Читать книгу Larry's 2011 Tax Guide for U.S. Expats & Green Card Holders....in User-Friendly English! - Laurence E. 'Larry' - Страница 2

Here's a question for you: What do Albert Einstein and Douglas Shulman, the current the Commissioner of the IRS have in common? The answer is something they have in common with most people: they each had to/have to pay someone to prepare their U.S. tax returns for them.

If you do not think that there is something wrong with this, then perhaps you should think about it in more detail - In my opinion, it is very, very wrong! It is wrong to have a system so complex that the head of the IRS can't even prepare his own return. Heck, preparing one's own return should be a mandatory requirement for any Commissioner - it just might be a humbling experience, a wake up call, if you will, that the system stinks!

Yet whether our tax system stinks or not is not why you are reading this. You are reading this because the law is the law is the law and you do not want to break it. I am going to be critical, at times, during this book but please do not misinterpret anything I might say - I don't like the new tax laws; I feel that they stink! I think they put the U.S. into the same category of invasiveness as, say, Libya or North Korea. I value my privacy and do not enjoy it being trampled upon in any way, shape or form. I will exercise my right of free speech and criticize because criticism is due but while I mumble away at times, I will still file and reveal things that I personally believe the IRS has no business knowing about because I am not going to put myself in violation of the law. And while the choice of what you tell your tax preparer is solely yours and while it is not legally the responsibility of that tax preparer to ask you any more than you provide, if you are omitting relevant data, your tax preparer will most assuredly know and ask you about it.

Bear in mind one other thing: The IRS code, regulations, procedures, etc are, cumulatively, 10,000 percent larger than the narrative in this book - this is a real executive summary.... and while I pride myself in thinking that this is a good one, it is still only a summary and you should never, ever put full reliance upon this - in other words, read it, try to learn from it...but don't even think of suing me under the pretence of considering this to be the authoritative source upon which you rely to make your important tax decisions!

Who does not have to file?

For 2010, if you are single, you get a standard deduction of $US5,700. Likewise, you are entitled to a single exemption of $US3,650. $US5,700 + 3,650 = $US9,350. If your income was under that amount, then, technically, you are not legally obligated to file a tax return for that year in which your income is lower than this amount. BUT...... Let us say, you are the recipient of a 1099 from someone in the U.S. for whom you performed services that the IRS deems subject to social security tax - then you've got to file that annual return, because even though you have earned under the taxable income exclusion, you have social security/medicare tax. Yes folks, unless your income is so low that you do not fall under the obligation of having to file because of social security, then you have to file, annually, even though you do not or will not owe any taxes - you are still liable to file an annual tax return. This is the law, a law that many of you are quickly discovering that you are in violation of.

The new, information gathering Form 8938

This book is a continuing work in process. It is Lunar New Year’s Eve, 2011 as I reread and change things to keep the editors and publishers happy. For those of you not attuned to the Chinese new year, that means I am rereading this portion on February 2, 2011! There’ll be changes made by the IRS well into March or April that will be retroactive to January 1, 2011 and the IRS, well into the new year, will still be issuing forms retroactive to 1 January 2011. It won't be finished with the passage of the new, December 2010 tax act. Then the old Congress simply passed the buck to the next Congress to rectify the financial pickle in which the U.S. finds itself. So.....go to www.lifeilao.com. That’s my website and there’ll be periodic updates not only about U.S. tax matters but about taxation in 9 Asian jurisdictions.....and my ever-cynical blog, too.

Yet we can portend what lies in store and will likely apply, retroactively, towards all of 2010 just by looking at a very new government form that will not be finalized until sometime early in 2011: Form 8938.

This form was, apparently, completed by the IRS in July, 2010 but not issued for public input until late in November 2010. I received my copy from American Citizens Abroad on Sunday morning 21 November 2010. We knew that this form was coming but the manner in which it came is worthy of comment:

•FATCA, the new U.S. tax law, was passed by both houses of Congress and signed into law by President Obama on 18 March 2010. This law specifically stated that the IRS would now be asking for the information required on this form. Why did it come out so late? Who knows? There are still practitioners who believe that the IRS will back down and make this form mandatory for 2011 tax returns, not 2010 tax returns…..only time will tell.

* The IRS has indicated that it will hold 'open forum' through 3 January 2011, prior to its proceeding. The IRS, on its webpage, is saught public input regarding this form. That IRS website ( www.irs.gov) indicated that it anticipated receiving 350,000 comments regarding the form. All of this leads me to ask:

•How many comments have they actually received?

•Will people really post their comments? After running its Voluntary Disclosure Program in conjunction with the Criminal Investigation Division of the IRS for reporting prior years’ data regarding overseas bank and brokerage account, many who used this program found that they were being singled out and penalized solely because they used this program, people are now going to be leery - is public comment going to be like 'Let 100 Flowers Bloom' in China, where simply commenting might put you on the 'wrong sort of list'?

