Blog Archives

IRS Streamlined Offshore Procedures

7/29/2020

Streamlined Offshore Procedures were established to allow Americans abroad to get caught up on filing their back taxes. The Streamlined Offshore Filing Procedures allow US expats who have fallen behind on filing an opportunity to catch up on their US income taxes without having to worry about penalties or criminal liability.

Many US expats are surprised to find out they may have US taxes abroad and they still encounter the IRS overseas. American expat tax services are difficult to find in foreign countries. Nevertheless, US expat tax filing is mandatory even if you are paying foreign taxes abroad. Independence Expat Tax offers US expat tax advice and US tax help for expats wanting to file US taxes abroad.

The IRS streamlined program simply requires you to file 3 years of delinquent tax returns and 6 years of foreign bank account reports (FBARs) instead of having to file potentially decades of tax returns that went unfiled while living abroad.

With the foreign earned income exclusion and foreign tax credit, we find many Americans living abroad owe nothing to the IRS even though they may still need to file a tax return. Many of our clients find that they owe zero US taxes because of the foreign earned income exclusion and foreign tax credits.

To successfully submit this Streamlined Offshore Disclosure Program to the IRS, you should work with an experienced Certified Public Accountant who has a track record of dealing with these types of situations. Contact us today at Independence Expat Tax for a free consultation!

Eligibility for Streamlined Procedures
Streamlined Filing Compliance Procedures are for US citizen taxpayers and permanent residents who neglected to file tax returns and/or foreign bank account reports (FBARs). The requirements for the program include:

The expat taxpayer failed to file required tax returns for the most recent 3 years or failed to file required international informational returns (forms 5471, 8938, 8621, 3520, etc.).
US expats must file 6 years of the most recent Foreign Bank Account Report (FBAR).
Expat taxpayers certify that failure to file was NON-willful; essentially, they were not fully aware of the filing requirements.
You must have been abroad for 330 days in at least ONE of the three years you will present to the IRS.

What about Tax Penalties?
Qualified taxpayers that comply with all the requirements for Streamlined Foreign Offshore Procedures will NOT have penalties that would typically be associated with failing to file tax returns and FBARs. If for some reason there is an amount due, there would be a small amount of interest associated but, IRS interest rates are VERY low in comparison to typical credit cards or other types of loans. If you don't end up owing any tax, you don't even need to worry about any interest!

Conclusion
If you have were not aware you needed to file US income taxes while living abroad the Streamlines Procedure for US expats is helpful to get you caught up while avoiding penalties.

Independence Expat Tax provides expat tax services for Americans abroad. We make filing US income taxes abroad seamless and refreshingly simple. Connect with us today for a free consultation.
https://www.independenceexpattax.com/

Foreign Earned Income Exclusion

7/18/2020

As a US expat, you might be seeking tax advantages for US citizens living abroad. Many US citizens or U.S. resident alien living abroad have worldwide income that will be taxed. The Foreign Earned Income Exclusion (FEIE) Form 2555 can be a valuable US income tax deduction if you meet the requirements. To meet the qualification a few other tax rules do need to consider such as Foreign- Earned Income, Self-Employment Income, Not foreign Earned Income, and Foreign Tax Home

Requirements:

US expats or U.S. resident alien remains a bona fide resident in a foreign country for a calendar tax year for example (January 1, 2020, to December 31, 2020).
US expat citizen or U.S. resident alien that is physically present in a foreign country for 330 days within an uninterrupted 12-month period. Expats may make trips back to the US during an continuous 12 months however you cannot exceed more than 35 full days in a given calendar tax year if you want to qualify for the FEIE tax exclusion.

Thus, if you take trips back to the U.S., we highly recommend keeping records of how many days you have spent in the US. In doing so it should help to limit any big tax surprise when filing your US income taxes for 2020. If you stay over 35 days in the U.S., you will not qualify for the FEIE exclusion.

