How the IRS Treats International Taxpayers and Returns

How the IRS Treats International Taxpayers and Returns

https://ift.tt/38evniS The proper tax reporting of international and foreign income is rather onerous. Be aware that the stakes are much higher and the returns can become much more difficult if you have a foreign bank account, a foreign corporation, a foreign pension and even a foreign life insurance policy. Frequently Asked Questions About International Taxpayers and Returns If I am a U.S. citizen living outside the U.S., do I need to file a U.S. tax return? Yes. Your worldwide income is subject to U.S. tax, so you will need to file a tax return. Note that there are likely to be various exclusions and deductions you can apply that may reduce the tax you owe. If I pay tax overseas, do I still have to file a U.S. return? Yes. You will need to file a U.S. return unless you revoke your residency status in the U.S. or your U.S. citizenship. When do I need to file a U.S. return? If you are outside the U.S. and Puerto Rico, you will typically need to file your return no later than June 15 in the year following the tax year you’re filing for. You can request an extension to delay filing until December 15. Note that tax underpayment penalties and interest will accrue from June 15. Do I need to file additional forms in addition to my U.S. individual income tax return? In some circumstances, you may be required to file additional forms. These can include: If you have foreign assets worth over a certain amount, you may have obligations under FBAR or FATCA reporting rules. If you run a business outside the U.S., you may need to file additional forms like Form 5471. If you are claiming certain foreign exclusions or deductions, you will need to file the relevant forms. There are some other circumstances where additional reporting and forms may be required. If I am not a U.S. citizen or resident, and I live outside the U.S., do I still need to file a return or pay U.S. taxes? If you’re a nonresident alien, you may need to file a return and pay taxes if you have any income sourced from the U.S. https://youtu.be/6PZxrk9KNNc IRS Medic

Why IRS Form 5471 preparation has become even MORE difficult

Why IRS Form 5471 preparation has become even MORE difficult

Previous video on Downward Attribution: https://youtu.be/dIwYRSo3mHw The Tax Cuts and Jobs act of 2017, otherwise known as tax reform, created many changes to the taxation and reporting of foreign stock ownership. And not for the better. Nowhere is this better demonstrated than on IRS Form 5471, a form with the easy to remember title of “Information Return of U.S. Persons With Respect to Certain Foreign Corporations."  In this video we will discuss some of the worst changes we’ve seen for tax years 2018 and moving forward. Here’s the big message: More people are now required to file a Form 5471, and Form 5471 has never been as complicated.  So let’s get into some of the big changes.  First off, there used to be a requirement that you had to own a stock for 30 days or more to trigger the status as a  US shareholder. Now the trigger is if you own the stock for any moment within a year. Even a second.  Second, there are now increased filing requirements because of new rules that attribute more stock ownership than actually exists - both individuals and entities can be affected. Tax reform repealed Section 958(b)(4)  - and perhaps this was an accident - I really think it was. But the effect has been to require more taxpayers to file a Form 5471 than ever before with a concept called downward attribution - a topic I discussed at length in a previous video - you’ll find the link in the description below.   While there is new program the IRS announced that offers some attribution relief, you need to check to see if it applies in your situation. Follow the links to irsmedic.com if this is something you need help with. Form 5471 now has new schedules and new definitions of certain categories - and don’t forget the attribution rules can differ category to category. Additionally Form 5471 isn’t just for information only anymore - in some cases you now use it to calculate a tax liability.  Another change - you  probably are not done with just a Form 5471. Also look to see if forms 965, 965-A 965 B, 8990, 8991, 8902, 8993 are needed.  And don’t forget about Form 926 - which has been around for a while - but it too has a  $10,000 penalty if not filed or if it is something that the IRS deems is substantially incomplete.   And lastly, Category 1 is back. If you look at the the general wording, it makes it seem like you only have to file if you have a transition tax due. But this is not true. Category 1 is related to the transition tax but again, even if you don’t have any transition tax due, you still could  a Category 1 filer.  Overall, Form 5471 preparation has gotten so complicated many very talented tax professionals have given up and are now outsourcing this work to firms like ours. They simply don’t feel comfortable - with good reason. And also, we are hearing from our clients and other tax professionals alike that many large accounting firms that used to prepare Form 5471 don’t want to be bothered - the work has gotten too difficult for them.  So does this situation seem impossible? Well there is hope. Understand that the IRS does not have the staff to examine every Form 5471 filed. This is some of the most difficult tax work around and there’s simply not enough people in the world who are up to the challenge - inside or outside the IRS. But what the IRS can do, is find easy to spot mistakes - so that’s exactly what they do. They find the low hanging fruit where they can assess those $10,000 penalties nearly automatically. The IRS doesn’t want to have to dig too deep. So the key with Form 5471 is to make sure that what you file can escape that first round of scrutiny with no problems - let the IRS focus on someone who took shortcuts, and not you or your client, right?  So what are your questions about Form 5471? What are your trouble spots? What do you want to know? Please leave your concerns below. We read every comment.  Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/hlKiO0nAFEg IRS Medic

IRS Schedule 1: The new shell game that may only confuse you.

IRS Schedule 1: The new shell game that may only confuse you.

Look how much simpler your tax return is now! Why there's even blank space on the first page of your return! Yes! Wow. Isn't this great news? Or this could be a fairly transparent shell game where the information that used to be on page 1 on your 1040 is simply now on the another page - now known as IRS Schedule 1. Per https://ift.tt/2Qf93iq "Have additional income, such as capital gains, unemployment compensation, prize or award money, gambling winnings. Have any deductions to claim, such as student loan interest deduction, self-employment tax, educator expenses." Be sure to suscribe as we go over more the the complexities that Tax Reform (Tax Cuts and Jobs Act of 2017) created. Parent & Parent LLP 144 South Main Street Wallingord, CT 06492 (230) 269-6699 ino@irsmedic.com https://youtu.be/K6yJMb6aKvM IRS Medic

Streamlined Disclosure v. IRS Relief Procedures for Certain Citizens? Which is better?

Streamlined Disclosure v. IRS Relief Procedures for Certain Citizens? Which is better?

Previous Videos: 2019 Streamlined Disclosure Updates: https://youtu.be/s_QxqiNZHTk The 2019 Relief Procedures for Certain Former Citizens: https://youtu.be/aZW508BNZWk What is a Covered Expat?: https://youtu.be/-8BUfwCcK6o In this video we discuss tow hyptheticals that can help you understand if either the Streamlined Disclosure program or the new IRS Relief Procedures for Certain Citizens are programs you may wish to consider. In hypothetical one Pierre woke up to learn that his bank account in France is going to be frozen - he was identified as US person. In fast Pierre was born in New York when his parents attended Columbia University. But he’s never been back to the US since he was 2 years old. His French is perfect ,but his English - not so much. Pierre lives a modest life and just wants this IRS FACTA issue to go away. He qualified for the Streamlined disclosure program and if he uses it, he will have no penalties and instead of owing taxes - his two children are earning him a tax credit of now $2000 per child - $4000 refund. So what should he do? Streamlined or Relief Procedures? Will he get the refund? Hypothetical two: Kyle does speak English well. He left the US in 1999 when he was 18 and now runs a few successful businesses overseas. He believes he filed returns in high school, but isn’t sure. His net worth is hard to calculate. He think he can sell his businesses, if the right buyers comes along for $10,000,000. Yet - on paper he isn’t really sure what is is worth. He make around $400,00 USD annually but has lost the same amount in other years. if you added up all his income from all his various business interests around the globe. He really has no intention returning to the US aside from visiting his family. He isn’t sure if he would owe any tax to the US - he is taxed heavily where he lives and believes the foreign tax credits should negate any tax liability. He is married and his wife sees no point to being a US person. And wonders why he’s hasn’t renounced yet? For help follow the link to https://ift.tt/1RfwK1f Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/Pz3OHREqcAA IRS Medic

