Expat Taxes - Offshore Tax Information

Individuals have been leaving their own land to seek opportunities elsewhere since the dawn of mankind. But it has only been since the development of the modern nation-state, and its taxation of the worldwide income of its citizen-residents, that expatriation has taken on significant tax consequences. One of the first tax advisors to appreciate the potential tax savings of expatriation was my friend and colleague, Marshall Langer J.D., a valued member of The Sovereign Society Council of Experts. Langer is an international tax attorney and the respected author of several major international tax treatises. He is also the daring creator of a now out-of-print book, The Tax Exile Report. This title gained international notoriety when the late U.S. Senator Daniel Patrick Moynihan (D-N.Y.), red-faced and angry, waived a copy of the book at a televised Senate hearing, denouncing it as “a legal income tax avoidance plan.” - Escapeartist has hatched a new partnership with Global Wealth Protection that will set the standard for authoritative information on Asset Protection, International Banking and Wealth Management and with a number of accountants, lawyers and bookkeepers that know the laws regarding expat taxes, how to do your income tax, which form to use, and which services understand the complexity of expat concerns. Simply put, the EscapeArtist Expat Taxes Newsletter portal will provide a wealth of information that will show you ways to save on taxes . . . and then some.

Expats Legally Save Over $90k Each Year - The Foreign Income Exclusion! - While many American taxpayers complain about the need to file US taxes while living abroad, the Foreign Income Exclusion, Foreign Tax Credit and Foreign Housing Allowance can actually decrease or eliminate your US tax liability. The trouble is that many expats are not aware of the big deductions or credits and end up paying thousands more in taxes than they should. Knowing about these deductions and credits as well as being aware of how to qualify for them is critical to saving money on an your expat tax return with the IRS. The Foreign Income Exclusion is one of the three main mechanisms the IRS has in place to help protect taxpayers from dual taxation while living abroad. The Foreign Income Exclusion allows qualified taxpayers to exclude up to $92,900 (for the 2011 tax year) from their foreign earned income when filing their expatriate tax return. The exclusion is claimed via Form 2555 and is attached to Form 1040 for expats when filing with the IRS.

Late FBAR? The IRS Gives Another Chance With the Offshore Voluntary Disclosure Program - The IRS has given taxpayers multiple opportunities to come forward with their delinquent FBAR reports. With the 2009 and 2011 disclosure programs closed, the IRS realized how affective these programs have been - over $4.4 billion has been raised so far! Due to this success and the FACTA requirements that go into effect this year, the IRS is offering taxpayers another opportunity to come forward with their delinquent FBAR reports and face reduced criminal and civil penalties. While there are some important differences between the current program and the expired programs, it is still the best way to come forward with your delinquent FBAR reports. The third Off Shore Voluntary Disclosure Program offers individuals who have not reported their foreign bank accounts, trusts, or accounts related to foreign corporations to come forward and face reduced penalties and avoid criminal persecution. The reduced penalties are not quite as low as the previous program’s penalties, but they are still significantly lower than what would be applied to a taxpayer’s delinquent FBAR filings if they were to come forward without taking advantage of the Offshore Voluntary Disclosure Program.

What Happens if You Just Can’t Pay Your Expat Taxes? - It is not uncommon for expat taxpayers to find themselves in a situation where they need assistance handling the burden from their expat taxes. Many individuals are unaware of their obligations to file, and so find themselves with a significant tax burden that is simply beyond the realm of possibility when it comes time to pay. Others may have failed to recognize this requirement for years and have ended up with significant penalties and interest on their US expat taxes. The IRS does understand when it comes to situations like this and does offer options for taxpayers who are unable to pay their tax obligations. Such options include different types of payment plans or an offer-in-compromise, both brining different procedures and consequences - while paying the IRS of course. If you are unable to make the entire payment on your expat taxes for a certain year or for multiple years of filing, the IRS is more than happy to set up monthly installment plan for you. To qualify, individuals must prove that they have looked at other options, including liquidating assets, loans and taking out credit cards. If none of these options for payment make sense, the IRS will allow you to set up a monthly amount with a $25 minimum. Taxpayers who need to take this option in order to pay their expat taxes must apply for a payment plan with Form 9465. The IRS does charge a fee to set up a payment plan if it is longer than 120 days.

