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International Tax

  1. I own a foreign bank account. What do I need to disclose to the IRS?

    Any US person (individuals, entities, trust, etc.) that owns a foreign bank account is required to file a FINCEN Form 114 to report the maximum value of the account during the year if at any time during the year their maximum balance exceeds $10,000 USD. Failure to do so can result in significant penalties. Additionally, US persons may also need to attach Form 8938 to their tax return if certain filing thresholds are met.

  2. I own an interest in a non-US company. How am I taxed on this income and what am I required to report to the IRS?

    The way in which income earned by a non-US company is taxed to a US owner largely depends on how the entity is structured and classified for US tax purposes. If the entity is classified as a foreign corporation, generally the income is taxed in the US when a dividend is paid to the US owner. However, certain anti-deferral rules may result in the income being taxed annually without a dividend actually being paid. It is important that these entities are properly classified for US tax purposes so that a US owner can avoid negative tax consequences associated with owning a non-US company.

    Additionally, ownership in a non-US company may also require special information reporting that will need to be included with a US owner’s tax return. It is important that these informational reports are filed annually because failure to file can result in significant penalties.

  3. Is foreign real estate reportable to the IRS?

    Foreign real estate is generally not reportable to the IRS. However, if the property is rented out you may have additional filing requirements if you own a foreign bank account associated with the property or earn rental income. Additionally, if the property is held through a non-US company you may have additional filing requirements to disclose the non-US company.

  4. I received a gift/inheritance from a non-US person. Is this taxable in the United States?

    No, gifts or bequests received from a non-US person are not subject to tax in the United States. However, though the gift is non-taxable, the IRS requires that a Form 3520 is filed to report the gift if the value of the gift exceeds $100,000 during the year.

  5. I am an expat and currently work outside of the United States. I also pay taxes in my country of residence annually. Am I still subject to tax in the US on this income?

    Yes, all US citizens and green-card holders, including those living and paying taxes abroad, are required to file a US tax return and pay taxes on worldwide income in the US. Special tax rules may apply with respect to US persons living abroad that can help mitigate their US tax liability. Generally, US persons living abroad can reduce their US tax liability by taking advantage of foreign tax credits or claiming the foreign earned income exclusion.

  6. I am a US citizen but have lived outside of the United States my entire life and have not filed a US tax return. What options do I have?

    The United States generally requires its citizens to file an income tax return annually. There are various options available for those looking to be in compliance and current with their taxes and tax filing obligations. The appropriate method to file the delinquent returns will largely depend on whether or not failure to file in the past was due to non-wilful neglect. A current favorable option that is available to US persons living abroad is known as the Streamline Filing Compliance Procedures. This program allows taxpayers that have failed to file prior tax returns due to non-wilful neglect to file under this procedure and avoid significant tax penalties. This program requires taxpayers to file the last 3 years of income tax returns and 6 years of Foreign Bank Account reports.

  7. I am a US citizen but have no intention to return to the US and am planning to renounce my US citizenship and expatriate. What do I need to do?

    If you are a US citizen and no longer want to retain citizenship, you have the option to renounce your citizenship and expatriate from the US. However, in order to fully expatriate from the US, you may need to pay an expatriation tax. The expatriation tax is applicable to “covered expatriates” and is based on appreciation of an individuals assets on the day prior to expatriation. The difference between the fair market value and a taxpayers cost basis in the asset is capital gain. Additionally, a taxpayer will need to file a dual status tax return in the year of expatriation.

  8. I am a foreigner and sold real estate located in the US. What are my tax implications?

    To ensure tax collection from non-US persons (both individuals and companies), the IRS requires withholding tax of 15% on the gross proceeds under FIRPTA on the sale of property in the United States. For example, if you sold a home for $1,000,000, $150,000 will be withheld on the sale and remitted to the IRS. Additionally, certain states (California requires 3.33% withholding) may also require withholding on gross proceeds. Because the withholding tax is on the gross proceeds on the sale, this may result in excess withholding. In order to claim a refund on the excess withholding, a foreigner will need to file an income tax return for federal and state. The gain on the disposition is reported on the tax return and any excess tax withheld will be refunded to you. There are certain ways to reduce or eliminate the withholding tax required upon sale however this will largely depend on a foreigners facts and circumstances and additional planning should be considered.