Important Aspects of Expat Taxes and Cross Border Taxation

Jul 27, 18 Important Aspects of Expat Taxes and Cross Border Taxation

When it comes to tax for expats, things can get quite complicated quite quickly. That is why so many people get help from the experts. But if you are living, working, or if you have significant business outside of the United States, there are some things you need to understand about expat and cross-border taxation. Here are a few things to keep in mind.

1. File on Time

Just like all other kinds of taxes, there are due dates for getting your taxes in to the Internal Revenue Service. Tax for expats is due on a different date, however: June 15 instead of April 15. Failure to submit your taxes on time often comes with fees and interest, and there can be other issues that arise as well. Always plan to have your taxes in on time or slightly early, not just for peace of mind but also to ensure that you don’t incur any unwanted fines or attention.

Be aware, however, that while your taxes may be due on June 15 instead of April 15, you may be required to submit forms before then, including your FBAR. You can apply for extensions so that you can file everything at once, but it is important that, when you file tax for expats, you strictly follow the deadlines.

2. Use the Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion is a program that lets you deduct a certain amount of your income from consideration for American taxes. For 2017, the amount was quite significant at $102,100. By using this program, you may end up not paying any tax at all, depending on your income, making it a key program when it comes to tax for expats.

You will need to pass one of two residency tests to use the Foreign Earned Income Exclusion program: either a Bona Fide Residency Test or a Physical Residency Test. The bona fide test means that you lived in a foreign nation uninterrupted for the entirety of the tax year, vacations excepted. The physical test lets you be in any number of foreign countries for a 330-day period, but they have to be full, 24-hour days. The benefit of the physical test is that you can choose the 12-month period rather than strictly sticking to the tax year. Many people who work abroad and have to file tax for expats choose the latter because of its convenience and lesser restrictions.

3. File Your FBARs

The Report of Foreign Bank and Financial Accounts, or FBAR, is a required form that must be filled out when you file your tax for expats if you had any financial accounts with a total balance of over $10,000 at any point during the year. The accounts must be outside of the United States, and failure to comply can result in serious fines or legal action. FBARs are for every American citizen, regardless of their age or circumstances.

4. Cross Border Taxation Involves More than Canada and the US

While many people enjoy the benefits of the relationship between Canada and the United States, some who work in both countries forget that all of their foreign income needs to be reported. It may sound strange, but Canada still counts as a foreign country, and as such, they still need to report that income and any related taxes via tax for expats.

5. Pay Attention to Your Residency

Most people who file tax for expats understand the right paperwork to use, but there are small differences in certain forms that can result in mistakes. Even tax professionals with little experience in dealing with foreign incomes and tax can make these mistakes, which sometimes leads to unintentional tax evasion. The most common mistake boils down to residency, especially when discussing cross border taxation. Always ensure that your forms match your living and working situation to ensure you are compliant and, in some cases, not paying more than you owe.

When you live, work, or earn income outside of the United States, your taxes can become quite complicated and are subject to completely different rules. This is why so many people who must file tax for expats choose to work with an experienced accounting firm that can help them file properly and on time. If you work abroad or have significant business outside of the United States, then be sure to contact a professional accounting firm to help with your taxes. They can help you stay compliant, take advantage of all the programs available, and help you avoid any unwanted fees, fines, or interest.

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Understanding the Offshore Voluntary Disclosure Program

Dec 24, 16 Understanding the Offshore Voluntary Disclosure Program

In finances, as with anything else important in life, it’s possible for things to go wrong. Sometimes, things can go very wrong and it can feel like there’s no way out without making everything worse. When undisclosed assets pile up and tax season is approaching once again, you may not even feel like trying to sort out your financial mess. That’s why the Offshore Voluntary Disclosure Program, or OVDP, is available. It provides a way out for people whose undisclosed assets have gotten out of control and who want to bring themselves back into line with all legal requirements surrounding their financial situation.

What Is an OVDP?

An Offshore Voluntary Disclosure Program is a program set up for people who have offshore assets that have not appeared on their tax returns, as they are legally required to do. It counts on the individual to come forward and declare the assets that they had previously left undisclosed, and pay any overdue taxes those assets may have accrued. An OVDP counts on you to make contact first, or talk to an international tax consultant in order to proceed.

Why Should I consider an OVDP?

Fixing financial problems can be a huge hassle and it can be tempting to simply ignore an issue like undisclosed financial assets, especially if it seems that they will never come to light. However, this is not only unethical; it’s potentially quite risky. You never know when your situation might change, making an audit more likely, or otherwise making it easier for your undisclosed assets to come to light in a way you didn’t choose. An Offshore Voluntary Disclosure Program gives you a way to take control of a difficult situation before it even happens by bringing your tax returns up to date on your own terms.

How Do I Know If I’m Eligible?

