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FAQ: Tax for Expats

When it comes to tax for expats, there are a lot of questions. Things can get very complicated very quickly, especially once you factor in unique situations, like dependents who are not US citizens, income made from something other than your salary or hourly wage, investments that you have made, or assets that you have secured. Here are a few answers to common questions about taxes ( www.EsquireGroup.com/tax-for-expats ) for expats that can help you to stay compliant and pay the right amount of tax.

Q: What are Income Tax Treaties and Can I Use Them?

A: For many people living abroad, they can actually pay a reduced income tax rate based on the country in which they reside. Sometimes they can actually not pay income tax to the IRS at all, but it all depends on the country. Tax for expats varies quite widely from country to country.

The United States has specific income tax treaties with many nations around the globe that were created to be mutually beneficial for both nations—and help with tax for expats. These treaties are often to encourage people and experiences to cross borders, like artists and valued skill sets, without making the trip too burdensome to be profitable.

While the IRS website lists the countries with which the US has tax treaties, you will need to consult a tax for expat specialist to understand if that treaty applies to your work, and how much you will save because of that treaty.

Q: I Pay Taxes in the Country I Work, Do I Get Double Taxed?

A: There is a common misconception that the United States Government will tax you your full foreign income regardless of the taxes that you pay to a foreign nation in which you paid your taxes. This is simply not the case. The IRS has rules set out to provide tax credits and deductions based on tax for expats paid abroad so that you are not simply taxed into making no money.

Like tax treaties, these deductions and credits based on tax for expats change from country to country, which is why many people rely on tax experts to help them figure out the best tax strategy for their income level, location, and future plans.

Q: Do I Pay My Taxes in US Dollars?

A: The short answer is yes. You need to pay your American taxes in American dollars, but the actual exchange rate varies since exchange rates change every single second in multiple markets around the world. In general, tax for expats is paid on an annual average for the year, a number that you can easily find on the website for the IRS. If you made money on specific days, then you can use that day’s specific exchange rate as well ( www.EsquireGroup.com/about ), which is also provided on the IRS’ website.

Filing tax for expats is complicated, which is why your best bet for filing your expat tax return is to rely on an experienced, professional accounting firm that specializes in foreign taxes and expats. They can help you file the right amount of tax and stay within the rules laid out by the IRS.

Understanding US Expat Tax

There are many adjustments that need to be made when you take up residence in a new country: learning the language, getting used to the culture, finding a home, and understanding workplace customs. One of the biggest adjustments is planning for your taxes. US expat tax ( https://Esquiregroup.com/US-Expat-Tax ) makes your tax filings a little more complex than they would be at home. Here are some things to consider before you begin earning income in another country.

Paying Taxes in your Country of Residence Doesn't Remove American Tax Obligations

You may be living and working abroad—and paying taxes within that country—but as an American citizen, you are still on the hook for US expat tax. You must claim all income, including salary, rental income, and investment income. Some of this income may come from your current country of residency, some may come from America investments, and some may come from other foreign sources. However, it is all potentially subject to American taxation ( https://Esquiregroup.com/About ), so it's important that all of it gets claimed in addition to claiming in your current country of residence. By being as transparent as possible, you're less likely to run into any trouble with US expat tax.

You Should File in America Every Year

It's important to keep up with your American tax filings by submitting every year. Even if you don't earn any income, having assets in America or having a spouse or partner who is earning income in any country could still have US expat tax implications for you. Making sure that the American government always has a current record of your income is important; it will make certain activities easier, should you choose to move back to the United States.

America has Tax Treaties with more than 40 Countries

Most people don't set out to try to avoid US expat tax entirely, or to operate in an illegal manner. But even the most honest person may get sloppy with the details of their tax filings, leading to serious US expat tax penalties or even legal trouble if even the slightest detail doesn't quite add up. America has tax treaties with more than 40 countries, so if you don't quite tell the IRS everything, odds are they will still find out. It's important to make sure that you're not only being honest, but that you are also cross-referencing and double- and triple-checking every detail so that you don't get into trouble.

Consulting an Expert

As you can see, dealing with US expat tax as you live abroad can be complicated at times. There is much to consider and, unfortunately, a fair bit of room for error. And when it comes to taxes, even the most honest of mistakes can get you into trouble. That's why it's important to always use the services of a US expat tax effort who can work with you to make sure your filings are clean, accurate, honest, and unlikely to cause you trouble or complications in the future.