2019 IRS Relief Procedures for Certain Former Citizens explained

2019 IRS Relief Procedures for Certain Former Citizens explained

Previous video on 2019 Streamlined Submission updates: https://youtu.be/s_QxqiNZHTk Next video: [not uploaded yet] What is a covered expatriate: https://youtu.be/-8BUfwCcK6o Link to IRS.gov: https://ift.tt/2NhGcrL The Internal Revenue Service announced new procedures that will enable certain individuals who relinquished their U.S. citizenship to come into compliance with their U.S. tax and filing obligations and receive relief for potential back taxes owed along with foreign reporting penalties such as Form 5471, 8839 and the FBAR form. Requirements: The Relief Procedures for Certain Former Citizens apply only to individuals who have not filed U.S. tax returns as U.S. citizens or residents, owe a limited amount of back taxes to the United States and have net assets of less than $2 million. Only taxpayers whose past compliance failures were non-willful can take advantage of these new procedures. Many in this group may have lived outside the United States most of their lives and may have not been aware that they had U.S. tax obligations. Eligible individuals wishing to use these relief procedures are required to file outstanding U.S. tax returns, including all required schedules and information returns, for the five years preceding and their year of expatriation. Provided that the taxpayer's tax liability does not exceed a total of $25,000 for the six years in question, the taxpayer is relieved from paying U.S. taxes. The purpose of these procedures is to provide relief for certain former citizens. Individuals who qualify for these procedures will not be assessed penalties and interest. The IRS is offering these procedures without a specific termination date. The IRS will announce a closing date prior to ending the procedures. Individuals who relinquished their U.S. citizenship any time after March 18, 2010, are eligible so long as they satisfy the other criteria of the procedures. Relinquishing U.S. citizenship and the tax consequences that follow are serious matters that involve irrevocable decisions. Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime. Taxpayers interested in these procedures should read all the materials carefully, including the FAQs, and consider consulting legal counsel before making any decisions. For more help follow the link to https://ift.tt/1RfwK1f Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/aZW508BNZWk IRS Medic

IRS Streamlined Disclosure Program 2019 updates

IRS Streamlined Disclosure Program 2019 updates

https://ift.tt/2N5i0ZD https://ift.tt/2Nw9pxU In this video will be discussing the new and updates regarding the IRS streamlined disclosure program - in particular how it relates to US taxpayers abroad. We are then going to follow up this segment with a video on on the new IRS program Relief Procedures for Certain Former Citizens, and after that we will give a few hypotheticals so we can show compete and contrast the two programs - which one is better for US persons who have not filed returns ever on in a long time. The Streamlined Programs was announced in June of 2014 and honestly - I am a very vocal critic on the IRS, but this is one program I do believe they got correct. At least when it comes to US filer abroad. Now the program can’t undo all the bad the code created - filing is still far too expensive - but the program itself is helpful overall. If you have questions abotu what type of disclosure to make follwo the links to irsmedic.com Parent & Parent LLP 144 South Main Steet Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/s_QxqiNZHTk IRS Medic

The ULTIMATE Social Security + IRS scam - the inside story

The ULTIMATE Social Security + IRS scam - the inside story

If you are fine risking a prison sentence and being completely dishonest, there is a little known tax scam where filers report too much income. There's a reason why. Will they ever get caught? https:///www.irsmedic.com Most tax scams have one thing in common - reporting too little in income. But there’s one scam I learned years ago from a Revenue Officer who is friend of mine. Now that he’s retired I can tell you about it - not because I want you to do this - oh it is most certainly a violation of US law that will put you in prison for many years if you get caught. Yet it is one of those things the government doesn’t want you to know about as it reveals a significant lack of control over something they pretend is well-administered. . A lack of control that is entirely foreseeable when you take something as complicated as the US tax code and combine it with our very expansive federal law that it must interact with.. So let’s get into this scam - one that you shall never do. Let’s suppose you are 58 years old. And you haven’t reported a lot of income your entire career and you start thinking about your social security benefits. You got most your recent statement from the social security administration and you see your retirement will be pretty light. Your income looks to be both fixed and very low. This saddens you. You want to get the maximum social security benefit but based on your contributions you will get the least. Let us suppose that you know that if you contributed the maximum for 40 quarters or 10 years, that you know that would qualify you for the maximum monthly benefit. And now let us suppose you are cavalier with the truth and your own freedom. So you file 10 years of tax returns with a Schedule SE filled out showing that you owe the maximum in self-employment tax - and this is key - self-employment is where your social security taxes are calculated. So even though these 10 returns show a ton of income and a ton in taxes you owe, you file them anyway. You file them anyway because you know that once the returns are filed - as long as they are not examined by an IRS examiner or another investigator, you know they will be processed and the 10 year statute of limitations on collections will begin to run. And you know that if you just lay low for a bit, the IRS will eventually give up looking for you, unless you give them a reason to look for you. And your tax debt will expire. So now that you are 68, you no longer owe the IRS anything and you based onto contributions you said you made - are now entitled to the maximum allowed by law for the rest of your life. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/3gpFcc0E8qc IRS Medic

Why the IRS just LOVES to attack the poor

Why the IRS just LOVES to attack the poor

https://ift.tt/1RfwK1f The entire idea behind progressive income tax rates - like the ones US tax code demands - is that the rich pay nearly all the taxes, and the poor pay virtually nothing. The tax rates for the rich are higher, exemptions are blown out, and deductions are phased out. Meanwhile for the poor - their tax rates are the lowest - assuming they exceeded the exemption amount in the first place. So you would think, the poor - as a whole — would have very little reason to ever have a problem with the IRS. So now to the story - ProPublica - a website I believe to be left-leaning, still, regardless of your political beliefs - did some great reporting into an issue tax attorneys like myself are too familiar with. The IRS attacks the poor who are weak. In fact, the IRS loves to attack the weak. The IRS loves to attack the weak because they can’t fight back. From a recent article written by Paul Kiel: Auditing poor taxpayers is a lot easier: The agency uses relatively low-level employees to audit returns for low-income taxpayers who claim the earned income tax credit. The audits — of which there were about 380,000 last year, accounting for 39% of the total the IRS conducted — are done by mail and don’t take too much staff time, either. Isn’t this crazy? Nearly half of an audits the IRS conducts are waged against poor people! How outrageous is this? Oh oh it is worse than you thought. Here’s a quote from the National Taxpayer Advocate Nina Olsen. “A survey by the Taxpayer Advocate Service found that more than a quarter of Earned Income Tax Credit recipients who were audited didn’t even understand that they were under audit." So why is the IRS doing this? I’ll give the most charitable response I can. The IRS doesn’t have the auditors it used to. The IRS claims to be about 75% of their highest strength, but I can tell you , they are operating at 50% of effective strength. Audits can take years to complete and demoralized examiners often retire as soon as they can, sometimes in the middle of an audit. Now why does the IRS not have the budget? Well according to Republicans political shenanigans occurred that have yet to be accounted for. So their response is to cut the IRS’s budget and keep it that way. Yet, for some reason - the IRS still wants to have great statistics to brag about to Congress and to impress the America people with. See - the IRS bemoans that auditing the so-called rich - another clumsy label - is hard. Yeah I suppose it is. There are tax firms like ours whose job it is to make the IRS’s job as hard as possible. Because yes we do enjoy giving the IRS a challenge. But lost in why it is so hard to audit the rich is the problem of the overcomplicated tax code. It is not nearly as hard to audit the so-called rich in other countries because their tax systems tend to be adminstratible - they simply don’t have the vague, massive ever expanding tax code. The US tax code is so complicated no one person understands it all - not even close. So firms like mine take advantage of the IRS’s own ignorance of its own seemingly endless code and regulations the best that we can. Using the vastness of the tax code against the IRS can be quite an effective strategy. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/V2-VHZyLgko IRS Medic

Making large cash deposits and IRS Form 8300

Making large cash deposits and IRS Form 8300

https://ift.tt/1RfwK1f https://ift.tt/29yqaCV The Bank Secrecy Act creating filing obligations for (1) foreign bank accounts over $10,000 on an FBAR form or face absolutely insane penalties and perhaps criminal exposure (2) when you come into the US with $10,000 or more in cash you must declare it or face absolutely insane penalties or perhaps criminal exposure and lastly what we are discussing in this video (3) created the requirement that when you deposit $10,000 or more in cash, a bank has to file a Form 8300 with the IRS. Or, if someone suspects you are trying to get around Form 8300, they can file one on you any way. Do you see how this could be a little insane? Form 8300 is required to be filed any time there is a cash deposit over $10,000. But also could potentially be filed when the deposit is under $10,000 when someone’s feelings tell them to do so. This means a Form 8300 could be imposed on ANY cash deposit depending on the subjective determination of a bank employee. Do you see how these wildly expansive reporting requirements aside from being mind-blowingly unconstitutional completely undermine any claims that Form 8300 is a legitimate crime fighting tool? Oh yeah, and Form 8300 is required to be filed by many other business besides banks who deal in cash. That’s a lot of forms. Let me explain the ridiculousness this way. When you dump useless data into useful data, you just made your useful data - that you worked so hard to get - useless. And it will stay useless until there is a way to segregate the useful from the useless. Which brings us back for Form 8300. Form 8300 is required to be filed so often it doesn’t mean anything. Even the US treasury admits to such. The best they can claim is that Form 8300 is used to discover patterns. But this has always seemed to be more a theoretical justification rather than something that has actually been used to find actual criminal conduct. And even think of this $10,000 threshold. It hasn’t change since 1970. Yet we know that $10,000 in 1970 is equivalent to around $65,000 today. But Treasury still refuses to admit that inflation exists - and are still fixated on that $10,000 number. So this about it this way. $10,000 today is would be about $1500 in 1970. Do you think congress intended the Bank Secrecy Act to apply to transactions of $1500 in 1970? Now I wasn’t alive yet - so I have to rely on the archived Congressional record. And you know — I don’t see it there. So here’s the bottom line. You are much better off making one huge deposit where you know a Form 8300 will be filed - because Form 8300 will likely never see human eyes, as opposed to trying to avoid the Form 8300 filing requirement by structuring cash deposits in smaller increments, which could trigger a Form 8300 being filed anyway. https://youtu.be/YLAXsnAWyhQ IRS Medic

