Tuesday, December 18, 2012
Saturday, July 7, 2012
For starters, these seven new taxes apply to those of us earning less than US$ 200,000:
1. Flexible spending accounts now are capped at $2,500 per year
2. Medical expense exclusion raised from 7.5% of gross to 10%
3. 20% penalty for non-medical withdrawals from Healthcare Savings Account (up from 10%)
4. 10% excise tax on indoor tanning salons
5. 40% excise tax on higher cost health insurance plans
6. Medicine Cabinet Tax - no purchases of over-the-counter drugs from a Flexible Spending Account
7. New surtax of 1% of your adjusted gross income (rising to 2.5% by 2016) if the government doesn't like your health insuranceThe minimum coverage (number 7) does not apply to US citizens living overseas. You can figure out what else does apply. If you earn over US$ 200,000.00, you have special taxes all your own. Next blog I'll talk about that.
Meanwhile, US health insurance costs will skyrocket and we all will subsidize those who have health care provided for them.
Monday, May 28, 2012
Any US shareholder who owns ANY interest in a PFIC is required to file form 8621, however no filing for tax year 2010 was required which means the first required year is 2011.
The CFC tax rules and the PFIC rules overlap so the law was modified in 1997 to relieve U.S. shareholders of compliance with the PFIC rules if the same income was subject to tax under the subpart f rules for CFCs. BUT the "fine print" indicates that this relief is only available for taxpayers who elect to treat their portion of the PFIC as a "Qualified Electing Fund" (QEF) in which the taxpayer pays taxes on his or her share of the fund's current earnings. This election would only apply to U.S. persons who own 10% or more of the PFIC shares and where more than 50% of the stock is owned by five or fewer U.S. shareholders.
See how nutty this all is? A foreign partnership that is organized to make passive investments will not get the PFIC designation because it's not a corporation and that may be an option. Please note that the IRS may impute CFC designation to partnerships (even though they are not corporations) and those rules should be considered carefully.
Thursday, May 10, 2012
Tuesday, May 1, 2012
You must file a tax return if you earn the following amounts of income:
Self-employed, any age: $400
Children and Teens classified as a dependent: $5,700
Single, under 65: $9,350
Single, over 65: $10,750
Married, filing jointly, both spouses under 65: $18,700
Married, filing jointly, one spouse over 65: $19,850
Married, filing jointly, both spouses over 65: $20,900
Married, filing separately, any age: $3,650
The first question most delinquent expat taxpayers have is almost always “How many years of US expat taxes do I need to file?” Unfortunately, there is no single answer to this question as it really depends on the specific situation. Technically, the IRS asks that you file for all years that your income was over the thresholds, but usually six to eight years will suffice.For the FBAR form 8938 this exception exists (straight from the IRS form instructions):
Exception if no income tax return required.
If you do not have to file an income tax return for the tax year, you do not have to file Form 8938, even if the value of your specified foreign financial assets is more than the appropriate reporting threshold.
There you have it.
Friday, April 27, 2012
How about "Fleeced Beyond All Recovery"? Nah. It actually stands for, "Foreign Bank And Financial Accounts". Right. Well, the form terrorizing people now is the Form 8938, which is new for most people this year. I'm addressing US Citizens living overseas now and the threshold of who must file is determined thusly:
If you are a taxpayer living abroad you must file if:
- You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year;
- You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
This is from the IRS. If you don't have assets like these, rest easy (yes, as in, "calm down") and forget this form, at least this year.
Wednesday, April 25, 2012
Sunday, April 22, 2012
The good news is that you can get an automatic extension to June 15 just by claiming it on an election statement included with the tax return. Assuming you're not military, you should state that you live outside the United States and were residing outside the United States during the time period that includes April 15 and you claim the automatic extension to June 15.
No penalties. However, the IRS will charge interest on unpaid taxes from April 15 which should not be much. So, rest easy and check again for another tip that will help keep you out of trouble.