Happy Holidays from our Family to Yours.
We will be closed January 23rd-24th for Chinese New Year.
Estimated Tax Payments
US Taxes are due in four quarters as you earn the money. Don't make the mistake of not making estimated payments. The 4th quarter for 2011 ends January 17th, 2012. For income earned during the first quarter of 2012, the payment is due April 15th, 2012.
Upcoming seminars:
Tentative Date May 9th at the American Club, Singapore.
U.S. Tax Compliance Issues For Americans (and Green Card holders) having an interest in a foreign business entity.
Please check back closer to the date for more details and a registration link.
Other Useful Information:
Our office is an authorized IRS E-Filer, but not all returns qualify.
There is a general misconception about the Foreign Earned Income and Housing Exclusions. You must file your 1040 and report the income to exclude it. If you have not filed, and the IRS notices you first you can lose the ability to exclude your income.
FEIE 2010 $91,500
FEIE 2011 $92,900
Singapore has lower tax rates than the United States. If you earn over the exclusion you will likely still have a US tax obligation even with foreign tax credits. Other countries in the region have higher taxes so you can expect to owe little to no US tax if you are working in Australia or China, for example but you should discuss your situation with a tax professional. Often the mistake is made to claim the FEIE when in fact it would benefit the taxpayer not to.
Foreign Account Tax Compliance Act of 2009 (FATCA) : Form 8938 (draft only) To be Filed w/2011 return. (Suspended by Notice 2011-55 to 2012 but 2011 information will need to be furnished as well.)
On March 18, 2010 the final version of FATCA became law as a part of the HIRE Act. Much of FATCA's regulations are directed towards forcing foreign banks to disclose information to the US authorities, but the impact on the American expatriate community (while arguably not FATCA's intended targets) is significant. FATCA increases the penalties and extends the statute of limitations for those with underreported foreign passive income and imposes an additional reporting requirement of foreign financial assets in Section 511 that is codified at section 6038D. Those with such "specified foreign financial assets" must report, as part of the tax return, information on the accounts if the aggregate balance equals or exceeds a certain thresholds. See the draft instructions for the thresholds. This is in addition to the requirement to file an FBAR.
FBAR TDF 90-22.1: Collect your details for your FBAR (click here for information on how to file this form electronically and here for more details) reporting. As a reminder, this form should by mailed from Singapore no later than June 15th as it must arrive in Detroit on or both June 30th or it will be untimely and you may be subject to punitive penalties. You need to go back and review your statements to find the highest daily balances of each foreign account. If you are a PR of Singapore, you also will need to report your interest and the high balance on your CPF account. Also, don't forget to report the interest paid by these foreign accounts on your Schedule B. See below for more information on this form. Ignored for decades, the IRS seems quite serious about it now. Do a Google search for information dated 2008 and later. An informative article can be found in the June-July 2008 edition of the Journal of Tax Practice & Procedure. You can also find good information in a publication put together by OffShore Press. (Google it). Please note that the form was further modified in October 2008, so for the most up to date information you'll have to refine your search even further. (Then you'll need to refer to the IRS website to get the revised definition of US Person.)
Hiring the Right Tax Professional
The United States tax code, specifically in its treatment of foreign-earned income, is complex and confounding to the untrained tax preparer. You need a tax preparer conversant with the current tax code and trends that specifically effect , American citizens living abroad, permanent residents of the U.S., U.S. military stationed abroad, and others with U.S.-connected income.
You could be overpaying or underpaying your taxes if you aren't careful. If you are a first-time overseas filer, this is especially true as there are many special time tests and first year elections that will affect your future tax filings.
Don't let your accountant from home guess his way through your taxes. Hire a preparer with expertise in these types of returns. If you aren't sure, ask your previous tax preparer if they have experience with forms 2555 and 1116. If they say no, you should not pay them to prepare your taxes. It just makes the most sense to have an expat tax preparer prepare your expat taxes. If you typically self-file, ask yourself if you are willing to devote the time to learn.
If you have foreign insurance policies, foreign investments, or are involved with a foreign business or foreign trust you should seek a preparer with a legal background. You should question them about their abilities to prepare and advise on forms 8621, 720, 5471, 3520, and 3520-A. Often you will need a team comprised of a JD and CPA such as our office offers.
If you have California income you should work with a licensed CA CPA or someone recognized by the state to prepare and sign California returns. California and a hand full of other states have specific requirements for their paid preparers.
It is illegal for someone to accept payment for preparing returns and not sign the return.
Companies offering complex services for a few hundred dollars may not be doing you any favors.
Let us take the guess work out of your tax returns. Our preparers are licensed professionals who keep current with all their State licensing requirements.
A quick word about penalties:
The failure to file penalty is the harshest and you risk criminal action and denial of the ability to take the foreign income and housing exclusions.
File even if you can't pay.
The failure to pay penalty isn't as bad but you should be aware that if you owe more than $50,000 the IRS can and likely will seize your assets in the U.S.
The interest rates that the IRS charges you for unpaid balances varies each quarter. It has been set at 4% for the past year but was reduced to 3% for the first quarter of 2011. If you amend a return and are due a refund, the IRS will pay this interest on your refund. If you owe them, the interest also accrues on the penalties.
You should be aware that the FATCA increased penalties for certain types of underreported foreign income and increased the Statute of Limitations. Contact our office for a Consultation for more information on how this legislation may affect you.
Highlights of Our Services:
