US Taxes for Expats Living in Singapore

Prized for its beauty, culture, and economic growth, Singapore is sometimes referred to as “the Switzerland of Asia.”  However, like Switzerland, Singapore’s status as a tax haven also makes it an attractive target for criminal investigations mounted by the IRS in conjunction with the Department of Justice.  As a US expatriate living in Singapore, you must comply with tax reporting requirements mandated by the federal government — or risk the potential for debilitating civil penalties and even criminal prosecution.

If you’re concerned about complying with income reporting regulations — or if you’d simply like to identify and maximize the foreign tax credits and deductions you may claim — CPA Ted Kleinman can help.  Ted has more than 20 years of experience working with clients around the globe, and is prepared to negotiate aggressively with the IRS to protect your best interests.  To set up a free and confidential consultation with Ted, call US Tax Help today at (800) 810-9312.

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Expatriation Tax: Am I A Covered Expatriate?

Pursuant to Sections 877 and 877A of the IRC or Internal Revenue Code, expatriation tax applies to “US citizens who have renounced their citizenship and long-term residents… who have ended their US resident status for federal tax purposes.”  However, expatriation tax is not a one-size-fits-all arrangement.  On the contrary, the applicable filing requirements can vary dramatically depending on the date the taxpayer expatriated to Singapore.  For example, if you expatriated from the US to Singapore:

  • On or before June 3, 2004: 
    • You must file Form 8854 (Initial and Annual Expatriation Statement).  Failure to do so constitutes a violation of IRC Section 877 and IRC Section 6039G, and can result in a fine of $10,000.
  • After June 3, 2004, but before June 16, 2008:
    • You must file Form 8854 or risk the $10,000 penalty.  You must also formally certify with the IRS your compliance with all reporting requirements during the five years leading up to the date of your expatriation.  This certification will be closely checked. You are also subject to US tax on worldwide income for up to 10 years after expatriating.  You will be treated as a US citizen until you file Form 8854.
  • On or after June 16, 2008: 
    • You are what’s called a “covered expatriate” if any of the following statements are true:
      • You had a net worth of $2,000,000 or more when you expatriated to Singapore.
      • You were unable to certify tax compliance with the IRS (dating back five years before expatriating).
      • Your average yearly income tax for the five years before you expatriated is more than $147,000 for 2011, $151,000 for 2012, $155,000 for 2013 or $157,000 for 2014.

As a covered expatriate, you must comply with the regulations contained within IRC Section 877A. Additionally, any gifts you make to US citizens, as well as any bequests (i.e. inheritance) are subject to exit tax.

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Income Reporting Requirements: OVDP, FBAR, and FATCA

Even if you are working or living overseas, the federal government of the United States still requires you to disclose your global income.  If you fail to report accounts or assets which you hold in countries outside the US, including Singapore, you may be investigated and even criminally prosecuted for tax violations, and may consequently be subject to tens or even hundreds of thousands of dollars in fines and years of incarceration, in addition to being burdened with a criminal record.  In order to avoid or mitigate these penalties, it is very important to report all income as and when required to do so.

The Offshore Voluntary Disclosure Program or OVDP, which is sometimes referred to as an “Initiative” or OVDI, is designed to help US citizens safely disclose accounts held with foreign financial institutions (FFIs). By participating in the OVDP, you may be able to avoid criminal liability and significantly reduce the financial penalties you would otherwise pay.

The IRS periodically releases updated OVDP procedures.  The most recent incarnation, dubbed the 2014 OVDP, is applicable to submissions made on or after July 1, 2014 (and in some cases, earlier submissions). The IRS also offers an alternative set of “streamlined” procedures, which require taxpayers to certify that their violation was non-willful (i.e. unintentional).

You must file an FBAR (Report of Foreign Bank and Financial Accounts) if you are a US person — including US residents and US citizens, as well as various business structures — who had signature authority over or financial interest in one or more foreign bank accounts, provided the account value surpassed $10,000 at any time during the reporting year.

In March of 2010, Congress enacted a law known as FATCA (Foreign Account Tax Compliance Act), which was, as described the IRS, designed to “target tax non-compliance by US taxpayers with foreign accounts.” As a taxpayer living abroad, you must comply with FATCA by filing Form 8938 (Statement of Specified Foreign Financial Assets) if:

  • You are filing a joint return, and the value of your asset(s) is either:
    • Over $200,000 on the last day of the tax year.
    • Over $300,000 at any point in the year.
  • You are filing anything besides a joint return, and the value of your asset(s) is either:
    • Over $400,000 on the last day of the tax year.
    • Over $600,000 at any point in the year.

Bear in mind there are extremely significant criminal and/or civil penalties for willful and even non-willful violations of all applicable reporting requirements.  For example, non-willful failure to file an FBAR can result in a fine of $10,000 per violation.  For willful violations, the penalties increase to either $100,000, or up to 50% of the balance in the offending account.

If you’re an American expatriate living in Singapore and are concerned about compliance with your tax reporting requirements, it’s extremely important to contact a skilled CPA with experience handling international tax matters.  To start discussing your situation and exploring your financial options in a free and private consultation, call CPA Ted Kleinman right away at (800) 810-9312.