Friday, December 27, 2013

Year end tax planning thoughts

As the year ends, some of you may be thinking of what you will do in 2014 for business.  Maybe you will start a new one.  If you do, give careful thought to how to structure things, especially if you are a U.S. citizen in Chile (or anywhere overseas).  The U.S. tax code has some difficult to understand sections that can make your life miserable if you don’t plan properly.  A number of qualification tests start with the ownership percentage of “10% or more”.  If you own 10% or more of a Sociedad de Responsabilidad Limitada (Ltda), for instance, you have special reporting requirements, especially if others like  you own “more than 50%” of the Ltda.  The IRS (Internal Revenue Service) can and will impute “Controlled Foreign Corporation”  (CFC) status to your Ltda, even though it’s not technically a corporation.  There are some rather onerous reporting requirements in this case that are avoidable.  Even if the Limitada does not pass the CFC test, 10% or more ownership in a foreign partnership has its own problematic filing issues. It doesn't necessarily mean you'll pay more in taxes but the non-filing penalties are draconian.  The above does not consider any imputed control based on  “constructive ownership” rules, which only adds to the confusion.  Consider owning less than 10% right from the start, if it doesn’t interfere with your business purpose.  This is a very complicated area of law that should be examined closely before any decisions are made. You can file a form with the IRS to treat the Ltda as a “pass-through” (or invisible) entity but that’s for another entry.

If you are interested in more detail about this, consider signing up for the free update service to receive more details of how this can be handled.

Saturday, December 14, 2013

10% Problem (and Solution)

FATCA implementation may be delayed again. Let's hope we get a Christmas present of yet another delay to some of the worst legislation ever created. Here is a little blurb from the nice folks at Forbes:

 Will FATCA Ever Go Into Effect? - Forbes Thu, 12 Dec 2013 15:42:10 GMT

Channel TelevisionWill FATCA Ever Go Into Effect?ForbesThe Foreign Account Tax Compliance Act seems to be revolutionizing the way governments share tax information. Other nations are using intergovernmental agreements to piggyback on FATCA informatio ...

Read more ...

But this is an aside.  The real reason I am writing this is because it's near the end of the year and even though Christmas is upon us, you need to know a little something for planning purposes.  A number of times I've been presented with tax situations that have been complicated by the fact that the US citizen involved owns 10% (or more) of a company, whether it's an S.A., Sp.A., Limitada or other.  Ten percent seems to be a magic number in several different ways and I'd like to point out that you will save yourself a lot of trouble if you only own 9.99% instead.  Tax law and regulations seem to look for 10% over and over again.  If you want specifics, subscribe to my free update service.  I'll be explaining things in more detail with my next broadcast.

Monday, November 25, 2013


FATCA is a slow implementation.  Much like Obamacare, FATCA is off to a slow start.  If you remember, the idea is to collect taxes on money that has previously evaded taxes.  The operative word is, 'evaded'.  In the US tax system, evasion is a crime, avoidance is not.  The difference is that the latter uses the regulations and tax law itself to reduce taxes through various means.  Evasion ignores the law.  The US has indicated it expects to recover something like $87 billion over the next ten years.  Likely the loss of taxes on falling international trade (as a result of FATCA compliance difficulties) will more than offset any gain.  For a good take on things read this link:  International Tax Evasion Crackdown: Slow, Tricky, And Only First Step in ... - International Business Times Wed, 30 Oct 2013 18:17:40 GMT

InsideCounselInternational Tax Evasion Crackdown: Slow, Tricky, And Only First Step in ...International Business TimesAttempts to implement the 2010 Foreign Account Tax Compliance Act (FATCA) have repeatedly stalled, partly because the sweeping law r ...

Read more ...

I'm hearing more and more stories of people renouncing their US citizenship because of the business difficulties caused by FATCA.

In my humble opinion, FATCA is bad law whose intended purposes cannot be realized without massive damage to international trade.  It needs to be repealed.

