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Opening a business can be difficult, but the process is especially challenging for American ex-pats living abroad. Our team can help you discover the perks of opening a business in a foreign country to make the process easier.

Owning and operating a business abroad as an American ex-pat puts you in a tricky situation regarding taxes. You must pay federal income taxes as long as you are still a U.S. citizen, even while living abroad. Your country of residence may also tax you. Perks of opening a business abroad include tax credits or exclusions to reduce how much you pay in taxes. The foreign tax credit could help you pay less to the U.S. federal government. The foreign earned tax exclusion could also reduce your taxable income, saving you money.

Call this link – get in touch to speak to our CPAs at US Tax Help to get help with your taxes while living and working abroad.

Paying Taxes as an American Expat with a Business Abroad

Opening a business abroad is exciting, but complex legalities make the situation challenging. Many American ex-pats living abroad and opening businesses often need help paying taxes.

Often, ex- ex-pats living abroad and operating foreign businesses pay taxes in the country where their businesses operate. They also must pay federal taxes to the United States government because they are still U.S. citizens.

It might seem as though opening a business abroad and living in a foreign country means getting taxed twice on the same income. Not only are you taxed by your new country of residence, but you also are taxed by the United States.

In truth, there are tax benefits and perks to opening a business abroad. Many of these perks provide workarounds to this double-taxation conundrum. Our team can help you assess your tax situation and determine how to take advantage of tax perks and benefits.

Claiming a Foreign Tax Credit While Operating a Business Abroad

Foreign tax credits might apply if a foreign government or U.S. possession taxes you. Since many ex-pat business owners abroad are taxed by the foreign countries in which they live, they can often take advantage of this credit. Tax credits work to lower your tax bill. For example, if you owe $700 in taxes but have a tax credit of $200, you only owe $500.

The foreign tax credit American ex-pats can take advantage of allows them to use the taxes they have paid overseas as a credit against their U.S. federal income tax. If you have paid $1,000 in taxes in your country of residence where you opened your business, you might claim a $1,000 tax credit on your U.S. federal income taxes.

The limits of the foreign income tax depend on numerous factors, including your overall international income, the taxes you have already paid, and things like inflation. In some cases, ex-pats living and working abroad who pay a higher tax rate in a foreign country owe nothing in U.S. taxes.

This might be a significant perk for people opening a business abroad. The money you earn through your business is taxable income, and the United States and your country of residence may tax it. By claiming the foreign tax credit, you might only pay taxes in your country of residence where you operate your business.

Remember, this only applies to foreign taxes on income. If you are taxed on other things (e.g., sales tax, property taxes, taxes on inheritance), the foreign tax credit might not apply.

Taking Advantage of Foreign Earned Income Exclusions as an American Expat

Another potential perk of opening a business abroad as an American ex-pat is taking advantage of foreign earned income tax exclusions. Although this works a bit differently than the foreign tax credits discussed earlier, many of the qualifications are similar.

To qualify, you must meet one of the following criteria. First, you must be a U.S. citizen living in a foreign country for an uninterrupted period, including a full tax year. Second, you must be a U.S. resident alien who is a citizen of a foreign country that has an income tax treaty with the United States, and you must live in the other country for an entire tax year uninterrupted. Finally, you must be a U.S. citizen or resident alien physically present in a foreign country for at least 330 days during any consecutive 12-month time.

This tax benefit excludes income you earned from foreign sources (i.e., your business you opened abroad) from your U.S. taxable income. The maximum amount of foreign earned income you can exclude changes each year and is adjusted for inflation, so you should speak to our team before filing your taxes.

Foreign Income

When assessing foreign earned income exclusions, we need to understand what is considered foreign earned income. Generally, income from salaries, wages, and fees paid to you for personal services rendered by you fall under this exclusion. If your earnings would be considered normal or typical income in the United States, it likely meets the criteria for exclusion.

It is important to note that you can include income earned from self-employment. Many ex-pats living and working abroad work for larger businesses or companies, but many others open their own businesses. Your self-employment income may be used to claim an exclusion, but only for income tax purposes. Other taxes related to your self-employment might not be offset.

Not Considered Foreign Income

We must also consider income that is not part of the foreign earned income exclusion. You cannot include income derived from pay received as a military member overseas, for services rendered in international waters or airspace, pay that would be excludable from income under different rules or laws, or pensions or annuity payments.

Call US Tax Help for Assistance Now

Call our experienced CPAs of US Tax Help at this link – get in touch to get help taking advantage of tax breaks for US ex-pats abroad.

United States citizens must pay taxes no matter where they live, including in other countries. To make the situation more complex, you must also report any gains on cryptocurrency, which is often confusing considering how new crypto is.

If you are a U.S. ex-pat living abroad, you must pay your federal taxes and report any gains from the sale or trade of cryptocurrency. Cryptocurrency is a relatively new kind of financial holding and is technically not currency but property. When you sell or trade crypto, you are taxed on capital gains. Exactly how those gains are taxed depends on how long you hold the crypto assets before selling or trading them. Living overseas and dealing with crypto finances can be difficult, but you generally need to report this information on your taxes if you bought or sold any crypto holdings. Many people mistakenly fail to report their crypto gains on their taxes, and a CPA experienced with ex-pat taxes can assist you.

If you live abroad and have bought, sold, or traded cryptocurrency in the last year, our team can help you properly report this information on your taxes. Call U.S. Tax Help at this link – get in touch today.

Are US Ex-Pats Required to Report Cryptocurrency Gains on Their Taxes?

If you are a U.S. citizen living abroad, you are still required to pay your federal taxes. U.S. taxes are not based on your location or country of residence but rather on your citizenship. As long as you maintain your U.S. citizenship while living overseas, you must complete your taxes each year. Cryptocurrency acquired abroad also must be reported.

Cryptocurrency is a somewhat new form of financial holdings that many people buy, sell, and trade. Some commonly known forms of cryptocurrency include Bitcoin, Ethereum, Tether, and Dogecoin. Any gains you make through cryptocurrency must be reported on your taxes, usually on form 8938.

You might also be paying taxes in the country where you live, which might play a role in how your U.S. taxes are assessed. Depending on your situation, you might be taxed differently by the United States if you also pay taxes in your country of residence.

Crypto is technically not money but is treated as property by the IRS for tax purposes. How cryptocurrency is taxed depends on what you do with it. Like other investments and properties, crypto does not yield any taxable gains until it is bought or sold. However, if you are paid in crypto as part of your income, that is taxable. Generally, if you sell your cryptocurrency and earn a profit, that profit may be taxed. Even if you did not sell or buy any crypto in the last year, you might still be required to report whatever cryptocurrency you have.

How Crypto Gains Are Reported for US Ex-Pats

Income from selling cryptocurrency holdings is not categorized as ordinary income but as capital gains. When you sell or trade crypto, you are taxed only on your gains. For example, if you purchased some cryptocurrency for $100 and later sold it for $250, you would be taxed only on the $150 gain, not the entire $250.

The tax rate you pay on capital gains depends on how long you hold the financial asset before making the sale. Short-term capital gains are from holdings typically held for less than one year. Short-term capital gains are taxed the same as your normal income tax. Since different people might be taxed according to different income tax brackets, the tax on short-term capital gains from cryptocurrency may vary based on your income.

Long-term capital gains are held for longer than one year and taxed at a different rate than short-term gains. Long-term capital gains are taxed according to a graduated scale that is updated or adjusted frequently. Our CPAs can help you determine the current scale used to tax your gains from crypto. Taxes on long-term capital gains are often smaller than short-term capital gains or standard income tax but depend on numerous factors, including your income, filing status, and other details.

Reporting Crypto Holdings for US Ex-Pats

Usually, ex-pats with cryptocurrency holdings have to report their holdings under the Foreign Account Tax Compliance Act (FATCA). Specifically, you must fill out a Statement of Specified Foreign Financial Assets if you acquired your crypto holdings abroad. Gains are reported when you go to pay taxes on those gains.

