IRS Clarifies Temporary ITIN Application Requirements

Effective Oct. 2, 2012, the IRS implemented two separate clarifying changes to its temporary procedures for issuing Individual Taxpayer Identification Numbers (ITINs).

First, the IRS will allow individuals studying in the United States under the Student Exchange Visitors Program (SEVP) to get ITINs under a streamlined procedure. SEVP participants already provide documentation to the Department of Homeland Security under the requirements of that program, and will need a letter from their educational institution verifying their status.

Second, the IRS is creating special procedures for taxpayers who have an approved Tax Year 2011 extension to file their completed tax returns.

Under these temporary procedures, eligible taxpayers will be allowed to have their original documents certified by a Certifying Acceptance Agent (CAA) or a SEVP approved institution as appropriate rather than mailing originals to the IRS. Extension filers that choose to not submit originals documents or copies certified by the issuing agency, must apply through a CAA and individuals studying under the SEVP will be required to apply through a university, college or other SEVP-approved institution. For both groups, these temporary procedures cover applications for the primary applicant, their spouse and dependents.

Designed specifically for tax-administration purposes, ITINs are only issued to people who are not eligible to obtain a Social Security Number. ITINs assist the IRS with the collection of taxes from foreign nationals, nonresident aliens and others who have filing or payment obligations under U.S. law. The tightened interim guidelines, announced in June, remain in effect for most other noncitizens. More information about ITINs and these interim guidelines can be found at 2012 ITIN Review Frequently Asked Questions.

The temporary procedures apply to these two groups of taxpayers:

  1. Noncitizens that have filed extensions: These are noncitizens who requested an extension of time to file a 2011 federal income tax return for resident and nonresident aliens and choose to not submit originals documents or copies certified by the issuing agency. The ITINs issued under this procedure are temporary, expiring one year from the extended return due date (e.g., Oct. 15, 2013). The noncitizens must submit their W-7 and related identification documents through a CAA, along with Form W-7 and related attachments. See below for special instructions for CAAs.
  2. SEVP Students: These are individuals admitted to the U.S. under an F, J or M visa who receive taxable scholarship, fellowship or other grants reportable by the school on Form W-2 or Form 1042-S. See below for special instructions for SEVP institutions, including a sample certification letter.

As previously announced, the IRS is in the process of conducting a review of its ITIN procedures.  Final rules will be issued before the start of the 2013 filing season.
Related Information:

Expiration of Bush Tax Cuts

The tax law changes – commonly referred to as the “Bush tax cuts” – are scheduled to expire on January 1, 2013.  If Congress fails to extend them, many Americans will experience a tax increase.  Many are skeptical that Congress – which has not moved on extending the cuts in two years – will take action before the presidential election.  Some believe that once the election is over, Congress will not have the political will to make changes to the tax code.

Read more here – http://uspolitics.einnews.com/247pr/304358

As always please feel free to contact us if you have any problems, questions, or concerns.

0.9% Medicare Surtax on High Income Earners

Under the Affordable Care Act, effective January 1, 2013, there is an increase in Medicare tax for certain high earners.  An individual is liable for the additional tax to the extent his or her wages, other compensation, or self-employment income (together with that of his or her spouse if filing a joint return) exceed the following threshold amounts for the individual’s filing status:

Filing Status Threshold Amount
Married filing jointly  $250,000
Married filing separately $125,000
Single $200,000
Head of household (with qualifying person) $200,000
Qualifying widow(er) with dependent child $200,000

Read more here -

http://www.grafinsurance.com/wp-content/uploads/2012/05/Additional-Medicare-Tax-081612R.pdf

3.8% Medicare Surtax on Investment Income

Beginning in 2013, certain investment income will be subject to an additional 3.8% surtax, enacted as part of the Health Care and Education Reconciliation Act of 2010.  This is sometimes referred to as the “Medicare” surtax because the legislation enacting this tax created a new section of the tax code entitled: “Chapter 2A – Unearned Income Medicare Contribution.” However, this was simply a revenue-raiser enacted to offset the cost of health care legislation; there does not appear to be any reason this surtax must be used for Medicare.

