·Ppl not filing returns (W9 – disclosing identity of taxpayer)
·Non compliant tax payer – aiding an embedding in a crime (eg aiding us citizens to make off-shore accounts
Compliance with us securities laws
Govern investment advisors services
swiss banks falling into3 categories -
Security and Exchange Commission
Set up properly regulated investment services
bank pictet
ubs
credit suisse
2nd tier – middle banks w enough business/resources not to have a fully registered us securities division but enough to police the US clients
(call blocking, software, training)
3rd categories – small fries; may have some us customers, but not big enough to comply with the law. the clients they have wont justify it.
most compliance policie
Raise the price of investment, reduce investments
VOLUNTARY DISCLOSURE PROGRAM
obligated to file tax returns on world wide income
even if you owe no tax, you have to file a return. US tax reduced by 2 factors.
foreign tax credit – against swiss taxes. (swiss taxes equal or more)
foreign earned income exclusion, 87k plus exclusions and rental deductions
on tax return, a box u have to check and has nothing to do with taxes; do you have a foreign bank account. that question leads you to foreign (fbar) bank account form.
established by bank secrecy act 1970. zero to do w taxation. until recently. treasury because of its roots in anti terrorism, money laundering, nasty set of penalties.50% balance from every year plus 5 years in jail.
Called into service in tax inforcement.
Voluntary disclosure in the past.
Policy to encourage non-compliant tax payers to come forward.
common element – income must be lawful.
you have some period of back taxes, 3rs, 6 yrs, unlimited. limited look back.
interest was obligitory (in tax statute)
penalties that would apply; 20% level or overlooked all together.
All has changed w voluntary disclosure program
“amnesty”
helping us clients w tax regularizations
heavy and punitive element.
deadline is sept 23.
GOAL: how much costs u but avoiding criminal prosecution.
This is the only legal method available for correcting past non compliant.
Summary to a proper disclosure – truthful, timely, complete.
Cooperate w IRS = potential interviews. //they are inundated, waving interview except exceptional circumstances.
limitations:
funds from illegal sources
not a guarantee against prosecution, but a recommendation to not receive criminal prosecution
IRS not responsible for prosecuting for tax crimes – they just make recommendation; justice dept. prosecutes.
IRS says come clean or it will only get harder
DETAILS MARCH 23 opened, ends SEPT 23.
WHat happensto a taxpayer? 4 components:
look back period for 6 years. amend and file unreported six years.
penalties on unreported taxes – 20-25%
interest due in tax due and penalty – on tax in 2003 and penalty – 6 yrs of interest at possibly 6%.
20% penalty aggregate amount, on highest account. //this is to avoid” all other penalties (inc Fbar penalty)
NItty Gritty -
married to a non resident alien, you are filing separately, if you gross income is more than your exemption amount, you have a US filing obligation. (eg you hvae a swiss rental property resulting in loss, doesnt matter – what is your gross before the deductions.
Different ways – married to non us person — 1 way.
1 spouse can claim foreign tax credit – when foreign tax is higher than US
if you have 100 and 80 is excluded — what rate is the 20 taxed
IRS doesnt care about capital gaines
rental property
IRS is thinking — we arent getting any tax out of the ppl overseas, what can we do to get money from them? Fbar penalties!! Extracting these funds, because we dont have representation in teh states. We are trying with american citizens abroad…
Issues we come across married to non-us:
bring them into us tax nap?
if they have no us income you can register them for a tax credit.
If you want to do that you need to fill out w7 form get a certified copy of their passport
children need ss no before you can claim
Plastic foreign investment companies – non us registered mutual funds.
settling foreign mortgages
could be you sell your home at the loss, exchange rate differences, you could have an exchange rate gain; youll have a phantom exchange rate gain that is taxable.
own a foreign trust – 3520a or 3520b forms 35% penalty of whats in the trust
foreign corporation – returns needing to be filed with the US; dont file: 10 k per year.
deductions –
i can deduct, mobile
to extent you itemize, and the expenses are greater tan 7.6 percent of their income, then you benefit
itemized deductions are allocated between
foreign housing exclusion -
to extent that your rent paid exceeds x amount, you can deduct the excess.
sometimes is better to claim foreign tax credit vs exclusions.
FBAR
if you have been reporting properly, (no unreporting) procedure to correct the FBar, no penalties. (ie what was highest account value during those 6 yrs)
file those returns where they r supposed to be filed. (detroit) fbar due june 30th.
