U.S. Tax Services For Expats

  Over the years, we’ve helped countless new clients clean up an issue that could have been avoided with better planning: the surprising tax implications of non-U.S. mutual fund investments for U.S. taxpayers. In short, when a foreign corporation has over 50% passive income or over 50% of passive assets in a single tax year, it is considered a Passive Foreign Investment Company (PFIC). This means virtually all foreign mutual funds, including indirect investments through pension plans or life insurance policies, are PFIC’s. The downsides to PFIC taxation can be significant. For every PFIC investment, you are required to file separate forms and disclosures, which makes tax compliance much more costly. And, when selling a PFIC, you are hit with punitive tax rates and interest charges, stretching back to the original purchase date. All that said, there may be instances where the potential upside of a PFIC investment outweighs the tax liabilities and compliance costs. Our team of experi...

  Greetings, non-U.S. entrepreneurs. If you’re looking to establish a business presence in the United States, a Limited Liability Corporation (LLC) might be the perfect entity for you. These entities are easy to form and inexpensive to maintain, making them a popular choice for non-U.S. persons. However, there is a critical issue that many are not aware of – the tax filing requirements that come with LLCs. So, what exactly is a U.S. LLC? Despite its name, an LLC is not taxed as a corporation. If an LLC has only one owner or member, it is treated as a disregarded entity, and any income generated is taxed on the owner’s individual income tax return, regardless of its source. This means that if the income generated by the LLC is deemed taxable in the United States to nonresidents, a non-U.S. owner would have to file a U.S. income tax return. But here’s where things can get a bit tricky. While a single-member U.S. LLC is treated as a disregarded entity for tax purposes, it is still con...

  If you’ve ever done business in the United States from abroad or received dividends from U.S. securities, you’ve likely been asked to complete a Form W-8 or W-9. These forms, created by the IRS, are intended to identify the individual or entity receiving income from US sources. It’s important to note that foreign, non-U.S. based individuals or entities complete a W-8, while U.S. based persons or entities complete a W-9. These forms help identify the type of entity, the taxable status of an entity, and how much U.S. tax is due to be withheld from the gross amount paid. Without a properly prepared W-8, the person or entity making a payment to you would need to withhold taxes at the maximum rate, currently 30%. Meaning, if you didn’t submit a complete and accurate form, the IRS will end up with more of your money than they should! This often leads to non-US persons needing to file a US income tax return to reclaim tax that was over-withheld, a costly and time-consuming process. At U...

  As part of the recently-passed massive  Coronavirus Aid, Relief, and Economic Security (CARES) Act , taxpayers will receive a direct stimulus payment within the coming weeks. This one-time remittance is based on an individual’s 2019 adjusted gross income (line 8b of your 2019 Form 1040) and is considered an advance payment of a refundable credit. If the taxpayer has not yet filed their 2019 tax return, the IRS will use their 2018 adjusted gross income (line 7 of your 2018 Form 1040) to calculate their allowable credit. We’re answering some of the most common questions about the recovery rebate below, including who’s eligible, amounts and questions about dependents. Rebate amounts and qualifications Every United States resident or citizen who filed a tax return in 2018 or 2019 may be eligible to receive a recovery rebate under the CARES Act. Filers are eligible for a $1,200 rebate ($2,400 for married filing jointly) according to the following gross adjusted income parameters:...

  As an American expat, you may have heard about US tax compliance laws like FATCA but you may not know what impact these tax laws have on you as an American abroad and what compliance with them is required. The FATCA legislation has forced foreign financial institutions to report assets held by Americans directly to the IRS. Tax compliance reporting requirements have always been important but FATCA has serious consequences that make compliance with tax laws more important now than ever. What is FATCA? FATCA stands for Foreign Account Tax Compliance Act and this legislation was passed in 2010. FATCA is a broad yet complex set of rules designed to increase tax compliance by Americans that have financial assets held outside the United States. This is largely a response to recent off-shore banking scandals that revealed that many Americans were keeping large financial holdings in Swiss bank accounts without reporting or paying the US tax due on those assets. FATCA created some new sel...

  If you are an American abroad who has never filed a US tax return, needs to get caught up on your filings, or to correct filings from prior years, we have good news for you. The IRS offers a program called the Streamlined Filing Procedure that allows non-filing Americans to catch up on their taxes without facing harsh penalties. Using the Streamlined Filing Procedure, eligible taxpayers can file the past three years of tax returns and the past six years of the Foreign Bank Account Reports (FBARs) without being subject to the typical penalties for late filings. But this program is only available if you file proactively, without first being contacted by the IRS. At US Tax Services AG, we specialize in both the Streamlined Filing Procedure, and the expatriation procedure. Often these go hand in hand, especially when someone has been unaware they have a filing requirement and wish to get caught up quickly to facilitate their expatriation. Please contact us with questio...

  If you are a US person and own 10 percent or more stock in a Controlled Foreign Corporation (CFC), then you need to know about GILTI, or Global Intangible Low-Tax Income. This recent regulation requires that all your share of taxable income from these Foreign Companies be reported to the IRS and included as taxable income on your personal US Tax return. U.S. shareholders previously did not have to worry about the inclusion of their operating corporate profits on their individual U.S. tax return… But those days are gone.  The Tax Cuts and Jobs Act (TCJA) of 2017, ushered in a new era in taxations for US taxpayers, the GILTI era. Now, a separate calculation must be done for each Controlled Foreign Company that you are a US shareholder in.  Then, all these GILTI calculations are aggregated and applied to your US tax return.  To make it worse – as an individual U.S. shareholder, you could be subject to a higher tax rate than the foreign companies themselves. Our t...

  Greetings, fellow global business enthusiasts. As the saying goes, the world is your oyster – and that includes expanding your market share and exploring business opportunities beyond your national borders. And let’s face it, with the United States of America boasting the largest market in the world, doing business in the land of the free can be a lucrative move. However, before you set your sights on the U.S., it’s crucial to acknowledge that its tax system is infamous for its complexity. In fact, one of the most common questions we get is “How is my business taxed on sales made to U.S. customers?” And the answer is not as straightforward as you might hope – it largely depends on your business structure. Even if selling to a U.S. customer doesn’t trigger any tax issues, doing business in the United States still exposes you to the convoluted realm of U.S. taxation. To determine whether your business is subject to U.S. taxation, you must consult the income tax treaty between the U...