If you live abroad and hold accounts totaling at least $10,000, you must file under the Foreign Bank and Financial Accounts (FBAR) requirements. This requirement only applies to cash, and since cryptocurrencies are considered property, you might not necessarily have to file under FBAR. Even so, the laws surrounding crypto tend to fluctuate, and you should be prepared to file under FBAR.

When you go to file taxes, there is a new reporting mechanism for 2022 taxes and beyond. You will be asked if you received, sold, exchanged, gifted, or otherwise disposed of digital assets (i.e., cryptocurrency). You must answer yes under the following conditions:

• You received crypto as a form of payment or for free
• You received cryptocurrency from hard fork, an airdrop, mining, or staking
• You sold cryptocurrency for a fiat currency
• You traded or exchanged crypto for other cryptocurrencies
• You traded crypto for property, services, or goods
• You gave crypto as a gift

What if I Accidentally Failed to Report My Crypto Gains as a US Ex-Pat?

Failing to report income you earned from cryptocurrency or simply the existence of cryptocurrency is not uncommon. Many taxpayers are unsure how to report cryptocurrencies to the IRS because it is still a new and evolving field of finance.

There is a common misconception that cryptocurrency is completely anonymous and does not have to be reported. In reality, gains from cryptocurrency are taxable income, and cryptocurrency holdings might be subject to audit and reporting similar to many other financial holdings. Additionally, you have to pay income tax on crypto you receive as a form of payment for services or goods.

You might be fined for failing to report your crypto gains while living abroad. You might face fines for initially failing to report and additional fines for continuing to fail to report after the issue has been brought to your attention by the IRS.

You might face criminal charges if you cannot present some good reason why you failed to report your cryptocurrency gains. Often, the IRS is understanding of new ex-pats who have never paid taxes while living overseas. However, repeat offenders or those who refuse to correct the problem might run into serious legal trouble.

Call US Tax Help for Assistance

You are required to report your gains from crypto holdings for your U.S. taxes even if you acquired those crypto holdings in another country. Our CPAs have experience helping ex-pats with their U.S. taxes. Contact U.S. Tax Help at this link – get in touch today to get started.

Many people want to become homeowners someday. With owning a home or second home in the United States comes not just pride, but additional financial benefits.

There are many financial benefits to buying a home or a second home in the United States. Capital appreciation in your home and equity buildup can allow you to sell your property at a higher price than what you bought it for. There are also many tax benefits for property owners in the U.S., including those who own rental or investment properties. Purchasing a second home can help you increase cash flow as well. Our experienced professionals can help you understand the ins and outs of real estate and how it relates to your tax liability so that you can comfortably proceed.

In fact, if you would like to invest in a picturesque townhouse in Redmond, OR, here is a home recently listed for sale: https://www.zillow.com/homedetails/10859-Village-Loop-Redmond-OR-97756/133621959_zpid/.

If you’re interested in buying a home or second home in the U.S., ask our tax CPAs about how doing so might impact your taxes. To learn more about how the tax accountants at US Tax Help can assist you, call us today at this link – get in touch.

What Are Some Financial Benefits of Buying or Second Home in the US?

If you are interested in securing your financial future, buying a home or a second home in the United States might be the answer. Owning real estate opens up the opportunity for capital appreciation, tax savings, cash flow, and equity buildup, among other benefits. Our tax accountants can explain the ins and outs of purchasing a home or an investment property in the U.S. so that you can more easily attain this goal.

Capital Appreciation

Purchasing property, whether a home your family can live in or an investment property to rent, can result in capital appreciation. Simply put, capital appreciation is the difference between the price of a property when you purchase it and the price of a property when you sell it. This applies to property owners of all kinds, including homeowners and investment property owners. If the area you live in or own real estate in increases in popularity over the years, so may the capital appreciation on your property.

Tax Savings

There are several tax benefits to owning a home or a second home in the United States. As our tax accountants can explain to you, single filers and married couples filing jointly can deduct up to $750,000 in mortgage interest from all properties they own. This includes investment or rental properties. Homeowners can also deduct property taxes on all properties, up to $10,000 if they are filing jointly or $5,000 if they are filing alone. There are additional tax benefits for those that purchase a second home with plans to rent it out for a few days out of the year.

Suppose you enjoy hiking and spending time outdoors. If you were to purchase this house in Oregon as a vacation home for you and your family to use but only rent it out for less than fourteen days out of the year, your income from renting will be tax-free.

Cash Flow

Purchasing a second home can allow you to earn additional income by renting it out. People interested in taking this route may choose to purchase a vacation home and rent it out for a portion of the year so that they can also enjoy it with their family. Whether you buy a property for investment purposes or partial rental and vacation purposes, you can increase your family’s income. Our tax accountants can help you understand how the income from rental properties should be reported on your taxes so that you can avoid any tax issues after purchasing a second home or investment property in the United States.

Equity Buildup

Building equity in a home or second home allows you to increase the difference between the value of a property and what you owe on your mortgage. You can do this by adding additions or appealing amenities that increase the value of your home. You can also achieve equity buildup by decreasing the amount you owe on your mortgage with the added income from a rental property.

Should I Purchase a Home or Second Home in the US?

Many people in the United States want to purchase property and own a home. Because it is a serious commitment, some people may hesitate to take the leap and start getting involved with real estate. If you want to buy a home or a second home in the United States but are concerned about the risks, reach out to our tax accountants.

There are many financial benefits to owning property in the United States. Still, it is important to understand what purchasing a home or a second home might mean for you. There may be additional hurdles if you are a foreign investor looking to purchase investment properties in the United States or a resident purchasing property from a foreign investor. You may be subject to Foreign Investment in Real Property Tax Act (FIRPTA) withholding in either case. Our tax accountants can help you understand what FIRPTA withholding means for your real estate endeavors and how to properly report it.

If you want to benefit from capital appreciation, tax savings, cash flow, and equity buildup, consider buying a home or a second home in the United States. Before you do, consult with our tax CPAs to learn more about your reporting requirements as a real estate owner or investor.

Call the Tax CPAs at US Tax Help Today

Engaging in real estate can be a wise decision to secure your financial stability. To learn more about how the tax accountants at US Tax Help can assist you, call us today at this link – get in touch.

As an American expatriate, reducing your taxable foreign income however possible is always ideal. One way to do this and lower your tax liability to the IRS while living overseas is by claiming the foreign housing exclusion.

If you live and work abroad as an American expatriate, you may be able to claim the foreign housing exclusion. This allows you to deduct certain household expenses from your taxable income, reducing your tax liability to the IRS as an expat. To qualify for this beneficial deduction, you must meet either the bona fide residence test or the physical presence test. Expats can claim the foreign housing exclusion by completing IRS Form 2555 and submitting it by Tax Day.

Our tax CPAs are here to help expats understand how to reduce their tax liability while living overseas by claiming the foreign housing exclusion. To learn more about the tax accountants for American expatriates at US Tax Help, call today at this link – get in touch.

How Does the Foreign Housing Exclusion Help Expats?

The foreign housing exclusion, which often goes hand in hand with the foreign earned income exclusion, allows certain American expats to deduct specific housing-related expenses from their taxable income. This can reduce your tax liability to the United States while living abroad.

As an American expatriate, you still have to report your income and certain financial information to the IRS. The United States has a citizenship-based taxation system, so you must pay taxes regardless of where you live. However, the IRS does recognize that it’s not fair for expats to pay taxes twice on the same income, especially if they work abroad. The IRS also recognizes that certain housing expenses paid for by a foreign income should be deductible. That is why the IRS allows expats to claim the foreign housing exclusion alongside the foreign earned income exclusion.

