|TAX & BANKING COMMITTEE
Margaret Nelson Spethmann & Eric Way
US Tax & Banking CoChairs
|FAWCO is helping to collect information & spread the word on
TAX & BANKING
issues for US Citizens abroad & their families
FAWCO US Tax & Banking Bulletin
This issue: ESTATE PLANNING
in Crossborder Context
& TAX Updates
Dear FAWCO Club Members!
In this Tax & Banking Bulletin, we introduce some topics where IRS and other countries' laws & policies impact Estate Planning as well as Banking & Saving for US tax persons living overseas. Our aim is to give you some basic tools & information to ask the right questions of your professional legal and tax advisors. It's a good idea to start thinking through these issues on your own before incurring advisor costs, so look at each of the FAWCO Lists of Questions documents for TAX, for BANKING, and for ESTATE PLANNING.
We encourage you to think through what you & your family really want well ahead of any deaths in the family. Get informed about the estate & gift tax laws in the country in which you live, as well as those of the US !!
Note our Disclaimer at the bottom of this mail, but please feel free to foward this Bulletin to friends who can use the information!
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We hope you find lots of helpful info & links here to guide you through these important issues.
We'd like to remind everyone to pass the word about the new special offer on tax prep services for FAWCO members- see Sponsors link at the bottom & on the right hand side of this Bulletin for more info.
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Estate Planning, Inheritance & Gift Tax Issues
Plan Before It Is Too Late !
Many of us don't think too much about death & dying while we are struggling to adapt to new cultures, raise our children & learn new languages, so estate planning issues can sneak up on us. In a crossborder context, these can be complicated issues. Always seek professional advice, but before you see a lawyer and pay high hourly fees, ask yourself these questions.
Have you looked at the impact your country of residence's laws may have on any inheritance you might receive from family in the States? US Domestic based parents are probably unaware of how their wills & trusts may impact you while you are living abroad. Get informed before everything is written in stone! Considering how local laws work together with US ones may reveal the need to change some things! This is also true depending on where your children may be living at the time they inherit. Residency matters!
Do you know the number of years you can live in your current country before you are subject to their inheritance tax laws?
In some countries, these laws run counter to US law and you may owe tax, or at the very least, reporting, in both jurisdictions. Many countries waive these requirements for short term residents, but it pays to know the cut off dates which can vary from country to country!
Do you understand the differences between these laws in your country of residence and in the United States? and in the U.S.State in which you own property? Do you know the number of days you can be in the US without being considered resident? Does your country of residence have a tax treaty with the US? Look to see if the tax you pay in one country will offset all or part of what you owe in the other. It helps to ask a professional advisor to run calculations on what you or your relatives ( heirs or testators) might owe in both jurisdictions so you can be prepared to pay it. Depending on where you live, how long & how you structure your estate, this kind of planning can in some cases help keep as much as 50% of the estate from going to a foreign jurisdiction.
If you are married, do you know the differences between how Inheritance laws in your country of residence treat common property vs separate property spouses? There can be big differences in tax free transfer amounts! Also, in some countries, spouses cannot transfer unlimited amounts between themselves without incurring gift taxes, unlike in the US. Tax free transfer amounts to children & grandchildren can vary widely from country to country.
Did you know that US EstateLaw treats Foreign Citizen Spouses differently than US Citizen Spouses?
For a introductory explanation of US estate & gift tax click here and see also IRS Publication 950 for their full introduction to US Estate & Gift Tax rules.
Do you have a will? In which country? Do you need one in both/several? For some examples of why you might need to consider these options click here
If you receive a gift of Money, shares, or financial interest in a foreign corporation or trust ( yes, including a divorce settlement or other gift from your spouse), you may owe special US taxes & reporting. For more info click here IMPORTANT: We have heard reports of people who receive income from foreign trusts getting false IRS Penalty coorespondance. If this situation applies to you, double check before you pay!