Read more here -
http://www.ustrust.com/Publish/Content/application/pdf/GWMOL/3.8_Medicare_Surtax.pdf

Additional 2 Month Extension

In addition to the 6-month extension, taxpayers who are out of the country (as defined in he form 4868 instructions) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address:

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215

You will not receive any notification from the IRS unless your request is denied for being untimely.

The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350 (for U.S. citizens and resident aliens abroad who expect to qualify for special tax treatment).

Read more here - http://www.gemms.us/tax-extensions

New Tax Rule for Local Lodging Expenses

The IRS recently issued long-awaited regulations that permit certain not-away-from-home lodging expenses to be deducted by workers if they are not reimbursed by their employer. Alternatively, if paid for by the employer, the expense can be treated as a tax-free working condition fringe benefit (WCFB) or tax-free accountable-plan reimbursement.

Thanks to prior IRS guidance, the value of an employer-provided WCFB is excluded from the recipient employee’s gross income for federal income and employment tax purposes. A WCFB is defined as any property or service provided to an employee to the extent that, if the employee paid for the property or service, it would be deductible by the employee as an unreimbursed employee business expense. Employer-paid lodging for an employee who is out of town on the employer’s business counts as a tax-free WCFB.

Prior regulations provide that the cost of an individual’s lodging that is not incurred while traveling away from home on business is generally a personal expense and is therefore generally not deductible by the individual. An individual is not considered away from home unless he or she is away from home overnight, or at least long enough to require rest or sleep.

The new regulations stipulate that an individual’s local lodging expenses can be deducted by the individual as business expenses if the applicable facts and circumstances dictate that such treatment is appropriate. In turn, expenses that would qualify for deductions if paid for by an employee will qualify as a tax-free WCFB if paid by the employer, or if advanced or reimbursed by the employer under an accountable plan. However, local lodging expenses will not qualify for the aforementioned tax-favored treatment if the lodging is lavish or extravagant, or if it is primarily to provide the individual with a social or personal benefit.

Safe Harbor Rule. Under the new regulations, local lodging expenses are automatically treated as ordinary and necessary business expenses if all of the following conditions are met: (1) the lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity, or other business function; (2) the lodging is for a period that does not exceed five calendar days and does not occur more frequently than once per calendar quarter; (3) in the case of an employee, the employer requires the employee to remain at the activity or function overnight; and (4) the lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation, or benefit.

Example: Tax-favored treatment allowed for employees.
Distant Corporation puts on periodic employee training sessions at a hotel near its main office. Distant requires all attending employees, including employees from the local area, to remain at the hotel overnight for the bona fide business purpose of maximizing the effectiveness of the training sessions.

If Distant directly pays the lodging costs for attending employees, the costs qualify as tax-free WCFBs for the attending employees, including those who live in the local area, and Distant can deduct the costs as business expenses. If Distant reimburses attending employees for the lodging costs under an accountable plan, the reimbursements are tax-free to the employees, including those who live in the local area, and Distant can deduct the reimbursements as business expenses.

Foreign Financial Assets Reporting – Form 8938

My friend and associate Hale Sheppard has written an article called “The New Duty To Report Foreign Financial Assets on Form 8938: Demstifying the Complex Rules and Severe Consequences of Noncompliance.”  It was just published in the International Tax Journal.

You might find the article interesting because (i) taxpayers and their adviors are struggling for the first time in 2012 with whether and/or how to complete the Form 8938, (ii) the article contains a thorough analysis of the Form 8938 filing requirements, incorporating guidance from multiple sources, (iii) the article addresses the confusing overlap between Form 8938 and the FBAR, and (iv) the article explains the unappreciated, and severe consequences for taxpayers who fail to file the Form 8938.

