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How Should an Expatriate Approach a Tax Letter from the IRS?

How Should an Expatriate Approach a Tax Letter from the IRS?

Taxpayers living abroad may face additional difficulties and inconveniences when they file their taxes. They may experience difficulties receiving correspondence and tax documents such as W-2s and 1099s. Other taxpayers living abroad may have real questions about how provisions in tax treaties impact their taxes and allow them to reduce the potential impact of double-taxation. Needless to say, the taxes of an expat living abroad can be far more complex than the taxes of a person living at home. Thus, there is a greater chance that an expat may receive a letter or other notice from the IRS regarding potential problems with one’s taxes. While you may believe that you have taken all steps necessary to protect against a letter from the IRS, the tax agency can send these letters for many reasons. In fact, some letters are merely informational and do not require any action on the part of the taxpayer. However, other notices may alert taxpayers to potentially serious issues that require immediate attention. Working with a tax professional such as Ted Kleinman at U.S. Tax Help can assist a tax payer in getting a handle on the situation they face. Ted can help an expat taxpayer understand what the IRS is asking about along with potential means to address it. To schedule a free “no cost” initial review, please call U.S. Tax Help at 1-800-810-9312. Take a Deep Breath and Avoid Potentially Undue Alarm When a taxpayer sees the letters I-R-S on a letter, their first instinct is often to panic. They may have already heard about the huge potential fines that can accompany an FBAR...
Can Streamlined Disclosure Really Eliminate Offshore and FBAR Penalties?

Can Streamlined Disclosure Really Eliminate Offshore and FBAR Penalties?

Since at least 2010, taxpayers living in the United States and in foreign nations have heard one steady message regarding foreign bank and financial accounts: disclose or face penalties and potential prosecution. Unfortunately, not all taxpayers have received this message. At least some taxpayers still seem to believe that the rules do not apply to them or do not reach them. Therefore, there is no reason for them to consider their compliance status. Such an approach to FBAR and foreign account disclosure obligations is dangerous and becoming even riskier. In light of an array of reporting requirements faced by foreign nations and foreign financial institutions, U.S. taxpayers can no longer rely on their account remaining secret from the IRS or other government regulators. Taxpayers who fail to comply with FBAR will continue to face an elevated risk of discovery as additional international governmental agreements authorizing tax and financial information sharing come into effect. When Do I Need to Make an FBAR Disclosure? The obligation to file a Report of a Foreign Bank Account (FBAR) is a longstanding obligation that has been on the books for decades. However, until recently, the obligation was rarely enforced because there was no penalty for noncompliance. However, in the late-2000s, a penalty was implemented. In fact, very serious penalties were implemented for all forms of FBAR noncompliance. Even a person who accidentally fails to file FBAR can face a penalty of up to $10,000 for each year where noncompliance existed. Generally, the obligation to file FBAR exists when a U.S. taxpayer holds foreign accounts containing more than $10,000. The funds can be held in...
Expats in Canada and Dual Citizens: Your Information May Have been Directly Transmitted to the IRS

Expats in Canada and Dual Citizens: Your Information May Have been Directly Transmitted to the IRS

Many American expatriates living in Canada are keenly aware of their obligation to file a Report of Foreign Bank Account (FBAR) and Foreign Account Tax Compliance Act (FATCA). However, some expats can lose sight of this obligation. Other taxpayers may be less aware of their need to file reports of foreign accounts. For instance, an “accidental American” is a Canadian citizen who unwittingly obtained citizenship from a parent at birth or through other means. These individuals may not even be aware that they are a United States Citizen — nevermind that they could have an obligation to file offshore disclosure reports. In at least some situations, this can lead to taxpayers facing enormous fines and other potential consequences. If you are an expat, a dual citizen, or a taxpayer who is otherwise concerned about potential U.S. tax or foreign disclosure obligations, Ted Kleinman of U.S. Tax Help may be able to assist. For decades, Ted has helped expats, dual citizens, and others with U.S. tax obligations for decades. To schedule a free consultation, please call Ted at 1-800-810-9312 or contact U.S. Tax Help online. Canada Is a FATCA Signatory and Reports Tax Information to the United States In 2010, FATCA was passed by Congress in an attempt to crack down on perceived income tax evasion by wealthy Americans. This law was put into effect through the signing of an intergovernmental agreement between the United States government and more than 100 other governments. The IGA between the United States and Canada went into effect in 2014. Under the Model 1 agreement the nations signed, tax information is sent to the...
U.S. Expat Tax Alert:  IRS Private Debt Collectors to Begin Collection Attempts

