International Tax Services

Did you live or work abroad or receive income from foreign sources during the year? If you are a U.S. citizen or resident, you must report income from all sources within and outside of the U.S. The rules for filing income tax returns are generally the same whether you’re living in the U.S. or abroad.

 

If you are a resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax the same way as an U.S. citizen.

 

If you are a nonresident alien engaged in a trade or business in the United States, you must pay U.S. tax on the amount of your effectively connected income, after allowable deductions, at the same rates that apply to U.S. citizens and residents.  If you are not engaged in a trade or business, the payment of U.S. source income that is fixed, determinable, annual, or periodical is taxed at a flat 30 percent (or lower treaty rate) and no deductions are allowed against such income.

 

In today’s fast-paced global marketplace, it is essential to make sure that you are complying with all IRS filing requirements. The US government has drastically increased its disclosure and reporting requirements for international holdings and transactions. You need a CPA that is current on all reporting requirements whether you reside in the U.S. or you are a foreign company doing business in the U.S. or a U.S. company doing business abroad. SAPIENT CPA will develop an international tax strategy that will insure your business is in compliance and that you understand all the tax implications associated with doing business internationally.

 

Our services include:

 

  • Taxation and reporting requirements for foreign companies and individuals investing in U.S. companies

  • Tax implications and reporting requirements for U.S. companies and individuals investing overseas

  • Foreign tax credits

  • Tax treaties

  • Cross border transactions

    • Withholding and reporting requirements for transactions with foreign individuals or companies

  • Consulting on international taxation issues

  • Investments overseas - Disclosures and filing requirements for foreign trust and foreign bank/brokerage accounts held by US citizens

  • Foreign bank account compliance

  • Foreign investment in U.S. real estate

  • Nonresident tax returns (Form 1040NR) preparation and filing

Foreign Account Tax Compliance Act

 

The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010.

 

  • FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts

  • FATCA focuses on reporting:

1. By U.S. taxpayers about certain foreign financial accounts and offshore assets.

2. By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest

  • The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.

 

Foreign Bank and Financial Account Reporting (FBAR)

 

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR) if:

 

  • the United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and

  • the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported

 

Streamlined Filing Compliance Procedures

 

The streamlined filing compliance procedures are available to taxpayers, certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part. The streamlined procedures are designed to provide to taxpayers in such situations with

 

  • a streamlined procedure for fling amended or delinquent returns, and

  • terms for resolving their tax and penalty procedure for filing amended or delinquent returns, and

  • terms for resolving their tax and penalty obligations.

 

The streamlined filing procedures that were first offered on September 1, 2012 have been expanded and modified to accommodate a broader group of U.S. taxpayers. Major changes to the streamlined procedures include: 

 

  • extension of eligibility to U.S. taxpayers residing in the United States

  • elimination of the $1,500 tax threshold, and 

  • elimination of the risk assessment process associated with the streamlined filing compliance procedure announced in 2012.

 

Several countries have signed the Foreign Account Tax Compliance Act (FATCA) with the United States and will be sharing bank account information of U.S. residents with the IRS.  Anyone affected by the Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer Taxpayers and the Offshore Voluntary Disclosure Program should have their individual situation reviewed to determine the most advantageous route in light of these new rules.

 

2014 Offshore Voluntary Disclosure Program (OVDP)

 

Taxpayers who do not qualify for one of the new Streamlined Procedures can still qualify for the 2014 OVDP.  These taxpayers face a one-time 27.5 percent offshore penalty based on the highest balance year. In addition, according to the IRS, effective Aug. 4, 2014, the 27.5 percent offshore penalty will increase to 50 percent if “either a foreign financial institution at which the taxpayer has or had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement has been publicly identified as being under investigation or as cooperating with a government investigation.” Taxpayers in the OVDP must file 8 years of income tax returns (or amended returns) and 8 years of FBARs. Failure to disclose foreign accounts and foreign financial assets can lead to:

 

  • Civil fraud monetary penalties,

  • Monetary penalties for failure to file information returns,

  • Monetary penalties for willful failure to file the FBAR, and

  • Criminal prosecution.

Here are seven tips from the IRS that U.S. taxpayers with foreign income should know:

 

 

  • Report Worldwide Income.  By law, U.S. citizens and resident aliens must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.

  • File Required Tax Forms.  You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts. See IRS.gov for more information.

  • Consider the Automatic Extension.  If you’re living abroad and can’t file your return by the April 15 deadline, you may qualify for an automatic two-month filing extension. You’ll then have until June 16, 2014 to file your U.S. income tax return. This extension also applies to those serving in the military outside the U.S. You’ll need to attach a statement to your return to explain why you qualify for the extension.

  • Review the Foreign Earned Income Exclusion.  If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $97,600 of your wages and other foreign earned income in 2013. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.

  • Don’t Overlook Credits and Deductions.  You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce the amount of taxes you have to pay if both countries tax the same income.

  • Use IRS Free File.  Everyone can prepare and e-file their federal tax return for free by using IRS Free File. If you make $58,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website. Some Free File software products and fillable forms also support foreign addresses for those who live abroad.

  • Get Tax Help Outside the U.S.  The IRS has offices in Frankfurt, London, Paris and Beijing. IRS staff at these offices can help you with tax filing issues and answer your tax questions. Visit IRS.gov for more information.

                                                             

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