US Expat Tax – what all Expats need to know - As enjoyable as living and working overseas can be, there are obligations that American expatriates must deal with regarding the US expat tax code. The introduction of additional filing requirements and new deductions or exclusions can be intimidating for first-time filers. While some US expat tax tips are as easy as making sure you qualify as an expat, others can be trickier - yet equally as important to take advantage of! Foreign Income Exclusion and Foreign Tax Credit - The IRS has multiple mechanisms in place to help avoid double taxation for individuals who are likely to be paying taxes to a foreign tax authority while living and working overseas in addition to any US expat tax that is due. In order to take full advantage of these money saving opportunities, expats need to be aware of the Foreign Earned Income Exclusion and Foreign Tax Credit when it comes time to file.

Why Being an Expat Is So Fantastic (Hint: Your Expat Taxes!) - Imagine if you could live in a tropical paradise US tax free – you can! There are a number of benefits that you can take advantage of on your expat taxes to save and protect your income. We will discuss the main ones here, but it is highly recommended that if you want to maximize the savings on your expat taxes you should seek expert expat tax advice. The Foreign Income Exclusion – This allow US expats who are earning money abroad to exclude up to $92,900 of their income from US taxation (this doubles if you are married). This is the most common and arguably the most profitable tax savings tool you can us on your expat taxes. If you combine this with the Foreign Housing Deduction, which allows you to deduct things like rent, utilities and insurance, they you and your spouse may be able to avoid paying taxes on over $250,000 of income each year! LEGALLY! The Foreign Tax Credit is also a great tool, but unfortunately you will need to be paying taxes to someone to take advantage of it. The foreign tax credit gives you a Dollar for Dollar tax credit for any taxes you have paid to a foreign government. Basically, if you have a good income someplace like Europe where taxes are high, then this will ensure that you are not taxed by two governments leaving you with the scraps.

Why Do Expats Pay So Little in US Tax? - The simple answer is that we don’t live in the USA so why should we have to pay any US tax at all! The fact is that the US government taxes expats and has for nearly 100 years. One look on the inside of your US passport and you will see that you are required to file each year. One look at the US deficit will show you that the IRS is using every method possible to track down every last nickel they can find! BUT THAT DOESN’T MEAN YOU WILL OWE ANY US TAX! US expats are one of the only demographics I can think of where the middle class gets more tax advantages than the Warren Buffets of the world. How is that? Well the middle class is the working class and workers EARN their income – unlike the rich who get it via capital gains which have a low tax rate. Earned income abroad has some very special tax breaks that mean that you can earn a 6 figure income abroad and have ZERO US tax liability! I will explain.

How to earn $200,000 each year US tax free (Legally!) - What would you do with an extra $43,779? Well if you are married and file a joint return with taxable income of $200,000 then you will pay about $43,779 in US tax! So if you could earn that money tax free what would you do with it? Maybe spend 6 months in Bali leaning to surf, what about wine tasting in Argentina, maybe buy a Greek Island? (I know they cost more than $40k now, but let’s see what happens!) Regardless of what you would do with the extra money the real question is why aren’t you already earning that money US tax free? I know – nothing is certain but death and taxes, but taxes are less certain than you may thing. Millions of people earn good livings each year and pay little or no US tax (I don’t mean political cronies) I mean US Expats! Yes the luck people living overseas avoid expat taxes in the US. This is legal and actually encourage by the IRS because it helps the US economy to have US workers live and learn abroad then bring those ideas back to the US or create new jobs back in the US.

How 1 day can cost you $40,000 or more in Expat Taxes- As a US expat, you are probably familiar with the Foreign Income Exclusion, which allows you to exclude $92,900 from your foreign earned income each year. This is one of the greatest gifts the IRS could give to expats as it allows us to live free of US taxes anywhere outside the USA. The trick it to make sure that you qualify for it each year, because if you don’t then you will owe expat taxes on all of your income! There are two ways to qualify and thus reduce your expat taxes; the first is called the Bona Fide Resident Test. This is basically for people who are permanent residents of a foreign country and have no plans for returning to the USA. If you are living and working abroad, paying taxes and you have no plans for returning to the US i.e. you are not on a 2 year contract etc. then you would likely qualify as a US expat under the Bona Fide Residents Test. The Physical Presence Test is the other test you can use to qualify as a US expat, and then receive the US tax savings that go along with being a US expat. To qualify under the Physical Presence Test you must be Physically Present in a foreign country for 330 days in a 365 day period. Now this could be from April to April or from November to November – that part does not matter. The part that matters is that you must be physically present in a foreign country for at least 330 days. If you go over by even 1 day then you don’t qualify and this means you would need to pay full US taxes!

