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...

  The 5471 is often regarded as one of the most complicated U.S. tax forms. Form 5471 is often regarded as one of the most complicated U.S. tax forms. Used by US persons to report their ownership interest in a foreign corporation and calculate how much of foreign a corporation’s earnings would potentially end up as additional income on a U.S. taxpayer’s income tax return. However, even if a U.S. person owns shares in a foreign corporation, it does not necessarily mean that there will be a Form 5471 filing requirement in every tax year. A filing requirement exists if a U.S. person falls within at least one of five Form 5471 filing categories. Without going in details about each of the filing categories (they will be covered in subsequent posts), below is the list of the most common situations that give rise to Form 5471 filing requirement: a) Acquisition of more than 10% interest in a foreign corporation during the tax year. b) Acquisition of new interest during the tax year which, ...