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Your Obligations as a US person

The US is one of the few countries in the world that taxes on citizenship rather than residency. Under the US tax system, US Persons are required to file annual US income tax returns, reporting worldwide income from any source, no matter where they live in the world.  A move overseas exposes you to additional US tax compliance and planning issues. Non-US Persons must also comply with the US tax rules if they have investments or income/gains from the United States.

You are considered a US Person if you meet one of the criteria below:

  • Born in the United States
  • Born outside the United States of a US parent
  • Naturalized citizen
  • Green Card Holders
  • US Residents

You need to file 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:
    • FBAR – Report of Foreign Bank and Financial Accounts FinCen 114 (formerly TD-F 90-22.1) for all foreign bank accounts, pension accounts, trust accounts, insurance accounts, in which you have a financial or beneficial interest in or signature authority over the account if the aggregate balance of all your accounts exceeds $10,000 at any time during the year.
    • Statement of Specified Foreign Financial Assets – Form 8938.  Different rules apply for individuals living in the US and US persons living abroad if you have specified foreign financial assets.  This form is in addition to the reporting of your FBAR.
  • Informational reports detailing ownership or beneficial interest in foreign corporations, partnerships, trusts and estates
  • State issues will also need to be considered.

If you have received assets in the form of property, income or other applicable benefit anywhere in the world, you will need to report this to the IRS. We can help you ascertain how you can report these receipts or disposals in the most tax-efficient way.

Filing your tax return is a responsibility you should not ignore. Failing to submit a tax return can have serious consequences, including possible criminal charges.  Here is a link to our services and how we can help.

The IRS is ramping up its efforts to find non compliant US taxpayers.  With the objective of catching 90% of delinquent individuals, the IRS is sending a strong message to the 6 million US taxpayers residing abroad who may not have complied with their US income tax obligations.  A key piece of new legislation called FATCA, which went into effect on July 1, 2014, will assist the IRS with this objective by requiring foreign financial institutions to disclose their US account holders.  Read here about how it impacts you.

There are several options for getting caught up on your tax return filings if you are behind, and the IRS has recently (18 June 2014) released changes to the Voluntary Disclosure programs which may benefit you.  Please read about Voluntary Disclosure here.

 

Did you Know?

  • Fact Seven

    Thanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
  • Fact Six

    The IRS is actively looking for non compliant US persons.
  • Fact Five

    It takes an average of 16 hours to do IRS Form 1040.
  • Fact Four

    There are over 500 IRS tax forms.
  • Fact Three

    Since 1916, illegal income has been taxable.
  • Fact Two

    US persons must file tax
    returns no matter where they live and work.
  • Text One

    7 million Americans abroad
    only 500,000 compliant