Monday, November 11, 2013

Filing taxes for free

Having recently received inquiries as to locating web sites that let you file income tax returns for free, I did a little research and this is what I've uncovered.  The IRS has a free filing option and you can get to it by clicking 'IRS Free Filing'.  There is another site you can investigate named FreeTaxUSA which may be of some help to you.  Be advised that all is not roses with this system as evidenced here: Pros & Cons of E-Filing Income Tax Return | The Classroom ... Fri, 20 Sep 2013 05:03:16 GMT

The Internal Revenue Service requires most income earners to file tax returns each year to make sure that it receives correct amount of tax. ... E-filing is a free service offered by the IRS, so you don't have to pay to submit your federal return.

Read more ...

The bottom line with these services is that YOU have to know what you are doing.  If you do your homework and are careful, these could be excellent services for you.

If you are not confident, you could always contact me.....

Thursday, November 7, 2013

Here it comes again!

The new year will be starting soon and with it the flurry of activity that means people are trying to minimize taxes.  The IRS has published new, inflation adjusted numbers and you can see the official publication here. The threshold minimums haven't changed for tax year 2013 to be filed in 2013, (see prior posting in Dec. 18, 2012).  Here is a new posting for tax year 2014 to be filed in 2015, just FYI.

IRS Announces 2014 Tax Brackets, Standard Deduction Amounts And More - Forbes Fri, 01 Nov 2013 15:22:13 GMT

BloombergIRS Announces 2014 Tax Brackets, Standard Deduction Amounts And MoreForbesAll together, the IRS posted more than 40 updates. You can read more about them at Revenue Procedure 2013-35 (downloads as a pdf). And kudos to the folks at CCH, part ...

Remember that you need to make any adjustments BEFORE the end of December (with only a few exceptions).

Soft landing!

Wednesday, October 30, 2013

2013 update

This is a pretty good review of the current state of affairs.

US Citizens Working Abroad: Everything you should know about ... Mon, 28 Oct 2013 07:02:45 GMT

There is nothing to be feared or be skeptical of, if you are a law abiding American without any malicious intention to evade taxes while working abroad. The Foreign Account Tax Compliant Act, better known as FATCA, passed ...

I would also like to point out that, if you have earned income exceeding the Foreign Earned Income Exclusion (FEIE) of $ 97,600 this year AND you have paid Chilean taxes on the excess amount as well, it's possible to use the tax paid on the excess (only) on the Form 1116 and take the foreign tax credit on the US taxes due for the excess amount.  The US imposes taxes on the amount exceeding the FEIE at the maximum marginal rate so it stands to reason that the tax paid to Chile, on just the excess (this can be calculated using table available at or click here) can be used to offset the US tax due, if possible.  The proof is to calculate the tax amount on ALL of your earnings (A); then calculate the tax on only the $97,600 (B).  Subtract B from A and you have the tax due to the US.  Do the same with the Chilean tax tables and see if the Chilean taxes exceed the US taxes.  They probably will as Chile's uppermost tax rate is higher than the US uppermost rate.  If you need help, drop me a line.

Sunday, October 27, 2013

FATCA woes!

FATCA is conquering the world!  Hitler would have been proud!  

Fortunately, there is considerable resistance to what amounts to subversion of the sovereignty of other countries.  Plus, do YOU want to have government agents snooping into your financial affairs...just 'because' you 'might' be doing something illegal?  Hmmmm?

Have a look at this entry on a Google Blog: Files Freedom of Information Act Request on ... Fri, 11 Oct 2013 18:34:54 GMT

As noted previously, FATCA (the “Foreign Account Tax Compliance Act”) cannot succeed unless the U.S. Treasury Department is successful in coercing a sufficient number of countries into enforcing this foreign (i.e., U.S.) law ...

Originally from :

This is good information and Americans need to get busy and repeal FATCA.  To fail to do so will cause a lot of regret later!