Please follow this link to read the article – Click here

Dutch Tax Update

The 2013 Budget Bill or the so called Spring Deal has recently been approved by the Dutch Senate. This Budget Bill contains a number of measures which are intended to bring and keep the Dutch budget deficit at the EU required 3%. The Budget Bill measures will in principle be implemented on January 1, 2013.

One of these measures consists of an additional one time employer end levy of 16% over salaries over Euro 150,000 in 2013. This end levy will be due on March 31, 2013 and will be calculated over the 2012 wage. Please note that this end levy will be fully for the account of the employer and will have to be paid in addition to the “normal” wage tax which was already withheld and paid over the wages in 2012. Consequently the end levy can not be recovered from the employee and the employee is also unable to report the end levy in his income tax return as already withheld wage tax. Of course the end levy can be deducted from the profits on an corporate income tax level, the same way as regular wage tax is.

The end levy is calculated over the 2012 wage. Consequently there are not many ways to prevent or mitigate the end levy. One of the possible solutions, spreading the total wage over various Dutch group companies, is for example explicitly prohibited in the applicable legislation. In that case the wages from the various group companies are added up and the end levy will still be applicable. Additionally the legislation also contains a special provision which enables further repair measures in case of avoidance of this end levy. Please note in this respect, that the end levy will of course not be applicable for employees who have multiple unrelated employers and thus earn a total wage of over Euro 150,000.

In the light of the above, in principle, there are only two possible options left to prevent or mitigate this end levy:

·         The first option consist of, where possible,  postponing the grant and payment of certain wage elements until 2013. This could be done for example with bonuses, tax equalization payments or with commissions. However if a bonus or commission would  habitually be granted and paid out in 2012, the tax authorities may not accept this postponement for tax purposes, especially not when employer and employee have formally agreed to postpone the payment until 2013. Consequently, in order to successfully postpone the payment, the employee would simply have to condone the later payment. Please also note that the grant of the wage element must also be postponed until 2013. If the employee would already be entitled to the wage element in 2012, regardless of the actualy payment date, the wage element would already be subject to taxation in 2012.

·         The second option consists of a salary split with one or more foreign group companies. The ratio behind this is that, if the salary above Euro 150,000 is not (fully) subject to Dutch taxation, the end levy would in principle not apply. However before implementing a salary split, advice and tax calculations are needed and also the implementation of any split will involve costs with respect to payroll services and the filing of personal income tax returns abroad. Also a salary split will have to be be in accordance with the actual situation and the employee must consequently actually physically be working abroad. A salary split that only exists on paper will consequently not be accepted by the tax authorities.
Please note that, depending on the applicable tax treaty, a  salary split could also apply to board members of foreign entities, even when they do not physically perform their activities in the other country.

We are of course gladly willing to discuss the above with you in further detail or to discuss the possible solutions for individual employees. In case you have any questions or would like to plan a meeting to discuss this end levy, please do not hesitate to contact us.

Kind regards,
Gilianne Nelissen – Van der Leeuw

Luminous Tax Matters N.V.
gilianne.nelissen@luminoustax.com
www.luminoustax.com

Affordable Healthcare Act & Dutch 30% Ruling

July News Letter

Happy Birthday USA.  Enjoy your holiday but remember to be safe and thank a veteran.

Below is a list of hot tax topics.  We hope you find the information helpful and useful.

US – AFFORDABLE CARE ACT (ACA) (aka OBAMA CARE)

This past Thursday, June 28, 2012, the Supreme Court upheld the individual mandate of ObamaCare.  Therefore, we can only hope for a repeal of the law and plan for the individual cost.  While waiting and hoping for a repeal, GEMMS is advising its clients of the two most taxing effects of ObamaCare (1) the new individual tax assessed for health insurance and (2) every US citizen and every individual living or working in the US are now required to file a US tax return.