Take a close look at this form, first.....then I'll make some comments regarding why you might just also have to file a tax return even though you are under the minimum income filing requirements…..

O.K. now let’s look at and let me comment on each of the four sections of the form.

Presumably, this form will have to be attached to every form 1040 filed, if that filer has banking or brokerage accounts outside of the U.S. and the accounts come to more than $US50,000:

PART A - Foreign bank accounts with over $US50,000 at any one time during 2010. This question is also asked on the form TDF90.22-1 which must be filed by 30 June 2011 for 2010 tax returns…..only the amount under which you are required to report goes down to $US10,000, for all accounts in any one country. We’ll get to that form, specifically, later on in this book. You are only required to attach form 8938 to your individual income tax return, filling in Part A, if your total is $US50,000 or more.

PART B – SCHEDULE OF STOCKS – Oh boy – is this more draconian than before! On the TDF90.22-1, you have to list brokerage accounts if they total over $US10,000. Here, though, if you have over $US50,000 in stocks, you have to list company by company by company held – with maximum amount per company at any one given time during 2010…..ain’t this a nightmare! What if you just happen to be a retiree, living in Thailand, falling under the scope of income reporting requirements, but having as stocks, your assets that enable you to maintain your retirement residency visa in Thailand – well now, guys, if you’ve already filed your tax return prior to the IRS formally issuing this form and providing guidelines for 2010 filing, it is more than likely that you are going to have to file, again, that U.S. tax return – just when you thought you finally got out of that requirement as part of getting to be that old. Tough luck, guys!

PART C – OTHER INSTRUMENTS, CONTRACTS OR INTERESTS - Hey, my friends, I honestly do not know what to tell you, here – it would appear that mortgages and bank loans fall under this area – what else does? How are we to know if the IRS has not provided instructions (to determine the scope of what keeps us legal and where we might be a law violator???) – and when will these instructions come???

PART D – INTEREST IN A FOREIGN ENTITY – Do you own your own business outside of the United States? Are you reporting it to Uncle Sam? Not only are you required to file an annual Form 5471, an information set of documents letting the IRS know about your overseas business activities (you didn’t know that? Welcome to the club – most expats have been unaware of this – only now that the IRS is enforcing $US10,000 penalties, it is time to become aware!), but now, in case you were unaware of it, you have it staring you in the face for Part D. Of course I expect that the IRS computer system will start correlating information filed on Form 8938 with the information you filed - or should have filed - on Form TDF90.22-1....and likely with the other forms mentioned in this book. There’ll be more about Form 5471 later on in this book.

Take a look at the last column of Part D – how did this go through the IRS ‘process’ from July through November without anyone picking up the typo? Thus, I did write to the IRS, performing that patriotic act of correcting the IRS typo. Following is my email to the IRS, with respect to this form:

From: Laurence Lipsher < prctaxman@yahoo.com>

To: Ralph.M.Terry@irs.gov; Ralph.M.Terry@irs.gov

Sent: Thu, November 25, 2010 11:25:13 AM

Subject: Form 8938

I received a copy of the form 8938 and, as a tax practitioner who has worked overseas, with expats, for over 20 years, I would like to comment on it but I do not have the instructions and feel that they would be essential, prior to commenting. Would it be possible to receive a copy?

Also, for what it is worth, the form, apparently prepared by the IRS in July, has thus far escaped complete spellcheck scrutiny - you've got a typo! Take a look at the last column, boldface title box under Part D, page 2: the form's got 'foreing' and it obviously should be 'foreign'!

It is a great pleasure to correct the IRS in any matter, whenever I can!!

Happy Thanksgiving!!!

Larry Lipsher

Guangzhou, PRC

25 November

2010

I wrote this on Thanksgiving Day, 2010. Little did I ever expect to receive an answer, two days later, when, I had assumed, that the IRS, like most of America, would be home, eating leftover turkey, watching football on television.

Here’s the answer to me.....over the Thanksgiving weekend:

RE: Form 8938

...

From:

Terry Ralph M < Ralph.M.Terry@irs.gov>

Mr. Lipsher,

Thank you for your correspondence unfortunate at this time there are no instructions available. When they become available we will forward you a link or copy. Ralph Terry

Thus, your guess is currently as good as mine when it comes to anticipating what the instructions will say regarding who should record what on Form 8938 and, if one has filed one’s tax return prior to the actual issuance of Form 8938, early in 2011, whether or not it will necessitate filing an amended individual income tax return if one has already filed his/her return without a required Form 8938. My gut reaction is that if this form is issued before mid-March, it will become a 2010 tax form. If there is any additional delay, then contrary to FATCA (you’ll read about FATCA, later on, too!), this will become a 2011 tax return form. Only time will tell…..and you can certainly find out from either the IRS ( www.irs.gov) or Li Fei Lao ( www.lifeilao.com)

All this adds up to the fact that there are few – very few U.S. expats or green card holders residing outside of the U.S. who are not going to have to file tax returns………for the rest of us, well…..we’re stuck – we all have to file, providing more data than we used to submit.