Don't live in the States & aren't US citizen, but have US assets? Why might you have to file US Estate Tax returns? click here
Here is another Blog on how non US citizens may need to pay US taxes. click here
Read the latest Blog from our Platinum sponsor on current planning moves you can take advantage of before the end of this tax year. Generous US Estate Tax taxfree transfer amounts are set to expire in 2012!. What might this mean for you? click here
Tax Free Gifting & When to Pay Gift Tax Keep track of what/ how much you gift and when. If you are using annual US tax free amounts to transfer assets to your heirs, keep good records and understand how these transfers are perceived & if they are taxed in the country jurisdiction in which you live, as well as in the US.
Here is a blog about the IRS increasing gift tax audits: click here
ALWAYS consult professional advisors in both US and the jurisdiction in which you live before finalizing wills or trust documents. This can save costly mistakes !
Review our Laundry List of items needed in discussions with Estate Planning & Tax advisors. having these things onhand ahead of your meetings will help you prepare & save their having to ask for them.
Click here for the complete List
|TAX: New IRS webpages ! The IRS has revamped parts of their website over the summer to make it easier for us to access information we need. Here are some of the most helpful pages, each with numerous links concerning filing issues for taxpayers from overseas.
( IRS calls us 'International Taxpayers' ) basic info click here
US Cit & Non Res Alien helpful info more specific links & forms
Data Mining !
Why you need to be compliant ! Don't make the mistake of thinking they won't find you because you have been gone so long! (If the IRS finds you before you file, it is too late for Voluntary Disclosure, and they are getting more & more likely to find you...) Here's why...
for IRS data mining explained click here.
Click here to read a recent Bloomberg article on this topic.
If you haven't filed before, as of September 2012, look at IRS's New 'Streamlined' Filing Compliance Procedures for 'not yet' filers. Beginning this fall, in part in response to some of the lobbying of Overseas American Organisations, there are some new 'expedited ' filing guidelines for 'low risk' overseas US tax persons. We have been hearing conflicting reports about whether it is more advisable to join the Offshore Voluntary Disclosure Program or to follow these new expedited procedures, so always seek professional tax advisor advice!
Here is a recent blog post on this new procedure from our Platinum Sponsor US TAX & FINANCIAL click for blog link
For details of the 2012 Offshore Voluntary Disclosure Programclick here
For our Sponsor's explanation of the new as of Sept 2012 procedures & who they apply to click here
For an IRS overview of who should use which procedure click here
File, even if you don't owe taxes ??!!
Did you know that US ' tax persons' & citizens are subject to tax & may have to file US tax information forms even if they have no earned income, already pay taxes in their country of residence, are below the foreign earned income exclusion, and/or give money away? You also may have to file an information form if you receive a gift of money or inheritance from a foreign citizen or corporation.Thresholds for non filers are very low, so check before you assume you don't have to file paperwork in the US!
The Consequences of Working Abroad:
Social Security, Medicare & Obamacare Taxes
In general, US Social Security & Medicare taxes still apply to what you earn for services performed as an employee or independent contractor outside the US. When do they apply? click here for the IRS link
For an update on what this may mean for the new Obamacare tax click here
. Our sister Organisation ACA has posted that this is not the case, but tax advisors are urging caution on this issue.
Employee or Independent Contractor?
How are you to determine whether you are an employee or an independent contractor?
This has enormous consequences for overseas Americans because if you are deemed to be independent contractor you will have to not only file all of the tax forms that are already due, but also subscribe to and pay into the U.S. Social Security system as well, sometimes even if you are required to pay into Social Security in your country of residence. The links above will help you sort out where you stand & if you owe, but as with all of this, consult your tax professional & ask questions! Not knowing is no longer an excuse!
Self Employed Overseas ??here is what the IRS expects you to do:
" Who Must Pay Self-Employment Tax?
