American Citizens Abroad Town Hall Meeting May 6, 2015 Stuart Hearn Enrolled Agent
Agenda • Some helpful tips (hopefully) and common mistakes made in preparing U.S. individual taxes. • A few 2015 updates.
Some helpful tips (hopefully) … • Form 8938 Statement of Specified Foreign Financial Accounts (the IRS’s FBAR copycat…with a few additions!) – Required if living outside U.S. and value of Specified Foreign Assets: > $200k Y/E balance or > $300k max – S, HoH, & MFS > $400k Y/E balance or > $600k max –MFJ – Required if living in U.S. and value of Specified Foreign Assets:
Some helpful tips (hopefully) … • Form 8938…what are Specified Foreign Assets? – Everything you report on your FBARs: • Maximum balances of all non-U.S. bank accounts • 2nd Pillar Year-end balance (if indeed best est. of max) • 3rd Pillar Year-end balance (if indeed best est. of max) • Cash surrender value of non-U.S. life insurance policies – All that precious metal you have in a safe deposit box or hidden under your bed (does not include personal jewellery);
Some helpful tips (hopefully) … • Reporting Retirement Distributions: – Social Security (Swiss and U.S.); • Taxable amount depends on filing status and other income • Foreign tax credit available against Swiss social security on U.S. tax return • 2/3 of 85% of U.S. social security taxable on Swiss tax return (per treaty) – 2nd and 3rd Pillar; • Lump sum distributions not reported on Swiss taxes – amounts taxed separately at beneficial rates
Some helpful tips (hopefully) … • Filing Deadlines, Penalties, & Interest: – US taxes • Due date is 3 months and 15 days after the close of fiscal year. Interest is due if any tax due past this date • Automatic 2-month for U.S. persons living abroad. Also an extension of time to pay • Other extensions requested using forms 4868/2350. Late payment penalties (0.5% per month of any unpaid tax, up to maximum of 25%) will apply • Late filing penalty 5% per month up to maximum of 25% • Other accuracy-related penalties can apply
Common mistakes made in preparing U.S individual taxes • Gross income from employment: – Gross income before the deduction of pension (LPP) and social tax (AVS) must be declared as wages on your U.S. taxes. – In addition, the amount your employer contributes to your pension fund should also be included in income!
Common mistakes made in preparing U.S individual taxes • Foreign Tax Credits – Credit can only be taken on taxes paid on income to a foreign jurisdiction. Wealth taxes cannot be credited (but may be deducted on schedule A). – Credit can be claimed on either the paid or accrued basis (even as a cash-basis taxpayer). – A foreign tax credit cannot be taken for any income excluded under the foreign earned income exclusion.
Common mistakes made in preparing U.S individual taxes • Filing Status – If you are married you can no longer file U.S. taxes using the filing status ‘Single’. This is the case even if your spouse is not a U.S. person and as of tax year 2013 for same-sex spouses. – If married you can file ‘Married Filing Separately’ (MFS), ‘Married Filing Jointly’ (MFJ) or ‘Head of Household‘ (HoH) if your spouse is not a U.S. person and you have a U.S. dependent allowing you to qualify as HoH.
Common mistakes made in preparing U.S individual taxes • Tax calculation – Tax tables are always used, but in some cases must be used in conjunction with other worksheets. – ‘Foreign Earned Income Tax Worksheet’ must be used if you are claiming the Foreign Earned Income Exclusion. – If you have qualifying dividends or long term capital gains to report, the ‘Qualified Dividends and Capital Gain Tax Worksheet’ will need to be completed.
A few 2015 updates • 2015 Foreign Earned Income Exclusion – $100,800 (first time to hit six figures!!!!) • 2015 Foreign Housing Exclusion – Geneva: $95,200 - $16,128 = $79,072 (maximum deduction) – Bern: $66,200 - $16,128 = $50,072 (maximum deduction) – Zurich: $39,219 - $16,128 = $23,091 (maximum deduction)
A few 2015 updates • Net Investment Income Tax (NIIT) of 3.8% – no change from 2014 – Kicks in MAGI > $250,000 MJF – Kicks in MAGI > $200,000 S & HoH – Kicks in MAGI > $125,000 MFS
Questions? TaxPro Sàrl Avenue de-Luserna 40 1203 Geneva www.tax-pro.ch Tel. +41.22.304.1690 shearn@tax-pro.ch
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