Tax Countdown is on for US Expats

If you're a US expat, it's tax time.  Your two-month reprieve on filing deadlines is just about up.  For Americans abroad, hunker down and get that tax return done.  It's due June 15th.

Pray you qualify for the Foreign Earned Income Exclusion (FEIE).  Reduce your agony, at least a bit.

If you live abroad, work overseas, are a Perpetual Traveler gallivanting from place to place (everywhere except the US, basically), you need a bank account wherever you're living.  Check those balances - the highest total hit during the year among all accounts combined - to see if you fall within FBAR and/or Form 8938 limits for reporting bank and other financial accounts, and/or foreign assets, respectively. 

The deadline for RECEIPT of FBAR and Form 8938 is June 30th.  This trips up a lot of people since tax return deadlines are typically the date of postmark.  If you have to file FBAR and/or Form 8938, make sure it arrives before June 30th!  These two have draconian penalties ($50,000) for failure to file or late receipt!

We've gone into these before, so let's not repeat it all again.  Just a friendly reminder to get it done.

Once you get through the pain, maybe you want to rearrange some living arrangements or financial arrangements to reduce next year's bill.

May your road rise to meet you (not Taxman)!
Ann

Quick Note on Foreign Pensions - the US Tax-Grab

Just a quick note while Tax Season rages onward.  We've mentioned the dread Form 8938, wherein "US persons" - not just US citizens - must annually report foreign assets.  This form is in addition to and far more broadly based than the FBAR report on foreign bank and other financial accounts.

Americans have gotten used to certain tax exemptions for IRAs, 401k's and various types of pensions and retirement savings.  We won't waste your time on all the ins-and-outs of those here. 

What you do need to worry about is any foreign pensions!  Foreign pensions are NOT tax-exempt from US taxes!  Unlike various types of IRAs or 401k's, etc, foreign pensions are fully reportable and fully taxable.  So foreign pension funds must be reported, just like foreign bank accounts, stockbrokerage accounts, and other financial accounts.

Don't fall afoul of the IRS on this one!  Penalties take up to 50% of your pension fund if you fail to report it as required.

May your road rise to meet you!
Ann

US Expats Tax-hell Commences

Monday was Tax Day for residents in the US and most "US persons" trapped in the US Tax Net.  But for Americans Abroad, expats' own tax-hell is about to begin.  June 15th is the deadline for filing US income tax returns for non-residents caught in the US tax net.  Worse, June 30th is deadline for RECEIPT (not mailing!) of the dread FBAR and Form 8938.

Time to get your financial records in order and get going on your filing requirements so you can meet these deadlines.

Remember!  It's not just US citizens who are subject to US tax laws.  IRS defines "US persons" more broadly than any other country in world stretches their tax boundaries.  Legal permanent residents, even if they are outside the US, are still subject to US tax laws.  So are a host of others.  If you have any US income or any kind of US connection, beware!  Make double-sure you're not trapped.

Many foreigners delivered their babies in the US, thinking they were giving the "gift" of US citizenship to their offspring.  For example, it was quite popular in the 1990's for Koreans in an attempt to keep sons out of Korea's military service requirements.  Backfire!  All these kids, who have been living back in their and their parents' countries since infancy or childhood, now are be hunted down by IRS for their income tax payments.  Failure to file and failure to pay, as required, are both felonies.  With FBAR and Form 8938, penalties are downright draconian.

Exercise extreme caution!  If you are a US citizen residing outside US, or if you have other ties to US which might trap you in the net, make sure you verify whether you have to file, what you have to file, and get it done on time!

May your road rise to meet you,
Ann

IRS Adds Fuel to the Tax Fires

As if the FBAR form (TD F 90-22.1) weren't enough to drive US citizens, legal permanent residents, and other "US persons" crazy, there's also Form 8938 to add fuel to the IRS fires under your butt.  Since the rules keep changing, and Form 8938 is new anyway, American expats can go crazy trying to keep up with US tax laws and various IRS requirements. 

We talked in our last post about FBAR (Foreign Bank Account Report, which includes reporting all kinds of banking and other financial accounts).  If you have had any kind of financial account(s) which hit a total of US$10,000 at any time during the year, you need to file the FBAR.  Here's that link: http://www.irs.gov/pub/irs-pdf/f90221.pdf.  Get on it NOW because the IRS must receive it by June 30th.  Note that's the deadline for IRS to receive it, not for you to mail it out!

Now comes Son-of-FBAR, Form 8938.  Here you have to report all specified types of foreign assets, not just banking or other kinds of financial accounts (such as stock brokerage accounts).  http://www.irs.gov/pub/irs-pdf/f8938.pdf is the link to Form 8938.  For the instructions, go to: http://www.irs.gov/pub/irs-pdf/i8938.pdf.  Attach that form, if required, to your income tax return, and file it by the deadline for your income tax return.  If you are living abroad, your deadline for filing your income taxes is June 15th - this week!  If you filed for an extension, that deadline will be October 15th.

Gee whillikers - ain't the IRS sweet?  They even give you a comparison table of the requirements for the two different tax forms, financial assets vs. other foreign assets.  See the comparison table at: http://www.irs.gov/businesses/article/0,,id=255986,00.html. 

It's not just people we think of as expats who are caught in the IRS tax traps.  Many foreigners come to the US & give birth to get their baby US citizenship, then take baby home.  Well, guess what!  They have to file annual income tax returns, FBAR, Form 8938, etc, as required even if they were born in the US, then promptly departed and have never returned.  Even if they have dual citizenship.  Whatever.  Uncle Sam's minions at the IRS want your money!

Penalties are severe - and I do mean really severe - so check these out.  Don't risk making any mistakes on these two forms, in addition to routine income tax returns.  Not all American expats are subject to them, but be careful.  Very, very, very careful!