We know and prepare the complex, high-penalty U.S. returns that U.S.-based CPAs, frankly, generally do not know how to prepare properly. Many rules applied in the U.S. – like for depreciation, Head of Household or the default tax classification for LLCs – are applied differently for an non-U.S.-based American citizen or greencard holder. You really are best-advised to utilize professionals that are themselves based outside of the United States and specialize in the more “exotic” returns …
Many Americans do not realize that in addition to wages and self-employment income, they are subject to income from non-U.S. rental properties, foreign government subsidies and social benefits, gains on the sale of non-U.S. business and personal property, foreign exchange gains arising out of mortgages on their homes denominated in a foreign currency, many types of income earned by the spouses.
Generally speaking, if you are an American citizen or Greencard holder, and the following income or asset information applies to you or your (non-)U.S. spouse, you may have a U.S. tax filing obligation.
|1040||Self-employment income > $400, total income > $12000|
|1040X||Underreporting of prior year, mistakes in prior year return|
|5471||10% or greater shareholder in non-U.S. corporation/LLC|
|8865||Partner in non-U.S. partnership or transparent LLC|
|8858||100% owner of non-U.S. LLC (Transparent entity) (optional)|
|3520||Member of non-U.S. pension, personal retirement plan|
|3520||Received a gift from a foreign legal and physical persons|
|8621||Own shares in non-U.S. mutual fund, passive activity|
|709||Made a gift to U.S/foreign legal or physical persons|
|FinCen114||Have non-U.S. financial accounts|
The penalties for not filing many of the returns above start at $10,000 per year, and can rise within a few months to as much as $50,000 if not supplied to the IRS upon request.
The US is increasing the range of information it collects from Americans and greencard holders around the world. The US Foreign Asset Transaction Compliance Act enters into force on July 1, 2014. US and non-US governments are using it as a framework for capturing and reporting financial transaction information to participating governments for use in tax evasion, money laundering and terrorism probes. Penalties on all of this new legislation are draconian, and even the availability of disclosure programs can protect taxpayers from potentially devastating penalties for missing or inaccurate filings. For those that have not filed the required returns on a significant amount of income, there is no substitute for qualified professional guidance.
We work happily with taxpayers and their attorneys to disclose non-U.S. financial assets and income not properly filed due to unwillful conduct. Often, these taxpayers were unaware of the filing obligation or were advised by so-called professionals and others that they had no obligation. If this describes you – please call us. We are however unable to assist taxpayers, whose lack of disclosure was due to willful conduct.
The two primary disclosure programs are:
Intended for taxpayers seeking protection from criminal and civil penalties for failure to file information/return on foreign financial assets
Generally, past eight years’ past due income tax and information returns and FBARs
Intended for taxpayers whose failure to file information/return on foreign financial assets not due to willful conduct
Generally, past three years’ past due income tax and information returns plus past six years’ FBARs
Limits filers to payment of tax and interest due; eliminated or reduced penalties
Filers potentially subject to criminal and civil penalties if IRS determines failure to file was willful