How to enter or re-entering the US with a large amount of cash

How to enter or re-entering the US with a large amount of cash

https://ift.tt/1RfwK1f This is not legal advice. The government is too unpredictable for that. Rather these are two true stories involving clients of ours. If you ever traveled into the US, you may be very leery about having a so called large amount of cash with you. You may know that if you have $10,000 or more with you, you could have a serious problem entering the US. But still - is it possible to fly into a US airport with millions of dollars in cash and totally get away with it? George had $2 million dollars in a Swiss bank account. He knew the government was cracking down on undeclared bank accounts abroad so as soon as he could he withdrew all of his money in cash and placed it in a safety deposit box in a Swiss bank. Now George did come clean with the IRS, as we entered him into a disclosure program. But his cash - he really wanted his cash to live on in the states. He looked into how to get his money from Switzerland and found that there were bonded couriers that would do the deed for him. But they charge a 5% commission!  George really isn’t the kind of guy to hand over $100,000 as a fee to a total stranger. So he had me look into it. So I researched the issue the best I could and determined to the best of my knowledge that it is 100% legal to bring in huge amounts of cash as long as FinCEN form 105 is properly filled out. Or so I hoped .  So that’s what we did — I filled out the form and drafted a cover letter for George to hand to customs when he arrived at JFK. So George and his son traveled to Zurich. Packed $2 million dollars in cash into two duffle bags. He and his son walked to the airport in Zurich and hopped on a flight back to JFK.  Watch the entire video to find out what happened to George. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/mLIPQuFlOaM IRS Medic

What is a covered expatriate? How can you avoid being one?

What is a covered expatriate? How can you avoid being one?

https://ift.tt/1RfwK1f If you are trying to figure out what a covered expatriate is and isn’t and are terribly confused - there's good reason. So I'll explain it as quickly as I can. Think about it this way:  If you relinquish your US citizenship or are long-term US resident who ceases to be a lawful permanent resident in a way - by default you are covered expatriate. Hi I’m Anthony Parent of IRSMedic and in this video I will explain what it means to be a covered expatriate and I will also explain how NOT to be one. Additionally, I will discuss a new IRS relief program for those who have expatriated incorrectly. So why is it bad to be a covered expatriate? If you are a covered expatriate, you are subject to the exit tax. The exit tax sort of works like the federal estate tax. The concern Congress had is that prior to death, US persons subject to the estate or death tax as it has been referred to, could easily avoid it merely by expatriating - that is giving up citizenship - before death. So Congress, in such desperate need of your stuff, created the exit tax, in large part, as a way to frustrate taxpayers from circumventing the estate tax. So the thing is the federal estate tax only starts to apply when you have a lot of assets so too, does the exit tax. The difference is that the asset test for expatriating is lower around $2 million compared to the estate exemption which is something you don’t need to worry about until your assets go over $5 million. And also with the exit tax there is an income test as well. The point is that for many middle class Americans who are covered expatriates, this means nothing to them, as even if the tax were applied to them, they would owe nothing.  Rather, the biggest downside for most people is that as covered expatriate, the law could still treat them as a US person for tax purposes - years after they gave up their US citizenship. That’s right - just because you are no longer a US citizen, it does not mean the IRS feels you should not be taxed. Pretty crazy, isn’t it?  So the problem is that the government - at some point - could try to claim you still owe taxes and subject you to the horrific penalty regimes of the FBAR and foreign account tax compliance act or FATCA - well after your ceased to be a US person. So for many people the real reason they don’t want to be a covered expat is because they want finality. They don’t have to wait and guess to see if the IRS is done with them  So now you know what a covered expat is, let’s talk about how not to be one.  Certify a form 8854. This means you need to be in compliance for the last 5 years. Now before you run off and file the last 5 years - stop right there and get legal advice - you may not actually have to file the last 5 years, and also you may want to use a disclosure program to reduce or eliminate massive penalty exposure. Follow the links to irsmedic for more help.  File and pay the exit tax if it applies.   The assets over a two million and income over around $161,000 could subject you to this. But this does not mean you have to pay. There are certainly ways to plan to avoid this tax bite.  And there are other exceptions. If you were born a dual national, you may not have to pay the exit tax even if you were a billionaire who did no planning.  And this is what is new - the IRS announced a program in  September of 2019 called Relief Procedures for Certain Former Citizens. This is a way for certain kinds of US expats - many so-called accidental Americans - to obtain relief from being deemed a covered expatriate.  Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/-8BUfwCcK6o IRS Medic

The IRS Bona Fide Residence Test an Foreign Housing Exclusion

The IRS Bona Fide Residence Test an Foreign Housing Exclusion

Qualifying for the Bona fide residence test and foreign housing exclusion https://ift.tt/34bCGFR In an earlier video, I discussed the benefits of the foreign income exclusion. Now in order to qualify for that and the foreign housing exclusion, you must satisfy something known as the IRS Bona Fide residence test. Hi I’m Anthony Parent of IRSMedic and in this video I will show how the bona fide residence test is satisfied and I will also be talking about the foreign housing exclusion so that your IRS tax bill will be as low as allowed by law. There are a number of factors that the IRS uses to determine if you have a bona fide residence in another country so that you are eligible to claim the Foreign Earned Income Exclusion. According to the IRS:   “You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.”   They go on to say: “Questions of bona fide residence are determined on a case-by-case basis, taking into account such factors as your intention or the purpose of your trip and the nature and length of your stay abroad. You must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. The IRS decides whether you qualify as a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555, Foreign Earned Income. “   Facts that the IRS will use to determine if you are a bona fide resident include:   The reason for you staying abroad.  The intended length of your stay. Whether your stay was uninterrupted. Whether your stay lasted an entire tax year. Whether you are subject to the income tax laws of the foreign country. If you have a domicile in the U.S.  So do you see - how much gray area there is? This should be a simple rule - but nothing is ever quite simple with the IRS - this is why taxpayers and tax professionals have a hard time keeping up with the complicated rules, that always seem to change. To something even more complicated.   Understanding the Foreign Housing Credit   The Foreign Earned Income Exclusion is not the only benefit you can get from living in another country. The IRS also allows you to deduct part of your housing costs while overseas. You can typically exclude anything in excess of 16 percent of the total amount of the Foreign Earned Income Exclusion that you have claimed.   Parnet & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/_zJv2jL-13o IRS Medic

*** SPECIAL UPDATE 2019 IRSMedic Master Tax Guide is up ****

*** SPECIAL UPDATE 2019 IRSMedic Master Tax Guide is up ****

Follow this link to the IRSMedic 2019 Master Tax Guide https://ift.tt/2KLA8Xi We have it all the essentials covered - you’ll find information on - Federal income tax tables, rates and brackets - State income taxes - Payroll taxes - Taxes on your pay stub - Information on Sales and use taxes - Dividend taxes - Taxes on interest earned - Gift taxes - Estate taxes - Inheritance taxes - Capital gains taxes - Taxes on trusts - Business pass through taxes including the new Qualified Business Income (QBI) deduction - Corporation taxes You know I really think that’s a lot of taxes. Don’t you? Now we cover the basics, like the different ways to file your taxes, the increased standard deduction amounts, and stealthy payroll taxes that you may not be aware are costing you so much. Follow the link and if there are topics you wish to us to cover, please leave them in the comments below. Be sure to subscribe, we continuously update with essential IRS news. This is Anthony Parent of IRSMedic, enjoy our guide as much as you can, and thanks for watching. https://youtu.be/IUM6_dNXF7s IRS Medic

The Foreign Earned Income Exclusion (FEIE): How does it work? Can it help you?