Overseas Taxes for Americans: Form 2555 and Form 1116 - As an American filing overseas taxes, you are going to want to maximize your exclusions as much as possible. To do so, there are a few exclusions we want to make sure you understand: the foreign income exclusion, the foreign housing allowance, and the foreign tax credit. To take advantage of these exclusions, you need to fill out forms 2555 and 1116. Using Form 2555 to minimize your overseas taxes - One of the biggest exclusions you can take advantage of on your overseas taxes is the Foreign Earned Income Exclusion, which allows you to exclude from your US expat taxes up to $92,900 of your foreign earned income. Note that this can only be applied to foreign income; income made inside the US cannot be counted. So if you live in a tax free area like the UAE, you can earn nearly $100,000 tax free! You should know that you do not automatically receive this exclusion. In order to receive it your tax preparer must file Form 2555 along with the Form 1040. Form 2555 includes information regarding how you qualify as an expat, general information about the taxpayer, days present in the United States and provides lines for you to calculate your foreign income.

International Money Transfers Don't Have to Be Hard Work - If you have ever used your bank to make international money transfers then you’ll be well aware that the process isn’t always a friendly one. Aside from dealing with paperwork, which usually requires a trip to the bank, much of the time you will receive a poor foreign exchange rate from your bank and this “service” can cost you a significant amount of money. This is especially true if you are moving a large amount of money overseas or are making a series of payments abroad (i.e. for a mortgage or student loan). There is a better way to make international money transfers. TorFX, is an award winning foreign currency exchange specialist (‘European Currency Broker of the Year’). Based in the UK and regulated under the FSA they currently assist over 40,000 private individuals and 5,000 businesses across the globe with their foreign currency transactions. The service covers everything from getting some cash for a holiday to paying recurring bills in a foreign country. TorFX can provide far more competitive foreign exchange rates than your bank when it comes to making an international money transfer and have saved clients as much as 5% on the exchange rate! The company does this by simply undercutting banks on the profit made on your international transfers and TorFX don’t weigh you down with transfer fees and charges. Banks are in the process of de-leveraging and are relying heavily on fee income to sustain their profit margins – this does not mean that you should help them sustain their profit margins!

Five Things to Know About US Tax Return Preparation Before Moving Abroad - Moving abroad is a life changing experience that more people are taking advantage of each year. Like all potentially life changing decisions you should learn as much as possible before you make a final decision. There are a number of things you need to know regarding your US tax return preparation before you move. In order to set you up for success, we have provided five must-know facts about your US tax return preparation and how they will change when you relocate to a different country. 1- You still need to file your US tax return from overseas - US citizens and green card holders will need to file a US expat tax return if they earn over the minimum income threshold. It doesn’t matter where this income was earned, which currency it was paid in, or if taxes have already been paid to a foreign country; you are required to file a US expat tax return if you have earned over the thresholds. The thresholds are currently set at the following: MORE > > >

Your US Tax Return: How To Make Currency Conversion Work To Your Benefit- To be compliant on your US tax return, the IRS requires that all income or deductions be reported in US dollars. This article will explain how Currency Conversion can impact your US tax liability. Having to convert your foreign earnings to USD may seem like a headache, but currency conversion can yield significant savings on your US tax return. By utilizing the most appropriate exchanges rates, you are able to translate your overseas earnings into lower USD amounts thus decreasing your US expat tax liability and staying compliant with the IRS rules. US Tax Compliance: Converting Earnings - Technically speaking, the IRS prefers that all income or expense be converted into US dollars on the date that the income or expense was received/paid using an IRS approved exchange rate. That said, they do not require you to use this method. You can choose to use the exchange rate on the day of the transaction, the monthly average or the annual average, to remain compliant on your expat taxes you just need to pick one method and use it across the entire tax return. While this may seem cut and dry, some US expats can find significant tax savings by using the right currency exchange.