This exclusion lets expat deduct certain household expenses, like rent, from their taxable income, reducing their tax liability to the IRS. Filing for the foreign housing exclusion can be complicated, so reach out to our tax accountants for American expatriates for help. Claiming the foreign housing exclusion is often beneficial for expats, especially if they want to reduce their taxable income while living abroad.

How Do Expats Qualify for the Foreign Housing Exclusion?

Simply earning paying rent abroad is not reason enough to qualify for the foreign housing exclusion. American expatriates must meet either the bona fide residence test or the physical presence test to claim the foreign housing exclusion and reduce their tax liability to the IRS.

Bona Fide Residence Test

To meet the bona fide residence test, American expats must establish residency in another country, which usually means cutting certain ties with the United States. Maintaining property, bank accounts, or employment in America might make you fail the bona fide residence test and disqualify you for foreign housing exclusion.

Physical Presence Test

If you meet the physical presence test, you may be able to claim the foreign housing exclusion as an American expatriate. Essentially, the physical presence test requires expats to remain physically in their country of residence for a full 330 days out of the year. Do this, and you may be able to claim the foreign housing exclusion come to Tax Day.

What is the Foreign Housing Exclusion Amount?

The IRS only allows U.S. expats to claim a certain amount under the foreign housing exclusion. Calculating this amount can be complicated, so it’s a good idea to consult our tax accountants for American expatriates so that you claim the full amount available to you.

In order to calculate the maximum amount, you can claim under the foreign housing exclusion, you have to use the IRS’s complex equation. Figuring it requires an in-depth understanding of how the foreign housing exclusion and the foreign earned income exclusion relate to one another, as well as your relationship to the base housing amount, which is 16% of the exclusion divided 365 (366 for leap years), then multiplied by the amount of days in a tax year that you qualify for the foreign housing exclusion. Clearly, this can get confusing.

Figuring out the exact amount you can claim can be challenging, as the IRS forbids expats from deducting costs for lavish or unnecessary housing expenses. To learn how much you can claim in deductions according to the foreign housing exclusion, consult our tax accountants for American expatriates.

How Can Expats Claim the Foreign Housing Exclusion?

In order to claim the foreign housing exclusion, you must submit Form 2555 to the IRS by Tax Day. Fail to do so, and you may lose your ability to reduce your tax liability to the IRS by claiming the foreign housing exclusion.

Expats use Form 2555 to claim both the foreign housing exclusion and the foreign earned income exclusion. To properly complete this form, you will need to provide a significant amount of detailed information, which is why seeking help from our tax accountants for American expatriates is wise. Our professionals can help you properly gather the necessary information to file Form 2555 with the IRS.

IRS Form 2555 is due on Tax Day, along with your annual tax return. The IRS allows an automatic two-month extension for U.S. expatriates who don’t file in time. After that point, expats may be unable to claim the foreign housing exclusion for that tax year.

Ask Our Tax CPAs About the Foreign Housing Exclusion Today

If you need assistance claiming the foreign housing exclusion, our professionals can help. To learn more about the tax accountants for American expatriates at US Tax Help, call today at this link – get in touch.

As an American expat, you shouldn’t be taxed twice on income earned outside of the United States. To avoid double taxation, you should learn about IRS Form 2555 and how filing it may help you.

IRS Form 2555 allows certain American expatriates living outside the U.S. to reduce their tax liability by claiming the foreign earned income exclusion and the foreign housing exclusion. Only those that meet either the bona fide residence test or the physical presence test are eligible to file Form 2555. Because this form requires detailed information about your foreign employment and other matters, it’s wise to consult an experienced tax CPA for help. The deadline to file IRS Form 2555 is Tax Day. Miss the due date, and you might end up paying taxes twice on the same income.

We’re here to help American expats claim the deductions available to them while living overseas. To learn more about the tax accountants for American expatriates at US Tax Help, call us today at this link – get in touch.

What is IRS Form 2555?

IRS Form 2555 is used by expats to claim the foreign earned income and the foreign housing exclusions. In doing so, American expatriates can substantially reduce their tax liability to the United States while living abroad.

The United States operates within a citizenship-based taxation system. That means, as long as you retain your American citizenship, you’ll have to pay taxes to the IRS despite living abroad. Not all countries have the same rules for tax liability as the U.S. and instead require residents to pay taxes, even if they are not citizens. This might mean American expats have to pay income taxes twice, depending on where they live.

To account for this and prevent double taxation, the IRS lets certain expats claim the foreign earned income exclusion by filing Form 2555. Our tax accountants for American expatriates can help you complete Form 2555 and exclude your foreign income, reducing your tax liability to the United States.

Expats can also use Form 2555 to claim the foreign housing exclusion, which allows expats to deduct certain housing costs like rent from their annual income, also reducing their taxable income.

In 2023, the foreign earned income exclusion is $120,000. For some American expatriates, that may be their entire income. In any case, filing IRS Form 2555 and claiming the available deductions can greatly reduce your taxable income.

Can All Expats File Form 2555?

Not all expats can file IRS Form 2555. In order to be eligible for the foreign earned income exclusion and the foreign housing exclusion, you must meet either the bona fide residence test or the physical presence test.

Bona Fide Residence Test

The IRS uses the bona fide residence test to determine if an expat can file Form 2555. To be a bona fide resident of another country, you must maintain a residence there for an entire tax year. While you can travel out of a foreign country for a bit, you must do so with the purpose of returning to your permanent residence there.

Physical Presence Test

To meet the physical presence test, U.S. expats must be physically present in a foreign country for most of a tax year. That adds up to about 330 full days out of 365. Our tax CPAs can help you determine whether you meet the IRS’s physical presence test and are eligible to file Form 2555.

What Information Do Expats Need to Complete Form 2555?

IRS Form 2555 is a lengthy document that requires much detailed information. Any mistakes on Form 2555 could delay your deduction or cause a larger issue with your tax return. To ensure you provide the necessary information and successfully complete Form 2555, you can seek help from our tax accountants for American expatriates.

You will need to provide many details when claiming the foreign earned income exclusion or the foreign housing exclusion on Form 2555. The following information may be required for expats filing IRS Form 2555:

• Foreign address
• Foreign employer’s name
• Foreign employer’s address
• Occupation at a foreign company
• Total foreign wages
• Date foreign residence began
• Previous filings of Form 2555

Claiming the foreign earned income exclusion or the foreign housing exclusion can greatly reduce an expat’s tax liability to the United States while living abroad. However, not providing the necessary information on Form 2555 or including the proper supplemental materials might harm your chances of success. Because Form 2555 can be complicated, it often benefits expatriates to get assistance from our skilled tax CPAs.

What is the Deadline to File Form 2555 with the IRS?

IRS Form 2555 can be filed alongside your annual tax return on Tax Day. While failure to file by the deadline won’t result in any financial penalties from the IRS, you won’t be able to reduce your tax liability. If you don’t file Form 2555 on time, you may be doubly taxed on your foreign earned income.

The deadline to file Form 2555 is Tax Day. Our tax CPAs can submit this form alongside your annual tax return and other tax forms due at the same time. The IRS allows for an automatic two-month extension for expats that do not submit Form 2555 on time. If you still don’t file by the extended deadline and do not request a special extension, you may be unable to claim the foreign earned income exclusion or the foreign housing exclusion.

Depending on the tax guidelines of your current country of residence, you might be taxed twice on your income if you don’t file Form 2555 with the IRS. This is clearly not ideal for American expats, who shouldn’t have to pay taxes on a significant portion of their foreign income to the IRS. Let our tax accountants for American expatriates help you file IRS Form 2555 by Tax Day to prevent this from happening.

Ask Our Tax CPAs About Form 2555 Today

If you need assistance filing Form 2555, our tax CPAs can help. To learn more about the tax accountants for American expatriates at US Tax Help, call us today at this link – get in touch.