U.S. Expat Tax Alert: IRS Private Debt Collectors to Begin Collection Attempts

U.S. expatriates living in foreign nations generally understand that their lack of physical presence does not excuse them from U.S. tax filing and payment obligations. In fact, absent certain provisions found in tax treaties, expats would face a more significant tax burden as they would face both local and U.S.-based taxation. For some taxpayers living abroad who may not be aware of methods to reduce or eliminate double-taxation, this can mean that large tax bills build up over time. These tax bills may be old and the IRS may have even given up on collecting them. However, these tax debts, which are due and owing, may spring back to the minds of U.S. taxpayers throughout the world as private debt collectors begin to make their collection attempts. U.S. taxpayers living abroad may be surprised to receive calls from debt collectors. CPA Ted Kleinman and U.S. Tax Help can provide the guidance expats need to avoid potential tax scams while navigating the new tax challenges presented by private IRS debt collectors. To schedule a no-cost consultation, call Ted at U.S. Tax Help at 1-800-810-9312. What Should I Do if I am Called by a Private Debt Collector Over Tax Debts? Until recently, tax practitioners could safely advise clients and potential clients that the IRS would never call them or seek payment of outstanding debts over a phone call. Despite this clear-cut advice, fraudsters tricked American taxpayers out of hundreds of millions of dollars. The use of private debt collectors who can and will call taxpayers will only serve to introduce additional confusion and uncertainty while increasing the likelihood that taxpayers...
Is it Possible to File a Joint FBAR?

Is it Possible to File a Joint FBAR?

Taxpayers are generally aware that certain tax obligations can be filed jointly. That is, a married couple can file a single tax return that satisfies each taxpayers’ obligation to file and pay taxes. However, a joint tax return is most commonly discussed in the context of a taxpayer’s income tax return. While income tax is often the main obligation that taxpayers face, it is far from the only informational reporting duty. In fact, in recent years, Congress has enacted new obligations requiring foreign disclosures or introduced new penalties to further compel compliance with already existing foreign disclosure obligations. In particular, taxpayers are frequently concerned with their potential duty to file FBAR. Concern over FBAR is justified because even inadvertent mistakes can result in large fines and unwanted scrutiny. If you have questions about whether you are required to file FBAR, Ted Kleinman and U.S. Tax Help may be able to assist. Likewise, if you are considering whether a joint FBAR filing may be appropriate, Ted can provide on-point guidance. To schedule a free consultation, call CPA Ted Kleinman at U.S. Tax Help by dialing 1-800-810-9312 today. When Is a Taxpayer Permitted to File a Joint Tax Return? Taxpayers are generally aware that they are able to file a joint tax return under certain circumstances. While state law impacts exactly who can file a joint tax return, the general rule is that only two married individuals are permitted to file taxes jointly. Whether you are considered married for tax filing purposes is based on your state’s laws. Generally, any couple who is recognized as married under their state’s laws is...
Can Canadians be Accidental Americans? Do they Need to Pay U.S. Taxes?

Can Canadians be Accidental Americans? Do they Need to Pay U.S. Taxes?

At least some Canadians may be aware that the United States’ method of taxation is unique among all other developed nations. That is, U.S. individuals are generally taxed on the basis of their citizenship rather than on the basis of an economic nexus. Therefore, individuals with U.S. citizenship are typically liable for U.S. taxes on foreign income – even if they never set foot in the United States during the tax year. In many cases, taxpayers are aware that they will need to file U.S. taxes to leverage provisions of international tax treaties to reduce or eliminate potential double taxation. However, when a person does not realize that he or she has U.S. citizenship, the ingredients for a potentially serious tax mistake are present. In particularly egregious cases, the individual could face tens or hundreds of thousands of dollars in back taxes and penalties. If you are a resident of Canada or another nation and are concerned about U.S. taxes due to potential dual citizenship, Ted Kleinman and U.S. Tax Help may be able to assist. Are You a Canadian Citizen Who is also Accidentally American? As some Canadians may be aware, there are several ways that one can obtain U.S. citizenship. Most cases involving “accidental” Americans stem from citizenship through birth. That is, individuals who are born to a U.S. parent or have U.S. grandparents will also be a U.S. citizen at birth will also be U.S. citizens. Additionally, individuals who are born on U.S. soil receive citizenship at birth. Finally, if a parent became a naturalized U.S. citizen while a child was under the age of 18...
U.S. Expats Beware:  The Tax Filing Deadline for the 2017 Filing Season is Quickly Approaching

U.S. Expats Beware: The Tax Filing Deadline for the 2017 Filing Season is Quickly Approaching

For expatriates living in nations like Brazil, China, the U.K., or Saudi Arabia tax time can quickly sneak up on a taxpayer. When you are living outside of the American media bubble, it can be easy to become immersed in the culture that surrounds you and to pay less attention to U.S.-based events and obligations. As far as taxes go, this level of cultural immersion is often a problem as expats can find themselves scrambling to make a timely filing at the last minute or miss the filing deadline entirely. If you are an expat and have not yet considered your 2016 taxes which will be filed during the 2017 filing season, the time to do so is now. While you have more time to file than a taxpayer living in the United States, the taxes of expats are frequently more complex and require more time. Expatriates may need to consider tax treaty provisions to minimize the impacts of double-taxation. U.S. taxpayers living abroad are also more likely to need to make offshore account disclosures through FBAR or FATCA. Deadlines for Expats Filing U.S. Tax Returns Most expats are aware that, provided they satisfy certain tests, as a foreign resident they automatically have additional time to file taxes. Taxpayers who qualify as foreign residents automatically have until June 15, 2017 to file their taxes. Furthermore, an additional six-month extension can be requested pushing the tax filing deadline to October 16, 2017. Taxpayers who require an additional six-month extension can request it by filing IRS Form 4868. However, it is important to note that the extension of time to file...
What Can Happen if a Taxpayer Fails to File Taxes?

