Premier Tax CFO

Expat Taxes: New IRS FATCA Rule is ANOTHER Way to Penalize You $10,000

The IRS continues to roll out new ways to identify Americans holding financial and investment accounts abroad. These disclosure reporting requirements all come loaded with the highest IRS penalties, starting at $10,000 per non-filing or incorrect filing incident.

Many of you are fully aware of the filing requirements of Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR). You know if the aggregate value of your foreign bank and financial accounts reach $10,000 in any one year, you must file this report with the Treasury Department (not the IRS) the following year. Non-filing or incorrect filing of this form bears a statutory $10,000 penalty.

The IRS has added ANOTHER required form, Form 8938, to be filed WITH your annual tax return. This form is also loaded with $10,000 non-filing or incorrect filing penalties. Additional penalties may be assessed, up to $50,000 for continued failure to file after IRS notification. A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed. A special statute of limitation also applies to the filing of Form 8938. Here are some other points to note:

Expat Q&A: 56 Questions You Need to Answer BEFORE You Move Abroad

Many Americans are financially active on an international basis, often preparing to live or work abroad at some point in their career or retirement.  We receive questions everyday from American expats who failed to ask themselves important questions about their plans and now have problems that need to be solved.  We have listed these important questions for you to consider:

Expatriating Your Assets

• Should you expatriate all or some of your assets?
• In which currencies will you need cash assets?
• Which foreign banks in your targeted areas are reputable?
• What are some of the cheaper ways to exchange currency?
• Should you attain an offshore credit card?
• Why should you keep U.S.-based credit cards?
• What disclosures will you be required to file?

Asset Protection Is an On-Going Process

• Do you have a CURRENT working financial plan?
• Do you fully understand your current situation?
• Do you know what it will take to reach your financial goals?
• Are you working your plan or reacting out of fear?
• Are your assets correctly positioned for your overall plan?
• How will your assets be handled in the event of a lawsuit?
• How will your assets be handled in the event of a death?
• Are you hiding assets from the IRS?
• Are you clear on the difference between tax avoidance and tax evasion?

Expat Taxes: 14 Questions You Need to Ask Your Tax Advisor

We receive questions nearly every day from American expatriates.  Most of their emails express confusion and distress surrounding an expat’s reporting and filing requirements.  Don’t be fooled, the IRS Tax Code regarding Americans living and working abroad are some of the most confusing regulations, whose application may be different for each expat.  Be sure you work with a tax professional experienced in helping American expats maximize their tax benefits and minimize their tax liabilities.

Make sure you ask these important questions:

Practice

1. Where are they located?  Even if you never have to meet them face-to-face, the professionalism required of a firm conducting a bona fide business is important.

2. What professional licensure(s) do they hold?  Make sure that the professional you would like to use has an active license in good standing.

3. What is the size of the practice?  Too small, and they will not be able to provide you the support you need.  Too large, and you are just a number, dealing with a junior partner being trained for larger arenas.  Know who is going to be there to help you if the IRS comes knocking at your door.

American Expat Tax Confessions: 7 Reasons I Did Not File A U.S. Tax Return

The single, most common mistake that U.S. citizens abroad make is to not file a U.S. tax return while they are out of the country.  Here are the reasons we’ve heard over the years. 

Please note:  the IRS does NOT accept ANY of these reasons for a failure to file.

“A presenter at a local expat community group told us we do not need to file.”

“I thought that since the Foreign Earned Income Exclusion (for 2009) was $91,400 and we made under $91,400, we did not need to file – that’s what ‘exclusion’ means, right?”

“I read online that if we do not work in U.S. we do not need to file.” 

“My stateside tax preparer said he didn’t think I needed to file while abroad because I didn’t think I’d be working while I was there.”

“A friend told me that I do not need to file because the U.S. only taxes U.S. income.”

“A co-worker told me when we arrived that since we work for a foreign company, we do not need to file.”

“I checked and learned that I worked in a non-tax jurisdiction.  Doesn’t that mean that I did not need to file?”

We share this list with you to reiterate:  If you’re a U.S. citizen or foreign national, you must file a U.S. tax return.

Establishing State Residency: 36 Ways to Make it Real

Establishing state residency is a highly subjective matter.

A simple checklist of actionable items does not guarantee proof of residency if the taxing authorities from your former state decide to scrutinize your situation.  However, creating a strong history of objective factors can help you credibly challenge an inquiry.

Creating a strong history includes taking actions that involve generating public information documents such as tax returns, shipping or voting receipts, utility and rental bills, banking and investments statements, and letters of instruction or confirmation utilizing your address in the new state.  Listed below are a number of objective, recordable actions you can take to help solidify your intent to establish residency in any state.