How You Can Benefit from the Offshore Voluntary Disclosure Program

Are you concerned with the current state of your taxes due to your offshore accounts? The IRS could make the decision to investigate your financial situation at any time. If the thought of that happening makes you sick to your stomach, it might be time to get your situation in order—before it is too late. Withholding information regarding foreign income or assets is a criminal offence, and it’s only a matter of time before this cover-up is discovered. You have the opportunity to come clean with reduced penalties by participating in the Offshore Voluntary Disclosure Program ( www.EsquireGroup.com/Offshore-Voluntary-Disclosure-Program ), made possible by the IRS.

Who Benefits from the Offshore Voluntary Disclosure Program?

Taxpayers that have previously undisclosed foreign accounts and assets have the opportunity to voluntarily come forward and report their existence with the Offshore Voluntary Disclosure Program. By doing so, these taxpayers have the chance to willingly resolve the issues in their previous income tax reports before they run the risk of coming under official investigation by the IRS. By partaking in this program, these taxpayers who were previously evading the IRS can prove to the government that they ought to be trusted with their yearly income tax declarations moving forward. This program allows taxpayers the opportunity to file up to eight years’ worth of tax returns and Foreign Bank and Financial Accounts (FBARs). Financial assets, such as bank accounts, mutual funds, trust funds, and other financial ( www.EsquireGroup.com/About ) interests, are included within these FBARs. The taxpayers who choose to voluntarily disclose their offshore accounts and assets will avoid prosecution and limit their exposure to civil penalties by partaking in the Offshore Voluntary Disclosure Program. This program not only benefits taxpayers; it also allows the IRS the opportunity to resolve a number of cases without conducting examinations.

How does the Offshore Voluntary Disclosure Program Work?

In order to be eligible to participate in the Offshore Voluntary Disclosure Program, a taxpayer must have invested legal source funds in their previously undisclosed assets. If any of the funds or assets being disclosed are found to be derived from criminal activity, you will be unable to participate in the program. If you have waited too long and are currently under civil examination or criminal investigation by the IRS, you are also ineligible to participate in the program. It is important that everyone who takes part in the program does so voluntarily—not because they fear that the IRS is closing in on them.

The Offshore Voluntary Disclosure Program was not designed to be a way out for those who are facing the threat of persecution. Instead, this program aims to assist those who acted intentionally when they chose to keep their offshore funds and accounts a secret from the U.S. government, but who have since decided to make things right. The decision must be of your own accord, ensuring that you can be trusted to disclose all of your accounts in the future. By admitting your past mistakes before the IRS is forced to take action, you will save yourself money and will avoid potential jail time. Once you have paid back your taxes owing, including any interest and penalties that have been added to those previously undeclared taxes, you can move on without the threat of criminal investigation or imprisonment. As this is a voluntary program, anyone who participates cannot be criminally prosecuted as a result of what is uncovered, and any non-compliance older than eight years will be forgiven.

Get a Second Chance with the Offshore Voluntary Disclosure Program

If you have made financial decisions that you regret, there may be time to correct them before it is too late. The Offshore Voluntary Disclosure Program allows U.S. citizens the opportunity to erase past mistakes before they cause you too much trouble. If you have been withholding information from the IRS, it is only a matter of time before your wrongdoings are discovered. If you are unprepared to face the consequences of your actions, you have the chance to right those wrongs.

What is the Offshore Voluntary Disclosure Program?

The Offshore Voluntary Disclosure Program (OVDP) was designed to offer negligent taxpayers a way out of a tricky situation. Any citizen who knew that they were supposed to be reporting their foreign income or assets, but chose not to, is at risk of investigation by the IRS. This program recognizes that these individuals acted intentionally, but it also recognizes a person’s ability to change. The program rewards those taxpayers who choose to come to terms with their past mistakes now, rather than waiting until they are criminally charged by the IRS for evading the payment of their taxes. If you are already under civil examination or criminal investigation by the IRS, it is too late to take part in the Offshore Voluntary Disclosure Program ( Esquiregroup.Com/Offshore-voluntary-disclosure-program ); doing so would no longer seem voluntary, but necessary. This program was not designed to be a way out for those who have already become entangled in the legal system, but it rather provides a chance to come clean for those individuals who have not yet been discovered. In order to be eligible for participation in the program, you must also have invested legal source funds in the undisclosed assets, and no funds can be derived from criminal activity of any kind. Finally, you must not have made a submission pursuant to a streamlined procedure.

