American Citizens are surprised to learn that even if they are living outside of America that they may be subject to paying taxes in the United States. The concept of paying taxes both in the foreign country you are working and residing in and in the united states may seem not only confusing but a difficult matter to understand on your own. To navigate the waters of Tax Treaties is a daunting task for the majority of people. As Tax Treaties differ from country to country and to further compound the task of being in compliance so are the Offshore reporting requirements.
The Treasury and the IRS have multiple tools to track the income of U.S. citizens that reside in foreign nations. Additionally, they are able to track the assets and foreign bank accounts of American citizens, green card holders or those who take the Substantial Presence test.
If you are facing a complex tax situation involving international income generating assets, offshore businesses or other foreign earnings, contact K and S Law Group today. We are a team of Tax Attorneys and experienced CPA in a law firm that is experienced in international tax law, so you can count on our experience and knowledge.
International Tax Planning, Compliance and Audits for American Expats and Businesses
As the world is continuing becoming more interconnected so does the burden of tax compliance. K and S Law Group is committed to help US and International businesses not only to capitalize in the US and abroad with minimal tax law implications. As proper planning and compliance is important not only for businesses but also individuals who are working overseas.
Experienced legal counsel from an international tax attorney can help individuals working abroad or retiring overseas maintain their citizenship through fulfilling their tax obligations. International tax attorney Omid Shirazi has extensive experience in international tax planning, offshore tax controversies, and foreign account compliance. At K and S Law Group, our tax professionals can assess an array of tax concerns related to double taxation of expatriates, tax minimization, FBAR, FATCA, and other international tax problems.
Can U.S. Citizens who reside in a foreign country or Non- US Residents be selected for an IRS or Foreign Tax Audit?
U.S. Citizens who reside overseas are surprised to learn that they are taxed based on their citizenship rather than were they are earning income. Additionally, foreign residing citizens are not aware that the foreign nation they are working and residing in taxes on basis of their residence and economic activity. If proper planning is not considered many are unaware that they may be subject to double taxation. If you fail to comply with IRS and Treasury regulations, you may be selected for an audit.
Our Firm can provide international tax planning and compliance. Tax planning for expats includes filing past tax returns, fulfilling payment obligations, minimizing the burden of double taxations and complying with informational requirements concerning FBARs, FATCA or other reporting requirements. Stemming the risk of IRS or Foreign tax audit.
Who is Required to File FBAR and FATCA?
If you are an U.S. Citizen or a foreign national that is residing in the United States or abroad and you hold assets in excess of $10,000. It is more than likely that you have foreign disclosure obligations. A mistake or lacking knowledge of the law can be punished harshly. That is why it is important to obtain a knowledgeable and experience tax planning and FBAR compliance Tax Attorney. At the K&S law Group our legal team and I are committed to help you remain compliant with U.S. and International Tax Laws. Our Team will apply our broad understanding of International tax treaties to help maintain your citizenship with minimal tax burdens.
Are VDP and Streamlined Disclosure a Solution to Fix International Tax Mistakes?
If a Taxpayer who has made a mistake or error regarding the disclosure of a foreign account under FBAR can face a penalty up to $10,000. If the reason you failed to disclose was intentional or voluntarily disregarded a known legal duty, the penalties can be significantly higher and can possibly lead to a significant portion of your foreign account to be consumed. If you are aware of the laws but have not fallen under suspicion.
If a Taxpayer is concerned that their noncompliance may be willful, they can utilize the new Voluntary Disclosure Program to correct FBAR Concerns. A Taxpayer who does not believe their actions are willful, may qualify for the Streamlined Disclosure Program. Taxpayers may qualify for the Streamlined Disclosure program who have been careless, negligent, or even grossly negligent. The Filing requirements under the Streamlined Disclosure are far less onerous and lower penalties (no penalties for non-US residents). It is important to note that if the IRS determines your actions were or have been willful will not be protected. That is why it is important to discuss your matter with an experienced Tax attorney.
How can International Businesses, U.S. Companies and Foreign Corporations Minimize International Tax Liabilities?