It’s a New Tax Year, and You Bet The IRS Has Changes for Your Overseas Expat Taxes - Overseas Expat Taxes: Changes for the 2011 Tax Year - The IRS changes the US tax laws every year and these changes can impact your overseas expat taxes. These changes generally will affect the exclusions and deductions, deadlines and tax rates that individuals will face when it comes time to file their overseas expat tax return and can be difficult to keep up with. While no single taxpayer can reasonably be responsible for knowing every change in tax law in any given year, being aware of the important tax changes is critical to staying compliant with the IRS, saving money on your US taxes and effectively planning for your financial future. The Exclusions and Deductions - The IRS adjusts the Foreign Earned Income Exclusion and the Foreign Housing Exclusion annually to keep up with inflation worldwide. For the 2011 tax year, the IRS introduced modest increases to both which allow expatriates to exclude more of their foreign earned income than when compared with the 2010 tax year.

Report Your Foreign Bank Accounts Or Go To Jail? - In the historical past, Americans living and working in abroad would open bank accounts with a local bank in whatever country they were living and working, and if it earned any interest at all would never show it on their U.S. income tax return. This was part of the unofficial benefits of living in outside of the U.S. and everyone thought it was fun. Then things started to change. The U.S. Department of Treasury created the form TDF 90-22.1 for reporting on foreign financial, bank and other investment accounts but never paid much attention to whether taxpayers living abroad filed it or not. Then money laundering connected with drugs and terrorists became items of concern. The IRS told Congress lately about the 300 billion of tax dollars the IRS was not collecting from cash businesses in the US and Americans living abroad who were not paying taxes on their taxable investment and other income.

The IRS Has Special Rules For Mexican Corporations And You Really Do Not Want To Ignore Them - If you have your own business in Los Cabos or are developing real estate you generally must use a Mexican corporation as the entity to conduct the business. The Mexican tax and legal rules concerning the operation of such corporations are complex enough, but if you are a US Citizen or permanent resident, Internal Revenue Services also has a lot more rules and regulations. Special forms are required and certain elections must be made or you might be in trouble or even worse, penalized. Unfortunately a majority of the CPAs in the States do not know any of these rules and forms and therefore cannot save you from possible tax disaster.

Uncle Sam Give US Expats Some Good News And Then Some Bad News - The housing deduction or exclusion is allowed in addition to the maximum foreign earned income exclusion and therefore comes into play when you exceeded that maximum amount. Previously in 2005, you could deduct all of these housing expenses in excess of approximately $12,000 without any maximum limit. Now for 2006 you can only deduct these expenses in excess of $13,184 up to a maximum of $11,536 in most of the world. The IRS has published Notice 2006-87 which gives a higher maximum deduction to those living in countries with a higher cost of living. Hong Kong is the highest with the maximum over $100,000. So if you are paying high rent, utilities, etc. you can no longer deduct those amounts.

IRS Loses Bid - To Track Overseas Tax-Dodgers - Second Passport & Economic Citizenship - The Internal Revenue Service recently decided to be clever. Their theory was to check an expatriates' tax status when the expat went into a U.S. embassy to renew his or her U.S. passport. However, unbeknownst to the IRS, the expats are no longer renewing their U.S. passports. What the expatriates are now doing is getting second passports from another nation before their U.S. passport expires. Thus far the IRS has decided to target expatriates in the UK, Canada, Mexico, Germany, Italy, Hong Kong, Australia, Israel and Switzerland. According to census data and estimates of unfiled tax returns and unpaid tax, more tax is being avoided by Americans living in those countries than elsewhere.

Trapped in America - Jurisdictional Prison - A Virtual Berlin Wall for a Virtual Age - It began in the early 1990's when thousands of rich Americans began to leave America. They did so by renouncing their American citizenship and reestablishing citizenship in low-tax or no-tax countries. They were called tax exiles and as soon as the word got out about the trend the U.S. Congress reacted to try to stop it before the trend spread out of control. Opening an unusually filthy bag of legislative tricks Congress attempting to build a jurisdictional "Berlin Wall" of sanctions against escapees in order to keep them jurisdictional prisoners of America. It is a clever trap of words that makes clear that the U.S. government assumes that they own everyone and everything on the planet and that their jurisdiction includes the known universe. To guarantee perpetual imprisonment of those who were attempting to flee it was necessary to create laws which threatened some sort of punishment for anyone caught escaping.