In order to provide health insurance to everyone in the US, all taxpayers (aka the 51%) are now required to pay $695 per person or $2,085 per family to the US federal government on their annual tax returns.  Although President Obama said several times this was “not a tax,” the Supreme Court has confirmed this is in fact a tax.  If a taxpayer can prove they pay more than the above amounts to US Insurance providers or Medicare, than the above amounts will be reduced accordingly.  For example, a retired US expatriate living in the UK paying UK insurance only, will be required to pay these taxes to the US federal government.

Additionally, GEMMS would like to note that in order for the US government to appropriately collect these funds, every US citizen and every individual that works or lives in the US will now be required to file a US federal tax return.  The individuals that historically never file returns because their income is either under the thresholds or their social security is non-taxable (aka the 49%) will now be required to file a US federal tax return in order to pay their fair share of health insurance.  For example, a non-US citizen that lives outside the US and works in the US for only a couple of days per year will now be required to file a US federal tax return in order to pay into the US Nationalized Health Care System – aka ObamaCare.

THE NETHERLANDS – CHANGES TO THE DUTCH 30% ALLOWANCE

Significant changes in the Dutch 30% allowance ruling as of January 1, 2012.

The 30% allowance ruling has changed signifiantly as of January 1, 2012. The most important changes are that the duration of the ruling has been reduced from 10 to 8 years and that the requirements for obtaining the ruling have changed significantly.

In order to qualify for the ruling, an employee must now prove that he has been hired from outside a 150 kilometre radius from the Dutch border (i.e in the 24 months prior to the employment in the Netherlands, the employee must have lived outside the 150 kilometre radius for at least 16 months). Additionally the employee must meet a minimum salary criterion. As a consequence the taxable salary under the 30% allowance ruling (i.e the 70%) must amount to at least Euro 35,000 for 2012. This salary criterion will be indexed annually. For 2012 this means that in order to benefit maximally from the 30% allowance ruling, the salary before application of the ruling (i.e. the 100%) must amount to at least Euro 50,000. Exceptions to the salary criterion however apply for scientific researchers, employees under the age of 30 who have obtained their master at a foreign university during the last 12 months and PHD graduates.

Please note that if the employee has a lower salary than Euro 50,000, this does not automatically mean that the employee is not eligible for the ruling. It is namely possible to reduce the amount of the tax free allowance in such a way that the taxable salary amounts to at least Euro 35,000. If an employee would for example have a salary of Euro 36,000, he can still benefit from the ruling, but his tax free allowance can only amount to Euro 1,000.

Another important change in the ruling is that the ruling ends when the employment in the Netherland ends. The ruling is consequently no longer applicable to all benefits from current employment that are received after the end of the employment. This would apply to bonuses, the benefits deriving from stock based remuneration, equalisation payments but also to the final reconciliation of the holiday allowance, holidays, 13. month etc.

For employees who have already obtained the ruling prior to January 1, 2012, grandfather clauses have been implemented as well. Depending on how long the employee has enjoyed the ruling prior to January 1, 2012, on the basis of these grandfather clauses the employee is allowed to continue the ruling unchanged for either a maximum period of five or ten years.

In case you would like to apply for the 30% allowance ruling for any of your employees, we strongly advice you to seek expert advice on the matter. For questions you can contact Gilianne Nelissen of  Luminous Tax Matters in the Netherland at +31 20 6549600 or gilianne.nelissen@luminoustax.com

As always please feel free to contact us if you have any problems, questions, or concerns.

Chartered Global Management Accountant

Chuck Heyde obtained his Charted Global ManageMent Accountant (CGMA) designation today.  Congratulations to Charles “Chuck” Heyde, Jr, CPA, CGMA

You can read more about this important new global designation at www.CGMA.org.

The Chartered Global Management Accountant (CGMA) is a new global management accounting designation that recognizes the unique role played by men and women at organisations around the world who are guiding critical business decisions and driving strong business performance.