Transitioning to online teaching can present you with various opportunities, especially when it comes to lowering your tax liability. If you’re an online teacher, it’s important to learn about the tax deductions available to you.

As a teacher, you’re eligible for certain tax deductions, whether you work online or in person. A popular deduction among teachers is the educator expense deduction. In 2022, the maximum deduction is $300. With the new online school model, teachers can educate online, making traveling and teaching abroad much more accessible. Expat teachers can claim various deductions, including the foreign earned income exclusion (FEIE), reducing their tax liability to the IRS. If you want to further your own education while teaching online, you may be able to claim the lifetime learning credit. An experienced tax accountant can help you understand your deductions and credits as you teach online.

At US Tax Help, we’re here to make tax season easier for teachers. To learn more about the tax accountants at US Tax Help, call us today at this link – get in touch.

What Are Common Tax Deductions Available to Online Teachers?

As a teacher, your responsibilities haven’t decreased just because you’re teaching online. In fact, digital teaching can be even more challenging than in-person teaching, especially when dealing with active children. Because your job is already hard enough, you should learn about the potential tax deductions available to you. Although you may be working online now, that doesn’t mean certain teacher tax perks don’t apply to you.

The main tax deduction available to online teachers is the educator expense deduction. If you used your own money to purchase supplies for your students, you might be able to deduct the cost from your annual tax return. Traditionally, this tax deduction referred to supplies purchased for a classroom. Although there has been a significant shift towards online education in the last several years, that doesn’t mean teachers don’t reach into their own pockets regularly to purchase supplies that will better their students’ learning experience.

Books, computer equipment, software, and other schooling supplies are tax deductible. In 2022, the maximum amount you can claim for the educator expense deduction is $300. An experienced tax accountant can help you claim the education expense deduction on your taxes so that you can lower your taxable income accordingly.

Because you now work from home, you might think you’re eligible for the home office deduction. Unfortunately, this deduction remains exclusive to business owners working from home, not teachers working a W-2 job. If you have any questions about this, don’t hesitate to speak with a tax CPA for clarification.

Are There Tax Deductions for Online Teachers Living Abroad?

If you’ve recently begun teaching online rather than in person, what’s stopping you from traveling the world? When a computer is your classroom, you can teach virtually anywhere. If you choose to take up residency in another country as an online teacher, several valuable deductions may be available to you.

Suppose you decide to live abroad and teach at a foreign school online. In that case, you may be eligible for certain deductions. A popular benefit claimed by expat educators teaching abroad is the foreign earned income exclusion (FEIE).

The FEIE allows expat teachers living and teaching abroad, whether online or in-person, to eliminate a certain amount of their foreign income from their American tax returns. This deduction is only available to Americans who take residency in a foreign country, not educators who choose to teach at a foreign school online while remaining in America.

In 2022, the FEIE limit is $112,000. That means you can deduct up to $112,000 of your foreign income from your American taxes. In most cases, expat teachers living and teaching abroad will not have a significant tax liability to the United States after claiming the FEIE. Ask a tax accountant for expatriates to learn more about the FEIE and other deductions like the foreign housing exclusion. Teaching online in a foreign country not only presents you with amazing opportunities to explore and learn, but also to claim advantageous tax deductions.

Are There Tax Benefits of Continuing Your Education While Teaching Online?

If you start teaching online, you may find yourself with a bit more time on your hands. You no longer have to commute to work every day or keep up with your classroom. Instead, you may have some time to focus on yourself and further your own education. If you choose, you may be able to claim a tax credit along the way.

The lifetime learning credit is available to eligible educators who wish to further their learning and improve their abilities as a teacher. Ask a tax CPA if you qualify for the lifetime learning credit. The following are a few of the eligibility requirements for this credit:

• You must be enrolled at an eligible institution
• You must be taking courses to get a degree or improve your job skills
• You must be enrolled for at least one academic period during the tax year
• Your modified gross adjusted income cannot be above $69,000 if you are filing independently
• Your modified gross adjusted income cannot be above $138,000 if you are filing jointly

The lifetime learning credit is worth 20% of the first $10,000 of qualified education expenses or a maximum of $2,000 per return. For online teachers wishing to further their education, the lifetime learning credit can make doing much more affordable. If you have extra time to focus on yourself and become a better teacher, you can take advantage of the opportunity and claim the lifetime learning credit on your annual tax return.

We Can Help Online Teachers with Their Taxes

If you want to learn about the tax deductions and credits available to you as an online teacher, ask our tax CPAs. To learn more about the foreign tax accountants at US Tax Help, call us today at this link – get in touch.

Getting a letter from the IRS can be stress-inducing. The good news is, this formality isn’t always a bad thing. That said, it’s important to understand the reasons the IRS often sends certified letters, so that you how to respond to correspondence from the tax collection agency.

The IRS sends certified letters for all sorts of reasons. If you have an outstanding tax liability or there are issues with your tax return, you may receive a letter from the IRS. The same can be said for taxpayers who left information out of their tax returns or those whose identity has been called into question. Often, these letters include confusing instructions for taxpayers. After receiving a letter from the IRS, call a tax CPA. A professional can read the letter and its accompanying instructions and determine the right action so that you can get things sorted out with the IRS.

Our team of skilled professionals is here to help you through tax season and beyond. To learn more about the tax accountants at US Tax Help, call us today at this link – get in touch.

Why Does the IRS Send Taxpayers Certified Letters?

Usually, the IRS sends certified letters to inform taxpayers of issues that need attention. Some common reasons for certified letters include an outstanding balance, refund issues, return questions, identification verification, missing information, return changes, and processing delays. If you’re unsure of the reason for a certified letter from the IRS, ask your tax accountant for help. A skilled professional can assess a certified letter to determine its purpose and help you proceed appropriately.

Outstanding Balance

If you haven’t paid your taxes, the IRS may want to have a word with you. Sending a certified letter might shock you into remembering your tax liability, which is what the IRS wants. If the purpose of your recent certified letter from the IRS was to remind you of your tax liability, don’t stress. While willfully ignoring an outstanding balance can result in financial penalties, a simple mistake may go without consequences. That said, it’s important to address the issue right away. Filing late returns and taxes can be overwhelming, especially with a strict deadline hanging over your head. Call a tax accountant immediately if you recently received a certified letter from the IRS regarding an unpaid tax balance. An experienced professional tax accountant can help you address your tax liability so that you remain in good standing with the IRS.

Refund Issues

Sometimes the IRS sends certified letters to inform taxpayers of a refund discrepancy. Depending on the situation, you may learn that your refund will be greater or smaller than you initially anticipated. It’s important to consult a tax accountant if you receive a certified letter from the IRS informing you of a refund discrepancy. A professional can compare the initial amount expected to the new amount determined by the IRS. If the IRS got it wrong, a tax CPA can help you rectify the situation. Any changes to a refund should be assessed critically to ensure you receive the correct amount from the IRS.

Return Questions

Filing an annual tax return can be a complicated process, especially if you have multiple sources of income. Naming multiple dependents, filing joint returns, and claiming deductions, can also cause complications. If the IRS has pressing questions regarding your return, it may send you a certified letter. The IRS will explain the information it requires and provide guidance within this letter. A tax CPA can help you answer any questions the IRS might have regarding your recent return so that your refund is not affected.

Identity Verification

Although you know who you are, the IRS may need to double-check. The IRS may send you a certified letter if there are issues with your tax return or other tax forms regarding your personal information. In this certified letter, the IRS will likely ask you to complete its identity verification process. In order to do so, taxpayers may have to compile identifying information that proves they are indeed themselves. Even a simple mistake on a tax return can call your entire identity into question. A tax CPA can help you meet the IRS’s criteria for identity verification so that any issues with your tax return are ironed out.

