. That is why we offer numerous ways to get help – whichever route works best for you.

 

Website Chat

On any page of taxesforexpats.com you will find a blue envelope icon -.

Click it and a chat window with a member of customer support team will come up. We provide live support 18 hours a day, 5 days a week.

If we are not there, leave a message and one of us will reach out to help in a couple of hours.

Please note that the chat is 100% human – we don’t employ bots or Artificial Intelligence.

Call Us

If you are more comfortable calling in, the same support team is here to answer your phone call. We can be reached at our NYC phone number – +1 646 EXPAT US or on the local country number (you can find it here: Contact Us).

Alternatively you can call us for free from the website – click this widget.

Whole Story at TFX.

Jan 17

TFX New Features 2018

by julie

We are busy year-round improving our system – hence making your life easier. Here are the changes we rolled out since the last tax year.

New Tax Questionnaire

We continue to improve our Tax Questionnaire. This year brings a wholesale redesign as well as many functional improvements. The clients who’ve started using it are giving it extremely high marks!

Income Calculator

Many of our clients live in the countries where the tax year differs from the U.S. calendar (Jan 1 – Dec 31). We have built a calculator in the Tax Questionnaire that allows you to input the income you earned in your home country calendar and it will convert it to the US tax year automatically. No more excel spreadsheets

Whole Story at TFX.