Created through a joint venture of the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA), the CGMA elevates management accounting and recognises the competencies and expertise of management accountants who are leading the world’s most successful organizations and providing employers with the best professional management accounting talent to drive sustainable business success. It demonstrates management accounting expertise in such areas as leading strategically with management to make more informed decisions; helping organisations manage change, risk and uncertainty; protecting corporate assets; and promoting operational efficiency and effectiveness. In addition, the CGMA advances management accounting while supporting and growing the U.S. CPA and the global reach of CIMA.

 

GEMMS Celebrates 10 Years of Service

In May of 2002 while Arthur Andersen began shutting down and most Andersen employees began moving to other Big 4 firms and clients of Andersen, James Smith developed a better idea.  James believed we could offer a better service at a better rate.  With that idea James Smith opened Global Executive ManageMent Solutions in May of 2002.  A few months later Jennifer Chapman and Chuck Heyde saw the genius of James Smith’s idea and joined GEMMS.

With Jennifer providing International Payroll and Chuck providing Expatriate and Inpatriate Tax, James, who already provided International Human Resource solutions,  now had a complete one stop shop to provide all your international US tax solutions.

Over the years, GEMMS has developed and continually refines an top notch group of affiliated companies (similar to the Big 4 affiliated companies) around the world to help with all your worldwide tax services.  Today GEMMS can not only provide expatriate tax and consulting services directly to the individual expatriate, inpatriate, and missionaries around the world, GEMMS also provides the same type services (equalization, hypo, gross up, consulting, etc) provided by the Big 4 accounting firms to Corporate Client’s international assignees – but at a much better rate.

While a lot has changed over the past 10 years, our rates have not.  We started in May of 2002 with an hourly rate of $150.  Today our rate is only $200/hr which is still substantially less than the first year staff at any one of the Final 4 accounting firms.  So we continue bragging today that at GEMMS you receive an experienced Manager level associate at the Big 4 Staff level rates.

Thank you for 10 great years and we are already looking forward to the next 10.

 

Illegals Using ITINs for Child Tax Credits

Attached is a link to an investigative news story out of Indiana.

The story is about how some of our neighbors from the south have figured out how to scam the US Tax system and steal the child tax credits for children that are not even living in the US.

I would argue that the individual that assisted these taxpayers with obtaining the ITIN’s for the non-US children should be sought out and punished as well…

http://www.wthr.com/video?autoStart=true&topVideoCatNo=default&clipId=7054149

Record Number of Individuals Renounce US Citizenship

Special Report: Tax time pushes some Americans to take a hike.

http://www.reuters.com/article/2012/04/16/us-usa-citizen-renounce-idUSBRE83F0UF20120416

(Reuters) – A year ago, in Action Comics, Superman declared plans to renounce his U.S. citizenship.

“‘Truth, justice, and the American way’ – it’s not enough anymore,” the comic book superhero said, after both the Iranian and American governments criticized him for joining a peaceful anti-government protest in Tehran.

Last year, almost 1,800 people followed Superman’s lead, renouncing their U.S. citizenship or handing in their Green Cards. That’s a record number since the Internal Revenue Service began publishing a list of those who renounced in 1998. It’s also almost eight times more than the number of citizens who renounced in 2008, and more than the total for 2007, 2008 and 2009 combined.

But not everyone’s motivations are as lofty as Superman’s. Many say they parted ways with America for tax reasons.

The United States is one of the only countries to tax its citizens on income earned while they’re living abroad. And just as Americans stateside must file tax returns each April – this year, the deadline is Tuesday – an estimated 6.3 million U.S. citizens living abroad brace for what they describe as an even tougher process of reporting their income and foreign accounts to the IRS. For them, the deadline is June.

The National Taxpayer Advocate’s Office, part of the IRS, released a report in December that details the difficulties of filing taxes from overseas. It cites heavy paperwork, a lack of online filing options and a dearth of local and foreign-language resources.