Missing Information

Life is hectic, and sometimes you forget things. When those things are all-important tax forms, the IRS may send you a certified letter. In a certified letter, the IRS will explain the specific tax forms or income information it needs to process your return properly. Remember, the IRS already has lots of information regarding your employment and financial situation. You must verify that information by providing the necessary documents and records along with your tax return. If you fail to do so, it might result in a certified letter or an audit from the IRS. A tax accountant can help you promptly provide the missing information to the IRS or, better yet, help you file your return in the first place to help you avoid unnecessary issues.

Return Changes

Sometimes, the IRS makes edits to tax returns. When it does, you must be informed. In such a situation, the IRS may send you a certified letter explaining any amendments and asking you to agree to or dispute the changes. Ask your tax CPA to look over any revisions so that you can quickly respond to the IRS’s letter regarding changes made to your tax return.

Processing Delays

While you might expect to receive your tax refund in the days or weeks after submitting a return, the IRS isn’t always that fast. If there is a considerable processing delay with your tax return, the IRS might send you a certified letter explaining the situation. In this case, there’s not much for you to do but wait. However, if a return is taking months and you haven’t heard anything else from the IRS, tell your tax CPA. An experienced professional US tax accountant can help you determine the reason for the delay.

Call Our Team for Tax Help Today

If you recently received a certified letter from the IRS and need assistance deciphering it, our tax CPAs can help. To learn more about the tax accountants at US Tax Help, call us today at this link – get in touch.

Suppose you recently purchased a property from a foreign person or corporation. In that case, it’s important that you understand the Foreign Investment in Real Property Tax Act (FIRPTA) and how it impacts your transaction.

If real U.S. property is transferred from a foreign person to an American citizen, FIRPTA withholding may apply. Under FIRPTA, a buyer may be required to withhold funds from a sale to cover taxes owed on the property transfer. While there are exceptions to FIRPTA withholding requirements, they only apply to specific situations. Understanding FIRPTA withholding rates and how to report withheld funds to the IRS can be challenging. Penalties for non-compliance with FIRPTA can be severe. Instead of incurring penalties because of improper withholding or reporting FIRPTA taxes to the IRS, consult an experienced tax accountant for help.

Our experienced professionals are here to help Americans comply with FIRPTA withholding requirements. To learn more about how the tax accountants at US Tax Help can assist you, call us today at this link – get in touch.

What is FIRPTA Withholding?

Property transactions between citizens and foreign persons are heavily monitored in the United States. The Foreign Investment in Real Property Tax Act allows the United States to keep tabs such transactions and prevent foreign persons or companies from profiting excessively from selling U.S. real property interest and not paying taxes.

The Foreign Investment in Real Property Tax Act was made federal law in 1980. This piece of legislation was designed to prevent foreign investors from purchasing and selling large amounts of American farmland, tax-free. FIRPTA seeks to prevent foreign investors from avoiding capital gains taxes on the sale of various types of U.S. real property interest, from land to stocks and bonds. The Foreign Investment in Real Property Tax Act still exists today and primarily impacts Americans that engage in real estate transactions with foreign people or corporations.

Under FIRPTA, a portion of the capital gains from a transfer of property between an American and a foreign person or company must be withheld. While the IRS imposes a standard rate, the exact amount withheld will depend on the gain from the sale itself.

FIRPTA withholding can be a complicated subject. Since this concept may be widely unknown to Americans who have never done real estate or other transactions with foreign persons or corporations, it’s important to consult an experienced tax accountant. While you may be unaware of FIRPTA withholding requirements and all they entail, that does not make non-compliance okay in the eyes of the IRS. If you’re unsure whether you have to abide by FIRPTA after a recent property purchase, speak to a tax CPA.

Important Definitions Under FIRPTA

Understanding the Foreign Investment in Real Property Tax Act rules requires a comprehension of many confusing terms. Because there are many words with FIRPTA-specific definitions, learning certain terms can help you better understand FIRPTA as a whole.

Disposition

Regarding FIRPTA withholding, the term disposition refers to the sale or purchase of real estate or other property by a foreign person to an American buyer. The term disposition can also refer to certain transactions between foreign and domestic companies and individual people.

U.S. Real Property Interest

The term U.S. real property interest can be confusing at first, but it is relatively simple. Essentially, U.S. real property interest refers to any interest in real property in the United States. That is a complicated way to say that the term includes any property or assets in the United States. This can include things like real estate or interest in a company. To gain a deeper understanding of U.S. real property interest and how it applies to your recent transaction, speak to a tax accountant.

Foreign Person

Concerning FIRPTA, a foreign person is defined as a non-resident alien or a foreign corporation, partnership, trust, or estate. Resident aliens are not considered foreign persons under the Foreign Investment in Real Property Tax Act.

Transferor

Under FIRPTA, a transferor is a foreign person, corporation, partnership, trust, or estate that sells, exchanges, gifts, or transfers U.S. real property interest to a person, shareholder, partner, or beneficiary of a trust or estate.

Transferee

The transferee is any person, including Americans, resident aliens, and non-resident aliens, who purchases or otherwise acquires U.S. real property interest from a foreign person. Essentially, a transferee purchases real estate or other types of property from a foreign person.

What is the Current FIRPTA Rate of Withholding?

Suppose you have a FIRPTA withholding obligation because of a recent purchase of U.S. real property interest from a foreign person or corporation. In that case, it’s important that you understand the current rate of withholding. The standard rate can change periodically to adjust for inflation, so it’s possible that it has changed since your last transaction with a foreign person.

As of 2022, the current FIRPTA rate of withholding is 15%. For all dispositions or sales before February 17, 2016, the rate of withholding is 10%.

If you have a FIRPTA obligation, you must withhold 15% of the amount a foreign person realized on the sale of U.S. real property interest. This amount can be in the sum of cash paid to the foreign person, the fair market value of the transferred property, or the amount of liability a transferee assumes.

There are also specific withholding rates and requirements for corporations jointly owned by American and foreign persons and for domestic corporations that distribute property to foreign shareholders. The specifics of these rules are extremely complicated and only applicable to certain scenarios. Consult a tax accountant to ensure you withhold the appropriate amount after a transaction with a foreign person or corporation. Remember, FIRPTA withholding rates can change from time to time, and it’s important that you withhold the correct amount.

Who is Subject to FIRPTA Withholding?

All parties aren’t required to withhold funds after a property transfer involving a foreign person or corporation. Generally, the buyer, not the seller, must abide by FIRPTA withholding requirements. As a transferee, it’s your job to know whether or not you have a FIRPTA obligation.

Suppose you are preparing to purchase property in the United States from a foreign person or company. In that case, it is your responsibility to withhold tax on the amount realized by a foreign person. That means you are responsible for withholding FIRPTA funds and reporting them to the IRS.

Again, FIRPTA withholding generally applies to transferees, not transferors. If you are exempt from FIRTPA withholding requirements based on a transferor’s qualifications, it is their responsibility to inform you of this exemption and provide the necessary certification.

If you are unaware that the person you are purchasing U.S. real property interest from is a foreign person, and you fail to withhold FIRPTA funds if required, that is on you, not the seller. To prevent such mistakes from impacting you, ask a tax accountant for clarification regarding your FIRPTA withholding liability.

Does FIRPTA Apply to All Real Estate Transactions?

The Foreign Investment in Real Property Tax Act most commonly impacts Americans that purchase real estate from foreign persons. Depending on your recent real estate transaction, you may be unsure whether or not FIRPTA applies to you. What if American expatriates are involved? How about resident aliens? Our experienced tax accountants are here to set the record straight about how FIRPTA relates to these complicated property transfers.

Expat Buyer

If you live abroad and purchase property in the United States, you may be responsible for FIRPTA withholding. That all depends on whether or not the seller in question is a foreign person. If not, you won’t have to worry about reporting withheld funds to the IRS as an American expatriate.

