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Tax Compliance Help for U.S. Expatriates

01Jan2017

Tax Compliance Help for U.S. Expatriates

The IRS has increased tax compliance requirements for U.S. taxpayers with foreign accounts in recent years, and many U.S citizens overseas do not understand how to file, or that they are even supposed to file. For example, one client thought that because he was paying taxes to the foreign country where he lived and works, he was not required to make any U.S. tax filings. Perhaps the requirement to file a U.S. tax return seemed strange to him because the U.S. is the only country that taxes its citizens on all income worldwide. He is not alone. We encounter many U.S. expatriates that have not filed taxes for years, especially if they left the U.S as children and lived their lives abroad until one day, they meet that special person. They want to marry and relocate to the U.S to raise a family close to relatives. That is when they discover that in order to sponsor the spouse for a green card, they must be tax compliant. Quite a rude awakening, but, no need to fear. We have helped many U.S. taxpayers living and working abroad successfully come into compliance.

U.S. Tax Compliance Requirements

FATCA – The Foreign Account Tax Compliance Act (FATCA) is designed to combat tax evasion by U.S. persons holding accounts and other financial assets offshore. FATCA requires U.S. taxpayers who hold foreign financial assets with an aggregate value of more than the reporting threshold (at least $50,000) to report information about those assets on a Statement of Foreign Financial Assets, which must be attached to the taxpayer’s annual income tax return. There are exceptions to the reporting requirement, such as assets that are not “specified financial assets” and assets that are reported elsewhere. The penalties for non-compliance are 50% of the balance in the foreign accounts or $50,000, whichever is higher. You don’t have to be a math genius to figure out how costly this could be. We have helped many clients avoid these costly penalties, even after they have not fulfilled their reporting obligations, by favorably arguing that their failure was due to a reasonable cause. We can do that for you as well if your case has merits.

FBAR – Notably, the FATCA requirement is in addition to the requirement to report foreign financial accounts on a Report of Foreign Bank and Financial Accounts (FBAR). FBAR reporting is required if the aggregate value of the US person’s foreign financial accounts exceeds US$10,000 at any time during the calendar year. Taxpayers that have a financial interest in or signatory authority over an offshore financial account, must report the account on an FBAR regardless of their obligation to file under FATCA. The failure to timely file the FBAR can be subject to civil penalties and possibly criminal sanctions. The civil penalties range from up to $10,000 per year for non-willful violations to $100,000 or 50% of the account balance per year for a “willful” failure to properly report a foreign account. Again, we know the ins and outs of the different procedures and have helped our clients to lower, and even eliminate, the penalties for non-compliance.

Finding out that you are behind on your tax filings can be scary, but relax. There are many ways our experienced and knowledgeable tax attorneys know how can help you get compliant. We will fight like gladiators on your behalf to rectify financial asset reporting mistakes. Depending on your situation, we may also help you benefit from tax treaties between your country of foreign residence to significantly reduce your taxes, even if you have not filed a return in many years. Contact us at Global Law PLLC to solve your compliance issues. Help is a click away.

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  • 1 Jan, 2017
  • suzette blackwell
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  • compliance, expatriates, FATCA, foreign taxpayer,

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