Sunday, October 20, 2013

The Great Con

This is only about taxes peripherally.  The IRS was created the same year as the Federal Reserve System and the secret tax of inflation started then.  Mike Maloney has created a video that greatly simplifies the explanation of what is going on and why it's important to you.  The IRS is mentioned in the video and why it exists to tax (rob) you of your hard earned money.  Please do yourself a favor and watch the video.  Click here.  Sometime, if you have time, go to my blog about currency and read some there, too.  After you have learned about the currency system, it will help you plan your future.

Best to you.

Saturday, October 12, 2013


Well, the new so-called Affordable Care Act is being implemented with all the grace of an elephant ballet.  To say the system if woefully unprepared would be putting it mildly.  There are tremendous problems with the implementation, even recognized by avid fans of the act.  Well, we'll concentrate on how people living overseas are affected.  According to the official ACA web site:

U.S. citizens living outside the U.S.

U.S. citizens living in a foreign country are not required to get health insurance coverage under the Affordable Care Act. If you’re uninsured and living abroad, you don’t have to pay the fee that other uninsured U.S. citizens may have to pay.
Generally, health insurance coverage in the Marketplace covers health care provided by doctors, hospitals, and medical services within the United States. If you’re living abroad, it’s important to know this before you consider buying Marketplace insurance.
Questions? Call 1-800-318-2596, 24 hours a day, 7 days a week. (TTY: 1-855-889-4325)

 Of course, if you think I may be misinformed, click here to see for yourself.

If you live permanently overseas, chances are you'll never have to deal with this.  If you are on temporary assignment and will return someday, keep your eyes peeled as to the developments so you'll know how to handle things when you return.

Friday, September 20, 2013

Yet more FBAR stuff...

Well, in typical government fashion, when I called the help desk to see about some details concerning getting registered as a 3rd party electronic filer of FBAR forms, the automated telephone answering system had me running in circles.  At one point, it was switching me back and forth between two messages and the only escape was to hang up and start over.  Sheeesh.  Is this any way to run a criminal, er, government enterprise? So, finally, I had to send an email after wasting almost an hour.  I mentioned the telephone number for FBAR help in my previous post; don't bother.  Send an email or, even better, email me and, if I know the answer, I'll tell you.  If I don't, I'll find out and make it a post. 

If you want to receive notices of new information, subscribe at the right and I'll keep you in the loop.  It's a free service so you have nothing to lose.

That's all for now.

Friday, August 23, 2013

More FBAR Stuff

Remember FBAR?  That nasty form that MUST be filed by June 30 each year for the previous calendar year?  Well, the US Treasury department is making it easier (?!) to file now.  Read this notice:

Effective July 1, 2013 – Electronic filing of FBARs is mandatory

E-filing is a quick and secure way for individuals to file FBARs. Filers will receive an acknowledgement of each submission. For more information about electronic filing, read the FinCEN news release . Help with electronic filing technical questions is available at or through the BSA E-Filing Help Desk at 866-346-9478.

Now, you are not allowed to MAIL in the form.  Electronic filing is required.

Well, on the plus side, you won't have to worry about postage now.

Additionally, there is a provision to allow you to hire someone to file for you.

Details in another post.


Saturday, August 10, 2013

Implementing FATCA

Here's a news flash gang!  FATCA implementation has been delayed for 6 months until July 1, 2014.  Who cares why they say, I think they are getting serious resistance, if for no other reason than the technical difficulty to comply.  FATCA is a deal killer and will have the unintended consequence of US Citizens being unable to do business internationally because foreign banks are so scared of the ramifications if they do it wrong.  Business people will not be able to get wire transfers in a timely manner, if at all, and deals will die.  Official estimates are that FATCA will gather $87 billion over a ten year period. Huh? That's $ 8.7 billion per year with the risk of bringing international trade to a dead stop.  What kind of impact will that have on an annual deficit of over $600 billion?  Exports from the US are over a trillion, yes trillion, dollars each year.  If that is damaged, not only will business suffer domestically but tax revenues will fall off by more than FATCA could ever gain. 

Friday, August 2, 2013

Special stuff for Chile

Just to let you know, I have the regulation in front of me as I type.
A “foreign eligible entity” is NOT an S.A. (Sociedad Anonima) for our purposes.

