FBAR – New Revision of TDF90-22.1 Form

Posted by Don W on May 18, 2011 under Expatriate Taxes, First Time Filing as an Expat, Foreign Bank Account Reporting (FBAR), Tax Matters in the News

The IRS has published a new revision to the annual reporting form for FBAR – Foreign Bank Account Report – Form TDF90-22.1, revised March 2011. 

The form warns not to use earlier versions of this form when reporting the existence of any NON-US bank or broker accounts in which the balance – or combined balances – exceeds US$10,000 for as much as a single day in the year (in this case, 2010).

If you have already reported for 2010 using the previous version of TDF90-22.1, I would think it reasonable that the US Treasury (to whom this form actually goes) would not have any problem about it at this writing (May 19th).  Except that they – via the IRS – have not been very reasonable in the administration of the program ever since they started ramping it up in 2009.   

Please know that this form is due no later than June 30, 2011 – and this means THEY MUST HAVE ARRIVED AT THE US TREASURY’S POST OFFICE BOX BY JUNE 30TH.  Draconian fines for being late or not filing at all.

There isn’t any good news when it comes to FBAR; it is a pain in the patoot burden to millions of US taxpayers who own or have signing authority over a non-US bank or brokerage account (and some foreign trusts) with draconian fines for non-c0mliance or incomplete compliance.

For more on this unfortunate topic, check out our webpage on FBAR and FATCA at: http://www.globaltaxhelp.com/fbar-new-enforcement.  You can also find the newly revised forms – short or long – of TDF90-22.1 PDF for download or printing.  Filing address is shown on the form.  Good luck.

Q&A: Are education assistance, housing, and vehicle benefits taxable income?

Posted by Don W on October 25, 2010 under Expatriate Taxes, First Time Filing as an Expat, Relocation and Taxes

Q: I’m getting transferred to the UAE and I can get up to $13,000 USD for education assistance for my elementary school daughter. Is this taxable income? What about housing and company car? I would appreciate your assistance.

A: Yes, the money would be included in your gross foreign income.  The same applies to housing and vehicle benefits. The easiest way to think about it is that anything that you would have had to pay with your own cash is taxable.

Q&A: How do we handle residency when we’ve left our US home to foreclosure?

Posted by Don W on October 10, 2010 under Expatriate Taxes, Relocation and Taxes

Q: In July 2009, we “walked away” from our Ohio home, deciding to leave it to foreclosure. As we are officially homeowners in the state of Ohio, until such time as foreclosure occurs, does Ohio still consider us as residents and subject to Ohio state taxes?

A: Residency, especially if you don’t have any economic ties to the state, is up to you. If you don’t intend to return to Michigan then you can renounce your statehood.

Q&A: Are lottery winnings in a foreign country taxable in the US?

Posted by Don W on September 25, 2010 under Expatriate Taxes, Foreign Bank Account Reporting (FBAR)

Q: I am a US citizen living in England.  If I were to win the UK lottery (which is tax free) – would I still be liable to pay taxes to the U.S?  I file U.S. taxes each year along with the foreign earned income form.

A: Yes, foreign lottery winnings are taxable by the IRS in the US (though they are generally exempt from the particular state income tax).  Do remember that if the aggregate value of of your foreign bank accounts exceed $10,000 at any time during the calendar year you have a legal requirement to file form TD F 90.22.1– please see the IRS FAQ page on FBAR (Foreign Bank Account Reporting).

Q&A: Should I pay into the US Social Security system so that I can receive Medicare benefits down the line?

Posted by Don W on September 7, 2010 under Expatriate Taxes

Q: I am considering whether it would be worthwhile for me to pay into the US social security system, in order to receive a Social Security payment and receive Medicare benefits later on. I am a US citizen, self-employed and living in Spain since 1994. I was born in 1962. I have worked in the US as well, for a total of about 3 years. I file income taxes here in Spain (as I am based here) and the US, though I have not yet had to pay taxes to the US. I pay for social security here in Spain but would like to look into whether I can also pay into the US system as well, for some extra coverage and to secure Medicare for later. To do this, I would need to know how much I would need to pay and what the return would be, and whether I would indeed be covered by Medicare (when in the US, as I understand that Medicare does not cover outside the US). Can you please advise?

A: To be eligible for Social Security you must have paid into the system for 40 credits (approximately 10 years). http://www.ssa.gov/retire2/credits2.htm

You can certainly pay in to the US system. This is calculated on Schedule SE, generally used in conjunction with Schedule C. The tax rate is 15.3% of your net self-employment income. This represents both the employer and employee portions of Social Security and

Q&A: Can we deduct moving expenses and mortgage interest/taxes abroad in our US return?

Posted by Don W on August 20, 2010 under Expatriate Taxes, Relocation and Taxes

Q: My wife is a dual Australian / US Citizen.  We are now residents of (and homeowners in) Australia. In June 2009, we incurred approximately $10,000 in moving expenses from Tennessee to Australia.  Are any of our moving expenses to Australia deductible? Does US Tax Code allow us to deduct any of the mortgage interest or taxes paid for our primary residence in Australia?

