Are you Compliant?
As part of the US tax system all US persons are obligated to file annual income tax returns along with any other supporting documentation to report worldwide income. US persons are defined as citizens of the United States, green card holders and tax residents living anywhere in the world. There are three routes to US tax compliance, Voluntary Disclosure with Reasonable Cause letter, Streamlined Voluntary Disclosure and the Offshore Voluntary Disclosure Program (OVDP).
Why Act Now?
As a US person it is important to act immediately to become compliant with the US tax system if you are not. The IRS (Internal Revenue Service) now has a number of ways to locate Americans living outside of the US who are not reporting their tax and Americans living in the US who invest internationally offshore. These include:
- FATCA – A number of corporations including local banks, stock brokers, pension and hedge funds, insurance companies and trusts will be required to report directly to the IRS with the details of all their clients who are US persons with details of their personal accounts
- Data Mining – The IRS has developed the E-trak Offshore Voluntary Disclosure system to actively locate non-compliant US persons whether in the US or abroad
- Passport Renewals
- Rewards are offered to whistleblowers
It is the obligation of the individual to ensure ‘true and accurate’ returns and forms are filed with the IRS on time so as to avoid penalties or in some cases, criminal prosecution. Should the IRS find you first, voluntary disclosure may no longer be an option.
2014 Changes to Voluntary Disclosure
On 18th June 2014, significant and important changes were made to the Voluntary Disclosure process, affecting US persons both living inside and outside the United States who have failed to properly report their income and foreign financial accounts.
These changes will give thousands of US persons a new, improved way to come into compliance with their US tax filing obligations. Changes have occurred to:
US Tax & Financial Services provide tax advice, guidance, planning and compliance services (tax return preparation) for individuals, partnerships, corporations, trusts and estates for anyone subjected to the US tax system, wherever they may be in the world. We also prepare UK tax returns, along with LDF (Liechtenstein Disclosure Facility) and UK Swiss (Rubik) disclosures. With more than 25 years experience, we have offices in London, Zurich and Geneva, bringing expertise from KPMG, Ernst & Young, Arthur Andersen, PwC and Deloitte across a wide range of sectors. Whether an expat living outside the US, an American investing offshore, or whether you are investing in the United States our specialist team of cross border advisors can help you.
The international aspects of the US tax system are extremely complex; not only are the statutes and regulations alien to US-based firms, but the additional informational returns relating to almost all aspects of an expat’s international lifestyle are complicated and carry stiff penalties if not filed correctly.
We are not affiliated with the US government or the IRS in any way. You have access to download the forms yourself from the IRS website. However, many of us here at US Tax & Financial are dual nationals with offices outside the US. The value in our service is that we live and work within these complicated international issues every day and can ensure you are compliant. We are happy to provide you with a fee estimate based on your own personal circumstances.
Are you compliant? Are your colleagues, family & friends aware?
An American passport states that all US citizens must comply with their US income tax obligations under the “While in the foreign country” header. This is not a widely known fact but lack of knowledge is not usually a valid defense to the IRS. Passing on this information to colleagues, family and friends who may be subject to US taxes could help them to become more tax efficient and avoid the penalties that come with non-compliance. To direct them to this page use the Email a Friend form on the right.
Who does this apply to? What if I live outside the United States?
All US persons no matter where they live in the world:
- Born in the United States
- Born outside the United States of a US parent
- Naturalized citizen
- Green Card Holders
- Tax residents
- US Corporations, Partnerships, Trusts or Estates
Applying for expatriation? To complete your expatriation process, you are required to submit returns for the past 5 years.
Why should I file my tax return and information statements?
Filing your tax return is a responsibility you should not ignore. Failing to submit a tax return can have serious consequences, including a possible criminal investigation.
The IRS is increasingly likely to find non-compliant taxpayers, as it now receives information from other countries regarding the activities of American persons abroad.
Further, from 2014, foreign banks will become increasingly likely to hand over data on its American clientele as they will otherwise be liable for large penalties through the new FATCA legislation.
With the objective of catching 90% of delinquent individuals this year, the IRS sends a strong message to the 6 million US taxpayers residing abroad who may not yet have complied with their US income tax obligations.
Act today by contacting US Tax below and sharing this document with friends, family and colleagues who may benefit from this information.
What should I be filing?
- An annual US individual tax return, form 1040 or 1040NR, reporting your income from all sources worldwide.
- Informational reports detailing benefits foreign assets and ownership in various foreign assets:
- FBARs - Report of Foreign Bank Account forms TD-F 90-22.1 for all foreign bank accounts, pension accounts, trust accounts, insurance accounts, which you have signature authority over, a financial or beneficial interest in the account and the aggregate balance of all your accounts exceeds $10,000 per year
- Statement of Specified Foreign Financial Assets – Form 8938 Different rules apply for individuals living in the US and US persons living abroad and you have specified foreign financial assets. This form is in addition to the reporting of your Form TD-F 90-22.1 (FBAR)
- Informational reports detailing ownership interest in foreign corporations, partnerships, trusts and estates.
- State issues will also need to be considered.
How do I get up to date with my filings?
If you have not complied with your tax and “offshore” filing obligations, you are legally obliged to bring your filing obligations up to date. There are several ways to become compliant and it’s important to find the right one for your circumstances as each person is different:
- Quiet filing
- Voluntary Disclosure with Reasonable Cause letter
- 2012 Voluntary Disclosure Program (OVDP)
- 2012 Streamline Voluntary Disclosure launched 1 September 2012
My life circumstances have changed recently through marriage, divorce or inheritance. Do I need to report this?
You will need to report to the IRS any assets you have received in the form of property, income or other applicable benefit anywhere in the world. Get in touch today and we can help you to establish how to report these receipts or disposals in the most tax-efficient way.