Expat Seller

Suppose you’re an American expatriate living in another country and plan on selling your previous stateside home to establish residency overseas. In that case, you may be wondering whether funds will be withheld on the sale of your house. As long as you retain your American citizenship, you won’t be considered a foreign person under FIRPTA. While you’ll still most likely have to pay capital gains taxes on the sale of your property, that amount won’t be withheld by the buyer upon purchase.

Resident Alien Seller

In the eyes of the IRS, resident aliens are treated just like any American citizen. Because of that, Americans that purchase real U.S. interest property from a resident alien will not have to withhold FIRPTA taxes. Remember, to be considered a foreign person under FIRPTA, a transferor cannot be American or be a resident of the United States.

Resident Alien Buyer

If you, as a resident alien, purchase real U.S. property from an American citizen, you will not have a FIRPTA withholding obligation. You will, of course, have to withhold taxes for FIRPTA if you purchase property from a foreign person or corporation.

Foreign Buyer

If a foreign person purchases property from a resident alien or American citizen, there is no FIRPTA withholding obligation. Remember, FIRPTA withholding is only necessary when a seller is a foreign person. The buyer’s nationality is of no consequence under the Foreign Investment in Real Property Tax Act.

Are There Exceptions to FIRPTA Withholding Requirements?

While many that engage in international real estate transactions or other property transfers with foreign persons are subject to FIRPTA withholding requirements, there are some exceptions. It’s important to understand whether or not you are exempt from FIRTPA withholding and what documentation you may need in order to prove an exemption.

Home Value

Home value is one of the most common FIRPTA withholding exceptions cited by buyers. If you purchase a property valued at less than $300,000 from a foreign seller, you may not have a FIRPTA withholding obligation. You and your family must also live in the purchased property for about a year to qualify for this FIRPTA withholding exception.

Non-Foreign Seller

Suppose a seller’s nationality is unknown to you, and they provide you with a certification proving that they are an American citizen and not a foreign person. In that case, you will not be subject to FIRPTA withholding obligations. This exemption extends to real estate companies selling property to American citizens that can certify they are domestic corporations.

Instead of providing this information to you, the buyer, a seller can also give a certification stating they are not a foreign person or acting on behalf of a foreign corporation to a qualified substitute. To learn who can act as a qualified substitute and what that means for your FIRPTA withholding liability, consult an experienced US tax accountant.

Withholding Certificate

In some situations, the IRS will grant a withholding certificate to American buyers purchasing property from foreign persons or corporations. You will be exempt from FIRPTA withholding requirements if the IRS grants you a withholding certificate. While you can apply for a withholding certificate, the IRS rarely grants them. To learn if you might be eligible for this specific FIRPTA withholding exception, ask a tax CPA.

Non-Recognition Provision

Depending on the circumstances of your recent acquisition, it is possible that the IRS does not recognize the gains or losses involved. If so, a non-recognition provision can exempt you from FIRPTA withholding requirements. It is the seller’s responsibility to inform a buyer of this specific exemption. Without written notice regarding a non-recognition provision from a seller, the IRS will not consider a buyer exempt from FIRPTA withholding requirements.

Zero Financial Gain on Transfer

Suppose, after a property transfer between a foreign seller and an American buyer, the transferor realizes no financial gain. In that case, the transferee will be exempt from FIRTPA withholding requirements. If a buyer doesn’t make any money on the sale, you won’t have to withhold any funds.

In addition to the commonly cited FIRPTA withholding exemptions listed above, there are more, rarer exceptions to FIRPTA withholding requirements. For example, American persons, partnerships, or trusts that purchase publicly traded stock in a foreign company don’t have a FIRPTA withholding obligation.

There is an exemption for instances when a transferor in a transaction realizes a return on an option and not the property itself. There is also an exemption for Americans that purchase interest in a company that is not publicly traded stock or U.S. real property interest. Finally, there is a FIRPTA withholding exemption for purchases made by the American government.

FIRPTA withholding exemptions are extremely complicated and nuanced, making it difficult for many Americans to understand their liability. Be sure to consult an experienced tax CPA upon purchasing U.S. real property interest from a foreign person, so you can learn if you are eligible for any FIRPTA withholding exemptions.

How to Apply for a FIRPTA Withholding Certificate

A withholding certificate from the IRS can either reduce or eliminate a transferee’s FIRPTA withholding reporting obligation. That said, being granted such a certificate is not guaranteed. In order to improve your chances of getting a withholding certificate from the IRS, consult an experienced tax CPA.

If you wish to apply for a withholding certificate to eliminate FIRPTA withholding on disposition of U.S. real property interest, you must do so using IRS Form 8288-B. Your tax CPA can help you complete this form so that you can apply for an exemption. A transferor can also apply for a withholding certificate. If they do, they must inform a transferee in writing.

The IRS grants withholding certificates at its own discretion and generally responds to requests within 90 days. If, after evaluating the sale of property and a transferor’s net gain, the IRS believes it is appropriate to reduce or eliminate FIRPTA withholding taxes, it might. Again, the IRS grants withholding certificates on a case-by-case basis.

What Forms Do You Use to Report FIRPTA Withholding to the IRS?

As a transferee of U.S. real property interest, you must comply with any FIRPTA withholding requirements from a transaction with a foreign person or corporation. Because of that, it is important to understand which forms you must use to report FIRPTA withholding and ultimately pay any necessary taxes.

Transferees reporting and paying FIRPTA withholding taxes must use IRS Form 8288. In addition to individuals, certain corporations, partnerships, estates, and trusts are required to withhold tax on certain distributions must report such funds using IRS Form 8288. It is also a transferee’s responsibility to prepare IRS Form 8288-A for each foreign person from whom tax has been withheld.

The IRS may require you to complete additional forms, depending on the nature of a transaction and its involved parties. A tax accountant can help you understand your reporting responsibilities and complete the necessary forms properly.

What is the Deadline for Reporting FIRPTA Withholding?

Reporting FIRPTA withholding to the IRS and quickly submitting the necessary funds is crucial. The IRS takes FIRPTA withholding seriously, so transferees must abide by a very short reporting deadline.

Transferees with a FIRPTA withholding obligation must submit the necessary forms and funds to the IRS within 20 days of a disposition date. That means, less than three weeks after you purchase U.S. real property interest from a foreign person or corporation, you must complete the necessary forms, withhold the appropriate amount, and report to the IRS.

Unfortunately, 20 days does not leave transferees ample time to assess their FIRPTA withholding liability at all. That is why it’s best to hire a tax CPA as soon as you decide to purchase property from a foreign person. That way, you can prepare for the IRS’s short deadline for reporting FIRPTA withholding and easily meet it.

Consequences for Non-Compliance with FIRPTA Withholding

Transferees that fail to file IRS Form 8288 by the deadline and fail to submit necessary withholding tax can face steep financial penalties from the IRS. The IRS takes non-compliance seriously, which is why understanding your FIRPTA withholding obligation is important.

For failure to pay withholding tax and report such information to the IRS, transferees can face financial penalties. If you fail to withhold the necessary funds from a transferor’s disposition, you may be responsible for paying any owed taxes yourself, plus interest. In addition, if the IRS finds that you willfully ignored your FIRPTA withholding obligation, you can face a financial penalty of $10,000.

Avoiding penalties for non-compliance with FIRPTA is possible, especially when you have an experienced tax accountant by your side. A skilled professional can inform you of any FIRPTA withholding and reporting requirements and all necessary deadlines so that you don’t incur any unnecessary financial penalties from the IRS.

How to Comply with FIRPTA Withholding Requirements

For many Americans, the Foreign Investment in Real Property Tax Act is not easy to understand. The countless rules and caveats within FIRPTA can make it challenging for transferees to comply with withholding requirements. Instead of confusing yourself with complicated IRS procedures, turn to an experienced tax CPA for help.