The Foreign Earned Income Exclusion (FEIE): How does it work? Can it help you?

https://ift.tt/1RfwK1f What is the Foreign income exclusion? How does it work? If you spend time living, studying, or working abroad, the Foreign Income Exclusion can greatly lower your tax bill. In this video, we explain how this exclusion works and to what type of income it applies All of your world wide income is taxable   Typically, U.S. citizens and residents are taxed on their worldwide income, wherever it is earned. However, if you meet certain requirements, you can exclude a certain amount of your foreign earnings from your income when you submit your tax return. The amounts you may be able to exclude are  one hundred four thousand dollars for the 2018 tax year, and one hundred five thousand and nine hundred dollars in 2019. This amount increases every year in line with inflation. To claim these exclusions, you need to show that you have been resident and earned money in countries outside the U.S.   What is Included and Excluded in Foreign Earned Income?   Here are some of the rules behind Foreign Earned Income Exclusion   It can only be applied to active income that you earn for performing a job, from wages or salary, or as money you paid yourself while self-employed. This can even apply to money paid to you by a US-based employer, providing you were outside of the country for a specific length of time. The exclusion does not apply to other types of income like retirement income, investment income, real estate income, social security benefits, and others. Certain other types of income don’t apply including income earned as employee of the U.S. government, or payments received after the end of the tax year.   Now a few warnings You may still have to file an income tax return. In order to claim the foreign income exclusion you have to file. If you have not filed, you may a very large penalty exposure on your hands as many foreign informational returns must be completely along with the tax return. Penalties can be automatically assessed - at $10,000 per year. We have seen the IRS begin doing this the last three years. Additionally, FBAR penalties may be an entirely separate but difficult issue. If you think you might have a problem, follow the link to irsmedic for expert advice. Your income is excluded from US tax- But chances are you are paying high taxes to the country in which you are living or working. So it’s like like you are getting away with not paying taxes. Now, Foreign tax credits work entirely differently. Additionally, to qualify for the Foreign In come exclusion, you need to satisfy something called the bona fide residence test to claim the foreign income exclusion. Be sure to subscribe to our channel as we will be coving both topics - foreign tax credits and the bona fide residence test in future videos. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269 - 6699 info@irsmedic.com https://youtu.be/-CiJ4394Ab0 IRS Medic

*** SPECIAL FATCA UPDATE *** Are Americans just IRS penalties waiting to happen?

*** SPECIAL FATCA UPDATE *** Are Americans just IRS penalties waiting to happen?

For immediate help with an international tax/FBAR/FATCA problem click to: https://ift.tt/1RfwK1f Joining international tax attorney Anthony E. Parent is John Richardson of citizenshipsolutions.ca and Keith Redmond of American Expatriates 2.0 - find him at https://ift.tt/2algxeE The three discuss the Canadian Foreign Account Tax Compliance Act (FATCA) litigation and what it means along with the next steps toward the Supreme Court of Canada, and the remarkable ease at which Canada seems perfectly fine surrendering its sovereignty to the whims of the IRS. Someone the Canadian Charter of Rights and Freedoms protects the Canadian government more than its people of Canada. Keith Redmond discussed the FATCA litigation in France on behalf of Accidental Americans. There two the French courts denied any real releif, but the upside is the case will be head by the EU courts - meaning that if succesful the ruling could benefit all Americans in Europe from the FATCA disaster. The three also discuss the merits of getting a social security number while simultaneously claiming one is not subject to US taxation. The three conclude by dismissing the internetexperts who claim there is a one-size solution for all. Attorney Parent discusses the situations in whcih a US person REALLY should comply and enter into a streamlined disclosure program, as opposed to gambling and hoping the IRS never catches up. More updates to come so be sure to subscribe. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269 6699 info@irsmedic.com https://youtu.be/qgrkX768GDE IRS Medic

FBAR filing requirements for children and dependents

FBAR filing requirements for children and dependents

https://ift.tt/33hI1Ls Do you need to file and FBAR FinCEN/Form 114 for you child? The report of Foreign Bank accounts, also known as the FBAR was a tool invented by congress in 1970 to make it difficult for criminal masterminds around the world to use the international banking system to facilitate their criminal mastermind plans. And because of that, any US person regardless of age or mental abilities must file an FBAR should their foreign bank accounts exceed $10,000 in the aggregate. Again, believe it or not this requirement extends to someone who is disabled or is a child - even a baby. Hi this is Anthony Parent of IRSMedic and in this video I will be talking about FBAR reporting obligations for dependents and what happens when a mistake is made. FBAR penalties The FBAR is form every US person is required to file or could face horrific penalties —starting at $10,000 and going up to 50% of account value. The reason why the penalties are so horrific is that the law was designed to dismantle the most violent, thuggish criminal syndicates. Now as as it turns out, FBAR penalties haven’t been assessed so much against terrorists and human and drug traffickers, but rather every day people who didn’t know they had to report a foreign pension on an FBAR form. What is an United States “person” The law imposes FBAR requirements against any “United States person” which is defined as United States citizens - including minor children -; United States residents; entities, including but not limited to, corporations, partnerships, or limited liability entities. Every child is responsible for filing an FBAR Further the law states a child is responsible for filing his or her own FBAR report.  If a child cannot file his or her own FBAR for any reason, such as age, the child's parent, guardian, or other legally responsible person must file it for the child. If the child cannot sign his or her FBAR, a parent or guardian must electronically sign the child's FBAR. So Would the IRS penalize a child for not filing FBAR? Absolutely. There exists a myth that because IRS employees are human they will act humanely. No doubt, many of them are conflicted about their job. But the fact is the humanity has been forced out of them because the job requires it. We have seen IRS employees attempt to assess FBAR penalties in woefully inappropriate settings - again and again. What if you made a mistake FBAR mistakes are incredibly common. And consider this, we have IRS employees as clients who messed up their FBARs. If you made a mistake there are often cost effective ways to deal with it, but you need to be careful. Trying to figure out this on your own could lead to a really bad result - we’ve seen people make a bigger messes trying to straighten things out on their own or by getting bad advice. Follow the link to IRSMedic for expert help with you or your child’s FBAR. If you have questions please leave them in the comments blow. If you found this video helpful please like and share it with your friends. Be sure to subscribe to stay on top of international tax topics you probably wish you didn’t need to. This is Anthony Parent of IRSMedic and thanks for watching. https://youtu.be/paK6rgc08dU IRS Medic

Understanding the IRS collection process -the most common questions answered

Understanding the IRS collection process -the most common questions answered

https://ift.tt/1RfwK1f The IRS is the world’s most powerful, complicated collection agency in the world. So when you have an unpaid tax problem, it’s hard to get answers that can actually help you. Hi, I’m Anthony Parent, tax attorney and founder of IRSMedic. In this video I will answer some of the most common questions people ask about the IRS collection process. Will the IRS call me? If you are expecting a call back yes. But if not, don’t expect anyone to call you. One reason is that if a revenue officer is assigned to your case, you will be contacted in person. One exception is the private IRS debt collectors - they do call unannounced. The problem is there’s many people posing as the IRS, claiming they will arrest you is you don’t pay them immediately. The IRS doesn’t work like that, although it may feel as they can. Will the IRS waive penalties and late fees? It depends. Some penalties can be waived as a matter of right with the First Time Penalty Abatement procedures. Others can be waived if the IRS believes there was a good reason. But you have to ask for it properly. Will the IRS forgive tax debt or settle for less? Yes. The IRS understands you can’t get blood from a stone and will work with taxpayers to get something rather than nothing. Also, there are special hardship programs. Additionally, for taxpayers who do file their tax returns, Chapter 7 bankruptcy can sometimes completely eliminate the tax debt. Look bankruptcy is not a lot of fun, and unfortunately, that bankruptcy will show up on your credit report - so we like to work directly with the IRS, often with an offer in compromise to settle back taxes for our clients. An offer in compromise is something that does not show up on a credit report. Additionally, if a tax lien was filed, the lien will be removed once the terms of the offer in compromise are fulfilled. That’s pretty nice. Will the IRS fix errors? Sometimes. But it can be incredibly difficult to get the IRS to follow their own rules. This is a reason why regular normal people who’ve never had to hire a tax firm or tax attorney before often find themselves in terrible need. The IRS rules are so complicated, the IRS has a difficult time following them themselves. And consider, we even have IRS employees as clients. So what does that tell you? Will the IRS take my house? My car? My business? Maybe. But honestly, it is something that can be avoided. I get it, the IRS is something most of us don’t want to deal with. It can take some real courage to face facts. But you will really likely be able to find a solution you can live with. Taxpayers who take steps to make it hard for the IRS to collect from them by hiding assets, transferring to a friend, often get the worst treatment - including criminal charges. So don’t do that. The IRS is not fun, but it can be managed. And it can get a lot easier if you’re able to hire a tax firm that you like. Will the IRS take my refund? Often the IRS will intercept a federal or state refund for back tax payments. It is possible to get the money back if you can prove you don’t owe it, however time limitations apply so it’s best to act quickly. Will the IRS take payments? Yes. The key is to make sure you don’t sign up for something you can’t afford. Just don’t agree to anything to get the IRS off your back. Getting a professional opinion about what you can and should repay is key and really might be money well spent. Can the IRS arrest you or put you in jail? If someone calls claiming they are from the IRS and that that they are going to arrest you, that is likely a scam. If special agents with gold badges show up at your house to arrest you, that is probably real. Can the IRS seize my 401k? Yes. No court order is required to do so Can the IRS garnish my wages? Yes. No court order is required to do so. Can the IRS freeze a bank account? Yes. No court order is required. Are you starting to see how powerful the IRS is? Can the IRS take inheritance for back taxes? Yes. That is why it is important to settle with the IRS before you come into money. The best time to negotiate with the IRS is when things are the worst for you financially. Don’t wait until you are back on your feet to make a deal, as your deal may be less than optimal. What other questions do you have about the IRS collection process? Please leave them in the comments below. Be sure to subscribe to our channel to stay on top of IRS news you probably wish you didn’t have to. And if you are looking for a firm to help you, follow the link to irsmedic.com This in Anthony Parent of IRSMedic, thanks for watching. https://youtu.be/L75TuOBtT20 IRS Medic