If you are abroad and you are a self-employed U.S. citizen or resident you generally are subject to the self-employment tax. This is a social security and Medicare tax on net earnings from self-employment of $400 or more a year. Your net self-employment income is used to figure your net earnings from self-employment. Net self-employment income usually includes all business income less all business deductions allowed for income tax purposes. Net earnings from self-employment is a portion of net self-employment income. This amount is figured on Schedule SE. The actual self-employment tax is figured on net earnings from self-employment.
Effect of Foreign Earned Income Exclusion
You must take all of your self-employment income into account in figuring your net earnings from self-employment, even income that is exempt from income tax because of the foreign earned income exclusion."
Foreign Retirement Accounts
There has been somewhat of a reprieve regarding Foreign Retirement plans! From the IRS web pages: ' In addition, retroactive relief for failure to timely elect income deferral on certain retirement & savings plans where deferral is permitted by relevant treaty is available through the new streamlined filing compliance process. The proper deferral elections with respect to such arrangements must be made with the submission.'
See ' New Streamlined Filing Procedures' link above for more information and consult your tax professional, or our sponsor for more help.
For helpful IRS info & links re Foreign Retirement Plans Click Here
FBARs & 8938 'Information' Forms
US tax persons, regardless of where they live & if they owe tax, must file Information forms on all financial accounts & assets they hold in foreign countries.Important enough to repeat: 'regardless of whether or not they owe tax to the US government'.
FBAR (the non extendable DEADLINE for FBARs to the Treasury is June 30) & NEW this year, Form 8938 detail all overseas financial interests. The new Form 8938, Specified Foreign Financial Assets is due to the IRS with your tax return ( included in any extensions).
|BANKING & INVESTING: Difficulties!
We will be updating the Banking pages more extensively in a later issue, but here are some basics that haven't changed since the May Bulletin. Take advantage of current low Capital Gains Tax rates in 2012. They may expire if Congress doesnt extend them & there is a good chance rates will go up next year!
FAWCO continues to collect information on which banks & foreign financial institutions are accepting US citizens abroad and which have discontinued servicing us. We will publish an updated GoTo /NoGo bank list at the end of this year.
New FATCA regulations & increased US IRS assertiveness have raised risk & compliance costs for foreign financial institutions. Many of our members & some Clubs have been finding it increasingly difficult to maintain existing, or open new, bank, brokerage & other financial accounts both abroad AND in the US. Click here for questions I should ask my banker?
your banking questions and suggestions.
To see how to proceed with States side US banking problems Click here for ACA recommendations.
Write your Reps in Congress !
You can help us get better representation and our voices better heard in Washington! There is a new bill (HR6263) proposed to study the impact of US legislation on Americans living overseas. FAWCO supports the establishment of this Commmision! Help get it passed !
For tips on how to write your Representives in DC click here
In this Issue:
Estate Planning in Cross Border Context
Questions to Ask Your Estate Planning Lawyer
Planning Pitfalls of Cross Border Marriages
Inheritance Tax Implications for Residents of Foreign Countries
Tax Updates Since Summer
to New IRS webpages
Filing Consequences of Working Overseas
IRS Data Mining
Pitfalls & Tips
while Living Overseas
A word about us...
Help Wanted !
The FAWCO TAX & BANKING Committee is looking for volunteers from Member Clubs living in a variety of countries to assist us in gathering information for these web pages.
The job can be minimized or expand to fill whatever time you can give us!
If you are interested in joining our team, please email us stating which Club you belong to, what areas you want to work on and ca. how much time you have to give.
We look forward to your help!
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The Purpose of this Bulletin is to inform, share & explain US reporting needs & banking & legal constraints to US citizens abroad. This is NOT individualized, professional tax, legal or banking advice for your particular situation. While we make every effort to keep the information here current & accurate, neither FAWCO, nor the authors accept personal liability for accuracy, content, mistakes of interpretation, omissions, or later changes to the law or policies, as well as for viruses or any other damage you may sustain.Any advice you may obtain herein is not intended, or written to be used & cannot be used to avoid tax, or tax penalites or other legal obligations, or promoting, marketing or recommending to any other party any transaction or matter described herein.
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