Go Beyond Form 1040 with a Globally Optimized Tax Strategy

Yes. U.S. citizens need to file and prepare U.S. tax returns if the filing thresholds are met, regardless of whether or not they live in the U.S.

They may be exposed to late filing penalties, late payment penalties and interest, but also the significant penalties from late filing certain U.S. international information returns such as the Forms 8938, 5471, 8865, 8858, 8621, 3520/3520-A, FBAR, etc. The penalty exposure for filing each of these forms is $10,000+.

As long as the person wasn’t aware and immediately took action to fix the problem, then they may qualify to become compliant with the U.S. tax system by filing delinquent returns pursuant to the Streamlined Filing Compliance Procedures.

Yes. The U.S. tax return still needs to be filed. The gross income needs to be reported, and then the foreign earned income exclusion is claimed on the tax return to exclude this income from being taxable on the U.S. return.

It depends, since each situation is different. Sometimes the foreign tax credit option isn’t available if the U.S. person lives in a country which doesn’t have an income tax which can then be used as a credit against the U.S. tax liability. In countries that have an income tax, often it can make sense for U.S. citizens with dependent children to claim the foreign tax credit to receive a refundable child tax credit.

Often this is the case. But there are many considerations. For instance, only $250,000 of gain from selling a primary residence is tax-exempt in the US. Different tax incentives abroad can lead to credits, deductions, and exemptions not available under US law, potentially increasing tax liability. Additionally, anti-tax deferral rules apply to non-US corporate interests. Given these complexities, consulting a qualified US international tax specialist is crucial.

Income earned within a corporation generally isn't taxed on the US shareholder's federal return, allowing tax deferral until profits are distributed as dividends. Subpart F, GILTI, and PFIC are U.S. tax rules aimed at disincentivizing U.S. income tax deferral and wealth accumulation within a foreign corporation. Consulting a US international tax specialist is crucial for navigating these complexities and optimizing the tax position.

Owning assets abroad exposes one to IRS disclosure and tax implications. Consulting a US tax advisor is crucial due to complexities in owning partnerships, trusts, corporations, pensions, retirement accounts, and foreign mutual funds. Simplifying entity structures is advisable. Certain accounts can be considered foreign trusts or PFICs, complicating US taxes. It is a good idea to discuss tax optimization, simplicity in entity structure, and compliance with a tax advisor.