Yes, it is a pain in the rear end….but the law’s the law and let me state as clearly as I can, that while I feel the law stinks, I do not advocate violating it!

What is income - at least what the IRS considers income - and which categories you fall under in having to classify your income. For all intents and purposes, this is a good ‘executive summary’ of what the U.S. tax system is like.

Why is this in bold face? Well, dear reader, this is important enough to be placed in bold face! FIRST: GO TO THE IRS WEBSITE: www.irs.gov ! There’s an awful lot that you will find in the IRS site - some say that there’s too much and thus too difficult to navigate. Nonetheless, give it a try!!!!!!!!!

Anyhow, here it is, the list of what you have to declare as taxable income - at least, according to the IRS, almost (but not quite) using their very own words:

All wages, salaries and tips, no matter where from

Taxable interest (yes, there is a nontaxable variety, as well.....)

Dividends - both qualified and not qualified (a lower tax rate for the latter) State tax refunds- this only applies if you itemized your deductions last year Alimony received

Self-employment, sole-proprietorship business income or loss Capital gains or losses (maximum loss: $US3,000)

Other gains (the capital gain laws are complicated!) IRA distributions

Taxable portion of pensions or annuities

Rental real estate (or loss), royalties and a whole slew of K-1 reporting Farm income or loss

Social security benefits

Other income (but losses, too: this is where you offset your foreign earned income with your foreign income exclusions.

That's it! All of the above is added up to become your total income, which, if you have any, you have got to report it. If you don't have any, you don't have to report it (unless your gross income is over $US9,350, as a single person, for 2010).

Then there are various adjustments you can use to further reduce total income to Adjusted Gross Income from which you either itemize your deductions or take a standard deduction. Frankly, most expats take the standard deduction, accounting for all of their excludable housing expenses on the form 2555 they file. The Foreign Earned Income Exclusion, Form 2555, is ONLY applicable to expats, but that's why you are reading this, in the first place! - read on for further details...and remember, both Form 2555 and the ‘lite’ edition of this form, Form 2555EZ are both contained within the appendix of this book - along with their instructions.

And now we come to the classifications under which you fall for tax reporting purposes. There are four categories into which you basically ‘fit’ and these each determine the amount of your standard deduction.

MFJ or QW - Married Filing Jointly or Qualified Widow (hopefully, you do not come under the Qualifying Widow/Widower category but if you do, then there are tax benefits) will be able to take an additional deduction amounting to $US11,400 from your income in order to arrive at your taxable income.

Single Not married? This is your category. Yes, you can still have dependents, but you would generally be filing as a single taxpayer, entitled to a $US5,700 standard deduction, half the amount that a married couple gets.

MFS Married Filing Separately If your spouse is not a citizen of the U.S., then you have an interesting option vis a vis reporting responsibilities - especially if you own little but your spouse is ‘loaded’. If you have a non-U.S. citizen spouse with substantial assets and income, he or she simply might not want to report to the IRS. Frankly, there are many expats or green card holders who have income producing assets and have placed those assets in spousal name to ‘escape’ reporting. Alarmed at putting it all in your spouse's name? Don't be: even the things I owned were no longer mine, so long ago in an equal division of property California divorce where equal division meant that my ex got all the assets while I got all the liabilities. If you file MFS, you've got a $US5,700 standard deduction for 2010.

HOH Head of Household If you have dependents living with you and are not married, there are some tax advantages and some tradeoffs in filing as HOH. True, you are going to get an $US8,400 standard deduction for 2010 but in the process, you will lose the exemption for the person qualifying you to take HOH. Speak to your tax advisor about which is better for you : either HOH or MFS, if you have dependents.

O.K. After you've taken your standard (or itemized deductions if you have a large enough amount to itemize and it is to your advantage) deduction, then you can take a personal exemption for you and an exemption, as well, for all those who qualify as your dependents for whom you list both names, relationship and either Tax Identification Number - TIN - or Social Security Number - SSN. If you do not have that number available and you are liable for taxes, the IRS will not allow you the exemption without getting that number....so you'd better apply for one! Go to the IRS site and download Form W-7 and the instructions for that form – you’re going to have to file this form and commensurate back up papers, along with your tax return for the year to a ‘special’ address in Philadelphia, PA to get that TIN. A special word of advice: The IRS loses things – make sure you have copies of everything that you file when you apply for the TIN – you might have to file again…and again…and again. Alas, the tax bureaucracy in the U.S. is not what it might have previously been – papers filed get lost far more frequently than the IRS will ever willingly admit!