That means E.I.R.L.’s and Limitadas ARE “foreign eligible entities”.

Unless a Limitada elects to be a “pass-through” within 75 days of its formation, it is a partnership and all the foreign partnership rules apply.
If the owner of the EIRL does not have limited liability, the EIRL is disregarded by default and the owner doesn’t have to do anything.

I don’t know if the Limitada and EIRL designations provide limited liability.  If they do, then the elections would have to be made in a timely manner.

That’s good news.  Plus, the fact that Social Security has exempted US citizens and residents who are living in Chile, makes things a lot easier.

Wednesday, July 24, 2013

Setting up for business overseas

We all know that the United States Code Title 26 (income tax) code is spider's web of laws and regulations that capture the unwary and sometimes those that are very wary.  It's so complicated that no one really knows what's going on.  A lot of people think, if you live overseas, you can reduce taxes by setting up a foreign business entity (S.A., Limitada, EIRL, IBC, Trust, etc., you get the picture) except DON'T!  If you think the domestic tax policy is complicated, you won't believe what the international side looks like.  Some international tax professionals state the rules are "insanely" complicated.  That's on a good day.  Some "entities" can be designated as "pass through" and, thus, simplify your life.  Others can't be.  For instance, Chile has an S.A. (Sociedad Anonima) and that particular entity isn't allowed the "pass-through" election.  This means, depending on the exact numbers, if you own a piece of that action, you will be required to file such nasty forms as 5471.  If you don't, you have to pony up US$ 10,000 in fines the IRS WILL levy.  Not only that, the IRS has the authority to "deem" a Limidata to be a foreign corporation unless you file a form electing to be a "pass-through" within 75 days of creating the Limitada.  These are just two examples.  There are many others.  I can't count the number of times I've been asked to help with a Limitada only to find it had been created the year before.  There's not much that can be done for relief at that point.  So, the moral of the story is, if you want to set up a legal business entity in a foreign country, talk to a tax adviser first.  At least get all the information before you move.  Maybe you'll decide an S.A. is the best way to go.  OK, if you make the decision with all the information.  There'll be no surprises and in business we all know we don't want surprises.  Tune in again as I detail some other issues that may concern you.



Tuesday, July 2, 2013

Abolishing the IRS

There is an amazing effort underway in the US Senate and House of Representatives.  That effort is to abolish the IRS and the tax code that it enforces.  This would be an incredible boost to the American economy and a HUGE step forward for the cause of liberty!  If you don't know about it, contact your Senator and Congressman and urge them to DO IT!  Yes, I know, it would put me out of a job but the cause of liberty is MUCH larger than that!  CALL THEM!  PUSH THEM! HOLD THEM ACCOUNTABLE!  This is the time to make the change!  Not just for you but your children and grand-children and on!

Tuesday, March 5, 2013

US Ex-pat filing extension

If you are an ex-pat living overseas, you have available an automatic 2 month extension to file AND pay your taxes due, to June 15.  To invoke this extension, you MUST include a statement with your tax return that you are claiming the extension.  If you need more time, you must file a form 4868 before the June 15 deadline but if you want to file for an extension electronically, do it by April 15.  The on-line services won't take an extension request after April 15th.
If you don't believe me, see what the IRS says, click here.

Filing thresholds

People are starting to ask me if they have to file now.  Living outside the US does have a different set of rules but the filing thresholds are the same.  So here they are, if you are below the number for your filing status, you don't have to file:

Filing Status Age Gross Income at least:
Single      < 65  $          9,750
Single     >= 65  $        11,200
Married Filing Jointly < 65 (both)  $        19,500
Married Filing Jointly >= 65 (either)  $        20,650
Married Filing Jointly >= 65 (both)  $        21,800
Married Filing Separately       All  $          3,800
Head of Household     < 65  $        12,500
Head of Household    >= 65  $        13,950
Qualifying Widow(er)     < 65  $        15,700
Qualifying Widow(er)    >= 65  $        16,850