When you purchase real estate or other U.S. real property interest from a foreign person, you may be shocked to learn that it is your responsibility to withhold tax under FIRPTA. That is understandable since buyers are generally not responsible for paying capital gains taxes; sellers are. When it comes to foreign-owned property in the United States, however, it’s the other way around.

Clearly, this can be a strange concept to transferees in America. The Foreign Investment in Real Property Tax Act is inherently complicated, with confusing definitions and requirements. An experienced US tax accountant will be familiar with FIRPTA and can explain how it applies to your recent purchase.

Understanding the specifics of withholding tax is not easy for many transferees. Leave it to a skilled professional to handle your FIRPTA withholding requirements so that you can focus on enjoying your recent purchase.

Speak with a U.S. Tax CPA to Discuss Your FIRPTA Withholding Questions

If you’re unsure whether FIRPTA applies to your recent purchase of U.S. real property interest from a foreign person or corporation, ask our tax CPAs for clarification. To learn more about how the tax accountants at US Tax Help can assist you, call us today at this link – get in touch.

Filing a Report of Foreign Bank and Financial Accounts (FBAR) is mandatory for some Americans. Noncompliance can lead to lofty financial penalties and other consequences, so you should learn whether or not you need to file an FBAR.

If you own a foreign bank account that exceeds $10,000, you will likely have to file an FBAR. This annual report is required by the Financial Crimes Enforcement Network (FinCEN) and is due by Tax Day for any year your foreign bank accounts exceed the threshold. Filers must use FinCEN Form 114 to file an FBAR. Filing is generally done online, although paper filing is possible if you wish to apply for an exemption. You can face serious financial penalties if you don’t file an FBAR when required. Instead of taking that risk, turn to an experienced tax CPA for help.

Our tax professionals are here to make FBAR filing easier for Americans. To learn more about how the tax accountants at US Tax Help can make tax season simpler for you, call today at this link – get in touch.

Do You Have to File the FBAR?

Filing a Report of Foreign Bank and Financial Accounts is crucial for Americans with bank accounts situated overseas. Compliance with FBAR reporting requirements is of the utmost importance, so it’s vital that you understand whether or not you need to file such a report with the Financial Crimes Enforcement Network.

Any American who owns a foreign bank account that has, at any point during the tax year, exceeded $10,000 must file an FBAR. Even if your account is valued at less than $10,000 when you file the FBAR, you must still file if the account was worth this much money at any point in the preceding tax year. What if you have multiple accounts outside the United States? In such a case, you are required to file an FBAR if the aggregate value of all those accounts is worth at least $10,000 at any time during the tax year. It does not matter if each individual account is worth less than this amount, their aggregate value is what is important. The following parties are responsible for making this report if they own foreign bank accounts whose contents exceed the threshold:

• Citizens
• Residents
• Corporations
• Partnerships
• Limited liability companies
• Trusts
• Estates

Generally speaking, FBAR reporting requirements affect American expatriates and resident aliens the most. As long as you retain your American citizenship, you must file a Report of Foreign Bank and Financial Accounts with FinCEN if you have over $10,000 in a foreign bank account.

Why The Government Wants People to File an FBAR

Taxes, finances, and reporting just about anything to the IRS and other federal governmental agencies are nothing short of complicated. You might be wondering why filing an FBAR is even necessary. The answer to your questions can be summed up under the Bank Secrecy Act.

There are numerous requirements under this act regarding financial interests, accounts, and holdings, both domestic and foreign. The Act is designed to prevent various types of financial crimes and fraud, particularly money laundering. In the past, people would often store ill-gotten funds in foreign accounts to hide them from the IRS. Even if the money did not come from criminal activity or fraud, people could use foreign banks to hide their money to avoid taxation.

Essentially, FBARs are meant to help the U.S. government keep track of Americans with foreign financial accounts. While many use foreign accounts for legitimate business and personal reasons, others use them to circumvent American laws regarding money and finances. FBARs make it harder for people to hide their assets in offshore accounts.

This is why filing your FBAR correctly and on time is so crucial. If you do not file or file late, the United States government may become suspicious. You might not only face civil penalties like fines and late fees, but you might also be under criminal investigation.

What Accounts Must Be Included in Your FBAR?

Under 31 C.F.R. § 1010.350(c), numerous accounts, assets, and holdings must be included in a Report of Foreign Bank and Financial Accounts. This may include typical bank accounts in addition to more complex financial holdings and interests. These accounts may be personal accounts or part of a larger business. Accounts might also be held by more than one person, and each must file an FBAR. However, there are a few exceptions worth discussing with a tax accountant or attorney.

Reportable Accounts

If you have any financial account or interest held within a foreign bank or financial institution, there is a good chance that it must be included in an FBAR when you file your taxes. This includes various bank accounts. Savings accounts, checking accounts, demand deposit accounts, and any other account maintained by a person engaged in the banking business must be reported. If you are unsure whether your foreign accounts meet these criteria, ask a tax accountant or talk to a lawyer.

You must also report accounts that are considered securities accounts. This includes accounts with a person or institution engaged in the business of selling, buying, trading, or holding stock and other securities. Remember, this might not necessarily involve liquid money. You might have stock in a foreign bank that is not realized yet but still must be reported.

Various other non-specific accounts should also be included in your FBAR. For example, you must report any foreign account with a person in the business of accepting deposits as a financial institution or agency. You must report accounts that are annuities or insurance policies with a cash value, accounts with someone who acts or works as a dealer or broker for futures or options transactions in a commodity subject to the rules of a commodity exchange or association, and accounts with mutual funds or similar pooled funds.

Consider whether you have any other types of investment funds with foreign banks or institutions. Check with a tax accountant to determine whether they must be included in your FBAR. Even if you are sure of your financial holdings and what must be reported, it is a good idea to talk to someone about it anyway, just to be certain.

Exceptions

Accounts maintained by an agency of the United States, an individual state or a political subdivision of a state, an Indian Tribe, or a wholly owned instrumentality or agency of any of these entities do not have to be reported. This exception likely would not apply to individual, private account holders, but it never hurts to ask a tax accountant.

Other accounts under the authority of governmental entities or intergovernmental compacts that exercise governmental authority are also excluded from FBAR filings. Similarly, an account of an international financial institution of which the U.S. is a member does not have to be reported on the FBAR.

If you are a member of the armed forces, you might have accounts with U.S. military banking facilities. These also do not have to be included in your FBAR.

Nostro accounts, or accounts held by domestic banks in foreign countries, often for the purpose of communicating with other banks, do not need to be included in your FBAR. This likely does not apply to individual taxpayers, but talking to a tax accountant or lawyer about it is not a bad idea.

What Forms Do You Use to File the FBAR?

A Report of Foreign Bank and Financial Accounts is not filed with the IRS as some may initially expect. Instead, an FBAR is filed with the Financial Crimes Enforcement Network (FinCEN), meaning those responsible for completing this report may have to use unfamiliar forms and reporting processes.

Like the IRS, the Financial Crimes Enforcement Network is part of the Department of Treasury. This bureau monitors American money overseas to reduce instances of money laundering and other illegal activity. That is why, when filing an FBAR, you’ll need to use forms from FinCEN.

Depending on your situation, you may use FinCEN Form 114 or Form 114a to file an FBAR. Form 114 is for single FBAR filers, while Form 114a is for those filing jointly with a spouse. Your tax accountant can help you understand whether or not you can file an FBAR jointly with your spouse, which is only possible under certain circumstances.

Properly completing Form 114 requires FBAR filers to have specific information regarding their foreign bank accounts on hand. The following is just some of the information you must provide on FinCEN Form 114:

• Name on foreign bank account
• Bank account number
• Name of foreign bank
• Address of foreign bank
• Type of foreign bank account

Filers may also have to provide the maximum value of all foreign bank accounts within the past year. Completing FinCEN Form 114 in its entirety is crucial if you have an FBAR liability for the past tax year. If you’re having difficulty understanding Form 114 and how to complete it, reach out to an experienced tax accountant for help.

