us expat foreign bank, financial & asset reporting guidance
DESCRIPTION
US Expatriate Tax Presentation given in Puerto Vallarta and Melaque Mexico for Americans living there concerning filing FBAR forms, form 8938 and other required IRS foreign reporting forms by Don D. Nelson, Attorney, CPA. His website at www.taxmeless.com has a wealth of additional informationTRANSCRIPT
Don D. Nelson, Attorney at Law , Certified Public AccountantKauffman Nelson LLP – www.TaxMeLess.com
•ALMOST EVERYTHING YOU NEED TO KNOW ABOUT US -IRS REQUIRED MEXICO FINANCIAL
& BANK ACCOUNT REPORTING •and
•US TAXES IN MEXICO
l IRS REQUIRED FORMS CAN BE SIMPLE AND
EASY
Current Status of International Taxes and the US Internal Revenue Service
• - Virtually every country in the world have agreed to participate in FATCA – this includes most countries which previously were “secrecy havens.”• - US now has agreements with over 60 countries to
exchange tax information (going both directions) and the list is growing daily. Mexico has signed one of these agreements.• - A US Citizen or green card holder must file a US
income tax return each year and report their worldwide income to the IRS even if they also pay and file taxes in their country of residence.
-
Mexican taxes and your US tax return:
l US Taxpayers get a dollar for dollar credit for any income taxes paid in Mexico against their US income taxes on the same income. Therefore NO DOUBLE TAXATION.
l Taxes withheld from your Intercam Account on Interest and Dividend income can be used to offset the US taxes on the same income.
l The Hacienda in many parts of Mexico is now forcing Americans renting their taxes to pay Mexican Income Taxes on the Income and IVA (16%) on the gross rental receipts.
l IVA is deductible on your US tax return as a rental expense and the Mexican Income taxes can be claimed as a foreign tax credit offsetting your US tax on the same income.
FBAR – FORM 114– Report of Foreign Financial and Bank Account
l - Due (Must Arrive by) June30 th 2014 for 2013 calendar year (cannot be extended for any reason)
l - Must now be filed on line over the internetl - Must file if your combined highest balances in all foreign accounts exceed
$10,000 US at any time during the yearl - File for foreign personal accounts and foreign financial accounts you sign
on or have right to control, even if you do not own the account.l - Reporting form, not tax form. You must report foreign interest and
dividends on regular schedules on your tax return.l - If you have a reasonable excuse for filing late you may be able to get
$10,000 or more per year penalty abated.l - There can be criminal penalties for late filing or non filing or late filing. l - Must check boxes on Form 1040 schedule B (bottom of page) to show
foreign accounts and if filing FBAR forml - Required for foreign pension accounts, foreign trust accounts, foreign
corporation accounts, brokerage accounts, money market accounts, etc. that you sign on
l - If a foreign bank or financial institution reports your foreign account and you have not filed the FBAR form you will most likely be assessed high penalties from the IRS.
l - IRS has programs which can reduce or eliminate potential civil and criminal penalties such as 2012 OSVDI and Streamlined program.
Information Required for Form 114 for on the internet:
Web address to enter FBAR (FORM 114) data on line: http://bsaefiling.fincen.treas.gov/main.html
- Your name, address, social security number and birth date
- Name of foreign bank or financial institution and its mailing address
- Your Account Number
- Highest balance in US dollars during the calendar year
- You can use to exchange rate for end of year.
- Name and address of any other signer on account and their social security number.
- If you sign on an account owned by another, you need to put their name and address and your relationship to them.
- When filing on line must use adobe acrobate reader which is free to download.
- Get number receipt for filing so you have proof the FBAR was filed.
INTERCAM Will send you all Data for your FBAR (form 114) and Form 8938 on the following form:
• Form 8938 - Report of Foreign Financial Assets (REQUIRED SINCE 2011)
l Must filed with personal tax return if (a) file as US single resident with $50,000 or more in foreign financial assets; (b) file as US resident with $100,000 or more in foreign financial assets; (c) Living abroad with foreign financial assets of $200,000 or more if filing single or $400,000 or more if filing jointly.
l Foreign financial assets include bank accounts, stock accounts, contracts to receive payment, foreign stocks, foreign bonds, foreign promissory notes, foreign partnership or trust interests, gold held by another in your behalf, foreign pension plans, etc.
l Real estate is not included in definition of foreign financial asset unless held in foreign corporation, trust, partnership or foreign LLC
l $10,000 penalty for failure to file
When You must file Form 8938 with Your Return
Filing Situation Value on last day of the tax year is at least this amount:
Or, at any time during the tax year, the value is greater than:
Single or Married Filing Separate taxpayers living in the U.S.
