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...

  Life insurance, mutual funds and ETFs are popular investments for US persons living abroad. However, if not properly executed they can fall under the rules of a “Passive Foreign Investment Company”, aka THE PFIC. If this happens, expenses can rise dramatically, and the investment can become more costly than beneficial. Understanding PFIC’s requires hours of study and calculations to determine if one is subject to PFIC treatment. However, we will leave the links below for those who, like us, are fascinated by esoteric tax rules. One example of PFIC’s that we see often in our practice is foreign life insurance. As the US tries to discourage Americans from making foreign investments, it issues complex rules with punitive consequences on these investments. Income from these investments can be subject to the highest US marginal income tax rate as well as interest that accrues from the first day of ownership. When adding all this together, easily 50% of the gains from foreign investmen...

  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...