Also, my wife and I have spent only 10 days in the USA since July 2008, so for TY 2010, 330 Rule is assured. Given the benefit of US Taxes 330 Rule, is it better to file as a US Citizen and offset Australian tax liabilities against that filing?

A: For Federal purposes you can deduct your moving expenses. You can also deduct foreign mortgage interest on Schedule A.

As for filing, there is only one option –  all US citizens are required to report their worldwide income to the IRS each year.  You can get a tax credit for foreign taxes paid, but your US tax return is still your primary tax return (in the eyes of the IRS).

Q&A: If I take a cruise departing from the States, how will it affect my Physical Presence Test?

Posted by Don W on August 2, 2010 under Expatriate Taxes

Q: I am a US expat living in Brazil.  I am trying to find some data on US expats taking cruises. I recall something about if a cruise departs from a US port, it will still be considered as time in the US and would count against the physical presence requirements. I have checked the IRS website as well as the State Dept Travel website, but I have been unsuccessful in finding the answer to this question.

A: If you are living in Brazil, then your tax home is Brazil.  That doesn’t change because you are on a cruise for a week or two. In this instance, you are still outside of the US and you have established a tax home already.

However, all bets are off if you are wondering if you can live on a cruise ship and also qualify for the Foreign Earned Income Exclusion.

The Physical Presence Test has two parts:

  • Tax Home
  • 330 days

You must meet both.  For more information on this test check out the Foreign Earned Income Exclusion section of the Expat Tax Basics page on our main site.

Q&A: I’m self-employed and confused– what do I need to do about US Self-Employment taxes if I have already paid into a foreign system?

Posted by Don W on May 13, 2010 under Business Tax Issues, Expatriate Taxes

Q: I have been in Finland for 12 years, and I am returning the the United States and filing previous year’s taxes. I am confused by the apparently contradictory information that I find in the the 2009 IRS publication 54, page 11, titled “Exemption from Social Security and Medicare Taxes”.

I paid all my self employment taxes in Finland dutifully all the years I lived there, and understand the Totalization Agreement with Finland means I don’t have to pay them again in the US, but my accountant says I have to pay the 15.3% Self-Employment tax.

Who is correct?

A: The basic rule is this – you must be paying into one system or the other (assuming there is a Totalization Agreement).

In your case, if you have been paying into Finland’s social system then you would not be required to pay Self-Employment tax on the income.  You would just be required to pay income tax.

Please check out the SocialSecurity.gov overview of the Totalization Agreements by country (you can also find full text of the Agreements on the site).  Keep in mind that these agreements only apply to the years spent abroad.  Once you return to the US you will again be responsible to US system.

Q&A: I don’t think I’m actually an expat. Do I need to file?

Posted by Don W on under Expatriate Taxes, First Time Filing as an Expat

Q: Hi, I’m American but I live in the Netherlands and am married to a Dutch citizen.  I am not an expat, as I’m on a highly skilled migrant visa and I work for a Dutch company, earning euros. I’ve been told that I need to file a tax return in the US– can you advise?

A: Because you are a US citizen living and working abroad, you are an expat.  Let me qualify that – by our definition you are an expat!

All US citizens are required to report their worldwide income each year.  You do have to file.

Based on what your question it looks like you will have to file Married Filing Separate instead of Married Filing Joint.  If your husband is a non-resident alien with no exposure to the US then you must file MFS.

There’s good news, though:  the IRS provides two tools to help reduce, or eliminate, double taxation.  The first is the Foreign Earned Income Exclusion, which if you qualify, allows you to exclude up to $91,500 for the 2010 tax year.  The second tool is the Foreign Tax Credit.  This, potentially, gives you a dollar-for-dollar credit against your US taxes for taxes paid to foreign country.

It is more complex than that and various factors can determine the outcome.  But, that is the gist of it.

Our web site has a great deal of information about expat filing requirements on our Expat Tax Basics page.

Q&A: I’ll be working in another country but paid by my company in the US– what do I need to know?

Posted by Don W on under Expatriate Taxes, Relocation and Taxes

Q: I would like some information regarding expatriate tax as related to my somewhat unique situation. My company is planning to send me to the Dominican Republic to work with our offshore partners. Here are the specifics of my situation:

  • I will be working in the Dominican Republic for 1-3 years
  • I will be paid by my company in the US
  • My company has not incorporated in the Dominican Republic
  • I will simply be working with companies in the DR but will be working for and getting paid by my company in the US.
  • I plan to travel to the US at least twice each year, probably around Christmas and the 4th of July.
  • What are my options? Thanks again in advance for any information you can provide.

The MOST important thing to remember is whether or not you will qualify for the Foreign Earned Income Exclusion. That is where the 330 day rule comes from.

All the time you return for meetings, vacation, medical emergencies, etc. count against it.  Are you going to be paying taxes in the Dominican Republic? If so, you will also be eligible for the Foreign Tax Credit.

You can also find a great deal of information on our Expat Tax Basics page on our main site.