For those wishing to legally escape the filing requirements, the only way is to formally renounce their U.S. citizenship. Last year, IRS records show that at least 1,788 people did, and that’s likely an underestimate. The IRS publishes in the Federal Register the names of those who give up their citizenship, and some who renounced say they haven’t seen their name on the list yet.

The State Department said records it keeps differ from those published by the IRS. They indicate that renunciations have remained steady, at about 1,100 each year, said an official.

The decision by the IRS to publish the names is referred to by lawyers as “name and shame.” That’s because those who renounce are seen as willing to give up their citizenship primarily for financial reasons.

There’s also an “exit tax” for the very rich who choose to leave. During the last 25 years, a number of millionaires and billionaires have renounced their citizenship. Among them: Ted Arison, the late founder of Carnival Cruises, and Michael Dingman, a former Ford Motor Co. director.

But those of more modest means renounce, too. They say leaving America is about more than money; it’s about privacy and red tape.

LIABILITY, NOT PRIVILEGE

On April 7, 2011, Peter Dunn raised his right hand before a U.S. consular officer in Toronto and swore that he understood the consequences of giving up his U.S. citizenship. Dunn, a dual U.S.-Canadian citizen who has lived outside the United States since 1986, says he renounced because he felt American citizenship had become more of a liability than a privilege.

As an American, Dunn had to file tax returns and report all of his bank accounts – even joint accounts and his Canadian retirement fund. If he didn’t, he would be breaking U.S. law and could face penalties of up to $100,000 or 50 percent of his undeclared accounts, whichever is larger. Dunn says he was tired of tracking IRS policy changes, and he had no intention of returning to the United States. Renouncing his citizenship, as he puts it, was “a no-brainer.”

“If it was just me then it would be one thing,” says Dunn, a part-time investor who worried that having to share information with the IRS would deter future business partners – and upset his wife, who is Canadian. “Disclosing joint accounts I hold with my wife and anyone I ever want to do business with – that’s just too much. My wife’s account is none of their business.”

Dunn, who blogs about expatriation, takes issue with being characterized as a tax evader. He says the taxes he pays in Canada are higher than what he would pay in the United States, and he says he had always complied with the IRS before renouncing. But, Dunn says, the IRS approach to enforcing compliance is misguided. “It’s making life difficult for a lot of people,” he says. “It’s driving us away.”

OLD, NEW REGULATIONS

Dunn is referring to two filing requirements that affect Americans abroad: the Report of Foreign Bank and Financial Accounts – which has been around since 1970 but now carries penalties for noncompliance – and the Foreign Account Tax Compliance Act, passed in 2010 with the aim of reducing offshore tax evasion.

The first regulation requires all Americans, including those living abroad, with at least $10,000 in overseas bank accounts, to file a supplementary form disclosing all of their foreign accounts. That includes any accounts in which the U.S. citizen has a financial interest. That could include a joint account with a spouse or child, accounts for corporations in which the American owns more than 50 percent of the value of shares of stock, or any trust or estate that benefits the U.S. citizen.

The tax compliance act – the newer law – asks foreign financial institutions such as banks, hedge funds, and private equity funds to provide the IRS with information on U.S. clients.

The United States and five European Union countries recently announced their intent to allow institutions to report the information through their own governments, rather than directly to the IRS. Institutions that do not comply will be subject to a 30 percent withholding tax on certain U.S.-sourced payments and proceeds of property sales beginning in the 2013 tax year – for instance, dividends on investments in U.S. companies.

Some expatriates say they were unaware of the first regulation for years and even decades. In 2008, the IRS received only 218,840 such filings. American nationality law grants citizenship to almost everyone born in the United States or born abroad to American parents, regardless of how much time they’ve spent in the United States. Many may not even know the extent of their U.S. ties.

