Why act immediately?
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 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. We have completed many successful cases of Voluntary Disclosure for clients and are aware of all changes that occur to these IRS programs. Please call or email us for a confidential consultation to discuss your options.
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. Many of us here at US Tax & Financial are dual nationals and our offices are outside the US. We live and work here with these international issues daily.
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:
- Overseas Voluntary Disclosure Program (OVDP)
- Streamlined Voluntary Disclosure
- Historic Voluntary Disclosure with Reasonable Cause Letter
- Delinquent FBAR (FinCEN 114) Submission Procedures
- Delinquent International Information Return Procedures
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.
Why does my Swiss bank care if I am American?
U.S. regulation aimed at tracking down tax evasion is making life difficult for Americans living abroad who use local bank accounts. Foreign banks have expressed concern about compliance costs and potential penalties for failing to report on their American clients and therefore are turning away their business. In addition, 11 Swiss banks are under investigation by the US Tax authorities for allegedly helping Americans avoid paying taxes, so there is a general wariness overall.
Legislation passed by the US government in 2010, The Foreign Account Tax Compliance Act (FATCA), means that US authorities, will withhold 30% tax from the sale of any US stock, bond, interest and dividends payments run through a foreign bank, if the bank is not FATCA compliant. In order for the Foreign Bank to be FATCA complaint, they must hand over the name, address, foreign bank account details and valuation of the account at year end of any beneficial owners who is a US citizen, resident or green card holder. This is true whether the account is owned in the name of an individual, corporation, partnership or trust. In other words, they are looking for the American citizen at the end of the chain.
Going forward, there will be a greater need to identify yourself as a US person from the beginning and for proving to your local banks that you are tax compliant with the US Internal Revenue Service (IRS). You may even need sign off from your tax accountant, a third party, who will verify that your foreign bank account and income generated by your foreign bank account has been reported to the US IRS.
Are my Swiss investments taxed the same way in the United States if I am reporting on worldwide income?
Many investments that are optimised for local Swiss taxes are not favored by the US tax system
- Passive Foreign Investment Companies (PFIC)
- Foreign registered mutual fund/ETFs/Funds/Insurance wrappers/unit trusts/bond wrappers
- Gains taxed at highest rate over time period held plus interest
- OR elect to pay income tax on the incremental growth each year
- “Local” Tax Favored Investments
- Benefits Clawed back by US system
Informational Returns need to be filed
- Foreign Bank accounts – Form TDF 90-22.1 Report of Foreign Bank Account FBAR
- Foreign Financial asset statements Forms 8938
What Swiss documents are required to help me file my US taxes?
To get compliant with US tax requirements while living in Switzerland, you’ll need to have the right forms. These include:
- Swiss Tax Return – “Steuererklärung”
- Wage Statement – “Lohnausweis” – like U.S. Form W2
- Tax Assessments required to complete US tax returns
- “Einschätzung/Veranlagungsverfügung” - estimated Swiss tax assessment
- “Definitiv/Schlussrechnung” – final/closing tax statement
- Portfolio/Valuation Statements – Vermögensauszug
- Swiss Pension Plan Statement (Pillar 2) – Vorsorgeausweis
- Swiss Pillar 3a Account Values – statement of interest earned in account
What is needed on my Swiss wealth and pension statements to file my US taxes?
- Standard annual statement, typically provided by your bank
- Purchase/sale information that is not listed on Swiss tax return
- Breakdown of assets allows for appropriate US tax treatment
Vorsorgeausweis – BVG 2nd Pillar
- Confirms both employee/er contribution to pension (US taxable)
- Breakdown Savings vs. Risk Contributions
- Shows interest earned or growth in the account (US taxable)
Did you Know?
Fact SevenFATCA reporting will include accounts held by US persons in 2013.
Fact SixThe IRS is actively looking for non compliant US persons.
Fact FiveIt takes an average of 16 hours to do IRS Form 1040.
Fact FourThere are over 500 IRS tax forms.
Fact ThreeSince 1916, illegal income has been taxable.
Fact TwoUS persons must file tax returns no matter where they live and work.
Text One7 million Americans abroad
only 500,000 compliant