July 2019 International Tax Update #FATCA #TFFAAA

July 2019 International Tax Update #FATCA #TFFAAA

Global Advocate for the American Overseas and Tax Attorney John Richardson join Anthony E. Parent to discuss the following important updates for any US expat concerned about tax compliance, tax reform, The Foreign Account Tax Compliance Act (FATCA), and the proposed Tax Fairness for Americans Abroad Act (TFFAAA) In this video we discuss: 1. Overall status of the TFFAAA bill: The bill is intact. The plan it to reintroduce it, with a Democrat sponsor. The good news is mot Democrat organization that represent Americans overseas are no on board with the bill. 2. GILTI/transition tax/TTFI updates: Enhanced Section 911 exclusions - the TFFAAA does not end citizenship based taxation, however it does greatly limit it and that is a great start. 3. The US Treasury got creative to limit GILTI taxes so that there is essential no GILTI due if taxpayers lives in country where tax rate is above 18.1%. 4. Form 3520-AForm 3520: tapxayers are leanrign the perils of over filing. Attorneys Richardson and Parent discuss why overfiling is a real bad idea. 5. Litigation updates: We discuss the Accidental Americans in France and other litigation and pushback in Europe along with updates from Canada. For help withyour international tax problem contact https://ift.tt/1RfwK1f Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 https://youtu.be/AOyM_9gCaVw IRS Medic

Should I Claim 99 Deductions

Should I Claim 99 Deductions

Do you get tired of the federal government gouging you paycheck after paycheck - especially if you work a lot of overtime, you might be really tempted to claim 99 deductions on your W-4. But should you? Are there downsides? Today I am going to tell you the real life story of one of our clients who made the mistake of the lifetime by claiming 99 deductions - and I will tell you what she could have done to limit the risk she created. https://youtu.be/pr3R_FZ385s IRS Medic

I Owe the IRS Should I File

I Owe the IRS Should I File

I owe the IRS - should I bother filing my taxes? Today we take a look at a common problem that happens to business owners and taxpayers -- finding out they owe more money than they expected to the IRS. This could be the year, you prepare your taxes and maybe you made more money or you didn’t put aside enough. Maybe this is the first year you are self-employed and learned about the horrors of self-employment taxes. Regardless like millions of other Americans and you are now facing the fact that you are little bit short of money for the IRS and wonder if you can buy some time if you don’t file your tax return. So should you? Can You can buy time by not filing your tax return? https://youtu.be/kjR0s0TdQAM IRS Medic

Tax Deductions verse Tax Credits: Which is Better

Tax Deductions verse Tax Credits: Which is Better

If something is to be done in this country, chances are it will involve the tax code. What do I mean? If you want more people to use public transportation, we don’t make driving car illegal, we make it expensive with punitive taxes.And then we create steep discounts and give huge incentives to public transportation via tax subsidies. And voila - Now we have public transportation few people actually want, but boy does it make for great press releases and complicated tax returns. This type of Approach is so American — We don’t seem to be able to do anything directly, but rather are obsessed with the passive aggressive machinations of the tax code. Which could be the primary explanation of why the income tax is a such a mess — Americans fully demand it!Now in order to execute this delightful Tyranny over everyone’s life, the primary tools the tax code uses are tax deductions and tax credits. So what’s the difference? Which one is better? https://youtu.be/V0o05KSFXMo IRS Medic

Self Employment Tax Deductions

Self Employment Tax Deductions

https://youtu.be/okVJNOcj6Zo IRS Medic

Live: GILTI Relief with Monte Silver

Live: GILTI Relief with Monte Silver

https://youtu.be/GV_z1FJJnJI IRS Medic

Live: Ryan Socash shares his experiences with IRSMedic

Live: Ryan Socash shares his experiences with IRSMedic

Ryan Socash https://youtu.be/SOTwfhNUL8w IRS Medic

Why it is so easy for entrepeneurs to get into income tax trouble...but how do you get out?

Why it is so easy for entrepeneurs to get into income tax trouble...but how do you get out?

Full article: https://ift.tt/2XoKQr4 Self-employed? Owe IRS taxes but can't pay? Just what can be done about this? When you work for yourself, if you lose a customer or go out of business you often don’t find any safety net. Cash flow for many small business owners can be the most important metric to measure. Light cash flow is real scary! Yet, a level of success can happen, but can be hard to recognize. So many freelancers become very leery or unsure about sending off huge estimated tax payments to the IRS. When you see an operating account looking healthy, the last thing you want to do is empty it by sending it to an agency that you probably don’t feel that good about. Many self-employed individuals simply can’t make the estimated payments they need to because it is too scary. The key to success is to be disciplined and make estimated tax payments without thinking about them. A trick can be making estimated payments every month, or even weekly. That way, the checks are smaller and more regular, so your emotions are easier manage. Problem 2: No one to withhold taxes for you During the 2019 tax season when your 2018 business tax return is due, there will be a whole set of new entrepreneurs caught off guard with the IRS. This problem is closely tied with our first problem. In 1943, the federal government forced employers to withhold taxes for employees. The reason this was done is that the US income tax began to apply to nearly every taxpayer during WWII. The expanded application of the code would completely fail without this. Most people, if let to their own devices, would not be compliance with the IRS without the promise of a refund check once they file. But the self-employed have no one to file their withholdings for them. They are responsible for themselves. There is no one to force discipline, a discipline that can be so critical. So one trick is to find someone, a friend, a spouse, a tax professional to give you a nudge about your estimated tax payments. Problem 3: High & kind of hidden self-employment taxes If you could set aside 16% of your income for retirement, you’d have a pretty good retirement, wouldn’t you? For instance, in Australia, employers and the self-employed are required to put at least 9.5% of they gross pay into a retirement fund. This was the privatization of social security. The result? Australia is beginning to have a lot of middle class individuals become millionaires. But here in the US we weren’t so lucky. Attempts to allow people to be responsible for their own retirement were shut down. So we are are stuck with the same broken retirement system that forces freelancers to pay about 16% of their net income to the IRS for medicare and social security taxes -- all for the privilege of working for oneself. This massive tax bite is typically ignored for planning, but often times, the self employment taxes are far more than federal income taxes. The key is to understand exactly how much in self-employment taxes you need to pay. And sometimes to look to see if a change of entity to say an S- corp makes sense in order to reduce self employment taxes. These three problems for the self-employed lead to an IRS penalty treadmill that doesn’t ever seem to end. So let’s suppose you get behind for one year. If you file, you see you were assessed penalties. So you go and try to throw money at that balance. And by the time you nearly paid off that balance, another year with more taxes due and more penalties is added to the pile. This leads to a bitter irony: Some of the people who have the hardest time paying taxes wind up paying the most to the IRS. Now if you do owe, Maybe you decide not to file. And not for just this year. But for all years you’ve owed. And now maybe you have five, ten, twenty even thirty years of unfiled returns. So how can we fix this? No matter whether we are dealing with just one tax bill for one tax year, or decades of tax problems our solution always starts the same. We always get our clients - no matter what - to start making estimated taxes. As once we make the right estimated tax payment, then our clients are no longer adding to the problem. If the client is adding to the problem, then we can get a real plan in place. A plan that is realistic and is based on what our client can pay, and also takes into account current tax compliance and all the necessary expenses to run a business. Whether your solution is an offer in compromise, a partial or full pay installment agreement, we enjoy getting our clients the breathing room they need so they can focus on their business, not wondering what the IRS is going to do next. https://youtu.be/wkbOce8XxEc IRS Medic

What is IRS Form 3520-A? When is it required? How is one filed?