In 2004, the stakes for noncompliance rose. Failure to file meant potential fines and criminal charges. Americans abroad can be punished for noncompliance even if they owed no income tax – and IRS data show that most of them don’t owe money.

Income up to $95,100 isn’t taxed under a rule called the Foreign Earned Income Exclusion. In 2009, the income cap was $91,400, and 88 percent of all taxpayers claiming the foreign earned income exclusion owed nothing. Since 2008, the IRS has offered several voluntary-disclosure grace periods during which expatriates can file back taxes without facing criminal charges – but with the possibility of incurring penalties.

Marylouise Serrato, head of American Citizens Abroad, a nonprofit organization based in Geneva, says that many members feel scared about reporting requirements they did not know existed. Their disenchantment, she says, is pushing some to renounce.

“Americans abroad are terrified. We’ve had people pay tens of thousands of dollars in fines. We’ve had people … pay huge amounts of back taxes,” she says. “Up to this point, we never heard of anyone renouncing, or if they did, they didn’t talk about it,” says Serrato, who says her group does not advocate renunciation.

“Now,” she says, “we’re seeing a lot of people speak openly about it and come to us for information.”

Congress is taking note. “While I fully support measures that reduce fraud and address offshore havens, the U.S. should not have policies that place undue burdens on legitimate Americans abroad,” says Representative Carolyn Maloney, D-N.Y., and the chair of the Congressional Americans Abroad Caucus. Maloney says she has taken the matter to the Department of the Treasury, which oversees the IRS.

‘TOO EXPENSIVE TO KEEP’

Lawyers report that banking is a big reason why people renounce. “I hear about banking problems again and again and again,” says Phil Hodgen, an attorney who has been helping Americans expatriate since 2008. The new reporting rules, he says, pose “a huge administrative burden. It’s made Americans too expensive to keep.”

Francisca N. Mordi, vice president and senior tax counsel at the American Bankers Association, says she has received a number of calls from Americans in Europe complaining about banks closing their accounts. “They’re going to drop Americans like hot potatoes,” Mordi says. “The foreign banks are upset enough about the regulations that they’re saying they just won’t keep American customers, and it’s giving (Americans living abroad) a lot of sleepless nights.”

Taxpayer complaints sometimes make their way to Nina Olson, the U.S. taxpayer advocate for the IRS, who addressed some of the international tax issues in a December report.

“The complexity of international tax law, combined with the administrative burden placed on these taxpayers, creates an environment where taxpayers who are trying their best to comply simply cannot,” the report reads. “For some, this means paying more U.S. tax than is legally required, while others may be subject to steep civil and criminal penalties. For some U.S. taxpayers abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship.”

In the same report, the IRS responded to the criticism, stating that the penalties for failing to report foreign accounts issued in its guidelines are maximums, not set amounts. It said the agency will not fine filers if the lapse is due to a “reasonable cause.” The IRS also acknowledged the need for more public awareness, and it detailed its efforts to inform Americans overseas through fact sheets, a telephone help line and Twitter.

The IRS did not respond to requests for comment.

WOMEN IN A TOUGH SPOT

Around the world, American women’s clubs – known for promoting American culture overseas through Fourth of July celebrations and Thanksgiving dinners – are growing empathetic toward those who renounce.

The American Women’s Club in Dusseldorf, for instance, now links to renunciation information on its Website. The Federation of American Women’s Clubs Overseas has opposed new IRS rules, in part because the rules were pushing members to give up their citizenship. “The candidates are not tax-evaders or un-patriots,” reads the organization’s last annual report.

In Europe, American women say they feel pressure to renounce even from their husbands.

“American women married to non-Americans are only just now finding out that they have to disclose years and years of income and accounts,” says Lucy Stensland Laederich, a leader of the women’s club who lives in Bordeaux, France.

Laederich has been acting as the group’s liaison with politicians and bureaucrats in Washington, D.C., and plans to attend a meeting to discuss expatriate tax issues with Maloney and Treasury Department officials on Tuesday.