Take Back Control of Your Financial Interests

By waiting until the IRS finds out that you have not been accurately reporting your foreign income or assets, you will force a mandatory investigation of your financial interests. If found guilty of withholding information from the United States government, you will face a multitude of charges and fines that may land you in prison, or at the very least, it will decimate your finances ( Esquiregroup.Com/About ) and grant you a criminal record for the rest of your life. Rather than letting it get that far, the Offshore Voluntary Disclosure Program gives citizens a chance to correct their past mistakes and gain control of their financial interests before those interests are destroyed by a criminal investigation. It is only through this program that a taxpayer who has previously evaded the government can prove to the IRS that they have changed and will accurately report their yearly income tax declarations in the future. Failing to do so, you may be the subject of investigation for years to come, and it will be very difficult to gain back the trust of the US government following a civil examination or criminal investigation.

Voluntary Participation in the OVDP

When deciding to take part in the Offshore Voluntary Disclosure Program, a taxpayer is voluntarily choosing to file or amend up to eight years of tax returns and Foreign Bank and Financial Accounts (FBARs). These FBARs may include bank accounts, mutual funds, trust funds, or other kinds of financial interests. The specific details concerning your financial situation will be documented throughout various questionnaires before you are given the opportunity to pay back the taxes owing. There may also be interest on these taxes, as well as penalties that can also be placed on previously undeclared taxes. Penalties often range from 27.5% to 50% on the highest value of unreported assets, which is often the bank at which your undisclosed assets reside. Once all fees are paid and required paperwork has been completed, a previously dishonest taxpayer is free from the threat of the IRS. As a reward for choosing to take part in the Offshore Voluntary Disclosure Program, these taxpayers cannot be criminally prosecuted for their past negligence, and any non-compliance over eight years is pardoned.

What is the use of availing the R & D tax credit loan?

Australian companies which are working on Research and development projects can consider getting a grant from the Australian government. This incentive is called the R & D tax credit incentive. The R &D Tax loan is another simple aspect of this huge R & D Tax credit incentive which was started by the Australian government to help companies that are working on research activities. To know more about the R & D Tax loans ( swansonreed.com.au/product/rd-tax-refund-financing/ ), you need to know what R & D tax credit incentive is. Read on to find out all you need to know about this incentive.

What is R & D Tax credit?

When your company is working on research activities, there is a lot of uncertainty involved. There is a lot of capital expenditure too. To cover the risks and to encourage such research activities, the Australian government along with the AusIndustry and ATO (Australian Tax office) has come up with the initiative of providing a credit in the form of monetary benefit to such companies. By availing this facility, your company would be able to run the business smoothly without having to think about capital raising.

What is R & D tax finance?

Since there is a lot of uncertainty involved, there are now a large number of companies which are ready to invest in your R & D activities. These companies provide the required finance to run your research activities. This type of finance is provided to both listed and unlisted companies. There are some terms and conditions associated with this type of funding and it purely depends on the kind of research activities that your company undertakes.

R & D Tax loans

Funding of your research activities through R & D tax finance is with a loan agreement. The R & D Tax loans are thus a debt instrument that is provided to your company by external financing institutions. The investors get into a secured loan agreement.

The general terms of this loan is to make sure that your company repays the loan with the help of the R & D tax credit that will be received from the government through the R & D tax incentive program. This type of R & D tax loans helps the companies to take the research and development activities to the next level.

Eligibility criteria

To avail the loan, your company/project should be working on research and development activities which will result in product that will help the larger section of population. The project/company must be registered annually with the AusIndustry (who act on behalf of Innovation Australia). Generally, financing companies which provide this type of R & D tax loans are interested in financing only technology related research activities. If your company is developing any new machines, prototypes, software’s for the welfare of the larger masses and not commercial in nature, your company can still be eligible for this tax credit ( https://www.swansonreed.com.au/what-we-do/ ) which is provided by the ATO – and hence it could also avail the R&D tax loan.