What is IRS Form 3520-A? When is it required? How is one filed?

http://bit.ly/2MTGP9g Did a tax software program tell you that you need to file IRS Form 3520-A? Have you heard vague rumors that you might need one? Hi I’m Anthony Parent of IRSMedic. In this video we will explain the most likely reason you need to file a Form 3520-A, what goes into the form, and what to do if you are late and want to avoid the steep penalties in case you are audited by the IRS. And in some cases, the IRS doesn't even need to examine you to assess penalties. . Form 3520-A is an annual informational return of a foreign trust with a US owner. The surprise is that many foreign pensions and retirement plans are considered by the tax law to be foreign trusts. 90% of the 3520-A forms that our tax firm files are all for foreign pensions. How can my foreign pension be a trust? The law on Form 3520-A could be a lot clearer. In fact, the instructions for Form 3520-A fail to even mention the words “foreign pension” or “foreign retirement” anywhere. Schedule B mentions Form 3520, but completely fails to mention Form 3520-A. So if you are unfiled, you are in good company. But this is what we do know. The IRS often takes the position that a foreign pension is something known as a grantor trust or an employee’s trust. The IRS’s treatment is not entirely consistent, which is why you may encounter different advice. But we are not here to tell you what you will get away with, but rather, what could happen to you if you don’t file a Form 3520-A. What will happen if I don’t file a Form 3520-A? Well you may get away with it. But if you are detected by the IRS, you could also be looking at a $10,000 penalty for each Form 3520-A you did not file. If unfiled or improperly filed, the IRS can examine your entire Form 1040 indefinitely. That’s right, the IRS can audit you back to when you first started this retirement plan if an Form 3520-A was required but not filed. Even if that was 20 years ago. Suppose an American moved to Australia in 1999, with contributions to a superannuation starting the same year. If a Form 3520-A was required, or not filed or improperly filed, that is 20 $10,000 penalties the IRS could assess, for a total of $200,000 in penalties alone. In the last three years, we have seen the IRS begin to be assess aggressive penalties - so aggressive many taxpayers and tax professionals find themselves shocked and stunned. There is another 3520-A penalty the IRS can assess. Yet it is as of today, it’s rare to see.The IRS can impose a penalty of 5% of the retirement plan’s value. So if you have say a Swiss pension valued at $1 million USD, you can be hit with additionally penalties including a $50,000 penalty for not filing a Form 3520-A. And htis can be assessed multiple times. But this type of penalty is not as common as it can not be automatically assessed, unlike the $10,000 Form 3520-A penalty which often can be. Will I get hit with a Form 3520-A penalty? If the IRS can assess a $10,000 Form 3520-A penalty with little or no effort, your chances of being penalized are much larger. So then the question is “when can the IRS assess a Form 3520-A penalty easily?“ The answer is when you file late outside of a program or when you have an obvious error. We do know that the IRS has a hard time following its own procedures, and Form 3520-A penalties are no exception. We routinely need to correct an IRS that fails to mitigate or improperly assesses penalties of a taxpayer who has gone through a streamlined disclosure program. When is a Form 3520-A due? Do I attach it to my tax return? Do I have to file an extension? Form 3520A is due 3 months and 15 days after the end of the tax year for the trust/pension. This usually makes the Form 3520-A due on March 15th - a month before your tax return is due if you live in the US and three months before your tax return is due if you live overseas. If you file an extension for your tax return, this extension does NOT carry over to Form 3520-A. An extension of time to file Form 3520 A (including the statements on pages 3 through 5) may be granted by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. If the idea of IRS civil penalties causes you anxiety and the threat of an IRS criminal prosecution gives you so much anxiety you’ve forgotten about all about your other anxieties, listen carefully. Form 3520-A is hardly the only international form that our clients are missing or have filled out incorrectly. International tax compliance is nothing but a series of clever traps. So my advice would be to get legal advice from a tax law firm that specializes in individual international taxation and is a Leader in offshore disclosures. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/5F0erzqae7c IRS Medic

Top 13 things US expat tax services get wrong when preparing returns

Top 13 things US expat tax services get wrong when preparing returns

http://bit.ly/2HEErEn http://bit.ly/2SduJNg We have reviewed thousands of expat tax returns prepared by hundreds of different tax preparation companies, CPAs and accountants. We reviewed thousands of returns taxpayers prepared themselves using software such as TurboTax. One of the reasons why our law firm advocates so strongly for a reform international taxation is that the tax industry and taxpayers alike are simply unable to keep up with the intense demands the IRS foists upon US expats. Don’t believe me? Well this is our top 13 list of what most tax preparers and taxpayers get wrong about filing US income tax returns for US expatriates. #1 Do you have a foreign retirement or pension plan? If you weren’t asked about who contributed more, your employer or yourself, you might have a big problem on your hands. If your preparer just reported the income and did not analyze whether a 3520 and/or Form 3520-A was required, you could huge penalty exposure. #2 Do you have foreign real estate? Under the tax reform of 2017, real estate taxes are not deductible on Schedule A. You need to find another place to deduct these expenses, or you will lose the deduction. #3 Foreign commercial property depreciation.The first mistake is that tax preparers will oftwn use the depreciation schedule of the country in wich the property is located. This is completely wrong. #4 Foreign tax credit (FTC) v. Foreign earned income exclusion (FEIE) analysis. The FEIE is often much better than the FTC for Americans living overseas. The reason is that tax credits must be separates by type of income to see what they can be offset against. #5 Tax Treaties are improperly understood. All the time. If you they don’t know what a savings clause is, the chances are that your tax professional is doing it all wrong. #6. Having a non-qualified foreign life insurance policy and not calculating the growth using 7702(g) computations. #7. Not using Form 720 for excise taxes due for premium paid to foreign life insurance or annuities. #8 Did you have to get a foreign corporation so you could buy a home? Have you filed Form 5471 for all years you owned this or any other shares in a foreign corporation? If not, you might have a very large problem. Form 5471 penalties are $10,000 per year and can be assessed for since indefinitely if unfiled or not filed properly. #9 Were you advised on using a disregarded entity election (“check the box”) on IRS Form 8858 to make your tax filings simpler? #10 Did you engage business with another person overseas? You might have a foreign partnership. Foreign partnerships, too, can have very complicated form requirement, Form 8865, which also has intense penalties if not filed or not filed correctly. #11 Do you have mutual funds overseas? Have you been made aware of Form 8621? And election options? #12 FBAR filing. While technically something that does not get placed on a tax return, it is a yearly requirement for many US expats. The confusion is that many tax preparers think it only applies to (1) bank accounts that (2) that go over $10,000. This is not true at all. The FBAR applies to many thing aside from bank accounts. For instance, a foreign pension is not a bank account, yet if it has a present value, it may really be something you need to put on a FBAR. Also, the $10,000 is the key figured for when we add up all of your accounts. If the sum of all your accounts goes over $10,000 then an FBAR is likely required. #13 Conversions to GAAP. The IRS requires all tax returns to be filed according to GAAP, otherwise known as Generally Accepted Accounting Principals. Yet, the US is the only country in the world to use GAAP. So are there any income statements or balance sheets that your tax preparer used that are not compliant with GAAP? Then your tax preparer could be setting up for massive penalties bomb — foreign informational returns like From 3520, Form 926, Form 3520-A, Form 5471, Form 8865 can be hit with penalties of $10,000 each per year, all because you use the wrong accounting method. Can you think of anything you were given some bad advice about? We’d like to know. Living overseas shouldn’t be an anxiety filled melodrama, so if you would like us to take a look at your situation, please contact us info@irsmedic.com give us a ring at 888-477-4258. We’ve helped thousands of Americans overseas remove their IRS worries, we’d like to do the same for you. Like and share if you found this video helpful and be sure you have subscribed if you have not done so already. This is Anthony Parent of Parent & Parent LLP and I thank you for watching. https://youtu.be/cNxULFipPlI IRS Medic