What Can Happen if a Taxpayer Fails to File Taxes?

While CPAs, accountants, and tax professionals frequently warn taxpayers regarding the parade of horribles that can occur if a taxpayer falls out of compliance with the U.S. Tax Code. Despite these warnings, taxpayers still fail to file taxes for an array of reasons. Some taxpayer – particularly expatriates – may fail to file their income taxes because they do not realize they have an obligation to report all income inclusive of foreign income. Other taxpayers may fail to file because they become overwhelmed with the complexity of their tax filing. Still others may fail to file taxes simply because they do not think the IRS will notice their non-filing. If you stopped filing taxes because you didn’t know where to start or made good faith mistakes regarding your filing obligation, U.S. tax accountant and CPA Ted Kleinman may be able to help. At U.S. Tax Help Ted is proud to assist taxpayers living in the United States and abroad. To schedule a no-cost consultation, call U.S. Tax Help at 1-800-810-9312 or contact Ted online. Also, please see our information on important 2017 dates for American expatriates. How Does the IRS Detect Tax Non-Filers? As mentioned above, at least some taxpayers do not file taxes because they believe the likelihood of facing an enforcement action is remote. Other taxpayers may simply decide to abandon their compliance efforts when they believe that enforcement is unlikely and they are facing a complex and confusing tax issue. Unfortunately, for taxpayers who engage in this type of action, the IRS has developed multiple systems to catch tax non-filers. In fact, a failure to file taxes...
Streamlined Offshore Compliance Procedures Provide a Pathway to Correct Foreign Income Tax Reporting Problems

Streamlined Offshore Compliance Procedures Provide a Pathway to Correct Foreign Income Tax Reporting Problems

American expatriates, recent immigrants, and wealthy individuals make up a diverse cross-section of the American population. However, there is at least one thing that each of these groups has in common. That is, an individual belonging to any of these groups are far more likely to hold or control foreign assets than other American taxpayers. An expat may keep foreign accounts for the convenience of carrying out daily transactions. A wealthy individual might seek to diversify their asset holdings. A recent immigrant may keep foreign accounts to send remittances back to family members who stayed behind. Regardless of one’s reasons for keeping foreign accounts, taxpayers have certain tax obligations regarding foreign assets. For one, these assets must be disclosed under FBAR when the aggregate foreign assets held by the individual exceeds $10,000. If the taxpayer receives income in the form of interest or dividends, he or she will need to report that income and pay taxes. Failures to satisfy these and other offshore tax obligations can lead to huge fines, penalties, and interest. However, expats and American taxpayers living outside of the United States can avoid the fines and penalties they would otherwise be obligated to pay. Individuals can correct past offshore tax mistakes by entering into the IRS’s Streamlined Offshore Voluntary Compliance program. US CPA for expats, Ted Kleinman of U.S. Tax Help, can assist with all aspects or your disclosure. Who Can File for Streamlined Voluntary Compliance? All taxpayers are theoretically eligible to file, but in practice, only taxpayers who have concerns about how they handled their tax obligations will have the ability to make a voluntary...
Implementation of IRS Passport Cancellation for Unpaid Tax Debts Nears

Implementation of IRS Passport Cancellation for Unpaid Tax Debts Nears

The IRS and Department of Justice have adopted an array of tactics in their ongoing efforts to combat offshore tax fraud. The U.S. Congress has authorized a number of additional reporting requirements under FBAR and FATCA. Under these laws, all U.S. taxpayers are required to disclose covered foreign assets when they exceed a certain asset threshold. Even an accidental failure to comply with these reporting obligations can result in large tax penalties. Interest and additional penalties due to continued non-compliance can cause these fines to swell quickly into tens or hundreds of thousands of dollars in tax debts. Previous IRS and DOJ attempts to secure payment of delinquent tax debts has focused on an array of tactics ranging from an experiment with private debt collectors in the late 2000s to more standard collection procedures involving reducing the debt to a lien against the property or a levy. However, when taxpayers attempt to hide assets overseas, the impact of a levy or lien may be diluted. As such, the IRS is exploring additional options to “convince” taxpayers to pay their taxes. The latest effort involves the potential for a passport denial, cancellation, or restriction. Why Would the IRS go After a Passport for U.S. Tax Debts? The link between one’s passport and tax debts may not immediately be apparent. However, when one considers how Congress perceives the “tax gap” such action does seem to make a degree of sense. That is, Congress believes that the difference between projected tax revenues and actual tax revenues is due to wealthy Americans who are using foreign accounts and foreign trusts to evade taxes....

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