In order to be able to benefit from an OVDP, you must meet certain conditions. First, the funds in your offshore accounts must be derived from legal activities. If you made that money by breaking the law, it cannot be brought to the table for an OVDP. The program also requires that you have not made a submission pursuant to a streamlined procedure, so avoid doing that if you are considering an Offshore Voluntary Disclosure Program. It is also vital that you not be under investigation by the IRS. This includes both civil examinations and criminal investigations. If you are unsure of your status when it comes to applying for an OVDP, speak to an attorney. They will be able to clarify the procedure surrounding the OVDP and answer any questions you might have.

What Will I Need to Do?

There are a few tasks you will need to complete as you pursue an OVDP. First, in order to kick off the process, you will need to bring yourself up to date with filing your taxes. Up to eight years of tax returns will need to be filled out accurately and submitted. If you submitted those tax returns already, you will need to amend them to more truthfully reflect your offshore assets. The same goes for your FBARs. You will need to bring them up to date for at least the past 8 years. When those taxes have been correctly calculated, you will be required to pay them along with any interest and penalties that have accrued. On top of that, an additional penalty of up to 50% of your highest undeclared assets will have to be paid. This may seem steep but it is better than losing all of your offshore assets to an audit or other legal trouble.

How Do I Get Started?

If you have decided to honestly and accurately update your taxes, the first thing you should do is contact an attorney to help you get started with an Offshore Voluntary Disclosure Program. They can help you provide a precise reporting of your undeclared offshore assets and help to minimize the penalties you will have to pay. It might seem like a difficult or onerous task, but an attorney can take a great deal of the pressure off of you as you update your finances, and you will finally have the peace of mind of knowing that you can weather any investigation into your financial life.

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Why Offshore Asset Protection is Good for Everyone

Sep 27, 16 Why Offshore Asset Protection is Good for Everyone

Due to the ever-changing and unstable nature of the economy – not to mention threats of lawsuits and identity theft – it is more important now than ever before to have an asset protection plan in place. In order to properly protect what is yours, you must plan for the future, before disaster strikes. If you have never before considered the benefits of offshore asset protection, or perhaps are unsure of how such offshore trusts work, it is important that you take your financial future into your own hands now, before it is too late.


What Assets Deserve Protection?

Before you consider the pros and cons of offshore asset protection, you must first understand what assets you have at your disposal. At its most basic, an asset is any type of economic resource, whether tangible or intangible, that can be owned or controlled to produce value. If the valuation of these economic resources is positive, it is an asset to you. Tangible assets have physical attributes and include such things as currency, real estate, vehicles, equipment, and jewelry. Intangible assets, in comparison, lack any kind of physical substance and include such things as copyrights, trademarks, and patents. Whether tangible or intangible, if your assets have a positive economic value, they deserve your protection.

What Does Asset Protection Involve?

Protecting your assets essentially means that you would like to put a plan into motion that will ultimately protect your wealth – in whatever form your assets exist, and whether they are tangible or intangible. Asset protection is not only a strategy used by businesses with a vast number of assets to guard; even individuals with only a few valuable assets in their possession can benefit greatly from protecting what is theirs. These asset protection techniques are designed to shield one’s assets, within the parameters of debtor-creditor law. This means that your assets will be guarded legally without you running the risk of being found guilty of concealment, tax evasion, bankruptcy fraud, or other such illegal practices.

How Offshore Asset Protection Works

One of the best methods of protecting your valuable assets is through setting up an offshore trust, also known as a foreign trust. By setting up an offshore trust, you are adding a barrier of protection between your most treasured assets and those who are attempting to lay claim to your wealth. When placing your assets into an offshore trust, the trustee involved in this transaction is a financial institution that does not exist within your country of origin. Choosing to protect your assets offshore also gives you the option to work within a jurisdiction that has lower taxes, as well as laws concerning the protection of wealth, which will be of great benefit to you.

Why Offshore Asset Protection is Good

Asset protection helps you preserve your wealth, not only for yourself, but also for your children and other descendants. Taking that protection offshore adds yet another layer of security, as some foreign institutions will offer better asset protection than the entities currently operating within the United States. By placing your assets offshore, they are beyond the reach of U.S. jurisdiction, meaning that U.S. creditors will have an extremely difficult time attempting to get to your assets. By taking a stand to protect what is rightfully yours before disaster strikes, you not only keep what you already have in your possession, but you also can avoid having a potential creditor collect against your future earnings and assets. You do not have to be wealthy to possess the desire to keep your wealth in your control. Asset protection planning offers you peace of mind in knowing that, in the event of future tragedy, your most valuable assets remain safe.

Try as you might, you cannot control the financial environment around you. The economy may unexpectedly crash, someone may attempt to steal your identity, or you may be dragged into a messy lawsuit. For all of these reasons and more, it is imperative that you do not wait for disaster to strike. You can take control of your own financial future now by trusting in offshore asset protection and ensuring that your wealth is not jeopardized by the surrounding economical climate. The best thing that you can do to secure your future and protect that which is already yours is to move your most valuable assets offshore.

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