The Rosetta Stone says what? TAX HISTORY SPECIAL

The Rosetta Stone says what? TAX HISTORY SPECIAL

http://bit.ly/2MFSetg Most of us know what the Rosetta Stone is. No, I am not talking about the popular language software, but rather, its namesake. Most of us know that the Rosetta Stone is a massive rock that has three different languages chiseled into it, all telling the same exact message. And because one of those languages was Greek, the Rosetta Stone provides a near perfect translation guide for both of the other languages - Egyptian hieroglyphics and Egyptian demotic script. I think we all can agree that the Rosetta Stone is one of the most important archeological finds of all time. Yet it seems to me is that everyone knows what the Rosetta Stone is, but no one knows what the Rosetta stone says. The Rosetta Stone is a tax amnesty. It is a tax amnesty written in three scripts because when it was written, there were three scripts being used in Egypt. Hieroglyphics, which were used in official or religious documents. Demotic script was the everyday script of Egyptians. And the third was Greek, as Greeks were ruling Egypt since Alexander the Great took over Egypt in 332 BC. So why was this tax amnesty written in stone? In three languages? Because King Ptomely, the ruler who declared the amnesty must have meant it. Egypt was in ruins by aggressive and out of control tax collections. People stopped engaging in commerce because the tax consequences were ruinous. Yet King Ptolemy knew that if he wrote the tax amnesty in papyrus, his tax collectors would probably pretend they never received it. And he knew that if he wrote it in one language, that would the the one language the tax collectors would claim not to know. Rather, this tax amnesty was so important to Egypt that it had to be permanently inscribed in all three languages. Oh yeah, by being written in stone, it was fairly impossible to destroy. Rulers that want to help their citizens vs those who don’t Tax Amnesties are obvious, rooted in logic, and easy to understand - especially when a country’s existence is on the line. Tax laws are unobtrusive and make sense when governments are good. Whereas tax laws that benefit the ruling class tend to be the opposite. I think of Roman emperor Caligula. He wrote his tax code so small and posted it so high, that no one had any actual knowledge of the law. So if Caligula ever had a beef with someone, he knew he could hoist them up on tax evasion charges. So my question for you is, do you find the current US tax system more like King Ptolemy’s open and notorious Rosetta Stone tax amnesty, or is it more like Caligula’s impossible fine print? Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/0zjPvtrq-rs IRS Medic

How to keep your Non-Profit 501(c)(3) tax-exempt status

How to keep your Non-Profit 501(c)(3) tax-exempt status

Don't be fooled. It can be easier to get non-profit status than to keep it. And if you lose it, bad things can happen. Full article: http://bit.ly/2HvUaWl What a Form 990 tax-exempt return and variant forms are used for The IRS and non-profit organizations use Form 990 and related forms in various ways including: IRS — Get information about tax-exempt organizations. IRS — Educate non-profits about tax law requirements to maintain 501(c)(3) status. IRS — Promote compliance with IRS rules to remain tax-exempt. Non-profits — Share information with the public about the organization and programs. State gov. — Complete charitable and regulatory oversight of non-profits. State gov. — Manage state income tax filing requirements for state income tax-exempt organizations. Key information for filling in a Form 990-N tax-exempt return Form 990-N, also known as an e-postcard can only be filed online with the IRS, there is no paper version of the form. You will need the following information to fill in and file a 990-N: Employer identification number (EIN). Legal name of the non-profit and mailing address. Any other names the organization uses. Name and address of a principal officer. Web site address. Confirmation that the organization’s annual gross receipts are $50,000 or less. If applicable, a statement that the organization has terminated or is terminating. That’s it — nice and simple. Key information for filling in a Form 990-EZ tax-exempt return The EZ (easy) version of Form 990 is more complex than the 990-N, but not as detailed as the full 990. Here are the key areas you’ll need to provide information on, in addition to what you’d provide in a 990-N. Summary of grants, contributions, membership dues, investment returns received, and other income. Summary of operational expenses and money spent on running the organization and charitable activities. Summary of gross and net income, profit, or loss and total revenue. Benefits and salaries paid to various parties and employees. Summary of types of assets, their value, and changes in asset value over the year. What the non-profit has accomplished in its three largest programs. Officers, directors, trustees, and key employees with compensation and benefits. Other miscellaneous information and schedules. Key information for filling in a Form 990 tax-exempt return Finally, we have the full Form 990. Here’s the information you’ll need to provide, in addition to that shown under Form 990-N and Form 990-EZ above. Checklist of required schedules that must also be filed. Statements regarding other IRS filings and tax compliance. Details of governing body and management. Policies and disclosures. Complete statement of revenue — how much the non-profit earned from various sources. Complete statement of expenses — how much the non-profit spent on various activities. Balance sheet — current financial position. Reconciliation of net assets. Financial statements and reporting declarations. You will also have to fill in and file additional schedules, depending on the nature, activites, and other factors of your non-profit, foundation, or charity. 990 is a long and complex form, so be sure to get some expert advice when you’re filling it in. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/KlrT1nHY15U IRS Medic

What is IRS Form 5472 and why is it such a big deal?

What is IRS Form 5472 and why is it such a big deal?

NOTE: Form 5472 now also applies to foreign-owned single-member LLC and not just foreign-owned US corporations! links: Full article on IRSMedic.com: http://bit.ly/2Rzw3ug IRS.gov Form 5472 filing information: http://bit.ly/2CuSc2q What is IRS Form 5472? IRS Form 5472 is the information return of a 25% Foreign-owned U.S. Corporation or a Foreign Corporation Engaged a U.S. Trade of Business. The form is both difficult to file and consequential if not done correctly. The IRS has kept up its enforcement campaign and additionally, the Tax Cuts and Jobs Act of 2017 (TCJA) made some rather significant changes to both the penalties and who is required to file a Form 5472. In this article, we will discuss what hasn’t changed, and what we consider the most important things that have changed. π What is the purpose of Form 5472? We could ask the IRS. But they’ll just say something that is true, yet unintelligible like: Use Form 5472 to provide information required under sections 6038A and 6038C when reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic-related party. π So what is really the purpose of Form 5472? It’s like this. If your US corporation has foreign owners and is 25% or more foreign owned, do you not see how it is possible to pull shenanigans and claim that what was revenue of the US corporation was really revenue of a related foreign company, thus reducing US taxes? And also do you see how someone could claim that expenses of the foreign corporation were actually the expenses of the US corporation, which also works to lower US taxes? π So the underlying purpose of the Form 5472 is to give the IRS insight into whether or not you are playing shenanigans with a foreign corporation or person — a foreign corporation or person that the IRS can not normally examine or audit. π I am a Green Card holder. Do I have to file a Form 5472? A Form 5472 is only required when you have foreign ownership. A Green Card, or resident status, means that you are not considered to be foreign person. A foreign person, according to to the IRS’s instructions, is: Someone who is not a citizen or resident of the US Someone who is a citizen or resident of the US possession, but not a citizen of the US. A foreign partnership association, company or corporations that is not created or organized in the United States A foreign estate or trust described in IRC section 7701(a)(31) Any foreign government (or agency or instrumentality thereof) to the extent that the foreign government is engage in the consumer of a commercial activity as defined in IRC section 892. Alert: A foreign person is not any foreign person who connects to the failing of a joint income tax return. π What is a reportable transaction? In the most basic sense, a reportable transaction is a type of transaction that the IRS considers to be an indication that shenanigans may be afoot. A Form 5472 is where a foreign-owned US company lists all its reportable transactions, unless there is an exception. π What are some exceptions to the Form 5472 filing requirement? The US corporation had no reportable transactions The person who controls the US corporation already filed a Form 5471 showing all reportable transactions that should appear on Form 5472 have already appeared on Schedule M for Form 5471. A related corporation qualifies a a foreign sales corporation and field a Form 1120-FSC The foreign corporation does not have a permanent establishment under an applicable tax treaty and a proper Form 8833 was filed. Its income is exempt from income taxation under IRS code 883 because it is exempted transportation and telecommunications satellite income that is taxed at 4% under IRC 887. Neither the corporation or related party re considered to be US persons under IRC 7701(a)(3) π Who has to file a Form 5472, the foreign shareholder? No. Unlike Form 5471 which is a shareholder requirement, Form 5472 filing is a requirement of the corporation. Penalties for not filing won’t be assessed to the non-US person, but rather the US corporation. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269=6699 info@irsmedic.com https://youtu.be/ufs3hwBKb4E IRS Medic