$50,000 $75,000
Married Taxpayers filing jointly living in the U.S. $100,000 $150,000
Taxpayers not filing jointly who are living outside the U.S. and would qualify for the foreign earned income exclusion
$200,000 $300,000
Married Taxpayers filing jointly who are living abroad and would qualify for the foreign earned income exclusion
$400,000 $600,000
- Same data for foreign financial accounts as included on FBAR form 114.
- Also include number of on forms 5471, 8865, 3520 also included in returns
- Do not have to list foreign real estate held in your own personal name (but do have to list if title held in foreign corporation, partnership, trust, etc.
- List other foreign financial assets such as foreign stocks, promissory notes, bonds, etc.
4 METHODS TO SURFACE WITH THE IRS FOR UNFILED RETURNS
OR UNFILED FOREIGN ASSET REPORTING FORMS
1.STREAMLINED PROGRAM
2. VOLUNTARY OFFSHORE DISCLOSURE PROGRAM
3. FAQ 17 FOR FBARS AND 5471 FORMS
4. REGULAR DISCLOSURE
• Other Special IRS Reporting Forms
l Mexican corporations ( Form 5471)
l Foreign trust forms (Forms 3520 and 3520A) no longer have to be filed for MexicanFideicomiso's effective 6/6/13 per Revenue Ruling – still required for other foreign trusts and foreign pension plans
l Mexican Partnerships (Form 8865)
l Passive Foreign Investment Companies (8621) These include all foreign mutual funds. Money market funds, and foreign corporations that just invest in passive investments.
l Failure to file any of these forms can result in adverse US income tax consequences and huge civil and criminal penalties which are now being assessed by the IRS.
• Great US tax Benefits of US Expats Living and working in Mexico
l Foreign Earned Income Exclusion of $97,600 for 2013
l US foreign tax credits for income taxes paid in Mexico
l Foreign Housing Exclusion or Deduction (if earning income through work – and earnings exceed foreign earned income exclusion.
l Using a Mexican corporation to avoid paying US social security taxes of self employed.
l Electing for US tax purposes flow through benefits for Mexican corporations will eliminate double taxation and allow you to take tax credits - a must for Mexican real estate held in a Mexican corporation
INCREASE IN IRS AUDITS OF US EXPATRIATES
l
--Big increase in audits due to GAO discoveries of inaccurate claims by expats-Usually done by mail-You will be required to provide written documentation for deductions and income-IRS often does lifestyle audits to determine if your assets and lifestyle match your reported income. You do have opportunity to explain other sources of assets including gifts and inheritances-IRS does have a tax treaty and other agreements with -exico to exchange information with each other and cooperate.
BEST WAY TO AVOID AUDITS:
-Report all foreign assets and income as required and if anything unusual is on return, attach a written explanation.-Stay within statistical guidelines for your income level with respect to charitable contributions, and other deductions.
US CITIZENSHIP SURRENDER – THE ULTIMATE SOLUTION?
Need Citizenship in another country- such as Mexico
Can be done without exit tax consequence if have net worth of less than $2 million US and paid less than $157,000 average income taxes in the past 5 years
Must be current on all required IRS Tax Filings
No guarantee the State Department will later allow you to get visa or Citizenship after surrender.
Cannot be done for Tax Avoidance purposes
In 2013- 2,999 Citizens surrendered their citizenship.
•Hey Gringo – Uncle Sam Wants Your Taxes
• We can help you control Uncle Sam and reduce your taxes
• Don D. Nelson, Attorney at Law, CPAKAUFFMAN NELSON LLP
• Websites: TaxMeLess.com & ExpatAttorneyCPA.com• Email: [email protected]
• More about Don
l Don D. Nelson is a California Attorney, Certified Public Accountant who has assisted Americans with their US taxes in Mexico for over 23 years. He is a partner in Kauffman Nelson LLP – Expatriate and International Tax CPAs
l Don is a graduate of the University of Southern California Law School, and has been with Ernst & Young, Price Waterhouse Coopers and Deloitte Touche. He has taught at UCLA and was an Assistant Professor at California State University Los Angeles.
l Websites: TaxMeLess.com ExpatAttorneyCPA.coml l Blogs: usexpatriate.blogspot.com / us-mexicantax.blogspot.coml US Phone in Mexico (949) 860-9606/ (949) 481-4094 / skype: dondnelson
l Email: [email protected] & [email protected]
● Don can be reach by phone, email or skype at any time. All tax services are provided by phone, skype, email, fax, and internet.