The United States Tax Court recently determined that the IRS does not have the authority to issue penalties to taxpayers who fail to file Form 5471, the Information Return of US Persons concerning Certain Foreign Corporations. This form is used to report interests in foreign corporations. The IRS strictly enforces late filing penalties, with civil tax penalties of up to $10,000 per year for non-compliance. However, the recent court ruling in Farhy v Commissioner (April 3rd, 2023) challenges the IRS’s authority to impose automatic penalties without a court order. The Farhy v Commissioner ruling ..read more

In a recent landmark ruling, the Supreme Court has ruled in favor of taxpayers regarding Foreign Bank and Financial Accounts (FBAR) penalties. This decision marks a significant victory for taxpayers who may have been subject to steep fines for failing to report foreign bank accounts.  Foreign Bank and Financial Accounts (FBAR) penalties have been a major concern for US taxpayers with foreign bank accounts. Failure to report foreign bank accounts worth $10,000 or more can result in severe penalties, including the potential forfeiture of up to 50% of the account balance per year. However, i ..read more

For 2023, the keyword for Expat Taxes is inflation. Inflation has many bad aspects, but some good ones include increased Foreign Earned Income Exclusion, higher 401(k) contributions, and higher IRA contributions. This article will discuss these IRS changes and how they may affect your US Expat Tax Updates for 2023.  2023 Changes to Foreign Earned Income Exclusion   The biggest one for expats will be the change to the FEIE. As you may know, the FEIE is indexed to inflation, and for the 2022 tax year, which gets filed in 2023, you can exclude up to $112,000. For you planners out t ..read more

With expenses rising around the world, many expats are struggling to cover the costs of higher education. Fortunately, the IRS is willing to help. In this guide, we’re looking at two continuing education tax deductions that expats can use to offset their taxes. What Are Continuing Education Tax Deductions? Americans pursuing higher education can claim certain deductions and credits to reduce their US tax burden. You may also be able to claim credits if your spouse or dependent is enrolled in a college, university, or other educational institution. The two main continuing tax deductions availab ..read more

What is an ITIN? How about an SSN? If you’re not clear on what these terms mean, you’re far from alone. ITINs and SSNs are similar in many ways. Both are tax identification numbers and can be used to fulfill certain tax obligations. However, there are plenty of differences between an ITIN and an SSN. Understanding those differences may help you: Complete US tax forms File your tax return on time Claim US tax benefits …and more. In this guide, we’ll compare ITINs vs. SSNs—and explain why they should matter to you. What Is a Tax Identification Number? ITINs and SSNs are both tax identification ..read more

If you’ve given someone a gift worth more than $16,000 this year, you probably need to file IRS Form 709. This form can be complicated—especially for expats. Fortunately, we’re here to clear things up. In this guide, we’ll take a look at what expats need to know about Form 709 and the US gift tax. Let’s get started! What Is Form 709? Form 709 is an IRS form used to report certain taxable gifts. If a taxpayer gives a gift that is subject to the US gift tax, they must fill out Form 709 and file it by the appropriate deadline. What Is the US Gift Tax? When a US person transfers cash or property t ..read more

Does the IRS Care If You Are a Dual Citizen? The Short Answer Is: No! The US is one of the only countries in the world that utilizes a citizenship-based tax system rather than a territorial one. The only other one is Eritrea. What this means is that the IRS taxes citizens—including dual citizens—wherever they reside in the world, whether or not a foreign jurisdiction has already taxed that income. It is a “luxury” afforded to US citizens. In contrast, most other countries tax their citizens on a territorial basis, which means they are only taxed when they live and work in that country, and not ..read more

Your employer has given you an opportunity to work overseas—an assignment that will provide immense career growth. You are excited and ready to adapt to the new environment; however, proper planning concerning state taxes prior to moving will help in saving significant taxes, penalties, and interest down the road. States can continue to assess income tax on your worldwide income if they determine you are still a resident. Changing your state residency when living abroad may help you save on taxes and plan your financial future. But, how do you change your state residency while living abroad? H ..read more

Every year, countless Americans living abroad receive a 1099 form. There are several variations of this form, and each one means something different. To help you understand what yours may mean, we’re going to take a look at Form 1099. What Is Form 1099? IRS Form 1099 is an “information tax return.” It is used to report various types of income. The type of income you have earned will determine which version(s) of the form you receive. For example, if you’ve received interest from money stored in a bank account or other financial institution, you may receive Form 1099-INT. If you’ve earned incom ..read more

All US persons are subject to US tax law regardless of where they live in the world. But what is a “US person?” The answer to that question is more complicated than you might think. You may even be a US person for tax purposes without knowing it. This could open you up to unexpected hefty fines. To help you avoid accidentally running afoul of the IRS, here’s how to know if you’re a US person for tax purposes. IRS Definition of a US Person for Tax Purposes There are two main categories for US persons: US citizens and US residents. Let’s take a closer look at both. 1. US Citizens All US citizens ..read more