The Good, The Bad, and The Ugly of Using Your Tax Preparer as Your Wealth Manager

Your tax preparer is one of your most important advisors.  You see them annually to manage the largest bill you will have over your lifetime:  your taxes.

The person that prepares your taxes knows your deepest secrets, things even your family may not know about you.  When you meet with them, they know how to ask you clear questions, can be trusted to keep your answers confidential, and will use that information to YOUR advantage while staying within the bounds of the law.  You trust your tax preparer.  You make sure to call them whenever you are going to make a financial decision because you know that they see how all the moving parts of your financial world fit together.

This brings up the obvious consideration that your tax preparer might be your best choice as a wealth manager.  They already know you.  They have a broad understanding of how your tax and financial worlds integrate.  They give you advice based on what’s best for you.  They try not to sell you something you don’t need.  And, you already trust them.  All of this is good, right?  Of course it is.

Let’s look deeper into how this tax management relationship pertains to your wealth management needs.

You think the Health Care Credit is easy to figure out?

Bob Jennings is a nationally known speaker and a friend.  Of all the links I've sent to you, this is one you NEED to watch.  This will be the most important 6-minutes you can spend toward understanding what Congress is doing to our tax laws. You'll be amazed!

"Who's on First": http://www.youtube.com/jenningsseminars

All the best,
Nick Hodges, CPA/PFS, MBA, CFP

4 Things Do-It-Yourself Investors Want

On a recent foray into the world of financial bloggers, I read a thread started by Jim, entitled “Your Take:  Do You Trust Financial Advisers?”  I was interested to read what savvy, do-it-yourself (DIY) investors had to say on the topic.  This post by Staci started me thinking:

“I read A LOT of books on finances, investing and follow a lot of financial blogs.  Generally, I don’t find that financial planners add much value beyond what I already know.  I’m always searching for that one planner that will give me some super compelling financial advice unlike anything I’ve ever heard or read to help us grow our money and make wise investments, but I always feel disappointed when we meet with someone.”

When I read this, I immediately thought of Jeremy (name has been changed.)  I met Jeremy when he interviewed me for one of his articles.  He shared Staci’s opinion.  As a financial reporter, he had an education and some experience in the financial world.  On top of that, he was very, very bright and technically oriented enough to consider the finest of details.  Like Staci, he was looking for that financial advisor who could go beyond the generic and provide ‘something more.’

At the end of my interview, I invited Jeremy to experience our process of working with clients.  He took full advantage of our technology resources, pressing my service team to their fullest in implementing our programs for collecting all his information in one place.  But that’s not when Jeremy thanked me, Jeremy was used to working with advanced technology.  He did, however, LOVE the depth and breadth of our resource technology because it really did bring all of his information together in one place – something he had been looking for.

Mythbusters: 4 Truths NO ONE is Telling the DIY Investor (Part 2)

In Part 1, I addressed the most common Do-It-Yourself (DIY) myth that I have encountered over my 30 years in the tax and financial industry:  If I do it all myself, I will save (A TON OF) money!

I also stated that some arenas should NOT be DIY.  When DIY beliefs are taken into the realm of managing your financial world, planning for retirement, or setting up your life’s legacy, they become myths that can cause irreparable damage to your financial world.  These myths are usually predicated on incorrect assumptions.

In this article, I will review the other three DIY myths that no one is talking about.

MYTH:  Any SMART person can make money in the market.
ASSUMPTION:   Information is the same as judgment.

Mythbusters: 4 Truths NO ONE is Telling the DIY Investor (Part 1)

From the television, to radio and print media, we are sold the Do-It-Yourself (DIY) values of saving money, controlling the outcome, and being self-reliant.  These are great American values that invite us to explore our capabilities in the typical DIY arenas of home improvements, sewing, yard care, auto repairs, and technology – often with great results!  Moreover, if the results are not so great, we can usually find a reliable expert to fix it for us. 

However, some arenas should NOT be DIY.  When DIY beliefs are taken into the realm of managing your financial world, planning for retirement, or setting up your life’s legacy, they become myths that can cause irreparable damage to your financial world.  These myths are usually predicated on incorrect assumptions.

In this, the first part of a two-part series, I will tackle the most common DIY myth that I have dealt with in my 30-years in the tax and financial arena.  In Part Two, I will review the other three DIY myths that no one is talking about.

MYTH:  If I do it all myself, I will save (A TON OF) money!
ASSUMPTION:  Cost is the same as Value