When is the FBAR Due?

Knowing that you may have to file a Report of Foreign Bank and Financial Accounts is not enough. Filers must also learn when they have to submit a completed Form 114 to the Financial Crimes Enforcement Network.

If your foreign bank accounts exceed $10,000 in aggregate value, you’ll have to file an FBAR. Generally speaking, these reports are due on Tax Day. You’ll qualify for an automatic six-month extension if you don’t submit an FBAR by the due date. You won’t have to file for an extension, which can be a relief for filers.

Although the FBAR is due on Tax Day, you can’t submit it alongside your annual tax return and other IRS forms. Americans with an FBAR liability must submit their completed paperwork directly to the Financial Crimes Enforcement Network. Currently, FinCEN requires filers to do this online by Tax Day. If you feel more comfortable filing a paper FBAR, your tax accountant can help you request an exemption from e-filing.

What Happens if You Don’t File the FBAR?

The Financial Crimes Enforcement Network takes the FBAR filing seriously. If you’re required to file an FBAR and fail to, you can face serious financial penalties that could potentially exceed the funds you have in your foreign bank account.

Those required to file an FBAR and fail to are likely to face steep financial penalties. For each year you don’t file an FBAR, you can incur a penalty of $100,000 or 50% of the contents of your foreign accounts, whichever amount is greater. If you continue not to file an FBAR and fail to pay financial penalties, you can even face time in prison.

Because of the Foreign Account Tax Compliance Act, foreign financial institutions must report bank accounts owned by American persons or companies to the IRS. That means that the IRS and FinCEN likely know whether or not you have to file an FBAR before you do. So, forgetting or ignoring FBAR reporting requirements won’t do you any good. Instead of risking serious penalties for failure to report your foreign bank accounts, enlist help from a tax accountant. That way, you can file an FBAR on time without worrying about any consequences.

What if More Than One Person Holds a Foreign Account?

Your situation might be a bit more complex if more than one person has control or authority over foreign accounts or assets. This is not uncommon when accounts are shared by married couples or business partners. The question is, do you have to file one FBAR per account or does each person who holds the account have to file an FBAR?

The answer is that each person must file an FBAR. If more than one person jointly holds a foreign account that meets the reporting requirements, all account holders must file an FBAR. This is likely to come up in cases of married couples who have joint accounts with foreign banking institutions. It might also come up in cases of business owners who jointly hold foreign accounts with one or several other business partners. If this sounds like you, talk about your accounts with an experienced tax accountant.

We Can Help You File the FBAR Today

If you need assistance filing a Report of Foreign Bank and Financial Accounts, our tax CPAs are here to help. To learn more about the tax accountants at US Tax Help, call today at this link – get in touch.

After receiving a foreign inheritance, you may not even consider your IRS reporting requirements. However, depending on the value of your inheritance, you may be required to report it to the IRS using Form 3520.

American citizens and resident aliens who receive a foreign inheritance valued at over $100,000 must report it using IRS Form 3520. Completing this form requires the determining the fair market value of inherited foreign assets and property, which can be complicated. Depending on where you hold your foreign inheritance, you may have additional reporting requirements. Generally, Form 3520 is due on Tax Day and can be submitted along with your annual tax return. If you fail to comply with reporting requirements after receiving a foreign inheritance, you can face steep financial penalties from the IRS.

Our tax CPAs are here to help you properly report your foreign inheritance to the IRS using Form 3520. To learn more about the tax accountants at US Tax Help, call today at this link – get in touch.

Do You Need to Report a Foreign Inheritance Using Form 3520?

If you receive a foreign inheritance, whether as an American citizen or resident alien, you may have to report it to the IRS. Whether you do or not depends on the value of the total inheritance you receive.

Both resident aliens and American citizens, whether they live abroad or domestically, must use Form 3520 to report foreign inheritances valued at over $100,000. Whether your inheritance comes from a foreign estate or family member, you must inform the IRS if it exceeds the threshold.

It’s important to note that foreign inheritances don’t have to be chase. If you inherited foreign assets, like property, you might still need to report such to the IRS, depending on the combined value of the inherited assets. To better evaluate your foreign inheritance and properly comply with IRS reporting requirements, turn to an experienced tax accountant for help.

If you receive a foreign inheritance, you should know that reporting it using Form 3520 doesn’t mean you’ll be taxed. There aren’t federal taxes on foreign inheritances in the United States. That said, your state of residence may impose taxes on a foreign inheritance. Because of that, you may have to report your foreign inheritance to your state tax collection agency as well as the IRS.

How to Complete Form 3520 to Report a Foreign Inheritance

IRS Form 3520 is a six-page document that can be confusing. This form is used to report transactions with foreign trusts as well as receipts of foreign gifts, meaning depending on your inheritance, you may only be responsible for completing part of Form 3520. Since even a small mistake can have serious consequences, it’s best to turn to a skilled professional for guidance.

While IRS Form 3520 can appear complex, foreign inheritance recipients are generally only responsible for completing Part IV of the document. That said, Americans and foreign persons living in the United States may need to have detailed information regarding an inheritance and a foreign donor on hand while completing Form 3520, making the process a bit more complicated.

You will also need to provide descriptions of the property or funds you received and their fair market value. Evaluating the fair market value of inherited assets is crucial, as inherited foreign financial assets valued above a certain amount can make you responsible for filing additional forms. For example, if you are an American living abroad and your foreign inheritance caused your foreign financial assets to go above the threshold, you may need to file Form 8938 in addition to Form 3520.

Or, suppose your foreign inheritance was placed in a foreign bank account you own. In that case, you may have to file Form 114 with the Financial Crimes Enforcement Network.

As you complete Form 3520, your other reporting requirements may become clear. Without an experienced tax accountant by your side, you may incorrectly report your foreign inheritance to the IRS or be unaware of additional reporting responsibilities you may have.

When is Form 3520 Due?

Understanding your reporting requirements for a foreign inheritance is important. What’s equally important, however, is knowing when IRS Form 3520 is due. As with any tax form, filing Form 3520 on time is crucial.

Those responsible for completing Form 3520 must do so by Tax Day. You can submit this form alongside your annual tax return and any other tax forms due by the same date. Foreign inheritance recipients can also file for an extension if they cannot complete Form 3520 by the due date.

Your tax accountant can help you file for an extension if necessary. Extensions for filing Form 3520 are generally six months long, giving you ample time to comply with IRS reporting requirements for foreign inheritances.

What Happens if You Don’t Use Form 3520 to Report a Foreign Inheritance?

Should you fail to report a foreign inheritance using IRS Form 3520 when required, you may face serious consequences. The IRS tends to impose steep financial penalties on American citizens and residents who don’t comply with reporting requirements.

Although the IRS doesn’t tax foreign inheritances, it can penalize you if you fail to report yours. For errors on Form 3520 or late filing, you can face penalties of either $10,000 or 35% of your inheritance, whichever amount is greater. Americans who are required to file other forms after receiving a foreign inheritance, such as IRS Form 8938 or FinCEN Form 114, can face additional financial penalties.

Getting penalized for failure to report a foreign inheritance is simply unnecessary. Instead of risking making mistakes on Form 3520, or forgetting to report your foreign inheritance altogether, turn to a reliable tax accountant you can trust. Otherwise, your foreign inheritance can be significantly reduced because of financial penalties.

Our Tax CPAs Can Help You Report a Foreign Inheritance Using Form 3520

If you need to report a foreign inheritance to the IRS, our experienced professionals can help. To learn more about the tax accountants at US Tax Help, call today at this link – get in touch.