IRS Revenue Officers: What do to when they come knocking

IRS Revenue Officers: What do to when they come knocking

Here;s the video accompaniment to one of our most popular articles: http://bit.ly/2M9OBLP First thing A Revenue Officer is not a Revenue Agent. There is a distinction between an IRS Revenue Officer and an IRS Revenue Agent. A Revenue Officer is employed by an IRS field collection office. Their job is to collect money. A Revenue Agent, on the other hand, is someone who is employed by the IRS to audit taxpayers. While they may send you something called a deficiency notice, the person who increases your taxes through an audit will not be the person who will be attempting to collect the taxes from you. After the IRS assesses the tax and you don't pay, a series of notices will be sent out. If your tax due is low, you may never get assigned a revenue officer. Number two. A Revenue Officer does not carry a gun. I think I would carry a gun. People can be kind of crazy. Third, a Revenue Officer's badge is a plastic card usually attached to a lanyard If someone flashes a gold badge and says they are from the IRS. That's not a Revenue Officer. That is an agent from the IRS Criminal Investigation Division (CID). My advice would to remain silent expect to contact your lawyer. Oh yeah, they do carry a gun.   Forth, a Revenue Officer can not arrest you. If someone brags about how they stopped a revenue officer from arresting you, you don’t have to listen to too much of whatever that person is saying. A revenue officer has no arresting ability. The only thing a revenue officer can do is refer you to CID. Yet CID only accepts a fraction of those cases referred.   Fifth - A Revenue Officer does not need a financial background for the job All that is required for a Revenue Officer position is a four-year degree. A Revenue Officer can have a bachelor of Fine Arts and be qualified for the job. This is why Revenue Officers initially engage in months of training of training on an on-going basis. The IRS has a lot of money and time invested in their best Revenue Officers.     Sixth. A Revenue Officer isn't graded on how much money they collect A Revenue Officer does not get promoted for bringing in the most money. Rather, it's how many cases they successfully remove from their "inventory" of collections matters. A Revenue Officer would rather you enter into a "collection alternative" like an offer in compromise to pay far less than for you to sandbag them for years.  Seventh. A Revenue Officer's powers are sort of limited The IRS's use of seizures of homes and personal assets is way down. The reason is that the Revenue and Reform Act of 1998 made it very difficult to do so. So, what can a Revenue Officer do? Levy any accounts receivable. Lien property. Levy retirement funds. Levy wages and bank accounts. Subpoena documents. Yet if a taxpayer is dedicated to running up new liabilities and trying to hide their personal affairs, this delays and frustrates the IRS. You could get the IRS to close out your case, or your obfuscation could earn a lot of federal attention. If someone at the IRS really wants to make an example out of, they can.   Eighth. A Revenue Officer MUST attempt initial contact in person. The Internal Revenue Manual requires that every Revenue Officer make first contact with a taxpayer in person.   You may not have been home the first time they showed up, so if you are wondering why someone from the IRS left a card for you at your home or on your car, don't ignore it. They will continue to attempt to contact you.   Ninth. Many Revenue Officers are friendly and reasonable. So too of taxpayers. And that's a problem. This can be a bad thing! As stated above, a Revenue Officer just wants to close the case, and many taxpayers just want to get the matter behind them. So both parties, anxious to close the matter, agree to a "collection alternative." The only problem is, in their haste to reach an agreement, neither one looked to see if the agreement is reasonable. Optimism and lack of information about alternatives cause taxpayers to enter into repayment agreements that are not realistic.  Ten. There’s not enough revenue officer and that could be a bad thing The IRS is about at half the effective strength they were 10 years ago. And you might think this is a good thing. And it can be a good thing - we’ve gotten deals we would not have gotten 10 years ago. But this is the problem. Cases are stacked up awaiting to be assigned revenue officers. The problem is that you are likely only going to add to your problem. By laying low, you aren’t able to take advantage of the great deals. Yet the IRS isn’t going away. And they tend to pop up right at the worst time. Taking the initiative when they IRS is overwhelmed could be the best strategy. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/M7ZqeR49l5Y IRS Medic

US taxation of foreign pensions, retirement plans, and social security-type benefits

US taxation of foreign pensions, retirement plans, and social security-type benefits

Link to Strafford Webinar event: http://bit.ly/2SSpUWV http://bit.ly/2AHCKQq Subscribe and comment below for a chance to win free admission! Attorney Robert Hanson, Sean O’Connor and I are offering much more extensive training for CLE/CPE credit with our friends at Strafford Publishing. We will be live on Tuesday January 22nd, 2019, but you will be able to watch on replay. The cost is $177 USD, but we are giving away three free passes. To enter to win, simply subscribe to this channel and leave a comment below telling us you want in. On January 18, 2019, we will be selecting 3 winners who can attend this training for free. Good luck! So now, how do we figure out if your foreign pension is taxable and also, if it is reportable. This is how we start our analysis The first inquiry is if your foreign retirement it a defined benefit plan or a defined contribution. With a defined benefit retirement plan you don’t have an account, do you? So can’t have an account value either right?? So we really shouldn’t see any requirements for foreign reporting forms like a Form 8938 and an FBAR as there are no numbers to put in. If we are dealing with a defined benefit retirement plan, typically our work is much easier and the consequences for getting something wrong are much less severe. No if you do have a defined benefit plan, contributions into that plan are usually treated as income. Yet, unlike earned income, this income can typically not be excluded by the foreign income exclusion. However, foreign tax credits may still be available. So if we don’t have a undefined benefit plan it must be a defined contribution plan. If so, the next question we ask is who funded most of it? The reason why is the IRS treats pension plans that are over 50% funded by the employee as foreign grantor trusts. The problem with this is that foreign grantor trusts can be very time consuming and expensive to properly report. A form 3520-A is likely required each year, and the penalty for not filing or filing incorrectly can be $10,000 per form per year. Additionally there could also be a Form 3520 requirement, where penalties can be even steeper. Yet there is an exception that might apply. The 402(b) exception. The problem is that the default position of the IRS is to reject 402(b) for everything BUT some Australian Superannuations and Singaporean CPFs. The reasoning is more baffling than you could imagine and we will get into that during our full presentation with Strafford. However, it is possible to get 402(b) treatment if your plan is something other than an Australian superannuation fund of Singaporean CPF. And this can save you thousands in tax prep fee alone each year! So when are you going to be taxed? For grantor trusts, you are taxed on the contribution and the growth, but not the distributions. For employee trusts, you are taxed on both the contributions and the distributions, that is, in an employee trust you often are allowed to defer taxes. Employer contributions to retirement plans are not excluded to the the FIE, but they are tax creditable. However, in many jurisdictions, there are no credits to apply. So what questions do you have? Pleas leave them below and please, if you feel you need more detailed training join us live with Strafford on January 22, 2019. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com https://youtu.be/jsRJVe3048g IRS Medic

GILTI - Global Intangible Low-Tax Income EXPLAINED: An intro

GILTI - Global Intangible Low-Tax Income EXPLAINED: An intro

More on what GILTI is: http://bit.ly/2F51o1o How to avoid GILTI: http://bit.ly/2F513e4 What is GILTI really? We will be getting into the specifics of what GILTI is, but first, we need to understand what its purpose was as that will help us figure out situations in which we should expect to see GILTI liabilities pop up. In 1962 Subpart F was passed to treat passive income overseas harshly. Subpart F is a vile nasty piece of work. But I guess Congress really liked it. Someone then got the idea that if Subpart F could be so effective in ruining most offshore tax planning, well then could we create some sort of taxing regime to hammer active income earned overseas? The answer is yes and GILTI is its name. The purpose of GILTI is to hammer active income of foreign businesses that are controlled by US shareholders. GILTI can hammer them so hard, that for some people, having their income taxed as Subpart F could even be better than GILTI! Oh and by the way, Tax Reform also expanded the definition of what it means for a shareholder to be subject to not just controlled foreign corporation rules that is CFC rules in addition to GILTI regime. Be sure to subscribe as these are these the topics we will be covering in future videos. How to avoid GILTI How to calculate GILTI GILTI vs Subpart F GILTI regualtions GILTI v transition tax GILTI & NIIT GILTI & BEAT GILTI & Intellectual property GILTI & Tangible property GILTI and Section 250 deductions GILTI and foreign partnerships GILTI does not just affect huge corporations overseas, but small and medium sized businesses, and it can even affect someone who is self-employed. Now for some people with income earned abroad, GILTI won’t affect them all that much. But, it could take some real meaningful research and analysis to properly answer that question. For our larger clients, the cost may not be all that noticeable, but I can tell you that for our clients who are working hard to create something for themselves, this amount of research is pushing many beyond their breaking point, forcing them to make a decision they wish they didn’t have to. Just getting a GILTI analysis can cost more than what a taxpayer’s tax bill is. Parent & Parent LLP 144 South Main Street Wallingford, CT 06492 (203) 269-6699 info@irsmedic.com How to mitigate GILTI: http://bit.ly/2F513e4 How to https://youtu.be/AB4ixELMEmE IRS Medic