Status: US Tax Reform From January 20 to September 27, 2017 - PowerPoint PPT Presentation

Status: US Tax Reform From January 20 to September 27, 2017 Margaret Conklin CPA www.mconklincpa.com 09/27/17

– Internal Revenue Code over 2,600 pages – Regulations, Revenue Rulings over 4,000 pages Current Tax – + Instructions + Guides + Explanations + Case Law Code Last major reform 1986 Source: Tax Foundation Margaret Conklin CPA www.mconklincpa.com 09/27/17

Change or no change Reforms – Reduce the # of Bracket to 3 – Simplify (same as 1986) – Double the standard – Eliminate Tax Breaks for deduction wealthy (1) (2) Reforms or – Maximum Rate of 35% vs – Provide relief to families with Changes for 39.6% child and dependent care expenses Individuals – (1) Maintain home ownership tax breaks of mortgage – Repeal AMT interest and property tax – Repeal Death Tax deduction – Repeal 3.8% Investment – (2) Maintain Charitable gift Income Tax tax deductions. Margaret Conklin CPA www.mconklincpa.com 09/27/17

Paul Ryan’s post card return Mockup by the House Ways and Means Committee Problems: 3) Specified savings plans 5) Mortgage interest limits 9-11) Rules for credits Margaret Conklin CPA www.mconklincpa.com 09/27/17

Senate Budget Committee add $1,500,000,000,000 September 21 ($1.5 trillion) to deficit in 10 years Margaret Conklin CPA www.mconklincpa.com 09/27/17

– Residency based taxation – Access to bank accounts and financial products not curtailed by FACTA What would you – Same country exception for FACTA like to see? – Treaty reform for Swiss Pensions – Exemptions and child care credits for non-American We will have to wait and children see. – Margaret Conklin CPA www.mconklincpa.com 09/27/17

Typical issues with US tax compliance Self prepared and professionally prepared ** Margaret Conklin CPA www.mconklincpa.com 09/27/17

Filing Status and Exemptions Single: does not mean married to a person that is not American Head of Household: if you have a non-American spouse and US dependents. Special rules apply Married Filing Separately : default if legally married to a non-American. Special Exemption for NRA spouses that do not have US source income. Margaret Conklin CPA www.mconklincpa.com 09/27/17

Form 1116 Foreign Tax Credit Example of computation of Foreign Tax Reduction in foreign taxes Reduction in foreign taxes for line 12 line 12 Form 1116. Credit Reduction Failure to reduce foreign tax credit for income excluded under Foreign Earned income exclusion and Foreign Housing deduction Numerator is the Excluded income from Form 2555. Denominator is Taxable income from line 7 (Salary and Pension) Margaret Conklin CPA www.mconklincpa.com 09/27/17

FBAR Form 114 and Form 8938 – FBAR instructions. Determine the maximum value of each account (in the currency of that account) during the calendar year being reported. The maximum value of an account is a reasonable Maximum balance approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year. Periodic account does not mean end of statements may be relied on to determine the maximum value of the year balance. the account, provided that the statements fairly reflect the maximum account value during the calendar year Convert to USD using end of the year rates Margaret Conklin CPA www.mconklincpa.com 09/27/17

Company Tax Basis in your Personal Contribution and Contribution Gain Reported to Reported to IRS as IRS as income in Total Foreign Average Exchange Cumulative USD Pillar II ** Year income in CHF CHF Currency Basis CHF Rate: 1 USD = X CHF USD Basis Basis example 5,000 10,000 15,000 1.5100 5,000 5,000 10,000 1.0850 $ 9,217 $ 9,217 2010 5,500 5,500 11,000 0.9230 $ 11,918 $ 21,134 2011 6,000 6,200 12,200 0.9760 $ 12,500 $ 33,634 2012 Failure to keep a 6,000 6,300 12,300 0.9640 $ 12,759 $ 46,394 2013 2014 6,000 6,400 12,400 0.9520 $ 13,025 $ 59,419 record of the basis in 6,000 6,500 12,500 1.0010 $ 12,488 $ 71,906 2015 your Pillar II and 6,500 7,000 13,500 1.0250 $ 13,171 $ 85,077 2016 - 2017 Pillar 3 pension - 2018 - 2019 funds. - 2020 Total 41,000 42,900 83,900 Record and basic documentation. Margaret Conklin CPA www.mconklincpa.com 09/27/17

– Mortgage Interest –limitation $1,100,000 – Deduction for Home maintenance costs Switzerland vs US – Code § 121 - Exclusion of gain from sale of principal residence Real Estate – Two big issues to understand: FX rate on residence and repayment of the Mortgage Margaret Conklin CPA www.mconklincpa.com 09/27/17