Protecting and Creating Wealth In and Beyond 2010 - As we enter the second decade of this millennium we have to ask themselves if the fabric of reality hasn’t been torn and all of us are falling into an Alice in Wonderland type fantasy. We live in a world where the financial Mad Hatters who created the greatest financial collapse in history are put in charge of fixing the problem. Where a Nobel Peace Prize is given to someone who has done nothing to promote peace and uses the acceptance speech to justify new acts of war. A world where the loss of hundreds of thousands of jobs a month is good news demonstrating we are now in a recovery. Perhaps it is just that I am getting old and my mind just isn’t functioning correctly. Or maybe my eyesight is failing and I no longer see things clearly. Whatever it is, this world seems to be getting more bazarre by the day. If you share this concern you are probably asking yourself some of the same questions including what a sane person has to do to protect themselves financially in this environment.

EscapeArtist.com Talks About International Real Estate As Survival Retreat - I have never been a dooms-day preacher and I don't intend to start now. With that said, it would be prudent for the reader to take a calm and objective look at some of the possible negative situations that may soon take place inside the USA and see how those events may affect you and your loved ones. I believe that you can avoid being in the pathway of those oncoming disasters by having an offshore survival retreat. An offshore survival retreat can be many things, it can bea summer home, a place where your family lives and survives a social break-down that may be happening in the USA, it can be an excellent investment, it can be an excellent place to live, it can be a way of expatriating and diversifying some of your assets offshore, it can be the beginning of a better way of life. That is what this article is about in a nutshell. It can be all of those things at the same time, or it can just be the one that is the most important to you. I call it investing in offshore real estate.

Never Pay U.S. Taxes Again - Legally - Expatriation: It’s been called “the ultimate estate plan” and it’s a legal, step-by-step process that can lead to the legal right for you to stop paying U.S. or other national income taxes—forever. In sum, it requires professional consultations, careful planning, movement of assets offshore and acquisition of a second nationality. When all that’s done (and done exactly right), you must leave behind your home country and become a “tax exile” with an established domicile in a low or no-tax jurisdiction. And, for U.S. citizens, this unusual plan requires, as a final step toward tax freedom, the formal relinquishment of citizenship. A drastic plan? You bet. And in truth, there are many other perfectly suitable offshore strategies that The Sovereign Society recommends that can result in significant tax savings. These include international life insurance policies (TSI 1/02)5 and offshore investments made through retirement plans (TSI 7/03).6 But for U.S. citizens and long-term residents who seek a permanent and completely legal way to stop paying all U.S. taxes, expatriation is the only option.

Zero Taxes for Expats - A New Concept In Offshore - The Foreign Earned Income Exclusion Coupled With Offshore eCommerce - In this issue of the Offshore Real Estate Quarterly we have two articles that refer to running a 'service based' business abroad. In those articles we discuss operating an Offshore Serviced Office & Call Center. In one of those articles we mention the Foreign Earned Income Exclusion for US citizens earning income abroad. This Exclusion, allows any expatriate American to earn $80,000 tax free. The $80,000 exemption for foreign income is of interest to the expat who does not want to sever ties with the US. According to the IRS, your tax home is specified by where you work and not by where you live. If we lived in Mexico and drove across the border each day to a job in the United States than we would not qualify for the $80,000 exclusion.

Offshore Web Hosting An Introduction - What it is, how to use, why you want to- What If Bill Could Move His Business To Panama Without Moving From His Easy chair? Bill makes his money from his website, and his website is hosted at a local Denver, Colorado ISP. Bill uses a downtown Denver bank for merchant services, so that he can bill his customers over the internet. The government of the country in which Bill lives, (USA) has absolute access to Bill's ISP, and to Bill's bank account. Bill lives in a country that does not respect privacy. If Bill had his website in Panama, and if Bill used a Private Panamanian or Caribbean Bank Account for his banking and merchant services, then no government agency could enter Bill's ISP, nor Bill's bank. In Panama the law protects banking privacy with banking secrecy laws, and the law protects websites with internet privacy laws.

Want to Really "Escape"? Start Your Own Tax Free Small Business - There are a number of you out there that are "fed up", and you are not alone. Perhaps you are tired of paying more and more each year in taxes, and getting no real value or benefit in return. Perhaps you just want to get out of the "rat race". Maybe you just want to get ahead financially, live the kind of life you thought you would have, and realize where you are now or what you are doing now is not getting you where you need to go. Well, here are some thoughts or ideas to consider. This is not a "get rich quick scheme" but it is about an idea that is proven based on some of our client's own success stories(we have one client that grosses over US$ 100,000 per month-and that's no lie). It is a business idea that requires quite a bit of work and effort on your part, but relatively little capital or start up costs. It is the only business that offers real "freedom".