Aha! We've now arrived at your taxable income........now you have to compare this with what your Alternative Minimum Tax - AMT - might be and you’re going to have to pay the higher amount. Soon to follow, just a mere two sections following this section of the book, is a user-friendly explanation of what the Alternative Minimum Tax is. I guarantee you this: As soon as you read it, you will understand what the AMT is....yet a week later, you'll have to reread this, to remember what it is.....Sadly, the AMT is a tax that simply defies memory retention!

Regardless, from the this point on, there are various and sundry credits to which you might be eligible for, which will reduce your tax bill - if you owe any taxes.....and if you are a self-employed sole proprietor, reporting your income and expenses on a Schedule C, even though you may be eligible for the foreign earned income exclusion, you are going to be liable for Social Security and Medicare taxes which, for the 2010 tax year, will equal 15.3 percent of your taxable Schedule C income. This is frequently a very rude awakening for some! (please note: that ‘final’ tax act of 2010 will lower the individual’s 2011 social security payment by 2 percent, for one year, only, in 2011....but that 15.3 percent is very painfully applicable to 2010!!!)

And now, for the very first time - at least as far as I know - your expat 2011 U.S. tax calendar:

1 January 2011 The tax year begins for individuals who are on a calendar year (come on, now - we're all calendar year taxpayers, whether we like it or not!). The 'Entire taxable year' begins on January 1. You are on a ‘cash basis’ for tax purposes – if you receive any income in the calendar year, you’ll have to include it during that year. If you ‘earned’ income that you did not receive until the next year (payments that should have been made to you in 2010 that you did not actually receive until some time during 2011?), then don’t worry about that income – it’ll be part of your 2011 taxable income – unless you receive a Form 1099 which includes that income…..

15 January 2011 - This date is the deadline for final payment of estimated federal income taxes for the last voucher of the 2010 1040ES.

31 January 2011 - You can 'technically' avoid that 15 January deadline for payment of estimated taxes if you actually file your final tax return and pay final taxes by 31 January. How you are going to do this, though, when the likelihood that the forms you are going to need to file correctly, will simply not have been issued by this date?

15 April 2011 - Ah, you've all heard of this day - it is tax day, across the land, except for Massachusetts, where they run the Boston Marathon as part of their Patriot's Day holiday, entitling you to file one day late.

Your first quarter, 2011 1040ES is due on this date

Your IRA payment just might be due by this date

Generally, this is the date for filing form 1040 unless you are on extension....gift tax returns are also due on 15 April and it is also the final date for filing an amended tax return for the third previous tax year.

15 June 2011 - this one is important for expats! This day, my friends, is the deadline for filing the 2010 tax return. You'd better file it - and have proof of mailing as 'insurance', or you'd better file an extension of time through 15 October to file. You'll still have interest due and underestimated penalties if you underestimated your prepayments and filed under extension, before your extension deadline, but you'll avoid some very costly penalties by filing your extension request - this extension form is virtually automatically approved. Oh, you can be the first to be penalized in this instance, if your extension application is denied - but I doubt it......! If you are a first time overseas filer, this is also the best date to file a specific form (2350) for filers who simply want to wait until they qualify under the physical presence test (we'll cover this one, later in the book!) in order to take advantage of foreign exclusions.

And...it is also the day for filing voucher #2 of the 1040ES.

30 June 2011 - Treasury Department Form TDF90.22-1 must be filed by this date.

15 September 2011 - Voucher # 3, third quarter payment of your 1040ES is due, today, if you are going to owe anything for 2011 - time to pay...!

15 October 2011 - Contrary to what the IRS or your accountant might lead you to believe, you definitely can file for further extension through 15 December – but you’d better do this before 15 October. Personally, I try to avoid anything dealing with tax after 15 October (because I value my sanity and, after 4+ decades of doing tax work, I really need to cut off by 15 October!!!) but the IRS will still allow you those extra two months if you file that additional extension.

31 December 2011 - The year's over - new income tomorrow? Worry about it next year!!

What’s this - you say that in spite of reading this you still have no idea of the tax system? Well, apparently, neither does the IRS Commissioner, who has someone else prepare his tax return.

Once again (yes, I know I’m repeating myself!) I propose that henceforth and forever more, it be made mandatory that all future IRS Commissioners must self-prepare their own returns, returns that are to immediately be audited, with instantaneous penalties assessed upon that IRS Commissioner preparing his return.....if nothing else, we’d finally get the head honcho of the IRS feeling a bit more sympathetic to the helplessness that the rest of the American public has to go through with this very user-unfriendly system!