Regardless of if you are an U.S., international, or multinational business, a top priority is to avoid double-taxation and other forms of possible taxes that you may be susceptible to without proper tax planning. For instance, let’s consider a foreign entity would want to expand its business to the United States. The foreign entity at a minimum must consider the following factors:
- Tax treatment of the entity. Depending on the entity type, different tax treatment will apply. Selecting among an LLC, C Corporation, S Corporation, or tax treatment as a disregarded entity will produce significantly different tax results. In addition, choice of a business entity includes liability considerations.
- Liability considerations. Entity selection also concerns issues of liability should the business run into problems and accrue debts and other obligations.
- Formation and administration of the entity. The goals of the entity should be considered thoroughly to ensure that the costs and procedure involved in forming, administering, and managing the entity are justified.
- Capital considerations. Depending on the business’s need for outside investment and other factors, parties should consider how the form of organization may make it easier or more complex to raise capital and the compensation contributing individuals and entities should receive.
- Exit strategy – Whether there is a chance that the business will exit the market or that shareholders and partners may move on to other ventures, considering the financial and tax impact of these events is necessary.
Concerns about tax liability often lead to choosing between forming a corporation or an LLC that will be treated as a disregarded entity. A corporation under the Tax Cut and Jobs Act in 2017 changed the corporate tax rate to a flat 21%. This has provided domestic corporations with large tax cuts and bringing corporate tax rate more aligned with foreign tax havens in Europe such as in Ireland. If your foreign entity does choose to form an LLC that is treated as a disregarded entity, the choose must be justified as the disregarded entity is treated as a branch of the foreign parent entity. Additionally, one other important factor to consider is that the structure that a foreign entity does choose to provide the flexibility in controlling the timing of the branch profits tax.
Our Newport Beach International Tax Law Team and I have a broad understanding of tax treaties between the United States and other countries around the world. We will apply our knowledge and experience to protect your business from double taxation.
Whether you are a foreign or domestic business that requires guidance or help with tax planning for your business, we are here to help you remain complaint with U.S. and International Tax Laws.
What are the Tax Reporting Obligations for International Businesses?
Tax Reporting requirements for foreign corporations depends on its status of if the entity is considered a Foreign corporation doing business in the United States or domestic U.S. Corporation. If a Domestic U.S. Corporation is foreign owned, then it must file a Form 5472. A Form 5472 is required when a Foreign corporation either owns 25% of a U.S. Corporation or when a foreign corporation engages in a U.S. Trade or business. Foreign corporations of this type are required to keep sufficient records regarding related parties. However, if a foreign corporation that engages in a Trade or Business in the United states may not be required to file an informational return per §6038A. Factors that determine if a foreign corporation is a nonreporting entity include if the corporation has establish a permanent presence in the United States and applicable Tax Treaties.
What is the Role of an International Tax Attorney?
When you entrust K&S Law Group with your tax strategy needs, you gain the benefit of a seasoned CPA and an experienced international tax lawyer for the price of one. Mr. Shirazi prior to becoming a tax attorney, worked for years as an adviser in Big 4 public accounting firms as an advisor and Certified Public Accountant. Mr. Shirazi has worked for the Office of Chief counsel of the IRS. As a dually certified tax attorney and CPA, Mr. Shirazi in-depth knowledge of State and Federal tax law has been invaluable in assisting individuals, and both U.S. and international businesses develop effective tax planning solutions.
Common International Tax Questions:
What Is International Tax Evasion?
International Tax Evasion occurs when a U.S. Taxpayer purposefully does not comply with foreign information and income tax reporting in order to illegally evade U.S. Taxation. For instance, a U.S. Taxpayer would like to avoid paying taxes on accumulated funds that are from unreported inheritances, real estate, foreign investments and business activity by holding the funds in an offshore account and does not report them. This deliberate evasion from taxes could lead to civil and criminal tax penalties in the United States.
A U.S. Taxpayer is allowed to hold and maintain international accounts as long as you are in compliance with reporting the income and filing the required foreign information requirements of both the country the account is held the United States. Using legal means internationally to minimize your tax liability is called tax avoidance.