HOW ABOUT A BI-NATIONAL WHO hasnt made lots and didnt know to do it.
Negligeable, no possible major tax evasion.
Question: is it worth filing the voluntary exclusion program if you have negligeable amounts? if not consciously trying to cheat the IRS.
Advise the client to quiet filing. (IRS could come out with civil penalties)
There are negligence penalties. the willfulness penalty is big one.
The risk of quiet filing may be better.
What r the fiscal implications of renouncing US citizen ship. legal and practical.
Generally if you want ot renounce, you have to be compliant, form 8854; (!!) They will tax you anyway.
Practical, make appt, interview 15mns, makes sure u r in your right mind, and accepts your passport. Certificate of loss of citizenship
change in tax law in 2008, if you fall over certain threshold of being a big taxpayer or good fortune (1xxK average, net worth 2mill cost of living) if you fall over, you have a deemed sale of all your world wide property and you are taxed on all your worldwide gain. Problem is the foreign currency issue.
what if you buy a house for 1mill (500k usd 8 yrs ago) 8 yrs ago, and you sell it today at 1 mill (worth 1 mill usd today) – you didnt make any money but because of exchange rate, US “gain” is 500K – you have to pay on that!!!
your kids have to pay 45% inheritance tax on your fortune when you die.
for 10 years after you give up citizenship, you are liable to pay tax if at your assets over 2000000 you would need to file for next 10 years;
puiblication 54 in the irs website – instructions. earned income on line 7 if below 87k index. negative amount on line 21, taxdeable income on 0. fill out.
VOLUNTARY DISCLOSURE PROGRAM
Motivations for banks to kick us ppl accounts:
Risk to banks
· Ppl not filing returns (W9 – disclosing identity of taxpayer)
· Non compliant tax payer – aiding an embedding in a crime (eg aiding us citizens to make off-shore accounts
Compliance with us securities laws
Govern investment advisors services
swiss banks falling into3 categories -
Security and Exchange Commission
Set up properly regulated investment services
2nd tier – middle banks w enough business/resources not to have a fully registered us securities division but enough to police the US clients
(call blocking, software, training)
3rd categories – small fries; may have some us customers, but not big enough to comply with the law. the clients they have wont justify it.
most compliance policie
Raise the price of investment, reduce investments
VOLUNTARY DISCLOSURE PROGRAM
obligated to file tax returns on world wide income
even if you owe no tax, you have to file a return. US tax reduced by 2 factors.
on tax return, a box u have to check and has nothing to do with taxes; do you have a foreign bank account. that question leads you to foreign (fbar) bank account form.
established by bank secrecy act 1970. zero to do w taxation. until recently. treasury because of its roots in anti terrorism, money laundering, nasty set of penalties.50% balance from every year plus 5 years in jail.
Called into service in tax inforcement.
Voluntary disclosure in the past.
Policy to encourage non-compliant tax payers to come forward.
All has changed w voluntary disclosure program
GOAL: how much costs u but avoiding criminal prosecution.
This is the only legal method available for correcting past non compliant.
Summary to a proper disclosure – truthful, timely, complete.
Cooperate w IRS = potential interviews. //they are inundated, waving interview except exceptional circumstances.
limitations:
DETAILS MARCH 23 opened, ends SEPT 23.
WHat happensto a taxpayer? 4 components:
NItty Gritty -
IRS is thinking — we arent getting any tax out of the ppl overseas, what can we do to get money from them? Fbar penalties!! Extracting these funds, because we dont have representation in teh states. We are trying with american citizens abroad…
Issues we come across married to non-us:
settling foreign mortgages
could be you sell your home at the loss, exchange rate differences, you could have an exchange rate gain; youll have a phantom exchange rate gain that is taxable.
deductions –
foreign housing exclusion -
FBAR
if you have been reporting properly, (no unreporting) procedure to correct the FBar, no penalties. (ie what was highest account value during those 6 yrs)
file those returns where they r supposed to be filed. (detroit) fbar due june 30th.
HOW ABOUT A BI-NATIONAL WHO hasnt made lots and didnt know to do it.
Negligeable, no possible major tax evasion.
Question: is it worth filing the voluntary exclusion program if you have negligeable amounts? if not consciously trying to cheat the IRS.
Advise the client to quiet filing. (IRS could come out with civil penalties)
There are negligence penalties. the willfulness penalty is big one.
The risk of quiet filing may be better.
What r the fiscal implications of renouncing US citizen ship. legal and practical.