Given the situation, with COVID19 many US citizens may have gone back to the US or maybe staying abroad. These unforeseen circumstances might change your qualification for the Foreign Earned Income Tax Exclusion when filing US income taxes Form 1040 on April 15, 2021. However, the IRS has issued certain guidance to allow for people who were in the USA during COVID19 to still qualify for an exclusion. This is why it is important to discuss your situation with an expat tax specialist.

Other Rules:

Excluded Foreign Earning: As an expat, you might be able to exclude your foreign earnings adjusted annually given inflation. The IRS states the following:

2018 taxable exclusion $103,900
2019 taxable exclusion $105,900
2020 taxable exclusion $107,600

Foreign-Earned Income: Any or all amounts of paid personal services you performed such as wages, professional fees, and salaries.

Self-Employment Income: US expat that qualifies for foreign earned income exclusion or self-employment income may exclude an amount that will reduce your income tax it might not reduce your self-employment tax. The foreign housing deduction may be something you are eligible to claim as opposed to the foreign housing exclusion.

Not Foreign Earned Income: Not all foreign income is included. The information from the IRS states below what is not considered eligible income.

Pension or annuity payments, including social security benefits.
Pay otherwise excludible from income, such as the value of meals and lodging furnished for the convenience of your employer on their premises.
Pay for services conducted in international waters or airspace.
Pay received as a military or civilian employee of the U.S. government.
Payments received after the end of the tax year following the year in which the services that earned the income were performed.

Foreign Tax Home: A US citizen living overseas, you may have purchased a home in a foreign country because you are planning on working for an indefinite amount of time in that country. The IRS refers to these homes as a Foreign tax home.

Some US citizens keep a home in the U.S. this does not qualify for Foreign tax home exclusion unless you are working for the Armed Forces of the United States or you are working in a declared combat zone.

Conclusion

The Foreign Earned Income Exclusion (FEIE) Form 2555 can be a significant income tax deduction for US expats or U.S. resident alien. Ensuring that you meet the qualification and other rules that may apply to your individual US income tax Form 1040 can be tricky this is why Independence Expat Tax; Certified Public Accountants is such a valuable resource to our clients.

Expat Certified Public Accountant

7/18/2020

Many Americans living overseas are busy with everyday expat life. Making time for expat adventures in your new country is part of the experience. Perhaps you have immersed yourself or family in learning a new language, culture, and indulging in traditional foods. As a US citizen or resident alien, the IRS requires you to uphold your tax filing obligation. Yes, many US expats do not realize that when you relocate overseas the IRS still requires you to file US taxes. Many US expatriates find expat tax returns to be a lot more complex. Independence Expat Tax, Certified Public Accountants, CPAs are experts with expat taxes.

Do you feel like you are in a face-off with your US income taxes or the IRS?
Working with a Certified Public Accountant is beneficial when filing your US expat income taxes. Most states require the equivalent of a Masters in Accounting, a set number of years of experience, and completing a CPA exam that most agree are more challenging than passing the attorney bar exams. Furthermore, the IRS recognizes CPAs as some of the only professionals who may represent clients before the IRS, comparable to attorneys.

Why should I work with CPA that specializes in US expat taxes?
Let say you had a problem with acne. Now you would not go to a cardiologist for an acne problem, right? You want to work with someone that is an expert in the field. CPAs that specialize with US expat taxes are specialists in the field with the knowledge and education involving the complexity of US expat taxes.

Certified Public Accountants that specialize in US expat taxes CPAs are valued in the industry for their technical skills. They are also required to practice according to a high ETHICAL standard. Furthermore, our CPAs maintain continuing education on the latest US tax rules for ex-pats. This is extremely important since many ex-pats experience tax related life changes for tax filing of 2020 US income taxes.

At Independence Expat Tax we make filing US income taxes abroad seamless and refreshingly simple. Schedule a conversation today with our Certified Public Accountants. Visit us on our website or bio.

https://www.independenceexpattax.com/

Expat Tax Blog.

IRS Streamlined Offshore Procedures

Foreign Earned Income Exclusion

Requirements:​

​Other Rules:

​Conclusion

Expat Certified Public Accountant

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