“When they decide to come clean and report everything,” she says, “they have to go ask their husbands for all of their bank information, retirement funds, and investment accounts, everything.”

Some of their husbands, Laederich says, refuse to hand over information to the IRS. That leaves the women in difficult predicaments.

“Your options are to ignore the IRS and stick your head in the sand; take your name off of all the accounts and live in a completely cash economy; divorce; or renounce U.S. citizenship,” Laederich says. “We’ve seen all of these things happen.”

DIVORCE OR DISCLOSE

Genette Eysselinck, a friend of Laederich’s, renounced early this year. Her husband, a European Union civil servant, saw no good reason to share his account information with the IRS, she says. And after considering all her options, Eysselinck decided that renouncing was the best path.

“It created a lot of tensions around here,” she says. “Divorce seemed a little extreme, so I asked myself, ‘What am I gaining as an American?’ And the cons outweighed the pros.”

Eysselinck was born in Fort Bragg, North Carolina, and says she grew up on military bases all over the world. Her father, she says, was an Air Force pilot. Eysselinck has lived abroad for decades and no longer has any close connections in the United States.

She spent her final months as an American collecting paperwork and filing tax returns from the past five years, even though she says she owed nothing. Her last act as a citizen was to swear before an American flag that she renounced all ties with the United States. She called the process “gut wrenching.”

“I grew up in a military family where patriotic feeling was very strong” Eysselinck says. “I’m amazed at how terrible I felt renouncing. But it was the only way to get them off my back. It’s very distressing and time consuming to keep up with all the paperwork. But if it’s this bad when I’m 64, how bad will it be when I’m 74?”

(Reporting By Atossa Araxia Abrahamian; editing by Blake Morrison and Michael Williams)

Last Chance to Claim Home Energy Credits Expiring in 2011

Cross References
  • IRC §25C, Nonbusiness Energy Property
  • Form 5695, Residential Energy Credits
The nonbusiness energy property credit is scheduled to expire at the end of 2011 so taxpayers only have a short time to take advantage of this credit.
The 2011 credit is more limited than in past years but is still available for qualifying improvements placed in service for the taxpayer?s principal residence located in the United
States before January 1, 2012.
Principal residence. The taxpayer must own the home and use it as a principal residence.
Credit. The nonbusiness energy property credit is a credit for making qualifying energy
efficient home improvements. The tax credit is 10% of the cost (up to $500), or a specific
amount, for qualified energy efficient improvements. It must be an existing home and the
taxpayer?s principal residence. New construction and rentals do not qualify.
Eligible items include:
Item: Credit Amount:
Biomass stoves $300
Heating, ventilating, air conditioning (HVAC) Varies from $50 ? $300
Insulation
10% of the cost, up to $500 (does not include installation costs)
Roof (metal and asphalt)
10% of the cost, up to $500 (does not include
installation costs)
Water heaters (non-solar) $300
Windows and doors
10% of the cost, up to $500, but windows are
capped at $200 (does not include installation
costs)?must be ENERGY STAR qualified
Energy Star. For 2011, an Energy Star label is generally sufficient proof that property is
qualifying property for the nonbusiness energy property credit.
Lifetime maximum credit. The lifetime credit for all types of property is $500. Therefore,
a taxpayer is not eligible to claim a 2011 credit if they claimed energy credits in previous
years that exceed $500. Additionally, the credit is nonrefundable and may not be carried
forward.
Basis. If a taxpayer receives a credit, the taxpayer?s basis in the qualifying property is
reduced by the amount of the credit received.
www.GEMMS.us

IRS Updates -Foreign Persons Receiving Rental Income From U.S. Real Property

U.S. real estate professionals and rental agents/property managers are encountering an increasing number of situations that involve foreign persons? acquiring U.S. real estate as a part-time residence, for investment or in some cases to conduct a U.S. business.

Read more here -

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